<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 24, 1997
REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
AUTOLIV, INC.
(Exact name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C> <C> <C>
DELAWARE 3714 51-0378542
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification No.)
Incorporation or Organization)
</TABLE>
3350 Airport Road World T rade Center
Ogden, Utah 84405 Klarabergsviadukten 70
(801) 629-9800 S-107 24 Stockholm, Sweden
46 (8) 402 0600
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Office)
--------------------------
THE CORPORATION TRUST COMPANY
Corporation Trust Center
1209 Orange Street
Wilmington, DE 19801
(302) 658-7581
(Name, Address, Including Zip Code and Telephone Number, Including Area Code, of
Agent For Service)
--------------------------
WITH COPIES TO:
ERIC S. ROBINSON, ESQ. SCOTT V. SIMPSON, SR., ESQ.
Wachtell, Lipton, Rosen & Katz Skadden, Arps, Slate, Meagher & Flom
51 West 52nd Street LLP
New York, NY 10019-6150 One Canada Square, Canary Wharf
(212) 403-1000 London E14 5DS, England
(44) (171) 519-7000
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of the Registration Statement.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION FEE
SECURITIES TO BE REGISTERED REGISTERED PER SHARE (1) PRICE (1) (2)
<S> <C> <C> <C> <C>
Common Stock, $1.00 par value..................... 102,803,738 $28.25 $2,904,301,374 $880,091.33
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(f) under the Securities Act, based on (i)
$601,800,000, the book value as of December 31, 1996 (the "ASP Value") of
the assets of the Automotive Safety Products business of Morton
International, Inc. ("Morton"), which will constitute the business of Morton
at the time of the Merger described herein in which shares of common stock,
par value $1.00 per share, of the Registrant ("New Autoliv Common Stock")
will be issued in exchange for all outstanding shares of Morton, (ii)
$41.25, the average of the high and low quotation per share of the American
Depositary Shares ("ADSs") of Autoliv AB ("Autoliv") on the PORTAL system on
March 18, 1997, and (iii) $41.87, the average of the high and low sale price
per share of common stock, par value 10 Swedish kronor per share, of Autoliv
("Autoliv Common Stock") on the Stockholm Stock Exchange on March 18, 1997
(based on the exchange rate of $1.00 = SEK 7.69 on March 18, 1997). The
proposed maximum aggregate offering price is equal to (i) the ASP Value,
plus (ii) the market value per Autoliv ADS multipled by 562,300, the number
of outstanding Autoliv ADSs as of March 18, 1997 (representing the maximum
number of Autoliv ADSs which may be exchanged in the Exchange Offer
described herein for shares of New Autoliv Common Stock), plus (iii) the
market value per share of Autoliv Common Stock multiplied by 54,437,700, the
number of outstanding shares of Autoliv Common Stock (not including ADSs) as
of March 18, 1997 (representing the maximum number of shares of Autoliv
Common Stock which may be exchanged in the Exchange Offer for shares of New
Autoliv Common Stock). The proposed maximum offering price per share is
equal to the proposed maximum aggregate offering price divided by the number
of shares being registered hereunder.
(2) Pursuant to Rule 457(b) under the Securities Act, $364,800 previously paid
on January 21, 1997 upon filing with the Commission of preliminary proxy
material of Morton has been credited against the registration fee payable in
connection with this filing.
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
PROSPECTUS/U.S. EXCHANGE OFFER
U.S. OFFER TO EXCHANGE FOR EACH
COMMON SHARE, PAR VALUE SEK 10 PER SHARE,
BENEFICIALLY OWNED BY A U.S. PERSON, CANADIAN PERSON OR AUSTRALIAN PERSON AND
EACH AMERICAN DEPOSITARY SHARE, REPRESENTING ONE COMMON SHARE
OF
AUTOLIV AB
FOR
ONE SHARE OF COMMON STOCK, PAR VALUE $1.00 PER SHARE,
OF
AUTOLIV, INC.
THE EXPIRATION DATE FOR THE U.S. OFFER IS 12:00 NOON, NEW YORK CITY TIME, ON
APRIL 24, 1997, AND WITHDRAWAL RIGHTS FOR THE U.S. OFFER WILL EXPIRE AT SUCH
TIME, UNLESS THE U.S. OFFER IS EXTENDED PENDING SATISFACTION OF THE CONDITIONS.
ANNOUNCEMENT OF THE RESULTS OF THE U.S. OFFER WILL BE MADE APPROXIMATELY FIVE
BUSINESS DAYS AFTER THE EXPIRATION DATE. ALTHOUGH AUTOLIV SECURITIES MAY BE
TENDERED DURING THE PERIOD OF CALCULATION OF THE RESULTS OF THE U.S. OFFER,
WITHDRAWAL RIGHTS WILL NOT BE AVAILABLE DURING SUCH PERIOD OR DURING THE PERIOD,
IF ANY, BY WHICH THE U.S. OFFER IS EXTENDED FOLLOWING THE ANNOUNCEMENT OF THE
SATISFACTION OF ALL CONDITIONS TO THE U.S. OFFER NOT PREVIOUSLY ANNOUNCED TO
HAVE BEEN SATISFIED OR WAIVED.
THE EXCHANGE OFFER IS CONDITIONED UPON (I) THERE BEING VALIDLY TENDERED AND
NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE EXCHANGE OFFER A NUMBER OF AUTOLIV
SECURITIES REPRESENTING MORE THAN 90 PERCENT OF THE OUTSTANDING AUTOLIV
SECURITIES, (II) THE APPROVAL OF THE SPINOFF AND THE COMBINATION AGREEMENT BY
THE REQUISITE AFFIRMATIVE VOTE OF THE SHAREHOLDERS OF MORTON IN ACCORDANCE WITH
THE INDIANA BUSINESS CORPORATION LAW AND THE RESTATED ARTICLES OF INCORPORATION
AND BYLAWS OF MORTON AND (III) THE SATISFACTION OF THE OTHER CONDITIONS TO THE
COMBINATION CONTAINED IN ARTICLE IX OF THE COMBINATION AGREEMENT. SEE "THE
EXCHANGE OFFER--GENERAL" AND "--SECTION 9. CERTAIN CONDITIONS OF THE U.S.
OFFER," AND "THE COMBINATION AGREEMENT--CONDITIONS TO THE MERGER AND THE
EXCHANGE OFFER."
THE BOARD OF DIRECTORS OF AUTOLIV HAS UNANIMOUSLY DETERMINED THAT THE
EXCHANGE OFFER IS FAIR TO, AND IN THE BEST INTERESTS OF, AUTOLIV AND ITS
STOCKHOLDERS, AND UNANIMOUSLY RECOMMENDS THAT THE AUTOLIV STOCKHOLDERS ACCEPT
THE EXCHANGE OFFER.
------------------------
The shares of common stock, par value $1.00 per share, of Autoliv, Inc.
("New Autoliv Common Stock") will be listed on the New York Stock Exchange, Inc.
In addition, Swedish Depositary Receipts representing shares of New Autoliv
Common Stock ("SDRs") will trade on the Stockholm Stock Exchange (the "SSE").
The shares of New Autoliv Common Stock and the SDRs are collectively referred to
herein as the "New Autoliv Securities." Concurrent with the U.S. Offer, Autoliv,
Inc. will commence an offer outside the United States, Canada and Australia (the
"Swedish and International Offer" and, together with the U.S. Offer, the
"Exchange Offer"), for all Autoliv shares held by non-U.S. Persons (as defined
herein) on the same terms and conditions as the U.S. Offer, except that pursuant
to the Swedish and International Offer, holders of Autoliv shares will receive,
at their option, for each such share, either one share of New Autoliv Common
Stock or one SDR.
------------------------
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY INVESTORS
IN EVALUATING AN INVESTMENT IN THE SECURITIES OFFERED HEREBY, SEE "RISK FACTORS"
BEGINNING ON PAGE 27 HEREIN.
THE SECURITIES TO BE ISSUED PURSUANT TO THIS PROSPECTUS HAVE NOT BEEN APPROVED
OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, THE SSE OR ANY
STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION, THE SSE OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTA TION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE DEALER MANAGERS FOR THE U.S. OFFER ARE:
ENSKILDA SECURITIES THE BLACKSTONE GROUP L.P. GOLDMAN, SACHS & CO.
MARCH 24, 1997
<PAGE>
The Exchange Offer is being made pursuant to the Combination Agreement,
dated as of November 25, 1996 (the "Combination Agreement"), 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 owned 50% by each of Autoliv and Morton ("New Autoliv"),
and ASP Merger Sub Inc., a Delaware corporation and a wholly owned subsidiary of
New Autoliv ("ASP Merger Sub"). In addition to the Exchange Offer, pursuant to
the Combination Agreement, ASP Merger Sub will be merged, following the Spinoff
(as defined below), with and into Morton (the "Merger"), with Morton as the
surviving corporation ("Morton ASP"), and the separate corporate existence of
ASP Merger Sub will thereupon cease. As soon as practicable after the
consummation of the Exchange Offer (assuming that New Autoliv has acquired
Autoliv Securities representing more than 90% of the outstanding Autoliv
Securities), New Autoliv, through a Swedish wholly owned subsidiary, will
commence a compulsory acquisition proceeding under Swedish law to acquire all of
the issued and outstanding Autoliv Securities, if any, not acquired by New
Autoliv pursuant to the Exchange Offer (such compulsory acquisition,
collectively with the Exchange Offer and the Merger, the "Combination"). Upon
the consummation of the Combination, Autoliv and Morton will become wholly owned
subsidiaries of New Autoliv, and, if the Exchange Offer is fully subscribed, the
former shareholders of Autoliv and Morton will hold 53.5% and 46.5%,
respectively, of the equity of New Autoliv. The Combination Agreement provides
that, shortly prior to the Merger, Morton will distribute to its shareholders
(the "Spinoff") all of the outstanding shares of New Morton International, Inc.
("New Morton"). At the time of the Spinoff, New Morton will hold (a) all of
Morton's businesses, assets and liabilities, other than Morton's automotive
safety products business and certain assets and liabilities related thereto (the
"ASP Business") and (b) $750 million in cash funded by a new credit facility,
for which Morton ASP will remain responsible following the Transactions (as
defined herein), and a portion of the cash generated by the ASP Business from
July 1, 1996 to the date of the Spinoff.
Any U.S. Person, Canadian Person or Australian Person desiring to tender all
or any portion of such person's common stock, par value 10 Swedish kronor per
share, of Autoliv ("Autoliv Common Stock"), or all or any portion of his
American Depositary Shares ("ADSs," and together with the Autoliv Common Stock,
"Autoliv Securities"), each representing one share of Autoliv Common Stock
should either (a) complete and sign the Offer Letter of Transmittal included
herewith (or a facsimile thereof) in accordance with the instructions thereto
and mail or deliver it, together with any other required documents, to the
Depositary as specified therein and, in the case of holders of ADSs only,
certificate(s) evidencing tendered ADSs, (b) request that a broker, dealer,
commercial bank, trust company or other nominee tender on such stockholder's
behalf, or (c) in the case of ADSs only, tender such ADSs pursuant to the
procedure for book-entry transfer set forth herein, together with an Agent's
Message (as defined herein). Any stockholder whose Autoliv Securities are
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee must contact such person if such stockholder desires to tender his
Autoliv Securities. See "The Exchange Offer--Section 2. Procedures for Tendering
Autoliv Securities."
Any stockholder who desires to tender ADSs and whose certificates evidencing
such ADSs are not immediately available, or who cannot comply with the procedure
for book-entry transfer on a timely basis, may tender such ADSs by following the
procedure for guaranteed delivery set forth herein. See "The Exchange
Offer--Section 2. Procedures for Tendering Autoliv Securities."
Questions or requests for assistance may be directed to the Information
Agent or to the Dealer Managers at their respective addresses and telephone
numbers set forth on the back cover of this Prospectus/U.S. Exchange Offer.
Additional copies of this Prospectus/U.S. Exchange Offer, the Offer Letter of
Transmittal and the Notice of Guaranteed Delivery enclosed herewith may also be
obtained from the Information Agent or from brokers, dealers, commercial banks
or trust companies.
The information set forth herein concerning New Autoliv and ASP Merger Sub
has been furnished by New Autoliv, which is (and until the consummation of the
Combination will be) 50% owned by each of
ii
<PAGE>
Morton and Autoliv. The information set forth herein concerning Autoliv has been
furnished by Autoliv. The information set forth or incorporated by reference
herein concerning Morton has been furnished by Morton.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION WITH RESPECT TO THE MATTERS DESCRIBED IN THIS PROSPECTUS/U.S.
EXCHANGE OFFER OTHER THAN THOSE CONTAINED HEREIN OR IN THE DOCUMENTS
INCORPORATED BY REFERENCE HEREIN AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY MORTON,
AUTOLIV, NEW AUTOLIV OR ASP MERGER SUB. THIS PROSPECTUS/U.S. EXCHANGE OFFER DOES
NOT CONSTITUTE AN OFFER TO, OR A SOLICITATION OF, ANY PERSON IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS/ U.S. EXCHANGE OFFER NOR ANY EXCHANGE OR SALE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF MORTON, AUTOLIV, NEW AUTOLIV OR ASP MERGER SUB SINCE THE DATE HEREOF
OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF.
A Swedish Prospectus, together with an English translation thereof (the
"Swedish Prospectus"), has been prepared in connection with the Swedish and
International Offer. The Swedish Prospectus (which contains substantially the
same information as contained herein) has been approved by the SSE in accordance
with the provisions of Chapter 5, Section 5a of the Act on Trading and Clearing
Activities. The approval of the Swedish Prospectus does not constitute any
guarantee by the SSE that the factual information contained in the Swedish
Prospectus is correct or complete. Copies of the Swedish Prospectus may be
obtained from the Information Agent by calling the toll-free telephone number on
the back cover of this Prospectus/U.S. Exchange Offer or from Autoliv, Attn:
Investor Relations.
iii
<PAGE>
PROSPECTUS OF
AUTOLIV, INC.
SHARES OF COMMON STOCK
PAR VALUE $1.00 PER SHARE
AND
PROXY STATEMENT
FOR
SPECIAL MEETING OF SHAREHOLDERS
OF
MORTON INTERNATIONAL, INC.
TO BE HELD ON APRIL 24, 1997
This Proxy Statement/Prospectus/Exchange Offer (this "Proxy
Statement/Prospectus/Exchange Offer") is furnished to the shareholders of Morton
International, Inc., an Indiana corporation ("Morton"), in connection with the
solicitation of proxies by the Board of Directors of Morton (the "Morton Board")
from the holders of outstanding shares of common stock, par value $1 per share,
of Morton (together with the associated preferred share purchase rights, "Morton
Common Stock"). These proxies will be used at the Special Meeting of
Shareholders of Morton to be held on April 24, 1997, and at any adjournments
thereof (the "Morton Special Meeting").
At the Morton Special Meeting, shareholders of Morton will be asked to
consider and vote upon:
(i) A proposal (the "Spinoff Proposal") to approve the Spinoff (as
defined below) described in the Distribution Agreement (as it may be
amended, supplemented or modified from time to time, the "Distribution
Agreement") to be entered into between Morton and New Morton International,
Inc., a corporation formed by Morton under the laws of the State of Indiana
("New Morton"). Pursuant to the Distribution Agreement, prior to the Merger
(as defined below), Morton will contribute to New Morton all of the
businesses, assets and liabilities owned by Morton and its subsidiaries (the
"New Morton Businesses"), other than its automotive safety products business
and certain assets and liabilities related thereto (the "ASP Business"),
together with $750 million of cash and a portion of the cash generated by
the ASP Business from July 1, 1996 to the date of the Spinoff (the
"Distribution Date"). Shortly following the contribution, Morton will
distribute to its shareholders on a share-for-share basis, all the shares of
New Morton (the "Spinoff"). Morton, following the Spinoff, is referred to in
this Proxy Statement/Prospectus/Exchange Offer as "Morton ASP."
(ii) A proposal (the "Merger Proposal") to approve the Combination
Agreement, dated as of November 25, 1996 (as it may be amended, supplemented
or modified from time to time, the "Combination Agreement"), among Autoliv
AB, a corporation organized under the laws of the Kingdom of Sweden
("Autoliv"), Autoliv, Inc., a Delaware corporation ("New Autoliv"), which
Autoliv and Morton have formed to effect the combination, ASP Merger Sub
Inc., a Delaware corporation and a wholly owned subsidiary of New Autoliv
("ASP Merger Sub"), and Morton. Pursuant to the Combination Agreement,
promptly following the Spinoff, ASP Merger Sub will merge (the "Merger")
with and into Morton, with Morton being the surviving corporation in the
Merger, upon the terms and conditions contained in the Combination
Agreement.
If the Exchange Offer (as defined below) is fully accepted, the shareholders
of Morton will receive, in the aggregate, 46.5% of the outstanding common stock,
par value $1.00 per share, of New Autoliv ("New Autoliv Common Stock") in the
Merger in exchange for their shares of Morton Common Stock. Also pursuant to the
Combination Agreement, New Autoliv will offer to exchange the remaining 53.5% of
its outstanding shares for all the outstanding shares of common stock, par value
Swedish kronor ("SEK") 10 per share, of Autoliv ("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 an exchange offer which will be conducted in two parts: (a) the offer made by
New Autoliv
<PAGE>
hereby to purchase shares of Autoliv Common Stock that are beneficially owned by
U.S. Persons, Canadian Persons and Australian Persons (each as defined herein)
and all outstanding ADSs (the "U.S. Offer"), and (b) the offer made outside the
United States, Canada and Australia (the "Swedish and International Offer" and,
together with the U.S. Offer, the "Exchange Offer") to purchase all the Autoliv
Securities that are not beneficially owned by U.S. Persons, Canadian Persons and
Australian Persons. The Exchange Offer is conditioned on, among other things,
more than 90% of the outstanding Autoliv Securities being tendered and not
withdrawn in the Exchange Offer (the "Minimum Condition").
Also pursuant to the Combination Agreement, if over 90% of the Autoliv
Securities are tendered in the Exchange Offer or are otherwise acquired by New
Autoliv, New Autoliv, through a wholly owned subsidiary of New Autoliv organized
under the laws of the Kingdom of Sweden ("Swedish Sub"), will acquire all
remaining Autoliv Securities for cash in a compulsory acquisition to be
conducted in accordance with Swedish law (the "Compulsory Acquisition"). In
accordance with the procedures governing the Compulsory Acquisition, New Autoliv
is entitled to acquire title to the Autoliv Securities not tendered in the
Exchange Offer, which acquisition should occur within four to eight months, and
the price to be paid for such Autoliv Securities will thereafter be set by an
arbitration tribunal. Payment for the Autoliv Securities so acquired will be
made after the tribunal has determined the price, which determination may take
up to two years, and may be further delayed until any appeals from the decision
of the tribunal have been finally resolved. Depending upon the number of Autoliv
Securities acquired in the Compulsory Acquisition and market conditions, New
Autoliv may seek to finance the posting of security for such purchases through a
combination of funds from operations and public or private issuances of debt or
equity securities. Accordingly, New Autoliv may seek to place shares of New
Autoliv Common Stock in Sweden and elsewhere in Europe immediately following the
Expiration Date (as defined herein) with institutional investors at a price
based upon the then market price of New Autoliv Securities (as defined below) on
the Stockholm Stock Exchange ("SSE"). Enskilda Securities ("Enskilda") or
another financial institution may act as New Autoliv's agent in connection with
any such placement for which it would receive a fee in an amount to be agreed
upon with New Autoliv.
The Merger Proposal and the Spinoff Proposal and certain related
considerations are described in this Proxy Statement/Prospectus/Exchange Offer,
including the attached Appendices; a copy of the Combination Agreement is
attached as Appendix A and the form of Distribution Agreement is attached as
Appendix B. Forms of two additional agreements to be entered into between Morton
and New Morton in connection with the Spinoff, the Tax Sharing Agreement (as it
may be amended, supplemented or modified from time to time, the "Tax Sharing
Agreement") and the Employee Benefits Allocation Agreement (as it may be
amended, supplemented or modified from time to time, the "Benefits Agreement")
are described in this Proxy Statement/Prospectus/Exchange Offer and forms of
these agreements are included as exhibits to New Autoliv's Registration
Statement on Form S-4 (the "New Autoliv Registration Statement") filed with the
Securities and Exchange Commission (the "SEC") in connection with the issuance
by New Autoliv of shares of New Autoliv Common Stock in the Merger and the
Exchange Offer. The Distribution Agreement, the Tax Sharing Agreement and the
Benefits Agreement are together referred to in this Proxy
Statement/Prospectus/Exchange Offer as the "Ancillary Agreements."
The Combination Agreement provides that, shortly prior to the Merger, Morton
will effect the Spinoff in accordance with the terms of the Distribution
Agreement. At the time the Merger becomes effective (the "Effective Time"), each
share of Morton Common Stock that is outstanding immediately before the
Effective Time (other than shares held in Morton's treasury or owned by Autoliv
or any subsidiary of Autoliv or Morton, which will be cancelled in accordance
with the Combination Agreement) will be converted into the right to receive a
fraction of a share of New Autoliv Common Stock calculated by dividing
47,803,738 by the number of shares of Morton Common Stock outstanding
immediately prior to the Effective Time (other than the cancelled shares),
rounded to the nearest thousandth or, if there is no nearest thousandth, to the
next highest thousandth (the "Merger Consideration"). The total number of shares
of New Autoliv Common Stock that a Morton shareholder will receive will be
aggregated and
2
<PAGE>
rounded down to the nearest whole number and holders of Morton Common Stock will
receive cash (without interest) based upon the value of the remaining fraction
of a share of New Autoliv Common Stock, if any, they would otherwise be entitled
to receive.
Shortly prior to, and subject to the satisfaction or waiver of each
condition to, the Merger, Morton will contribute to New Morton (the
"Contribution") (a) all of the businesses, assets and liabilities (with certain
exceptions) owned by Morton and its subsidiaries not exclusively related to the
ASP Business (including the assets associated with Morton's corporate
operations) and (b) $750 million in cash funded by a new credit facility for
which Morton ASP will remain responsible following the Spinoff, and a portion of
the cash generated by the ASP Business from July 1, 1996 to the Distribution
Date, and New Morton will assume the liabilities related to the transferred
assets and businesses. See "Pre-Merger Transactions-- Terms of the Distribution
Agreement." In the Spinoff, holders of Morton Common Stock outstanding on the
record date for the Spinoff (the "Distribution Record Date") will receive a
distribution of one share of common stock, par value $1 per share, of New Morton
("New Morton Common Stock") and one associated preferred share purchase right
with respect to each of their shares of Morton Common Stock, as provided in the
Distribution Agreement.
The Merger, the Exchange Offer and the Compulsory Acquisition are
collectively referred to as the "Combination." The Contribution, the Spinoff and
the Combination are sometimes referred to in this Proxy
Statement/Prospectus/Exchange Offer as the "Transactions." The Merger Proposal
and the Spinoff Proposal are together referred to as the "Proposals." Following
consummation of the proposed Transactions: (a) New Morton will be a stand-alone
publicly traded corporation with its shares listed on the New York Stock
Exchange, Inc. (the "NYSE") and the Chicago Stock Exchange, Inc. (the "CSE"),
(b) New Autoliv will be a stand-alone publicly traded U.S. corporation and (c)
Morton ASP and Autoliv will be wholly owned subsidiaries of New Autoliv. Shares
of New Autoliv Common Stock will be listed on the NYSE and Swedish Depositary
Receipts representing shares of New Autoliv Common Stock ("SDRs") will be listed
on the SSE. The shares of New Autoliv Common Stock and SDRs are collectively
referred to herein as the "New Autoliv Securities."
This Proxy Statement/Prospectus/Exchange Offer is also furnished by New
Autoliv to Morton shareholders as a prospectus in connection with the issuance
of shares of New Autoliv Common Stock in the Merger and to Autoliv stockholders
as a prospectus in connection with the issuance of New Autoliv Securities in the
Exchange Offer. The information statement of New Morton (the "New Morton
Information Statement"), which accompanies this Proxy
Statement/Prospectus/Exchange Offer, is furnished to Morton shareholders in
connection with the issuance by New Morton of the shares of New Morton Common
Stock in connection with the Spinoff.
------------------------
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY MORTON AND
AUTOLIV SHAREHOLDERS IN CONNECTION WITH THE PROPOSED TRANSACTIONS, SEE "RISK
FACTORS" BEGINNING ON PAGE 27 HEREIN.
------------------------
This Proxy Statement/Prospectus/Exchange Offer is first being mailed to
Morton shareholders (along with the accompanying form of proxy) and to Autoliv
stockholders on or about March 24, 1997.
3
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION WITH RESPECT TO THE MATTERS DESCRIBED IN THIS PROXY
STATEMENT/PROSPECTUS/EXCHANGE OFFER OTHER THAN THOSE CONTAINED HEREIN OR IN THE
DOCUMENTS INCORPORATED BY REFERENCE HEREIN AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY MORTON, AUTOLIV, NEW MORTON, NEW AUTOLIV OR ASP MERGER SUB. THIS PROXY
STATEMENT/PROSPECTUS/EXCHANGE OFFER DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY SECURITIES, NOR DOES IT CONSTITUTE THE
SOLICITATION OF A PROXY, IN ANY JURISDICTION TO OR FROM ANY PERSON TO OR FROM
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION.
NEITHER THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS/EXCHANGE OFFER NOR ANY
EXCHANGE OR SALE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF MORTON, AUTOLIV, NEW
AUTOLIV OR ASP MERGER SUB SINCE THE DATE HEREOF OR THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
UNTIL MAY 19, 1997, ALL DEALERS EFFECTING TRANSACTIONS IN NEW AUTOLIV
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A COPY OF THIS PROXY STATEMENT/PROSPECTUS/EXCHANGE OFFER.
------------------------
THE SECURITIES TO BE ISSUED PURSUANT TO THIS PROXY STATEMENT/PROSPECTUS/EXCHANGE
OFFER HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC, THE SSE OR ANY STATE
SECURITIES COMMISSION, NOR HAS THE SEC, THE SSE OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OF ADEQUACY OF THIS PROXY
STATEMENT/PROSPECTUS/EXCHANGE OFFER. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS/EXCHANGE OFFER IS MARCH 24, 1997.
4
<PAGE>
FORWARD-LOOKING STATEMENTS
This Proxy Statement/Prospectus/Exchange Offer includes forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities Act"), and Section 21E of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). All statements regarding Morton's, New
Morton's, Morton ASP's, Autoliv's or New Autoliv's expected future financial
position, business strategy, budgets, projected costs, and plans and objectives
of management for future operations, are forward-looking statements. Although
Morton, Autoliv, New Morton and New Autoliv believe their respective
expectations reflected in such forward-looking statements are based on
reasonable assumptions, no assurance can be given that such expectations will
prove to have been correct. Important factors that could cause actual results to
differ materially from the expectations reflected in the forward-looking
statements herein include, among others, those set forth under "Risk Factors,"
general economic and business and market conditions, changes in U.S. and
non-U.S. laws and regulations with respect to automotive safety, difficulties in
achieving expected cost savings from the Combination or costs or difficulties
relating to the integration of the ASP Business and Autoliv's businesses, costs
or difficulties relating to the establishment of New Autoliv and New Morton as
independent entities, increased competitive and/or customer pressure in the
automotive occupant safety restraints industry or the specialty chemicals and
salt industries, and the ability of New Morton, Morton ASP, New Autoliv and
Autoliv to achieve the goals described in "Background, Reasons and
Recommendations" during the periods covered by the forward-looking statements.
5
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
INDEX OF DEFINED TERMS..................................................................................... 9
EXCHANGE RATES............................................................................................. 11
QUESTIONS AND ANSWERS ABOUT THE SPINOFF, THE MERGER AND THE EXCHANGE OFFER................................. 12
SUMMARY.................................................................................................... 14
RISK FACTORS............................................................................................... 27
BACKGROUND, REASONS AND RECOMMENDATIONS.................................................................... 33
Background of the Transactions......................................................................... 33
Reasons for the Spinoff and the Merger; Recommendations of the Morton Board............................ 35
Reasons for the Combination and the Exchange Offer; Recommendations of the Autoliv Board............... 37
OPINIONS OF FINANCIAL ADVISORS............................................................................. 39
Opinion of Goldman Sachs............................................................................... 39
Opinion of Enskilda and Blackstone..................................................................... 44
THE MORTON SPECIAL MEETING................................................................................. 48
Time and Place; Purpose................................................................................ 48
Record Date............................................................................................ 48
Voting Rights; Votes Required for Approval............................................................. 48
Voting and Revocation of Proxies....................................................................... 48
Solicitation of Proxies................................................................................ 49
Judges of Election..................................................................................... 49
PRE-MERGER TRANSACTIONS.................................................................................... 50
Background and Reasons for the Spinoff................................................................. 50
Terms of the Distribution Agreement.................................................................... 50
Continuing Arrangements between Morton ASP and New Morton.............................................. 53
Terms of the Employee Benefits Allocation Agreement.................................................... 53
Terms of the Tax Sharing Agreement..................................................................... 54
THE MERGER................................................................................................. 56
Effect of the Merger................................................................................... 56
Conversion of Morton Common Stock...................................................................... 56
Fractional Shares...................................................................................... 56
Effective Time......................................................................................... 57
Exchange Procedures.................................................................................... 57
No Dissenters' Rights.................................................................................. 57
Accounting Treatment................................................................................... 58
THE EXCHANGE OFFER......................................................................................... 59
General................................................................................................ 59
Section 1. Terms of the U.S. Offer; Number of Shares; Expiration Date.................................. 62
Section 2. Procedures for Tendering Autoliv Securities................................................. 63
Section 3. Withdrawal Rights........................................................................... 66
Section 4. Acceptance for Exchange; Delivery of New Autoliv Common Stock............................... 67
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Section 5. Certain U.S. Income Tax Consequences........................................................ 68
Section 6. Certain Information Concerning New Autoliv.................................................. 68
Section 7. No Appraisal Rights; Compulsory Acquisition................................................. 69
Section 8. Dividends and Distributions................................................................. 69
Section 9. Certain Conditions of the U.S. Offer........................................................ 69
Section 10. Fees and Expenses.......................................................................... 70
Section 11. Miscellaneous.............................................................................. 70
THE COMBINATION AGREEMENT.................................................................................. 71
Terms of the Merger and the Exchange Offer............................................................. 71
Representations and Warranties......................................................................... 71
Business of Morton Pending the Merger.................................................................. 72
Business of Autoliv Pending the Merger................................................................. 72
No Solicitation of Third-Party Acquisition Proposals................................................... 72
New Autoliv Board of Directors......................................................................... 73
Agreements on Post-Closing Transactions................................................................ 73
Certain Other Agreements............................................................................... 73
Fees and Expenses...................................................................................... 74
Conditions to the Merger and the Exchange Offer........................................................ 74
Termination; Certain Fees.............................................................................. 75
Director and Officer Liability......................................................................... 76
REGULATORY MATTERS......................................................................................... 77
U.S. Antitrust Filing.................................................................................. 77
European Competition Filings........................................................................... 77
Obligations Under the Combination Agreement............................................................ 77
CERTAIN TAX CONSEQUENCES OF THE TRANSACTIONS............................................................... 78
United States Federal Income Tax Considerations........................................................ 78
Swedish Income Tax Considerations...................................................................... 81
Certain Legislative Initiatives........................................................................ 82
ACCOUNTING TREATMENT OF THE TRANSACTIONS................................................................... 82
INTERESTS OF CERTAIN PERSONS IN THE TRANSACTIONS........................................................... 83
DESCRIPTION OF NEW AUTOLIV................................................................................. 86
General................................................................................................ 86
Business............................................................................................... 86
Directors and Executive Officers....................................................................... 86
Stock Ownership of Directors, Executive Officers and Five Percent Shareholders......................... 90
Certificate of Incorporation and Bylaws................................................................ 90
Dividend Policy........................................................................................ 90
COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION................................................ 91
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION............................................... 93
DESCRIPTION OF AUTOLIV..................................................................................... 100
SUMMARY SELECTED HISTORICAL FINANCIAL INFORMATION OF AUTOLIV............................................... 119
</TABLE>
7
<PAGE>
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<CAPTION>
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<S> <C>
AUTOLIV MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.............. 122
DESCRIPTION OF THE ASP BUSINESS............................................................................ 128
SUMMARY SELECTED HISTORICAL FINANCIAL INFORMATION OF AUTOMOTIVE SAFETY PRODUCTS............................ 137
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF AUTOMOTIVE SAFETY
PRODUCTS................................................................................................. 139
DESCRIPTION OF CAPITAL STOCK OF NEW AUTOLIV................................................................ 144
New Autoliv Common Stock............................................................................... 144
Preferred Stock........................................................................................ 144
Certain Provisions in the New Autoliv Certificate and New Autoliv Bylaws............................... 145
CHANGES IN THE RIGHTS OF SHAREHOLDERS RESULTING FROM THE COMBINATION....................................... 148
NO DISSENTERS' RIGHTS...................................................................................... 156
STOCK EXCHANGE LISTINGS AND DELISTINGS..................................................................... 157
EXPERTS.................................................................................................... 157
LEGAL MATTERS.............................................................................................. 157
SUBMISSION OF SHAREHOLDER PROPOSALS........................................................................ 158
WHERE SHAREHOLDERS CAN FIND MORE INFORMATION............................................................... 158
INDEX TO FINANCIAL STATEMENTS.............................................................................. F-1
</TABLE>
<TABLE>
<S> <C> <C>
Appendix A: Combination Agreement, dated as of November 25, 1996, among Autoliv AB,
Morton International, Inc., Autoliv, Inc. and ASP Merger Sub Inc...... A-1
Appendix B: Form of Distribution Agreement between Morton International, Inc. and
New Morton International, Inc......................................... B-1
Appendix C: Opinion of Goldman, Sachs & Co.......................................... C-1
Appendix D: Opinion of Enskilda Securities and The Blackstone Group L.P............. D-1
Appendix E: Autoliv Manufacturing Facilities........................................ E-1
Appendix F: Autoliv Addresses....................................................... F-1
Appendix G: Autoliv Board of Directors, Auditors and Executive Officers............. G-1
Appendix H: Extracts from the Autoliv Articles of Association....................... H-1
Appendix I: Morton Automotive Safety Products Production Facilities................. I-1
Appendix J: Morton Automotive Safety Products Senior Executives..................... J-1
Appendix K: Autoliv AB (Parent Company) Financial Statements........................ K-1
Appendix L: Information Statement of New Morton International, Inc. (Separate
document distributed to Morton shareholders)
</TABLE>
8
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
$....................................... 11
ADSs.................................... 1
ADS Bank................................ 61
Affiliate............................... 74
Affiliate Letter........................ 74
Agent's Message......................... 64
AlliedSignal............................ 116
Allocated Debt.......................... 41
Ancillary Agreements.................... 2
ASP..................................... 33
ASP Business............................ 1
ASP Combined Values..................... 42
ASP Direct Spinoff...................... 40
ASP Employees........................... 53
ASP Liabilities......................... 51
ASP Market Capitalization Value......... 43
ASP Merger Sub.......................... 1
ASP Ongoing Values...................... 41
ASP P/E Multiples....................... 41
ASP Public Comparables.................. 40
ASP Spinoff Values...................... 40
Australian Person....................... 59
Auto Manufacturers...................... 40
Autoliv................................. 1
Autoliv Articles........................ 148
Autoliv Board........................... 23
Autoliv Common Stock.................... 1
Autoliv Employment Agreements........... 84
Autoliv Equity Percentage............... 42
Autoliv Executives...................... 84
Autoliv Group........................... 100
Autoliv Market Capitalization........... 43
Autoliv Securities...................... 1
Automobile Part Suppliers............... 40
Average Value of New Autoliv Common
Stock................................. 56
Base Allocated Debt Case................ 41
Benefits Agreement...................... 2
Blackstone.............................. 35
Blocked Share Accounts.................. 68
Book-Entry Confirmation................. 64
Book-Entry Transfer Facilities.......... 64
Book-Entry Transfer Facility............ 64
broker non-votes........................ 48
business day............................ 63
Business Combination.................... 152
Canadian Person......................... 59
Capital Contribution.................... 51
Change in Control....................... 83
Code.................................... 30
Combination............................. 3
Combination Agreement................... 1
Combination Conditions.................. 60
Companies Act........................... 60
Competing Transaction................... 73
Compulsory Acquisition.................. 2
Contribution............................ 3
<CAPTION>
PAGE
---------
<S> <C>
CSE..................................... 3
Depositary.............................. 61
DGCL.................................... 148
Distribution Agreement.................. 1
Distribution Date....................... 1
Distribution Record Date................ 3
DOJ..................................... 31
EBIT.................................... 40
Effective Time.......................... 2
Electrolux Group........................ 100
Eligible Institution.................... 64
Employment Period....................... 83
Enskilda................................ 2
EPS..................................... 42
ERISA................................... 71
Estimated 1997 P/E Ratios............... 41
Estimated Annual EPS Growth Rates....... 41
Eurobags................................ 102
Exchange Act............................ 5
Exchange Fund........................... 57
Exchange Offer.......................... 2
Expiration Date......................... 62
FTC..................................... 31
Goldman Sachs........................... 33
Goldman Sachs Engagement
Letter................................ 44
Growth Measures......................... 40
Guaranteed Delivery Procedures.......... 65
HSR Act................................. 31
Hybrid Chemical Companies............... 41
IBCL.................................... 57
IBES.................................... 41
IC...................................... 105
Income and Cash Flow Data............... 40
Indemnifiable Losses.................... 52
Indemnified Party....................... 76
Information Agent....................... 61
interested shareholder.................. 152
Interim Period.......................... 62
IRS..................................... 30
ISO 9000................................ 107
ITS..................................... 105
Kanoe................................... 34
Livbag.................................. 103
Merger.................................. 1
Merger Consideration.................... 2
Merger Proposal......................... 1
Minimum Condition....................... 2
Morton.................................. 1
Morton 1996 Form 10-K................... 32
Morton 1996 Proxy Statement............. 32
Morton Articles......................... 32
Morton ASP.............................. 1
Morton BEOP............................. 49
Morton Board............................ 1
Morton Bylaws........................... 32
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Morton Certificates..................... 57
Morton Common Stock..................... 1
Morton DRP.............................. 49
Morton Equity Percentage................ 42
Morton ESIP............................. 49
Morton Nichiyu.......................... 133
Morton Options.......................... 54
Morton Preferred Stock.................. 149
Morton Special Meeting.................. 1
Morton Special Meeting Record Date...... 48
Morton Stockholder Approval Condition... 60
Morton Thiokol.......................... 33
MSEK.................................... 11
MST..................................... 116
New Autoliv............................. 1
New Autoliv Board....................... 34
New Autoliv Bylaws...................... 32
New Autoliv Certificate................. 32
New Autoliv Common Stock................ 1
New Autoliv P/E Multiples............... 42
New Autoliv Preferred Stock............. 144
New Autoliv Registration Statement...... 2
New Autoliv Securities.................. 3
New Credit Facility..................... 51
New Morton.............................. 1
New Morton Articles..................... 32
New Morton Businesses................... 1
New Morton Bylaws....................... 32
New Morton Common Stock................. 3
New Morton Employees.................... 53
New Morton Information Statement........ 3
New Morton Liabilities.................. 51
New Morton Public Comparables........... 41
New Morton Registration Statement....... 158
New Morton Values....................... 41
NHTSA................................... 29
No-Action Letter........................ 59
Noon Buying Rate........................ 11
NOPLAT.................................. 46
NYSE.................................... 3
Offer Exchange Ratio.................... 60
Offer Letter of Transmittal............. 63
Offer Period............................ 62
Official List........................... 24
Option Plan............................. 54
<CAPTION>
PAGE
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<S> <C>
Original Share Accounts................. 68
PORTAL system........................... 24
Private Letter Ruling................... 30
Projections............................. 40
Proposals............................... 3
Proxy Statement/Prospectus/ Exchange
Offer................................. 1
Purchase Accounting Adjustments......... 42
QS 9000................................. 107
Recommendation.......................... 59
Relocation Event........................ 84
Restructuring Taxes..................... 55
Rights.................................. 71
Rights Agreement........................ 71
Sagem................................... 108
Sale.................................... 44
SDRs.................................... 3
SEC..................................... 2
Section 23-1-43......................... 152
Section 23-1-44-8....................... 156
Securities Act.......................... 5
SEK..................................... 1
Selected Financial Data................. 40
S.N.P.E................................. 103
Specialty Chemical Companies............ 41
Spinoff................................. 1
Spinoff Proposal........................ 1
SSE..................................... 2
Stockholder Notice Procedure............ 146
Stockholder Supermajority Vote.......... 145
Success Fee............................. 44
Swedish and International Offer......... 2
Swedish Sub............................. 2
surplus................................. 153
Tax Sharing Agreement................... 2
Thiokol................................. 51
Third-Party Acquisition................. 72
Transactions............................ 3
U.S. Autoliv Holder..................... 80
U.S. Exchange Agent..................... 57
U.S. GAAP............................... 58
U.S. Offer.............................. 2
U.S. Person............................. 59
United States........................... 59
US$..................................... 11
Voting Power............................ 145
</TABLE>
10
<PAGE>
EXCHANGE RATES
All currency amounts in this Proxy Statement/Prospectus/Exchange Offer are
expressed in U.S. dollars ("US$" or "$") unless it is specifically indicated
that a different currency is being used. Certain portions of this Proxy
Statement/Prospectus/Exchange Offer contain amounts which have been converted
from SEK (one million SEK is hereinafter referred to as "MSEK") into US$. For
convenience, we have converted SEK amounts using an exchange rate of US$ 1 to
SEK 6.8250 unless it is indicated that a different exchange rate was used for a
specific conversion. The above exchange rate, which was used to perform the
conversions, represents the noon buying rate, certified by the Federal Reserve
Bank of New York for customs purposes in New York City on December 31, 1996 for
cable transfers in SEK. Use of this exchange rate is not a representation that
the converted SEK amounts actually represent the corresponding US$ amounts or
that SEK could be converted into US$ at the exchange rate used or at any other
exchange rate. The table below lists the noon buying rate, certified by the
Federal Reserve Bank of New York for customs purposes, in New York City for
cable transfers in SEK (the "Noon Buying Rate") at year-end for each of the
years 1992 through 1996. The table also indicates the average, the high and the
low Noon Buying Rates for each of these years.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
End of period.................................................... 6.8250 6.6290 7.4295 8.3400 7.0790
Average for period*.............................................. 6.7082 7.1406 7.7161 7.7956 5.8258
High for period.................................................. 7.0300 7.5510 8.3840 8.4835 7.1150
Low for period................................................... 6.5455 6.5045 7.0640 7.0640 5.0885
</TABLE>
- ------------------------
* The average for the period was calculated by averaging the Noon Buying Rate
on the last business day of each month during the relevant period.
During the period from January 1, 1997 to March 20, 1997, the high Noon
Buying Rate was SEK 7.7350 and the low Noon Buying Rate was SEK 6.8749. The
closing spot rate for SEK in the United States on March 20, 1997, the most
recent practicable date prior to the printing of this Proxy Statement/
Prospectus/Exchange Offer, was US$ 1 to SEK 7.6560.
11
<PAGE>
QUESTIONS AND ANSWERS ABOUT
THE SPINOFF, THE MERGER AND THE EXCHANGE OFFER
<TABLE>
<S> <C>
Q: WHY IS MORTON PROPOSING TO SEPARATE ITS
SPECIALTY CHEMICALS AND SALT BUSINESSES
FROM ITS AUTOMOTIVE SAFETY PRODUCTS
BUSINESS?
A: Morton believes that separating these
businesses will allow each one to
pursue strategies and focus on
objectives appropriate to that
business. Morton believes that the
separation of the two businesses will
assist New Morton in expanding its
business and product lines through an
active acquisition program, making its
planned capital investments and
continuing its ongoing share
acquisition program.
Q: WHY ARE MORTON AND AUTOLIV PROPOSING TO
COMBINE AUTOLIV WITH MORTON'S
AUTOMOTIVE SAFETY PRODUCTS BUSINESS?
A: Morton's and Autoliv's Boards of
Directors believe that the ASP Business
and Autoliv have complementary
geographic, product, customer and
marketing focuses, and that combining
them would create a leading automotive
safety systems supplier with a strong
worldwide presence and substantial
potential synergies.
Q: WHAT WILL MORTON SHAREHOLDERS RECEIVE
FOR THEIR MORTON SHARES?
A: Morton shareholders will receive, in
what is intended to be a tax-free
distribution for U.S. federal income
tax purposes, one share of New Morton
Common Stock with respect to each share
of Morton Common Stock that they own.
This represents a continuing interest
in Morton's specialty chemicals and
salt businesses. In addition, they will
receive, in what is intended to be a
tax-free merger for U.S. federal income
tax purposes, approximately one share
of New Autoliv common stock in exchange
for every three shares of Morton Common
Stock that they own. For a description
of the exact exchange calculation, see
"The Merger--Conversion of Morton
Common Stock" at page 56.
Q: WILL NEW AUTOLIV ISSUE FRACTIONAL
SHARES TO MORTON SHAREHOLDERS?
A: New Autoliv will not issue fractional
shares in the merger. As a result,
Morton shareholders will receive a
whole number of New Autoliv shares
based on the aggregate number of shares
they own and a cash payment based on
the market value of the remaining
fraction of a share of New Autoliv they
would otherwise be entitled to receive.
Q: WHAT WILL AUTOLIV STOCKHOLDERS RECEIVE
FOR THEIR AUTOLIV SECURITIES?
A: Autoliv stockholders who accept the
exchange offer will receive, in what is
intended to be a tax-free exchange
under U.S. federal income tax and
Swedish tax laws, one New Autoliv share
for each share of Autoliv Common Stock
or each American Depositary Share
representing one share of Autoliv
Common Stock that they own. If holders
of more than 90% of Autoliv's out-
standing securities accept the exchange
offer or New Autoliv otherwise acquires
more than 90% of the outstanding
Autoliv Securities, a compulsory
acquisition will be conducted under
Swedish law. Under the compulsory
acquisition, any Autoliv stockholders
who did not tender their securities
will receive cash in a taxable exchange
for their Autoliv Securities following
the combination, which process may take
up to two years or longer if the
arbitration award required under
Swedish law is challenged.
If the exchange offer is fully
accepted, Autoliv stockholders will
receive 53.5% and Morton shareholders
will receive 46.5% of the outstanding
New Autoliv Securities.
Q: WHY IS THE TRANSACTION STRUCTURED AS A
SPINOFF, A MERGER AND AN EXCHANGE
OFFER?
A: The Spinoff is necessary to separate
Morton's automotive safety products
business from its specialty chemicals
and salt businesses. Morton's
automotive safety products business
will then be combined with Autoliv
through the merger and the exchange
offer. Under this structure, the
spinoff and the
</TABLE>
12
<PAGE>
<TABLE>
<S> <C>
merger are intended to be tax free, for
U.S. federal income tax purposes, to
Morton and its shareholders (except
that Morton shareholders will be taxed
on any cash they receive in lieu of
fractional New Autoliv shares), and the
exchange offer is intended to be tax
free for U.S. and Swedish income tax
purposes (except for persons who
receive cash in the compulsory
acquisition) to Autoliv and its
stockholders.
Q: WHAT DOES A MORTON SHAREHOLDER NEED TO
DO NOW?
A: Just mail your signed proxy card in the
enclosed return envelope as soon as
possible, so that your shares may be
represented at the special meeting. The
meeting will take place on April 24,
1997. MORTON'S BOARD OF DIRECTORS
RECOMMENDS THAT MORTON SHAREHOLDERS
VOTE IN FAVOR OF THE PROPOSALS TO
APPROVE THE SPINOFF AND THE COMBINATION
AGREEMENT. Morton shareholders should
NOT send in their stock certificates at
this time. If you continue to hold your
shares of Morton Common Stock at the
time of the Spinoff, you will
automatically receive your shares of
New Morton Common Stock. You will also
receive written instructions for
exchanging your shares of Morton Common
Stock for shares of New Autoliv Common
Stock (and your cash payment in lieu of
any fractional share of New Autoliv).
Q: WHAT DOES AN AUTOLIV STOCKHOLDER NEED
TO DO NOW?
A: Just complete and sign the enclosed
Offer Letter of Transmittal (or a
facsimile of the letter) and return the
letter in the enclosed return envelope.
If you are a holder of ADSs, just
complete and sign the enclosed Offer
Letter of Transmittal (or a facsimile
of the letter) and return the letter
and your certificates representing ADSs
in the enclosed return envelope. If you
do not have your certificates
representing ADSs because they are
registered in the name of a broker,
dealer, commercial bank, trust company
or other entity, you must contact them
if you wish to accept the exchange
offer. If you do not have your
certificates representing ADSs for
another reason, you can still accept
the exchange offer by following the
procedure for guaranteed delivery
described on page 65 of this Proxy
Statement/Prospectus/Exchange Offer.
Q: WILL AUTOLIV BE PAYING A DIVIDEND IN
RESPECT OF FISCAL YEAR 1996?
A: The Board of Directors of Autoliv has
proposed that a dividend of SEK 2.75
per Autoliv share be declared and paid
in respect of fiscal year 1996 prior to
the consummation of the Combination,
which dividend has been approved by
Autoliv's stockholders.
Q: WILL MORTON CONTINUE TO PAY DIVIDENDS
IN 1997?
A: Under the Combination Agreement, Morton
is permitted, prior to the consummation
of the Combination, to pay regular
quarterly cash dividends not in excess
of $.15 per share of Morton Common
Stock.
Q: WHEN DO MORTON AND AUTOLIV EXPECT THE
SPINOFF AND THE COMBINATION TO BE
COMPLETED?
A: Morton and Autoliv expect that the
Spinoff and the Combination will be
completed in late April or early May
1997. Prior to the completion of
transactions, Morton's shareholders
must approve the Spinoff and
Combination and Autoliv stockholders
holding more than 90% of the Autoliv
Securities must accept the Exchange
Offer.
</TABLE>
13
<PAGE>
SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT, AND MAY NOT
CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. TO BETTER UNDERSTAND
THE TRANSACTIONS, AND FOR A MORE COMPLETE UNDERSTANDING OF THE LEGAL TERMS OF
THESE TRANSACTIONS, YOU SHOULD READ THIS ENTIRE DOCUMENT CAREFULLY, AS WELL AS
THOSE ADDITIONAL DOCUMENTS REFERRED TO IN THIS SUMMARY AND ELSEWHERE. SEE "WHERE
SHAREHOLDERS CAN FIND MORE INFORMATION." CAPITALIZED TERMS USED IN THIS SUMMARY
THAT HAVE NOT PREVIOUSLY BEEN DEFINED ARE DEFINED ELSEWHERE IN THIS
PROXY/STATEMENT/PROSPECTUS/EXCHANGE OFFER. SEE THE "INDEX OF DEFINED TERMS" ON
PAGE 9.
THE COMPANIES
MORTON INTERNATIONAL, INC.
100 North Riverside Plaza
Chicago, Illinois 60606
(312) 807-2000
Morton is a manufacturer and marketer of specialty chemicals, salt and
automotive inflatable restraint systems, and offers a wide range of products for
industrial and consumer use in the United States and internationally.
AUTOLIV AB
World Trade Center
Klarabergsviadukten 70
Box 70381
S-107 24 Stockholm
Sweden
46 (8) 402-0600
Autoliv is one of the world's leading companies for airbags, seat belts and
related equipment for personal safety in automobiles.
REASONS FOR THE SPINOFF AND THE COMBINATION
(SEE PAGE 33)
Morton was spun off from its former parent, Morton Thiokol, Inc., in 1989,
at a time when Morton's automotive safety products business represented less
than 4% of Morton's combined sales. Since that time, the ASP Business has
developed financial, investment and operating characteristics different from
those of Morton's specialty chemicals and salt businesses. Morton believes that
separating these businesses will allow each of these businesses to pursue
strategies and focus on objectives appropriate to that business. Developments in
the automotive safety industry include heightened pressure by automobile
manufacturers on suppliers to be cost efficient, to supply fully-integrated
airbag systems, and to coordinate the global supply of airbags, seat belts and
other automotive safety devices. Due to these and other factors, the Morton
Board and Morton's management determined to investigate alternatives for the ASP
Business, including a spinoff of the ASP Business as a stand-alone entity and a
strategic combination with another industry participant. After reviewing these
alternatives, and considering the benefits of combining ASP with Autoliv to
create a leading automotive safety systems supplier with a strong presence in
all major regions of the world, the Morton Board concluded that the Spinoff and
the Combination offered greater potential for increasing Morton shareholder
value. The Morton Board also considered the benefits to New Morton from the
Spinoff, including enhancing New Morton management's ability to focus on, and to
develop from within, the specialty chemicals and salt businesses, and thereby
assisting New Morton in expanding its business and product lines through an
active acquisition program, making planned capital expenditures and continuing
its ongoing share acquisition program. In addition, Goldman, Sachs & Co. has
given its opinion to the Morton Board that, as of the date of the Combination
Agreement, the consideration to be received by Morton shareholders in the
Spinoff and the Merger, taken as a whole, is fair to Morton shareholders.
The Autoliv Board and Autoliv management have reviewed, from time to time,
strategic alternatives and believe that a combination to expand Autoliv's
geographic presence is desirable for Autoliv's long-term prospects. The Autoliv
Board believes that the Combination represents the best alternative for
increasing shareholder value because of Autoliv's and the ASP Business's
complementary products and geographic markets. The Combination also represents
an opportunity to achieve additional benefits through anticipated synergies in
the evolving automotive safety industry. In addition, Enskilda Securities and
The Blackstone Group L.P. have given their opinion to
14
<PAGE>
the Autoliv Board that, as of the date of the Combination Agreement, the
consideration to be received by Autoliv stockholders in the Exchange Offer is
fair from a financial point of view to Autoliv stockholders.
Morton and Autoliv have structured the transactions as the Spinoff followed
by the Combination in order to achieve the strategic benefits of the Combination
in a tax-free manner. Neither Autoliv nor Morton was interested in a transaction
that would combine Autoliv with all of Morton's businesses.
RECOMMENDATIONS TO SHAREHOLDERS
TO MORTON SHAREHOLDERS:
The Morton Board, by a unanimous vote of those present (with one director
absent), has approved the Spinoff and the Distribution Agreement, approved the
other Ancillary Agreements and the Merger, and adopted the Combination
Agreement. The Morton Board recommends that you vote FOR the following
proposals:
(a) to approve the spinoff to Morton's shareholders of New Morton which
will hold all of Morton's businesses other than the ASP Business; and
(b) to approve the Combination Agreement, under which a subsidiary of
New Autoliv will be merged with and into Morton, then holding only the ASP
Business subject to $750 million of new indebtedness used to finance a
capital contribution to New Morton.
TO AUTOLIV STOCKHOLDERS:
The Autoliv Board has unanimously approved the Combination Agreement and the
transactions contemplated by the Combination Agreement, and unanimously
recommends that you ACCEPT the Exchange Offer.
THE SPINOFF, THE MERGER AND THE EXCHANGE OFFER
The Combination Agreement, which is the legal document that governs the
Combination, is attached as Appendix A to this Proxy Statement/Prospectus/
Exchange Offer. The Distribution Agreement, which is the legal document that
governs the Spinoff, is attached as Appendix B to this Proxy Statement/
Prospectus/Exchange Offer. Shareholders are encouraged to read both
documents carefully. Morton shareholders should also read the enclosed New
Morton Information Statement. In addition, New Autoliv has filed other related
agreements, which will govern specific relationships between New Morton and
Morton ASP after the Spinoff and the Combination, as exhibits to the New Autoliv
Registration Statement. "Where Shareholders Can Find More Information" (page
158) describes how to obtain copies of these exhibits.
WHAT MORTON SHAREHOLDERS WILL RECEIVE
(SEE PAGES 2 AND 56)
In the Spinoff, Morton shareholders will receive one share of New Morton
Common Stock and one associated preferred share purchase right for each share of
Morton Common Stock that they own on the Distribution Record Date. This
represents a continuing interest in Morton's specialty chemicals and salt
businesses.
In the Merger, Morton shareholders will receive approximately one share of
New Autoliv Common Stock in exchange for every three shares of Morton Common
Stock that they own immediately before the effective time of the Merger. The
exact exchange ratio will depend on the number of Morton shares outstanding
immediately before the Merger, but the total number of shares of New Autoliv
Common Stock that Morton shareholders will be entitled to receive is fixed at
47,803,738.
New Autoliv will not issue fractional shares in the Merger. Instead, Morton
shareholders will receive a whole number of New Autoliv shares based upon the
aggregate number of shares held by each Morton shareholder, and cash in lieu of
any remaining fractional share that they would otherwise be entitled to receive.
WHAT AUTOLIV STOCKHOLDERS WILL RECEIVE
(SEE PAGE 59)
Autoliv stockholders who accept the Exchange Offer will receive one New
Autoliv Security for each share of Autoliv Common Stock and each ADS that they
tender in the Exchange Offer. If all Autoliv Securities are tendered in the
15
<PAGE>
Exchange Offer, Autoliv stockholders will receive, in total, 53.5% of the New
Autoliv Securities. If more than 90% of the Autoliv Securities are tendered in
the Exchange Offer or are otherwise acquired by New Autoliv, the remaining
Autoliv stockholders who do not accept the Exchange Offer will receive cash for
their Autoliv Securities in the Compulsory Acquisition and will not receive any
New Autoliv Securities.
In accordance with the procedures governing the Compulsory Acquisition, New
Autoliv is entitled to acquire title to the Autoliv Securities not tendered in
the Exchange Offer, which acquisition should occur within four to eight months,
and the price to be paid for such Autoliv Securities will thereafter be set by
an arbitration tribunal. Payment for the Autoliv Securities so acquired will be
made after the tribunal has determined the price, which determination may take
up to two years and may be further delayed until any appeals from the decision
of the tribunal have been finally resolved.
HOW THE TRANSACTIONS WILL BE COMPLETED (SEE PAGES 50, 56 AND 59)
The Transactions will involve the following steps:
(a) Morton has created a new subsidiary (New Morton) which will hold all
of the assets and businesses of Morton other than the ASP Business. Morton
will also contribute to New Morton $750 million of cash, which will be
borrowed under a new credit facility that will remain the responsibility of
Morton ASP, plus an additional $50 million of the cash generated by the ASP
Business since July 1, 1996 plus $7.2 million of cash for each month that
the Spinoff and the Merger are delayed past March 31, 1997.
(b) Morton will spin off to its shareholders all of New Morton, leaving
behind only the ASP Business.
(c) A subsidiary of New Autoliv will then merge with and into Morton
ASP, and, as a result, (i) Morton ASP will become a subsidiary of New
Autoliv, and (ii) the outstanding shares of Morton Common Stock will be
converted into the right to receive New Autoliv Common Stock.
(d) New Autoliv will offer to exchange New Autoliv Securities for all of
the outstanding shares of Autoliv Common Stock and ADSs.
CONDITIONS TO THE TRANSACTIONS (SEE PAGE 74)
The Transactions will not be completed unless a number of conditions are met
(or waived), including the following:
(a) approval of both Proposals by Morton shareholders holding at least a
majority of Morton's outstanding shares;
(b) tender of more than 90% of the Autoliv Securities in the Exchange
Offer;
(c) receipt by Morton and continued effectiveness of an Internal Revenue
Service ruling regarding the tax-free treatment, for U.S. federal income tax
purposes, of the Spinoff (which ruling has been received); receipt of
opinions of outside legal counsel that the Merger and Exchange Offer will be
non-taxable (other than cash received in lieu of fractional shares) for U.S.
federal income tax purposes; and receipt of an opinion of Autoliv's public
accountants that the Exchange Offer will be non-taxable (with certain
limited exceptions) for Swedish income tax purposes;
(d) the absence of any U.S. legislation or pending Congressional action,
or Swedish legislation or pending parliamentary action, that would
materially affect the tax consequences of the Transactions (for certain
legislative developments relating to this condition see page 82);
(e) clearance under U.S., Swedish, German and Belgian antitrust laws
(all of which clearances have been received); and
(f) the establishment by Morton of a new credit facility, which will
fund the $750 million cash contribution that Morton will make to New Morton
and which will remain the responsibility of Morton ASP after the
Transactions.
In addition, the Combination will not occur unless the Spinoff has been
completed. If the Spinoff is completed and all other conditions to
16
<PAGE>
the Merger and the Exchange Offer are met, the Merger and the Exchange Offer
will be consummated promptly following the Spinoff.
TERMINATION OF THE COMBINATION AGREEMENT (SEE PAGE 75)
Morton and Autoliv can terminate the Combination Agreement by mutual
consent, if Morton's shareholders fail to approve the Transactions or if the
Exchange Offer expires without more than 90% of the Autoliv Securities having
been tendered. In addition, either company can terminate the Combination
Agreement if the Transactions have not been completed by August 31, 1997, or
upon the occurrence of certain other events.
EXPENSE REIMBURSEMENT (SEE PAGE 75)
If Morton's or Autoliv's Board of Directors withdraws or changes its
recommendation to shareholders with respect to the Transactions, or recommends
acceptance of, or fails to recommend against, certain competing transactions
with third parties, the other party (Autoliv or Morton) is entitled to terminate
the Combination Agreement and to receive expense reimbursement of up to $20
million.
REGULATORY APPROVALS (SEE PAGE 77)
The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
prohibits Morton and Autoliv from completing the Combination until the two
companies have furnished certain information to the Antitrust Division of the
U.S. Department of Justice and the U.S. Federal Trade Commission, and a required
waiting period has expired or been terminated. On December 27, 1996, the waiting
period expired.
The Combination is also subject to the competition laws of Sweden, Germany
and Belgium, which require pre-closing notification and clearance. On March 7,
1997, the German Federal Cartel Office cleared the Combination. On December 19,
1996, the Combination was cleared by the Swedish Competition Authority. On
January 13, 1997, the deadline for the Belgian Competition Council to take
formal action on the Combination expired without any action on the part of the
Council. In accordance with the Belgian Competition Act, the Combination is
therefore deemed cleared by the Council.
OPINIONS OF FINANCIAL ADVISORS (SEE PAGE 39)
In deciding to approve the transactions, the Morton and Autoliv Boards of
Directors considered, among other things, advice from their respective financial
advisors. The Morton Board subsequently received a written opinion from its
financial advisor, Goldman, Sachs & Co., and the Autoliv Board received a
written opinion from its two financial advisors, Enskilda Securities and The
Blackstone Group L.P., as to the fairness of the consideration to be received by
shareholders in the transactions. These opinions are attached as Appendices C
and D to this Proxy Statement/Prospectus/Exchange Offer. You are encouraged to
read these opinions thoroughly.
In connection with delivering these opinions, Morton's and Autoliv's
financial advisors performed a variety of analyses. While not uniformly
performed or presented, the analyses included comparing Morton and Autoliv
historical stock prices to each other, comparing certain Morton (including ASP)
and Autoliv financial multiples to each other and to those of selected publicly
traded companies and estimating the relative values and contributions to the
Combination of the ASP Business and Autoliv based on past and estimated future
performances and anticipated benefits of the Combination.
CERTAIN INCOME TAX CONSEQUENCES (SEE PAGE 78)
The Spinoff and the Combination have been structured so that neither Morton
nor its shareholders will recognize any gain or loss for U.S. federal income tax
purposes in the Spinoff or the Merger (except with respect to cash received in
lieu of fractional shares). The Combination has also been structured so that
generally none of Autoliv, its stockholders or New Autoliv will recognize any
gain or loss for U.S. federal income tax purposes or for Swedish income tax
purposes as a result of the Exchange Offer. The companies do not intend to
complete the Transactions unless the private letter ruling received by Morton
from the Internal Revenue Service remains effective and the companies receive
opinions of outside tax
17
<PAGE>
counsel and accountants regarding certain of these tax consequences. In
addition, the companies are not required to complete the Transactions if there
is any U.S. or Swedish legislation, or pending congressional or parliamentary
action, that would materially affect the anticipated tax consequences of the
Transactions. For certain legislative developments relating to this condition,
see page 82.
NO DISSENTERS' RIGHTS
(SEE PAGE 156)
Under Indiana law, Morton shareholders have no right to an appraisal of the
value of their shares in connection with the Merger.
ACCOUNTING TREATMENT
(SEE PAGE 82)
The Merger will be accounted for as a purchase for financial accounting
purposes in accordance with U.S. generally accepted accounting principles, with
Autoliv treated as the acquiror of the ASP Business. For New Morton's financial
accounting purposes, the Spinoff will be accounted for as if the ASP Business
were being spun off from Morton and discontinued.
EFFECTS OF THE SPINOFF AND THE COMBINATION ON THE RIGHTS OF MORTON AND AUTOLIV
SHAREHOLDERS
(SEE PAGE 148)
MORTON SHAREHOLDERS:
If the Spinoff and the Merger are completed, Morton shareholders will be
shareholders of both New Morton and New Autoliv. New Morton will be governed by
Indiana law and New Morton's articles of incorporation and bylaws, which will be
substantially the same as Morton's. New Autoliv will be governed by Delaware law
and New Autoliv's certificate of incorporation and bylaws. Rights of Morton
shareholders under these provisions differ in certain respects from the current
rights of Morton shareholders.
AUTOLIV STOCKHOLDERS:
If the Exchange Offer is completed, Autoliv stockholders who tender their
Autoliv Securities will become stockholders of New Autoliv, which will be
governed by Delaware law and New Autoliv's certificate of incorporation and
bylaws. Rights of stockholders under these provisions differ in certain respects
from the current rights of Autoliv stockholders, which are governed by Swedish
law and Autoliv's articles of association.
INTERESTS OF DIRECTORS AND OFFICERS IN THE
TRANSACTIONS (SEE PAGE 83)
Certain of the current and former directors and/or officers of Morton and
Autoliv have employment agreements, benefit plans and other arrangements that
provide them with interests in the Transactions that may be different from, or
in addition to, yours. These interests may result in these individuals receiving
compensation or other benefits that they would otherwise not receive if the
Transactions were not completed.
DIVIDENDS BEFORE THE COMBINATION
The Board of Directors of Autoliv has proposed that a dividend of SEK 2.75
per Autoliv share in respect of fiscal year 1996 be declared and paid prior to
the consummation of the Combination, which dividend has been approved by
Autoliv's Stockholders.
Under the Combination Agreement, Morton is permitted, prior to the
consummation of the Combination, to pay regular quarterly cash dividends not in
excess of $.15 per share of Morton Common Stock.
DIVIDENDS AFTER THE SPINOFF AND THE COMBINATION
(SEE PAGE 32)
Morton currently expects that, following the Spinoff and the Combination,
New Morton will initially pay quarterly cash dividends at the annual rate of
$.48 per share of New Morton Common Stock, and Morton and Autoliv currently
expect that New Autoliv will initially pay quarterly cash dividends at an annual
rate of $.44 per New Autoliv Security. However, the actual amount of such
dividends, if any, may vary and will depend on New Morton's and New Autoliv's
operating results, financial requirements and other factors.
18
<PAGE>
LISTING OF NEW MORTON AND NEW AUTOLIV
SECURITIES (SEE PAGE 157)
The shares of New Morton Common Stock to be issued in the Spinoff are
expected to be listed on the NYSE and the CSE. With respect to New Autoliv, the
shares of New Autoliv Common Stock are expected to be listed on the NYSE and the
SDRs are expected to be listed on the SSE. However, there is currently no public
trading market for any of these securities, and there is no guarantee that there
will be an active market in the securities of New Morton or New Autoliv
following the Spinoff and the Combination.
VOTE REQUIRED FOR MORTON SHAREHOLDER
APPROVAL OF TRANSACTIONS (SEE PAGE 48)
In order for the Proposals to be approved, the holders of a majority of the
shares of Morton Common Stock outstanding as of the record date for the Morton
Special Meeting must vote in favor of the Proposals. As of the record date for
the Morton Special Meeting, Morton's directors and executive officers, and their
respective affiliates, as a group held less than 2% of the shares of Morton
Common Stock entitled to vote at the Morton Special Meeting.
19
<PAGE>
SUMMARY SELECTED HISTORICAL FINANCIAL INFORMATION
AUTOLIV
The following selected financial data for the years 1992 to 1996 have been
derived from Autoliv's Consolidated Financial Statements and the Notes thereto.
The data should be read in conjunction with "Autoliv Management's Discussion and
Analysis of Financial Condition and Results of Operations" and Autoliv's
Consolidated Financial Statements and notes thereto included elsewhere herein
and are qualified in their entirety by reference to Autoliv's Consolidated
Financial Statements and the notes relating thereto.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996 1995 1994 1993 1992
<CAPTION>
PRO PRO
(MSEK UNLESS OTHERWISE STATED) FORMA(1) FORMA(1)
- ------------------------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA (2)
Net sales....................................................... 11,629 10,201 8,947 5,333 3,534
Operating income................................................ 1,093 916 664 310 211
Income before taxes............................................. 1,145 1,009 680 240 167
Net income...................................................... 760 649 430 125 97
Earnings per share (SEK)(3)..................................... 13.82 11.80 8.15
Dividends paid per share (SEK)(3)............................... 2.75(4) 2.25(5) 1.50(6)
BALANCE SHEET DATA (2)
Total assets.................................................... 7,238 5,585 4,911 3,058 2,380
Shareholders' equity............................................ 3,150 2,527 2,040 1,201 811
</TABLE>
- ------------------------
(1) According to the Initial Public Offering Prospectus of Autoliv, dated May
26, 1994. See "Description of Autoliv--General."
(2) See "Unaudited Pro Forma Condensed Combined Financial Information" for the
effects of the Transactions.
(3) Adjusted for a 2 for 1 stock split effective in May 1996.
(4) Dividend approved by Autoliv stockholders at Autoliv's Annual Meeting of
Stockholders on March 24, 1997; to be declared and paid prior to
consummation of the Combination.
(5) Dividend declared in April 1996 with respect to the year ended December 31,
1995, which amount was equivalent to approximately $.33 based on an exchange
rate of US$ 1=SEK 6.8240 on May 3, 1996, the date such dividend was paid.
(6) Dividend declared in April 1995 with respect to the year ended December 31,
1994, which amount was equivalent to approximately $.21 based on an exchange
rate of US$ 1=SEK 7.2590 on May 5, 1995, the date such dividend was paid.
20
<PAGE>
MORTON AUTOMOTIVE SAFETY PRODUCTS
The following selected combined financial information for Morton's
Automotive Safety Products Group has been derived from the combined financial
statements of ASP. The data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations of
Automotive Safety Products" and the combined financial statements of ASP and
notes thereto included elsewhere herein. The income statement data for the years
ended June 30, 1996, 1995 and 1994, and the balance sheet data as of June 30,
1996 and 1995, have been derived from the audited combined financial statements
of ASP. The income statement data for the years ended June 30, 1993 and 1992,
and the six months ended December 31, 1996 and 1995, and the balance sheet data
as of June 30, 1994, 1993 and 1992, and as of December 31, 1996 and 1995, have
been derived from the unaudited combined financial statements of ASP, which, in
the opinion of management, include all adjustments (consisting of normal
recurring adjustments) necessary for a fair presentation of financial position
and results of operations for such periods. Operating results for the six months
ended December 31, 1996, are not necessarily indicative of the results that may
be expected for the entire fiscal year ending June 30, 1997.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30 DECEMBER 31
----------------------------------------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1996 1995 1994 1993 1992 1996 1995
--------- --------- --------- --------- --------- --------- ---------
<CAPTION>
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA(1)
Net sales................................. $ 1,397.5 $ 1,226.3 $ 938.5 $ 524.0 $ 328.9 $ 732.0 $ 659.6
Operating income.......................... 251.5 223.9 160.7 78.0 48.4 121.3 122.7
Income before other charges, net of income
taxes................................... 151.6 141.4 103.2 49.7 31.2 73.0 74.7
Other charges to income(2)................ -- -- -- 3.7 -- -- --
Net income................................ 151.6 141.4 103.2 46.0 31.2 73.0 74.7
BALANCE SHEET DATA(1)
Total assets.............................. $ 776.5 $ 729.0 $ 616.0 $ 506.9 $ 366.7 $ 830.7 $ 784.8
Equity.................................... 561.9 592.1 499.9 418.6 310.1 601.8 591.6
</TABLE>
- ------------------------
(1) See "Unaudited Pro Forma Condensed Combined Financial Information" for the
effects of the Transactions.
(2) The 1993 charge was the cumulative effect of the change in accounting for
postretirement benefits other than pensions and postemployment benefits.
21
<PAGE>
MORTON
The following table sets forth selected historical financial data of Morton,
including ASP. The financial data set forth below have been derived from the
consolidated financial statements of Morton as of the dates indicated and for
each of the fiscal years in the five-year period ended June 30, 1996. The data
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the consolidated financial
statements of Morton and notes thereto included in Morton's Report on Form 10-K
for the year ended June 30, 1996 and Morton's Quarterly Report on Form 10-Q for
the fiscal quarter and six months ended December 31, 1996, each of which is
incorporated herein by reference. The income statement data for each of the five
years in the period ended June 30, 1996, and the balance sheet data as of the
same dates have been derived from the audited consolidated financial statements
of Morton. The income statement data for the six months ended December 31, 1996
and 1995, and the balance sheet data as of December 31, 1996 and 1995 have been
derived from the unaudited consolidated financial statements of Morton, which,
in the opinion of management, include all adjustments necessary for a fair
presentation of financial position and results of operations for such periods.
Operating results for the six months ended December 31, 1996 are not necessarily
indicative of the results that may be expected for the entire fiscal year ending
June 30, 1997.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED JUNE 30 DECEMBER 31
----------------------------------------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1996 1995 1994 1993 1992 1996 1995
--------- --------- --------- --------- --------- --------- ---------
<CAPTION>
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net sales....................... $ 3,612.5 $ 3,325.9 $ 2,849.6 $ 2,309.8 $ 2,043.9 $ 1,819.2 $ 1,725.7
Income before other charges, net
of income taxes(1)............ $ 334.2 $ 294.1 $ 226.5 $ 126.9 $ 144.5 $ 166.8 $ 166.8
Other charges to income(2)...... -- -- -- 94.4 -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net income...................... $ 334.2 $ 294.1 $ 226.5 $ 32.5 $ 144.5 $ 166.8 $ 166.8
--------- --------- --------- --------- --------- --------- ---------
Income before other charges per
common share(1)............... $ 2.24 $ 1.96 $ 1.51 $ .86 $ .98 $ 1.15 $ 1.11
Other charges to income per
common share(2)............... -- -- -- (.64) -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net income per common share..... $ 2.24 $ 1.96 $ 1.51 $ .22 $ .98 $ 1.15 $ 1.11
--------- --------- --------- --------- --------- --------- ---------
Cash dividends paid per common
share......................... $ .520 $ .440 $ .373 $ .320 $ .320 $ .300 $ .260
--------- --------- --------- --------- --------- --------- ---------
BALANCE SHEET DATA
Total assets.................... $ 2,771.5 $ 2,756.0 $ 2,462.6 $ 2,238.8 $ 2,110.9 $ 2,937.4 $ 2,868.8
Long-term debt.................. 218.5 218.5 198.6 217.8 222.6 218.5 218.5
Shareholders' equity............ 1,672.8 1,663.5 1,399.6 1,200.2 1,222.9 1,788.9 1,740.0
Shareholders' equity per common
share......................... $ 11.75 $ 11.22 $ 9.48 $ 8.20 $ 8.40 $ 12.57 $ 11.83
</TABLE>
- ------------------------
(1) Fiscal 1996 included special charges of $15.8 million or $.11 per share
related to the early adoption of the accounting standard related to
impairment of long-lived assets and $8.1 million or $.05 per share for the
costs related to selected facility rationalizations and employee
terminations resulting from the reorganization of certain of the specialty
chemicals operations. Fiscal 1996 also included $15.1 million or $.10 per
share of income related to the settlement of several environmental insurance
issues and $7.1 million or $.05 per share related to proceeds from the sale
of distribution rights, net of the impact on operations, received in
conjunction with the formation of a joint venture. Fiscal 1993 included
special accruals related to the restructuring of operations, including
disposition of facilities and relocation of manufacturing facilities of
$19.1 million or $.13 per share. Six months ended December 31, 1995 included
$15.1 million or $.10 per share of income related to the settlement of
several environmental insurance issues.
(2) The 1993 charge was the cumulative effect of the change in accounting for
postretirement benefits other than pensions and postemployment benefits.
22
<PAGE>
SUMMARY SELECTED UNAUDITED PRO FORMA
FINANCIAL INFORMATION OF NEW AUTOLIV
The following selected pro forma financial data for New Autoliv as of and
for the year ended December 31, 1996 has been derived from the pro forma
condensed combined financial statements included elsewhere herein. The
accompanying consolidated financial statements, including the notes thereto, of
Autoliv and the combined financial statements, including the notes thereto, of
Morton ASP are an integral part of the pro forma financial data. Assuming
completion of the Transactions, the actual financial position and results of
operations will differ, perhaps significantly, from the pro forma amounts
reflected herein because of a variety of factors, including access to additional
information, changes in value, and changes in operating results between the date
of the pro forma financial data and the date on which the Transactions take
place.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
-----------------
<S> <C>
(IN MILLIONS,
EXCEPT
PER SHARE
DATA)(1)
INCOME STATEMENT DATA
Sales........................................................................................ $ 3,204.4
Operating income (2)......................................................................... 348.7
Income before income taxes (2)............................................................... 303.6
Net income (2)............................................................................... 176.9
BALANCE SHEET DATA
Total assets................................................................................. $ 3,371.0
Long-term debt............................................................................... 762.8
Shareholders' equity......................................................................... 1,834.8
PER SHARE DATA (3)(4)
Net income (2)............................................................................... $ 1.72
Shareholders' equity......................................................................... 17.85
</TABLE>
- ------------------------
(1) For purposes of preparing the selected pro forma financial data for New
Autoliv, exchange rates of US$ 1 = SEK 6.87 and US$ 1 = SEK 6.7046 were used
to convert SEK amounts as of and for the year ended December 31, 1996,
respectively.
(2) These amounts do not reflect the effects of the $555.0 million, $5.40 per
share, one-time writeoff of purchased in-process research and development
with no resulting tax benefit.
(3) Per share data have been computed using 102.8 million shares outstanding,
assuming the Exchange Offer is fully accepted.
(4) Pro forma dividends per share have not been reflected as Morton ASP operated
as a division of Morton. Autoliv declares dividends annually, and, on
January 30, 1997, the Board of Directors of Autoliv (the "Autoliv Board")
proposed a dividend to be paid related to the year ended December 31, 1996
of approximately $.38 (SEK 2.75) per share, which dividend was approved by
Autoliv's stockholders at Autoliv's Annual Meeting of Stockholders on March
24, 1997. See "Comparative Per Share Market Price and Dividend Information"
and "Risk Factors--Dividend Policies."
23
<PAGE>
COMPARATIVE PER SHARE INFORMATION
The Morton Common Stock is listed on the NYSE and the CSE under the symbol
"MII." The Autoliv Common Stock is listed on the SSE under the symbol "ALIV" and
Autoliv's ADSs are quoted on the Private Offerings, Resales and Trading through
Automated Linkages system (the "PORTAL system"). As of December 31, 1996,
approximately 30% of the Autoliv Securities were held by U.S. Persons.
Applications have been or will be made to list the New Morton Common Stock on
the NYSE and the CSE, and for New Autoliv to list the New Autoliv Common Stock
on the NYSE and the SDRs on the SSE. There is currently no trading market for
either the New Morton Common Stock or the New Autoliv Common Stock. See "Risk
Factors--Absence of Trading Markets for New Autoliv Securities and New Morton
Common Stock; Market Prices." SECURITY HOLDERS ARE URGED TO OBTAIN CURRENT
MARKET QUOTATIONS PRIOR TO MAKING ANY DECISIONS WITH RESPECT TO THE
TRANSACTIONS.
On September 27, 1996, the last full trading day prior to the public
announcement of the signing of the letter of intent in connection with the
proposed Transactions, the closing price of Morton Common Stock on the NYSE
Composite Transaction Tape was $38 per share and the closing price of Autoliv
Common Stock on the SSE was SEK 253 per share. On November 22, 1996, the last
full trading day prior to the public announcement of the signing of the
Combination Agreement, the closing price of Morton Common Stock on the NYSE
Composite Transaction Tape was $39 5/8 per share and the closing price of
Autoliv Common Stock on the SSE was SEK 289 per share.
On March 20, 1997, the most recent practicable date prior to the printing of
this Proxy Statement/ Prospectus/Exchange Offer, the closing price of Morton
Common Stock on the NYSE Composite Transaction Tape was $42 7/8 per share and
the closing price of the Autoliv Common Stock on the SSE was SEK 315 per share.
The left portion of the following table sets forth, for the calendar
quarters indicated, the reported high and low sale prices of the Morton Common
Stock as reported on the NYSE Composite Transaction Tape and the dividends
declared per share of Morton Common Stock. The right portion of the table below
sets forth, for the calendar periods indicated, the high and low closing sale
prices for the Autoliv Common Stock, as stated in the Official List of the SSE
(the "Official List"), and the ADSs on the PORTAL system as well as dividends
declared on the Autoliv Common Stock. The Official List reflects price and
volume information for trades completed by members of the SSE during the day as
well as for inter-dealer trades completed off the SSE and certain inter-dealer
trades completed during trading on the previous business day. Dividends on
Autoliv Common Stock are declared annually and are subject to a vote by the
Autoliv stockholders at a general meeting.
24
<PAGE>
PER SHARE MARKET PRICE AND DIVIDEND INFORMATION
<TABLE>
<CAPTION>
MORTON COMMON STOCK AUTOLIV COMMON STOCK(1)
--------------------------- -----------------------
MARKET PRICE CASH MARKET PRICE
------------- DIVIDEND -----------------
HIGH LOW DECLARED HIGH LOW
----- ----- ----------- ----- ----
($ PER SHARE) (SEK PER SHARE)
<S> <C> <C> <C> <C> <C>
1995
First Quarter............. 30 7/8 26 1/4 .11 145 1/2 127
Second Quarter............ 32 26 1/4 .11 207 140 3/4
Third Quarter............. 34 28 1/8 .13 252 195
Fourth Quarter............ 36 1/8 29 5/8 .13 218 163 1/2
1996
First Quarter............. 40 1/4 34 .13 195 146 3/4
Second Quarter............ 39 3/4 34 3/8 .13 201 1/2 187 1/2
Third Quarter............. 40 1/2 33 1/4 .15 310 182
Fourth Quarter............ 43 38 1/8 .15 307 266
1997
First Quarter through
March 20................ 44 5/8 40 .15 349 293
<CAPTION>
AUTOLIV ADSS(1)(2)
CASH -------------------------
DIVIDEND HIGH LOW
------------- ----------- ------
($ PER ADS)
<S> <C> <C> <C>
1995 2.25 (3)
First Quarter............. N/A N/A
Second Quarter............ 27 1/2 23
Third Quarter............. 35 27 5/16
Fourth Quarter............ 31 1/2 26
1996 2.75 (4)
First Quarter............. 29 1/8 21 1/4
Second Quarter............ 31 1/2 25 3/8
Third Quarter............. 42 7/8 27 3/4
Fourth Quarter............ 45 1/8 40 3/4
1997
First Quarter through
March 20................ 47 1/2 41
</TABLE>
- ------------------------
(1) Adjusted to reflect a 2 for 1 stock split effective in May 1996.
(2) Each ADS represents one share of Autoliv Common Stock.
(3) Dividend declared in April 1996 with respect to the year ended December 31,
1995.
(4) Dividend of SEK 2.75 (approximately $.38, based on current exchange rates)
per share with respect to the year ended December 31, 1996 approved by
Autoliv's stockholders at Autoliv's Annual Meeting of Stockholders on March
24, 1997. The dividend will be paid prior to consummation of the
Combination.
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<PAGE>
The following table sets forth certain per share information relating to
Autoliv and Morton ASP, as well as pro forma per share information relating to
New Autoliv. The last two columns indicate the pro forma New Autoliv information
based on the exchange ratios for each of the Exchange Offer and the Merger.
COMPARATIVE NEW AUTOLIV PER SHARE DATA
DECEMBER 31, 1996
<TABLE>
<CAPTION>
MORTON PRO FORMA EQUIVALENT PRO FORMA DATA(3)
AUTOLIV ASP NEW AUTOLIV ------------------------------
(1) (2) (3) AUTOLIV MORTON ASP
---------- ------ -------------- ---------- -----------------
<S> <C> <C> <C> <C> <C>
(IN MILLIONS EXCEPT PER SHARE DATA)
Book Value Per Share......................... $8.34 $ 4.23 $17.85 $23.25(6) $7.81(6)
Net Income Per Share (4)..................... $2.06 $ 1.02 $ 1.72(5) $ 1.72(5) $0.58(5)
Cash Dividends Declared Per Share............ $0.38(7) $ -- (8) $ 0.44(9) $ 0.44 $0.15
Average Shares Outstanding................... 55.0 146.7 102.8
Shares Outstanding........................... 55.0 142.3 102.8
</TABLE>
- ------------------------
(1) For purposes of preparing the data above, exchange rates of US$ 1=SEK 6.87
and US$ 1=SEK 6.70 were used to convert SEK amounts as of and for the year
ended December 31, 1996, respectively.
(2) Amounts computed using shares outstanding of Morton.
(3) Pro forma and equivalent pro forma per share data is computed based on the
assumption that the Exchange Offer is fully accepted.
(4) Net income per share are based on net income for the year ended December 31,
1996.
(5) These amounts do not reflect the effect of the $555.0 million, $5.40 per
share, one-time writeoff of purchased in-process research and development
with no resulting tax benefit.
(6) Equivalent pro forma book value per share has been calculated based on pro
forma shareholders' equity before the one-time charge related to the
writeoff of purchased in-process research and development.
(7) On January 30, 1997, the Autoliv Board proposed a dividend to be paid
related to the year ended December 31, 1996 of SEK 2.75 per share, which
dividend was approved by Autoliv's stockholders on March 24, 1997.
(8) Dividends declared per share have not been reflected as Morton ASP operated
as a division of Morton.
(9) Morton and Autoliv currently expect New Autoliv will initially pay quarterly
dividends at an annual rate of $.44 per share.
26
<PAGE>
RISK FACTORS
ABSENCE OF TRADING MARKETS FOR NEW AUTOLIV SECURITIES AND NEW MORTON COMMON
STOCK; MARKET PRICES
Prior to the consummation of the Transactions, there will not have been any
trading market for the New Autoliv Securities or New Morton Common Stock, and
there can be no assurance as to the prices at which trading in the New Autoliv
Securities or New Morton Common Stock will occur after completion of the
Transactions. Trading prices of the New Autoliv Securities and New Morton Common
Stock may be volatile while the securities are being fully distributed and while
an orderly market is developing. Prices for the New Autoliv Securities and New
Morton Common Stock will be determined in the marketplace and may be influenced
by many factors, including the operating performance of New Autoliv and New
Morton, the depth and liquidity of the market for New Autoliv Securities and New
Morton Common Stock, investor perception of New Autoliv and New Morton and the
prospects for their businesses, New Autoliv's and New Morton's reported
financial results and respective dividend policies, and general economic and
market conditions. Applications have been or will be made to list the shares of
New Autoliv Common Stock on the NYSE and the SDRs on the SSE, and to list the
shares of New Morton Common Stock on the NYSE and the CSE. There can be no
assurance as to the trading prices or volatility of any such securities on any
of these exchanges. The sum of the trading prices of each of the New Autoliv
Securities and New Morton Common Stock held by former Morton shareholders after
the Spinoff and the Combination may be less than, equal to or greater than the
trading price of the shares of Morton Common Stock held by such shareholders
prior to the Spinoff.
CERTAIN FINANCIAL CONSIDERATIONS; SUBSTANTIAL LEVERAGE
Following consummation of the Transactions, New Autoliv will be
substantially more leveraged on a consolidated basis than either Morton or
Autoliv has been on an historical basis as a result of Morton's borrowings under
the New Credit Facility (as defined herein), which will be the obligation of
Morton ASP after the Spinoff and which may reduce New Autoliv's flexibility in
responding to adverse changes in economic, business or market conditions. Morton
believes that New Morton and Morton ASP, and Autoliv and ASP believe that New
Autoliv, should be able to finance their respective current operating and
capital requirements. On a pro forma basis, New Autoliv would have had $762.8
million of long-term debt outstanding, as of December 31, 1996. See
"Summary--Summary Selected Unaudited Pro Forma Financial Information of New
Autoliv" and "Unaudited Pro Forma Condensed Combined Financial Information."
NONREALIZATION OF SYNERGIES; RESTRUCTURING CHARGE
The Combination involves the integration of two previously independently
operated companies with separate international operations. New Autoliv
anticipates that such integration will result in New Autoliv taking a
restructuring charge in 1997, although such amount is not currently
determinable. There can be no assurance that New Autoliv will not encounter
difficulties in integrating the respective operations of Autoliv and Morton ASP
or that the benefits expected from such integration will be realized. Such
difficulties would include, among other things, differences between Sweden and
the United States, which may make more difficult the integration of New Autoliv
senior management and the establishment of a managerial and operational team.
Any material delays or unexpected costs incurred in connection with such
integration could have a material adverse effect on New Autoliv's business,
operating results or financial condition. Among the factors considered by the
Autoliv Board and the Morton Board in connection with their respective approvals
of the Combination Agreement and the applicable transactions were the
opportunities for economies of scale and operating efficiencies that could
result from the Combination. See "Background, Reasons and
Recommendations--Reasons for the Spinoff and the Merger; Recommendations of the
Morton Board" and "--Reasons for the Combination and the Exchange Offer;
Recommendations of the Autoliv Board."
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<PAGE>
STRUCTURE OF THE TRANSACTIONS; INDEMNIFICATION OBLIGATIONS
As a result of the Transactions, the shareholders of Autoliv and Morton will
become shareholders of New Autoliv, whose businesses will be subject to the
risks of the ASP Business and the Autoliv businesses, and Morton shareholders
will become shareholders of New Morton, whose businesses will be subject to the
risks of the New Morton Businesses. In addition, while New Morton will agree to
indemnify Morton ASP and New Autoliv for the liabilities assumed by New Morton
pursuant to the Ancillary Agreements (including certain liabilities related to
the salt and chemicals businesses which are contingent liabilities of Morton ASP
by virtue of the structure of the Spinoff), and Morton ASP will agree to
indemnify New Morton for the liabilities retained by Morton ASP pursuant to the
Ancillary Agreements, the availability of such indemnities will be dependent
upon the financial strength and creditworthiness of New Morton and Morton ASP,
respectively. No assurance can be given that such entities will be in a position
to fund such indemnities should they be obligated to do so in the future. For a
description of the Ancillary Agreements and the liabilities and respective
indemnity obligations of New Morton and Morton ASP thereunder, see "Pre-Merger
Transactions."
DEPENDENCE ON THE AUTOMOTIVE INDUSTRY
The customers of Autoliv and ASP are automobile manufacturers whose
production volumes are dependent upon general economic conditions and the level
of consumer spending. The volume of car production in Autoliv's and ASP's most
important markets in North America, Europe and Asia has fluctuated considerably
year to year, and such fluctuations may give rise to fluctuations in the demand
for Autoliv's and ASP's products.
SUBSTANTIAL RELIANCE BY NEW AUTOLIV ON MAJOR CUSTOMERS
A relatively small number of automobile manufacturers compose the existing
customer base of Autoliv and ASP. Although business with any given customer is
typically split into several contracts (usually one contract per car model), the
loss of certain customers of the combined business could have a material adverse
effect on New Autoliv. Certain customers may decide to shift some orders that
would have been given to ASP or Autoliv while such companies were independent to
a third party in order to reduce such customers' dependence on New Autoliv.
Combined sales to Autoliv's seven largest customers represented approximately
70% of total fiscal 1996 sales. Combined sales to ASP's three largest customers
represented approximately 55% of total fiscal 1996 sales. See "Description of
Autoliv--Customers" and "Description of the ASP Business--Customers."
NEW AUTOLIV'S PRICING PRESSURES
As a consequence of the major automobile manufacturers' strong purchasing
power, and the competitive pressures on car occupant restraint system suppliers
to increase such suppliers' manufacturing capabilities, the unit prices of seat
belts and airbag systems may continue to decline in the future. In addition,
similar to other automobile component manufacturers, Autoliv and Morton expect
that New Autoliv and its subsidiaries will, under certain circumstances, quote
fixed or maximum prices for long-term supply arrangements. The future
profitability of New Autoliv will depend upon, among other things, its ability
to continue to reduce its per unit costs and maintain a cost structure,
internally and with its suppliers, that will enable it to remain
cost-competitive. New Autoliv's profitability may also be influenced by its
success in designing and marketing technological improvements in car occupant
restraint systems.
NEW AUTOLIV'S DEPENDENCE ON SUPPLIERS
New Autoliv may be dependent in certain instances on a single supplier for
certain components. Delays or stoppages in the delivery of components could
result in New Autoliv being unable to supply complete products. Such delays or
stoppages could result in New Autoliv's customers having to halt their
28
<PAGE>
own production processes, which might result not only in loss of income to New
Autoliv on the reduced volume of supplied products but also in the customer
seeking recoupment for consequential losses incurred due to its own lost
production.
PATENTS AND PROPRIETARY TECHNOLOGY
An important aspect of the strategy of each of ASP and Autoliv has been
active involvement in the original design and marketing of innovative car
occupant restraint systems. In this regard, ASP and Autoliv have each developed
a considerable amount of proprietary technology and each relies on a number of
patents to protect such technology. There can be no assurance that any patents
now owned by ASP or Autoliv, or, following the Combination, by New Autoliv, will
afford protection against competitors that develop similar technology.
Although ASP and Autoliv believe that their products and technology do not
infringe the proprietary rights of others, there can be no assurance that third
parties will not assert infringement claims against them, or against New Autoliv
in the future.
TECHNOLOGICAL CHANGE
Certain areas of the businesses of ASP and Autoliv, in particular, restraint
and protection systems utilizing airbags, are subject to technological change.
While ASP and Autoliv believe that, through their research and development
activities, their product range will keep pace with changing technologies, there
can be no assurance that products or technologies developed by others will not
reduce the competitiveness of New Autoliv's products.
CERTAIN REGULATORY MATTERS AND DEVELOPMENTS
The automotive safety industry is subject to substantial regulation, both in
the United States and in many other countries, which may affect the demand for
New Autoliv's products and New Autoliv's manufacturing and development costs.
These regulations are subject to frequent review by applicable regulatory
authorities and other governmental entities, and are subject to change. In the
United States, current federal legislation requires driver-side and
passenger-side airbags in all new passenger cars by September 1, 1997, and in
all new light vehicles (unloaded vehicle weight of 5,500 pounds or less) by
September 1, 1998. Changes in regulations, including permitting delays in
implementing certain provisions regarding installation of airbags under
applicable U.S. regulations, could have a material impact on New Autoliv's
operations and financial condition. Such regulations are subject to a number of
factors that are not within the control of New Autoliv, including adverse
publicity regarding the safety risks of airbags to children and small adults,
domestic and foreign political developments, and litigation relating to New
Autoliv's and its competitors' products. There can be no assurance that
regulatory developments or adverse publicity will not adversely affect customer
demand for automotive safety products or New Autoliv's business. Such changes
could also result in slower increases, or in decreases, in demand for automotive
safety products in other countries.
In November and December 1996, the U.S. National Highway Traffic Safety
Administration ("NHTSA") announced a series of proposed and final regulations
relating to airbags. The proposed regulations include a fall 1998 phase-in
schedule (for 1999 model-year cars) for adaptive airbags that adjust deployment
based on the size of the car occupant and the crash circumstances. NHTSA has
proposed certain regulations, to be in force until the regulations requiring
adaptive airbags take effect, relating to de-powering of airbags (which proposed
regulations were adopted on an interim basis in March 1997) and deactivation of
airbags at a customer's request. NHTSA has also indicated its intention to
propose regulations that would require the phase-in of "smart airbags," the
deployment of which would vary depending upon the severity of the crash and
certain physical characteristics of the seat occupant. Implementation of such
regulations could result in additional capital expenditures by New Autoliv,
could
29
<PAGE>
require additional technological improvements and could result in lower sales
than would otherwise be expected. The final regulations also require various
additional warning labels to be conspicuously installed on new cars with airbags
prior to the implementation of the regulations requiring adaptive airbags. The
effect on New Autoliv of the proposed regulations, if implemented, or of future
regulatory developments in the United States or other countries is dependent
upon many factors, some of which are outside New Autoliv's control and cannot be
predicted. For a description of Autoliv's and ASP's product development programs
relating to adaptive airbags, see "Description of Autoliv--Research, Development
and Engineering" and "Description of the ASP Business--Research, Development and
Engineering."
PRODUCT RECALLS AND PRODUCT LIABILITY LITIGATION; INSURANCE COVERAGE LIMITS
From time to time, Morton, with respect to the ASP Business, and Autoliv
have been named as defendants in product liability lawsuits. Product liability
historically has not had an adverse impact on the financial condition of either
Autoliv or ASP. However, in the United States, future damages awards could
exceed the limits of available insurance coverage, and Morton, with respect to
the ASP Business, and Autoliv might be held liable for punitive damages which
are not capable of estimation. In addition, from time to time, the customers of
Autoliv and ASP request their suppliers to participate in the defense of product
liability litigation or to contribute to claim settlements.
The possibility of substantial product recalls could pose a significant
commercial risk to New Autoliv in the future. Autoliv carries product liability
and product recall insurance with coverage limits that Autoliv management
believes are sufficient to cover potential product recalls. While ASP carries
product liability insurance, product recall insurance generally is unavailable
in the United States, and ASP carries no such product recall insurance. A
substantial product recall or damages award that is not covered by insurance or
results in liabilities in excess of any coverage limits could have a material
adverse effect on the financial condition and operating results of New Autoliv.
GLOBAL OPERATIONS
The operations of New Autoliv will be subject to the usual risks inherent in
global operations, including, but not limited to: risks with respect to currency
exchange rates; economic and political destabilization; other disruption of
markets; restrictive laws and actions of certain governments (such as
restrictions on transfer of funds, export duties and quotas, foreign customs and
tariffs, and unexpected changes in regulatory environments); difficulty in
obtaining distribution and support; nationalization; laws and policies of the
United States, the European Union, and the World Trade Organization affecting
trade, investment and loans; and tax laws. There can be no assurance that these
factors will not have a material adverse impact on New Autoliv's ability to
increase or maintain its international sales or on its results of operations.
For a description of Autoliv's and ASP's operations outside of the United
States, see "Description of Autoliv" and "Description of the ASP Business."
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
Consummation of the Transactions is conditioned upon, among other things,
the continued effectiveness of the private letter ruling received by Morton (the
"Private Letter Ruling") from the U.S. Internal Revenue Service (the "IRS") to
the effect, among other things, that the formation of New Morton and the Spinoff
will be tax free under Sections 368(a)(1)(D) and 355 of the Internal Revenue
Code of 1986, as amended (the "Code"). See "Certain Tax Consequences of the
Transactions--United States Federal Income Tax Considerations." Such rulings,
while generally binding upon the IRS, are subject to certain factual
representations and assumptions, including a representation that the Merger will
qualify as a tax-free reorganization under Section 368(a)(1)(B) of the Code.
Morton and Autoliv are not aware of any present facts or circumstances which
would cause such representations and assumptions to be untrue. In addition, in
February 1997, the U.S. President proposed to Congress certain changes in the
Code, which, if effected, would cause the Spinoff to be taxable to Morton. The
U.S. President's proposal would amend the
30
<PAGE>
relevant provisions effective on the first day of Congressional committee
action; in its current form, the proposed legislation contains no "binding
contract" or other grandfathering provision that would permit the Spinoff, if
not consummated before the date of Congressional committee action, to be treated
as non-taxable to Morton for U.S. federal income tax purposes. Congressional
action with respect to the U.S. President's proposals could delay or prevent the
consummation of the Transactions.
Consummation of the Transactions is also conditioned on Morton's receipt of
an opinion of counsel that the Merger qualifies as a tax-free reorganization
under Section 368(a)(1)(B) of the Code and Autoliv's receipt of an opinion of
counsel that the Exchange Offer (in conjunction with the acquisition of Morton
Common Stock in the Merger) will be a tax-free transfer of property for U.S.
federal income tax purposes. An opinion of counsel is not binding on the IRS or
the courts. See "Certain Tax Consequences of the Transactions--United States
Federal Income Tax Considerations."
New Autoliv has agreed in the Combination Agreement, and New Morton will
agree in the Distribution Agreement, to certain restrictions on their future
actions to provide further assurances that the Transactions will qualify as tax
free for U.S. federal income tax purposes. See "Pre-Merger Transactions--Terms
of the Tax Sharing Agreement."
REGULATORY CONDITIONS AND APPROVALS
Consummation of the Transactions is conditioned upon the receipt of all
material governmental authorizations, consents, orders and approvals, including
the expiration or termination of the applicable waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and any other competition, merger control or similar law, including
approvals under such laws of Germany, Sweden and Belgium. The waiting period
under the HSR Act expired in December 1996, and the Combination was cleared by
the Swedish Competition Authority on December 20, 1996. On January 13, 1997, the
deadline for the Belgian Competition Council to take formal action on the
Combination expired without any action on the part of the Council, and, as a
result, the Combination is deemed cleared by the Belgian Competition Council. On
March 7, 1997, the German Federal Cartel Office cleared the Combination.
Notwithstanding the expiration of the waiting period under the HSR Act, the U.S.
Federal Trade Commission (the "FTC"), the U.S. Department of Justice (the "DOJ")
or others could take separate action under the antitrust laws independent of the
HSR Act with respect to the Combination, including seeking to enjoin the
consummation of the Merger and the Exchange Offer, to rescind the Merger or the
Exchange Offer, or to require the divestiture of substantial assets of Morton,
Autoliv or New Autoliv. There can be no assurance that a challenge to the
Combination on antitrust grounds will not be made or, if such a challenge is
made, that it would not be successful. In addition, Morton and Autoliv may
decide voluntarily to notify competition authorities in other countries. There
can be no assurance that any such approvals will be obtained, or, if they are
obtained, that they will be obtained in a timely manner or that they will not be
subject to conditions that could have an adverse effect on New Autoliv's
business. See "The Combination Agreement--Conditions to the Merger and the
Exchange Offer" and "Regulatory Matters."
INTERESTS OF MANAGEMENT
Certain members of Morton's and Autoliv's current and former managements and
their respective boards of directors, including individuals who will be
directors and/or executive officers of New Autoliv, have certain interests in
the Transactions that are different from, or in addition to, the interests of
the companies' shareholders generally. The Combination will give rise to
entitlements and benefits with respect to certain severance, employment and
change of control agreements. There can be no assurance that New Autoliv will
not experience the loss of key Autoliv or Morton ASP personnel. In addition, all
outstanding Morton stock options held by ASP employees will become fully
exercisable options to purchase New Autoliv stock. See "Interests of Certain
Persons in the Transactions." Information concerning certain matters relating to
the employment and compensation of the directors and executive
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<PAGE>
officers of Morton is contained in Morton's Report on Form 10-K for the year
ended June 30, 1996 (the "Morton 1996 Form 10-K"), which incorporates the
relevant portions of Morton's 1996 Notice of Annual Shareholders Meeting and
Proxy Statement (the "Morton 1996 Proxy Statement"), and which is incorporated
herein by reference. See "Where Shareholders Can Find More Information."
Information concerning certain matters relating to the employment and
compensation of those current and former directors and executive officers of
Autoliv who will serve as directors and/or executive officers of New Autoliv is
contained under "Description of New Autoliv--Directors and Executive Officers"
and in Appendix G to this Proxy Statement/Prospectus/Exchange Offer. For a
discussion of provisions of the Combination Agreement relating to the
indemnification of directors and officers of Morton and Autoliv, see "The
Combination Agreement--Director and Officer Liability."
DIVIDEND POLICIES
It is currently anticipated that, following the Transactions, New Morton
will initially pay quarterly cash dividends at the annual rate of $.48 per share
of New Morton Common Stock and New Autoliv will initially pay quarterly cash
dividends at an annual rate of $.44 per New Autoliv Security. No such dividends
have been declared, however, and the actual amount of such dividends, if any,
may vary and will depend on the companies' respective operating results,
financial requirements and other factors. The Autoliv Board proposed, and the
Autoliv stockholders on March 24, 1997 approved, that a dividend in the amount
of SEK 2.75 (approximately $.38, based on current exchange rates) per Autoliv
Share attributable to fiscal year 1996 be paid on or about April 7, 1997 to
stockholders of Autoliv as of the record date of March 27, 1997.
CERTAIN ANTITAKEOVER EFFECTS
If the Transactions are consummated, the certificate of incorporation of New
Autoliv (the "New Autoliv Certificate") and the bylaws of New Autoliv (the "New
Autoliv Bylaws"), and the articles of incorporation of New Morton (the "New
Morton Articles") and the bylaws of New Morton (the "New Morton Bylaws") will
each contain several provisions that may make the acquisition of control of such
companies more difficult or expensive than they would otherwise be in the
absence of such provisions. The New Morton Articles and the New Morton Bylaws
will be substantially the same as the articles of incorporation of Morton (the
"Morton Articles") and the bylaws of Morton (the "Morton Bylaws"). See
"Description of Capital Stock of New Autoliv--Certain Provisions in the New
Autoliv Certificate and New Autoliv Bylaws" and "Changes in the Rights of
Shareholders Resulting From the Combination."
EXCHANGE RATES
Fluctuations in the relative value of US$ and certain other currencies may
be significant to New Autoliv and its stockholders because, among other things,
they affect the translation of the results of non-U.S. operations into US$ for
purposes of the consolidated financial statements of New Autoliv. New Autoliv
may implement currency hedging strategies to help offset the effects of these
fluctuations. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations of Automotive Safety Products" and "Autoliv
Management's Discussion and Analysis of Financial Condition and Results of
Operations." Based on sales for fiscal year 1996 for each of Autoliv and ASP,
approximately 35% of New Autoliv's sales would be in US$ and 65% would be in
other currencies.
For information concerning the translation of amounts in SEK into US$ and
amounts in US$ into SEK, see "Exchange Rates."
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<PAGE>
BACKGROUND, REASONS AND RECOMMENDATIONS
BACKGROUND OF THE TRANSACTIONS
Morton was formed in 1989 in connection with the spinoff of the commercial
businesses of Morton Thiokol, Inc. ("Morton Thiokol") from Morton Thiokol's
aerospace businesses. At the time of the Morton Thiokol spinoff, Morton's
inflatable restraint systems group, now its automotive safety products group
("ASP"), generated sales of approximately $50 million (in fiscal 1989), or less
than 4% of Morton's combined sales. Since then, strong consumer demand for
airbags and U.S. federal legislation requiring installation of airbags both on
the driver's and the front passenger's sides in all passenger cars by model-year
1998 and in trucks, vans and sport utility vehicles by model-year 1999 have
fueled the significant growth of Morton's automotive safety products business.
By fiscal 1996, ASP generated close to 40% of Morton's sales.
The automotive safety industry is characterized by automobile manufacturers
demanding that their key suppliers increase their size, presence, cost
efficiency, and research, development and engineering activities. In addition,
car manufacturers are seeking "Tier I suppliers" that can provide integrated
systems and subsystems directly to the manufacturer. In the case of automotive
safety systems suppliers, these systems and subsystems consist of seat belts and
airbags, among other products, with airbags often pre-installed in steering
wheels. Because of the combined effects of these factors, automotive safety
products manufacturers will need to be agile suppliers with global scale, able
to invest in new technology, and to be increasingly cost efficient in order
successfully to maintain profitability.
From time to time Morton has reviewed various strategic alternatives
relating to ASP. Over the past several years, ASP has generated substantial
revenues and profits, but has required significant capital investment to
increase capacity and to develop new technologies and products. As ASP's
business has grown, it has developed financial, investment and operating
characteristics different from those of Morton's specialty chemicals and salt
businesses. In addition, Morton management concluded that it would not be in the
best interests of Morton shareholders for Morton to attempt to develop
internally the capability of providing the integrated systems that automobile
manufacturers are increasingly demanding.
By 1995, Autoliv had recognized that a combination with another company in
the automotive safety industry could be an effective means of achieving the
operating efficiency, scale, scope and financial resources necessary to compete
in the evolving automotive safety industry. In particular, Autoliv recognized
that a combination with another company in the automotive safety industry could
be an effective means of expanding Autoliv's geographic presence. In September
1995, senior executives of Autoliv and Morton engaged in exploratory discussions
regarding the possibility of strategic collaboration between Autoliv and ASP.
However, no such collaborative efforts resulted from these discussions.
In the spring and summer of 1996, the Morton Board and Morton management
determined to investigate whether a spinoff, sale or other combination with a
participant in the automotive safety restraint business or a related industry
would be in the best interests of Morton and its shareholders. Morton and
Goldman, Sachs & Co. ("Goldman Sachs"), Morton's financial advisor, contacted
various parties that in their view might have had an interest in combining with
ASP, including Autoliv. Neither Autoliv nor Morton was interested in a
transaction that would combine Autoliv with all of Morton's businesses. Goldman
Sachs also distributed to certain parties expressing an interest in combining
with ASP and which had entered into confidentiality agreements with Morton a
descriptive memorandum relating to ASP. Other than Autoliv, no party submitted a
proposal for a transaction relating to ASP. Morton also considered whether a
direct spinoff of ASP without a subsequent combination with another party might
better maximize shareholder value. At regularly scheduled meetings of the Morton
Board during this period, the Morton Board continued to review Morton's
strategic alternatives and received updates from Morton management and its
financial and legal advisors regarding the status of these discussions. The
inquiries by Goldman Sachs on behalf of Morton did not result in any formal
proposals from, or substantive negotiations with, parties other than Autoliv.
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During June 1996, representatives of Autoliv's and Morton's management
determined that the companies' respective financial advisors should meet as a
first step in evaluating a possible transaction. During June and July, Autoliv's
and Morton's financial and legal advisors began discussions regarding possible
alternative structures for combining Autoliv and ASP.
At a June meeting of the Autoliv Board, members of Autoliv's management
apprised the Autoliv Board of the status of the discussions with Morton and
provided the Autoliv Board additional details on a possible combination. It was
the consensus of Autoliv's directors that Autoliv's management and advisors
should continue discussions with Morton concerning a possible transaction.
In mid-July, Autoliv and Morton entered into reciprocal confidentiality
agreements and began to exchange financial and other information relating to
their respective businesses.
Pursuant to a planned retirement which was announced in December 1995,
effective August 1, 1996, Gunnar Bark retired from his position as Chief
Executive Officer of Autoliv, and was succeeded by Autoliv's President, Paul
Charlety. At the effective time of Mr. Bark's retirement, the Autoliv Board
approved a consulting agreement between Autoliv and Kanoe AB ("Kanoe"), a
company controlled by Mr. Bark, that contemplated Mr. Bark's continued role as
an advisor to Autoliv in connection with a possible transaction with Morton. See
"Interests of Certain Persons in the Transactions--Arrangements with Autoliv's
Former Chief Executive Officer." In March 1997, Mr. Bark was elected a director
of Autoliv and appointed Chairman of the Autoliv Board.
During mid-August 1996, representatives of management and the financial and
legal advisors of Autoliv and Morton met to discuss alternative transaction
structures, continue preliminary due diligence and to establish a framework for
continuing the negotiation process. Autoliv's and Morton's negotiating teams
continued these discussions in a series of in-person and telephonic meetings
throughout the remainder of August and early September 1996, during which
discussions they continued to explore possible terms for a combination and began
efforts to identify the synergy benefits of a proposed transaction. During this
time period, each party's management and advisors apprised its respective board
of directors on the status of the discussions.
During a meeting in London in mid-September 1996, the Morton and Autoliv
negotiating teams reached a general agreement on the key financial and business
terms of the proposed transaction, including, among other things, the use of the
current transaction structure, the consideration that Morton shareholders and
Autoliv stockholders would receive in the Combination, the pre-Spinoff
contribution by Morton to New Morton of $750 million in cash to be funded by
newly created Morton indebtedness to be retained by Morton ASP following the
Spinoff, the U.S. domicile of New Autoliv, and the structure and composition of
the Board of Directors of New Autoliv (the "New Autoliv Board") and certain
senior executive positions.
Shortly thereafter, the Autoliv Board met and received presentations from
members of Autoliv management and Autoliv's advisors regarding the transaction
terms that had been negotiated in London. The Autoliv Board preliminarily
approved such terms subject to due diligence to be conducted by Autoliv and its
legal, financial and accounting advisors. On September 30, 1996, Autoliv and
Morton executed a letter of intent and issued a press release summarizing the
terms of the proposed combination.
During October and November of 1996, the Autoliv and Morton teams continued
their due diligence investigations in a series of meetings held in Stockholm,
New York, Chicago, London and Ogden, Utah, and prepared the definitive
agreements providing for the Spinoff, the Merger and the Exchange Offer.
Morton's management and financial advisors reviewed the status of the
Transactions for the Morton Board at the Morton Board's October meeting. During
early November, Autoliv senior executives toured Morton's production facilities
in Utah, and Morton senior executives toured certain of Autoliv's European
production facilities.
On October 28, November 8 and November 15, 1996, members of Autoliv
management and Autoliv's advisors reviewed with the Autoliv Board the status of
ongoing negotiations regarding several financial and
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business terms of the proposed transaction. At the October 28 meeting, Enskilda
and The Blackstone Group L.P. ("Blackstone") rendered to the Autoliv Board an
oral opinion, subsequently confirmed in writing as of the date the Combination
Agreement was executed and as described under "Opinions of Financial Advisors
- --Opinion of Enskilda and Blackstone," to the effect that, as of the dates of
such opinions, the Offer Exchange Ratio (as defined herein) was fair from a
financial point of view to Autoliv stockholders. Autoliv's outside legal counsel
reviewed the structure of the Transactions and the terms of the Combination
Agreement, the Distribution Agreement and the other Ancillary Agreements. The
Autoliv Board discussed the advice it had received at the various Autoliv Board
meetings and the significant potential benefits to stockholders, customers and
employees of Autoliv which would result from the combination of ASP with
Autoliv. Following the Autoliv Board's review of the transaction, the Autoliv
Board approved the Combination Agreement and the transactions contemplated
thereby, and authorized, subject to completion of negotiation of a limited
number of remaining issues, the execution and delivery of the Combination
Agreement. Over the course of the following week, Morton and Autoliv
representatives resolved all remaining business issues and continued to
negotiate the final terms of the Combination Agreement, the Distribution
Agreement and the other Ancillary Agreements.
On November 20, 1996, the Morton Board met and received presentations from
Goldman Sachs and outside legal counsel. Goldman Sachs reviewed various
financial and other information. Goldman Sachs advised the Morton Board that,
assuming no material developments relating to the Transactions, it would furnish
to the Morton Board its written opinion, dated as of the date of the Combination
Agreement, and Goldman Sachs subsequently delivered its written opinion dated
November 25, 1996 (which opinion is described below under "Opinions of Financial
Advisors--Opinion of Goldman Sachs"), as of the date of such opinion, the
consideration to be received by Morton shareholders in the Spinoff and the
Merger, taken as a whole, was fair to Morton's shareholders. Morton's outside
legal counsel reviewed for the Morton Board the structure of the transaction and
the terms of the Combination Agreement, the Distribution Agreement and the other
Ancillary Agreements. The Morton Board discussed the advice it had received at
the various Morton Board meetings and the significant potential benefits to
shareholders, customers and employees of Morton which would result from the
spinoff of the specialty chemicals and salt businesses and the combination of
ASP with Autoliv. The Morton Board also concluded that the spinoff of the ASP
Business as a stand-alone entity would be less advantageous to Morton
shareholders than the Transactions. The Morton Board's conclusion in this regard
was based upon the responses to Goldman Sachs' inquiries on behalf of Morton,
which did not result in any formal proposals from, or substantive negotiations
with, parties other than Autoliv, the financial and other analyses related to a
spinoff of the ASP Business as compared to the Combination and the Spinoff,
including Goldman Sachs' analysis provided to the Morton Board, see "Opinions of
Financial Advisors--Opinion of Goldman Sachs," and the strategic issues relating
to the automotive safety industry noted above, as well as upon the other reasons
for the Morton Board's decision to approve the Spinoff and the Merger set forth
in this Proxy Statement/Prospectus/Exchange Offer, see "--Reasons for the
Spinoff and the Merger; Recommendations of the Morton Board." Following these
discussions, the Morton Board, by a unanimous vote of those present (with Dennis
C. Fill, who subsequently advised Morton that he concurred with the Morton
Board's action, absent), approved the Distribution Agreement and the Spinoff,
approved the other Ancillary Agreements and the Merger and adopted the
Combination Agreement, and resolved to submit the Proposals to the shareholders
of Morton with the Morton Board's recommendation for approval.
Thereafter, on November 25, 1996, the Combination Agreement was executed by
the parties.
REASONS FOR THE SPINOFF AND THE MERGER; RECOMMENDATIONS OF THE MORTON BOARD
The Morton Board determined that the Spinoff and the Merger are fair to and
in the best interests of Morton's shareholders. The Morton Board considered many
factors, including the following:
(a) The separation of the ASP Business from the New Morton Businesses,
which businesses possess different financial, investment and operating
characteristics, will allow each to adopt strategies
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and pursue objectives appropriate to its specific businesses and will enable
management of each business to concentrate its attention and financial
resources on its own businesses without considering the corporate
objectives, policies and investment needs of the other businesses;
(b) The presentations by Morton management regarding the benefits of
combining ASP with Autoliv, including the high regard held by Morton's
management for Autoliv's business and organization, the Morton Board's
belief that the two businesses possess complementary geographic, product,
customer and manufacturing focuses, and that the Combination would create a
leading automotive safety systems supplier with a strong presence in all
major regions of the world and substantial opportunities for synergies;
(c) The structure of the Combination as a merger of equals in which
Morton shareholders will hold 46.5% of the outstanding New Autoliv
Securities (assuming the Exchange Offer is fully accepted), the fact that
Morton will initially designate one-half of the members of the New Autoliv
Board, and the role that Autoliv and ASP management will play in New
Autoliv;
(d) The Morton Board's conclusion, following a review of Morton's
strategic alternatives relating to the ASP Business, including a spinoff of
the ASP Business as a stand-alone entity and a review of the contacts by
Morton and Goldman Sachs with certain other parties to determine their
interest in a strategic combination with the ASP Business, that the Spinoff
and the Combination offered greater potential for increasing Morton
shareholder value.
(e) Trends in the automotive industry, including the desire of ASP
customers for integrated systems suppliers with worldwide capabilities and
those customers' desire to achieve global supply arrangements, and the
belief that Morton's shareholders and employees as well as customers of ASP
will share in the benefits of New Autoliv becoming an integrated safety
systems supplier to the automotive industry;
(f) A presentation from Goldman Sachs, including (i) an analysis of the
trading history of Autoliv Common Stock and Morton Common Stock and the
trading performance of the two stocks since announcement of the letter of
intent regarding the Spinoff and Merger; (ii) a review of historical, pro
forma and projected financial data for ASP, Autoliv, New Autoliv and New
Morton, as well as a comparison of the alternatives of a direct spinoff of
ASP and a combination with Autoliv; and (iii) advice that, assuming no
material developments in the circumstances surrounding the Transactions
prior to the date the Combination Agreement was executed, Goldman Sachs
would provide an opinion to the Morton Board as of such date that the
consideration to be received by Morton shareholders in the Spinoff and the
Merger, taken as a whole, was fair to Morton shareholders;
(g) The fact that in connection with the Spinoff, New Morton would
receive $750 million in cash through Morton's capital contribution to New
Morton in addition to a portion of the cash generated by the ASP Business
from July 1, 1996 to the Distribution Date, which will assist New Morton in
expanding its business and product lines through an active acquisition
program, making its planned capital investments, and continuing its ongoing
share acquisition program;
(h) The terms and conditions of the Combination Agreement, the
Distribution Agreement and the related agreements, including the condition
that the Transactions are subject to approval by the holders of a majority
of the outstanding Morton Common Stock, and the interests of certain ASP
executives in the Transactions (see "Interests of Certain Persons in the
Transactions"); and
(i) Advice from Morton's legal counsel that the Merger and the Spinoff
are expected generally to be tax free for U.S. federal income tax purposes
to Morton and its shareholders and the fact that the transactions are
subject to the receipt of an IRS ruling (which ruling was subsequently
received by Morton) and legal opinion relating to certain tax consequences
of the Spinoff and the Merger.
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The foregoing includes all material factors considered by the Morton Board.
In view of its many considerations, the Morton Board did not find it practical
to, and did not, quantify or otherwise assign relative weights to the specific
factors considered. In addition, individual members of the Morton Board may have
given different weights to the various factors considered.
FOR THE REASONS DISCUSSED ABOVE, THE DIRECTORS OF MORTON, BY A UNANIMOUS VOTE OF
THOSE PRESENT (WITH ONE DIRECTOR ABSENT), HAVE APPROVED THE SPINOFF AND
DISTRIBUTION AGREEMENT, APPROVED THE OTHER ANCILLARY AGREEMENTS AND THE MERGER
AND ADOPTED THE COMBINATION AGREEMENT AND RECOMMEND THAT MORTON SHAREHOLDERS
VOTE "FOR" APPROVAL OF THE SPINOFF PROPOSAL AND "FOR" APPROVAL OF THE MERGER
PROPOSAL. YOUR PROXY WILL BE SO VOTED UNLESS YOU SPECIFY OTHERWISE.
REASONS FOR THE COMBINATION AND THE EXCHANGE OFFER; RECOMMENDATIONS OF THE
AUTOLIV BOARD
The Autoliv Board believes that the Combination is advantageous to Autoliv
and Autoliv stockholders for the following reasons:
(a) COMPLEMENTARY GEOGRAPHIC MARKETS AND PRODUCTS. Whereas Autoliv is a
leading supplier of automotive occupant safety restraint systems in Europe,
Australia and Southeast Asia, Autoliv has a limited presence in North
America and Japan. ASP, on the other hand, has a major presence for airbags,
including inflators, in North America and for inflators in Japan, but has
only a modest presence in Europe. Autoliv currently offers a complete range
of occupant restraint products, consisting of seat belts and seat belt
pretensioners, frontal airbags, thorax and head side-impact airbags, and
rear-impact protection devices in addition to systems controls. ASP has
achieved substantial worldwide sales of airbag inflators and modules for
frontal protection, and increasing sales of side-impact inflators and
modules for thorax protection. The complementary nature, in terms of
products and geographic markets, of ASP's and Autoliv's businesses should
allow Autoliv's stockholders to participate in a merged company with
excellent market positions on a worldwide basis for most of its product
categories. Thus, the Autoliv Board believes that the Combination will
create a potential for increasing stockholder value for Autoliv's
stockholders, as well as incremental value for Autoliv's customers.
(b) EVOLVING NATURE OF AUTOMOTIVE SAFETY INDUSTRY. The Combination will
create a company which is expected to compete successfully in an automotive
safety industry which is characterized by price reduction pressure and
automobile manufacturers demanding that their key suppliers increase their
size and global presence and, in addition, assume responsibility for
complete subsystems or macro components. New Autoliv should be better able
to compete successfully in such an environment due to New Autoliv's ability
to achieve economies of scale.
(c) POTENTIAL FOR LONG-TERM GROWTH IN REVENUES, EARNINGS AND CASH FLOW.
With an expanded presence in key geographic markets, New Autoliv should be
better positioned to achieve long-term growth in both revenues and earnings.
New Autoliv is expected to recognize substantial synergy effects as a result
of combining the operations of Autoliv and ASP. Autoliv currently
anticipates that New Autoliv will realize stronger cash flow (as compared to
Autoliv as a stand-alone company) through increased potential for revenue
growth and earnings capacity. This should facilitate New Autoliv's ability
to finance its operations, capital expenditures, strategic acquisitions and
dividends internally while maintaining a strong credit rating, and provide
the financial flexibility to be a major competitor in the automotive safety
industry.
(d) SUPERIOR TO STRATEGIC ALTERNATIVES. From time to time Autoliv has
explored various strategic alternatives which would assist it to expand
geographically and better meet the growing demands of automobile
manufacturers. The Autoliv Board concluded that the Combination is superior
to such alternatives because of ASP's strong market position in North
America and Japan, and because of the
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good reputation in the automotive safety industry of the ASP Business and
organization. The Autoliv Board also noted that the Combination is
structured as a tax-free transaction to Autoliv and most of its
stockholders, and permits the payment of a cash dividend in respect of
fiscal year 1996.
In reaching its conclusions, the Autoliv Board considered, among other
things, (a) information concerning the financial performance and condition,
business operations, synergy effects, capital levels and prospects of Autoliv,
and the projected future financial performance of Autoliv as a separate entity
and on a combined basis; (b) current industry, economic and market conditions
and trends; (c) attitudes and reactions from customers; (d) the importance of
market position, significant scale and scope and financial resources to
Autoliv's ability to compete effectively in a maturing automotive safety
industry; (e) the Combination's structure as a merger of equals; (f) the terms
of the Combination Agreement; (g) current and historical market prices of the
Autoliv Common Stock; (h) the opinion of Enskilda and Blackstone described below
as to the fairness, from a financial point of view, of the Offer Exchange Ratio
(as defined herein); (i) labor relations with Autoliv's unions; and (j) the
impact of the Combination on Autoliv's customers and employees, including the
interests of certain current or former officers and directors of Autoliv in the
Transactions. In reaching its decision to approve the Exchange Offer and to
recommend the Exchange Offer to its stockholders, the Autoliv Board did not
assign any relative or specific weights to the various factors considered and
individual directors may have given differing weights to different factors.
THE AUTOLIV BOARD HAS DETERMINED THAT THE TERMS OF THE EXCHANGE OFFER ARE FAIR
TO, AND IN THE BEST INTERESTS OF, AUTOLIV AND ITS STOCKHOLDERS, AND HAS, BY
UNANIMOUS VOTE OF ALL DIRECTORS, APPROVED THE COMBINATION AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY AND UNANIMOUSLY RECOMMENDS THAT AUTOLIV
STOCKHOLDERS ACCEPT THE EXCHANGE OFFER.
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OPINIONS OF FINANCIAL ADVISORS
OPINION OF GOLDMAN SACHS
On November 20, 1996, Goldman Sachs advised the Morton Board that, assuming
no material developments in the circumstances surrounding the Transactions, it
would furnish to the Morton Board its written opinion, dated as of the date of
the Combination Agreement, and Goldman Sachs subsequently delivered its written
opinion, dated November 25, 1996, that as of the date of such opinion the
consideration to be received by the holders of shares of Morton Common Stock
(other than Morton, Autoliv or any direct or indirect wholly owned subsidiary of
Autoliv or of Morton) in the Spinoff and the Merger, taken as a whole, was fair
to such holders.
THE FULL TEXT OF THE WRITTEN OPINION OF GOLDMAN SACHS, DATED NOVEMBER 25,
1996, WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS OF
THE REVIEW UNDERTAKEN IN CONNECTION WITH THE OPINION, IS ATTACHED HERETO AS
APPENDIX C TO THIS PROXY STATEMENT/PROSPECTUS/EXCHANGE OFFER AND IS INCORPORATED
HEREIN BY REFERENCE. MORTON SHAREHOLDERS ARE URGED TO, AND SHOULD, READ SUCH
OPINION IN ITS ENTIRETY. GOLDMAN SACHS' WRITTEN OPINION IS ADDRESSED TO THE
MORTON BOARD AND DOES NOT CONSTITUTE A RECOMMENDATION AS TO HOW MORTON
SHAREHOLDERS SHOULD VOTE AT THE MORTON SPECIAL MEETING AND SHOULD NOT BE RELIED
UPON BY ANY SUCH HOLDER AS SUCH. THE SUMMARY OF THE OPINION OF GOLDMAN SACHS SET
FORTH IN THIS PROXY STATEMENT/PROSPECTUS/EXCHANGE OFFER IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE WRITTEN OPINION.
In connection with its opinion, Goldman Sachs reviewed, among other things,
the Combination Agreement; the form of Distribution Agreement attached as
Exhibit A to the Combination Agreement; Annual Reports to Shareholders and
Annual Reports on Form 10-K of Morton for the five years ended June 30, 1996;
the Initial Public Offering Prospectus of Autoliv dated May 26, 1994, and Annual
Reports to Stockholders of Autoliv for the two years ended December 31, 1995;
certain interim reports to stockholders of Autoliv and Quarterly Reports on Form
10-Q of Morton; certain other communications from Morton and Autoliv to their
respective shareholders; and certain internal financial analyses and forecasts
for Morton and Autoliv prepared by their respective managements. Goldman Sachs
also held discussions with members of the senior managements of each of Morton
and Autoliv regarding the past and current business operations, financial
condition and future prospects of their respective companies and the future
prospects of New Autoliv and New Morton. In addition, Goldman Sachs reviewed the
reported price and trading activity for Morton Common Stock and Autoliv Common
Stock, compared certain financial and stock market information for Morton and
Autoliv with similar information for certain other companies the securities of
which are publicly traded, reviewed the financial terms of certain recent
business combinations in the automotive original equipment manufacturer parts
supply industry specifically and in other industries generally, and performed
such other studies and analyses as Goldman Sachs considered appropriate.
Goldman Sachs relied, without independent verification, upon the accuracy
and completeness of all of the financial and other information reviewed by it
for the purposes of its opinion. With respect to financial forecasts and
projections provided by the respective managements of Morton and Autoliv,
Goldman Sachs assumed, with Morton's consent, that such financial forecasts and
projections were reasonably prepared on a basis reflecting the best currently
available judgments and estimates of the managements of Morton and Autoliv as to
the future financial and other performance of Morton and Autoliv, as applicable.
Goldman Sachs further assumed, with Morton's consent, that the projections as to
the future financial performance of New Autoliv and the estimates of synergies
for New Autoliv were reasonably prepared on a basis reflecting the best
currently available judgments and estimates of the managements of Morton and
Autoliv. Goldman Sachs also assumed, at Morton's instruction, that obtaining any
necessary regulatory or third-party approvals for the Transactions would not
have an adverse effect on Morton or Autoliv, as applicable. Goldman Sachs has
not made an independent evaluation or appraisal of the assets and liabilities of
Morton or Autoliv or any of their respective subsidiaries or divisions and
Goldman Sachs was not furnished
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with any such evaluation or appraisal. Goldman Sachs assumed, with Morton's
consent, that the Transactions would be treated as tax free to both Morton and
its shareholders. Goldman Sachs did not express any opinion as to the prices at
which New Autoliv Common Stock or New Morton Common Stock may trade if and when
they are issued, and Goldman Sachs did not express any recommendation as to how
Morton shareholders should vote at the Morton Special Meeting held in connection
with the consideration of the Transactions.
The following is a summary of certain financial analyses used by Goldman
Sachs in connection with providing its opinion to the Morton Board.
(i) CERTAIN FINANCIAL DATA. Goldman Sachs reviewed selected data
("Selected Financial Data") and projections ("Projections") provided to
Goldman Sachs by Morton's management relating, respectively, to the
historical and estimated financial performance of Morton, New Morton and the
ASP Business, each on an independent basis, including five-year historical
income statement data and cash flow statement data ("Income and Cash Flow
Data") for each of Morton and New Morton, four-year historical Income and
Cash Flow Data for the ASP Business, Projections of Income and Cash Flow
Data for Morton and New Morton for the two fiscal years ended June 30, 1998
and Projections of Income and Cash Flow Data for the ASP Business for the
three calendar years ended December 31, 1998. Goldman Sachs also reviewed
Selected Financial Data and Projections provided to Goldman Sachs by
Autoliv's management, as well as research reports and certain public
documents, relating to the historical and estimated financial performance of
Autoliv, including three-year historical Income and Cash Flow Data for
Autoliv and Projections of Income and Cash Flow Data for Autoliv for each of
the three years in the period ended December 31, 1998.
Based on the Selected Financial Data and Projections for Morton, New
Morton, the ASP Business and Autoliv, as well as research reports and
certain public documents in the case of Autoliv, Goldman Sachs calculated a
series of growth and margin measures (the "Growth Measures") for each of
Morton, New Morton, the ASP Business and Autoliv. Among other things,
Goldman Sachs' calculation of the Growth Measures indicated that, over the
relevant historical and future periods relating to the Selected Financial
Data and Projections of each of these companies, sales growth ranged from
4.8% to 23.4%, 2.0% to 9.9%, 9.0% to 71.5% and 10.0% to 72.9% and the
margins represented by earnings before interest and taxes ("EBIT") ranged
from 10.1% to 16.2%, 8.7% to 14.5%, 14.8% to 18.8% and 5.8% to 9.9% for
Morton, New Morton, the ASP Business and Autoliv, respectively.
(ii) ASP BUSINESS SPINOFF ANALYSIS. Using information and projections
provided by Morton, certain publicly available information and various
research estimates, Goldman Sachs calculated the range of total values ("ASP
Spinoff Values") of the ASP Business as a stand-alone corporation in the
event that Morton were to spin off the ASP Business to Morton shareholders
(the "ASP Direct Spinoff").
As part of its analysis, Goldman Sachs reviewed and compared certain
actual and estimated financial information relating to the ASP Business to
corresponding actual and estimated financial information for 19 publicly
traded companies (the "ASP Public Comparables") that Goldman Sachs deemed
relevant to its evaluation of the ASP Business. Of the 19 ASP Public
Comparables, the following three companies are primarily automobile
manufacturers: Chrysler Corporation, Ford Motor Company and General Motors
Corporation ("Auto Manufacturers"); and the following 16 companies are
primarily automobile original equipment manufacturer part suppliers: A. O.
Smith Corporation, Arvin Industries Inc., Borg-Warner Automotive, Inc.,
Breed Technologies, Inc., Collins & Aikman Corporation, Dana Corporation,
Excel Industries, Inc., Gen Corp. Inc., Lear Corporation, Magna
International Inc., MascoTech, Inc., OEA, Inc., Simpson Industries Inc.,
Superior Industries International, Inc., TRW Inc. and Walbro Corporation
(the "Automobile Part Suppliers"). Based on Goldman Sachs research estimates
and information obtained from the Institutional Broker Estimate
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System ("IBES"), Goldman Sachs calculated (i) the ratio of the respective
current common stock price to the respective estimated 1997 earnings
("Estimated 1997 P/E Ratios") for each of the ASP Public Comparables and
(ii) the average annual growth rates of the estimated earnings per share
("Estimated Annual EPS Growth Rates") for each of the ASP Public
Comparables. The Estimated 1997 P/E Ratios ranged from 6.4x to 7.1x for the
Auto Manufacturers and ranged from 6.3x to 18.4x for the Automobile Part
Suppliers. The Estimated Annual EPS Growth Rates approximated 5.0% for each
of the Auto Manufacturers and ranged from 6.0% to 28.5% for the Automobile
Part Suppliers.
Goldman Sachs performed its analysis based on Morton's estimates of
sales and net income for the ASP Business for each of the three calendar
years in the period ended December 31, 1998, and the associated Growth
Measures for the ASP Business for each of such years, the Estimated 1997 P/E
Ratios and Estimated Annual EPS Growth Rates for the ASP Public Comparables,
and other information Goldman Sachs deemed relevant to its analysis. This
analysis resulted in implied public market multiples for the ASP Business as
a stand-alone corporation of 10.0x to 12.0x the estimated earnings for the
calendar year ended December 31, 1997 (the "ASP P/E Multiples").
Based on the ASP P/E Multiples and Morton's estimate of the ASP
Business' 1997 net income (as reduced by the approximate after-tax interest
amounts payable by the ASP Business attributable to the Allocated Debt (as
defined below)), Goldman Sachs calculated the range of values to Morton
shareholders of the ASP Business as a stand-alone corporation on an ongoing
basis (the "ASP Ongoing Values"). Goldman Sachs then calculated the ASP
Spinoff Values by adding to the range of the ASP Ongoing Values the amount
of debt which Morton potentially would allocate to the ASP Business (the
"Allocated Debt") prior to the ASP Direct Spinoff. Applying an Allocated
Debt amount of $750 million (the "Base Allocated Debt Case") and the ASP P/E
Multiples, this analysis resulted in ASP Spinoff Values ranging from
approximately $2.2 billion to $2.5 billion.
(iii) NEW MORTON COMPARABLE COMPANY ANALYSIS. Using information and
projections provided by Morton, certain publicly available information and
various research estimates, Goldman Sachs calculated the range of total
values of New Morton as a stand-alone corporation in the event that Morton
were to spin off New Morton to Morton shareholders ("New Morton Values").
As part of its analysis, Goldman Sachs reviewed and compared certain
actual and estimated financial information relating to New Morton to
corresponding actual and estimated financial information for 24 publicly
traded companies (the "New Morton Public Comparables") that Goldman Sachs
deemed relevant to its evaluation of New Morton. Of the 24 New Morton Public
Comparables, Goldman Sachs utilized the following 11 companies, which are
producers of specialty chemicals: Albemarle Corporation, Betzdearborn Inc.,
Crompton & Knowles Corporation, Ethyl Corporation, Great Lakes Chemical
Corporation, Hercules Incorporated, Lawter International, Inc., Monsanto
Company, Nalco Chemical Company, Petrolite Corporation and Sigma-Aldrich
Corporation (the "Specialty Chemical Companies"); and Goldman Sachs utilized
the following 13 companies, which are producers of specialty and other
chemicals: ARCO Chemical Company, Cytec Industries Inc., Eastman Chemical
Company, E.I. du Pont de Nemours and Company, Minerals Technologies Inc.,
Olin Corporation, Polymer Group Inc., PPG Industries, Inc., Rohm and Haas
Company, Tredegar Industries, Inc., Wellman, Inc., Witco Corporation and
W.R. Grace & Co. (the "Hybrid Chemical Companies"). Based on Goldman Sachs
research estimates and information obtained from IBES, Goldman Sachs
approximated the Estimated 1997 P/E Ratios and the Estimated Annual EPS
Growth Rates for each of the New Morton Public Comparables. The Estimated
1997 P/E Ratios ranged from 10.0x to 22.8x for the Specialty Chemical
Companies and ranged from 11.5x to 19.1x for the Hybrid Chemical Companies.
The Estimated Annual EPS Growth Rates ranged from 8.0% to 14.5% for the
Specialty Chemical Companies and ranged from 7.0% to 16.5% for the Hybrid
Chemical Companies.
Goldman Sachs performed its analysis based on Morton's estimates of
sales and net income for New Morton for each of the two fiscal years in the
period ended June 30, 1998, and the associated
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Growth Measures for New Morton for each of such years, the Estimated 1997
P/E Ratios and Estimated Annual EPS Growth Rates for the New Morton Public
Comparables and other information Goldman Sachs deemed relevant to its
analysis. This analysis resulted in New Morton Values ranging from
approximately $2.9 billion to $3.5 billion.
(iv) PRO FORMA MERGER ANALYSIS ON AUTOLIV. Goldman Sachs calculated pro
forma analyses of the financial impact of the Combination to Autoliv's
earnings per share ("EPS"). Based on the Projections for Autoliv and the ASP
Business for the two calendar years in the period ended December 31, 1998,
Goldman Sachs calculated pro forma Income and Cash Flow Data for New Autoliv
and compared the estimated EPS for status quo Autoliv (without giving effect
to the Combination) to the estimated EPS of New Autoliv after giving effect
to the Combination. As part of its analysis, Goldman Sachs considered the
Allocated Debt (and associated interest payable thereon), Autoliv's and
Morton's joint estimates of the likely pre-tax synergies which potentially
would result from the Combination in the calendar year ended December 31,
1997, and in the calendar year ended December 31, 1998, and certain purchase
accounting adjustments ("Purchase Accounting Adjustments"), including the
amortization of the ASP Business goodwill created in the Merger over a
40-year period. Based on the Base Allocated Debt Case, estimated synergies
for 1997 and 1998 and the Purchase Accounting Adjustments, this analysis
indicated that the Combination would be slightly dilutive to Autoliv's EPS
in 1997 and significantly accretive in 1998.
(v) PRO FORMA MERGER ANALYSIS ON MORTON. Goldman Sachs calculated pro
forma analyses of the financial impact of the Transactions to Morton's EPS.
Based on the Projections for Autoliv and Morton (as calendarized, in the
case of Morton) for the two calendar years ended December 31, 1998, Goldman
Sachs calculated pro forma Income and Cash Flow Data for New Morton and
compared the estimated EPS of status quo Morton (without giving effect to
the Transactions) to the amount equal to the aggregate of (i) the estimated
EPS of New Morton and (ii) the amount resulting from multiplying the
estimated EPS of New Autoliv by the fractional interest in New Autoliv to be
issued for each share of Morton Common Stock. For the purposes of its
analysis, Goldman Sachs assumed, with Morton's consent, that New Morton
would repurchase $750 million worth of shares of New Morton Common Stock
with the proceeds of the Allocated Debt. Based on the Base Allocated Debt
Case, estimated synergies for 1997 and 1998 and the Purchase Accounting
Adjustments, this analysis indicated that the Transactions would have a
dilutive effect to Morton's EPS in 1997 and a slightly accretive effect to
Morton's EPS in 1998.
(vi) NEW AUTOLIV MULTIPLE ANALYSIS. Goldman Sachs performed its analyses
based on the pro forma Income and Cash Flow Data for New Autoliv, the
Estimated 1997 P/E Ratios and Estimated Annual EPS Growth Rates for the ASP
Public Comparables, the P/E multiple for Autoliv of 17.7x (based upon
information and projections provided by Autoliv, Autoliv's estimated 1997
earnings and the Autoliv Common Stock price on November 10, 1996), the Base
Allocated Debt Case, and other information Goldman Sachs deemed relevant to
its analysis. This analysis resulted in implied public market multiples for
New Autoliv of 13.0x to 18.0x the estimated earnings for the calendar year
ended December 31, 1997 (the "New Autoliv P/E Multiples"). Such implied New
Autoliv P/E Multiples were compared to the implied ASP P/E Multiples
described above under "--ASP Business Spinoff Analysis."
(vii) ASP BUSINESS COMBINED INTO AUTOLIV ANALYSIS. Based on the results
described under "--New Autoliv Multiple Analysis" and the projections,
assumptions and factors considered therein, Goldman Sachs calculated the
range of total values ("ASP Combined Values") to holders of Morton Common
Stock of the consummation of the Transactions. For the purposes of its
analysis, Goldman Sachs assumed, with Morton's consent, that holders of
Morton Common Stock and holders of Autoliv Securities would hold 46.5%
("Morton Equity Percentage") and 53.5% ("Autoliv Equity Percentage"),
respectively, of the New Autoliv Securities as a result of the consummation
of the Transactions.
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Applying the New Autoliv P/E Multiples to Morton's and Autoliv's joint
estimates of New Autoliv's 1997 earnings, as adjusted, on an after tax
basis, to account for (a) the interest payable on the amount of debt under
the Base Allocated Debt Case, (b) estimated synergies for 1997 and (c) the
Purchase Accounting Adjustments, Goldman Sachs calculated the range of
values to Morton shareholders of their equity interest in New Autoliv.
Goldman Sachs then calculated the ASP Combined Values by adding to this
range the capital contribution to New Morton equal to the amount of debt
under the Base Allocated Debt Case, resulting in values ranging from
approximately $2.2 billion to $2.8 billion. Goldman Sachs noted that the
mean of such range exceeded the mean of the range of ASP Spinoff Values
resulting as described under "--ASP Business Spinoff Analysis."
Goldman Sachs also noted to the Morton Board that, based on Autoliv's
approximate equity market capitalization as of November 18, 1996, of $2.3
billion (based on a spot rate of 6.61 SEK/$ and stock price of SEK 281.5)
("Autoliv Market Capitalization"), Goldman Sachs had calculated an implied
ASP Combined Value. Goldman Sachs noted that it had multiplied the Autoliv
Market Capitalization by the ratio resulting from dividing the Morton Equity
Percentage by the Autoliv Equity Percentage to determine the equity market
capitalization value ("ASP Market Capitalization Value") of the shares in
New Autoliv received by holders of Morton Common Stock as a result of the
Combination. Adding the amount of debt allocated under the Base Allocated
Debt Case to the ASP Market Capitalization Value, this analysis resulted in
an implied ASP Combined Value of approximately $2.8 billion.
(viii) HISTORICAL STOCK TRADING. Goldman Sachs reviewed the historical
trading prices and volumes for Autoliv Common Stock for the period from June
10, 1994 to November 15, 1996. This review indicated that, since June 10,
1994, the market price of Autoliv Common Stock has increased approximately
200%. Goldman Sachs also reviewed the relationship between movements in the
trading prices for Morton Common Stock and Autoliv Common Stock and the S&P
500 for the period from September 27, 1996 (the date one business day prior
to the signing and announcement of the letter of intent relating to the
Transactions) to November 15, 1996. This review indicated that, during that
period, each of Morton Common Stock and Autoliv Common Stock had
outperformed the S&P 500.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analyses as a whole, could create an incomplete view of the processes
underlying Goldman Sachs' opinion. In arriving at its fairness determination,
Goldman Sachs considered the results of all such analyses, together with the
underlying strategic rationale, taken as a whole. Furthermore, in arriving at
its fairness opinion, Goldman Sachs did not attribute any particular weight to
any analysis or factor considered by it. No company used in the above analyses
as a comparison is identical to Morton, New Morton, the ASP Business, Autoliv or
New Autoliv. The analyses were prepared solely for purposes of Goldman Sachs in
providing its opinion to the Morton Board as to the fairness of the
consideration, taken as a whole, to be received by the holders of Morton Common
Stock in the Spinoff and the Merger and do not purport to be appraisals or
necessarily reflect the prices at which businesses or securities actually may be
sold. Analyses based upon forecasts of future results are not necessarily
indicative of actual future results, which may be significantly more or less
favorable than suggested by such analyses. Because such analyses are inherently
subject to uncertainty, being based upon numerous factors or events beyond the
control of the parties or their respective advisors, none of Morton, Autoliv,
New Morton, New Autoliv, Goldman Sachs or any other person assumes
responsibility if future results are materially different from those discussed.
As described above, Goldman Sachs' presentation to the Morton Board was one
of many factors taken into consideration by the Morton Board in making its
determination to adopt the Combination Agreement and approve the Spinoff, the
Merger and the Ancillary Agreements. Although Goldman Sachs evaluated the
fairness of the consideration, taken as a whole, to be received by the holders
of Morton Common Stock
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in the Spinoff and the Merger, the specific consideration was determined by
Morton and Autoliv through arm's-length negotiation. The foregoing summary does
not purport to be a complete description of the analyses performed by Goldman
Sachs and is qualified by reference to the written opinion of Goldman Sachs set
forth in Appendix C to this Proxy Statement/Prospectus/Exchange Offer.
Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. Morton selected Goldman
Sachs as its financial advisor because it is an internationally recognized
investment banking firm that has substantial experience in transactions similar
to the Transactions. Goldman Sachs is familiar with Morton, having provided
certain investment banking services to Morton from time to time, including as
advisor in the spinoff of Morton from Morton Thiokol in 1989 and having acted as
lead managing underwriter in the private placement of $120 million of senior
notes in 1989 and the public offering of $200 million of credit sensitive
debentures in 1990; and having acted as its financial advisor in connection
with, and having participated in certain of the negotiations leading to, the
Transactions. Goldman Sachs also is acting as one of the dealer managers of the
U.S. Offer for which it will not receive any additional consideration. Goldman
Sachs may provide investment banking services to New Autoliv, New Morton or
their respective subsidiaries in the future.
In the ordinary course of the trading activities of Goldman Sachs, Goldman
Sachs actively trades the debt and equity securities of Morton and Autoliv for
its own account and for the accounts of customers of Goldman Sachs and may,
therefore, at any time hold a long or short position in such securities.
Pursuant to a letter agreement dated June 1, 1996 (the "Goldman Sachs
Engagement Letter"), Morton engaged Goldman Sachs to act as its financial
advisor in connection with the possible Sale (as defined below) of the ASP
Business and the possible distribution to Morton's shareholders of the shares of
New Morton. Pursuant to the terms of the Goldman Sachs Engagement Letter, Morton
agreed to pay Goldman Sachs a success fee (the "Success Fee") of 0.45% of the
aggregate consideration, not to exceed $12 million, in the event that a merger
or business combination with respect to, or sale of all or substantially all of
the assets or business operations of, or greater than 10% of the equity interest
in, the ASP Business is consummated (a "Sale"), less up to $250,000 in financial
advisory fees previously paid to Goldman Sachs by Morton. Morton also has agreed
to reimburse Goldman Sachs for its reasonable expenses, including the fees and
disbursements of Goldman Sachs' attorneys, plus any sales, use or similar taxes
in connection with Goldman Sachs' engagement, and to indemnify Goldman Sachs
against certain liabilities, including certain liabilities under the U.S.
federal securities laws.
OPINION OF ENSKILDA AND BLACKSTONE
Enskilda and Blackstone rendered to the Autoliv Board at its meeting on
October 28, 1996, their oral opinion, subsequently confirmed in writing, that,
based upon and subject to the various considerations set forth in the opinion,
as of the date of the opinion, the Offer Exchange Ratio was fair from a
financial point of view to holders of the Autoliv Securities.
THE FULL TEXT OF THE OPINION OF ENSKILDA AND BLACKSTONE DATED NOVEMBER 25,
1996, WHICH SETS FORTH ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON
THE REVIEW UNDERTAKEN, IS ATTACHED AS APPENDIX D TO THIS PROXY
STATEMENT/PROSPECTUS/EXCHANGE OFFER. AUTOLIV STOCKHOLDERS ARE URGED TO READ THE
OPINION CAREFULLY AND IN ITS ENTIRETY. ENSKILDA AND BLACKSTONE'S OPINION IS
DIRECTED ONLY TO THE FAIRNESS OF THE OFFER EXCHANGE RATIO TO THE HOLDERS OF
AUTOLIV SECURITIES FROM A FINANCIAL POINT OF VIEW AND DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY STOCKHOLDER OF AUTOLIV AS TO HOW SUCH STOCKHOLDER SHOULD
RESPOND TO THE EXCHANGE OFFER. ALTHOUGH ENSKILDA AND BLACKSTONE OPINED AS TO THE
FAIRNESS FROM A FINANCIAL POINT OF VIEW OF THE OFFER EXCHANGE RATIO TO THE
HOLDERS OF AUTOLIV SECURITIES AS SET FORTH IN THEIR OPINION, SUCH RATIO WAS
NEGOTIATED BY AUTOLIV AND MORTON. THE SUMMARY OF THE OPINION OF ENSKILDA AND
BLACKSTONE SET FORTH IN THIS PROXY STATEMENT/PROSPECTUS/EXCHANGE OFFER IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINION.
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In rendering their opinion, Enskilda and Blackstone reviewed and analyzed:
(a) drafts of each of the Combination Agreement and the Distribution Agreement,
together with certain other related documents; (b) certain publicly available
information concerning the business, financial condition, assets and
liabilities, and operations of Autoliv and Morton (including ASP) which they
believed to be relevant to their inquiry; (c) certain publicly available
information relating to financial markets, industry and economic conditions; (d)
financial and operating information with respect to the business, operations and
prospects of Autoliv and Morton (including ASP) furnished to Enskilda and
Blackstone by Autoliv and Morton; and (e) publicly available historical and
current financial information and stock price data with respect to certain
public companies that they considered relevant to their inquiry. In addition,
Enskilda and Blackstone had discussions with the management of Autoliv and
Morton (including ASP) concerning their respective businesses, operations,
assets and liabilities, financial conditions and prospects, and undertook such
other studies, analyses and investigations as they deemed appropriate in
arriving at their opinion.
Enskilda and Blackstone assumed and relied upon without independent
verification the accuracy and completeness of the information reviewed by them
for purposes of rendering their opinion and have not assumed any responsibility
for independent verification of such information. In addition, Enskilda and
Blackstone relied upon the assurances of management of Autoliv that they are not
aware of any facts that would make such information inaccurate, incomplete or
misleading. With regard to the financial forecasts of Autoliv and Morton, the
pro forma financial projections of New Autoliv and the projected Transaction
synergies as a result of the Combination, Enskilda and Blackstone relied upon
the assurances of management of each of Autoliv and Morton that they were
reasonably prepared on bases reflecting the best currently available estimates
and judgments of the respective managements of Autoliv and Morton as to their
future financial performance. Enskilda and Blackstone expressed no view as to
such financial forecasts or projected synergies or the assumptions on which they
are based.
Enskilda and Blackstone did not make any independent evaluation or appraisal
of the assets or liabilities of Autoliv or Morton (including ASP), nor were they
furnished with any such appraisals. Enskilda and Blackstone's opinion stated
that it is necessarily based on business, economic, regulatory, market and other
conditions, as in effect on, and the information made available to Enskilda and
Blackstone as of, the date of such opinion.
The following is a brief summary of certain of the financial analyses
performed by Enskilda and Blackstone in connection with the preparation of their
opinion letter and reviewed with the Autoliv management and/or Autoliv Board at
various meetings over the course of their assignment. Enskilda and Blackstone
were not requested to, nor did they, solicit third-party indications of interest
in acquiring Autoliv or any of its assets.
STOCK PRICE PERFORMANCE: As part of their analysis Enskilda and Blackstone
reviewed the recent stock market performances of Autoliv and Morton and compared
the performance of each with the other. Enskilda and Blackstone also compared
the stock price performance of each of Autoliv and Morton with the selected
companies referred to below. The analysis showed, among other things, that the
share prices for both Autoliv and Morton, after the announcement of the signing
of the letter of intent, outperformed broad equity indices in Sweden and the
United States, respectively.
SELECTED COMPANIES ANALYSIS: Using publicly available information, Enskilda
and Blackstone also compared selected historical and projected financial and
operating data of Autoliv and ASP, and stock market data of Autoliv, with the
corresponding data of a group of several publicly traded companies in the
automotive safety industry. Such financial information included, among other
things, market capitalization, market value as a multiple of earnings, and
aggregate value as a multiple of operating results. The companies which were
focused on for purposes of such analysis were TRW Inc., Breed Technologies,
Inc., OEA, Inc., Lear Corporation, Johnson Controls, Inc. and Magna
International Inc. The analysis showed, among other things, that Autoliv, prior
to the announcement of the signing of the letter of intent, was valued at 16.0x
projected earnings as compared to the median 1997 projected earnings multiple of
13.3x for
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the selected comparable companies referred to above. All earnings estimates in
this analysis were sourced from IBES.
SELECTED COMPARABLE TRANSACTION ANALYSIS: Enskilda and Blackstone also
compared certain publicly available financial information of Autoliv and ASP
with that of a group of several acquired automotive original equipment
manufacturer suppliers which includes 31 corporate transactions effected during
the period from November 1988 to July 1996. Such financial information included,
among other things, transaction value, transaction value as a multiple of
earnings, and aggregate transaction value as a multiple of operating results.
The analysis showed, among other things, that none of the corporate transactions
studied involved companies with the same size or growth characteristics as those
of the Combination. Enskilda and Blackstone did not believe that those corporate
transactions provided a reliable comparison to the Combination.
DISCOUNTED CASH FLOW ANALYSIS: Enskilda and Blackstone also conducted a
discounted cash flow analysis for each of Autoliv and ASP, based on, among other
things, publicly available financial data and financial data provided by the
managements of Autoliv and ASP. Such analysis assumed terminal value multiples
ranging from 12.0 to 15.0 times net operating profit less adjusted taxes
("NOPLAT"), perpetual growth rates ranging from 2.3% to 7.5%, and discount rates
of 10% to 13%. The analysis showed that, assuming mid-point terminal value
NOPLAT multiples and discount rates for each company, Autoliv would contribute
approximately 56% of the combined discounted cash flow equity value.
INCOME STATEMENT CONTRIBUTION ANALYSIS: Enskilda and Blackstone also
analyzed the income statement contribution of each of Autoliv and ASP. Such
analysis was based on financial data provided by the managements of Autoliv and
Morton. The analysis showed, among other things, that, for 1997, with Autoliv
data stated on a Swedish generally accepted accounting principles basis, Autoliv
would contribute approximately 55.5%, 40.4% and 48.6% of the revenues, EBIT and
net income of the combined company, respectively.
LEVERAGED RECAPITALIZATION ANALYSIS: Enskilda and Blackstone also conducted
a leveraged recapitalization analysis to determine the highest price a financial
buyer could pay for a substantial majority interest in each of Autoliv and ASP
and still be able to meet standard internal rate of return benchmarks. The
analysis showed, among other things, that the price per share derived from the
leveraged recapitalization analysis was between 11.2% and 15.9% lower than
Autoliv's share price immediately prior to signing of the letter of intent and
between 23.1% and 27.2% lower than Autoliv's share price at the time of the
rendering of the oral opinion.
PRO FORMA ANALYSIS OF THE COMBINATION: Enskilda and Blackstone analyzed
certain pro forma effects of the Combination on the earnings and capitalization
of New Autoliv. These analyses were based on certain forecasts provided by
Autoliv's senior management regarding the financial performance of Autoliv and
certain forecasts prepared by ASP's senior management regarding the financial
performance of ASP, as well as the mean of analyst estimates for Autoliv. Based
on such analysis, and after taking into account certain cost savings and other
synergies that Autoliv management considered New Autoliv could achieve if the
Combination were consummated, but before certain non-recurring costs, Enskilda
and Blackstone observed that the Combination would result in a minor dilution to
estimated EPS for Autoliv stockholders for the fiscal year ending December 31,
1997, and in a significant accretion for the fiscal years ending December 31,
1998 and 1999.
The summary of the Enskilda and Blackstone analyses set forth above does not
purport to be a complete description of the work performed by Enskilda and
Blackstone and presented to the management and/or the Autoliv Board at various
meetings over the course of their assignment. Enskilda and Blackstone believe
that their analyses and the summary set forth above must be considered as a
whole and that selecting portions of their analyses, the factors considered by
them or the above summary, without considering all such analyses or factors,
could create an incomplete and/or misleading view of the process underlying the
analyses performed by Enskilda and Blackstone in connection with the preparation
of their
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opinion. In addition, Enskilda and Blackstone have given various analyses more
or less weight than other analyses, and may have deemed various assumptions more
or less probable than other assumptions. In performing their analyses, Enskilda
and Blackstone made numerous assumptions with respect to industry performance,
general business and economic conditions and other matters, many of which are
beyond the control of Autoliv or Morton. The analyses performed by Enskilda and
Blackstone are not necessarily indicative of actual values or actual future
results, which may be significantly more or less favorable than suggested by
such analyses. No public company utilized as a comparison is identical to
Autoliv or ASP, and none of the comparable transactions utilized is identical to
the Combination. Accordingly, an analysis of publicly traded comparable
companies and comparable transactions is not purely mathematical, but, rather,
involves complex considerations and judgments concerning differences in
financial and operating characteristics of the comparable companies or the
companies involved in comparable transactions and other factors that could
affect the public trading value of the comparable companies or company or
transaction with which they are being compared.
Autoliv retained Enskilda and Blackstone to act as its financial advisors in
connection with the Combination. Enskilda and Blackstone were selected by
Autoliv to act as Autoliv's financial advisors based on Enskilda's and
Blackstone's qualifications, expertise and reputation, as well as their
investment banking relationship and familiarity with Autoliv. Enskilda and
Blackstone are internationally recognized investment banking and advisory firms.
Enskilda and Blackstone, as part of their investment banking business, are
regularly engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for corporate and other purposes. Enskilda makes a
market in Autoliv Securities and Enskilda and Blackstone may provide investment
banking services to New Autoliv in the future. Enskilda may act as New Autoliv's
agent in connection with a possible placement of New Autoliv Common Stock to
finance the Compulsory Acquisition following the Transactions. In the course of
its market-making and other trading activities, Enskilda may, from time to time,
have a long or short position in, and buy and sell, securities of Autoliv and
Morton. Enskilda provides financial advisory and financing services to Autoliv
and has received customary fees in connection with these services.
If the Combination is consummated, Autoliv will pay Enskilda and Blackstone
an aggregate transaction fee of MSEK 60 (approximately US$ 8 million, based on
exchange rates on March 17, 1997). Also, Autoliv has agreed to reimburse
Enskilda and Blackstone for their out-of-pocket expenses and to indemnify
Enskilda and Blackstone and their affiliates, their respective directors,
officers, agents and employees and each person, if any, controlling Enskilda or
Blackstone, or any of their affiliates against certain liabilities, including
liabilities under U.S. federal securities laws, and expenses related to Enskilda
and Blackstone's engagement. Autoliv has agreed to pay certain taxes on behalf
of each of Enskilda and Blackstone in connection with such fees and expenses.
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THE MORTON SPECIAL MEETING
THIS PROXY STATEMENT/PROSPECTUS/EXCHANGE OFFER IS FURNISHED IN CONNECTION
WITH THE SOLICITATION OF PROXIES FROM THE HOLDERS OF MORTON COMMON STOCK BY THE
MORTON BOARD FOR USE AT THE MORTON SPECIAL MEETING.
TIME AND PLACE; PURPOSE
The Morton Special Meeting will be held at Morton's headquarters, 100 North
Riverside Plaza, Chicago, Illinois 60606, on Thursday, April 24, 1997, starting
at 9:00 a.m., local time. At the Morton Special Meeting the shareholders of
Morton will be asked to consider and vote upon the approval of (a) the Spinoff
Proposal and (b) the Merger Proposal. Each Proposal will be voted upon
separately by the shareholders of Morton; however, the consummation of each
Proposal is conditioned upon, among other things, the approval of both Proposals
by Morton shareholders.
RECORD DATE
The Morton Board has fixed the close of business on February 25, 1997, as
the record date for determining which shares of Morton Common Stock are entitled
to notice of and to vote at the Morton Special Meeting (the "Morton Special
Meeting Record Date"). Only holders of record of shares of Morton Common Stock
on the Morton Special Meeting Record Date are entitled to notice of and to vote
at the Morton Special Meeting. On the Morton Special Meeting Record Date, there
were 140,644,645 shares of Morton Common Stock outstanding and entitled to vote
at the Morton Special Meeting, held by 10,737 shareholders of record.
VOTING RIGHTS; VOTES REQUIRED FOR APPROVAL
Each holder of record, as of the Morton Special Meeting Record Date, of
Morton Common Stock is entitled to cast one vote per share. The presence, in
person or by proxy, of the holders of a majority of the outstanding shares of
Morton Common Stock is necessary to constitute a quorum at the Morton Special
Meeting. The affirmative vote, in person or by proxy, of the holders of a
majority of the shares of Morton Common Stock outstanding on the Morton Special
Meeting Record Date is required to approve the Spinoff Proposal and the Merger
Proposal.
VOTING AND REVOCATION OF PROXIES
All shares of Morton Common Stock represented by properly executed proxies
received prior to or at the Morton Special Meeting and not revoked, will be
voted in accordance with the instructions indicated in such proxies. If no
instructions are indicated on a properly executed returned proxy, such proxy
will be voted FOR the approval of the Spinoff Proposal and the Merger Proposal.
A properly executed proxy marked "ABSTAIN," although counted for purposes of
determining whether there is a quorum and for purposes of determining the
aggregate voting power and number of shares represented and entitled to vote at
the Morton Special Meeting, will not be voted. Accordingly, since the
affirmative vote of a majority of outstanding shares is required for approval of
each of the Spinoff Proposal and the Merger Proposal, a proxy marked "ABSTAIN"
will have the effect of a vote against the Proposals. Shares represented by
"broker non-votes" (i.e., shares held by brokers or nominees which are
represented at a meeting but with respect to which the broker or nominee is not
empowered to vote on a particular proposal) will be counted for purposes of
determining whether there is a quorum at the Morton Special Meeting. In
accordance with NYSE rules, brokers and nominees are precluded from exercising
their voting discretion with respect to the approval of either the Spinoff
Proposal or the Merger Proposal and thus, absent specific instructions from the
beneficial owner of such shares, are not empowered to vote such shares with
respect to the approval of such Proposals. Therefore, since the affirmative vote
of a majority of the aggregate voting power is required for approval of the
Proposals, a broker non-vote with respect to either Proposal will have the
effect of a vote against such Proposal.
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The enclosed Morton proxy card will also serve as voting instructions from a
Morton shareholder who is a participant in Morton's Book Entry Ownership Program
(the "Morton BEOP"), Morton's Dividend Reinvestment Plan (the "Morton DRP"),
and/or Morton's Employee Savings and Investment Plan (the "Morton ESIP"). If
proxy cards representing shares in the Morton BEOP, the Morton DRP or the Morton
ESIP are properly executed and returned but a vote is not specified, those
shares will be voted FOR the Spinoff Proposal and FOR the Merger Proposal.
No business will be acted upon at the Morton Special Meeting other than as
described herein. The Morton Special Meeting may be adjourned for the purpose of
soliciting additional proxies. Shares represented by proxies voting against the
approval of the Spinoff Proposal or the Merger Proposal will be voted against
any proposal to adjourn the Morton Special Meeting for the purpose of soliciting
additional proxies. Morton does not currently intend to seek an adjournment of
the Morton Special Meeting.
A shareholder may revoke such shareholder's proxy at any time prior to its
use by delivering to the Secretary of Morton a signed notice of revocation or a
later-dated signed proxy or by attending the Morton Special Meeting and voting
in person. Attendance at the Morton Special Meeting will not in itself
constitute the revocation of a proxy.
It is the policy of Morton to keep confidential proxy cards, ballots and
voting tabulations that identify individual shareholders, except where
disclosure is mandated by law.
SOLICITATION OF PROXIES
The cost of solicitation of proxies from Morton shareholders will be paid by
Morton. In addition to solicitation by mail, arrangements will be made with
brokerage houses and other custodians, nominees and fiduciaries to send proxy
material to beneficial owners; and Morton will, upon request, reimburse them for
their reasonable expenses in so doing. Morton has retained Georgeson & Co., Inc.
to aid in the solicitation of proxies and to verify certain records related to
the solicitation at a fee of $15,000 plus expenses. To the extent necessary in
order to ensure sufficient representation at the Morton Special Meeting, Morton
may request by telephone, telegram, facsimile or through personal contacts that
shareholders return their proxy cards. The extent to which this will be
necessary depends entirely upon how promptly proxy cards are returned. Morton
shareholders are urged to send in their proxies without delay.
MORTON SHAREHOLDERS SHOULD NOT SEND IN ANY STOCK CERTIFICATES WITH THEIR
PROXY CARDS. A TRANSMITTAL FORM WITH INSTRUCTIONS FOR THE SURRENDER OF STOCK
CERTIFICATES OF MORTON COMMON STOCK WILL BE MAILED BY NEW AUTOLIV TO FORMER
MORTON SHAREHOLDERS AS SOON AS PRACTICABLE AFTER CONSUMMATION OF THE MERGER.
JUDGES OF ELECTION
In accordance with the Morton Bylaws, the Morton Board has elected three
officers of First Chicago Trust Company of New York, Morton's transfer agent and
registrar, as the judges of election to serve at the Morton Special Meeting.
Voting at the Morton Special Meeting will be conducted under the direction of
these judges of election or their respective replacements selected in accordance
with the Morton Bylaws, if required. Any decision by a majority of such judges
regarding the outcome of voting at the Morton Special Meeting will be binding
upon Morton and its shareholders in the absence of actual fraud in the decision
of a majority of such judges.
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PRE-MERGER TRANSACTIONS
THIS SECTION OF THE PROXY STATEMENT/PROSPECTUS/EXCHANGE OFFER DESCRIBES
CERTAIN ASPECTS OF THE PROPOSED CONTRIBUTION AND SPINOFF. THE FOLLOWING
DESCRIPTIONS DO NOT PURPORT TO BE COMPLETE AND ARE QUALIFIED IN THEIR ENTIRETY
BY REFERENCE TO THE DISTRIBUTION AGREEMENT OR THE APPLICABLE ANCILLARY
AGREEMENT, AS THE CASE MAY BE. A COPY OF THE FORM OF DISTRIBUTION AGREEMENT IS
ATTACHED AS APPENDIX B TO THIS PROXY STATEMENT/PROSPECTUS/ EXCHANGE OFFER, AND
IS INCORPORATED HEREIN BY REFERENCE. COPIES OF THE FORMS OF THE OTHER ANCILLARY
AGREEMENTS HAVE BEEN FILED AS EXHIBITS TO THE NEW AUTOLIV REGISTRATION
STATEMENT. ALL MORTON SHAREHOLDERS AND AUTOLIV STOCKHOLDERS ARE URGED TO READ
THE DISTRIBUTION AGREEMENT AND THE OTHER ANCILLARY AGREEMENTS IN THEIR ENTIRETY.
BACKGROUND AND REASONS FOR THE SPINOFF
The Spinoff is intended to facilitate the merger of Morton's ASP Business
and Autoliv's business and to strengthen the growth opportunities of each of
Morton's businesses in their respective industries. The Morton Board believes
that because the ASP Business and the New Morton Businesses serve different
markets with no interaction or synergies between the two, the separation of the
ASP Business from the New Morton Businesses will allow each business to pursue
objectives appropriate to its specific business. The Morton Board further
believes that the Spinoff will enhance New Morton management's ability to focus
on, and to develop from within, the specialty chemicals and salt businesses and
will assist New Morton in expanding its business and product lines through an
active acquisition program, making its planned capital investments and
continuing its ongoing share acquisition program. See "Background, Reasons and
Recommendations--Reasons for the Spinoff and the Merger; Recommendations of the
Morton Board." Morton intends to distribute the New Morton Businesses to its
shareholders, by means of the Spinoff, prior to the Merger.
Morton shareholders are being asked to vote separately on each of the
Spinoff and the Merger. Although the Spinoff Proposal and the Merger Proposal
are separate proposals, the consummation of the Transactions is conditioned upon
approval of both Proposals by Morton's shareholders. The Spinoff is separate
from the Merger, and the New Morton Common Stock to be received by holders of
Morton Common Stock in the Spinoff will not constitute part of the Merger
Consideration.
TERMS OF THE DISTRIBUTION AGREEMENT
GENERAL DESCRIPTION OF THE SPINOFF. The Spinoff involves the following
steps, which will be taken pursuant to the terms of the Distribution Agreement:
(a) Morton will contribute the assets of the New Morton Businesses to
New Morton and effect the Capital Contribution (as defined below). New
Morton will also assume the liabilities of Morton, other than the ASP
Liabilities (as defined below).
(b) Morton will distribute the capital stock of New Morton to Morton's
shareholders in the Spinoff, with one share of New Morton Common Stock
distributed for each share of outstanding Morton Common Stock.
Promptly following the Spinoff, Morton, then consisting of only the ASP
Business, will merge with ASP Merger Sub in the Merger. See "The Merger."
THE CONTRIBUTION; ASSUMPTION OF NEW MORTON LIABILITIES. Pursuant to the
Distribution Agreement, immediately prior to the Spinoff, Morton will contribute
specified assets to New Morton. These assets consist primarily of (a) all of the
assets of Morton not exclusively related to the ASP Business (with certain
additions and exclusions), including the assets associated with Morton's
corporate operations, and (b) the Capital Contribution.
Morton ASP will retain the ASP Liabilities following the Spinoff, and New
Morton will assume and indemnify each of Morton ASP and New Autoliv against all
other liabilities and obligations of Morton,
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including environmental liabilities arising out of the ownership and operation
of the salt and specialty chemicals businesses (the "New Morton Liabilities").
These environmental liabilities include the obligation to perform environmental
remediation pursuant to the Comprehensive Environmental Response, Compensation
and Liability Act or equivalent state statutes at a number of sites currently or
formerly owned, operated or used as disposal sites in connection with the salt
and specialty chemicals businesses. The "ASP Liabilities" are defined in the
Distribution Agreement as the following: (a) the liabilities of Morton relating
exclusively to the ASP Business or the assets retained by Morton ASP following
the Spinoff, (b) the liabilities assigned to or assumed by Morton ASP under the
Distribution Agreement or the other Ancillary Agreements except as expressly
provided, (c) all of the liabilities on the balance sheet of the ASP Business as
of June 30, 1996 (which is included at page F-21 of this Proxy
Statement/Prospectus/ Exchange Offer), and any liabilities incurred by the ASP
Business from July 1, 1996, until the Distribution Date to the extent not
previously paid, (d) Morton's liabilities under the New Credit Facility, (e)
certain specified liabilities including certain of Morton's obligations to
Thiokol Corporation ("Thiokol") in connection with the 1989 spinoff of Morton
from Morton Thiokol, (f) the obligations of Morton under employment agreements
with executives of the ASP Business, (g) obligations to repay intercompany
indebtedness of the ASP Business incurred after June 30, 1996, in excess of the
amount of such intercompany indebtedness on June 30, 1996, (h) obligations of
Morton to repay up to $1.1 million of municipal financing and (i) obligations to
pay $15 million of the costs and expenses incurred by Morton in connection with
the Transactions to the extent not previously paid.
PARTICULAR REPRESENTATIONS AND WARRANTIES OF NEW MORTON. In the
Distribution Agreement, New Morton will make certain representations and
warranties to Morton to the effect that (a) the assets being retained by Morton
ASP following the Spinoff will include all of Morton's assets which are
exclusively used in the operation of the ASP Business as of the Distribution
Date (including certain cash and checking accounts) and (b) the interest-bearing
indebtedness (excluding certain obligations incurred in the ordinary course of
business) of the ASP Business as of the Distribution Date will not exceed $750
million plus up to $1.1 million of municipal financing. The Distribution
Agreement provides that these particular representations and warranties of New
Morton will survive until March 31, 1998. All other representations and
warranties of New Morton will expire as of the Distribution Date.
THE NEW CREDIT FACILITY AND THE CAPITAL CONTRIBUTION. Prior to the Spinoff,
Morton will enter into a new credit facility or other financing arrangements
with third parties (the "New Credit Facility") on terms which are acceptable to
both Morton and Autoliv. Morton expects to borrow approximately $750 million
under the New Credit Facility prior to the Distribution Date. As part of the
Contribution, Morton will contribute (a) $750 million of cash to New Morton and
(b) $50 million of cash generated by the ASP Business from July 1, 1996 through
the Distribution Date plus an amount of cash equal to the product of $7.2
million multiplied by the number of months (or fraction thereof) that the
Spinoff and the Merger are delayed past March 31, 1997 (as adjusted as described
herein, the "Capital Contribution"), except that the maximum amount payable by
Morton as described in clause (b) will be limited to the estimated retained
earnings of the ASP Business, exclusive of any costs and expenses paid by ASP
relating to the transactions contemplated by the Combination Agreement and the
Distribution Agreement, for the period from July 1, 1996, through the
Distribution Date calculated as if the ASP Business were a stand-alone business
during such period. Morton's cash contribution to New Morton as described in
this paragraph will be adjusted to reflect certain asset transfers and repayment
of intercompany indebtedness outstanding on June 30, 1996 in connection with
Morton's German and Dutch operations to be made pursuant to the terms of the
Distribution Agreement.
METHOD OF EFFECTING THE SPINOFF. The Distribution Agreement provides that,
effective at the time of the Spinoff, Morton will distribute all outstanding
shares of New Morton Common Stock and related preferred share purchase rights to
holders of record of Morton Common Stock on the Distribution Record Date on the
basis of one share of New Morton Common Stock and one preferred share purchase
right for each share of Morton Common Stock outstanding on the Distribution
Record Date.
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INDEMNIFICATION. Pursuant to the Distribution Agreement, Morton ASP will
agree to indemnify New Morton, and New Morton will agree to indemnify Morton ASP
and New Autoliv, against losses arising from certain matters. The
indemnification provided for in the Distribution Agreement will also apply to
the indemnified parties' respective directors, officers, employees, agents and
affiliates, and their heirs, executors, successors and assigns.
Specifically, New Morton will indemnify Morton ASP and New Autoliv for the
New Morton Liabilities and for losses, claims, debts, liabilities, commitments,
obligations and related costs and expenses (including, without limitation,
reasonable attorneys' fees) (collectively, "Indemnifiable Losses") arising out
of New Morton's or its subsidiaries' failure or alleged failure to discharge the
New Morton Liabilities in due course. New Morton will also indemnify Morton ASP
and New Autoliv against any Indemnifiable Losses arising from disclosures
contained in this Proxy Statement/Prospectus/Exchange Offer based on information
provided by or containing information relating to Morton (including the New
Morton Businesses and the ASP Business). In the event that New Morton is unable
to perform its indemnification obligations pursuant to the Distribution
Agreement, Morton ASP could be contingently liable for certain New Morton
Liabilities arising prior to the Spinoff.
Morton ASP will indemnify New Morton for the ASP Liabilities and for
Indemnifiable Losses arising out of its or its subsidiaries' failure or alleged
failure to discharge the ASP Liabilities in due course, or from disclosures in
this Proxy Statement/Prospectus/Exchange Offer based on information provided by
or containing information relating to Autoliv.
The amounts paid under the indemnification obligations contained in the
Distribution Agreement will be reduced by any insurance proceeds or other
amounts recovered by an indemnified party or paid on its behalf in connection
with an Indemnifiable Loss. The Distribution Agreement provides for procedures
for making a claim under the indemnifications and for converting foreign
currency amounts payable under the indemnifications. Such procedures provide,
among other things, that if Morton ASP determines that it is likely that it will
be named as a potentially responsible party in any environmental litigation with
respect to a New Morton Liability, New Morton, if requested to do so by Morton
ASP, will notify the potential claimant of its indemnification obligation in
favor of Morton ASP. The indemnification obligations of New Morton and Morton
ASP contained in the Distribution Agreement will be binding upon the successors
and assigns of New Morton or Morton ASP and upon any transferee of all or
substantially all of the assets (in one transaction or a series of transactions)
of New Morton or Morton ASP. Until the 20th anniversary of the date of the
Distribution Agreement, if 25% or more of the assets of the ASP Business or the
New Morton Businesses are spun off to their respective shareholders following
the Spinoff, the spun-off entity is required to assume in writing a
proportionate share of its parent's indemnification obligations under the
Distribution Agreement based on the relative assets of the spun-off entity and
the remaining assets in its parent and, thereafter, New Morton or Morton ASP, as
the case may be, will be released from the assumed proportionate share.
Separate indemnification with respect to tax matters is governed by the Tax
Sharing Agreement as described below.
NON-COMPETITION. The Distribution Agreement provides that New Morton
generally will not engage in the automotive safety restraint business for a
period of four years following the Spinoff. However, New Morton may acquire (a)
up to 10% of any entity even if it engages in such business, (b) more than 10%
of an entity that engages in such business if not more than 10% of its revenues
come from the competing business, or (c) more than 50% of an entity whose
revenues from such business are less than 40% and more than 10% of the entity's
total revenues (or, if less than 10%, constitute a stand-alone business that can
be divested without materially affecting the remaining business or operations of
such entity) so long as New Morton uses all commercially reasonable efforts to
divest the competing business as soon as practicable on terms that are
reasonable. In addition, New Morton will agree not to use the "Morton" or
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"MI" names in any trade names used in the automotive safety restraint business
for a period of 10 years following the Spinoff.
The Distribution Agreement also provides that, for a period of two years
after the Spinoff, Morton ASP and New Morton will not solicit the employment of
or employ any employee of the other company without its prior written consent.
USE OF MORTON NAMES. New Morton, which will change its name to "Morton
International, Inc.," will retain the exclusive right to use the "Morton" and
"Morton International" names following the Spinoff. Morton ASP, which will
change its name to "Autoliv ASP, Inc.," will agree in the Distribution Agreement
to remove the "Morton" names from its corporate name and the names of its
affiliates. However, to facilitate the transition, Morton ASP may otherwise
transitionally use the "Morton" names for eight months following the Spinoff on
previously printed materials, products in inventory and similar items if an
immediate change is impractical.
CONTINUING ARRANGEMENTS BETWEEN MORTON ASP AND NEW MORTON
The Distribution Agreement provides that for up to 12 months following the
Distribution Date New Morton will make certain services available to Morton ASP
at Morton ASP's request. These services include legal, accounting, intellectual
property, payroll and payroll tax, real estate, human resources, environmental,
corporate secretarial, insurance, treasury, management information, tax
preparation, and other services which the parties agree will facilitate an
orderly transition. Any required tax preparation services will be provided by
New Morton in accordance with the Tax Sharing Agreement described below. Morton
ASP will pay New Morton for the services listed above at a formula rate that
will include the direct and indirect costs of providing the services plus a 5%
surcharge.
Following the Spinoff, New Morton will continue to occupy a portion of the
shared Rochester Hills, Michigan technical center (which will remain with Morton
ASP) under a two-year lease renewable by mutual agreement.
The Distribution Agreement also provides that Morton ASP and New Morton will
have access to certain records and information in the possession of the other
following the Spinoff. In addition, if there is a material adverse change in the
financial condition of either New Morton or Morton ASP following the Spinoff
that seriously impairs its ability to meet its indemnification obligations under
the Distribution Agreement, the other party will be entitled to monitor the
situation through limited access to the records and personnel of the affected
company.
TERMS OF THE EMPLOYEE BENEFITS ALLOCATION AGREEMENT
The Benefits Agreement provides that, effective as of the Spinoff, New
Morton (or a subsidiary) will assume or retain all liabilities of Morton under
employee benefit plans, policies, arrangements, contracts and agreements,
including under collective bargaining agreements, with respect to employees who
on or after the Spinoff will be employees of New Morton, including employees of
Morton's corporate operations ("New Morton Employees") and with respect to
former employees of any business that is part of New Morton and related
discontinued operations. The Benefits Agreement also provides that Morton ASP
generally will retain all liabilities relating to employees or former employees
of the ASP Business and related discontinued operations ("ASP Employees") under
employee benefit plans, policies, arrangements, contracts and agreements
maintained by Morton prior to the Spinoff.
The Benefits Agreement further provides that employment by New Morton of
individuals who were employees of Morton immediately prior to the Spinoff will
not be deemed a severance of employment from Morton for purposes of any policy,
plan, program or agreement that provides for the payment of severance, salary
continuation or similar benefits, and New Morton will assume responsibility for
all severance liabilities, if any, with respect to New Morton Employees.
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New Morton or a New Morton subsidiary, as appropriate, will assume and
discharge all of the liabilities and obligations relating to New Morton
Employees from and after the Spinoff under all applicable collective bargaining
and labor agreements to which Morton is a party. Currently there are no such
agreements covering employees of the ASP Business other than legally mandated
workers' councils or similar organizations outside the United States.
Pursuant to the Benefits Agreement, Morton will take all action necessary to
amend outstanding options ("Morton Options") under the Morton International,
Inc. 1989 Incentive Plan, as amended, or any predecessor plan (the "Option
Plan"). Pursuant to such amendments, subject to certain conditions set forth in
the Benefits Agreement, as of the Distribution Date, each Morton Option which is
outstanding and not exercised immediately prior to the Distribution Record Date
and which is held by a New Morton Employee or a former employee of a New Morton
Business or a related discontinued business will be exchanged for an option to
purchase New Morton Common Stock with terms identical to the Morton Option,
except that the exercise price and number of shares subject to such new option
will be adjusted to reflect the difference in the fair market value between the
Morton Common Stock and the New Morton Common Stock in accordance with the
requirements of Section 424 of the Code and the regulations promulgated
thereunder. The adjustment of the number of shares subject to such new options
and the exercise price of such options will be made pursuant to a formula
designed to maintain the relationship between the exercise price of the new
options and the market price of the underlying shares as well as the aggregate
unrealized value of such options. The method that will be used to adjust the
number of outstanding options and their related exercise prices will not result
in additional compensation expense since (a) the aggregate intrinsic value of
the options immediately after the changes will not be amended, (b) the ratio of
the exercise price per option to the market value per share will not be reduced
and (c) the vesting provisions and terms of the original grants will not be
amended.
Pursuant to the Combination Agreement, each Morton Option which is
outstanding and not exercised immediately prior to the Effective Time and which
is held by an ASP Employee, including Morton Options granted to ASP Employees in
August 1996, will be converted into an option to purchase shares of New Autoliv
Common Stock in accordance with the requirements of Section 424 of the Code. The
adjustment of the number of shares subject to such new options and the exercise
price of such options will be made pursuant to a formula designed to maintain
the relationship between the exercise price of the new options and the market
price of the underlying shares as well as the aggregate unrealized value of such
options. In addition, Morton Options held by ASP Employees which are unvested
prior to the Distribution Date will vest, pursuant to the terms of the Option
Plan, upon consummation of the Transactions. See "Interests of Certain Persons
in the Transactions."
As of January 31, 1997, there were outstanding (a) Morton Options to
purchase an aggregate of 265,261 shares of Morton Common Stock held by ASP
Employees that would be converted into options to purchase New Autoliv Common
Stock pursuant to the Combination Agreement and (b) Morton Options to purchase
5,708,228 shares of Morton Common Stock held by New Morton Employees and former
employees of the New Morton Businesses that would be converted into options to
purchase New Morton Common Stock pursuant to the Benefits Agreement. As a result
of these adjustments, the Morton Options held by ASP Employees would be
converted into options to purchase shares of New Autoliv Common Stock
representing less than 1% of the outstanding shares of New Autoliv Common Stock
on a fully diluted basis and the Morton Options held by New Morton Employees and
former employees of the New Morton Businesses would be converted into options to
purchase shares of New Morton Common Stock representing approximately 6% of the
outstanding shares of New Morton Common Stock on a fully diluted basis.
TERMS OF THE TAX SHARING AGREEMENT
Under the Tax Sharing Agreement, for all taxable periods ending on or before
the Spinoff, the results of Morton's specialty chemical and salt operations will
continue to be included in Morton's consolidated
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U.S. federal income tax returns. The Tax Sharing Agreement provides for the
allocation of U.S. federal, state and local, and non-U.S. tax liabilities
arising in connection with all taxable periods ending on or before the
Distribution Date or ending thereafter but including the Distribution Date. In
general, the Tax Sharing Agreement provides that New Morton will be liable for
all such tax liabilities, including liabilities resulting from the audit or
other adjustment to previously filed tax returns, which are attributable to the
assets or businesses being transferred to New Morton, and that Morton ASP will
be responsible for taxes and adjustments attributable to the ASP Business being
retained by Morton ASP.
In addition, except as provided in the next sentence, New Morton will be
liable for all taxes resulting from the transfers of stock and/or assets
undertaken to effect the Spinoff ("Restructuring Taxes") including, without
limitation, any tax imposed on Morton as a result of the Spinoff failing to
qualify under Section 355 of the Code. The foregoing sentence will not apply,
however, to any Restructuring Taxes to the extent that all or any portion of
such Restructuring Taxes (including any Restructuring Taxes imposed as a result
of the Spinoff failing to qualify under Section 355 of the Code) would not have
resulted but for an act or omission of Morton ASP or any of its affiliates, a
misrepresentation on the part of Morton ASP made in connection with the opinion
of counsel required by the Distribution Agreement to be obtained by New Morton
before taking certain corporate actions, or any other post-Distribution Date
transaction involving either the stock or assets of Morton ASP or any of its
affiliates. Furthermore, both New Morton, in the Distribution Agreement, and New
Autoliv, in the Combination Agreement, have undertaken not to engage in certain
acts or transactions for one year following the Spinoff, including ceasing to
engage in an active trade or business, certain transfers, issuances and
repurchases of capital stock, and liquidating or merging with another entity,
unless New Morton or Morton ASP, as the case may be, first obtains an opinion of
counsel or a supplemental IRS ruling to the effect that such transaction or act
will not cause the Spinoff to fail to qualify under Section 355 of the Code. See
"The Combination Agreement--Agreements on Post-Closing Transactions."
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THE MERGER
THIS SECTION OF THE PROXY STATEMENT/PROSPECTUS/EXCHANGE OFFER DESCRIBES
CERTAIN ASPECTS OF THE PROPOSED MERGER. TO THE EXTENT THAT IT RELATES TO THE
COMBINATION AGREEMENT, THE FOLLOWING DESCRIPTION DOES NOT PURPORT TO BE COMPLETE
AND IS QUALIFIED BY REFERENCE TO THE COMBINATION AGREEMENT, WHICH IS ATTACHED AS
APPENDIX A TO THIS PROXY STATEMENT/PROSPECTUS/EXCHANGE OFFER AND IS INCORPORATED
HEREIN BY REFERENCE. OTHER ASPECTS OF THE PROPOSED COMBINATION OF THE ASP
BUSINESS WITH AUTOLIV ARE DESCRIBED ELSEWHERE IN THIS PROXY STATEMENT/
PROSPECTUS/EXCHANGE OFFER.
EFFECT OF THE MERGER
At the Effective Time, ASP Merger Sub will be merged with and into Morton
ASP and the separate corporate existence of ASP Merger Sub will cease. Morton
ASP (which at the Effective Time will consist only of the ASP Business, subject
to $750 million of indebtedness under the New Credit Facility) will be the
surviving corporation in the Merger and will continue to be governed by the laws
of the State of Indiana. Morton ASP's name will be changed to "Autoliv ASP,
Inc." following the Merger.
The Combination Agreement provides that the articles of incorporation of
Morton ASP will be amended and restated as of the Effective Time as set forth in
the Combination Agreement, and the bylaws of ASP Merger Sub in effect at the
Effective Time will be the bylaws of Morton ASP following the Merger.
The Combination Agreement provides that the directors of ASP Merger Sub at
the Effective Time will be the directors of Morton ASP following the Merger, and
the officers of Morton ASP at the Effective Time will be the officers of Morton
ASP following the Merger, in each case until their respective successors are
duly elected or appointed or qualified or until their earlier death, resignation
or removal.
CONVERSION OF MORTON COMMON STOCK
Pursuant to the Combination Agreement, as of the Effective Time, each issued
and outstanding share of Morton Common Stock (other than shares held in Morton's
treasury or owned by Autoliv or a subsidiary of Autoliv or Morton, which will be
cancelled in accordance with the Combination Agreement) will be converted into
the right to receive a fraction of a share of New Autoliv Common Stock
calculated by dividing 47,803,738 by the number of shares of Morton Common Stock
outstanding immediately prior to the Effective Time (other than the cancelled
shares), rounded to the nearest thousandth or, if there is no nearest
thousandth, to the next highest thousandth. As an example, if the Merger had
occurred as of the Morton Special Meeting Record Date when there were
140,664,645 outstanding shares of Morton Common Stock, each share of Morton
Common Stock would have been converted into the right to receive 0.34 of a share
of New Autoliv Common Stock.
Pursuant to the Combination Agreement, at the Effective Time, each issued
and outstanding share of common stock of ASP Merger Sub will be converted into
one share of Morton Common Stock, with the effect that Morton ASP will become a
wholly owned subsidiary of New Autoliv.
FRACTIONAL SHARES
No fractional shares of New Autoliv Common Stock will be issued in the
Merger. As a result, Morton shareholders will receive a whole number of shares
of New Autoliv Common Stock based on the aggregate number of Morton shares they
own and a cash payment (without interest) in lieu of any fraction of a share of
New Autoliv Common Stock they would otherwise be entitled to receive in an
amount equal to such fraction multiplied by the Average Value of New Autoliv
Common Stock. For purposes of the above, the "Average Value of New Autoliv
Common Stock" means the average for each of the first five trading days
beginning immediately following the Effective Time of the average of the daily
high and low trading prices of New Autoliv Common Stock on the NYSE.
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EFFECTIVE TIME
The Combination Agreement contemplates that the Merger will occur as
promptly as practicable after the Spinoff and substantially contemporaneously
with the acquisition of the Autoliv Securities by New Autoliv. The Combination
Agreement provides that the Merger will become effective and the Effective Time
will occur in accordance with the articles of merger to be filed with the
Secretary of State of the State of Indiana and the certificate of merger to be
filed with the Secretary of State of the State of Delaware.
EXCHANGE PROCEDURES
Pursuant to the Combination Agreement, promptly after the Effective Time,
New Autoliv will deposit with First Chicago Trust Company of New York (the "U.S.
Exchange Agent") the shares of New Autoliv Common Stock (together with any
dividends or distributions payable with respect thereto and cash to pay for
fractional shares, the "Exchange Fund") issuable pursuant to the Combination
Agreement in exchange for certificates which, immediately prior to the Effective
Time, represented outstanding shares of Morton Common Stock (the "Morton
Certificates"). As promptly as practicable after the Effective Time, New Autoliv
will cause the U.S. Exchange Agent to mail a transmittal form and instructions
to each holder of record of Morton Certificates. The form and instructions are
to be used by a holder of Morton Certificates in forwarding such certificates
for surrender and exchange for (a) the number of whole shares of New Autoliv
Common Stock which such holder has the right to receive in the Merger and (b)
cash for any fractional share of New Autoliv Common Stock to which such holder
would otherwise be entitled. MORTON SHAREHOLDERS ARE REQUESTED NOT TO SURRENDER
THEIR MORTON CERTIFICATES FOR EXCHANGE UNTIL THEY RECEIVE THE TRANSMITTAL LETTER
AND INSTRUCTIONS FROM THE U.S. EXCHANGE AGENT. Until surrendered as provided
above, Morton Certificates will be deemed to represent only the right to receive
shares of New Autoliv Common Stock, cash in lieu of fractional shares as
described above, and any dividends or other distributions to which such holder
may become entitled. Holders of Morton Certificates will not be entitled to
receive dividends or any other distributions from New Autoliv until their Morton
Certificates are so surrendered. Upon surrender of a Morton Certificate, the
person in whose name such shares of New Autoliv Common Stock are issued will be
paid any dividends or other distributions on such whole shares which have a
record date after the Effective Time and before the date of surrender and which
have a payment date before the date of surrender. Any such dividends or other
distributions with a payment date after the date of surrender of the Morton
Certificates will be paid on the payment date.
The Combination Agreement provides that any portion of the Exchange Fund
remaining undistributed to holders of Morton Certificates for six months after
the Effective Time will be delivered to New Autoliv. Thereafter, holders of
Morton Certificates may look only to New Autoliv for any shares of New Autoliv
Common Stock, cash in lieu of fractional shares, and any dividends or other
distributions with respect to New Autoliv Common Stock to which they are
entitled pursuant to the Combination Agreement.
NO DISSENTERS' RIGHTS
Under Section 23-1-44-8 of the Indiana Business Corporation Law (the
"IBCL"), dissenters' rights are not available to the shareholders of a
corporation in connection with certain mergers and other extraordinary
transactions if the corporation's shares are registered on a U.S. securities
exchange that is registered under the Exchange Act. Morton shareholders are not
entitled to dissenters' rights in connection with the Merger because Morton
Common Stock is listed on the NYSE.
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ACCOUNTING TREATMENT
The Merger will be accounted for as a purchase for financial accounting
purposes in accordance with U.S. generally accepted accounting principles ("U.S.
GAAP"), and Autoliv will be treated as the acquiror of the ASP Business.
For a description of certain other provisions of the Combination Agreement
relating to the Merger, including conditions to the obligations of Morton and
ASP Merger Sub to consummate the Merger, see "The Combination Agreement."
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THE EXCHANGE OFFER
(APPLIES ONLY TO HOLDERS OF AUTOLIV SECURITIES)
MORTON SHAREHOLDERS ARE NEITHER BEING ASKED TO, NOR WILL THEY BE PERMITTED
TO, TENDER THEIR SHARES OF MORTON COMMON STOCK IN THE EXCHANGE OFFER. MORTON
SHAREHOLDERS WILL PARTICIPATE IN THE COMBINATION PURSUANT TO THE MERGER. SEE
"THE MERGER."
GENERAL
The Combination Agreement contemplates that New Autoliv will commence an
offer to exchange one New Autoliv Security for each outstanding share of Autoliv
Common Stock and each outstanding ADS. The Exchange Offer will be conducted in
two parts, the U.S. Offer and the Swedish and International Offer. The U.S.
Offer and the Swedish and International Offer will be on substantially the same
terms and subject to the same conditions, except that holders of Autoliv Common
Stock that are U.S. Persons, Canadian Persons or Australian Persons will receive
shares of New Autoliv Common Stock pursuant to the U.S. Offer and holders of
shares of Autoliv Common Stock that are not U.S. Persons, Canadian Persons or
Australian Persons will receive, at their option, either shares of New Autoliv
Common Stock or SDRs pursuant to the Swedish and International Offer. The
Swedish and International Offer will be made in accordance with the
Recommendation Concerning Public Offers to Purchase Shares promulgated in 1988
by the Joint Committee of the Stockholm Chamber of Commerce and the Federation
of Swedish Industries (the "Recommendation"), which is applicable to certain
takeovers of Swedish companies. The Swedish and International Offer is not being
made directly or indirectly in, or by use of the mails of, or by any means or
instrumentality (including, without limitation, the mail, facsimile
transmission, telex or telephone) of interstate or foreign commerce in, or any
facilities of a national securities exchange of, the United States, Canada or
Australia.
ON NOVEMBER 15, 1996, THE AUTOLIV BOARD DETERMINED, BY UNANIMOUS VOTE, THAT
THE EXCHANGE OFFER IS FAIR TO, AND IN THE BEST INTERESTS OF, AUTOLIV AND ITS
STOCKHOLDERS, AND UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS ACCEPT THE EXCHANGE
OFFER.
The U.S. Offer is being made to holders of ADSs and to U.S. Persons who hold
beneficially, or of record, shares of Autoliv Common Stock. The U.S. Offer may
also be accepted by Canadian Persons and Australian Persons. Each holder
tendering Autoliv Securities in the U.S. Offer will be required to certify that
such holder is a U.S. Person, Canadian Person or Australian Person. As used
herein, the term "U.S. Person" has the meaning set forth in Regulation S
promulgated under the Securities Act; for purposes of the description of the
Exchange Offer contained in this section of the Proxy Statement/Prospectus/
Exchange Offer, the term "United States" means the United States of America,
including each of the 50 states and the District of Columbia, its territories,
its possessions and other areas subject to its jurisdiction; the term "Canadian
Person" means any individual, corporation, partnership, trust or other entity
resident in Canada, or any corporation, partnership, trust or other entity
organized under or governed by the laws of Canada or any political subdivision
thereof; and the term "Australian Person" means any individual, corporation,
partnership, trust or other entity resident in Australia, or any corporation,
partnership, trust or other entity organized under or governed by the laws of
Australia or any political subdivision thereof.
In order to facilitate the making of the U.S. Offer, the SEC has issued a
"no-action letter" (the "No-Action Letter") granting New Autoliv relief with
respect to certain of the SEC's rules pertaining to tender and exchange offers
in the United States under the Exchange Act, particularly with respect to the
timing of exchange for, or return of, tendered securities, as described herein.
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U.S. OFFER. New Autoliv hereby offers, upon the terms and subject to the
conditions set forth in this Proxy Statement/Prospectus/Exchange Offer and in
the related Offer Letter of Transmittal (as defined herein), to exchange for (a)
each outstanding share of Autoliv Common Stock that is owned of record or owned
beneficially by a U.S. Person, Canadian Person or Australian Person, one share
of New Autoliv Common Stock, and (b) each outstanding ADS, whether or not held
by a U.S. Person, Canadian Person or Australian Person, one share of New Autoliv
Common Stock (the "Offer Exchange Ratio").
CONDITIONS. The Exchange Offer is conditioned upon the satisfaction or, if
permissible, waiver of the Minimum Condition, the condition that the Combination
Agreement and the transactions contemplated by the Distribution Agreement shall
have been approved by shareholders holding a majority of the outstanding shares
of Morton Common Stock in accordance with the IBCL and the Morton Articles and
Morton Bylaws (the "Morton Stockholder Approval Condition") and the other
conditions set forth in Article IX of the Combination Agreement occurring prior
to or contemporaneously with the Effective Time (together with the Minimum
Condition and the Morton Stockholder Approval Condition, the "Combination
Conditions"). See "The Combination Agreement--Conditions to the Merger and the
Exchange Offer" and "--Section 9. Certain Conditions of the U.S. Offer."
COMPULSORY ACQUISITION. If, as described in "--Section 7. No Appraisal
Rights; Compulsory Acquisition," as a result of the Exchange Offer or otherwise,
New Autoliv acquires Autoliv Securities representing more than 90% of the
outstanding Autoliv Securities, New Autoliv intends to acquire through Swedish
Sub all of the remainder of the Autoliv Securities pursuant to the Compulsory
Acquisition. Swedish Sub (and each remaining stockholder of Autoliv) would have
the right under Sections 31 through 35 of Chapter 14 of the Swedish Companies
Act (the "Companies Act") to commence a process leading to the Compulsory
Acquisition. If such level greater than 90% is obtained by New Autoliv as a
result of the Exchange Offer or otherwise, New Autoliv intends to cause Swedish
Sub to exercise its right to effect the Compulsory Acquisition, unless Autoliv
and Morton mutually agree that there is a more effective method of achieving the
objectives of the Compulsory Acquisition (in which case such method will be
used). The Compulsory Acquisition initiated by Swedish Sub will relate only to
those Autoliv Securities not held by Swedish Sub or its subsidiaries. As soon as
practicable after the Exchange Offer, Autoliv will cause the shares of Autoliv
Common Stock to be delisted from the SSE and the quotation of ADSs on the PORTAL
system to be terminated, and, consequently, there will be no active trading
market for the Autoliv Securities subsequent to such delisting and termination
of trading.
Absent an agreement between Swedish Sub and all remaining holders of Autoliv
Securities as to the price to be paid in the Compulsory Acquisition, the price
will be set by an arbitration tribunal convened under, and subject to, the
Companies Act. The tribunal will determine the price based on an evaluation of
New Autoliv. Under Sections 31 through 35 of Chapter 14 of the Companies Act, if
an owner holding more than 90% of the share capital and voting power in a
company has acquired the majority of such share capital through a tender offer,
the compulsory acquisition price must be the same as the value of the
consideration paid in such owner's offer for such share capital, unless there
are special reasons for a different price. NO ASSURANCE CAN BE GIVEN THAT THE
PRICE TO BE PAID FOR AUTOLIV SECURITIES IN THE COMPULSORY ACQUISITION WOULD BE
EQUAL TO THE VALUE OF THE NEW AUTOLIV COMMON STOCK RECEIVED BY TENDERING
STOCKHOLDERS IN THE EXCHANGE OFFER.
After the arbitration tribunal has been constituted and if it confirms that
Swedish Sub has the right to effect the Compulsory Acquisition, Swedish Sub will
have the right to terminate the equity rights of the holders of Autoliv
Securities (other than Swedish Sub or its subsidiaries) upon posting appropriate
security for payments to be made in connection with the Compulsory Acquisition.
Interest is set by the tribunal, payable on the price finally determined,
typically from the date of commencement of the Compulsory Acquisition process to
the date of payment. New Autoliv presently intends to cause Swedish Sub to post
security and terminate equity rights pursuant to the Compulsory Acquisition as
soon as reasonably practicable after it is legally permitted to do so. While no
assurance can be given as to the interval of time between the commencement of
the Compulsory Acquisition process and the posting of security, in other
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transactions this interval has typically ranged from four to eight months.
Payment for the Autoliv Securities so acquired will be made after the tribunal
has determined the price, which determination may take up to two years, and may
be further delayed until any appeals from the decision of the tribunal have been
finally resolved.
Depending upon the number of Autoliv Securities acquired in the Compulsory
Acquisition and market conditions, New Autoliv may seek to finance the posting
of security for such purchases through a combination of funds from operations
and public or private issuances of debt or equity securities. Accordingly, New
Autoliv may seek to place the New Autoliv Securities in Sweden and elsewhere in
Europe immediately following the Expiration Date (as defined herein) with
institutional investors at a price based upon the then market price of shares of
New Autoliv Common Stock or the SDRs, as the case may be. Enskilda or another
financial institution may act as New Autoliv's agent in connection with any such
placement for which it would receive a fee in an amount to be agreed upon with
New Autoliv.
FEES OF TENDERING STOCKHOLDERS. Tendering stockholders of Autoliv will not
be obligated to pay brokerage fees or commissions. New Autoliv will bear all
charges and expenses of First Chicago Trust Company of New York (the
"Depositary"), and of Shareholder Communications Corporation, which is acting as
information agent in the United States on behalf of New Autoliv in connection
with the U.S. Offer (the "Information Agent").
ADS FACILITY. Bank of New York, which currently acts as the depositary bank
for the ADSs (in such capacity, the "ADS Bank"), has advised New Autoliv that,
as of December 31, 1996, there were 562,300 ADSs outstanding.
CANADIAN HOLDERS. The New Autoliv Common Stock has not been qualified for
distribution under provincial securities laws in Canada. However, such laws
provide exemptions in certain circumstances from normally applicable
registration and prospectus requirements where securities as in the current
instance are issued in connection with a takeover bid. Exemptions from otherwise
applicable takeover bid requirements may be available either because offers are
made to a limited number of persons in respect of a minimum number of shares and
are prepared in accordance with the rules of the SEC or because of other
exemptions available under the applicable securities laws of the various
Canadian provinces. Holders of Autoliv Securities that are Canadian Persons may
tender their Autoliv Securities into the U.S. Offer on the same basis as U.S.
Persons, and, if they desire to so tender, should complete the Offer Letter of
Transmittal. Exchanges of Autoliv Securities for shares of New Autoliv Common
Stock with holders of Autoliv Securities that are Canadian Persons will be made
on the same basis as such exchanges are made with U.S. Persons. HOLDERS OF
AUTOLIV SECURITIES THAT ARE CANADIAN PERSONS SHOULD CONSULT THEIR OWN TAX
ADVISORS FOR ADVICE ON THE CANADIAN TAX IMPLICATIONS OF THE U.S. OFFER.
Because the New Autoliv Common Stock has not been qualified for distribution
under provincial securities laws in Canada, New Autoliv Securities purchased by
Canadian Persons may be subject to resale restrictions in certain provinces.
Before selling New Autoliv Securities, Canadian Persons are advised to consult
with their legal or other advisors regarding applicable regulatory requirements,
including the filing of the appropriate forms within the prescribed time
periods.
AUSTRALIAN HOLDERS. New Autoliv Common Stock issued in connection with the
U.S. Offer will be distributed in Australia pursuant to an exemption, granted by
the Australian Securities Commission, from the requirement to file a prospectus.
However, New Autoliv Common Stock issued may be subject to resale restrictions
in Australia. Before selling their shares, Australian Persons holding New
Autoliv Common Stock are advised to consult with their legal or other advisors
regarding applicable regulatory requirements, particularly in relation to
secondary trading requirements, including the filing of the appropriate notices
within the prescribed time period.
OTHER. The New Autoliv Common Stock that New Autoliv hereby offers to
exchange for Autoliv Securities pursuant to this Proxy
Statement/Prospectus/Exchange Offer has been registered under the
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Securities Act, and is described in detail, together with financial and other
information concerning New Autoliv, elsewhere in this Proxy
Statement/Prospectus/Exchange Offer, which constitutes part of the New Autoliv
Registration Statement. Application will be made to list the shares of New
Autoliv Common Stock exchanged for Autoliv Securities and issued in the Merger
on the NYSE and the SDRs exchanged for Autoliv Securities on the SSE.
For additional information concerning New Autoliv, see "--Section 6. Certain
Information Concerning New Autoliv."
THIS PROXY STATEMENT/PROSPECTUS/EXCHANGE OFFER AND THE RELATED OFFER LETTER
OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION THAT SHOULD BE READ BEFORE ANY
DECISION IS MADE WITH RESPECT TO ACCEPTING THE U.S. OFFER.
SECTION 1. TERMS OF THE U.S. OFFER; NUMBER OF SHARES; EXPIRATION DATE
GENERAL. Upon the terms and subject to the conditions set forth in the U.S.
Offer, as it may be amended or supplemented from time to time, New Autoliv will,
in connection with the U.S. Offer, accept for exchange, and exchange, all
outstanding Autoliv Securities subject to the U.S. Offer that are validly
tendered in the Exchange Offer and not withdrawn prior to the final day (the
"Expiration Date") of the Offer Period (as defined below). U.S. Persons,
Canadian Persons and Australian Persons who wish to accept the U.S. Offer must
tender their Autoliv Securities during the period commencing March 27, 1997, and
ending 12:00 noon, New York City time, on April 24, 1997 (as such period may be
extended as described in the following sentence, the "Offer Period"). New
Autoliv expressly reserves the right, in its sole discretion (subject to the
consent of Morton and Autoliv), at any time or from time to time, to extend the
Offer Period for any reason, and in relation thereto, to delay delivery of the
New Autoliv Securities, by giving oral or written notice of such extension to
the U.S. Exchange Agent, accompanied by a public announcement. New Autoliv
intends to extend the U.S. Offer if the Swedish and International Offer is
similarly extended. The delivery of shares of New Autoliv Common Stock in
exchange for Autoliv Securities tendered in the U.S. Offer will not commence
until New Autoliv has announced that all conditions to the U.S. Offer have been
met or waived in accordance with the Combination Agreement. In accordance with
customary Swedish practice regarding determining the level of acceptances in
tender and exchange offers, New Autoliv may not announce the level of acceptance
of the U.S. Offer until at least five business days after the expiration of the
Offer Period (such period from the Expiration Date to the date of such
announcement is referred to as the "Interim Period"). Assuming that such
announcement is made on or about May 1, 1997, it is estimated that settlement
can begin on or about May 5, 1997. Withdrawal rights will not be available
during the Interim Period or the period, if any, during which the U.S. Offer
remains open following the announcement by New Autoliv of the satisfaction of
all conditions to the U.S. Offer.
Subject to the applicable rules and regulations of the SEC, in accordance
with the Recommendation and subject to the terms of the Combination Agreement,
New Autoliv also reserves the right, in its sole discretion, at any time, to (a)
delay acceptance for exchange of and, regardless of whether any Autoliv
Securities have theretofore been accepted for exchange, delay delivery of shares
of New Autoliv Common Stock for any Autoliv Securities tendered in the U.S.
Offer pending receipt of any governmental or other regulatory approvals or other
actions specified in "Risk Factors--Regulatory Conditions and Approvals," (b)
terminate the U.S. Offer and not accept for exchange any Autoliv Securities
unless the Combination Conditions shall have been satisfied or, if permissible,
waived, and (c) waive (to the extent permissible) any Combination Condition, or
otherwise amend the U.S. Offer in any respect, by giving oral or written notice
of such delay, termination or amendment to the Depositary and by making a public
announcement thereof. Autoliv and Morton may jointly cause New Autoliv to take
certain actions, including waiving any of the Combination Conditions. New
Autoliv has agreed to take all such actions if so directed. The Combination
Agreement provides that the Exchange Offer will be extended by New Autoliv,
unless Autoliv and Morton otherwise agree, from time to time thereafter until
such time as all of the Combination Conditions have been satisfied; provided,
however, that, unless a Third-Party Acquisition (as defined herein) involving
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Autoliv has theretofore been proposed, neither party will unreasonably object if
the other party determines not to extend the Expiration Date if the Minimum
Condition has not been satisfied at such time following (a) the date of the
Morton Special Meeting and (b) the satisfaction of certain conditions set forth
in the Combination Agreement. Subject only to the satisfaction or, if
permissible, waiver of the Combination Conditions, New Autoliv will accept for
exchange and will exchange all Autoliv Securities validly tendered and not
withdrawn pursuant to the terms of the Exchange Offer at the earliest
practicable time following the Expiration Date.
Without limiting the manner in which New Autoliv may choose to make any
public announcement, whether in connection with an extension, delay,
termination, amendment or waiver of any of the terms of the U.S. Offer, and
except as provided by applicable law, New Autoliv shall have no obligation to
publish, advertise or otherwise communicate any such public announcement other
than by making a press release to the Dow Jones News Service. If such press
release relates to an extension of the U.S. Offer, New Autoliv will issue such
press release no later than 9:00 a.m. on the next business day after the
scheduled termination of the U.S. Offer. For purposes of the U.S. Offer, a
"business day" means any day other than a Saturday, Sunday or U.S. federal
holiday and consists of the time period from 12:01 a.m. through 12:00 midnight,
New York City time.
OTHER. The U.S. Offer is conditioned upon the satisfaction or, if
permissible, waiver of the Combination Conditions. See "The Combination
Agreement--Conditions to the Merger and the Exchange Offer" and "--Section 9.
Certain Conditions of the U.S. Offer."
New Autoliv will not accept for exchange any Autoliv Securities tendered in
the U.S. Offer and Swedish and International Offer during the Offer Period
unless all Autoliv Securities validly tendered in the U.S. Offer and Swedish and
International Offer and not withdrawn prior to the Expiration Date are accepted
for exchange.
The Depositary has provided New Autoliv with a list of record holders of
ADSs for the purpose of disseminating the U.S. Offer to holders of ADSs. Autoliv
has arranged for New Autoliv to obtain a list of holders of record of other
shares of Autoliv Common Stock that have registered addresses in the United
States, Canada or Australia and that are believed by Autoliv to be U.S. Persons,
Canadian Persons or Australian Persons, as well as the names of non-U.S.
nominees that are believed to be holding ADSs or shares of Autoliv Common Stock
on behalf of U.S. Persons, Canadian Persons or Australian Persons. This Proxy
Statement/Prospectus/Exchange Offer, the Offer Letter of Transmittal and other
related materials will be mailed by New Autoliv to such record holders and will
be furnished by New Autoliv to brokers, dealers, commercial banks, trust
companies and similar persons whose names, or the names of whose nominees,
appear on such lists for subsequent transmittal to beneficial owners of Autoliv
Securities, or who otherwise indicate to New Autoliv that they are holding
Autoliv Securities for the benefit of U.S. Persons, Canadian Persons or
Australian Persons.
SECTION 2. PROCEDURES FOR TENDERING AUTOLIV SECURITIES
GENERAL. In order for a holder of Autoliv Securities to validly tender
Autoliv Securities pursuant to the U.S. Offer, an offer letter of transmittal
(the "Offer Letter of Transmittal") or facsimile copy thereof, must be properly
completed and duly executed, and, together with any other required documents,
must be delivered to the Depositary specified in such Offer Letter of
Transmittal. In order for a holder of ADSs to validly tender such ADSs (a) the
Offer Letter of Transmittal and other required documents (including the
certificates representing such ADSs) must be delivered as described in the
preceding sentence, (b) in the case of holders of ADSs tendering their ADSs
pursuant to a book-entry transfer, an Agent's Message (as defined below) and any
other required documents, must be received by the Depositary at one of its
addresses set forth on the back cover of this Proxy
Statement/Prospectus/Exchange Offer, and either certificates representing such
ADSs must be received by the Depositary at one of such addresses or be delivered
pursuant to the procedures for book-entry transfer set forth below and a
confirmation thereof
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must be received by the Depositary, in each case prior to the Expiration Date or
(c) such holder must comply with the Guaranteed Delivery Procedures (as defined
below).
ANY STOCKHOLDER WHOSE AUTOLIV SECURITIES ARE REGISTERED IN THE NAME OF A
BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE MUST CONTACT
SUCH PERSON IF SUCH STOCKHOLDER DESIRES TO TENDER SUCH AUTOLIV SECURITIES.
In order to accept the U.S. Offer, a holder of Autoliv Common Stock will
need to certify that such holder is a U.S. Person, Canadian Person or Australian
Person, or is holding such Autoliv Common Stock on behalf of a U.S. Person,
Canadian Person or Australian Person. Holders of ADSs do not need to make such
certification in order to accept the U.S. Offer.
THE METHOD OF DELIVERY OF CERTIFICATES REPRESENTING ADSS AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY
(AS DEFINED BELOW), IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER. IF
DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
If certificates for ADSs are forwarded separately to the Depositary, a
properly completed and duly executed Offer Letter of Transmittal (or a facsimile
copy thereof) must accompany each such delivery.
BOOK-ENTRY TRANSFER. THE FOLLOWING PROCEDURES ARE AVAILABLE ONLY TO HOLDERS
OF ADSS, AND ARE NOT AVAILABLE TO HOLDERS OF AUTOLIV COMMON STOCK. The
Depositary will establish accounts with respect to the ADSs at The Depository
Trust Company and the Philadelphia Depository Trust Company (each a "Book-Entry
Transfer Facility" and, collectively, the "Book-Entry Transfer Facilities") for
purposes of the U.S. Offer, within two business days after the date of this
Proxy Statement/Prospectus/Exchange Offer. Any financial institution that is a
participant in the system of any Book-Entry Transfer Facility may make book-
entry deliveries of ADSs by causing such Book-Entry Transfer Facility to
transfer such ADSs into the Depositary's account at such Book-Entry Transfer
Facility in accordance with that Book-Entry Transfer Facility's procedure for
such transfer. Although delivery of ADSs may be effected through book-entry
transfer at the Book-Entry Transfer Facilities, the Offer Letter of Transmittal
(or facsimile copy thereof), properly completed and duly executed, together with
any required signature guarantees and any other required documents and an
Agent's Message, must, in any case, be received by the Depositary at one of its
addresses set forth on the back cover of this Proxy
Statement/Prospectus/Exchange Offer prior to the Expiration Date, or the
tendering stockholder must comply with the Guaranteed Delivery Procedures
described below. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES
NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
The confirmation of a book-entry transfer of ADSs into the Depositary's
account at a Book-Entry Transfer Facility as described above is referred to
herein as a "Book-Entry Confirmation." The term "Agent's Message" means a
message transmitted by a Book-Entry Transfer Facility to, and received by, the
Depositary and forming a part of a Book-Entry Confirmation, which states that
such Book-Entry Transfer Facility has received an express acknowledgment from
the participant in such Book-Entry Transfer Facility tendering ADSs that such
participant has received and agrees to be bound by the terms of the Offer Letter
of Transmittal and that New Autoliv may enforce such agreement against the
participant.
SIGNATURE GUARANTEES. No signature guarantee is required on Offer Letters
of Transmittal if Autoliv Securities are tendered (a) by a registered holder of
Autoliv Securities that has not completed either the box entitled "Special
Delivery Instructions" or the box entitled "Special Payment Instructions" on the
Offer Letter of Transmittal or (b) for the account of any financial institution
(including most commercial banks, savings and loan associations and brokerage
houses) that is a participant in the Security Transfer Agents Medallion Program,
the NYSE Medallion Signature Guarantee Program or the NYSE Medallion Program (an
"Eligible Institution"). In all other cases, all signatures on the Offer Letter
of Transmittal
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must be guaranteed by an Eligible Institution. See Instructions 1 and 5 to the
Offer Letter of Transmittal. If the certificates for ADSs are registered in the
name of a person other than the signer of the Offer Letter of Transmittal, or if
exchange is to be made with, or if the shares of New Autoliv Common Stock to be
issued pursuant to the U.S. Offer are to be issued to, or if the certificates
for ADSs not accepted for exchange or not tendered are to be returned to, a
person other than the registered owner(s) of ADSs so surrendered, then the
certificates for ADSs so tendered must be endorsed or accompanied by appropriate
stock powers, in either case signed exactly as the name(s) of the registered
owner(s) appear on the certificates for ADSs, with the signature(s) on such
certificates or stock powers guaranteed as aforesaid. See Instructions 1 and 5
to the Offer Letter of Transmittal.
GUARANTEED DELIVERY. THE FOLLOWING PROCEDURES ARE AVAILABLE ONLY TO HOLDERS
OF ADSS AND ARE NOT AVAILABLE TO HOLDERS OF AUTOLIV COMMON STOCK. If a holder of
ADSs desires to tender ADSs pursuant to the U.S. Offer and such holder's
certificates are not immediately available, or the procedures for book-entry
transfer cannot be completed on a timely basis, or time will not permit all
required documents to reach the Depositary prior to the Expiration Date, such
ADSs may nevertheless be tendered, provided that all the following conditions
are satisfied (the "Guaranteed Delivery Procedures"):
(a) such tender is made by or through an Eligible Institution;
(b) a properly completed and duly executed Notice of Guaranteed Delivery
substantially in the form provided by New Autoliv is received by the
Depositary, as provided below, prior to the Expiration Date; and
(c) the certificates for all tendered ADSs (or, in the case of
book-entry transfer of any ADSs into the Depositary's account at a
Book-Entry Transfer Facility, an Agent's Message and timely Book-Entry
Confirmation as described above), in proper form for transfer, in each case,
together with an Offer Letter of Transmittal (or facsimile copy thereof)
properly completed and duly executed, with any required signature guarantees
and any other documents required by the Offer Letter of Transmittal, are
received by the Depositary within three NYSE trading days after the date of
execution of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand to the Depositary
or transmitted by telegram, facsimile transmission or mail to the Depositary and
must include a guarantee by an Eligible Institution in the form set forth in
such Notice of Guaranteed Delivery.
Notwithstanding any other provision hereof, delivery of the New Autoliv
Common Stock accepted for exchange pursuant to the U.S. Offer will in all cases
be made only after timely receipt by the Depositary of certificates evidencing
ADSs to be exchanged pursuant to the Guaranteed Delivery Procedures (or timely
Book-Entry Confirmation with respect to such ADSs), and an Offer Letter of
Transmittal (or facsimile copy thereof) properly completed and duly executed,
together with any required signature guarantees or, in the case of a book-entry
transfer, an Agent's Message and any other required documents.
The valid tender of Autoliv Securities pursuant to one of the procedures
described above will constitute a binding agreement between the tendering
stockholder and New Autoliv upon the terms and subject to the conditions of the
U.S. Offer.
DETERMINATION OF VALIDITY. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of any tender of Autoliv
Securities will be determined by New Autoliv with respect to the U.S. Offer, in
its sole discretion, which determination shall be final and binding on all
parties. New Autoliv reserves the absolute right to reject any or all tenders
determined by it not to be in proper form, or the acceptance for exchange of
which may, in the opinion of its counsel, be unlawful. New Autoliv also reserves
the absolute right to waive any defect or irregularity in the tender of any
Autoliv Securities. No tender of Autoliv Securities will be deemed to have been
validly made until all defects or irregularities relating thereto have been
cured or waived. None of New Autoliv, the Depositary, the Information Agent, the
dealer managers or any other person will be under any duty to give notification
of any defects or
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irregularities in tenders or incur any liability for failure to give any such
notification. The interpretation by New Autoliv of the terms and conditions of
the U.S. Offer (which includes the Offer Letter of Transmittal and the
instructions thereto) will be final and binding.
If the Offer Letter of Transmittal or any certificates or stock powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and, unless waived by
the Depositary, proper evidence satisfactory to the Depositary of their
authority to so act must be submitted.
OTHER REQUIREMENTS. By executing the Offer Letter of Transmittal, a
tendering stockholder will irrevocably appoint designees of New Autoliv as such
stockholder's attorneys-in-fact and proxies, with full power of substitution, in
the manner set forth in the Offer Letter of Transmittal, to the full extent of
such stockholder's rights with respect to Autoliv Securities tendered by such
stockholder and accepted for exchange by New Autoliv in respect of the U.S.
Offer and with respect to any and all other Autoliv Securities or other
securities issued or issuable in respect of such Autoliv Securities on or after
the date hereof. All such proxies shall be considered coupled with an interest
in the tendered Autoliv Securities. Such appointment will be effective when, and
only to the extent that, New Autoliv accepts such Autoliv Securities for
exchange pursuant to the U.S. Offer. Upon such acceptance for exchange, all
prior proxies given by such stockholder will be revoked without further action,
and no subsequent proxies may be given nor any subsequent written consents
executed (and, if given or executed, will not be deemed effective). The
designees of New Autoliv will be empowered to exercise all voting and other
rights of such stockholder as New Autoliv, in its sole discretion, may deem
proper at any annual or special meeting of Autoliv's stockholders or any
adjournment or postponement thereof, by written consent in lieu of any such
meeting or otherwise. New Autoliv reserves the right to require that, in order
for Autoliv Securities to be deemed validly tendered, immediately upon their
exchange for such New Autoliv Common Stock, New Autoliv must be able to exercise
full voting rights with respect to such Autoliv Securities.
The acceptance of Autoliv Securities by New Autoliv pursuant to any of the
procedures described above will constitute a binding agreement between the
tendering stockholder and New Autoliv upon the terms and subject to the
conditions applicable to the U.S. Offer.
SECTION 3. WITHDRAWAL RIGHTS
Tenders of Autoliv Securities in the U.S. Offer are irrevocable, except as
otherwise provided in this section. Autoliv Securities tendered pursuant to the
U.S. Offer may be withdrawn pursuant to the procedures set forth below at any
time during the Offer Period except that withdrawal rights will not be available
during the period, if any, during which the U.S. Offer remains open following
the announcement by New Autoliv of the satisfaction of all conditions to the
U.S. Offer. In addition, holders of Autoliv Securities will not have withdrawal
rights during the Interim Period.
To be effective, a written notice of withdrawal or a telegraphic or
facsimile transmission thereof must be timely received by the Depositary at one
of its addresses set forth on the back cover of this Proxy
Statement/Prospectus/Exchange Offer and must specify the name of the person
having tendered Autoliv Securities to be withdrawn, the number and type of
Autoliv Securities to be withdrawn and, if certificates representing ADSs have
been tendered, the name of the registered holder of the ADSs, if different from
the name of the person who tendered such ADSs. If certificates representing ADSs
have been delivered or otherwise identified to the Depositary, then, prior to
the physical release of such ADSs, the identification numbers shown on such
certificates must be submitted and, unless ADSs evidenced by such certificates
have been tendered by an Eligible Institution, the signatures on the notice of
withdrawal must be guaranteed by an Eligible Institution. If ADSs have been
delivered pursuant to the procedures for book-entry transfer set forth in
"--Section 2. Procedures for Tendering Autoliv Securities," any notice of
withdrawal must also specify the name and number of the account at the
appropriate Book-Entry Transfer
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Facility to be credited with the withdrawn Autoliv Securities and otherwise
comply with such Book-Entry Transfer Facility's procedures.
Withdrawals of tendered Autoliv Securities may not be rescinded, and any
Autoliv Securities properly withdrawn will thereafter be deemed not validly
tendered for the purposes of the U.S. Offer. However, Autoliv Securities
withdrawn during the Offer Period may be re-tendered by following one of the
procedures described in "--Section 2. Procedures for Tendering Autoliv
Securities" at any time during the Offer Period.
All questions as to the validity (including time of receipt) of notices of
withdrawal with respect to the U.S. Offer will be determined by New Autoliv, in
its sole discretion, whose determination will be final and binding. None of New
Autoliv, the Depositary, Enskilda, Blackstone and Goldman Sachs, which are
acting as dealer managers for the U.S. Offer on behalf of New Autoliv, the
Information Agent or any other person will be under any duty to give
notification of any defects or irregularities in any notice of withdrawal or
incur any liability for failure to give any such notification.
SECTION 4. ACCEPTANCE FOR EXCHANGE; DELIVERY OF NEW AUTOLIV COMMON STOCK
Upon the terms and subject to the conditions of the U.S. Offer (including,
if the U.S. Offer is extended or amended, the terms and conditions of any such
extension or amendment), New Autoliv will accept for exchange, and will
exchange, as promptly as practicable after the Expiration Date, all Autoliv
Securities validly tendered into the U.S. Offer prior to the Expiration Date and
not withdrawn in accordance with procedures set forth in "--Section 3.
Withdrawal Rights." Subject to applicable rules of the SEC, New Autoliv
expressly reserves the right to delay acceptance for exchange of, or delivery of
any consideration for, Autoliv Securities tendered in the U.S. Offer pending
receipt of any governmental or other regulatory approvals, orders or actions
specified in "Risk Factors--Regulatory Conditions and Approvals."
In all cases, exchange for Autoliv Securities accepted for exchange pursuant
to the U.S. Offer will be made only after timely receipt by the Depositary of an
Offer Letter of Transmittal (or facsimile copy thereof) properly completed and
duly executed (together with any required signature guarantees or, in the case
of a book-entry transfer of ADSs, an Agent's Message) and any other documents
required by the Offer Letter of Transmittal and, in the case of ADSs,
certificates evidencing such ADSs (or a timely Book-Entry Confirmation with
respect to such ADSs).
For purposes of the U.S. Offer, New Autoliv will be deemed to have accepted
for exchange, and thereby acquired, Autoliv Securities validly tendered to it
pursuant to the U.S. Offer and not withdrawn as, if and when New Autoliv gives
oral or written notice to the Depositary of its acceptance for exchange of such
Autoliv Securities tendered pursuant to the U.S. Offer.
In accordance with customary Swedish practice regarding determining the
level of acceptances of the Swedish and International Offer, New Autoliv
anticipates that it will be unable to announce the level of acceptances of the
U.S. Offer until the end of the Interim Period. New Autoliv acknowledges that
Rule 14e-1(c) under the Exchange Act provides that an offeror must pay the
consideration offered or return the securities deposited by, or on behalf of,
security holders promptly after the termination or withdrawal of an offer.
However, pursuant to the No-Action Letter, the SEC has granted New Autoliv
certain relief from the provisions of Rule 14e-1(c). If, after determination of
the results of the Exchange Offer following the end of the Offer Period, it is
determined that the Minimum Condition has not been satisfied and will not be
waived, and New Autoliv determines to withdraw the Exchange Offer, all tendered
securities will be returned promptly thereafter to the persons tendering such
shares.
New Autoliv acknowledges that Rule 14e-1(d) under the Exchange Act provides
that an extension must be accompanied by a public announcement, which must
include disclosure of the approximate number of securities deposited to date,
issued by 9:00 a.m., Eastern time, on the next business day after the
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scheduled expiration date of the Exchange Offer. However, pursuant to the
No-Action Letter, the SEC has granted New Autoliv certain relief from the
provisions of Rule 14e-1(d). In accordance with the customary practice in Sweden
with respect to determining the level of acceptances in a Swedish exchange
offer, New Autoliv anticipates that it will not announce the level of
acceptances of the U.S. Offer until at least five business days after the end of
the Offer Period.
If New Autoliv is delayed in its acceptance for exchange of, or issuance of
New Autoliv Common Stock in exchange for, Autoliv Securities or is unable to
accept for exchange, or issue New Autoliv Common Stock in exchange for, Autoliv
Securities pursuant to the U.S. Offer for any reason, then, without prejudice to
the rights of New Autoliv with respect to the U.S. Offer under this Proxy
Statement/Prospectus/Exchange Offer (but subject to compliance with applicable
rules of the SEC and the Recommendation), the Depositary may nevertheless, on
behalf of New Autoliv, retain tendered Autoliv Securities, subject to withdrawal
rights as described in "--Section 3. Withdrawal Rights." Under no circumstances
will interest be paid, nor will any additional New Autoliv Common Stock be
issued, by New Autoliv, regardless of any delay in making such exchange.
If any tendered ADSs are not accepted for exchange or are exchanged for any
reason, the certificates evidencing any such ADSs will be returned, without
expense, to the tendering stockholder (or, in the case of ADSs delivered by
book-entry transfer of such ADSs into the Depositary account at a Book-Entry
Transfer Facility pursuant to the procedures set forth in "--Section 2.
Procedures for Tendering Autoliv Securities," will be credited to an account
maintained at the appropriate Book-Entry Transfer Facility), as promptly as
practicable after the Expiration Date or termination of the U.S. Offer. If any
Autoliv Securities are not accepted for exchange or are not exchanged for any
reason, any Autoliv Securities validly transferred by book-entry transfers from
the share accounts designated by a tendering stockholder (the "Original Share
Accounts") to blocked share accounts which have been opened pending the
announcement of the satisfaction of the Combination Conditions (the "Blocked
Share Accounts") will be re-transferred to the Original Share Accounts, without
expense to the tendering stockholder, as promptly as practical after the
Expiration Date or termination of the U.S. Offer.
SECTION 5. CERTAIN U.S. INCOME TAX CONSEQUENCES
See "Certain Tax Consequences of the Transactions--United States Federal
Income Tax Considerations--To U.S. Holders of Autoliv Securities" for a summary
of the U.S. federal income tax consequences to U.S. Autoliv Holders (as defined
therein).
SECTION 6. CERTAIN INFORMATION CONCERNING NEW AUTOLIV
New Autoliv does not own of record any Autoliv Securities and, except as
otherwise stated in this Proxy Statement/Prospectus/Exchange Offer: (a) there
have not been any contacts, transactions or negotiations between New Autoliv,
any of its subsidiaries or, to the best knowledge of New Autoliv, any of the
directors or executive officers of Morton, Autoliv or New Autoliv, on the one
hand, and Autoliv or any of its directors, officers or affiliates, on the other
hand, concerning a merger, consolidation, or acquisition; a tender offer or
other acquisition of securities; an election of directors; or a sale or other
transfer of a material amount of assets, (b) there are no current or proposed
material contracts, arrangements, understandings or relationships between New
Autoliv, its controlling persons or subsidiaries or, to the best knowledge of
New Autoliv, any of the directors or executive officers of Morton or Autoliv, on
the one hand, and Autoliv or any of its controlling persons, subsidiaries,
executive officers, or directors, on the other hand, and (c) neither New Autoliv
nor, to the best knowledge of New Autoliv, any of the directors or executive
officers of Morton or Autoliv has any contract, arrangement, understanding or
relationship with any person with respect to any Autoliv Securities. See
"Background, Reasons and Recommendations--Background of the Transactions,"
"Description of New Autoliv--Directors and Executive Officers" and Appendix G to
this Proxy Statement/Prospectus/Exchange Offer.
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SECTION 7. NO APPRAISAL RIGHTS; COMPULSORY ACQUISITION
Holders of Autoliv Securities do not have appraisal rights as a result of
the U.S. Offer and will not be entitled to receive any amounts other than New
Autoliv Securities pursuant to the U.S. Offer and cash pursuant to the
Compulsory Acquisition.
If for any reason the Compulsory Acquisition is not consummated, New Autoliv
will evaluate its other alternatives. Such alternatives could include purchasing
additional Autoliv Securities in the open market, in privately negotiated
transactions, in another tender or exchange offer or otherwise, or taking no
further action to acquire Autoliv Securities. During the nine-month period
following termination of the Exchange Offer, under the Recommendation, any such
additional purchases by New Autoliv may not exceed the cash value of the
Exchange Offer but thereafter could be at prices greater or less than, or equal
to, the price to be paid for Autoliv Securities in the Exchange Offer, and could
be for cash or other consideration.
SECTION 8. DIVIDENDS AND DISTRIBUTIONS
If, on or after the date hereof, Autoliv should split, combine or otherwise
change any Autoliv Securities or its capitalization, or disclose that it has
taken any such action, then, without prejudice to the rights of New Autoliv
under "--Section 9. Certain Conditions of the U.S. Offer," New Autoliv may make
such adjustments to the purchase price (or portion thereof), Offer Exchange
Ratio and other terms of the U.S. Offer as it deems appropriate to reflect such
split, combination or other change.
Pursuant to the Combination Agreement, Autoliv is permitted to pay a regular
cash dividend in respect of fiscal year 1996 so long as such dividend does not
exceed the lesser of 20% of Autoliv's net income per share for fiscal year 1996
and SEK 2.75 per Autoliv share. A dividend in the amount of SEK 2.75
(approximately US$ .38) per Autoliv Share attributable to fiscal year 1996 was
approved by Autoliv's stockholders at Autoliv's Annual Meeting of Stockholders
on March 24, 1997, and will be paid on or about April 7, 1997 to stockholders of
Autoliv as of the record date of March 27, 1997.
SECTION 9. CERTAIN CONDITIONS OF THE U.S. OFFER
Notwithstanding any other term of the U.S. Offer, New Autoliv will not be
required to accept for exchange or, subject to the procedures described in
"--Section 4. Acceptance for Exchange; Delivery of New Autoliv Common Stock," to
issue the shares of New Autoliv Common Stock in exchange for, any Autoliv
Securities tendered pursuant to the U.S. Offer, and may terminate or amend the
U.S. Offer or postpone the acceptance of, or exchange for, Autoliv Securities
tendered pursuant thereto, unless the Combination Conditions shall have been
satisfied or, if permissible, waived. The Combination Agreement provides that
New Autoliv (a) will waive any of the Combination Conditions if so directed by
Autoliv and Morton and (b) may not waive any of the Combination Conditions
without the prior written consent of each of Morton and Autoliv. See "The
Combination Agreement--Conditions to the Merger and the Exchange Offer."
The Combination Conditions include, among others:
(a) approval of both Proposals by Morton shareholders holding at least a
majority of Morton's outstanding shares;
(b) tender of more than 90% of the Autoliv Securities in the Exchange
Offer;
(c) continued effectiveness of the Private Letter Ruling received by
Morton regarding the tax-free treatment, for U.S. federal income tax
purposes, of the Spinoff; receipt from Wachtell, Lipton, Rosen & Katz,
special outside legal counsel to Morton, of an opinion that the Merger will
be non-taxable (other than cash received in lieu of fractional shares) for
U.S. federal income tax purposes; receipt from Skadden, Arps, Slate, Meagher
& Flom LLP, special outside legal counsel to Autoliv, of an opinion that the
Exchange Offer will be non-taxable for U.S. federal income tax purposes; and
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receipt of an opinion of Autoliv's public accountants that the Exchange
Offer will be non-taxable (with certain limited exceptions) for Swedish
income tax purposes;
(d) the absence of any U.S. legislation or pending congressional action,
or Swedish legislation or pending parliamentary action, that would
materially affect the tax consequences of the Transactions, see "Certain Tax
Consequences of the Transactions--Certain Legislative Initiatives;"
(e) clearance under U.S., Swedish, German and Belgian antitrust laws
(which clearances have already been obtained); and
(f) the establishment by Morton of a new credit facility, which will
fund the $750 million cash contribution that Morton will make to New Morton,
that will remain the responsibility of Morton ASP after the Transactions.
SECTION 10. FEES AND EXPENSES
Enskilda, Blackstone and Goldman Sachs are acting as dealer managers in the
United States in connection with the U.S. Offer. Enskilda and Blackstone are
acting as financial advisors to Autoliv with respect to the Combination. Goldman
Sachs is acting as financial advisor to Morton with respect to the Transactions.
Neither Enskilda, Blackstone nor Goldman Sachs will be paid any additional
compensation in connection with services rendered as co-dealer managers. See
"Opinions of Financial Advisors."
The Information Agent may contact stockholders by mail, telephone, telex,
telegraph and personal interview and may request brokers, dealers, banks, trust
companies and other nominee security holders to forward the materials for the
U.S. Offer to beneficial owners. The Information Agent and the Depositary each
will receive reasonable and customary compensation for their services, will be
reimbursed for certain reasonable out-of-pocket expenses and will be indemnified
against certain liabilities and expenses in connection with their services,
including certain liabilities under the U.S. federal securities laws.
New Autoliv will not pay any fees or commissions to any broker or dealer or
other person (other than the Information Agent) for soliciting tenders of
Autoliv Securities pursuant to the U.S. Offer. Brokers, dealers, commercial
banks and trust companies will be reimbursed by New Autoliv for customer mailing
and handling expenses incurred by them in forwarding offering material of New
Autoliv to their clients.
SECTION 11. MISCELLANEOUS
The U.S. Offer is not being made to (nor will tenders of Autoliv Securities
be accepted from or on behalf of) holders of Autoliv Securities in any
jurisdiction in which the making of the U.S. Offer or the acceptance thereof
would not be in compliance with the laws of such jurisdiction. In any
jurisdiction the securities laws or blue sky laws of which require the U.S.
Offer to be made by a licensed broker or dealer, the U.S. Offer is being made on
behalf of New Autoliv by one or more registered brokers or dealers that are
licensed under the laws of such jurisdiction.
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THE COMBINATION AGREEMENT
THIS SECTION OF THE PROXY STATEMENT/PROSPECTUS/EXCHANGE OFFER DESCRIBES
CERTAIN ASPECTS OF THE COMBINATION AGREEMENT AND THE PROPOSED COMBINATION. TO
THE EXTENT THAT IT RELATES TO THE COMBINATION AGREEMENT, THE FOLLOWING
DESCRIPTION DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE COMBINATION AGREEMENT, WHICH IS ATTACHED AS APPENDIX A TO THIS
PROXY STATEMENT/PROSPECTUS/EXCHANGE OFFER AND IS INCORPORATED HEREIN BY
REFERENCE. ALL SHAREHOLDERS ARE URGED TO READ THE COMBINATION AGREEMENT IN ITS
ENTIRETY.
TERMS OF THE MERGER AND THE EXCHANGE OFFER
The Combination Agreement sets forth the terms and procedures for the
Merger, the Exchange Offer and the Compulsory Acquisition, which are described
under "The Merger" and "The Exchange Offer."
REPRESENTATIONS AND WARRANTIES
The Combination Agreement includes representations and warranties by Morton
relating to (a) the corporate organization, standing and power of Morton and
certain of its subsidiaries, (b) Morton's capitalization, (c) the authorization
of the Combination Agreement and the Ancillary Agreements, (d) noncontravention
of laws and agreements and the absence of the need (except as specified) for
governmental or third-party consents, (e) the accuracy of Morton's stock
exchange and SEC filings and financial statements, (f) the conduct of the ASP
Business by Morton and its subsidiaries in the ordinary course and the absence
of any material adverse change with respect to the ASP Business, (g) certain
matters relating to the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and certain employment and labor relations matters, (h)
Morton's not having taken any actions which would jeopardize the tax-free nature
of the Spinoff and the Exchange Offer, (i) Morton's compliance with applicable
tax laws, (j) Morton's disclosure of material contracts, (k) pending or
threatened litigation, (l) environmental matters pertaining to the ASP Business,
(m) intellectual property of Morton and its subsidiaries, (n) New Morton's not
having breached its representations contained in the Distribution Agreement, (o)
the Morton Board having taken all requisite action in order to amend the Rights
Agreement, dated as of June 12, 1989, as amended, between Morton and First
Chicago Trust Company of New York (the "Rights Agreement") so as to render the
preferred share purchase rights (the "Rights") pursuant thereto inapplicable to
the transactions contemplated by the Combination Agreement and the Distribution
Agreement, (p) receipt of a fairness opinion from Morton's financial advisor and
(q) brokers and finders employed by Morton.
The Combination Agreement also includes representations and warranties by
Autoliv relating to (a) the corporate organization, standing and power of
Autoliv and its subsidiaries, (b) Autoliv's capitalization, (c) the
authorization of the Combination Agreement, (d) noncontravention of laws and
agreements and the absence of the need (except as specified) for governmental
consents, (e) the accuracy of Autoliv's stock exchange and SEC filings and
financial statements, (f) the conduct of Autoliv's and its subsidiaries'
businesses in the ordinary course and the absence of any material adverse change
with respect to Autoliv and its subsidiaries, (g) certain matters relating to
ERISA and certain employment and labor relations matters, (h) Autoliv's not
taking any actions which could jeopardize the tax-free nature of the Spinoff and
the Exchange Offer, (i) Autoliv's compliance with applicable tax laws, (j)
Autoliv's disclosure of material contracts, (k) pending or threatened
litigation, (l) environmental matters pertaining to Autoliv and its
subsidiaries, (m) intellectual property of Autoliv and its subsidiaries, (n)
receipt of a fairness opinion from Autoliv's financial advisors and (o) brokers
and finders employed by Autoliv.
The Combination Agreement also includes representations and warranties by
New Autoliv and ASP Merger Sub as to their (a) corporate organization, standing
and power, (b) capitalization, (c) authorization of the Combination Agreement
and (d) not having engaged in any activity unrelated to the Transactions.
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BUSINESS OF MORTON PENDING THE MERGER
Between the date of the Combination Agreement and the Effective Time, except
as expressly contemplated or permitted by the Combination Agreement and the
Ancillary Agreements, unless Autoliv otherwise agrees in writing, and except
that solely for purposes of the Distribution Agreement, ASP will to the fullest
extent reasonably practicable be treated as if it were a stand-alone,
self-financed entity, Morton and its subsidiaries will conduct the ASP Business
in the ordinary course, including, without limitation, using reasonable efforts
to preserve relationships between the ASP Business and its suppliers, customers
and certain other persons. The Combination Agreement also includes limitations,
prohibitions and other provisions relating to the conduct of the ASP Business
and each subsidiary of Morton that will be owned by Morton ASP following the
Spinoff during this period with respect to (a) capital projects, (b) contracts
and agreements outside the ordinary course of business, (c) dividends, (d)
changes in, or issuances, repurchases or redemptions of, capital stock, (e)
charter or bylaw amendments, (f) acquisitions, (g) incurrence of indebtedness,
(h) adoption or amendment of benefit plans or arrangements, (i) changes in
accounting principles, policies or procedures, (j) waiver or settlement of
material legal claims or litigation, (k) tax elections or the filing of any tax
returns which would be materially adverse to the ASP Business and (l) failing to
abide by, or failing to cause ASP to abide by, their respective obligations
under the Ancillary Agreements.
BUSINESS OF AUTOLIV PENDING THE MERGER
Between the date of the Combination Agreement and the Effective Time, except
as expressly contemplated or permitted by the Combination Agreement, or to the
extent that Morton otherwise agrees in writing, or unless prohibited by any
applicable Swedish law, each of Autoliv and its subsidiaries will conduct its
business in the ordinary course, including, without limitation, using reasonable
efforts to preserve relationships with its suppliers, customers and certain
other persons. The Combination Agreement also includes limitations, prohibitions
and other provisions relating to the conduct of business of Autoliv and its
subsidiaries during this period with respect to (a) capital projects, (b)
contracts and agreements outside the ordinary course of business, (c) dividends,
(d) changes in, or issuances, repurchases or redemptions of, capital stock, (e)
charter or bylaw amendments, (f) acquisitions, (g) incurrence of indebtedness,
(h) adoption or amendment of benefit plans or arrangements, (i) changes in
accounting principles, policies or procedures, (j) waiver or settlement of
material legal claims or litigation and (k) tax elections or the filing of any
tax returns which would be materially adverse to Autoliv.
NO SOLICITATION OF THIRD-PARTY ACQUISITION PROPOSALS
Pursuant to the Combination Agreement, each of Morton, Autoliv, New Autoliv
and ASP Merger Sub will not, nor will they authorize any of their directors,
officers, employees or other representatives and agents to, directly or
indirectly, solicit, initiate or encourage any inquiries or proposals from or
with any person or such person's directors, officers, employees, representatives
and agents that constitute, or could reasonably be expected to lead to a
Third-Party Acquisition, or otherwise enter into discussions or negotiations
with respect to a Third Party Acquisition. A "Third-Party Acquisition" means any
of the following involving Autoliv or Morton: (a) any merger, consolidation,
share exchange, business combination or other similar transaction, (b) any sale,
lease, exchange, transfer or other disposition of 10% or more of such party and
its subsidiaries, taken as a whole, or (c) a tender offer or exchange offer for,
or any other acquisition by any person of, 10% or more of the outstanding voting
securities of such party. Third-Party Acquisitions do not, however, include any
transactions relating solely to the New Morton Businesses which would not
prevent or delay consummation of the Transactions. The Combination Agreement
provides that Morton, Autoliv, New Autoliv and ASP Merger Sub may furnish
information and may participate in discussions or negotiations with any person
that has delivered a bona fide written proposal with respect to a Third-Party
Acquisition relating to a merger, consolidation, share exchange, tender or
exchange offer, business combination or other similar transaction involving all
or substantially all of the assets or more
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than 50% of the voting securities of Morton or Autoliv (a "Competing
Transaction"), and the board of directors of such party determines, after
consultation with independent legal counsel, that the failure to provide such
information or participate in such negotiations and discussions would cause the
board of directors of such party to breach its fiduciary duties to such party or
its stockholders under applicable law. A party furnishing such information or
participating in such discussions or negotiations must notify the other party
promptly of such action and must, in any such notice, indicate the identity of
the person making the written proposal and indicate in reasonable detail the
terms and conditions of such written proposal.
NEW AUTOLIV BOARD OF DIRECTORS
Immediately prior to the Effective Time, New Autoliv will, and Autoliv and
Morton will cause New Autoliv to, take action to (a) cause the full New Autoliv
Board at the Effective Time to consist of certain individuals designated by each
of Autoliv and Morton and (b) cause to be confirmed as executive officers of New
Autoliv certain individuals designated by each of Autoliv and Morton. See
"Description of New Autoliv--Directors and Executive Officers." Pursuant to the
New Autoliv Bylaws, to the extent practicable, 50% of the New Autoliv directors
will be United States citizens and 50% will be citizens of Sweden or the
European Union countries.
AGREEMENTS ON POST-CLOSING TRANSACTIONS
New Autoliv has agreed in the Combination Agreement to certain covenants
restricting its future actions for a period of one year following the Merger to
provide further assurances that the Merger, the Contribution and the Spinoff
will be tax free for U.S. federal income tax purposes. Specifically, New Autoliv
has agreed not to engage in any of the following transactions unless it obtains
from nationally recognized tax counsel an opinion reasonably satisfactory to New
Morton and/or a supplemental ruling from the IRS, in either case, to the effect
that such transaction(s) would not adversely affect the tax consequences of the
Merger, the Contribution or the Spinoff: (a) causing Morton ASP, by any means,
to cease to engage in an active trade or business within the meaning of Code
Section 355(b), (b) disposing of any of the historic business assets of Morton
that would result in Morton ASP's failing the continuity of business enterprise
test of Treasury Regulation Section 1.368-1(d), (c) transferring or causing
Morton ASP to issue shares of Morton ASP's capital stock that would cause New
Autoliv to fail to be in control of Morton ASP within the meaning of Code
Section 368(c), (d) reacquiring any of the New Autoliv stock issued in the
Merger, or (e) liquidating or merging with any other entity (including any
subsidiary of New Autoliv or Morton ASP).
New Morton will agree in the Distribution Agreement that neither New Morton
nor its subsidiaries will engage in any of the following transactions for one
year following the Spinoff, without first obtaining from nationally recognized
tax counsel an opinion reasonably satisfactory to New Autoliv and/or a
supplemental ruling from the IRS, in either case, to the effect that such
transaction(s) would not adversely affect the tax consequences of the
Contribution, the Spinoff or the Merger: (a) ceasing to engage in an active
trade or business within the meaning of Code Section 355(b), (b) repurchasing
more than 20% of the New Morton Common Stock outstanding immediately following
the Spinoff, (c) issuing an amount of capital stock of New Morton that would
cause the Spinoff to fail to satisfy the requirement that Morton have been in
control of New Morton within the meaning of Code Section 368(c) immediately
prior to the Spinoff or that New Morton shareholders be in control of New Morton
immediately after the Spinoff within the meaning of Code Section 368 (a)(1)(D),
or (d) liquidating or merging with any other entity (including a subsidiary of
New Morton).
CERTAIN OTHER AGREEMENTS
DISTRIBUTION. Prior to the Spinoff, Morton and New Morton will enter into
the Distribution Agreement and each of the other Ancillary Agreements. Prior to
the Effective Time, Morton will not agree to or permit any amendment or waiver
of the terms of the Distribution Agreement or any of the other Ancillary
Agreements without the prior written consent of Autoliv.
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STOCK EXCHANGE LISTING. New Autoliv will use its reasonable efforts to
cause the shares of New Autoliv Common Stock to be issued in the Merger and the
Exchange Offer to be approved for listing on the NYSE and the SDRs to be issued
in the Exchange Offer to be approved for listing on the SSE. It is a condition
to the Combination that the New Autoliv Common Stock to be issued in the Merger
and the Exchange Offer will have been authorized for listing on the NYSE and the
SDRs to be issued in the Exchange Offer will have been authorized for listing on
the SSE.
Morton will use its reasonable efforts to cause the Morton Common Stock to
be delisted from the NYSE and de-registered under the Exchange Act as soon as
practicable following the Effective Time if such actions are determined prior to
the Effective Time, in the reasonable judgment of Morton and Autoliv, to be
necessary to the consummation of the Combination. Autoliv will use its
reasonable efforts to cause (a) the Autoliv Common Stock to be delisted from the
SSE and (b) the quotation of the ADSs on the PORTAL system to be terminated,
each as soon as permitted under applicable laws.
AFFILIATES. Not less than 30 days prior to the Effective Time, Morton will
deliver to Autoliv a letter identifying all persons who are, as of the Morton
Special Meeting Record Date, "affiliates" of Morton for purposes of Rule 145
under the Securities Act (each such person, an "Affiliate"). Morton will use its
reasonable efforts to deliver or cause to be delivered to Autoliv, prior to the
Effective Time, an affiliate letter (an "Affiliate Letter") from each such
Affiliate providing that such Affiliate will not sell, pledge, transfer or
otherwise dispose of the shares of New Autoliv Common Stock to be received by
such person in the Merger except in compliance with the applicable provisions of
the Securities Act and the rules and regulations thereunder.
Not less than 30 days prior to the Effective Time, Autoliv will deliver to
Morton a letter identifying all persons who are, as of the Morton Special
Meeting Record Date, Affiliates of Autoliv. Autoliv will use its reasonable
efforts to deliver or cause to be delivered to Morton, prior to the Effective
Time, an Affiliate Letter from each such Affiliate providing that such Affiliate
will not sell, pledge, transfer or otherwise dispose of the shares of New
Autoliv Common Stock to be received by such person in the Exchange Offer except
in compliance with the applicable provisions of the Securities Act and the rules
and regulations thereunder.
FEES AND EXPENSES
Except as otherwise provided in the Combination Agreement or the Ancillary
Agreements, all fees and expenses incurred in connection with the Merger and the
Exchange Offer will be paid by the party incurring such fees or expenses,
whether or not the Merger or the Exchange Offer is consummated, except that
expenses incurred in connection with printing, mailing and filing of this Proxy
Statement/Prospectus/Exchange Offer and the related registration statements and
other regulatory filings will be shared equally by Autoliv and Morton. See
"--Termination; Certain Fees" and "Pre-Merger Transactions--Terms of the
Distribution Agreement--The Contribution; Assumption of New Morton Liabilities."
CONDITIONS TO THE MERGER AND THE EXCHANGE OFFER
Neither Morton nor Autoliv is required to consummate the Merger, exchange
any New Autoliv Securities pursuant to the Exchange Offer or effect the
Compulsory Acquisition unless the following conditions are met or, if
permissible, waived: (a) the New Autoliv Registration Statement has been
declared effective, (b) the Spinoff has been consummated, (c) the Combination
Agreement and the transactions contemplated by the Distribution Agreement have
been approved by the holders of a majority of the shares of Morton Common Stock,
(d) no relevant authority has declared the Merger, the Exchange Offer or the
Compulsory Acquisition illegal, all necessary government filings, consents and
waiting periods have been obtained or lapsed as appropriate, and no proposed
legislation has been introduced threatening the tax treatment of the
transactions contemplated by the Combination Agreement, (e) Morton shall have
received the Private Letter Ruling regarding the tax-free status of the Spinoff,
(f) Wachtell, Lipton, Rosen
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& Katz, special outside legal counsel to Morton, shall have issued a favorable
tax opinion regarding the U.S. federal income tax consequences of the Merger
(see "Certain Tax Consequences of the Transactions--United States Federal Income
Tax Considerations"), (g) Skadden, Arps, Slate, Meagher & Flom LLP, special
outside legal counsel to Autoliv, shall have issued a favorable tax opinion
regarding the U.S. federal income tax consequences of the Exchange Offer (see
"Certain Tax Consequences of the Transactions--United States Federal Income Tax
Considerations") (h) Ernst & Young AB shall have issued a favorable tax opinion
regarding the Swedish tax consequences of the Exchange Offer, (i) the shares of
New Autoliv Common Stock and the SDRs to be issued in the Merger and the
Exchange Offer shall have been authorized for listing on the NYSE and the SSE,
respectively, (j) Morton shall have established a credit facility of not less
than $750 million, the liability for which will remain with Morton ASP, and
Morton shall have effected the Capital Contribution, and (k) more than 90% of
the outstanding Autoliv Securities shall have been tendered in the Exchange
Offer.
Morton is further not required to consummate the Merger unless the following
additional conditions are met: (a) the representations and warranties of Autoliv
shall have been true and correct in all material respects when the Combination
Agreement was signed and will remain true at the Effective Time, and (b) Autoliv
shall have performed or complied in all material respects with all of its
agreements and covenants required under the Combination Agreement to be
performed prior to the Effective Time.
Autoliv is further not required to consummate the Exchange Offer unless the
following additional conditions are met: (a) the representations and warranties
of Morton shall have been true and correct in all material respects when the
Combination Agreement was signed and will remain true on the date of expiration
of the Exchange Offer, (b) Morton shall have performed or complied in all
material respects with all of its agreements and covenants required under the
Combination Agreement to be performed prior to the Effective Time, (c) the
Ancillary Agreements shall have been executed substantially in the form of the
exhibits attached to the Combination Agreement, and (d) ASP's interest-bearing
debt shall not exceed $750 million, plus additional indebtedness (not to exceed
$1.1 million) incurred prior to the signing of the Combination Agreement
relating to ASP's facility in Ogden, Utah.
TERMINATION; CERTAIN FEES
The Combination Agreement may be terminated and the Merger and the Exchange
Offer may be abandoned prior to the Effective Time: (a) by mutual consent of
Autoliv and Morton, (b) by either Autoliv or Morton, if the Effective Time shall
not have occurred by August 31, 1997, and the failure to so occur is not the
fault of the party seeking termination, (c) by Autoliv, if the Morton Board
changes its recommendation in favor of the Combination Agreement, recommends a
Third-Party Acquisition to its shareholders or fails to recommend against a
commenced tender or exchange offer for 10% or more of the Morton Common Stock,
(d) by Morton, if the Autoliv Board changes its recommendation in favor of the
Exchange Offer, recommends a Third-Party Acquisition to its shareholders or
fails to recommend against a publicly announced tender offer or exchange offer
for 10% or more of the Autoliv Securities, (e) by either Autoliv or Morton, if
the Combination Agreement or the transactions contemplated by the Distribution
Agreement fail to receive the necessary votes by Morton shareholders, or the
Exchange Offer expires without any Autoliv Securities having been accepted for
payment, (f) by either Autoliv or Morton, if there occurs a breach of a material
representation or warranty, covenant or agreement by the other party, and (g) by
Morton or Autoliv, if its board of directors determines that it has a fiduciary
obligation to withdraw its recommendation of the transactions at the time of a
publicly announced Competing Transaction with respect to such company.
If the Combination Agreement is terminated (a) by Autoliv due to the Morton
Board having: (i) withdrawn, modified or changed its recommendation in favor of
the Combination Agreement, (ii) recommended a Third-Party Acquisition, (iii)
following commencement of a tender offer or exchange offer for 10% or more of
Morton's stock, failed to recommend against acceptance of such offer, or (b) by
Morton due to the Morton Board having withdrawn its recommendation based on a
fiduciary obligation in
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favor of a Competing Transaction, then Morton will reimburse Autoliv for all its
expenses in connection with the Combination Agreement, the transactions
contemplated thereby, the preparation, printing, filing and mailing of this
Proxy Statement/Prospectus/Exchange Offer, the prospectus for the Swedish and
International Offer and the solicitation of stockholder approvals and all other
matters related to the consummation of the transactions contemplated thereby, up
to an aggregate amount of US$ 20 million. Autoliv has also agreed to reimburse
Morton for up to US$ 20 million of Morton's expenses under the corresponding
circumstances relating to action by the Autoliv Board.
DIRECTOR AND OFFICER LIABILITY
Subject to commercial availability, for a period of six years after the
Effective Time, New Autoliv will cause to be maintained in effect the current
directors and officers liability insurance policies maintained by Morton and
Autoliv (provided that, in the event of the cancellation or termination of such
policies, New Autoliv may substitute policies reasonably satisfactory to the
indemnified parties containing terms and conditions which are no less
advantageous) with respect to claims arising from facts or events that occurred
prior to the Effective Time.
From and after the Effective Time, New Autoliv will indemnify and hold
harmless each present and former director and officer of Morton or Autoliv,
determined as of the Effective Time (each an "Indemnified Party"), against any
costs incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of or pertaining to matters existing or occurring at or prior to the
Effective Time, whether asserted or claimed prior to, at or after the Effective
Time, to the fullest extent that Morton or Autoliv would have been permitted
under applicable Indiana or Swedish law, as the case may be, and their charter
documents (each as in effect on the date of the Combination Agreement) to
indemnify such Indemnified Parties (and New Autoliv will also advance expenses
as incurred to the fullest extent permitted under applicable law; provided that
such Indemnified Party to whom expenses are advanced provides an undertaking to
repay such advances if it is ultimately determined that such Indemnified Party
is not entitled to indemnification); and provided, further, that any
determination required to be made with respect to whether an officer's or
director's conduct complies with the standards set forth under applicable
Indiana or Swedish law and Morton's or Autoliv's charter documents will be made
by independent counsel selected by New Autoliv.
To the extent the foregoing provision does not serve to indemnify and hold
harmless an Indemnified Party, for a period of six years after the Effective
Time, the Combination Agreement provides that New Autoliv will, subject to the
terms set forth in the Combination Agreement, indemnify and hold harmless, to
the fullest extent permitted under applicable law (and New Autoliv will also
advance expenses as incurred to the fullest extent permitted under applicable
law; provided that the Indemnified Party to whom expenses are advanced provides
an undertaking to repay such advances if it is ultimately determined that such
Indemnified Party is not entitled to indemnification), each Indemnified Party
against any costs incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of or pertaining to the Combination; provided,
however, that New Autoliv will not be required to indemnify any Indemnified
Party if it is determined that the Indemnified Party acted in bad faith and not
in a manner such Indemnified Party believed to be in, or not opposed to, the
best interests of Morton or Autoliv, as the case may be.
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REGULATORY MATTERS
U.S. ANTITRUST FILING
Under the HSR Act, and the rules and regulations promulgated thereunder,
certain transactions, including the Merger and the Exchange Offer, may not be
consummated unless certain waiting period requirements have expired or been
terminated. On December 27, 1996, the waiting period under the HSR Act expired.
The expiration of the waiting period closes the merger review process by the FTC
and the DOJ. However, notwithstanding such termination, at any time before or
after the Effective Time, the FTC, the DOJ or others could take separate action
under the antitrust laws independent of the HSR Act with respect to the
Combination, including seeking to enjoin the consummation of the Merger and the
Exchange Offer, to rescind the Merger or the Exchange Offer, or to require the
divestiture of substantial assets of Morton, Autoliv or New Autoliv. There can
be no assurance that a challenge to the Combination on antitrust grounds will
not be made or, if such a challenge is made, that it would not be successful.
EUROPEAN COMPETITION FILINGS
The Combination is subject to the competition laws of Belgium, Germany and
Sweden, which require the pre-closing notification and clearance of mergers,
acquisitions and similar concentrative transactions when certain statutorily
defined criteria are met.
Belgian competition law requires the pre-closing approval of certain
transactions, including the Merger and the Exchange Offer. On January 13, 1997,
the one-month deadline for the Belgian Competition Council to take formal action
on the Combination expired without any action on the part of the Council. In
accordance with the Belgian Competition Act, the Combination is therefore deemed
cleared by the Belgian Competition Council.
Swedish competition law requires the pre-closing approval of any merger or
acquisition in which (a) there is an acquisition of a Swedish business and (b)
the aggregate worldwide turnover of the parties to the transaction exceeds SEK 4
billion (approximately US$ 586 million). The Swedish Competition Authority has
an initial 30-day review period in which it may either (a) approve a merger, or
(b) initiate a "second phase" investigation of a merger. On December 19, 1996,
the Combination was cleared by the Swedish Competition Authority.
German competition law requires the pre-closing approval of any merger or
acquisition where (a) one party has consolidated worldwide net sales in its most
recent financial year exceeding 2 billion Deutsche marks (approximately US$ 1.29
billion) or each of at least two parties to such transaction has consolidated
worldwide net sales exceeding 1 billion Deutsche marks (approximately US$ 643
million), and (b) the transaction has effects in Germany. The German Federal
Cartel Office cleared the Combination on March 7, 1997.
OBLIGATIONS UNDER THE COMBINATION AGREEMENT
The Combination Agreement requires Morton and Autoliv to use reasonable
efforts promptly to make any filings, enter into negotiations, sell or dispose
of assets or businesses, or take other actions necessary to obtain required
governmental approvals, except that neither Morton nor Autoliv or any of their
affiliates will be required to take any action that would be, or is reasonably
likely to be, materially adverse to the business, properties, financial
condition or results of operations of the business to be retained by Morton or
Autoliv, as the case may be, after taking into account the transactions
contemplated by the Combination Agreement and the Ancillary Agreements.
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CERTAIN TAX CONSEQUENCES OF THE TRANSACTIONS
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
TO MORTON SHAREHOLDERS
The following is a discussion of the material U.S. federal income tax
consequences of the Transactions to Morton shareholders. The discussion which
follows is based on the Code, Treasury regulations promulgated thereunder, and
judicial and administrative interpretations thereof, all as in effect on the
date hereof, and is subject to any changes in these or other laws occurring
after such date. The discussion below does not address the effects of any U.S.
state or local, or non-U.S. tax laws.
The tax treatment of a Morton shareholder may vary depending upon such
shareholder's particular situation, and certain Morton shareholders (including
individuals who hold options in respect of Morton Common Stock, insurance
companies, tax-exempt organizations, financial institutions or broker-dealers,
persons who do not hold the Morton Common Stock as capital assets and persons
who are neither citizens nor residents of the United States, or who are non-U.S.
corporations, non-U.S. partnerships or non-U.S. estates or trusts as to the
United States) may be subject to special rules not discussed below.
EACH MORTON SHAREHOLDER IS URGED TO CONSULT SUCH SHAREHOLDER'S OWN TAX ADVISOR
AS TO THE PARTICULAR TAX CONSEQUENCES TO SUCH SHAREHOLDER OF THE TRANSACTIONS,
INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS,
AND OF CHANGES IN APPLICABLE TAX LAWS.
Morton has received a Private Letter Ruling from the IRS as to the U.S.
federal income tax consequences of the formation of New Morton and the Spinoff.
Specifically, the Private Letter Ruling provides that, assuming the Merger
qualifies as a "reorganization" described in Code Section 368(a)(1)(B):
(a) The Contribution followed by the Spinoff will qualify as a
reorganization within the meaning of Code Section 368(a)(1)(D) and the
Spinoff will qualify as a "distribution" described in Code Section 355.
(b) No gain or loss will be recognized by Morton or New Morton as a result
of the Contribution or the Spinoff.
(c) No gain or loss will be recognized by (and no amount will otherwise be
included in the income of) the Morton shareholders as a result of their
receipt of New Morton Common Stock in the Spinoff.
(d) The basis of New Morton Common Stock and Morton Common Stock to be owned
by Morton shareholders immediately after the Spinoff will be the same as the
basis of the Morton Common Stock held immediately before the Spinoff and
such tax basis will be allocated between the New Morton Common Stock and
Morton Common Stock based upon their relative fair market values at the time
of the Spinoff.
(e) The holding period of New Morton Common Stock received by a Morton
shareholder in the Spinoff will include the period during which the
shareholder held Morton Common Stock, provided that the Morton Common Stock
was held as a capital asset.
Consummation of the Transactions is conditioned upon the continued effectiveness
of the Private Letter Ruling. For information regarding certain recent
legislative developments relating to the Code, see "--Certain Legislative
Initiatives."
If the Contribution and the Spinoff did not qualify for tax-free treatment
under Code Sections 368(a)(1)(D) and 355, Morton would recognize gain equal to
the excess of the fair market value of the New Morton Common Stock distributed
to its shareholders over Morton's tax basis in such stock. Any resulting
corporate income tax on such gain would be payable by Morton ASP. New Morton has
agreed to
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indemnify Morton ASP for such tax liability unless the failure of the
Contribution or the Spinoff to qualify under such Code sections would not have
resulted but for an act or omission of Morton ASP or any of its affiliates, a
misrepresentation on the part of Morton ASP made in connection with the opinion
of counsel required by the Distribution Agreement to be obtained by New Morton
before taking certain corporate actions, or any other post-Distribution Date
transaction involving either the stock or assets of Morton ASP or any of its
affiliates. In addition, each Morton shareholder who received shares of New
Morton Common Stock could be generally treated as if such shareholder had
received a taxable distribution in an amount equal to the fair market value of
New Morton Common Stock received. Further, if the Merger fails to qualify as a
reorganization under Code Section 368(a)(1)(B) each Morton shareholder who
receives shares of New Autoliv Common Stock would recognize gain or loss equal
to the difference between the fair market value of the New Autoliv Common Stock
received and such shareholder's tax basis in the shares of Morton Common Stock
surrendered. Failure of the Merger to qualify as a tax-free reorganization could
jeopardize the tax-free treatment of the Contribution and the Spinoff under Code
Sections 368(a)(1)(D) and 355.
New Autoliv has agreed in the Combination Agreement and New Morton will
agree in the Distribution Agreement to certain covenants restricting their
respective future actions for a period of one year following the Transactions to
provide further assurances that the Merger, the Contribution and the Spinoff
will be tax free for U.S. federal income tax purposes. See "The Combination
Agreement--Agreements on Post-Closing Transactions."
The Transactions are also conditioned on Morton's receipt of an opinion of
Wachtell, Lipton, Rosen & Katz that the Merger qualifies as a tax-free
reorganization under Code Section 368(a)(1)(B). Shareholders should be aware
that an opinion of counsel is not binding on the IRS or the courts. Further, the
opinion of Wachtell, Lipton, Rosen & Katz will be based on current law, and such
opinion and Private Letter Ruling are based on certain representations as to
factual matters made by, among others, Morton, New Morton and Autoliv which, if
incorrect in certain material respects, would jeopardize the conclusions reached
by counsel in its opinion or the IRS in its ruling, respectively. None of
Morton, New Morton or Autoliv is currently aware of any facts or circumstances
which would cause any such representations to the IRS or Wachtell, Lipton, Rosen
& Katz to be untrue or incorrect in any material respect. Based upon the
foregoing opinion, (a) Morton shareholders who exchange Morton Common Stock in
the Merger solely for New Autoliv Common Stock will not recognize gain or loss
upon the receipt of New Autoliv Common Stock in exchange for their Morton Common
Stock, (b) the tax basis of the shares of New Autoliv Common Stock received in
the Merger by holders of Morton Common Stock will be the same as the tax basis
of the Morton Common Stock (adjusted as set forth above to reflect the Spinoff)
surrendered in exchange therefor, and (c) the holding period of the shares of
New Autoliv Common Stock received by a Morton shareholder will include the
holding period of the Morton Common Stock surrendered in exchange therefor.
No fractional shares of New Autoliv Common Stock will be issued in the
Merger. A Morton shareholder that receives cash in lieu of a fractional share of
New Autoliv Common Stock pursuant to the Merger will be treated as having
received such cash in exchange for such fractional share interest and will
generally recognize capital gain or loss on such deemed exchange in an amount
equal to the difference between the amount of cash received and the
shareholder's adjusted tax basis in such fractional share. Such capital gain or
loss generally will be long-term capital gain or loss if the holding period for
the Morton Common Stock with respect to which such fractional share would be
issued exceeds one year.
Morton expects that the Private Letter Ruling will remain effective and
expects to receive the opinion of Wachtell, Lipton, Rosen & Katz described above
prior to the Effective Time. Although the conditions regarding continued
effectiveness of the Private Letter Ruling and receipt of the opinion of
Wachtell, Lipton, Rosen & Katz described above are waivable by the parties to
the Combination Agreement, neither Morton nor Autoliv intends to waive such
conditions to consummation of the Transactions. In the event
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that these conditions were to be waived by the parties, Morton intends to
re-solicit shareholders with respect to the Proposals.
BACKUP WITHHOLDING. Under the U.S. backup withholding rules, a holder of
New Morton Common Stock and New Autoliv Common Stock may be subject to backup
withholding at the rate of 31% with respect to dividends and proceeds of
redemption, unless such shareholder (a) is a corporation or comes within certain
other exempt categories and, when required, demonstrates this fact or (b)
provides a correct taxpayer identification number, certifies as to no loss of
exemption from backup withholding and otherwise complies with applicable
requirements of the backup withholding rules. Any amount withheld under these
rules will be credited against the shareholder's U.S. federal income tax
liability. New Morton or New Autoliv may require holders of New Morton Common
Stock or New Autoliv Common Stock, respectively, to establish an exemption from
backup withholding or to make arrangements satisfactory to New Morton or New
Autoliv with respect to the payment of backup withholding. A shareholder who
does not provide New Morton or New Autoliv with his current taxpayer
identification number may be subject to penalties imposed by the IRS.
TO U.S. HOLDERS OF AUTOLIV SECURITIES
The following is a discussion of certain material U.S. federal income tax
consequences of the U.S. Offer and the Compulsory Acquisition to U.S. Autoliv
Holders under current U.S. federal income tax law. This summary is based upon
the Code, administrative pronouncements, judicial decisions and Treasury
regulations, all of which are subject to changes, possibly with retroactive
effect. The discussion does not purport to address all of the tax consequences
applicable to a particular taxpayer. In particular, the discussion does not
address the tax treatment of U.S. Autoliv Holders subject to special tax rules,
such as banks, insurance companies, dealers in securities, holders who acquired
their Autoliv Securities pursuant to the exercise of employee stock options or
otherwise as compensation, or holders who acquire New Autoliv Securities other
than through the U.S. Offer. This discussion applies to U.S. Autoliv Holders
which hold Autoliv Securities as capital assets, as defined in Section 1221 of
the Code (i.e., generally property held for investment). U.S. Autoliv Holders
are urged to consult their tax advisors as to the particular U.S. federal income
tax consequences to them of the U.S. Offer and the Compulsory Acquisition and as
to the foreign, state, local income and other tax consequences thereof.
For purposes of this discussion, a "U.S. Autoliv Holder" is a holder of
Autoliv Securities which is (a) a U.S. citizen or resident, (b) a corporation,
partnership or other entity created or organized under the laws of the U.S. or
any political subdivision thereof, (c) an estate whose income is includible in
gross income for U.S. federal income tax purposes regardless of its source and
(d) a trust the income of which is includible in gross income for U.S. federal
income tax purposes regardless of its source or, for taxable years beginning
after December 31, 1996 (and, if a trustee so elects, for taxable years ending
after August 20, 1996), a trust if a U.S. court is able to exercise primary
supervision over the administration of such trust and one or more U.S.
fiduciaries have the authority to control all substantial decisions of such
trust.
The obligation of Autoliv to consummate the U.S. Offer is conditioned on the
receipt by Autoliv of an opinion from Skadden, Arps, Slate, Meagher & Flom LLP
to the effect that, under current law, the transfer of Autoliv Securities by
holders thereof to New Autoliv pursuant to the U.S. Offer in exchange solely for
New Autoliv Common Stock, together with the Merger, will constitute a transfer
described in Section 351 of the Code. This opinion will be based upon certain
facts, assumptions and representations contained in certificates of officers of
New Autoliv, Autoliv and Morton, dated as of the Effective Time. Opinions of
counsel are not binding on the IRS or the courts, and no rulings will be
requested from the IRS with respect to the U.S. federal income tax consequences
of the U.S. Offer. Accordingly, there can be no assurance that the IRS will not
challenge such conclusion or that a court will not sustain such challenge.
Autoliv expects to receive the opinion of Skadden, Arps, Slate, Meagher & Flom
LLP described above prior to the Effective Time. Although the condition
regarding receipt of such opinion is waivable by the parties to the Combination
Agreement, neither Morton nor Autoliv intends to waive such condition to
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consummation of the Transactions. In the event that this condition were to be
waived by the parties, Morton intends to re-solicit shareholders with respect to
the Proposals.
Based upon the foregoing opinion, (a) U.S. Autoliv Holders who exchange
Autoliv Securities in the U.S. Offer solely for New Autoliv Common Stock will
not recognize gain or loss upon the receipt of New Autoliv Common Stock in
exchange for their Autoliv Securities, (b) the tax basis of shares of New
Autoliv Common Stock received in the U.S. Offer by U.S. Autoliv Holders will be
the same as the tax basis of the Autoliv Securities surrendered in exchange
therefor and (c) the holding period of the shares of New Autoliv Common Stock
received by a U.S. Autoliv Holder will include the holding period of the Autoliv
Securities surrendered in exchange therefor. No fractional shares of New Autoliv
Common Stock will be issued in the U.S. Offer.
A U.S. Autoliv Holder who receives cash pursuant to the Compulsory
Acquisition in exchange for Autoliv Securities generally will recognize capital
gain or loss in an amount equal to the difference between the amount of cash
received and the holder's adjusted tax basis in its Autoliv Securities exchanged
therefor. Such capital gain or loss will be long-term capital gain or loss if
the holding period for such Autoliv Securities exceeds one year. In certain
circumstances, a portion of the cash received by a U.S. Autoliv Holder pursuant
to the Compulsory Acquisition may be taxable as interest income. In addition, a
U.S. Autoliv Holder who receives cash pursuant to the Compulsory Acquisition in
a taxable year after the year in which title to the Autoliv Securities is
transferred pursuant to the Compulsory Acquisition may be entitled to report
such gain under the installment method of tax accounting. Under the installment
method, (a) such U.S. Autoliv Holder generally would recognize any gain on the
sale of its Autoliv Securities in the taxable year in which cash is received
pursuant to the Compulsory Acquisition and (b) certain U.S. Autoliv Holders may
be required to pay an additional interest charge with respect to a portion of
the tax payable on any taxable gain recognized with respect to the sale of
Autoliv Securities pursuant to the Compulsory Acquisition. U.S. Autoliv Holders
participating in the Compulsory Acquisition should consult their tax advisors
with respect to the applicability of the installment method.
SWEDISH INCOME TAX CONSIDERATIONS
The following is a discussion of certain material Swedish income tax
consequences of the Exchange Offer to holders of Autoliv Securities, and of the
Exchange Offer to each of New Autoliv and Autoliv.
Generally, a non-Swedish stockholder, other than an individual, is not
liable for tax in Sweden on the exchange of Autoliv Securities unless the
stockholder maintains a permanent establishment in Sweden and the holding of the
Autoliv Securities is effectively connected with such permanent establishment.
The obligation of the parties to consummate the Transactions is conditioned
on the receipt by New Autoliv, Autoliv and Morton of an opinion from Ernst &
Young AB to the effect that, under the income tax laws of Sweden, the transfer
of Autoliv Securities by holders thereof to New Autoliv pursuant to the Exchange
Offer, and the consummation of the Exchange Offer will not cause the recognition
of income or gain by New Autoliv, Autoliv or the holders of Autoliv Securities
(with certain exceptions) under Swedish income tax laws. This opinion will be
based upon certain facts, assumptions (including assumptions regarding certain
actions of holders of Autoliv Securities) and representations contained in
certificates of officers of Autoliv. An opinion of Ernst & Young AB with respect
to Swedish income tax consequences of the Transactions is not binding on Swedish
tax authorities or judicial authorities. Accordingly, there can be no assurance
that such authorities will not challenge such conclusions or that a court will
not sustain such challenge.
According to Swedish tax law, individuals who are not resident in Sweden for
tax purposes may generally be taxed on the exchange of Autoliv Securities only
if the individual at any time during the 10 calendar years immediately preceding
the year when the exchange takes place (in this case, 1987-1996) has maintained
his or her habitual abode or been resident or lived permanently in Sweden.
Furthermore, such liability for tax would arise only if an applicable income tax
treaty permits Sweden to levy tax or if no tax
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treaty is applicable. The taxable gain, if any, will be taxed in Sweden at a
rate of 30%. The special Swedish share-for-share exchange tax provision,
according to which the capital gains taxation is postponed, is not applicable
for non-residents of Sweden.
The new tax treaty between Sweden and the United States (effective January
1, 1996) permits Sweden to tax the exchange of Autoliv Securities made by an
individual who is resident in the United States and who has been a resident of
Sweden if the exchange takes place during the 10 years following the date on
which the individual has ceased to be a resident of Sweden. However, if such
taxation occurs, Sweden will, according to the new tax treaty, permit a
deduction against the Swedish tax for the U.S. income tax paid.
------------------------
BECAUSE OF THE INDIVIDUAL NATURE OF TAX CONSEQUENCES, EACH HOLDER OF AUTOLIV
SECURITIES IS URGED TO CONSULT SUCH HOLDER'S TAX ADVISOR WITH RESPECT TO THE TAX
CONSEQUENCES TO SUCH HOLDER OF THE U.S. OFFER OR THE COMPULSORY ACQUISITION,
INCLUDING THE EFFECT OF U.S. FEDERAL, STATE AND LOCAL, AND FOREIGN AND OTHER TAX
RULES, AND THE EFFECT OF POSSIBLE CHANGES IN TAX LAWS.
HOLDERS OF AUTOLIV SECURITIES WHO ARE CANADIAN PERSONS OR AUSTRALIAN PERSONS
SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE CONSEQUENCES UNDER
CANADIAN OR AUSTRALIAN LAW IF SUCH HOLDER ACCEPTS THE U.S. OFFER.
CERTAIN LEGISLATIVE INITIATIVES
In 1996, the U.S. President's budget recommendations to Congress called for
new legislation, generally effective retroactive to March 19, 1996, which, if
enacted with such retroactive effect, would cause the Spinoff to be taxable to
Morton. The Chairmen of both the Senate Finance Committee and the House Ways and
Means Committee publicly announced in March 1996 in a joint statement that any
such legislation, if enacted, would be effective "no earlier than the date of
appropriate congressional action." Subsequently, the ranking minority member of
the Senate Finance Committee and the ranking minority member of the House Ways
and Means Committee issued statements supporting the substance of that joint
statement. Such legislation was not introduced in the 104th Congress and that
session of Congress adjourned in the first week of October 1996.
In February 1997, the U.S. President proposed to Congress certain changes in
the Code, including amendment of certain provisions, which, if effected, would
cause the Spinoff to be taxable to Morton. The President's proposal would amend
the relevant provisions effective on the first day of Congressional committee
action; in its current form, the proposed legislation contains no "binding
contract" or other grandfathering provision that would permit the Spinoff, if
not consummated before the date of Congressional committee action, to be treated
as non-taxable to Morton. Congressional action with respect to the President's
proposals could delay or prevent the consummation of the Transactions. Morton's
and Autoliv's respective obligations to consummate the Transactions are
conditioned upon there not being any legislation introduced in bill form and
pending congressional action, which, if enacted, would have the effect of
amending the Code so as to alter in any materially adverse respect any of the
tax consequences described above to Morton, New Morton, any of their respective
subsidiaries or Morton's shareholders with respect to the Contribution, the
Spinoff or the Merger. The Combination Agreement contains a similar provision
regarding adverse tax developments in Sweden with respect to the Exchange Offer,
none of which is pending or expected to be introduced in the Swedish Parliament.
ACCOUNTING TREATMENT OF THE TRANSACTIONS
The Merger will be accounted for as a purchase for financial accounting
purposes in accordance with U.S. GAAP, with Autoliv treated as the acquiror of
the ASP Business. For New Morton's financial accounting purposes, the Spinoff
will be accounted for as if the ASP Business were being spun off from Morton and
discontinued.
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INTERESTS OF CERTAIN PERSONS IN THE TRANSACTIONS
In considering the respective recommendations of the Morton Board and the
Autoliv Board with respect to the Transactions, security holders of Morton and
Autoliv should be aware that certain current and former officers and directors
of Morton and Autoliv have specific interests in the Transactions that are
different from, or in addition to, the interests of shareholders of Morton and
security holders of Autoliv generally. The Autoliv Board was aware of these
interests of Autoliv management and considered them, among other matters, in
approving the Combination and the Combination Agreement. Similarly, the Morton
Board was aware of these interests of Morton management and considered them,
among other matters, in approving the Transactions and the Ancillary Agreements
and adopting the Combination Agreement.
MORTON CHANGE OF CONTROL AGREEMENTS
Fred J. Musone, President of ASP, who will become Chief Executive Officer
and a director of New Autoliv, has a change of control employment agreement with
Morton. Following a change in control, as defined in Mr. Musone's agreement (a
"Change in Control"), Mr. Musone is entitled to continued employment for a
period of three years (the "Employment Period"), on an equivalent basis to his
employment immediately before the Change in Control. Approval of the Proposals
by the Morton shareholders would constitute such a Change in Control.
Mr. Musone's agreement provides for minimum base salary and bonus payments
during the Employment Period based upon the highest of such payments during
certain periods before the Change in Control. If Mr. Musone terminates his
employment for good reason (as defined in his agreement, including for any
reason during the 30-day period beginning on the one-year anniversary of a
Change in Control) during the Employment Period, or if Mr. Musone's employment
is terminated other than for cause (as defined in his agreement) or due to
disability during the Employment Period, he will be entitled to receive an
immediate lump sum cash payment of (a) three times the sum of his then-current
annual salary, average long-term bonus and highest annual bonus plus (b) a
retirement benefit in an amount equal to the difference between his actual
benefit payable under Morton's Excess Pension Plan and the amount he would
receive if he continued to be employed throughout the Employment Period and
assuming all accrued benefits under such plan were fully vested. Mr. Musone's
lump sum payment would be reduced by any amounts payable to him upon the Change
in Control under Morton's long-term incentive compensation plan which relate to
performance periods subsequent to Mr. Musone's termination of employment. In
addition, following a Change in Control, Mr. Musone would be entitled to receive
service and earnings credits under Morton's retirement and other benefit plans
which he would have earned during the Employment Period and continued fringe
benefits during the Employment Period. Under Mr. Musone's employment agreement,
Mr. Musone would be made whole on an after-tax basis with respect to excise
taxes payable under Section 4999 of the Code as a consequence of any payments
made to him (whether or not under the agreement) being classified as "parachute
payments" under Section 280G of the Code.
Two other executives of Morton's ASP Business have similar change of control
employment agreements that would entitle them, upon Morton shareholder approval
of the Proposals, to benefits similar to Mr. Musone's.
It is currently contemplated that Mr. Musone will be offered a new
employment agreement with New Autoliv, with respect to his compensation and
benefits as Chief Executive Officer of New Autoliv, while he will retain his
rights under his existing change of control agreement with Morton, which will
become the obligation of Morton ASP.
MORTON STOCK OPTIONS
The Combination Agreement and the Benefits Agreement provide that, at the
Effective Time, all outstanding Morton Options which are held by ASP Employees
will be converted into options to purchase
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shares of New Autoliv Common Stock (which options, pursuant to the terms of the
Option Plan, will be fully exercisable upon consummation of the Transactions),
and all such outstanding options held by New Morton Employees will be converted
into options to purchase shares of New Morton Common Stock. See "Pre-Merger
Transactions--Terms of the Employee Benefits Allocation Agreement." Mr. Musone
holds 17,100 unvested Morton Options which will become vested upon these terms,
and all ASP Employees as a group hold 45,475 unvested Morton Options which will
so vest.
AUTOLIV CHANGE OF CONTROL AGREEMENTS
Autoliv has entered into change in control agreements ("Autoliv Employment
Agreements") with certain of its current executive officers that provide for
specific assurances in the event of a change in control of Autoliv.
In August 1996, Paul Charlety entered into an Autoliv Employment Agreement
which provided that if, as a result of a change in control of Autoliv, he was
terminated from his position as President and Chief Executive Officer (or if he
was asked to accept a different position with Autoliv or any merged operation or
combined entity of which Autoliv forms a part), he would, at his option, retire
and receive an annual severance payment (which payment will cease upon his
attainment of age 65) equal to his annual salary as in effect on the date of
termination plus his average bonus achieved over the last three years (or such
shorter period, if he has not served for three years) of his term as President.
The foregoing benefit was subject to reduction by the amount of any income he
receives from subsequent employment (which reductions are subject to cost of
living adjustments). In March 1997, this agreement was amended to provide that:
(i) if a competitor of Autoliv acquires a majority interest in Autoliv or if the
Autoliv Board determines that a competitor effectively has control of Autoliv,
Mr. Charlety would have the right to retire with annual pension benefits equal
to his salary at the time of resignation (until age 60), and (ii) the
Combination would not be deemed a change of control of Autoliv for purposes of
Mr. Charlety's agreement.
Five other executive officers of Autoliv (the "Autoliv Executives") have
entered into Autoliv Employment Agreements. Each such Autoliv Employment
Agreement provides that if, as a result of a change in control of Autoliv, the
Autoliv Executive's employment with Autoliv is terminated (or if the Autoliv
Executive is either asked to relocate outside of Stockholm, Sweden (a
"Relocation Event") or asked to accept a different position with Autoliv or any
merged operation or combined entity of which Autoliv forms a part), the Autoliv
Executive may, at his option, terminate employment with Autoliv and receive a
lump sum severance payment equal to a multiple (ranging from two to three,
unless the number of years remaining until the executive's retirement date is
lower, in which case the multiple will equal the number of years remaining until
the Autoliv Executive's retirement date) times the sum of (a) the annualized
base salary in effect at the time of such termination, (b) the average incentive
bonus over the previous two years and (c) the annual value of any
company-provided automobile. It is currently contemplated that each of the
Autoliv Executives will enter into a new employment agreement or arrangement
with New Autoliv which would supersede and replace his current Autoliv
Employment Agreement.
OTHER ARRANGEMENTS
Six executive officers of Autoliv, including the Autoliv Executives, are
entitled to special one-time bonuses which are in consideration for significant
increases in the responsibilities and workload of such executive officers of
Autoliv during the transition period leading up to the Combination. The special
bonuses, which were paid in February 1997, were in the aggregate approximately
US$ 1 million.
ARRANGEMENTS WITH AUTOLIV'S FORMER CHIEF EXECUTIVE OFFICER
On August 1, 1996, Autoliv entered into an agreement with Kanoe, a
corporation controlled by Gunnar Bark, the former Chief Executive Officer of
Autoliv. Pursuant to the agreement, Kanoe (acting
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primarily through, and at the direction of, Mr. Bark) was to represent Autoliv
in negotiations with Morton regarding all aspects of the Combination. Mr. Bark
had a substantial role in such negotiations. In March 1997, Mr. Bark was elected
a director of Autoliv and appointed Chairman of the Autoliv Board. As discussed
in "Description of New Autoliv--Directors and Executive Officers," Mr. Bark will
become Chairman of the Board of New Autoliv.
In consideration for providing such services, and subject to the
consummation of the Combination, Kanoe is entitled to receive from Autoliv MSEK
10 (approximately US$ 1.5 million).
CERTAIN OFFICERS AND DIRECTORS OF NEW AUTOLIV
Upon consummation of the Transactions, S. Jay Stewart, George A. Schaefer
and Roger W. Stone, each of whom is a director of Morton, will become directors
of New Autoliv. In addition, Per-Olof Aronson and Per Welin, each of whom is an
Autoliv director, will become directors of New Autoliv. See "Description of New
Autoliv--Directors and Executive Officers."
INDEMNIFICATION AND INSURANCE
New Autoliv is required by the Combination Agreement to provide
indemnification and liability insurance arrangements for, and to otherwise
indemnify, the officers and directors of Morton and Autoliv. See "The
Combination Agreement--Director and Officer Liability."
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DESCRIPTION OF NEW AUTOLIV
GENERAL
New Autoliv is a Delaware corporation which was formed in October 1996 by
Morton and Autoliv for the purpose of effecting the Transactions. Morton and
Autoliv each own 500 shares of New Autoliv Common Stock, which shares will be
cancelled in connection with the Merger and the Exchange Offer. New Autoliv has
no other shareholders, and, until consummation of the Merger and the Exchange
Offer, will not actively engage in any business. If the Exchange Offer is fully
subscribed, as of the Effective Time, the stockholders of Autoliv immediately
prior to such time will own 53.5% of the outstanding New Autoliv Shares and the
shareholders of Morton immediately prior to the Effective Time will own 46.5%
(before giving effect to any fractional shares, which will be paid in cash) of
the outstanding New Autoliv Shares. Following the Transactions, New Autoliv will
be a publicly traded holding company, with the businesses of Morton ASP and
Autoliv as its only businesses. New Autoliv's fiscal year will end on December
31. It is expected that New Autoliv's principal executive offices as of the
Effective Time will be located in London, England.
BUSINESS
By combining the ASP Business and Autoliv's businesses, New Autoliv will be
one of the world's leading suppliers of automotive occupant safety restraint
systems with a broad range of product offerings including modules and components
for passenger and driver-side airbags, side-impact airbag protection systems,
seat belts, steering wheels and other safety systems and products.
New Autoliv will initially employ approximately 15,000 people. Of those just
over 60% will be individuals currently employed by Autoliv and slightly less
than 40% will be individuals currently employed by Morton ASP. Based on 1996
numbers, New Autoliv's sales will exceed SEK 20 billion (approximately US$ 3
billion), approximately 70% of which will consist of airbags and associated
products and approximately 30% of which will consist of seat belts and
associated products. Approximately 55% of New Autoliv's sales will be to
customers in Europe, 35% to customers in North America and 10% to customers in
the rest of the world. New Autoliv will have production facilities in 24
countries and will have as customers almost all of the world's largest car
manufacturers.
The New Autoliv organization is expected to reflect Autoliv's country- and
market-oriented structure and Morton ASP's process-oriented organization.
Following consummation of the Transactions, the management of New Autoliv will
prepare a more detailed plan to combine the resources within the different
business areas of Autoliv and Morton ASP. New Autoliv expects to benefit from
Autoliv's and Morton ASP's complementary geographical market coverage and
products.
New Autoliv's corporate headquarters will be located in London, United
Kingdom, its European operations will be headquartered in Stockholm and its
North American operations will be headquartered in Ogden, Utah. For more
information on the ASP Business and Autoliv's businesses, including, among other
things, information regarding their sales activities, products, research and
development programs, employees, production capabilities, properties and
litigation matters, see "Description of the ASP Business" and "Description of
Autoliv."
DIRECTORS AND EXECUTIVE OFFICERS
BOARD OF DIRECTORS. Immediately prior to the Effective Time, the New
Autoliv Board will consist of eight members, including Gunnar Bark (currently
Chairman of the Board and a director of Autoliv and formerly the Chief Executive
Officer and President of Autoliv), Wilhelm Kull (currently the Chief Financial
Officer of Autoliv), S. Jay Stewart (currently the Chairman and Chief Executive
Officer of Morton) and Fred Musone (currently the President of ASP). The
remainder of the New Autoliv Board will consist of two directors designated by
each of Autoliv and Morton. It is expected that Morton will
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designate George A. Schaefer and Roger W. Stone, both currently serving as
non-employee directors on the Morton Board, to serve as directors on the New
Autoliv Board, and Autoliv will designate Per-Olof Aronson and Per Welin, both
currently serving as nonemployee directors of Autoliv, to serve as directors on
the New Autoliv Board. Pursuant to the New Autoliv Certificate, the New Autoliv
Board is divided into three classes with terms of approximately one-third of the
directors expiring each year. At each annual meeting of New Autoliv stockholders
commencing with the 1998 Annual Meeting of Stockholders, directors whose terms
expire at such meeting will be considered for election to three-year terms.
Background information for each of these individuals, including their initial
terms of office, is set forth below:
TERMS EXPIRING 1998
PER-OLOF ARONSON, age 67, has been a director of the Autoliv Board since
Autoliv's initial public offering in 1994. Mr. Aronson has worked in the
aluminum company Granges AB since 1956, where he has held various senior
executive positions, including three years as Technical Director and 11 years as
President and Chief Executive Officer. Mr. Aronson is now Vice Chairman of
Granges AB. Mr. Aronson also serves as Chairman of Componenta Industri AB. Mr.
Aronson holds a graduate degree in chemical engineering from the Royal Institute
of Technology (KTH) in Stockholm.
GEORGE A. SCHAEFER, age 68, is a director (since 1983) of Caterpillar Inc.,
a manufacturer of construction, earthmoving and material handling machines and
engines. He retired in 1990 as Chairman and Chief Executive Officer of
Caterpillar Inc., positions he had held since 1985. Mr. Schaefer has been a
director of Morton since 1990. He is also a director of Aon Corporation,
Helmerich & Payne, Inc. and McDonnell Douglas Corporation. Mr. Schaefer is a
graduate of St. Louis University.
TERMS EXPIRING 1999
WILHELM KULL, age 60, has been Vice President and Chief Financial Officer of
Autoliv since 1975, at which time the business of Autoliv was conducted by the
entity Granges Weda, a subsidiary of Granges AB, a publicly listed company. Mr.
Kull served as Deputy Chief Financial Officer of Granges AB prior to becoming
Vice President and Chief Financial Officer of Autoliv. Prior to serving as
Deputy Chief Financial Officer of Granges AB, Mr. Kull worked for five years at
a certified public accounting firm in Sweden. He holds a B.S. degree in business
and an M.B.A. from the University of Colorado.
S. JAY STEWART, age 58, became Chairman and Chief Executive Officer of
Morton in April 1994. He has been a director of Morton since 1989, and was
President and Chief Operating Officer of Morton from 1989 through March 1994. In
addition, he is a director of Household International, Inc. Mr. Stewart holds a
B.S. degree in Chemical Engineering from the University of Cincinnati and an
M.B.A. degree from West Virginia University.
ROGER W. STONE, age 62, is Chairman of the Board (since 1983), President
(since 1975), and Chief Executive Officer (since 1979) of Stone Container
Corporation, a multinational producer and marketer of pulp, paper, and packaging
products. He has been a director of Morton since 1989. Mr. Stone is also a
director of McDonald's Corporation and Option Care, Inc. He is a graduate of the
University of Pennsylvania Wharton School of Finance.
TERMS EXPIRING 2000
GUNNAR BARK, age 57, was elected a director of Autoliv and appointed
Chairman of the Autoliv Board in March 1997. Mr. Bark had previously served as
President and Chief Executive Officer of Autoliv and as a member of the Autoliv
Board from 1982 until he retired from his position as President of Autoliv and
member of the Autoliv Board in April 1996 and as Chief Executive Officer of
Autoliv in August 1996. Mr. Bark serves as Chairman of Allgon AB, and as Vice
Chairman of Spectra-Physics AB where he holds the position of Chairman and Chief
Executive Officer of Spectra-Physics, Inc. in the United States.
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Mr. Bark also serves as a director of Esselte AB. Mr. Bark is a graduate
engineer in theoretical physics from the Royal Institute of Technology (KTH) in
Stockholm. He will be awarded the title of Honorary Doctor of Engineering in May
1997 by the Chalmers Institute of Technology in Gothenburg.
FRED J. MUSONE, age 52, became a Group Vice President of Morton and
President of Morton's Automotive Safety Products Group in February, 1995. Mr.
Musone spent 22 years with Federal-Mogul Corporation, an automotive parts
supplier, where he was President of Worldwide Manufacturing from 1993 to 1995
and President, Chassis Product Operations from 1989 to 1993. He holds a B.S. in
business from Wittenberg University.
PER WELIN, age 60, has been a director of Autoliv since 1995. Mr. Welin has
served as Executive Vice President and director of L-E Lundberg-foretagen AB, an
investment company, since 1991. He also holds the position of Vice Chairman of
Ostgota Enskilda Bank and is a director of Allgon AB, MoDo AB and Siab AB. Mr.
Welin is a graduate engineer in theoretical physics from the Chalmers Institute
of Technology in Gothenburg, from which he also holds a licentiate of
engineering degree in applied thermo and fluid dynamics. He also holds an M.B.A.
from the Gothenburg School of Economics.
EXECUTIVE OFFICERS. Upon consummation of the Transactions, New Autoliv will
have an executive committee consisting of the following members of New Autoliv's
senior management, which committee is designed to enhance communication,
coordination and effective shared decision making among the senior executives of
New Autoliv:
<TABLE>
<S> <C>
Gunnar Bark Chairman of the Board
Fred J. Musone Chief Executive Officer and Director
Wilhelm Kull Chief Financial Officer and Director
Sture Andersson Vice President--Engineering
Jacques M. Croisetiere Vice President--Finance ASP
Claes Humbla Vice President--Human Resources
Robert Rapone Vice President--Production
Roger D. Tea Vice President--Human Resources ASP
</TABLE>
The executive committee is expected to meet monthly and will be chaired by
Gunnar Bark.
New Autoliv will announce the appointment of additional officers at a later
date. Such additional officers are expected to be selected from the current
management of Autoliv and Morton ASP.
Background information for Messrs. Andersson, Croisetiere, Humbla, Rapone
and Tea is set forth below:
STURE ANDERSSON, age 58, has served as Senior Vice President--Engineering of
Autoliv since 1995, prior to which he served in positions of increasing
responsibility at Autoliv beginning in 1985. At the time of the initial public
offering of Autoliv, Mr. Andersson served as Vice President--Engineering of
Autoliv. Mr. Andersson is a graduate engineer in mechanics from the Royal
Institute of Technology (KTH) in Stockholm.
JACQUES M. CROISETIERE, age 43, joined ASP in January 1996 as Vice
President--Finance and Information Systems. Prior to joining ASP, for six years,
he held the senior finance and information systems positions with Morton's
Canadian salt unit and one of Morton's chemicals segments. Mr. Croisetiere holds
a B.S. degree in finance from the University of Montreal and a B.S. degree in
manufacturing from Ahuntsic College and is a Canadian Certified Management
Accountant.
CLAES HUMBLA, age 57, was appointed Vice President--Human Resources of the
Electrolux Components division of Electrolux AB in March 1989. At the time of
the initial public offering of Autoliv in 1994, Mr. Humbla served as Senior Vice
President--Human Resources of Electrolux Components, and upon the initial public
offering, Mr. Humbla was appointed Senior Vice President--Human Resources of
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Autoliv. Mr. Humbla holds a Master of Science degree in Mechanical Engineering
from the Chalmers Institute of Technology in Gothenburg.
ROBERT RAPONE, age 41, became ASP's Vice President--Operations in April
1995. Prior to joining ASP, from 1989 to 1995, he was employed by Federal-Mogul,
an automotive parts supplier, where he most recently held the position of
Director of Process Engineering. From 1983 to 1989 he held various manufacturing
positions with Texas Instruments Incorporated, most recently as Manufacturing
Superintendent. Mr. Rapone is a graduate of the U.S. Military Academy--West
Point, where he received a General Engineering Degree in 1978. He also received
an M.B.A. from Bryant College in 1987.
ROGER D. TEA, age 45, became Vice President--Human Resources of ASP in
August 1989, prior to which time he served as Manager Human Resources since
joining the business in 1987. Mr. Tea holds a B.S. degree in sociology from the
University of Utah and performed postgraduate studies at the University of Utah
and Baylor University.
The current President and Chief Executive Officer of Autoliv, Mr. Paul
Charlety, will, among other tasks, serve as special advisor to the Chairman of
the Board of New Autoliv, focusing on certain strategic issues in connection
with the integration of Autoliv and Morton ASP and New Autoliv's future
development.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS. The directors and
executive officers of New Autoliv will receive no compensation from New Autoliv
prior to the Effective Time. Certain of the directors and executive officers of
New Autoliv are presently directors and/or executive officers of Autoliv and
Morton and are entitled to compensation and/or certain other employment benefits
from Autoliv and Morton, respectively, including certain compensation and other
benefits in connection with the Transactions. See "Risk Factors--Interests of
Management" and "Interests of Certain Persons in the Transactions." It is
currently expected that certain officers and/or directors of Autoliv and Morton
will enter into new employment agreements or arrangements with Morton ASP or New
Autoliv.
The New Autoliv Board will rely on its compensation committee, which will be
composed of nonemployee directors (Messrs. Aronson, Stewart, Stone and Welin),
and upon such committee's independent advisors, to recommend the form and amount
of compensation to be paid to New Autoliv's directors and executive officers.
The New Autoliv Board also will have an audit committee, which will be composed
of nonemployee directors (Messrs. Aronson, Schaefer, Stewart and Welin).
New Autoliv expects that it will, prior to or shortly following the
Effective Time, adopt a comprehensive incentive compensation plan, which plan
may include stock options, long-term incentive programs, annual bonuses and
other customary incentive compensation arrangements, for members of senior
management as well as for other key employees of New Autoliv. If adopted, such
plan may in the future be submitted to New Autoliv shareholders for approval to
the extent required by the rules and regulations of the NYSE or in order to
obtain beneficial treatment of such plans under the Code.
For information regarding compensation paid to executive officers of Morton
for the three fiscal years in the period ended June 30, 1996, see the Morton
1996 Form 10-K which incorporates by reference the relevant portions of the
Morton 1996 Proxy Statement. Information regarding compensation paid in the
three fiscal years in the period ended December 31, 1996 to Mr. Bark and those
executive officers of Autoliv who will serve as directors and/or executive
officers of New Autoliv is contained in the table below:
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SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------
<S> <C> <C> <C> <C> <C> <C>
ALL OTHER
SALARY SALARY BONUS BONUS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SEK US$ SEK US$ SEK
- ------------------------------------------------ --------- ---------- --------- ---------- --------- -------------
Gunnar Bark..................................... 1996 3,072,000 450,110 1,000,000 146,520 (1)
Former President and 1995 3,500,000 512,821 1,500,000 219,780 (1)
Chief Executive Officer 1994 2,640,000 386,813 1,000,000 146,520 (1)
Sture Andersson................................. 1996 988,000 144,762 149,000 21,832 (1)
Senior Vice President--Engineering 1995 895,000 131,136 191,000 27,985 (1)
1994 630,000 92,308 220,000 32,234 (1)
Wilhelm Kull.................................... 1996 1,116,000 163,516 149,000 21,832 (1)
Senior Vice President and 1995 895,000 131,136 191,000 27,985 (1)
Chief Financial Officer 1994 630,000 92,308 220,000 32,234 (1)
Claes Humbla.................................... 1996 988,000 144,762 149,000 21,832 (1)
Senior Vice President--Human Resources 1995 895,000 131,136 191,000 27,985 (1)
1994 630,000 92,308 220,000 32,234 (1)
</TABLE>
- ------------------------
(1) Autoliv has paid pension and retirement benefits premiums for Messrs. Bark,
Andersson, Kull and Humbla in accordance with customary Swedish practice.
STOCK OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS AND FIVE PERCENT SHAREHOLDERS
No director or executive officer of New Autoliv is expected to own more than
1% of the outstanding New Autoliv Common Stock after giving effect to the
Transactions. The directors and executive officers of New Autoliv as a group are
expected to beneficially own less than 1% of the outstanding shares of New
Autoliv Common Stock after giving effect to the Transactions. No person is
expected to beneficially own more than 5% of the outstanding New Autoliv Common
Stock after giving effect to the Transactions (based upon publicly available
information). For information concerning the beneficial ownership of Morton
Common Stock by Morton directors and executive officers, see Appendix J to this
Proxy Statement/Prospectus/Exchange Offer and the Morton 1996 Proxy Statement,
the relevant portions of which are incorporated by reference into the Morton
1996 Form 10-K. See "Where Shareholders Can Find More Information." For
information concerning the beneficial ownership of Autoliv Common Stock by
Autoliv directors and executive officers, see Appendix G to this Proxy
Statement/Prospectus/Exchange Offer.
CERTIFICATE OF INCORPORATION AND BYLAWS
For a description of certain provisions in the New Autoliv Certificate and
the New Autoliv Bylaws that may make acquisition of control of New Autoliv more
difficult or expensive than it would otherwise be, see "Description of Capital
Stock of New Autoliv--Certain Provisions in the New Autoliv Certificate and New
Autoliv Bylaws."
DIVIDEND POLICY
It is currently anticipated that, following the Transactions, New Autoliv
will initially pay quarterly cash dividends at an annual rate of $0.44 per share
of New Autoliv Common Stock. No such dividends have been declared, however, and
the actual amount of such dividends, if any, may vary and will depend on New
Autoliv's operating results, financial requirements and other factors.
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COMPARATIVE PER SHARE MARKET PRICE
AND DIVIDEND INFORMATION
The Morton Common Stock is listed on the NYSE and the CSE under the symbol
"MII." The Autoliv Common Stock is listed on the SSE under the symbol "ALIV" and
Autoliv's ADSs are quoted on the PORTAL system. As of December 31, 1996,
approximately 30% of the Autoliv Securities were held by U.S. Persons.
Applications have been or will be made to list the New Morton Common Stock on
the NYSE and the CSE, and to list the shares of New Autoliv Common Stock on the
NYSE and SDRs on the SSE. There is currently no trading market for either the
New Morton Common Stock or the New Autoliv Common Stock. See "Risk
Factors--Absence of Trading Markets for New Autoliv Securities and New Morton
Common Stock; Market Prices." SECURITY HOLDERS ARE URGED TO OBTAIN CURRENT
MARKET QUOTATIONS PRIOR TO MAKING ANY DECISIONS WITH RESPECT TO THE
TRANSACTIONS.
On September 27, 1996, the last full trading day prior to the public
announcement of the signing of the letter of intent in connection with the
proposed Transactions, the closing price of Morton Common Stock on the NYSE
Composite Transaction Tape was $38 per share and the closing price of Autoliv
Common Stock on the SSE was SEK 253 per share. On November 22, 1996, the last
full trading day prior to the public announcement of the signing of the
Combination Agreement, the closing price of Morton Common Stock on the NYSE
Composite Transaction Tape was $39 5/8 per share and the closing price of
Autoliv Common Stock on the SSE was SEK 289 per share.
On March 20, 1997, the most recent practicable date prior to the printing of
this Proxy Statement/ Prospectus/Exchange Offer, the closing price of Morton
Common Stock on the NYSE Composite Transaction Tape was $42 7/8 per share, and
the closing price of the Autoliv Common Stock on the SSE was SEK 315 per share.
The left portion of the table below sets forth, for the calendar quarters
indicated, the reported high and low sale prices of the Morton Common Stock as
reported on the NYSE Composite Transaction Tape and the dividends declared per
share of Morton Common Stock. The right portion of the table below sets forth,
for the calendar periods indicated, the high and low closing sale prices for the
Autoliv Common Stock, as stated in the Official List of the SSE, and the ADSs on
the PORTAL system, and dividends declared on the Autoliv Common Stock. The
Official List reflects price and volume information for trades completed by
members of the SSE during the day as well as for inter-dealer trades completed
off the SSE and certain inter-dealer trades completed during trading on the
previous business day. Dividends on Autoliv Common Stock are declared annually
and are subject to a vote by the Autoliv stockholders at a general meeting.
91
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AUTOLIV COMMON
MORTON COMMON STOCK STOCK(1)
----------------------- ----------------------
AUTOLIV
MARKET PRICE CASH MARKET PRICE ADSS(1)(2)
------------- DIVIDEND ------------ CASH ------------
HIGH LOW DECLARED HIGH LOW DIVIDEND HIGH LOW
---- ----- -------- ----- ----- -------- ---- ----
($ PER SHARE) (SEK PER SHARE) ($ PER ADS)
1995 2.25 (3)
First Quarter.............. 30 7/8 26 1/4 .11 145 1/2 127 N/A N/A
Second Quarter............. 32 26 1/4 .11 207 140 3/4 27 1/2 23
Third Quarter.............. 34 28 1/8 .13 252 195 35 27 5/16
Fourth Quarter............. 36 1/8 29 5/8 .13 218 163 1/2 31 1/2 26
1996 2.75 (4)
First Quarter.............. 40 1/4 34 .13 195 146 3/4 29 1/8 21 1/4
Second Quarter............. 39 3/4 34 3/8 .13 201 1/2 187 1/2 31 1/2 25 3/8
Third Quarter.............. 40 1/2 33 1/4 .15 310 182 42 7/8 27 3/4
Fourth Quarter............. 43 38 1/8 .15 307 266 45 1/8 40 3/4
1997
First Quarter through March
20....................... 44 5/8 40 .15 349 293 47 1/2 41
</TABLE>
- ------------------------
(1) Adjusted to reflect a 2 for 1 stock split effective in May 1996.
(2) Each ADS represents one share of Autoliv Common Stock.
(3) Dividend declared in April 1996 with respect to the year ended December 31,
1995.
(4) In March 1997, Autoliv stockholders approved a dividend of SEK 2.75
(approximately US$ .38, based on current exchange rates) per share (the
highest amount permissible under the restriction in the Combination
Agreement that such dividend cannot exceed the lesser of 20% of Autoliv's
net income per share for fiscal year 1996 and SEK 2.75 per Autoliv share) to
be declared and paid in respect of fiscal year 1996 prior to the
consummation of the Combination.
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<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The unaudited pro forma information set forth below gives effect to the
Transactions as if they had been consummated on December 31, 1996 for balance
sheet presentation purposes, and January 1, 1996 for income statement purposes,
subject to the assumptions and adjustments in the accompanying notes to the pro
forma financial information.
The pro forma financial statements have been prepared in accordance with
U.S. GAAP and reflect the consummation of the Transactions based upon the
purchase method of accounting and upon the assumptions set forth in the notes
hereto. Accordingly, Morton ASP is treated as being acquired in the
Transactions.
The pro forma adjustments do not reflect any operating efficiencies and cost
savings which may be achievable with respect to the combined companies, nor do
they reflect potential restructuring and rationalization costs which may be
incurred following the Combination. The pro forma adjustments do not include any
adjustments to historical sales for any future price changes nor any adjustments
to selling and marketing expenses for any future operating changes.
The following information is not necessarily indicative of the financial
position or operating results that would have occurred had the Transactions been
consummated on the date, or at the beginning of the period, for which the
consummation of the Transactions is being given effect. For purposes of
preparing the New Autoliv consolidated financial statements, New Autoliv will
establish a new basis for Morton ASP's assets and liabilities based upon the
value of the New Autoliv Securities issued in the Merger and the costs of the
Transactions borne by New Autoliv. A final determination of required purchase
accounting adjustments, including the allocation of the purchase price to the
assets acquired and liabilities assumed based on their respective fair values,
has not yet been made. Accordingly, the purchase accounting adjustments made in
connection with the development of the pro forma combined financial information
are preliminary and have been made solely for purposes of developing such pro
forma combined financial information. New Autoliv has undertaken a study to
determine the fair value of certain of Morton ASP's assets and liabilities,
including in-process research and development, and will make appropriate
revisions to the purchase accounting adjustments upon completion of that study.
A preliminary estimate of purchased in-process research and development of
$555.0 million has been reflected in the pro forma balance sheet. In addition, a
preliminary appraisal value of $223.0 million has been assigned to patents and
patent-supported technology and the amortization period related thereto ranges
from 8 to 25 years. As noted above, the appraisal process is not yet complete
and these amounts may require revision. Assuming completion of the Transactions,
the actual financial position and results of operations will differ, perhaps
significantly, from the pro forma amounts reflected herein because of a variety
of factors, including access to additional information, changes in value, and
changes in operating results between the dates of the pro forma financial data
and the date on which the Transactions take place. These financial statements do
not include the restructuring charge anticipated to be taken by New Autoliv in
1997, which amount is not currently determinable.
For purposes of preparing the unaudited pro forma information for New
Autoliv set forth below, exchange rates of US$ 1=SEK 6.87 and US$ 1=SEK 6.7046
were used to convert SEK amounts as of and for the year ended December 31, 1996,
respectively.
93
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET OF NEW AUTOLIV
The unaudited pro forma condensed combined balance sheet of New Autoliv has
been derived from the historical consolidated balance sheet of Autoliv and the
historical combined balance sheet of Morton ASP as of December 31, 1996, and
gives effect to the Transactions using the purchase method of accounting and
certain costs and expenses to be incurred as a result of the Transactions. The
unaudited condensed combined balance sheet of New Autoliv has been prepared
assuming the Transactions occurred on December 31, 1996.
The unaudited pro forma condensed combined balance sheet should be read in
conjunction with the historical consolidated financial statements, including the
notes thereto, of Autoliv for the year ended December 31, 1996, and the audited
combined financial statements, including the notes thereto, of Morton ASP for
the year ended June 30, 1996, and the unaudited combined financial statements,
including the notes thereto, of Morton ASP for the six-month period ended
December 31, 1996, all of which are included elsewhere herein, and the notes to
this unaudited pro forma condensed combined balance sheet. The unaudited pro
forma condensed combined balance sheet is not necessarily indicative of the
financial position of New Autoliv that would actually have been obtained had the
Transactions been consummated on December 31, 1996, nor is it indicative of any
future financial position.
94
<PAGE>
AUTOLIV, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, 1996
--------------------------------------------
<S> <C> <C> <C> <C>
MORTON PRO FORMA NEW
AUTOLIV ASP ADJUSTMENTS AUTOLIV
--------- --------- ----------- ---------
<CAPTION>
(IN MILLIONS)
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents........................................ $ 131.7 $ (10.7) $ -- $ 121.0
Receivables, less allowances..................................... 383.4 214.8 -- 598.2
Recoverable design and preproduction costs....................... -- 22.9 (22.9)(a) --
Inventories...................................................... 100.8 77.5 -- 178.3
Refundable and deferred income tax benefit....................... 15.9 7.5 23.3(a) 46.7
Prepaids......................................................... 9.4 4.7 9.1(a) 23.2
--------- --------- ----------- ---------
Total current assets....................................... 641.2 316.7 9.5 967.4
Property, plant and equipment, net............................... 322.4 463.3 -- 785.7
Investments in affiliated companies.............................. 26.0 -- -- 26.0
Recoverable design and preproduction costs....................... -- 46.5 (46.5)(a) --
Miscellaneous.................................................... -- 4.2 .5(b) 4.7
Intangible assets, net (mainly acquisition goodwill)............. 64.0 -- 31.0(c) 1,587.2
223.0(d)
1,269.2(e)
--------- --------- ----------- ---------
Total assets............................................... $ 1,053.6 $ 830.7 $ 1,486.7 $ 3,371.0
--------- --------- ----------- ---------
--------- --------- ----------- ---------
LIABILITIES AND EQUITY
Current Liabilities
Short-term debt.................................................. $ 62.1 $ -- $ -- $ 62.1
Notes payable to affiliate....................................... -- 51.6 (51.6)(f) --
Advances from affiliates......................................... -- 17.7 (17.7)(f) --
Accounts payable................................................. 281.2 99.2 .5(b) 411.9
31.0(c)
Accrued expenses................................................. 182.1 26.4 -- 208.5
Income taxes..................................................... 21.1 6.0 -- 27.1
--------- --------- ----------- ---------
Total current liabilities.................................. 546.5 200.9 (37.8) 709.6
Noncurrent Liabilities
Long-term debt................................................... 12.8 -- 750.0(b) 762.8
Other noncurrent liabilities..................................... 13.8 28.0 -- 41.8
Minority interests in subsidiaries............................... 22.0 -- -- 22.0
--------- --------- ----------- ---------
Total noncurrent liabilities and minority interests........ 48.6 28.0 750.0 826.6
--------- --------- ----------- ---------
Common stock..................................................... 80.1 -- 47.8(e) 102.8
(25.1)(g)
Additional paid-in capital....................................... -- -- 1,883.5(e) 1,908.6
25.1(g)
Retained earnings (accumulated deficit) and foreign currency
translation adjustments........................................ 378.4 601.8 (37.0)(a) (176.6)
(750.0)(b)
115.9(e)
69.3(f)
(555.0)(h)
--------- --------- ----------- ---------
Total shareholders' equity................................. 458.5 601.8 774.5 1,834.8
--------- --------- ----------- ---------
$ 1,053.6 $ 830.7 $ 1,486.7 $ 3,371.0
--------- --------- ----------- ---------
--------- --------- ----------- ---------
</TABLE>
95
<PAGE>
- ------------------------
(a) Autoliv has consistently expensed design and preproduction costs except
tooling and will continue to do so after the Merger. Adjustment reflects
conforming Morton ASP accounting methods to Autoliv accounting practice
through the elimination of this asset and the corresponding reduction of
retained earnings. The adjustment also reflects the related tax impact and
the reclassification of tooling to the prepaid account.
(b) To reflect debt to be incurred under the New Credit Facility and related
financing costs.
(c) To accrue estimated transaction costs to be paid by New Autoliv in
connection with the Transactions. These costs consist principally of
financial advisory, legal, accounting, registration fees, printing and
similar costs.
(d) To record the preliminary estimate of patent and patent-supported technology
as determined by independent appraisal. The appraisal process is not yet
complete and, therefore, the above amount is subject to change.
(e) Represents the implied market valuation of the New Autoliv Common Stock to
be issued to Morton shareholders in the Merger in excess of the sum of the
amounts of assets acquired, less liabilities assumed, of Morton ASP. This
excess is recorded as goodwill. The appraisal process related to certain
assets is not yet complete and, therefore, the above amount is subject to
change.
(f) To eliminate intercompany indebtedness to Morton.
(g) Represents the adjustment to the common stock account to reflect the
difference between the par value of New Autoliv Common Stock to be issued in
the Combination and the par value of the outstanding Autoliv Securities.
(h) To record the preliminary estimate of purchased in-process research and
development, as determined by independent appraisal, which has been charged
off and reflected as a reduction of retained earnings. The appraisal process
is not yet complete and, therefore, the above amount is subject to change.
96
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME OF NEW AUTOLIV
The unaudited pro forma condensed combined statement of income of New
Autoliv has been derived from the historical consolidated statement of income of
Autoliv and the combined statements of income of Morton ASP adjusted to give
effect to the Transactions using the purchase method of accounting. Due to
Morton ASP's June 30 fiscal year, the amounts for Morton ASP for the year ended
December 31, 1996 have been derived by combining the amounts for each of the
quarters ended March 31 and June 30, 1996 and the amounts for the six months
ended December 31, 1996. The unaudited pro forma condensed combined statement of
income of New Autoliv has been prepared as if the Transactions occurred on
January 1, 1996.
The unaudited pro forma condensed combined statement of income should be
read in conjunction with the historical consolidated financial statements,
including the notes thereto, of Autoliv for the year ended December 31, 1996 and
the audited combined financial statements, including the notes thereto, of
Morton ASP for the year ended June 30, 1996, and the unaudited combined
financial statements, including the notes thereto, of Morton ASP for the
six-month period ended December 31, 1996, all of which are included elsewhere
herein, and the notes to the unaudited pro forma condensed combined statement of
income. The unaudited pro forma condensed combined statement of income is not
necessarily indicative of the operating results of New Autoliv that would
actually have been obtained had the Transactions been consummated on January 1,
1996, nor is it necessarily indicative of any future operating results.
AUTOLIV, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED DECEMBER 31, 1996
-------------------------------------------------
<S> <C> <C> <C> <C>
MORTON PRO FORMA NEW
AUTOLIV ASP ADJUSTMENTS(D) AUTOLIV(D)
--------- --------- -------------- -----------
<CAPTION>
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Sales.......................................................... $ 1,734.5 $ 1,469.9 $ -- $ 3,204.4
Cost of sales.................................................. 1,387.3 1,119.1 17.9(a) 2,524.3
--------- --------- ------- -----------
Gross profit................................................... 347.2 350.8 (17.9) 680.1
Selling, administrative and general expense.................... 76.3 84.2 -- 160.5
Research and development expense............................... 100.0 18.0 -- 118.0
Amortization of intangibles, primarily goodwill................ 11.2 -- 32.2(b) 57.6
14.2(c)
Other income--net.............................................. (3.3) (1.4) -- (4.7)
--------- --------- ------- -----------
Operating income............................................... 163.0 250.0 (64.3) 348.7
Equity in earnings (loss) of affiliates........................ 7.5 (4.5) -- 3.0
Interest income................................................ 5.7 .7 -- 6.4
Interest expense............................................... (5.4) (2.4) (46.7)(e) (54.5)
--------- --------- ------- -----------
Income before income taxes..................................... 170.8 243.8 (111.0) 303.6
Income taxes................................................... (56.8) (93.9) 24.7(f) (126.0)
Minority interests in subsidiaries............................. (.7) -- -- (.7)
--------- --------- ------- -----------
Net income..................................................... $ 113.3 $ 149.9 $ (86.3) $ 176.9
--------- --------- ------- -----------
--------- --------- ------- -----------
Net income per share........................................... $ 1.72
-----------
-----------
Average shares outstanding..................................... 102.8(g)
-----------
-----------
</TABLE>
- ------------------------
(a) To reflect the change in accounting practice related to Morton ASP's
recoverable design and prepro-duction costs to conform to New Autoliv
accounting practice.
97
<PAGE>
(b) To record the estimated amortization of goodwill relating to the acquisition
of Morton ASP, based upon a 40-year straight-line amortization method.
(c) To record the estimated amortization of patents and patent-supported
technology based upon lives ranging from 8 to 25 years using a straight-line
amortization method.
(d) These amounts do not reflect the estimated writeoff of the preliminary
estimated appraisal value of in-process research and development of $555.0
million. The appraisal is not yet complete and, therefore, this amount is
subject to change. There is no offsetting tax benefit associated with this
adjustment.
(e) To reflect estimated interest expense for the $750 million of debt to be
retained by Morton ASP in the Spinoff, including amortization of related
debt financing costs, and eliminate interest expense related to intercompany
indebtedness of Morton. Interest expense for the $750 million of debt to be
retained by Morton ASP was calculated assuming an interest rate of 6.5%,
which represents a conservative estimate of the interest rate to be paid on
commercial paper to be issued by ASP. A 1/8% change in the assumed interest
rate would impact annual interest expense by approximately $.9 million.
(f) To record the tax provision adjustment resulting from adjustments (a) and
(e) above.
(g) Represents the estimated outstanding shares of New Autoliv Common Stock
following the Transactions, assuming all outstanding Autoliv shares are
tendered in the Exchange Offer and ignoring the impact on outstanding shares
of New Autoliv Common Stock of cash paid to Morton shareholders in lieu of
fractional shares of New Autoliv Common Stock they would otherwise be
entitled to receive.
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<PAGE>
CAPITALIZATION OF AUTOLIV AND PRO FORMA CAPITALIZATION OF NEW AUTOLIV
The following table sets forth the capitalization of Autoliv and the pro
forma capitalization of New Autoliv at December 31, 1996, after giving effect to
the Transactions and related adjustments described in the notes to the Unaudited
Pro Forma Condensed Combined Balance Sheet of New Autoliv and Unaudited Pro
Forma Condensed Combined Statement of Income of New Autoliv included elsewhere
herein. This table should be read in conjunction with the notes referred to
above and the consolidated financial statements, including the notes thereto, of
Autoliv include elsewhere herein.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
------------------------
<S> <C> <C>
AUTOLIV NEW AUTOLIV
HISTORICAL PRO FORMA
----------- -----------
<CAPTION>
(IN MILLIONS)
<S> <C> <C>
Debt, including short-term debt.................................................... $ 74.9 $ 824.9(1)
Shareholders' equity:
Autoliv Common Stock:
Common Stock--$1.46 par value, 55.0 million shares authorized, issued and
outstanding.................................................................. 80.1
New Autoliv Common Stock:
Common Stock--$1.00 par value, 325.0 million shares authorized, 102.8 million
shares issued and outstanding................................................ -- 102.8(2)
Preferred Stock--$1.00 par value, 25.0 million shares authorized, none
issued....................................................................... -- --
Additional paid-in capital....................................................... -- 1,908.6(3)
Retained earnings (accumulated deficit) and foreign currency translation
adjustments.................................................................... 378.4 (176.6)(4)
----------- -----------
Total shareholders' equity......................................................... 458.5 1,834.8
----------- -----------
Total capitalization............................................................... $ 533.4 $ 2,659.7
----------- -----------
----------- -----------
</TABLE>
- ------------------------
(1) Includes $750.0 million of debt of Morton ASP to be incurred under the New
Credit Facility.
(2) Reflects the issuance of 47.8 million shares of New Autoliv to Morton
shareholders in the Merger and the exchange of 55.0 million New Autoliv
Securities for the outstanding shares of Autoliv in the Exchange Offer.
(3) Includes the adjustment ($25.1 million) to reflect the difference between
the par value of New Autoliv Common Stock issued in the Combination and the
par value of the outstanding Autoliv Securities and the adjustment ($1,883.5
million) to reflect the implied market valuation of the New Autoliv Common
Stock to be issued to Morton shareholders in the Merger in excess of the
book value of the assets acquired, less liabilities assumed, of Morton ASP.
(4) Amount reflects the effect of the $555.0 million one-time writeoff of
purchased in-process research and development with no resulting tax benefit.
99
<PAGE>
DESCRIPTION OF AUTOLIV
GENERAL
Autoliv, incorporated in Sweden and the parent company of an international
group (the "Autoliv Group"), is a leading developer, manufacturer and supplier
of car occupant restraint systems to the automotive industry. Starting with seat
belts in 1956, Autoliv has expanded its product lines to include seat belt
pretensioners (1989), frontal airbags (1991), side-impact airbags (1994),
steering wheels (1995) and seat subsystems (1996).
The legal entity of the current Autoliv was incorporated in 1937. Granges
Weda AB, a subsidiary of Granges AB which had manufactured, among other
products, seat belt retractors since the 1960's, acquired Autoliv in 1975. In
1980, Granges AB was purchased by Electrolux AB (together with its consolidated
subsidiaries, the "Electrolux Group") and in 1984 the name of Granges Weda AB
was changed to "Electrolux Autoliv AB." Throughout the 1980's and 1990's, the
Autoliv Group has expanded through a number of acquisitions of seat belt
manufacturers predominantly in Europe, but also in Australia and New Zealand. In
the late 1980's and in the 1990's, the Autoliv Group established a number of
joint venture operations to expand into new markets outside Europe and into new
areas of technology.
In 1994, the Electrolux Group sold its shares in Autoliv through an initial
public offering and the name of the company was changed from "Electrolux Autoliv
AB" to "Autoliv AB." As part of the initial public offering, Autoliv's shares
were quoted on the SSE and Autoliv introduced an American Depositary Share
program.
GOAL AND STRATEGY. Autoliv's goal has been to be the leading company in the
world in the development, manufacture and marketing of systems and components
for personal safety in automobiles. Autoliv has pursued this goal by focusing
on:
- technical leadership, including leadership in the area of integrated car
occupant restraint systems,
- global presence,
- cost efficiency through product redesign, increased integration and
automation, and
- reliability through high quality, delivery precision and superior service.
ORGANIZATION. Autoliv's organization is decentralized and responsibility is
delegated deep into the organization. Autoliv's head office is located in
Stockholm and employs just over 20 people.
The operations of the Autoliv Group are divided into four main areas:
account management, seat belt and airbag assembly, key components groups and
joint ventures. All companies and units have profit and cash flow
responsibility, and each reports financial results to the head office on a
monthly basis.
Account managers coordinate contacts between major customers and multiple
production and engineering facilities. Product assembly managers are responsible
for both production and sales. Autoliv's product assembly managers in Sweden,
Germany, France, Spain and the United Kingdom are responsible for a group of
facilities in their own and one or two additional countries. This structure
follows the geographical production structure of Autoliv's major customers. The
production of key components is organized into separate profit centers. With
respect to supplying the Autoliv Group, the key component groups are treated
like arm's-length suppliers that compete with external suppliers at market
prices. The Autoliv Group has established a number of joint ventures to promote
geographical expansion and technological development.
PRODUCTS
Autoliv designs, develops and manufactures car occupant restraint systems
and markets them to the world's major automobile manufacturers. Car occupant
restraint systems encompass a variety of safety
100
<PAGE>
devices, the most significant of which in the current market are seat belts and
frontal airbags, products that are designed primarily to protect car occupants
from injuries sustained in frontal impacts. Seat belts also prevent passengers
from being thrown out of cars in accidents. Autoliv also manufactures
side-impact airbags, and Autoliv has recently been awarded development contracts
for new rear-impact protection devices.
SEAT BELTS. Since their introduction in the 1950's, seat belts have
undergone significant safety and comfort improvements. Autoliv's current seat
belt restraint systems are based upon three point seat belts and comprise a
number of individual components (described below), which are often used in
combination with each other and with airbag systems according to the
specifications agreed upon with the car manufacturer. The three-point seat belt
is primarily designed to restrain the car occupant and distribute the force of a
frontal collision to the strongest parts of the body of the occupant. In most
modern cars this function is combined with a strengthened passenger compartment
and a crumple zone at the front. The principal components of the seat belts
developed, designed and manufactured by Autoliv are the retractor, the buckle,
the pretensioner, the load limiter and the height adjuster. The addition of load
limiters is a recent development. Seat belt webbing is the only major component
sourced externally by Autoliv (mainly from Van Oerle Alberton Holdings B.V., a
company in which Autoliv holds a 20% interest). Unlike airbags, seat belts also
provide protection in roll-over accidents and multiple collisions. During 1996,
Autoliv's wholly owned companies delivered more than 35 million belt systems
(1995: 34 million), almost 15 million of which were equipped with belt
pretensioners (1995: 10 million).
RETRACTORS. The retractor stores unutilized belt webbing on a spindle,
releasing the webbing when the belt is drawn out, and retracting to
eliminate slack after the belt has been fastened. The retractor mechanism is
designed to lock and prevent release of the webbing in a crash situation,
thereby restraining the car occupant.
Autoliv has developed a series of retractors incorporating design
improvements for increased safety and comfort and for reduced manufacturing
costs. One of the most significant of these improvements is the use of a
sophisticated web-lock within the retractor called the "belt grabber,"
which, in a crash, reduces both the extension of the webbing due to
stretching and the "film-spool effect," which is caused by the belt's being
yanked out when the loops of rolled-up webbing are tensioned upon impact.
BUCKLES. The buckle is comprised of a clip with a steel tongue attached
to the webbing and a mounting which is secured either to the chassis of the
car or to the seat structure. The buckle must withstand forces of up to two
tons during a crash and still be easily released even if the webbing is
under considerable tension. Autoliv supplies unique, patented buckles which
are completely "g-force insensitive," meaning that the buckle will not open
even if it is suddenly pulled in any direction by great force. This buckle
can thus be used in seat belt systems in conjunction with buckle
pretensioners, a factor which has contributed to Autoliv's leading worldwide
position as a supplier of such seat belt systems.
PRETENSIONERS. The less a car occupant is thrust forward in a collision
and the gentler the seat belt catches the occupant, the better is the chance
of the occupant's surviving a collision and of avoiding serious injuries.
Autoliv has therefore developed belt pretensioners, which are associated
with either the buckle or the retractor, whose function it is to tighten the
belt by up to six inches before a car occupant's body begins to move forward
in a collision.
Autoliv develops and manufactures both mechanical and pyrotechnic
pretensioners. In the former, a mechanical sensor triggered by the force of
a collision activates a spring attached to the buckle or retractor, thereby
tightening the belt; in the latter, an electrical sensor triggers a
pyrotechnic charge which pulls down the buckle or operates the retractor.
All sensors are carefully calibrated to be activated only after an impact of
appropriate magnitude. In 1996, approximately 80% of all new cars sold in
Europe were equipped with seat belt pretensioners in the front seats. As
almost no U.S. or
101
<PAGE>
Japanese cars currently contain such safety improvements, Autoliv believes
significant growth potential exists for its pretensioner products outside of
Europe.
LOAD LIMITERS. In 1995, Autoliv began to install advanced load limiters
or tug restraints in its seat belt systems to reduce the risk of rib
fractures and other injuries. The load limiter, which is combined with the
retractor, allows the belt to pull out slightly if the force on the rib cage
becomes excessive. Instead, the airbag is used to absorb the excess energy.
PILLAR LOOP OR D-RING. To allow the retractor to be placed at the bottom
of the B-pillar (the side pillar behind the front door) and at the same time
achieve the correct belt geometry, a pillar loop through which the webbing
can pass, is used. It is mounted on the B-pillar or directly on the height
adjuster. The loop not only allows the webbing to slide through with minimum
friction, but also enables the belt to carry the high belt loads in a crash
without rupturing the webbing.
HEIGHT ADJUSTERS. Height adjusters allow alteration of the height of the
shoulder belt, thereby increasing the effectiveness of the seat belt in a
crash situation as well as increasing the ease and comfort of use for car
occupants of above or below average height. While height adjusters are
typically mounted in the pillar behind the front door, Autoliv has developed
a number of different designs to suit the individual requirements of various
manufacturers, including a height adjuster integrated with the retractor.
Height adjusters can be either mechanical or fully automatic.
SEAT BELT BEAM. In many cars, installing a satisfactory seat belt system
for the middle rear seat is difficult. The problem is particularly acute for
hatchback- and stationwagon-type cars. To address these particular
requirements, Autoliv has developed a beam with three complete three-point
retractor belts. The beam, which is attached to the top of the rear
backrest, can absorb the energy from three adult passengers in the event of
a crash. It also reinforces the car's body and provides passengers with
side-impact protection.
INTEGRATED CHILD RESTRAINTS. Autoliv's child restraint system is
integrated into the rear seat armrest or the rear backrest and is designed
for use in conjunction with a three-point seat belt, giving protection to
children between the ages of three and 10 years.
"BELT-IN-SEAT." Autoliv has started to deliver safety belts which are
attached to the backrest of the seat and which allow the shoulder belt to
come closer to the car occupant's body. This position also allows the
shoulder belt (and not just the lap belt) to restrain an occupant in the
seat in the event of a roll-over accident. "Belt-in-seat" systems require
some modifications of traditional seat belt components--most significantly
the redesign and strengthening of the structures of most currently available
car seats. In 1996, Autoliv acquired two seat component companies in order
to be able to promote the development of "belt-in-seat" systems and other
safety systems related to seats.
FRONTAL AIRBAGS. Autoliv introduced its first airbag system in 1991, which
system was designed to meet legislative requirements in the United States.
Differences in U.S. and European legislative requirements regarding the use of
restraint systems have resulted in the development of different airbag designs
for each market. Since not all states in the United States mandate seat belt
use, and since seat belt use is not as universal as in Europe, U.S. federal
requirements focus on airbag system optimization in order to provide protection
to unbelted occupants. IT SHOULD BE EMPHASIZED THAT SEAT BELTS REMAIN THE
PRIMARY MODE OF PROTECTION AND SHOULD ALWAYS BE USED EVEN IF A VEHICLE IS
EQUIPPED WITH AN AIRBAG. Nearly all of Autoliv's competitors sell only
U.S.-sized airbags both within and outside the United States. In Western Europe,
where seat belt use is mandatory and compliance with such laws generally is
high, smaller airbags ("Eurobags") have been designed for use in combination
with seat belts. These smaller-sized airbags are designed to prevent an impact
of the occupant's head and upper body with the steering wheel or dashboard,
rather than to provide full body protection. The price of Eurobags is less than
that of U.S.-sized airbags and the safety device is lighter as well as less
bulky. The fact
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that Eurobags are smaller and that the inflator in this system contains less
propellant also makes them less "aggressive" than U.S.-sized airbags. Autoliv
introduced this "de-powered" system in 1992.
The complete airbag system developed and produced by Autoliv consists of
both the electronic control unit (including sensor) and the airbag module
(housing, gas generator (including initiator), sundry mechanical parts, textile
bag and cover for the steering wheel or dashboard panel). Autoliv has the
capability to manufacture all such components internally, with the exception of
sensors. Generally, a greater proportion of the value of the components in
Autoliv's airbags is purchased either internally or externally, as compared to
the value of the components used in Autoliv's seat belt production. Autoliv sold
more than six million airbag modules (including side-impact airbag modules) in
1996 (1995: less than five million).
BAGS. The bags are typically made of synthetic fabric such as nylon and
have vent holes to ensure deflation almost immediately following deployment.
In this way, the vent holes serve to increase the cushioning effect. The
Eurobag volume used to be 30 to 35 liters on the driver side, but is now
usually being increased to 40 to 45 liters on the driver side, and is
between 60 and 100 liters on the passenger side. The volume of U.S.-sized
airbags varies between 50 and 75 liters on the driver side and between 120
and 160 liters on the passenger side. Autoliv has developed a one-piece
woven bag mainly for its Eurobag production to reduce manufacturing costs.
Autoliv's primary supplier of nylon bags is Autoliv Textiles, which
consists of Airbags International Ltd. in Great Britain and Svensk Airbag AB
in Sweden, both wholly owned subsidiaries of Autoliv.
GAS GENERATORS AND IGNITERS. The airbag is inflated by a gas generator.
The gas generators used in most of Autoliv's airbag systems contain an
electrical igniter (or initiator), a propellant, and, in some cases, filters
to clean and cool the gas as it exits the generator and inflates the bag.
In its Eurobags, Autoliv utilizes a small gas generator called
"Euroflator" containing propellant, based on an invention of Alfred Nobel,
consisting of a nitro-cellulose and nitro-glycerin based propellant. One
generator is needed to inflate the driver-side airbag and two are required
for the passenger-side airbag. Autoliv has developed the Euroflator gas
generator in conjunction with its subsidiary Livbag S.A. ("Livbag") and its
joint venture partner Societe Nationale des Poudres et d'Explosifs SA
("S.N.P.E.") in France. Euroflator is used exclusively in Autoliv's Eurobag
system. Autoliv purchases all gas generators used in its U.S.-sized airbags
from an external supplier.
In the fall of 1996, Autoliv began producing its own solid-fueled,
non-azide inflator called the "Globoflator," which can be used in U.S.-sized
airbags. It uses a patented, environmentally friendly and easy-to-handle
composite material as propellant. The Globoflator is 35% lighter and 50%
smaller than traditional sodium azide-based gas generators. The Globoflator
will be used in driver-side airbags, where its low weight and small size are
particularly advantageous. The propellant in Globoflator will also be used
in hybrid gas generators.
Concurrently with the introduction of the Globoflator, Autoliv started
to produce its own hybrid inflator, which will be used in passenger-side
airbags and for side-impact protection systems. In a hybrid gas generator
the bag is primarily inflated by compressed gas. Autoliv's hybrid inflator
is smokeless, easy to handle and recyclable. Unlike inflators already on the
market and many traditional pyrotechnic inflators, one version called the
"Varioflator" will not have the drawback of a pressure peak immediately
following ignition. Instead, with the Varioflator, it will be possible to
control the gas flow and to ease the inflation of the bag. This will not
only allow the use of thinner and less expensive fabric in the textile bags,
but it will also reduce the risk to children, small adults and
"out-of-position" passengers of being injured in the event of their being
too close to a deploying airbag.
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SENSORS AND ELECTRONICS. Three types of sensors can be used for airbag
deployment: electronic, electromechanical and mechanical. In its frontal
airbag systems, Autoliv uses only its single-point, electronic control unit
if Autoliv is the supplier of the electronic system. All crash sensors
operate according to a similar principle: they react to a crash based
primarily on the associated change in velocity beyond certain calibrated
limits. The electronic control unit evaluates the signals from the sensor
and determines when the bag should be inflated. An electrical impulse is
then sent to the initiator which ignites the propellant in the gas
generator.
If the car has seat belts with pyrotechnic belt pretensioners, the seat
belt system can be connected to the electronic control unit of the airbag
system. The two safety systems are then integrated to give optimal
protective effect and to raise the speed threshold at which the airbag
deploys.
The connection between the electronic control unit and the gas generator
must always remain intact. In addition, the steering wheel must be capable
of being turned several revolutions without this connection being
interrupted. Autoliv has developed a special connecting coil or spool able
to withstand such strains and which ensures that the impulse from the
control unit will reach the gas generator on the driver side.
SIDE-IMPACT PROTECTION. After five years of research and development
efforts, in part together with Volvo, Autoliv began supplying the world's first
side-impact airbag in 1994. Shipments have recently commenced to Volkswagen,
where the side-impact airbags are offered on an optional basis in certain
countries for its Golf and Passat models, and to Audi for its Audi A8 model.
Within the next few years, deliveries are planned to both existing and new
Autoliv airbag customers.
The side-impact airbag provides protection to the occupant's upper body in a
side impact and keeps the occupant's body away from the point of impact. In a
side-impact airbag, inflation must occur much faster than in a frontal-impact
airbag since a side collision occurs closer to the occupant. This requirement
for high speed prompted the development of a special sensor system and special
gas generators. Autoliv's side-impact airbag has been designed to inflate within
12 milliseconds of impact (compared to approximately 40 milliseconds for
Autoliv's frontal-impact airbags).
Interest in side-impact protection is due to the fact that an estimated
one-third of all fatalities and serious injuries to car occupants are caused by
side collisions. This interest can also be explained by new laws and test
requirements. Beginning with the 1997 model year, all new cars in the United
States must be able to withstand a side collision equivalent to 30 m.p.h. with
no resulting serious injury to the occupants. There are now similar legal
requirements in Europe applicable to new models produced in model year 1999 and
later, and to all new cars produced beginning in October 2003. Several of
today's models do not meet these requirements. Consequently, within the next few
years, Autoliv expects that side-impact airbags, which cost less than half the
price of frontal airbags, are likely to become standard equipment in many new
cars.
With Autoliv's current side-impact airbags, the risk for serious chest
injuries is estimated to be reduced by more than 20% according to tests
performed by independent testing institutes. Increased head protection is also
attained due to the occupant being kept away from the intruding side of the car.
However, special equipment is required in order to obtain adequate head
protection in side collisions. Such equipment is now under development by
Autoliv. See "--Head Protection."
SENSORS. A vehicle occupant is at greatest risk of sustaining injury in
a side collision if he or she is seated on the side of impact and if the
door or side of the car is destroyed. The sensor in Autoliv's side-impact
airbag system is therefore placed close to the occupant in the seat or in
the side of the car and is activated if the speed of the impacting vehicle
is greater than 9-12 m.p.h. The sensor transmits the impulse to the gas
generator in less than five thousandths of a second.
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THORAX SIDE BAGS. The bag module in Autoliv's system is mounted in the
seat's backrest, the optimal placement since the bag then follows changes in
the position of the seat and the tilt of the backrest. Despite having a
volume of only 12 liters, the bag protects occupants sitting in a forward
position and tall persons reclining on the backrest when the seat is in the
rear position. Upon inflation, the bag covers the chest and a portion of the
occupant's abdomen. Other parts of the abdomen and the hip are protected by
collapsible material in the door. The bag is either sewn in nylon fabric by
Svensk Airbag AB or woven directly in a single piece by Airbags
International Ltd.
HEAD PROTECTION. After introducing in 1994 the world's first side-impact
airbag, Autoliv has taken the lead in another safety area: head protection
in side collisions. The need for products in this area is great, since the
head is hit in two-thirds of the serious and fatal injuries caused by side
collisions. In the United States alone, an estimated 15,000 serious or fatal
injuries are caused each year by head injuries in side collisions.
Autoliv develops mainly three different products for head protection.
The Inflatable Tubular Structure ("ITS") consists of a unique nylon tube,
which can rapidly expand to a diameter of about six inches along the side
window. The thin tube is installed in the roof above the door and is
inflated by a gas generator. The system is being developed in cooperation
with BMW and Simula, Inc. pursuant to a worldwide marketing agreement.
Another head protection product currently under development is the combined
Head & Thorax-Bag, in which an extra bag deploys from the regular
side-impact airbag that protects the chest. This product is being developed
in cooperation with other car manufacturers. The third head protection
product is the Inflatable Curtain ("IC"), which will cover, when inflated,
the entire upper part of the car's side, and which will cushion the heads of
the driver and all passengers seated next to the doors--both front and rear.
The IC also protects against occupants being ejected through the side window
(e.g., in a roll-over accident). The IC is being developed in cooperation
with both European and non-European car manufacturers.
STEERING WHEELS. Frontal airbags are capped by covers on the steering wheel
or the instrument panel. Although steering wheels and dashboards are usually
produced by other automobile component suppliers, Autoliv, as a complete airbag
system supplier, must ensure that the steering wheel and dashboard panel covers
are manufactured according to designs and specifications that permit reliable
and safe deployment of the airbag. Consequently, design modifications are made
in collaboration with Autoliv and in accordance with Autoliv's specifications.
In the fall of 1995 and the beginning of 1996, Autoliv acquired, in a
two-step transaction, 77% of the outstanding shares of Isodelta S.A., Europe's
third largest producer of automotive steering wheels. Autoliv has a call option
and is subject to a put option to purchase the remaining shares before June 30,
1999. Isodelta S.A. and Autoliv have cooperated for a period of time and, among
other things, Isodelta S.A. has been supplying steering wheel covers for some of
Autoliv's airbag modules.
Due to greater interaction with Isodelta S.A., Autoliv now has the
capability to deliver steering wheels containing pre-installed airbags to
automobile manufacturers. This is consistent with the trend in the automobile
industry towards "macro component supply," where a small number of sub-suppliers
have responsibility for supplying entire systems.
Autoliv's cooperation with Isodelta S.A. also enables the introduction of
Isodelta S.A.'s products to new customers and new markets through Autoliv's
worldwide organization. In 1996, the world market for automotive steering wheels
is estimated to have been at least US$ 1.0 billion. Growth potential exists for
sales of advanced steering wheels with such added features as cruise control,
radio controls and cellular telephone controls.
Isodelta S.A. primarily produces automotive steering wheels, but the
company's products also include steering wheel covers for airbag modules, tools
and certain gear shift lever products.
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SEAT SUB-SYSTEMS. During 1996, Autoliv completed acquisitions of the
Swedish seat component makers Autoliv-Hammarverken AB (formerly Hammarverken i
Vaxjo AB) and Autoliv Mekan AB (formerly Hassleholm Automotive AB), which are
now part of a newly formed business unit, Autoliv Seat Sub-Systems. These
companies primarily produce seat frames, backrests, seat adjusting tracks and
other load-bearing components for automotive seats, but are also developing knee
protection devices. Autoliv concentrates on safety-enhancing components, and
does not plan to manufacture complete seats.
The car seats of the future will be an even more important part of a car's
safety system than they are today. Seat belts, for example, will in many cars be
attached to the backrest instead of the side of the vehicle. This positioning
should provide the safety advantage of bringing the seat belt even closer to the
body. However, many of today's car seats and sliding rails must be reinforced to
allow attachment of the seat belt to the backrest.
Prior to the acquisition of the seat component companies, Autoliv had
already developed a patented, stronger recliner for the backrest. Shipments of
this recliner or backrest adjustment began during the fall of 1995.
MANUFACTURING AND PRODUCTION
Including joint venture operations, Autoliv has 45 wholly or partially owned
production facilities located in 23 countries, consisting of both component
factories and assembly factories. The component factories manufacture gas
generators, initiators, textile airbags, pressed steel parts, springs, moulded
plastic parts, and over-moulded steel parts used in seat belt and airbag
assembly, seat subsystems, and steering wheels. In addition, electronics are
produced at the production facilities of the Autoliv Group's joint venture
operations. The assembly factories source components from a number of parties,
including Autoliv's own component factories, and assemble complete restraint
systems for "just-in-time" delivery to customers.
The Autoliv Group's "just-in-time" delivery system has been designed to
accommodate the specific requirements of each customer for low levels of
inventory and rapid stock delivery service. "Just-in-time" deliveries turn
manufacturing close to the customers into an important competitive advantage.
The fact that the major automobile manufacturers are continually expanding
production activities into more countries increases the importance to suppliers
of having production capacity in several countries. Autoliv currently operates
production facilities for car safety products in more countries than its
competitors.
Automobile manufacturers are seeking competitive quotes from suppliers and
demanded significant staged price reductions over a product's life cycle. In
line with its customers' purchasing strategies, Autoliv has implemented
cost-saving programs which are reducing Autoliv's own material, production and
administrative costs.
The Autoliv Group's wholly owned component factories are located at
Caudebec-les-Elbeuf and Pont-des-Buis (France), Norderstedt (Germany), Turin
(Italy), Chichester, Congleton and Milton Keynes (United Kingdom), and
Hassleholm, Kungalv, Vargarda and Vaxjo (Sweden). Autoliv also has joint
ventures producing key components.
The Autoliv Group's wholly owned assembly factories are located in Melbourne
(Australia), Gournay-en-Bray (France), Dachau, Dobeln and Elmshorn (Germany),
Sopron (Hungary), Havant (United Kingdom), Landgraaf (the Netherlands), Auckland
(New Zealand), Barcelona and Valencia (Spain), Vargarda (Sweden), Indianapolis
(United States) and Toluca (Mexico).
The Autoliv Group's steering wheel production facilities are located in
Poitiers, France.
For a list of Autoliv's production facilities, see Appendix E to this Proxy
Statement/Prospectus/Exchange Offer.
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If the supply of raw materials and components is not disrupted, the Autoliv
Group's assembly operations are not generally constrained by capacity
considerations. Autoliv can adjust capacity in response to changes in demand
within a few weeks by the addition or removal of standardized production and
assembly lines, while there is typically a three-year time span before a new
contract results in actual sales and shipments. Most of the Autoliv Group's
assembly factories can make sufficient space available to accommodate additional
production lines to satisfy foreseeable increases in capacity.
The products manufactured by the Autoliv Group's assembly factories in 1996
consisted of more than 35 million complete seat belt systems (almost 15 million
of which were fitted with pretensioners), and more than 6 million airbag
modules.
QUALITY MANAGEMENT. Autoliv's products face extremely high reliability
requirements. In order to meet high customer quality requirements and internal
production efficiency requirements, Autoliv has for several years operated an
advanced quality management system. The system is a zero defect rate system and
is based upon preventive principles involving the measurement of a number of
quality indicators. By reference to best practice within its industry segment,
Autoliv had developed quality "benchmarks" applied throughout the Autoliv Group
and places great emphasis on continually improving the quality of its products,
customer service and production processes.
Autoliv's quality management system meets the strict quality requirements
demanded by Autoliv's customers, all of whom have approved the system and many
of whom have formally acknowledged the high standards attained by the Autoliv
Group. All wholly owned Autoliv companies that deliver products directly to car
manufacturers, with the exception of one company which is expected to be
certified later this year, are certified according to ISO 9000 (as defined
below) requirements. Most of Autoliv's joint venture companies are also ISO
9000-certified, with the remaining ones expected to be certified during 1997.
"ISO 9000," a quality assurance management system endorsed by European nations
and many other countries, is a checklist of functions, policies and rules
considered necessary to assure the quality of a company's products and services.
ISO 9000's standards were deliberately designed to be generic so that they can
be used by manufacturing and service industries worldwide.
Two Autoliv subsidiaries have already received QS 9000 certification, a
quality standard stipulated by U.S. car manufacturers ("QS 9000"), and Autoliv's
other major assembly companies are in the process of being QS 9000-certified. QS
9000 applies to all suppliers, internal and external, who provide production and
service parts and materials to Chrysler, Ford and General Motors.
PURCHASING COORDINATION. Purchasing is, to a large extent, centralized. The
purchasing process involves "Group Lead Buyers," who are assigned to each of
Autoliv's major suppliers and/or major commodities. These Group Lead Buyers are
responsible for negotiating the purchasing requirements of specific types of
components for the entire Autoliv Group. In addition, major products are
coordinated by "Purchasing and Tool Coordination Teams." Product development
projects have increasingly involved the selection of certain suppliers to
participate in the engineering stages of product development in order to improve
both processes and products. In order to aggregate purchase volumes, reduce
purchasing costs and allow closer collaboration in product development, the
Autoliv Group has gradually reduced the total number of its suppliers.
AUTOLIV AUTOMATION. Achieving low production costs is critical for
suppliers to the world's automotive industry. Autoliv's manufacturing is often
highly automated, and allows for low-cost production in the high-wage countries
where the largest customers are located. In addition, Autoliv has been
implementing a program to standardize its automated production lines across all
factory sites.
Autoliv Automation, a division of the Autoliv Group, oversees the
development and manufacturing of computerized assembly lines and other automatic
production equipment. Autoliv Automation exclusively
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supplies Autoliv's subsidiaries and joint ventures and is situated at the
Gournay-en-Bray production facility in France. Autoliv Automation has
approximately 80 employees.
MAJOR COMPONENTS PRODUCTION UNITS--INTEGRATION. For several years, Autoliv
has continually increased the level of backward vertical integration of its
production activities. This integration helps Autoliv maintain low production
costs and gives Autoliv direct control and experience with the underlying
product phases. Augmenting self-sufficiency with respect to important components
is one of Autoliv's strategic goals.
Autoliv has achieved increased vertical integration primarily by
establishing subsidiaries or by combining with other companies through joint
ventures. In order to enhance vertical integration, the production of key
components has been organized into separate profit centers. Autoliv Steel &
Plastics and Autoliv Textiles, both divisions of Autoliv, were formed during
1995. During 1996, Autoliv formed Autoliv Electronics and the Autoliv Inflators
and Autoliv Seat Sub-Systems divisions.
AUTOLIV STEEL & PLASTICS. Autoliv Steel & Plastics had total sales in
1996 of MSEK 700, made mainly to companies in the Autoliv Group. The steel
and plastics companies employ 800 individuals. The business consists of
Autoliv Composants SNC in France, Stakupress GmbH in Germany, the Precision
Components division and Tensator Ltd. in Great Britain, and Cosma S.p.A. in
Italy. Autoliv Composants SNC manufactures metal components for seat belts,
Stakupress GmbH and the Precision Components division manufacture a variety
of metal and plastic components while Tensator Ltd. specializes in retractor
springs for seat belt retractors and height adjusters. Cosma S.p.A.
manufactures plastic components for seat belt systems.
AUTOLIV TEXTILES. Autoliv Textiles had total sales in 1996 of MSEK 600,
all of which were internal. Autoliv Textiles has 800 employees and comprises
Airbags International in the United Kingdom and Svensk Airbag AB in Sweden.
Airbags International Ltd. was started as a joint venture in 1989 to build
production capacity to meet the rapidly growing need for airbags. Airbags
International Ltd. became a wholly owned subsidiary of Autoliv during 1994.
The unit also includes Svensk Airbag AB, which was acquired by Autoliv at
the end of 1995. Svensk Airbag AB supplies most of Autoliv's sewn nylon
airbags, while Airbags International Ltd. has developed a unique, patented,
cost-efficient technology which allows the textile bags to be manufactured
directly from the yarn on the loom.
AUTOLIV ELECTRONICS. Autoliv Electronics had total sales in 1996 of MSEK
800, all of which were made to Autoliv companies, and just over 400
employees. Although early in its development Autoliv developed its own
electronics to control airbags, Autoliv contracted out manufacturing since
it lacked electronics production capabilities. Autoliv's first contract
manufacturer was the former Luxor in Motala, Sweden, which later became
Nokia Audio & Electronics AB. At the end of 1995, Nokia O.Y. decided to
transfer most of this business to a separate entity, Autoliv Nokia AB, in
which Autoliv acquired a 50% interest during 1996. Autoliv had already
formed Sagem-Autoliv SNC in France in 1994 together with Societe
d'Applications Generales d'Electricite et de Mecanique ("Sagem"), one of
Europe's leading electronics companies. The new company, in which Autoliv
owns 50 percent of the shares, has become one of Autoliv's most important
suppliers of electronics. Autoliv Electronics AB develops products that will
partially replace electronics currently purchased from external suppliers,
which will help further increase Autoliv's level of integration.
AUTOLIV INFLATORS. Autoliv Inflators, which consists of Livbag,
Autoflator and N.C.S., has almost 500 employees and had sales of
approximately MSEK 1,100 in 1996, most of which were made to companies in
the Autoliv Group. Livbag was begun in 1990 as a joint venture with
S.N.P.E., a leading French manufacturer of explosives. Livbag, Autoliv's
source for pyrotechnics, has developed the gas generator used in Autoliv's
Eurobag system and side-impact airbag system as well as the micro gas
generator used in the pyrotechnic seat belt pretensioners. Livbag has also
started to produce a new advanced, solid-fueled, non-azide inflator, the
Globoflator, mainly for U.S.-sized airbag systems.
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Livbag is currently 51% owned by Autoliv. Autoliv has an option to increase
its shareholding to 66% and S.N.P.E. has a mirror put option. Autoflator AB
in Sweden, which was established by Autoliv in 1994 and transferred in 1996
to Livbag, produces cold gas generators. During 1996, Autoflator AB began
manufacturing its own hybrid gas generator, which will partially replace gas
generators currently purchased from outside suppliers. Autoliv Inflators
also consists of the French company N.C.S., which Livbag acquired in the
fall of 1996. N.C.S. is a key supplier to Livbag and a leading producer of
initiators for gas generators. The company offers both glass-to-metal and
plastic sealed initiators.
AUTOLIV SEAT SUB-SYSTEMS. Autoliv Seat Sub-Systems consists of the
Swedish seat component makers Autoliv-Hammarverken and Autoliv Mekan AB,
which together had approximately 470 employees in 1996 and MSEK 560 in
sales, all of which were to external customers. These companies primarily
produce seat frames, backrests, seat adjusting tracks and other load-bearing
components for automotive seats. The product lines also include knee
collision protection devices. Autoliv's interest in such companies relates
primarily to the safety-enhancing components and not to the manufacturing of
complete seats.
RESEARCH, DEVELOPMENT AND ENGINEERING
Autoliv is continually investing in research, development and engineering to
maintain and strengthen its position globally for car occupant restraint
systems. Research activities are concentrated in the Autoliv Group's research
center in Vargarda, Sweden, while new product development takes place at the
Autoliv Group's technical centers located in Gournay-en-Bray, France; Dachau,
Germany; Havant, United Kingdom and in Detroit in the United States; as well as
in Vargarda. The Autoliv Group also has crash laboratories in Barcelona, Spain;
Melbourne, Australia; and Hamburg, Germany. Engineering is undertaken at all of
the Autoliv Group's production sites and within its joint venture operations in
close cooperation with each site's local customers and utilizing the resources
of the technical centers when necessary.
Each of the technical centers is equipped with an advanced crash laboratory
which possesses crash tracks capable of simulating the crash environment in
dynamic tests at speeds of up to 50 m.p.h. with complete automobiles weighing up
to two tons, or with crash sleds. In Autoliv's new crash facilities in Sweden
and the United States, full scale tests can also be performed with complete
trucks weighing up to 10 tons. These laboratories permit reliable data to be
gathered from repetitive tests. In addition, mathematical simulations of
collisions are performed in parallel with the dynamic tests. With 12 crash
tracks, including eight tracks for full-scale tests with complete automobiles,
Autoliv has more crash test resources than any other automotive safety company.
Autoliv's customers make considerable use of both the test facilities and
Autoliv's specialists located at these facilities. The proximity of Autoliv's
development centers to its most important customers reflects Autoliv's strategy
to ensure its position as the customers' specialist and development partner for
auto safety concerns.
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TECHNICAL CENTERS AND CRASH LABORATORIES
<TABLE>
<CAPTION>
LOCATION FUNCTION
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Autoliv Research, Vargarda (Sweden) Research center
Autoliv Safety Center, Vargarda (Sweden) Technical center for full-scale tests, roll-overs, etc.
Autoliv Germany, Dachau Technical center with full-scale test laboratory
Autoliv France, Gournay-en-Bray Technical center with full-scale test laboratory
Autoliv UK, Havant Technical center with full-scale test laboratory
Autoliv North America, Detroit Technical center with full-scale test laboratory
Autoliv Australia, Melbourne Full-scale test laboratory
Autoliv Spain, Barcelona Full-scale test laboratory
Autoliv Germany, Hamburg Full-scale test laboratory
</TABLE>
Autoliv's research, development and engineering expenses in 1996 were
approximately 6% of 1996 net sales (1995: 6%). In total, research, development
and engineering activities employ approximately 1,100 people.
RESEARCH. Autoliv is actively engaged in the search for new systems and
improved methods to protect car occupants from injury. Autoliv's research is
conducted in consultation with the Autoliv Technical Advisory Board, which
consists of internationally recognized scientists in the fields of traffic
safety and biomechanical research, as well as with the safety design engineers
of major automobile manufacturers. Autoliv's research and development is based
on Autoliv's own tests and trials as well as on injury statistics and general
collision data from, for example, insurance companies. Reports from independent
researchers at universities and technical institutes provide other important
sources of information.
Autoliv's research resources have identified and are focusing on the
following five principal areas of new restraint and protection systems: seat
belt systems, frontal airbag systems, side-impact protection devices,
rear-impact protection devices and roll-over protection.
SEAT BELT SYSTEMS. Consistent with Autoliv's strategy to continually
upgrade and improve its existing products in order to maintain its
leadership in seat belt technologies, Autoliv has continually worked to make
its seat belt systems more efficient, more comfortable, lighter, less bulky
and more cost-efficient. In this regard, Autoliv is currently developing the
next generation of load limiters, which will be adaptive so as to limit the
load on an occupant's chest depending on the crash severity, the occupant's
weight and other parameters. In addition, at the beginning of 1997, Autoliv
began to produce the next generation of pretensioners, which are smaller and
have fewer components and a more simplified design than previous models.
Also, as part of its cost-reduction program, Autoliv is developing a new
retractor which is expected to be introduced later in 1997.
FRONTAL AIRBAG SYSTEMS. Autoliv will be able to draw on the in-house
expertise of its key component groups Autoliv Electronics, Autoliv
Inflators, Autoliv Textiles and Autoliv Steel and Plastics to develop the
next generation of airbag systems. Airbag systems research and development
is mainly focused in two areas: the "Gentle Bag" and the "Adaptive Bag."
The goal of the Gentle Bag project is to make the bag less aggressive
during deployment and to reduce the risk of injury to occupants who are
sitting close to the steering wheel or dashboard. The project incorporates
an extensive re-design of the current airbag systems, from the cover, which
will open at a lower bag pressure, to the design of the textile bag itself,
to the inflation process, which will be progressive and follow an S-curve,
providing for a minimum level of release of gas before the bag emerges from
the cover followed by increased gas flow as the bag deploys.
With the introduction of the Varioflator, Autoliv can offer an S-curve
inflator for the passenger side, where the need for such gas generators is
greatest. For the driver side, Autoliv's inflator
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company, Livbag, has likewise developed a "dual-stage" inflator, which uses
two pyrotechnic charges to produce an S-curve inflation.
Autoliv's other major development focus is adaptive airbag systems. The
goal of these Adaptive Bag airbag systems is to make it possible to adjust
the inflation of the airbag for, among other things, the severity of the
crash, the weight of the occupant and the characteristics of the car's seat
belt system. The system is also expected to be able to determine if the
occupant is belted and if there is an occupant -- or a child seat--in the
front passenger seat. These adaptive systems will require new electronic
sensors, as well as more intelligent electronic control units.
In parallel with these two major development projects, Autoliv is
continuously endeavoring to develop smaller, lighter, more environmentally
friendly and more cost-efficient airbag systems.
SIDE-IMPACT PROTECTION DEVICES. The development of the market for
side-impact protection systems in both North America and Europe is primarily
driven by customer demand for improved safety features. In response, Autoliv
is conducting research into a range of side-impact protection devices,
including research relating to airbags mounted in the seat or the car door
and research relating to head protection devices. Although the technology in
these areas is being developed rapidly, the designs used are often more
complex than those for frontal impacts due to the much faster response times
required. The most important development projects related to side-impact
protection are the ITS, the Head & Thorax-Bag and the IC, which have been
described more extensively above.
REAR-IMPACT PROTECTION DEVICES. Although rear impacts result in a much
lower risk of fatal injury than frontal or side impacts, occupants can incur
long-term or permanent disabilities from relatively minor impacts due to
damage to the neck arising from a sharp backwards rotation of the head,
known as the "whiplash effect." Autoliv has developed new systems which are
considered to be effective for minimizing such injuries. Automobile
manufacturers have awarded Autoliv development contracts for these systems.
Due to the potential to reduce the large number of long-term injuries,
Autoliv believes the market potential for its whiplash protection systems to
be significant.
ROLL-OVER PROTECTION. Although seat belts are designed to restrain car
occupants in their seats, currently available safety restraint systems
provide limited protection in a roll-over situation. Autoliv is developing
restraint and protective devices, including the IC, that will improve safety
in such accidents.
OTHER. Autoliv is conducting research aimed at developing "Safety
Systems Controls," coordinating the deployment of all restraint devices,
including both seat belts and various airbags. Over the long term, Autoliv
anticipates that automobile manufacturers will increasingly require occupant
restraint systems to be integrated with other major components of the
vehicle, thereby reducing the assembly time and production costs for such
manufacturers. An example might include a "safety seat" with a belt-in-seat
system, a side-impact airbag system, a whiplash protection system and other
restraint systems supplied together as a macro component. The driver-side
airbag will be designed as an OPAS (one-piece-airbag-steering-wheel) in a
similar fashion. Autoliv's in-house expertise in these areas well positions
Autoliv to become a leading developer of these macro components.
PRODUCT DEVELOPMENT. Autoliv's product development program is performed
at Autoliv's technical centers in Sweden, Germany, France, the United
Kingdom and the United States, with each center focusing on specific product
ranges. Through its development program, Autoliv aims to continuously
upgrade the effectiveness of its restraint systems, reduce the costs of
manufacturing and materials used, and thereby improve Autoliv's competitive
position.
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Autoliv's product development focus in each country is as follows:
<TABLE>
<CAPTION>
SWEDEN GERMANY FRANCE UK U.S.
- ---------------------- ------------------- ---------------------- ----------------------- ----------------
<S> <C> <C> <C> <C>
U.S.-sized airbags Eurobags Pyrotechnic buckle Height adjusters Belt-in-seat
Airbag covers Head protection pretensioners Roll-over protection retractors
Gentle Bags New retractors Gas generators Gentle Bag covers Gentle Bags
Electronics in Retractor Adaptive Bags Adaptive Bags
adaptive airbags pretensioners Airbag electronics
Whiplash Integrated steering
protection wheels
Integrated child
restraints
</TABLE>
ENGINEERING. Engineering encompasses the process of designing and adapting
the restraint system to meet customers' specific requirements for product
performance, as well as the integration of the system with the automobile design
and production process. In addition, stringent testing and consequential
modification to the restraint system are required to ensure that the system
performs according to the specified requirements when fitted into a complete
automobile, a process known as "product homologation." This process is conducted
in close cooperation with customers, both during the development phase of a new
vehicle model and, later, in the form of revisions and upgrades to the restraint
system or the car model during its production life.
PATENTS, TRADEMARKS AND OTHER INTELLECTUAL PROPERTY RIGHTS. Autoliv
protects many of its innovations with patents, and vigorously protects and
defends its patents, trademarks and know-how against infringement and
unauthorized use. At present, Autoliv holds more than 1,300 patents covering a
large number of innovations and product ideas, mainly in the fields of seat belt
and airbag technologies. In addition, Autoliv utilizes, and has access to, the
patents of Autoliv's joint ventures and joint venture partners.
These patents expire on various dates during the period 1997 to 2016. The
expiration of any single patent is not expected to have a material adverse
effect on Autoliv's financial position.
JOINT VENTURES
An important element of the Autoliv Group's strategy has been to establish
joint ventures to promote the Autoliv Group's geographical expansion and
technological development, as described below.
Total sales of the Autoliv Group's joint venture operations to outside
customers aggregated to approximately MSEK 1,240 in 1996 (1995: approximately
MSEK 1,500). The reduction in sales is due to the fact that some joint ventures
became subsidiaries during 1996. These joint venture operations are accounted
for according to the equity method.
GEOGRAPHICAL EXPANSION. In order to expand into new markets, such as
Argentina, China, India, Indonesia, Malaysia, the Philippines, Taiwan, Thailand
and Turkey, Autoliv has established joint ventures with local partners in order
to gain assistance in marketing Autoliv's full product line to local automobile
manufacturers. These automobile manufacturers frequently belong to the same
automobile manufacturing groups as Autoliv's customers in Europe. Autoliv
typically contributes its design and production knowledge to the joint venture,
with the local partner providing sales support and manufacturing facilities.
Several of these local partners manufacture and sell standardized seat belt
systems, but will, through the joint venture with Autoliv, be able to upgrade
their product range to include pretensioners, airbags and other technological
improvements upon their customers' demand. In addition to joint ventures
established in emerging markets, Autoliv has, in certain instances, established
joint ventures in markets such as France and South Africa, either to strengthen
its sales position or to gain access to the market.
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<PAGE>
TECHNOLOGICAL DEVELOPMENT. Technological developments in airbag restraint
systems have forced Autoliv to become familiar with and enter into new areas of
technology such as pyrotechnics, electronics and fabric weaving techniques used
in airbag production. In order to compete effectively as a system supplier,
Autoliv recognizes that it will increasingly need to influence the direction of
research in these areas to meet its own customers' requirements and to secure
availability of technological advances, rather than having to rely on suppliers
for state-of-the-art technology. Consequently, Autoliv has established joint
ventures with partners that contribute to Autoliv's expertise in the areas of
pyrotechnics and electronics. These joint ventures include Autoliv Nokia AB and
Sagem-Autoliv SNC. See "--Manufacturing and Production--Major Components
Production Units."
SUMMARY OF JOINT VENTURES
<TABLE>
<CAPTION>
COUNTRY PRODUCTION FACILITY PARTNER YEAR SIGNED OWNERSHIP
- ------------------- ------------------------------------------- ---------------------- ------------- -----------
<S> <C> <C> <C> <C>
Argentina Autoliv Slowik, Buenos Aires Slowik EMM 1995 50%
China CHA, Changchun NHAEF(1) and Changchun 1994 30%
Automobile Gaskets
Factory
NHA, Nanjing NHAEF(1) 1989 50%
France EAK, Mulhouse ECIA 1990 49%
Sagem-Autoliv, Rouen Sagem 1994 50%
India RHW-Autoliv, Bangalore RHW India Ltd. 1991 50%
Indonesia Autoliv Indonesia, Jakarta Bimantara Cakra Nusa 1995 50%
Malaysia Autobelt, Kuala Lumpur Auto-industries 1994 30%
Airbag Systems Malaysia, Auto-belt Sdn. Bhd 1995 25%
Kuala Lumpur
Philippines Autoliv QB, Manila Qualibrand 1995 30%(2)
South Africa Autoflug, Johannesburg Automotive 1991 26%
Manufacturing
Investments Ltd.
Sweden Autoliv Nokia, Motala Nokia Audio & 1995 50%
Electronics
Taiwan Mei-An Autoliv, Taipei Holmsgreens Holdings 1992 59%(3)
Thailand Autoliv Thailand, Bangkok Thai Rung Union Car 1995 50%
Turkey Autoliv Cankor, Istanbul Mr. Necip Alaca 1993 50%
</TABLE>
- ------------------------
(1) Nanjing Hongguang Airborne Equipment factory.
(2) Autoliv's joint venture in Malaysia, Autobelt Sdn. Bhd, also holds 30%.
(3) Autoliv holds a 59% interest in the capital but does not consolidate because
it controls only 50% of the voting power.
MARKETS
The market for car occupant restraint systems first developed in the 1950's
in response to the high number of deaths and personal injuries suffered by car
occupants in traffic accidents. Research has indicated that since seat belts in
front seats were first introduced, they have contributed to a dramatic reduction
in fatalities and serious injuries in traffic accidents.
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Despite the improvements made over the last 30 years in areas such as car
design and the development of advanced car occupant restraint systems, estimates
indicate that each year car accidents still cause approximately 250,000 deaths
and 2.5 million injuries to car occupants worldwide. Legislation requiring the
installation of car restraint systems has been adopted in many jurisdictions. In
addition, car owners are becoming increasingly aware of the benefits of car
occupant restraint systems, a fact that has become an important marketing
consideration for a number of automobile manufacturers. These trends continue to
provide strength to the development and growth of the market for car occupant
restraint systems.
No official statistical data exist on the market for car occupant restraint
systems. According to Autoliv's estimates, for the calendar year 1996, global
sales were close to US$ 10 billion for these systems. Market growth in 1996 is
estimated to have been approximately 15%. Growth is generally higher for airbags
than for seat belts. Autoliv estimates that close to 55 million frontal airbags
and approximately 2 million side-impact airbags were sold in 1996 and those
volumes are expected to increase significantly by the year 2000.
Europe accounts for approximately 90% of Autoliv's sales. Autoliv's most
important markets are Germany, France, the United Kingdom, Spain, the Benelux
countries and Sweden.
<TABLE>
<CAPTION>
PRODUCTS
1996 CONSOLIDATED SALES -------------------------------------
BY REGION(1) REGION AIRBAGS(2) SEAT BELTS(3) TOTAL
- --------------------------------------------- --------- ----------- ------------- ---------
<S> <C> <C> <C> <C>
Europe....................................... 89% 50% 50% 100%
North America................................ 5% 0% 100% 100%
Rest of the World............................ 6% 30% 70% 100%
Total........................................ 100% 47% 53% 100%
</TABLE>
- ------------------------
(1) Excludes sales from joint ventures.
(2) Includes steering wheels.
(3) Includes seat components.
THE EUROPEAN MARKET. During the 1970's and 1980's, legislation requiring
the installation and use of front seat belts was passed in most countries in
Europe and, more recently, legislation requiring the installation and use of
seat belts in the rear seat has been passed in most of these countries. Since
front and rear seat belts now are installed in nearly all new car models, the
market for seat belts in Europe can be characterized as mature, with overall
unit sales largely determined by the level of vehicle production. However,
recent technological developments in seat belt design, such as the introduction
of new generations of retractors, mechanical and pyrotechnic pretensioners, as
well as load limiters, have significantly improved the effectiveness of seat
belt systems and above average market growth for these innovative designs has
been possible during their period of introduction. Autoliv estimates that
retractors (of various kinds) are approaching 100% penetration levels in new car
models in industrialized countries, but believes that there is still growth
potential for pretensioners and load limiters.
Within Europe, the use of seat belts is generally high since their
installation and use have been mandatory for a number of years. Consequently,
there has been less of a requirement within Europe compared, for example, to the
United States for, or promotion of, airbags to minimize the effects of serious
injuries. There is no legislation in Europe requiring installation of airbags in
cars. However, the additional level of protection achieved from the installation
of airbag systems as a supplement to the seat belt system has resulted in the
introduction of airbags over the last few years in a growing number of European
car models in response to customer demand. The installation rate in Europe has
increased from almost zero in 1990 to an estimated level of two new cars out of
three being equipped with a driver-side airbag and close to every second new car
with a passenger-side airbag in 1996. There is, consequently, potential for
further growth of the airbag market in Europe.
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<PAGE>
THE U.S. MARKET. Legislation regarding car occupant restraint systems in
the United States has differed from that in Europe. In 1984, federal legislation
was passed that required passive restraint devices to be installed on the driver
side in new passenger car models over the period 1987 to 1990. Passive restraint
devices typically consist of either airbags or motorized (or otherwise
automatically) fastened seat belt systems. Two further legislative actions have
influenced the more rapid development of the airbag market in the United States.
In 1991, a federal law, the Intermodal Surface Transportation Efficiency Act,
was passed, requiring, among other things, that all passenger cars manufactured
from and after September 1, 1997, and all light vehicles manufactured from and
after September 1, 1998, provide as optional equipment both driver-side and
passenger-side airbags. In 1993 the law was amended to make these installations
mandatory. For a discussion of recent legislative developments in the United
States, see "Risk Factors--Certain Regulatory Matters and Developments."
This legislative program, combined with an increase in demand for airbags
driven by growing awareness of their effectiveness in reducing injuries, has
resulted in a rapid increase in penetration of the airbag market. For the 1997
model year, the penetration rate is approaching 100% for driver-side airbags in
new light vehicles while more than 80% of all new light vehicles are expected to
have dual airbags, compared to 20% and 1%, respectively, in 1990. The potential
for growth in the U.S. market for airbags is, consequently, lower than in other
countries.
As in Europe, the market for seat belts in the United States is
characterized as mature. The seat belt market has not, however, developed as
quickly as in Europe, and thus there is still significant potential for
pretensioners and other seat belt related new products.
OTHER PARTS OF THE WORLD. In Australia, New Zealand, Japan and South Korea,
the development of the market for seat belts and airbags has followed the
European pattern due to similarities in the content and timing of applicable
legislation. However, the rate of installation of airbags in these countries is
lower than in Europe and thus may offer the potential for higher growth.
Within the emerging markets, the seat belt market is expected to exhibit
stronger growth than in Europe or the United States, reflecting increased
automobile production in these countries and rapid movement towards western
safety standards for new cars, many of which are exported to the United States,
Europe or Japan. Consequently, the demand in such emerging markets for advanced
seat belt systems could grow, and customers in such markets have begun to demand
frontal and side-impact airbags.
CUSTOMERS
Autoliv's customers are the world's major automobile manufacturers. In
Europe, Autoliv supplies seat belts to almost all of the automobile
manufacturers, including Audi, BMW, Ford, Mercedes-Benz, Mitsubishi, Nissan,
Opel, Peugeot and Citroen, Renault, Rover, Saab, Seat, Suzuki, Volkswagen and
Volvo. Significant seat belt customers outside Europe include Chrysler, Ford,
General Motors, Honda, Isuzu, Maruti, Mazda, Mitsubishi, Nissan, Suzuki and
Toyota. Autoliv currently supplies airbags to Audi, BMW, Daewoo, Ford, Hyundai,
Isuzu, Mitsubishi, Nissan, Peugeot and Citroen, Proton, Renault, Rover, Saab,
Subaru, Volkswagen and Volvo. Combined sales to Autoliv's seven largest
customers represented approximately 70% of total fiscal 1996 sales. The sales to
each customer are allocated among a number of contracts (typically one contract
per car model) with varying duration.
Due to the importance of each major customer, Autoliv has concentrated on
developing long-term relationships founded on close collaboration between its
engineering and design departments and those of its customers. During a new car
model's development period, which can last for a number of years, Autoliv
conducts the design and testing of the occupant restraint system in accordance
with the automobile manufacturer's specifications. In doing so, Autoliv aims to
become one of the principal suppliers of car occupant restraint systems for a
particular model.
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<PAGE>
Customers for Autoliv's steering wheel products include Renault, Volvo,
Peugeot and Citroen, Saab and Volkswagen. Important customers for Autoliv's seat
components are the Swedish operations of the American company Lear Corporation
and the Belgian company ECA, which use the components in car seats for Volvo.
Delivery contracts generally are divided among the different car models of a
particular customer and each contract usually covers the entire production of a
specific model. Autoliv typically supplies between 25% and 75% of its customers'
purchasing requirements for car occupant restraint systems. However, in some
cases, Autoliv is the customer's exclusive supplier of car occupant restraint
systems.
COMPETITION
The market for car occupant safety products is characterized by strong
competition among suppliers. High quality, innovative products, delivery
precision, service and price are all important competitive tools. It has become
increasingly important for a supplier to provide integrated safety systems in
order to maintain a strong market position. Integrated systems can include seat
belts, seat belt pretensioners, frontal and side-impact airbags and
rear-protection devices, all controlled and activated by the same electronic
sensor system.
In Europe, Autoliv is a leading manufacturer and supplier of seat belts and
airbags, accounting for approximately 50% of seat belt sales and close to 40% of
airbag module sales. Autoliv estimates that its shares of total world sales for
seat belts and airbag modules are greater than 25% and approximately 12%,
respectively. For car occupant restraint products as a whole, Autoliv estimates
that it accounts for European sales and worldwide sales of close to 45% and 20%,
respectively. These estimated market shares include sales made through Autoliv's
joint venture companies.
Autoliv's primary competitors include major manufacturing groups such as the
U.S. companies TRW Inc. and AlliedSignal Inc. ("AlliedSignal") and the Japanese
company Takata Corporation, all of which supply both seat belts and airbags, and
Morton. TRW Inc. is estimated to be larger than Autoliv, while Takata
Corporation and Morton are about the same size as Autoliv in terms of sales.
Other significant competitors, mainly in the European market for steering wheels
and airbags, are the German companies Petri A.G. and Magna Safety Technologies
("MST"), a division of Magna International Inc., TRW Inc. has recently announced
its intention to acquire 80% of MST from Magna International, Inc.
EMPLOYEES
During the years ended December 31, 1996, 1995 and 1994, Autoliv had an
average of 8,662, 6,093 and 5,304 employees, respectively. For further
information on Autoliv's employees, see Note 13 of the Notes to Autoliv's
Consolidated Financial Statements included in this Proxy
Statement/Prospectus/Exchange Offer.
The majority of Autoliv's employees in Sweden are unionized. The principal
unions to which Autoliv's Swedish employees belong are the Swedish Metal Workers
Union, the Swedish Union of Clerical and Technical Employees in Industry, the
Swedish Foremen and Supervisors' Association and the Swedish Association of
Graduated Engineers. Important unions to which some of Autoliv's employees in
countries other than Sweden belong are IG Metall and Textil und Bekleidung in
Germany, Amalgamated Engineering and Electrical Union in the United Kingdom, the
Metal Workers Union in Australia, the Union of Needletraders and Industrial and
Textile Employees in the United States, Confederation Generale des Travaileurs
in France and Federacion Minerometalurgica, Union General de Trabajadores and
Comisiones Obreras in Spain.
In Sweden, wages and general working conditions are typically the subject of
centrally negotiated collective bargaining agreements. Within the limits
established by these agreements, Autoliv negotiates directly with the local
unions representing the employees. In Australia, France and Spain, wages,
salaries and general working conditions are negotiated with the local unions. In
Germany, wages but not salaries
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<PAGE>
are negotiated with the local unions, while in the United Kingdom and the United
States there is far less union involvement in establishing wages, salaries and
working conditions than in, for instance, Germany.
Autoliv considers its labor relations to be good in Sweden as well as in
other countries, and has not experienced any major strike or other significant
labor dispute for many years.
Under Swedish law, Autoliv must negotiate important changes in operations
and working conditions with the unions representing its employees. Although
these negotiations may from time to time affect the timing of certain management
decisions and actions, Autoliv's experience is that such negotiations contribute
to good labor relations. In many other countries (e.g. Germany, Spain and
France), negotiations must take place when a company wishes to dismiss employees
and under certain other circumstances.
PROPERTIES
Autoliv's various businesses operate through a number of production
facilities and offices. Autoliv believes its properties to be adequately
maintained and suitable for their intended use and its production facilities to
have a capacity adequate for its current and foreseeable needs.
LITIGATION AND INSURANCE COVERAGE
Neither Autoliv nor its subsidiaries have been involved in any litigation
which could have a material adverse effect on the financial position of the
Autoliv Group.
From time to time, Autoliv has received various third-party product
liability claims directly from automobile owners or via automobile
manufacturers, based on alleged defects in the products manufactured by Autoliv.
Autoliv has so far been successful in defending itself against such third-party
claimants. Consequently, no such claims have had a material adverse effect on
the financial position of the Autoliv Group.
To the best of Autoliv's knowledge, its present product liability and recall
insurance coverage provides adequate coverage of insurable risks, taking into
account the cost and availability of insurance.
THE AUTOLIV SHARES
Autoliv is a public company and its shares are listed on the SSE. Autoliv
shares were initially quoted on June 9, 1994, on the O-list of the SSE. On May
2, 1995, the Autoliv shares were moved to the A-list of the SSE, and, on July 3
the same year, to the index of the most actively traded issues of the SSE.
Autoliv also has an American Depositary Shares program in the United States. The
program is restricted to Qualified Institutional Buyers (as defined in Rule 144A
of the Securities Act). Bank of New York serves as the depositary for such
program, and the prices of the ADSs are reported on the PORTAL system. As of
December 31, 1996, 562,300 Autoliv shares were held in the form of ADSs.
A total of 54.3 million Autoliv shares were traded on the SSE for a total
value of SEK 15.7 billion during 1996. Autoliv accounted for just under 2% of
total trading volume on the SSE; Autoliv shares were the 13th most actively
traded shares during 1996. The first price paid for the year 1996 was SEK 192.5
(adjusted for a 2 for 1 stock split in 1996) (approximately US$ 28.2) and the
year's last quote was SEK 299 (approximately US$ 43.8). Autoliv's market
capitalization by year-end 1996 was SEK 16.4 billion (approximately US$ 2.4
billion). The highest price paid during 1996 was SEK 310 on September 30. The
lowest price paid was SEK 146.75 on February 15 (adjusted for the 2 for 1 stock
split in 1996). Autoliv and Morton issued a press release on September 30, 1996
announcing the signing of a letter of intent regarding the Transactions. The
last quoted price on the last trading day prior to the announcement of the
proposed transaction was SEK 253. The closing price on September 30, 1996 was
SEK 286.
Fifty-five million shares of Autoliv Common Stock were outstanding on
December 31, 1996, and Autoliv had a total share capital of MSEK 550. Autoliv's
share capital was increased by MSEK 50 in
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connection with its public offering and issuance of 2.5 million new shares in
1994 (corresponding to 5.0 million after a 2 for 1 stock split in 1996).
DEVELOPMENT OF SHARE CAPITAL
<TABLE>
<CAPTION>
NUMBER OF SHARES AFTER SHARE CAPITAL AFTER
YEAR TRANSACTION TRANSACTION TRANSACTION
- --------- ---------------------- -------------------------------- ----------------------------
<S> <C> <C> <C>
1994 Share issuance 27,500,000 550,000,000
1996 Share split 2:1 55,000,000 550,000,000
</TABLE>
All shares are entitled to one vote at a general meeting of Autoliv's
stockholders and all shares have the same rights with respect to Autoliv's
assets and profits. No stockholder is able to vote more than 20% of the shares
represented at a stockholders' meeting.
BENEFICIAL OWNERSHIP OF AUTOLIV COMMON STOCK. The following table sets
forth information as of December 31, 1996 with respect to all major shareholders
of Autoliv known by Autoliv to hold more than 1.5% of the total number of shares
of Autoliv Common Stock, and the total amount of Autoliv's share capital owned
as of December 31, 1996 by all directors and officers as a group.
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL CAPITAL AND VOTING
IDENTITY OF PERSON OR GROUP NUMBER OF SHARES OWNED RIGHTS
- ---------------------------------------- ---------------------- ---------------------------
<S> <C> <C>
SPP (Swedish Pension Insurance)......... 1,863,400 3.4
Fjarde AP-Fonden........................ 1,850,000 3.4
Skandia Group........................... 1,723,183 3.1
Wasa Forsakring......................... 1,060,700 1.9
AMF Pensionsforsakrings AB.............. 945,000 1.7
Directors and officers as a group....... 6,660 0.0
Other................................... 47,551,057 86.5
------------ ------
Total................................... 55,000,000 100.0
------------ ------
------------ ------
</TABLE>
The number of stockholders, either with shares registered with the
Securities Register Center (VPC) or with a Swedish nominee, was slightly greater
than 13,000 on December 31, 1996 (1995: approximately 10,000).
The proportion of shares held by institutions and corporations (other than
closely held entities) is estimated to be more than 90%. Stockholders in Sweden
own approximately 40%, while the remaining stockholders are evenly divided
between the rest of Europe (primarily the United Kingdom), on the one hand, and
the United States, on the other hand.
OTHER INFORMATION
For information regarding the Autoliv Articles, the Autoliv Board and the
auditors and executive officers of Autoliv, and the addresses of the offices of
Autoliv and its affiliated companies, see Appendices H, G and F, respectively,
to this Proxy Statement/Prospectus/Exchange Offer.
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SUMMARY SELECTED HISTORICAL FINANCIAL INFORMATION OF AUTOLIV
The following selected financial data for the years 1992 to 1996 have been
derived from Autoliv's consolidated financial statements and the notes thereto.
The data should be read in conjunction with "Autoliv Management's Discussion and
Analysis of Financial Condition and Results of Operations" and Autoliv's
consolidated financial statements and notes thereto included elsewhere herein
and are qualified in their entirety by reference to the consolidated financial
statements and the notes relating thereto. In 1992, Autoliv purchased Autoflug
Fahrzeugtechnik GmbH & Co., a German corporation. In the fall of 1995 and in the
beginning of 1996, Autoliv acquired 77% of the outstanding shares of Isodelta
SA, in two steps. In January 1996, Autoliv completed acquisitions of the Swedish
seat component makers Autoliv-Hammarverken (formerly Hammarverken i Vaxjo AB)
and Autoliv Mekan AB (formerly Hassleholm Automotive AB), which are now part of
a newly formed business unit, Autoliv Seat Sub-Systems. Isodelta SA, Autoliv
Hammarverken AB and Autoliv Mekan AB have been consolidated subsidiaries since
January 1, 1996. During 1996, Autoliv increased its interest in Livbag, a joint
venture with S.N.P.E., to 51% from 50% and received an option to increase its
ownership an additional 15%. Livbag has been a consolidated subsidiary since
July 1996. As a result of Autoliv's 1994 initial public offering, by the
issuance of 2.5 million new shares (corresponding to 5.0 million shares after a
2 for 1 stock split in 1996), Autoliv's equity was increased by MSEK 414.
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<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996 1995 1994 1993 1992
--------- --------- --------- ----------- -----------
<CAPTION>
PRO PRO
FORMA(1) FORMA(1)
(IN MSEK UNLESS OTHERWISE STATED)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT SUMMARY
Sales........................................................ 11,629 10,201 8,947 5,333 3,534
Operating income............................................. 1,093 916 664 310 211
Income before taxes.......................................... 1,145 1,009 680 240 167
Net income................................................... 760 649 430 125 97
BALANCE SHEET SUMMARY
Operating assets............................................. 3,500 2,667 2,661 1,826 1,304
Total assets................................................. 7,238 5,585 4,911 3,058 2,380
Operating liabilities........................................ 3,339 2,738 2,632 1,529 973
Interest bearing liabilities................................. 598 320 239 328 596
Minority Interest............................................ 151
Stockholders' equity......................................... 3,150 2,527 2,040 1,201 811
Total liabilities and stockholders' equity................... 7,238 5,585 4,911 3,058 2,380
KEY DATA
Operating margin (%)......................................... 9.4 9.0 7.4 5.8 6.0
Net margin (%)............................................... 6.5 6.4 4.8 2.3 2.7
Capital employed............................................. 2,994 1,773 1,234 1,370 1,259
Return on capital employed (%)............................... 44.5 68.5 52.7 22.6 19.7
Return on stockholders' equity (%)........................... 27.1 28.0 25.6 19.0 15.0
OTHER DATA
Expenditures in plant and equipment.......................... 991 706 588 388 312
Seat belt sales including seat components.................... 6,149 5,339 4,818 4,055 3,469
Airbag sales including steering wheels....................... 5,480 4,862 4,129 1,278 65
Number of employees at December 31........................... 9,000 6,670 5,740 4,392 4,531
PER SHARE DATA(2)
Earnings per share (SEK)..................................... 13.82 11.80 8.15(2) 2.95 2.05
Dividend per share (SEK)..................................... 2.75(3) 2.25(4) 1.50(5)
Stockholders' equity (SEK)................................... 57.27 45.95 37.10 24.00
Share price, end of period................................... 194 143
P/E Ratio.................................................... 21.6 16.4 18.3
Dividend yield (%)........................................... 0.9 1.2 1.0
Average number of shares outstanding (thousands)............. 55,000 55,000 52,820 50,000 50,000
</TABLE>
- ------------------------
(1) According to the Initial Public Offering Prospectus of Autoliv, dated May
26, 1994.
(2) Adjusted for a 2 for 1 stock split effective in May 1996.
(3) Dividend approved by Autoliv stockholders in March 1997; to be paid prior to
consummation of the Combination.
(4) Dividend declared in April 1996 with respect to the year ended December 31,
1995, which amount was equivalent to approximately $.33 based on an exchange
rate of US$ 1=SEK 6.8240 on May 3, 1996.
(5) Dividend declared in April 1995 with respect to the year ended December 31,
1994, which amount was equivalent to approximately $.21 based on an exchange
rate of US$ 1=SEK 7.2590 on May 5, 1995.
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DEFINITIONS
CAPITAL EMPLOYED
Total assets, minus cash and cash equivalents, non-interest bearing liabilities
and deferred tax liabilities.
EARNINGS PER SHARE
Net income relative to average number of shares outstanding.
NET MARGIN
Net income relative to sales.
OPERATING MARGIN
Operating income relative to sales.
P/E RATIO
Stock price at year end relative to earnings per share.
RETURN ON CAPITAL EMPLOYED
Income before tax and interest income and expense relative to average capital
employed.
RETURN ON STOCKHOLDERS' EQUITY
Net income relative to average stockholders' equity.
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AUTOLIV MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
Autoliv's sales during the period 1994-1996 were distributed as set forth in
the tables below.
SALES BY PRODUCT GROUP
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-------------------------------
<S> <C> <C> <C>
(MSEK) 1996 1995 1994
- ------ --------- --------- ---------
Airbags and associated products(1).................................................... 5,480 4,862 4,129
Seat belts and associated products(2)................................................. 6,149 5,339 4,818
--------- --------- ---------
Total............................................................................. 11,629 10,201 8,947
--------- --------- ---------
--------- --------- ---------
</TABLE>
- ------------------------
(1) Includes sales of steering wheels from 1996.
(2) Includes sales of seat components from 1996.
SALES BY GEOGRAPHIC REGION
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-------------------------------
<S> <C> <C> <C>
(MSEK) 1996 1995 1994
- ------ --------- --------- ---------
Europe................................................................................ 10,320 9,224 8,160
North America......................................................................... 546 277 251
Other Regions......................................................................... 763 700 536
--------- --------- ---------
Total............................................................................. 11,629 10,201 8,947
--------- --------- ---------
--------- --------- ---------
</TABLE>
The development of sales is discussed under "--1996 Compared to 1995" and
"--1995 Compared to 1994."
1996 COMPARED TO 1995
SALES
Autoliv reported sales of MSEK 11,629 in 1996, an increase of 14 percent
over 1995 sales. Consolidated sales outside Sweden represented 93 percent of
sales in 1996, as compared to 93 percent in 1995. The increase in sales was
attributable to a number of factors, which can be analyzed as follows:
<TABLE>
<CAPTION>
(MSEK) %
----------- ---
<S> <C> <C>
Sales in 1995................................................................. 10,201
Increase in sales for comparable units........................................ 1,186 12
Acquisitions.................................................................. 992 10
Exchange rate effects......................................................... (750) (7)
Sales in 1996................................................................. 11,629 14
</TABLE>
The decrease in sales due to exchange rate changes was due to the fact that
the SEK on average was 10 percent higher valued against the ECU in 1996 as
compared to 1995.
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The acquisition component of the increase in consolidated sales was mainly
due to the increase in ownership in the steering wheel manufacturer Isodelta
S.A. from 49 percent to 77 percent and the acquisitions of Autoliv-Hammarverken
and Autoliv Mekan, both manufacturers of seat components. These three companies
are consolidated into Autoliv's financial statements as of January 1, 1996.
For comparable units, excluding the effect of changes in exchange rates and
acquisitions, the increase in consolidated sales was MSEK 1,186 in 1996, an
increase of 12 percent compared to 1995 sales.
Sales of seat belts and associated products were MSEK 6,149 in 1996,
compared to MSEK 5,339 in 1995, an increase of 15 percent (adjusted for
acquisitions and currency effects, the increase was 14 percent). As Europe
accounted for almost 90 percent of Autoliv's consolidated sales in 1996, the
growth in Autoliv's sales of seat belts and associated products is comparable to
the 3 percent growth in production of light vehicles in Europe in 1996. The
increase in sales of seat belts and associated products was mainly due to the
increase in deliveries of belt pretensioners, which increased by approximately
50 percent to nearly 15 million units.
Sales of airbags and associated products were MSEK 5,480 in 1996, compared
to MSEK 4,862 in 1995, an increase of 13 percent (adjusted for acquisitions and
currency effects, the increase was 12 percent). The increase in sales of airbags
and associated products was mainly attributable to increased penetration (e.g.,
an increase in the number of light vehicles sold with airbags) with respect to
existing customers, but new customers (e.g., Audi and Volkswagen) also
contributed to sales growth.
OPERATING EXPENSES
Autoliv's cost of sales, which was MSEK 9,300 in 1996 and MSEK 8,193 in
1995, represented 80.0 percent of sales in 1996 compared to 80.3 percent in
1995. Cost of sales is dependent upon a number of factors, including changes in
costs of raw material, improvements in manufacturing technologies, a higher
degree of integration in manufacturing, efficient cost controls and productivity
gains, and, as for all costs, fluctuations in the exchange rates of currencies
in countries in which Autoliv's production facilities are located.
Selling, general and administrative expenses were MSEK 512 in 1996 and MSEK
467 in 1995. As a percentage of sales, selling, general and administrative
expenses decreased from 4.6 percent in 1995 to 4.4 percent in 1996, which
decrease was due to immaterial changes in various items.
During 1996, Autoliv's expenses for research, development and engineering
amounted to MSEK 671 or 5.8 percent of sales, compared to MSEK 623, or 6.1
percent of sales in 1995.
Depreciation and amortization increased from MSEK 413 in 1995 to MSEK 550 in
1996 primarily due to the increased capital expenditures and to the acquisition
of an additional 28 percent in Isodelta S.A. and the acquisitions of
Autoliv-Hammarverken and Autoliv Mekan AB including the associated amortization
of goodwill.
OPERATING INCOME
Autoliv's operating income increased in 1996 by 19 percent to MSEK 1,093
compared to MSEK 916 in 1995. The increase in operating income was mainly due to
the growth in sales, a higher degree of integration and other productivity
enhancing measures. The operating margin increased to 9.4 percent in 1996,
compared to 9.0 percent in 1995.
AFFILIATED COMPANIES
Autoliv's share of income in affiliated companies increased from MSEK 35 in
1995 to MSEK 50 in 1996. Autoliv's affiliated companies consist mainly of
joint-venture operations established to expand into new markets and into new
technologies. Such joint ventures normally incur losses during the start-up
phase
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prior to any sales being made. The increase in Autoliv's share in affiliated
companies is mainly due to the fact that a number of joint ventures have evolved
past the start-up phase and have begun to generate sales.
INTEREST INCOME AND EXPENSE, NET
Autoliv's net interest income decreased from MSEK 58 in 1995 to MSEK 2 in
1996 mainly due to the decrease in net liquid funds. For an explanation of the
change in net liquid funds, see "--Liquidity, Capital Resources and Financial
Position."
NET INCOME
Autoliv reported a net income of MSEK 760 in 1996, after income taxes of
MSEK 381, representing an effective tax rate of 33 percent. Autoliv's effective
tax rate is higher than the statutory Swedish rate of 28 percent mainly because
of the higher statutory tax rates in other countries where Autoliv derives a
significant portion of its net income.
EARNINGS PER SHARE
Net income per share increased from SEK 11.80 in 1995, to SEK 13.82 in 1996,
an increase of 17 percent, due to the factors discussed above. The earnings per
share for 1995 have been restated to reflect the 2 for 1 share split effected
during 1996.
INVESTING ACTIVITIES
Capital expenditures for property, plant and equipment increased from MSEK
706 in 1995 to MSEK 991 in 1996. Capital expenditures as a percentage of sales
increased from 6.9 percent in 1995 to 8.5 percent in 1996. Most of the funds
were allocated to new development resources in the U.S., Sweden and Germany, and
to additional manufacturing capacity.
In the U.S., the construction of Autoliv's North American Tech Center was
completed in the fall of 1996. The total cost of this complex amounted to MSEK
90, most of which was spent in 1996.
In Sweden, the construction of the Autoliv Safety Center commenced and
several improvements of the premises were made while the facilities were being
repaired following a fire in 1995. The total cost for the Auto Safety Center,
which will be one of the most advanced of its kind in the world, is calculated
to be MSEK 75, most of which was spent in 1996.
At Elmshorn in northern Germany, another crash test facility is being built
as a complement to the Tech Center Autoliv already has in the south of Germany.
The production of seat belts at Rellingen in northern Germany, which emanate
from an acquisition of Autoflug in 1992, have been concentrated in the Elmshorn
site to streamline operations. The extra costs for this move has been expensed
over the last three years.
Capital expenditures for increased manufacturing capacity included a new
plant in the United Kingdom for production of textile airbags, a new seat belt
plant in Mexico and an extension of the plant in Barcelona, Spain.
Acquisitions of businesses and investments in affiliated companies increased
from MSEK 369 in 1995 to MSEK 460 in 1996. Such acquisitions and investments
included the following:
In 1995, Autoliv acquired 49 percent of Isodelta S.A. During 1996, Autoliv
increased its ownership in Isodelta S.A. to 77 percent and increased its
ownership stake in Livbag to 51 percent from 50 percent. During 1996, Autoliv
acquired Autoliv-Hammarverken and Autoliv Mekan. Autoliv also acquired a 50
percent interest in the new airbags electronics joint venture, Autoliv Nokia AB,
which cooperates with the similar joint venture, Sagem-Autoliv, and both
operationally report to Autoliv Electronics, which was
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formed in 1996. Autoliv sold its 50 percent interest in each of NSK-Autoliv,
Inc. and Fuji Autoliv Co. Ltd. during 1996 as well as its shares in SensoNor
A/S.
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL POSITION
Net cash provided by operating activities decreased during 1996 to MSEK
1,076, from MSEK 1,135 in 1995, mainly due to an increase in working capital.
Working capital as a percentage of sales increased from (0.7) percent at
year-end 1995 to 1.4 percent at year-end 1996 mainly due to the acquisitions
described above. Inventories increased from MSEK 521 at year-end 1995 to MSEK
692 at year-end 1996, or from 5.1 percent of consolidated sales in 1995 to 6.0
percent in 1996 as a result of a higher degree of integration. Receivables
amounted to MSEK 2,635 at year-end 1996 compared to MSEK 1,961 at year-end 1995.
Cash flow from financing activities amounted to MSEK 178 in 1996 compared to
MSEK (35) in 1995.
Estimated cash flow from operations and financial resources is expected to
be adequate to fund Autoliv's anticipated working capital requirements and
capital expenditures in the foreseeable future. As Autoliv is self-financed, the
borrowing is limited.
As of December 31, 1996, Autoliv's cash and cash equivalents exceeded debt
obligations by MSEK 307, compared to MSEK 754 as of December 31, 1995.
1995 COMPARED TO 1994
SALES
Autoliv reported sales of MSEK 10,201 in 1995, an increase of 14 percent
over 1994. Consolidated sales outside Sweden represented 93 percent of sales in
1995 as compared to 94 percent in 1994. This increase in sales was attributable
to a number of factors, which can be analyzed as follows:
<TABLE>
<CAPTION>
(MSEK) %
----------- --
<S> <C> <C>
Sales in 1994.................................................................. 8,947
Increase in sales for comparable units......................................... 1,075 12
Exchange rate effects.......................................................... 179 2
Sales in 1995.................................................................. 10,201 14
</TABLE>
The increase in sales due to exchange rate changes was principally due to
the fact that the SEK, on average was 1 percent lower valued against the ECU in
1995 as compared to 1994.
For comparable units, excluding the effect of changes in exchange rates, the
increase in consolidated sales was MSEK 1,075 in 1995, an increase of 12 percent
over 1994 sales.
Sales of seat belts and associated products were MSEK 5,339 in 1995,
compared to MSEK 4,818 in 1994, an increase of 11 percent. Adjusted for
acquisitions and currency effects, the increase was 9 percent. As Europe
accounted for 90 percent of Autoliv's consolidated sales in 1995, the growth in
Autoliv's sales of seat belts and associated products could be compared with the
5 percent growth in production of light vehicles in Europe in 1995. The increase
in sales of seat belts and associated products was mainly due to the strong
sales of seat belt systems with pretensioners.
Sales of airbags and associated products were MSEK 4,862 in 1995, compared
to MSEK 4,129 in 1994, an increase of 18 percent. Adjusted for acquisitions and
currency effects, the increase was 16 percent. The increase in sales of airbags
and associated products was mainly attributable to increased penetration among
existing customers.
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<PAGE>
OPERATING EXPENSES
Autoliv's cost of sales, which was MSEK 8,193 in 1995 and MSEK 7,412 in
1994, represented 80.3 percent of sales in 1995 compared to 82.8 percent in
1994. The improvement is partly due to higher sales, a higher degree of
integration in manufacturing and other productivity gains.
Selling, general and administrative expenses were MSEK 467 in 1995 and MSEK
403 in 1994. As a percentage of sales, selling, general and administrative
expenses increased from 4.5 percent in 1994 to 4.6 percent in 1995. The fire in
July 1995 that destroyed inventory and other parts of the facility in Vargarda,
Sweden did not affect the year's result since the related expense was covered by
insurance.
During 1995, Autoliv's expenses for research, development and engineering
amounted to MSEK 627, or 6.1 percent of sales, compared to MSEK 408, or 4.6
percent of sales in 1994. The increase was partly due to many new contracts for
side-impact protection systems and the expansion and upgrading of Autoliv's
technical centers.
Depreciation and amortization decreased from MSEK 437 in 1994 to MSEK 413 in
1995, primarily due to the 1994 change in amortization period of the value of
patents obtained through acquisitions. The amortization period was changed from
10 years to 5 years because of the shorter product cycles experienced in the
industry, which increased amortization by MSEK 70 in 1994.
OPERATING INCOME
Autoliv's operating income after depreciation increased in 1995 by 38
percent to MSEK 916 from MSEK 664 in 1994. The improvement in operating income
was mainly due to the growth in sales, a higher degree of vertical integration
and other productivity enhancing measures. The operating margin increased to 9.0
percent in 1995, from 7.4 percent in 1994.
AFFILIATED COMPANIES
Autoliv's share of income in affiliated companies increased from MSEK 15 in
1994 to MSEK 35 in 1995, due to an improved development in some of the larger
joint venture companies.
INTEREST INCOME AND EXPENSE, NET
Autoliv's net interest income increased from MSEK 1 in 1994 to MSEK 58 in
1995, primarily due to a stronger cash position during the full year 1995.
Autoliv's net cash position at year-end 1994 included the funds received in
consequence of the equity infusion in mid-1994. For an explanation of the
development in net liquid funds, see "--Liquidity, Capital Resources and
Financial Position."
NET INCOME
Autoliv reported a net income of MSEK 649 in 1995, after income taxes of
MSEK 360, representing an effective tax rate of 36 percent. Autoliv's effective
tax rate is higher than the statutory Swedish rate of 28 percent mainly due to
higher statutory tax rates in other countries where Autoliv derives a
significant portion of its net income.
EARNINGS PER SHARE
Earnings per share increased from SEK 8.15(1) in 1994 to SEK 11.80(1) in
1995, an increase of 45 percent, due to factors discussed above. The earnings
per share for 1994 and 1995 have been restated to reflect the 2 for 1 share
split effected during 1996.
- ------------------------
(1) Calculated for an average number of shares of 52.8 million and 55.0 million
for 1994 and 1995, respectively.
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<PAGE>
INVESTING ACTIVITIES
Capital expenditures for property, plant and equipment increased from MSEK
588 in 1994 to MSEK 706 in 1995. Capital expenditures as a percentage of sales
increased from 6.6 percent in 1994 to 6.9 percent in 1995.
The single largest project included a complete facility with new offices, a
new plant and a new technical center for Autoliv Ltd. in England. This
investment totaled MSEK 90. In Sweden, the production facilities in Vargarda
were expanded. The new space, intended for producing new products, temporarily
replaced the space that was damaged in July 1995 in connection with the fire. By
the end of 1995, the new premises were gradually being put to their original
intended use of producing new products.
Autoliv decided to expand the technical center in Vargarda at a total cost
of MSEK 75. Such facility will become a center for auto safety research.
Construction was also started on a new technical center in Detroit in the United
States. This facility will also include a manufacturing plant for airbags and
the total cost is estimated to be almost MSEK 100.
A crash laboratory was built in Australia, and the crash laboratory in Spain
was expanded to allow for full scale testing.
Acquisitions of businesses and investments in affiliated companies increased
from MSEK 12 in 1994 to MSEK 369 in 1995. In 1995, Autoliv acquired 49 percent
of Isodelta S.A. Autoliv also acquired the remaining shares in the company Auto
Safety de C.V. in Mexico and 50 percent of the shares in Autoliv Slowik EMM,
Autoliv's licensee in Argentina.
Autoliv also formed joint ventures in Indonesia, the Philippines, Malaysia
and Thailand during 1995. A second joint venture was formed in China.
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL POSITION
Net cash provided by operating activities decreased marginally during 1995
to MSEK 1,135, compared to MSEK 1,141 in 1994.
Working capital as a percentage of sales decreased from 0.3 percent in 1994
to (0.7) percent in 1995. Inventories increased from MSEK 486 at the beginning
of 1995, to MSEK 521 at year-end 1995, but decreased from 5.4 percent of
consolidated sales in 1994 to 5.1 percent of consolidated sales in 1995.
Net cash flow from financing activities amounted to MSEK (35) in 1995
compared to MSEK 321 in 1994.
As of December 31, 1995, Autoliv's cash and cash equivalents exceeded debt
obligations by MSEK 754, compared to MSEK 806 as of December 31, 1994.
The cash flow from operating activities covers Autoliv's financial needs
sufficiently. As Autoliv is self-financed, its borrowing needs are limited.
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<PAGE>
DESCRIPTION OF THE ASP BUSINESS
GENERAL
ASP, one of Morton's three business groups, pioneered airbag technology in
1968, and has since grown into one of the world's leading producers of airbag
modules and inflators. ASP designs, develops and manufactures gas generators,
inflators, modules and cushions; it sells inflators and modules for use in
driver, passenger, side-impact and knee bolster automotive airbag passive
restraint systems for worldwide markets.
ASP's development and initial sales of airbag inflators began in the late
1960s as an outgrowth of the aerospace gas generant operations of a predecessor
corporation. The first gas generator plant for formulation and production of
chemical ingredients began operations in 1980, at the same time ASP installed
its first inflator production assembly lines. Low volume production continued
until the development in 1985 of a new "second generation" inflator that was
adaptable to high production volumes. In 1988, ASP launched an automated line
with high-rate capability for lightweight inflators, and, in late fiscal 1988,
began producing airbag modules. Over the past eight years, the ASP Business has
experienced significant growth with the broadening of its product line and
customer base, increasing sales from $20.5 million in fiscal 1988 to $1.4
billion in fiscal 1996.
ASP's customer base includes most of the world's major automobile
manufacturers, particularly those based in the United States and Japan.
Chrysler, Ford, General Motors, Honda, Mazda and Toyota are among ASP's largest
customers in these markets. ASP's inflators, modules and other products are
specially designed by ASP in close collaboration with the applicable customer
for each vehicle model. For this and other purposes, ASP maintains several
centers located close to its customers' operations providing direct customer
liaison and technical support services.
GOALS AND STRATEGY. ASP's goal has been to become recognized as the FIRST
CHOICE supplier in the development and manufacture of lifesaving safety systems
through:
- Continued focus on improving the value creating processes of the
business:
- Concept to Manufacturing
- Order to Cash
- Service to Market
- Operations located in all major markets worldwide
- Introduction of competitive product innovations
- Development of strategic alliances for steering systems, belts, seats and
interior trim
- Creation of new products serving unserved markets utilizing existing
technologies
ORGANIZATION. ASP is managed largely as an autonomous business unit, other
than certain centralized services which it receives from Morton's corporate
headquarters.
ASP's head office is located in Ogden, Utah. The head office is staffed with
a small central organization which provides the coordination and necessary
coaching to the organization. ASP's organization reflects the changes brought
about by the requirements for a process-oriented organization. The six North
American and the two European manufacturing facilities have complete
responsibility to service their respective customers. ASP describes this
activity as "order to cash." Operations at each major production facility are
managed by a Plant Manager who is the general manager and who has direct
profitability, productivity and customer service accountabilities. Sales and
marketing activities, which ASP describes as "service to market," are
coordinated by three Regional Business Unit Teams with customer-specific
responsibilities on a worldwide basis for each customer. These teams, composed
of cross-
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<PAGE>
functional representatives, are responsible for the coordination between
production facilities, design engineering and the marketplace for customer
specific product development, product launches, market and customer-specific
strategies. New technologies and generic product development activities, also
described as "concept to manufacturing," are performed by a central group in
Ogden, Utah.
PRODUCTS
ASP supplies a broad array of airbag inflators and modules.
INFLATORS. ASP's inflator products include a full range of passenger-side
and driver-side airbag inflators, as well as inflators for side-impact
protection systems. Conventional inflators consist of a metal casing that houses
an igniter, gas-producing pellets or wafers, and filters. The inflator is
connected to one or more sensors which, upon sensing a sharp reduction in
automobile speed, send an electrical signal to the inflator unit, resulting in
the igniting of the gas generant and the release of nitrogen gas to fill the
airbag. ASP's conventional pyrotechnic inflators utilize sodium azide gas
generants. ASP also produces advanced pyrotechnic inflators, introduced in 1994,
which utilize sodium azide gas generants but which are smaller, lighter and less
costly than conventional inflators. In January 1996, ASP announced production of
its first non-azide inflators for driver-side airbags.
ASP also manufactures hybrid inflators that use argon gas stored under very
high pressure which is heated upon deployment by the rapid combustion of a small
amount of pyrotechnic material. This less expensive and slightly larger
alternative to the passenger-side pyrotechnic inflator was introduced in
Chrysler's LH model cars. ASP also produces a more compact "mini-inflator" for
Japanese markets where driver-side airbags have increasingly become standard
equipment. ASP also recently introduced a fluid-fueled inflator that produces no
particulates. All of the fluid-fueled inflator's components are inexpensive and
recyclable. ASP's fluid-fueled inflators, for which several U.S. patents have
been granted, are being introduced in certain model-year 1997 vehicles for both
passenger-side and side-impact applications.
Sales of inflators in fiscal 1996 accounted for an estimated 41% of ASP
sales; in fiscal 1995 for 37% of ASP sales; and in fiscal 1994 for 35% of ASP
sales.
MODULES. An airbag module consists of an inflator, a cushion, mounting
hardware and a cover for the steering wheel or instrument panel. ASP produces a
full range of modules for driver-side, passenger-side and side-impact
applications. ASP has patented an innovative aluminum extrusion design that
combines lightweight convenient packaging with low-cost manufacturing. Through a
joint venture with the Bendix Safety Restraints Group of AlliedSignal, ASP
assembles passenger-side airbag modules for certain North American-based
customers.
In fiscal 1994, ASP began internal production of cushions (i.e., the textile
bag) at a dedicated facility in Utah for assembly into its airbag modules.
In fiscal year 1996, modules accounted for approximately 59% of ASP sales;
in fiscal 1995 for 63% of ASP sales; and in fiscal 1994 for 65% of ASP sales.
KNEE BOLSTERS--AIRBAGS FOR KNEES. In 1996, ASP began producing the world's
first airbag-activated knee bolster for Kia, a Korean automaker. The knee
bolster, located in the lower part of a vehicle's instrument panel, is deployed
by a small airbag that moves the trim panel toward the knee. It protects the
occupant's knees in the event of a frontal crash. It also provides benefits for
the head and chest by keeping the occupant in the proper position to receive
maximum protection afforded by the vehicle's conventional airbag.
Airbag-activated knee bolsters also provide advantages in automobile design.
Made of lightweight, energy-absorbing materials, ASP knee bolsters allow for
more functional, roomy styling in the vehicle interior. They do not require
expensive prototype instrument panels during development and can be
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produced independently. Also, by including a knee bolster of this type, the
airbag system can be designed more easily to meet occupant protection
requirements.
ADVANCED PYROTECHNICS. ASP and Thiokol have entered into a technology
agreement to jointly develop a series of advanced solid-fueled airbag inflators.
These products are expected to be lightweight, small, economical and
environmentally friendly, and provide greater packaging flexibility than
azide-based inflators. Combined with new fabrics in development, the micro
module may allow automobile designers to reduce the space requirements for
airbags, and thus to return to sleeker steering wheel designs.
FUTURE AIRBAG SYSTEMS. The next generation of modules will feature, among
other things, seamless doors, integral steering wheel/modules and advanced horn
switches capable of accommodating added functionality. Morton and Toyoda Gosei
Co. Ltd., a steering wheel supplier, executed a joint development agreement in
1995 to develop integrated steering wheel/airbag systems.
ASP is developing SMART-TM- inflators and SMARTBAG-TM- modules, which are
expected to have electronic sensors to identify the severity of a crash and to
determine an occupant's position, size and presence. Such inflators and modules
are anticipated to be used in adaptive systems that will be an important
component of future airbag systems. These systems are expected to be able to
detect when an infant is present or an occupant is unbelted or very close to the
steering wheel or dashboard, and will either deactivate or reduce the speed of
deployment of the airbag. See "--Regulatory Developments" and "Risk
Factors--Certain Regulatory Matters and Developments."
MANUFACTURING AND PRODUCTION
PRODUCTION FACILITIES. ASP operates eight wholly owned production facilities
located in the United States and Europe. ASP manufactures gas generant at the
Promontory, Utah location, and inflators at two facilities in Ogden and Brigham
City, Utah and one in Amsterdam, the Netherlands. Driver and passenger cushions,
screenpacks and leadwire assemblies are produced in two Utah locations, and
module assembly is performed in Utah and in Braunschweig, Germany. ASP's joint
venture with AlliedSignal produces passenger modules in Tennessee.
QUALITY MANAGEMENT. In order to meet its customers' high quality and
reliability requirements, as well as to enhance the efficiency of its
operations, ASP has implemented a process known as "Concept to Manufacturing."
This system involves every aspect of designing and producing ASP's products,
whether for customer-specific applications or for advanced development of new
technologies. It relies heavily on Advanced Product Quality Planning methodology
and tollgate disciplines that require design and process development activities
to proceed in an appropriate sequence and in a manner that assures potential
problems will be timely addressed. The Concept to Manufacturing system
implemented by ASP structures its design and operational processes so as to
achieve both high product quality and optimal manufacturing efficiency, as well
as to create an atmosphere that promotes continuous improvement.
ASP's success in meeting the strict quality requirements of its customers
has been reflected in several journal awards and acknowledgments. In January
1996, ASP achieved QS9000 registration for its three manufacturing sites in the
United States that ship product to customers. The registration certificate was
personally presented at ASP's Utah facilities by a senior executive of the
registrar in recognition of ASP's having achieved an audit result that surpassed
any score previously received by a first-time applicant for QS9000 registration.
Throughout the production process, integrated information systems collect
data from ASP's automated production equipment. Once completed, airbags are
scanned for flaws by matching real-time radiographic images against
computer-stored specifications. A serial number, which identifies the lot number
and date of manufacture, is then etched onto each metal canister and an X-ray of
every inflator is taken. Prior to packaging and shipment, each inflator is
matched against a computer-generated shipping
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list. In addition, to ensure quality and accurate product delivery, ASP's
automated product tracking systems can aid in identifying the vehicles into
which specific airbags and components have been installed.
Over the past 10 years, ASP has received numerous awards from its customers
for quality excellence and product innovation.
MANUFACTURING PROCESSES. In January 1995, ASP began to reorganize its
manufacturing processes in an effort to improve productivity, increase
efficiency and flexibility, and improve response time. To date, implementation
of the Toyota production system has resulted in significant increases in output
without the addition of capital and manpower. The implementation of this new
process has also led to reduced inventory levels and improved response time from
the internal and external supply base. In addition, manufacturing space
requirements have been reduced which will allow ASP to expand production without
adding infrastructure. The new processes should also enable ASP to produce new
generations of passenger-side and side-impact inflators utilizing existing
production lines.
For a list of ASP's production facilities, see Appendix I to this Proxy
Statement/Prospectus/Exchange Offer.
PURCHASING COORDINATION. Purchasing at ASP is a combination of centralized
and plant specific operations. The central procurement group is responsible for:
research and development support, initial costing efforts, cost/price analysis,
strategic planning, and centralized record keeping. The plant specific
operations include supplier capability analysis, launch coordination issues,
day-to-day delivery performance monitoring and pricing. Over time, the number of
suppliers has been reduced in order to facilitate product development, improve
leverage and improve processes. Particular attention is given to supplier
capacity and process capability.
INTEGRATION. During the past three years, efforts to vertically integrate
key production processes have been increased. Currently, generant production,
screen packs and leadwire assemblies are 100% supported by ASP subassembly
plants. Approximately 50% of the cushions used in ASP's products are produced by
ASP's cushion manufacturing facility.
RESEARCH, DEVELOPMENT AND ENGINEERING
ASP conducts research and development programs to provide pyrotechnic
materials, inflators and module concepts which can be adapted through its
applications engineering groups to meet the specific needs of customers around
the world. To accomplish this effort ASP has a dedicated group of engineers,
scientists and chemists located in four areas around the world. These locations
include research, development and application engineering centers in Utah
(including in both Ogden and Promontory), and technical centers in Rochester
Hills, Michigan; Yokohama, Japan; and Markgroningen, Germany.
Research into pyrotechnic materials and development of the materials and
processing as well as development of new inflator concepts are all performed at
the Utah locations, which include laboratories and chemical and pyrotechnic
processing facilities. All of the development facilities have prototype assembly
operations and static testing laboratories to evaluate the performance of both
inflators and modules.
ASP also has a cooperative development program with Thiokol for the
development of energetic materials which can be utilized in inflators. Thiokol's
aerospace operations have extensive pyrotechnic research and development
capability at its facilities adjacent to the Promontory operations of ASP. This
cooperative effort has led to the development of a new pyrotechnic gas generant
which is planned to be incorporated in pyrotechnic inflators in the near future.
The material is also being considered for use in hybrid inflators.
ASP's three technical centers also have sled testing capabilities to
evaluate performance of components as well as system approaches. The technical
centers are strategically located to support development
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close to customers as well as to perform application engineering on programs
dedicated to those various customers.
Each location has Computer Aided Design (CAD) capability to support design
and development activities. The CAD systems as well as ASP's product data
management systems are linked worldwide to assure both consistency in ASP's
approach as well as to allow each location to draw upon the expertise which is
available at other locations around the world.
<TABLE>
<CAPTION>
LOCATION PRIMARY ACTIVITY
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Utah (Promontory and Ogden)............................. Pyrotechnic Research and Development, Inflator
Development, Module Development and Application
Engineering
Rochester Hills, Michigan............................... Systems Analysis and Development, Module Technical
Center Development, Application Engineering and Sled
Testing
Japan Technical Center (Yokohama)....................... Systems Analysis, Application Engineering and Sled
Testing
European Technical Center (Markgroningen, Germany)...... Systems Analysis and Development, Module Development,
Application Engineering and Sled Testing
</TABLE>
At June 30, 1996, ASP employed approximately 170 professional engineers and
scientists and 230 supporting technical personnel.
Expenses incurred by Morton for research and development related to the ASP
Business were $20.0 million, $14.4 million, and $12.3 million for fiscal years
1996, 1995 and 1994, respectively, representing 1.4 percent, 1.2 percent and 1.3
percent of net ASP sales, respectively.
PATENTS AND TRADEMARKS. Morton owns approximately 1500 U.S. and non-U.S.
patents and patent applications in the fields of airbag inflators, modules and
gas generants, which expire on varying dates through the year 2016. ASP's
management believes its present position in these fields is enhanced by the
patents it owns as well as the technical expertise, know-how and trade secrets
it has developed. Patents are important to ASP's development of state-of the-art
technologies for new products. To enhance and protect this technology position,
ASP actively seeks to patent new innovations worldwide and vigorously defends
its patents against infringements. The Distribution Agreement provides that all
of Morton's intellectual property primarily related to the ASP Business (other
than with respect to the "Morton" name) will remain with Morton ASP following
the Spinoff.
RESEARCH AND DEVELOPMENT. ASP has a full range of pyrotechnic inflators for
both driver and passenger applications. The majority of these inflators utilize
a sodium azide-based gas generant to produce the nitrogen gas which inflates the
airbag. In addition, ASP provides hybrid passenger inflators to many customers
around the world.
ASP's research and development emphasis over the last few years has been,
and current applications are, focused in four main technological areas. These
areas are discussed below.
PYROTECHNIC MATERIALS AND INFLATORS. In response to customer desires for
an alternative to sodium azide-based gas generants and in a continuing
effort to develop smaller and lighter inflators, ASP has developed new gas
generant formulations which are utilized in both full size inflators and
inflators for face bag applications. These new inflators were first
introduced in limited quantities in model-year
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1996. In model-year 1998, over 6 million of this new type of smaller,
lighter and more environmentally friendly inflators are expected to be
produced.
The development of new pyrotechnic materials and inflators is proceeding
jointly with Thiokol. The new advanced solid fuel (also known as
"non-azide") material is being adapted into a new family of smaller
inflators for applications on both the driver and passenger sides for
frontal collisions as well as in small side-impact inflators. In addition,
for both driver and passenger applications, SMART-TM- inflators are being
developed to meet the needs for adaptive airbag systems. These SMART-TM-
inflators will be required to provide a long-term solution to the problem
recently experienced in the United States involving the deaths of some
children and small adults (typically in cases where such persons were
unbelted) from airbag deployments.
HYBRID INFLATORS. ASP has been developing a driver hybrid inflator to
complement its passenger hybrid inflator. Hybrid inflators utilize a stored
argon gas which is heated by a small amount of pyrotechnic material. The
introduction of the these new inflators is scheduled for model-year 1998.
The improved version of the passenger hybrid is also being developed for
introduction into late model-year 1997. This inflator will utilize the new
advanced solid fuel pyrotechnic described above in a hybrid inflator to heat
the compressed argon gas. Utilizing this new material results in a cleaner
effluent which should meet the desires of many of ASP's customers.
FLUID FUELED. ASP has undertaken considerable development on a new type
of stored gas inflator which utilizes the combustion of a fluid fuel instead
of a solid pyrotechnic to heat the compressed gas in order to provide
sufficient pressure to inflate the airbag. The inflator has set a new
standard for environmental friendliness and for clean effluents. The
side-impact version of this inflator was first introduced in late model-year
1996. Research and development on simplifying the design and improving the
output is continuing with introduction scheduled for model-year 1998. The
passenger version will also be introduced in model-year 1998.
MODULES. In the area of module development, ASP works closely with
components suppliers to utilize their expertise. New cover materials and
configurations have been developed and introduced into production to make a
lighter weight module. Development is still ongoing to produce cover
material with the desired colors without the application of paint. Cushion
materials and cushion configurations also have been improved in order to
meet the increasing demand by customers for ever-smaller module envelopes.
ASP is also developing module attach hardware, including plastic molding
material as well as utilizing ASP's patented extruded aluminum module
hardware, to provide the freedom to create integrated inflator and module
designs. ASP is working with steering wheel suppliers to develop various
designs for integrated steering wheel airbag modules. ASP has already been
awarded two contracts leading to production of integrated steering wheel
modules.
JOINT VENTURES
In 1988, Morton Nichiyu Co., Ltd. ("Morton Nichiyu") was formed in Japan as
a 50-50 joint venture between Morton and NOF Corporation. Morton Nichiyu
performs marketing and customer service functions with certain Japanese
customers of ASP. In 1990, Morton Bendix was formed as a 50-50 general
partnership between Morton and AlliedSignal. Morton Bendix assembles
passenger-side modules at a facility in Maryville, Tennessee using components
(e.g., inflators, cushions and hardware) supplied primarily by Morton and/or
AlliedSignal. Such modules are marketed directly to certain North American
customers by Morton and AlliedSignal.
In 1995, Morton executed a joint development agreement with Toyoda Gosei
Co., Ltd. for the purpose of establishing a framework for combining the parties'
respective technical capabilities for the coordinated development of integrated
steering wheel/driver airbag modules. The agreement establishes, among other
provisions, a basis for determining ownership of and license rights in
intellectual property resulting from joint development activity. In 1996, Morton
established a technical cooperation arrangement with Thiokol
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pursuant to which the two companies' respective capabilities have been combined
to develop advanced non-azide pyrotechnic materials for use in next generation
inflators and modules that are anticipated to be smaller, and more lightweight,
economical and environmentally friendly than traditional products.
MARKETS
The automotive safety industry, like the original equipment supplier
industry in general, has been experiencing a trend toward globalization and
consolidation. As automobile manufacturers begin to move toward global platform
strategies, they are, in turn, demanding that their direct suppliers have global
supply capabilities. In addition, automobile manufacturers are generally
demanding that their suppliers provide fully-integrated subsystems, and, in the
case of automotive safety suppliers, integrated airbag and steering wheel
systems and coordinated supply of airbags and other related safety devices,
including seat belts.
Globally, airbag penetration rates have been rising as consumers demand
inclusion of airbags in their vehicles. The growth of unit sales is outpacing
penetration rates due to the inclusion of a greater number of airbags per
outfitted vehicle, including passenger-side airbags, side-impact airbags and
knee bolsters.
In North America, current penetration levels for driver-side and
passenger-side airbags in light vehicles are relatively high due to strong
customer demand and federally-mandated installation requirements, with
driver-side penetration levels exceeding those for passenger-side airbags. New
units sales growth in North America is expected to come from the achievement of
full penetration and an increase in the number of airbags per vehicle, with
increased installation of side-impact airbags, multi-bag systems and adaptive
airbags providing the impetus for the anticipated per vehicle growth. Delivery
value per vehicle may increase as a result of the introduction of adaptive
airbags, and the demand for the more expensive dual-stage inflators required by
these systems may present a growth opportunity for ASP in the future. In
addition, regulatory developments and customer demands may lead to continuing
technological improvements and more advanced airbags.
The automotive safety industry in Europe is currently at a stage similar to
that experienced in the United States a few years ago, with penetration levels
approximately 60% on the driver side and 40% on the passenger side. Japan
currently has lower penetration rates than those in Europe. Over the next
several years, unit sales in this region are expected to experience substantial
growth. China, Southeast Asia and India, together with South America, have very
low penetration levels and represent growth opportunities for automotive safety
products in general, and airbags in particular. See "Risk Factors--Certain
Regulatory Matters and Developments" and "--Global Operations."
CUSTOMERS
ASP's customers include most of the world's major automobile manufacturers,
as well as competing module manufacturers that account for a significant portion
of ASP's inflator sales. Inflators, modules and other products are specially
designed by ASP in close collaboration with the applicable customer for each
vehicle model.
In fiscal 1996, North America accounted for approximately 70% of ASP sales,
Asia accounted for an estimated 16% of ASP sales and Europe accounted for the
remaining 14% of ASP sales. In fiscal 1995, sales in North America, Asia and
Europe accounted for an estimated 71%, 15% and 14% of ASP sales, respectively,
and in fiscal 1994, for 75%, 14% and 11% of ASP sales, respectively. Chrysler,
Ford, General Motors, Honda, Mazda and Toyota are among ASP's largest customers
in these regions. Combined sales to ASP's three largest customers represented
55% of total fiscal 1996 sales. See "Risk Factors--Substantial Reliance by New
Autoliv on Major Customers."
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COMPETITION
Currently, ASP competes with a number of other firms, many of which are
large, well qualified and possess sufficient resources to compete effectively
for the business of a relatively small number of automobile manufacturers
selling large numbers of cars in the United States, Europe and Asia. Some of
ASP's inflator customers compete with ASP for module sales. The continuing rapid
expansion of the automotive airbag industry has led to the entrance of a number
of new competitors into the market. ASP's business uses process capability,
technology, quality, delivery and price as its principal methods of competition.
ASP's primary competitors in North America include AlliedSignal, Breed
Technologies, Inc., Delphi, Inc., OEA, Inc. and TRW Inc. In Japan, ASP's primary
competitors include Daicel Chemical Industries Ltd., Takata Corporation and TRW
Inc. and in Europe ASP's primary competitors include AlliedSignal, Autoliv,
Temic Bayern-Chemie Airbag GmbH, MST, Petri A.G. and TRW Inc. According to ASP's
internal estimates, in 1996, ASP was among the top 3 suppliers of automotive
safety products (as measured by sales) in each of North America and Asia, and
among the top 6 suppliers in Europe.
EMPLOYEES
During the fiscal years ended June 30, 1996, 1995 and 1994, ASP employed an
average of 5,215, 4,685 and 3,759 individuals, respectively, based on year-end
levels.
Employees at ASP's Amsterdam, the Netherlands and Braunschweig, Germany
facilities are represented by legally mandated workers' councils or similar
organizations. ASP management believes that it generally has good relations with
its employees worldwide.
PROPERTIES
ASP currently operates eight production facilities in the United States and
Europe. ASP also operated three technical centers in the United States, Japan
and Germany, and seven technical support/sales offices located in Nagoya and
Hiroshima, Japan; Ottobrun and Aschaffenburg, Germany; Seoul, South Korea;
Melbourne, Australia; and London, England. ASP also maintained three warehouse
facilities located in the State of Utah. These facilities have an aggregate
floor space of approximately 2.2 million square feet. Of this floor space,
approximately 97% was owned and approximately 3% was leased. ASP considers its
facilities to be generally well-maintained and suitably equipped in accordance
with the requirements of its business.
Morton ASP's production facilities, with the recent addition of the North
Ogden, Utah plant, provide adequate capacity to manufacture existing
sub-assembly and final product requirements. Additional equipment may be
required in the future in the normal course of business to manufacture products
for new customer needs and to satisfy increased sales demand on existing
products.
REGULATORY DEVELOPMENTS
In the United States, current federal legislation requires driver-side and
passenger-side airbags in all new passenger cars by model-year 1998, and in all
new light vehicles (unloaded vehicle weight of 5,500 pounds or less) by
model-year 1999. In November and December 1996, NHTSA announced a series of
proposed and final regulations relating to airbags. See "Risk Factors--Certain
Regulatory Matters and Developments."
LITIGATION
From time to time, Morton has been named as a defendant in product liability
lawsuits relating to ASP products. Product liability historically has not had a
significant adverse effect on ASP's financial condition. In addition, from time
to time, ASP's customers request their suppliers, including Morton, to
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participate in the defense of product liability litigation or to contribute to
claim settlements. ASP carries product liability insurance that management
believes is adequate for the risks posed; however, there can be no assurance
that such insurance will continue to be available in adequate amounts or at
acceptable prices or that product liability will not have a material adverse
effect on ASP in the future. See "Risk Factors-- Product Recalls and Product
Liability Litigation; Insurance Coverage Limits." In addition, from time to
time, Morton has been named as a defendant in lawsuits relating to the ASP
Business involving matters other than product liability claims. Such lawsuits
have not been financially material, individually or in the aggregate, to Morton
ASP.
INSURANCE COVERAGE
As part of Morton, ASP has insurance coverages in effect for property
damage, business interruption, general liability, product liability, automobile
liability, excess liability, workers' compensation, employer's liability, marine
cargo, inland cargo, directors and officers liability, crime, fiduciary
liability, contingent crime, and travel accident.
SENIOR EXECUTIVES
For information regarding the senior executives of ASP, see Appendix J to
this Proxy Statement/ Prospectus/Exchange Offer. In fiscal 1996, the aggregate
cash compensation paid to those senior ASP executives listed in Appendix J
totalled $1,991,377.
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SUMMARY SELECTED HISTORICAL FINANCIAL INFORMATION
OF AUTOMOTIVE SAFETY PRODUCTS
The following selected combined financial information for ASP has been
derived from the combined financial statements of ASP. The data should be read
in conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations of Automotive Safety Products" and the combined
financial statements of ASP and notes thereto included elsewhere herein. The
income statement data for the years ended June 30, 1996, 1995 and 1994, and the
balance sheet data as of June 30, 1996 and 1995, have been derived from the
audited combined financial statements of ASP. The income statement data for the
years ended June 30, 1993 and 1992, and the six months ended December 31, 1996
and 1995, and the balance sheet data as of June 30, 1994, 1993 and 1992, and as
of December 31, 1996 and 1995, have been derived from the unaudited combined
financial statements of ASP which, in the opinion of management, include all
adjustments (consisting of normal recurring adjustments) necessary for a fair
presentation of financial position and results of operations for such periods.
Operating results for the six months ended December 31, 1996, are not
necessarily indicative of the results that may be expected for the entire year
ending June 30, 1997.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30 DECEMBER 31
----------------------------------------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1996 1995 1994 1993 1992 1996 1995
--------- --------- --------- --------- --------- --------- ---------
<CAPTION>
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA(1)
Net sales................................. $ 1,397.5 $ 1,226.3 $ 938.5 $ 524.0 $ 328.9 $ 732.0 $ 659.6
Operating income.......................... 251.5 223.9 160.7 78.0 48.4 121.3 122.7
Income before other charges, net of income
taxes................................... 151.6 141.4 103.2 49.7 31.2 73.0 74.7
Other charges to income(2)................ -- -- -- 3.7 -- -- --
Net income................................ 151.6 141.4 103.2 46.0 31.2 73.0 74.7
BALANCE SHEET DATA(1)
Current assets............................ $ 302.6 $ 273.4 $ 235.6 $ 180.6 $ 119.8 $ 316.7 $ 324.4
Fixed assets--net......................... 435.3 422.3 362.1 316.2 240.4 463.3 418.4
Other assets.............................. 38.6 33.3 18.3 10.1 6.5 50.7 42.0
Total assets.............................. 776.5 729.0 616.0 506.9 366.7 830.7 784.8
Current liabilities....................... 186.0 110.2 91.8 68.8 46.6 200.9 165.7
Non current liabilities................... 28.6 26.7 24.3 19.5 10.0 28.0 27.5
Equity.................................... 561.9 592.1 499.9 418.6 310.1 601.8 591.6
Total equity and liabilities.............. 776.5 729.0 616.0 506.9 366.7 830.7 784.8
OTHER DATA
Operating margin.......................... 18.0% 18.3% 17.1% 14.9% 14.7% 16.6% 18.6%
Net income margin......................... 10.8% 11.5% 11.0% 8.8% 9.5% 10.0% 11.3%
Capital employed.......................... $ 629.0 $ 621.7 $ 502.0 $ 418.6 $ 310.1 $ 681.8 $ 629.4
Return on capital employed................ 39.8% 40.3% 35.6% 21.4% 18.8% 36.3% 39.2%
Capital expenditures...................... $ 92.0 $ 125.8 $ 94.9 $ 103.5 $ 108.1 $ 70.2 $ 35.0
Number of employees....................... 5,407 5,017 4,346 3,169 2,071 6,271 5,421
</TABLE>
- ------------------------
(1) See "Unaudited Pro Forma Condensed Combined Financial Information" for the
effects of the Transactions.
(2) The 1993 charge was the cumulative effect of the change in accounting for
postretirement benefits other than pensions and postemployment benefits.
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DEFINITIONS
CAPITAL EMPLOYED
Total assets, minus cash and cash equivalents, non-interest-bearing liabilities
and deferred tax liabilities.
OPERATING MARGIN
Operating income after depreciation relative to net sales.
NET INCOME MARGIN
Net income relative to net sales.
RETURN ON CAPITAL EMPLOYED
Income before interest income and expense relative to average capital employed.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF AUTOMOTIVE SAFETY PRODUCTS
OVERVIEW
ASP, an operating group of Morton, produces airbag inflators and modules for
automobile manufacturers in the United States, Europe and Asia.
On November 25, 1996, Morton, Autoliv, New Autoliv and ASP Merger Sub
entered into the Combination Agreement pursuant to which ASP will become a
wholly owned subsidiary of New Autoliv and New Autoliv will acquire more than 90
percent of the outstanding capital of Autoliv. The transaction is intended to be
a merger of equals in which Morton's shareholders will exchange their interest
in ASP for 46.5 percent of New Autoliv and Autoliv's shareholders will exchange
their Autoliv shares for 53.5 percent of the equity of New Autoliv, assuming the
Exchange Offer is fully subscribed.
Immediately prior to the Combination, Morton will contribute all of its
businesses other than ASP to New Morton, and will spin off New Morton to Morton
shareholders in a tax-free distribution. Each holder of Morton Common Stock will
receive one share of New Morton Common Stock for each share of Morton Common
Stock owned prior to the Combination. In addition, in conjunction with the
Spinoff, Morton will contribute $750.0 million in cash to New Morton to be
funded by debt which will be retained by ASP. Morton will also contribute to New
Morton an amount from the retained earnings of the ASP Business subsequent to
June 30, 1996, equal to $50.0 million plus $7.2 million per month after March
31, 1997, until the consummation of the Spinoff.
The transactions described above are subject to, among other things,
approval by Morton shareholders, acceptance by holders of more than 90 percent
of Autoliv's outstanding shares of the Exchange Offer, receipt by Morton of the
Private Letter Ruling described above and certain regulatory approvals.
The following is a discussion of ASP's operating results comparing the first
six months of fiscal 1997 (ASP's fiscal year is July 1 to June 30) to the first
six months of fiscal 1996; operating results comparing fiscal years 1996 to 1995
and 1995 to 1994; liquidity and capital resources; and the impact of inflation.
This discussion is provided solely for the purpose of disclosure with respect to
the financial position and results of operations of ASP to be merged with
Autoliv and should be read in conjunction with the accompanying consolidated
financial statements of ASP. These historical results may not necessarily
reflect the results which would have existed had ASP been an independent
company.
COMPARISON: FIRST SIX MONTHS OF FISCAL 1997 TO FIRST SIX MONTHS OF FISCAL 1996
ASP's sales for the six months ended December 31, 1996 were $732.0 million,
an 11 percent improvement over the same period in the prior year. The sales
increase for the first six months of fiscal 1997 was primarily generated by
growth in all inflator business product lines, and reflected healthy car
production levels, new product launches and business which developed as a result
of problems competitors had meeting initial customer requirements. Sales of
driver-side inflators increased 18 percent while passenger-side inflators
increased 40 percent from the first six months of fiscal 1996. Sales of all
inflators increased 28 percent over the six months ended December 31, 1995.
Sales of modules increased slightly, up 4 percent, in the first half of fiscal
1997 over the same period in the prior year with a slight increase in
passenger-side modules partially offset by lower shipments of driver-side
modules. Side-impact inflator and module sales were approximately $12.0 million
for the six months ended December 31, 1996.
Unit volume continued to increase during the six months ended December 31,
1996, up 34 percent. The increase was primarily generated by Asian customers,
which purchased significantly greater numbers of driver-side and passenger-side
inflators.
For the six months ended December 31, 1996, pretax earnings decreased 3
percent to $118.2 million from the same period in fiscal 1996. Average selling
prices were significantly lower than the first six months
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of fiscal 1996, down 14 percent. However, successful implementation of
manufacturing process improvements coupled with vertical integration efforts
have permitted ASP to substantially offset the impact of selling price
reductions.
Lower earnings resulted mainly from higher freight and certain other costs,
unfavorable performance of the Japanese joint venture which was impacted by the
weakening of the yen, and losses from disposal of certain fixed assets.
The higher freight and other expenses reflected ASP's commitment to service
customers in a timely fashion. Higher than planned volume during the first half
of fiscal 1997 created a raw material supply shortage which resulted in higher
expediting costs to ASP's facilities and customers as well as higher raw
material costs.
As a result of these higher costs, cost of sales and selling, general and
administrative expenses were a larger percentage of net sales for the six months
ended December 31, 1996 than for the same period in fiscal 1996. Cost of sales
increased from 75 percent of net sales in fiscal 1996 to 76 percent for the
first six months of fiscal 1997. Similarly, selling, general and administrative
expenses rose from 5 percent to 6 percent of net sales for the six-month periods
ended December 31, 1995 and 1996, respectively.
COMPARISON: FISCAL 1996 TO FISCAL 1995
As in the past several years, sales of driver-side and passenger-side airbag
inflators and modules increased in fiscal 1996 reflecting car companies around
the world providing airbag protection as standard equipment in their cars and
trucks. For fiscal 1996, sales were up 14 percent to $1.40 billion. Increased
sales of both driver-side and passenger-side modules, up 15 percent and 18
percent, respectively, were the main contributors to the sales growth. Overall
inflator sales grew 8 percent in fiscal 1996 as the 35 percent year-over-year
growth in passenger inflators was partially offset by a 1 percent decrease in
sales of driver-side inflators. Because driver-side units account for 69 percent
of this product line's sales, the overall growth rate for inflators is more
heavily influenced by driver-side inflator growth where ASP has a leading market
position. Total units shipped increased 19 percent over fiscal 1995 to 18.1
million. As with sales, the growth in units was due to greater module shipments.
Customers whose sales were up strongly in the year included Toyota, Nissan,
Ford, and Isuzu. Sales to Toyota showed significant growth in both driver-side
inflators and passenger-side modules, up $27.8 million and $37.1 million,
respectively. Higher volume with Nissan was primarily in passenger-side
inflators, while at Ford sales grew in both driver-side and passenger-side
modules. Increased sales to Isuzu were in both driver-side and passenger-side
inflators.
ASP's strong performance was achieved despite the negative impact on sales
and earnings of General Motor's strike in March and continued price reductions
to customers. As in fiscal 1995, downward pricing pressure continued as overall
average selling prices decreased 5 percent, with the largest decrease in the
passenger-side inflator product line. To offset these market conditions, ASP
continued to implement cost reduction initiatives and reengineer its
manufacturing processes to improve efficiency. These savings enabled ASP to
continue to deliver attractive returns.
Gross profit margins as a percent of sales were relatively flat year over
year at slightly less than 25 percent. Net income for the year of $151.6 million
was 7 percent higher than the fiscal 1995 results of $141.4 million. The lower
growth in net income compared with growth of net sales was attributed in part to
increases in selling, administrative, and general expenses, as well as to
research and development costs increasing faster than sales. Increased testing
at the Rochester Hills technical center to meet future customer requirements,
expansion of the European technical center, and the start-up of the Japanese
technical center were the main reasons for the higher levels of spending in
fiscal 1996. Also contributing to the lower net income growth rate is a higher
effective tax rate in 1996, 38.7 percent versus 37.7 percent in 1995.
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COMPARISON: FISCAL 1995 TO FISCAL 1994
Sales of driver-side and passenger-side airbag inflators and modules
steadily increased as automakers in the United States, Europe and Japan
accelerated the introduction of inflatable restraint systems into passenger
cars, trucks and vans. For the second consecutive year, ASP increased its share
of the module market, which contributed to the improved sales results.
ASP's fiscal 1995 sales were $1.23 billion, 31 percent over fiscal 1994.
Sales of passenger-side modules were the main reason for the increase, growing
from $215.2 million in fiscal 1994 to $368.3 million in fiscal 1995, an increase
of 71 percent. Also contributing to the year-over-year sales increase were
driver-side inflators and modules with growth rates of 24 percent and 20
percent, respectively.
Units shipped increased to 15.2 million, an increase of 38 percent over
fiscal 1994. Modules were the main contributor to the volume increase, growing
42 percent with passenger-side module shipments up 80 percent and driver-side
module shipments up 25 percent over fiscal 1994. Inflators also showed
significant growth, up 33 percent, as driver-side and passenger-side inflators
grew 37 percent and 17 percent, respectively.
Downward pricing pressure continued in fiscal 1995 as overall average
selling prices decreased 5 percent. Continued implementation of cost reductions
and operational efficiencies offset these pricing pressures and resulted in
gross profit margins as a percentage of sales remaining relatively flat
year-over-year at approximately 25 percent and an improved pretax return on
sales of 18.5 percent versus 17.5 percent in fiscal 1994.
Net income increased 37 percent to $141.4 million. This growth was
significantly ahead of the sales growth with selling, administrative and general
expenses as well as research and development costs increasing at a significantly
lower rate than sales.
Selling, general and administrative expense as a percent of sales decreased
from 7 percent in fiscal 1994 to 5 percent in fiscal 1995, despite a $2.4
million pretax charge for the elimination of 324 administrative and technical
support positions included in fiscal 1995 earnings. A lower corporate expense
allocation coupled with foreign exchange gains were the principal reasons for
the decrease in selling, general and administrative expense as a percent of net
sales in fiscal 1995.
Fiscal 1995 pretax profits were also adversely affected by approximately
$5.0 million of expense related to the start-up of the European airbag
manufacturing operations. Before such charges, net income increased 41 percent
over fiscal 1994.
LIQUIDITY AND CAPITAL RESOURCES
OPERATING ACTIVITIES
ASP's cash requirements are funded primarily by its operating activities.
The group participates in Morton's centralized cash management system.
Operating activities were the principal source of cash in the first six
months of fiscal 1997 and 1996 providing $89.5 million in cash in the first six
months of fiscal 1997, a decrease of $10.8 million from the first six months of
fiscal 1996. Changes in operating assets and liabilities resulted in a $24.7
million use of funds during the first six months of fiscal 1997 compared to an
$11.0 million use of funds during the same period in fiscal 1996.
Cash provided by operating activities was $230.9 million, $147.8 million and
$113.1 million for the fiscal years ended June 30, 1996, 1995 and 1994,
respectively. Net cash from operations in fiscal 1996 increased $83.1 million.
Changes in operating assets and liabilities resulted in a $.2 million use of
funds compared with a $59.3 million use of funds in fiscal 1995; the reduction
in the use of funds primarily
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resulted from improved working capital management. Fiscal 1996 net income
increased $10.2 million over fiscal 1995. Depreciation expense in fiscal 1996
increased $8.7 million.
Net cash from operations in fiscal 1995 increased $34.7 million over fiscal
1994. This increase resulted primarily from a $38.2 million increase in net
income year over year and a $17.8 million increase in depreciation expense due
principally to the higher level of capital spending in recent years. Offsetting
was an increase in the use of funds related to changes in operating assets and
liabilities driven largely by a decrease in accounts payable and accrued
expenses in fiscal 1995. Changes in operating assets and liabilities resulted in
a $59.3 million use of funds in fiscal 1995 compared with a $37.0 million use of
funds in fiscal 1994.
INVESTING ACTIVITIES
Net investing activities for fiscal 1996 required $92.1 million of cash
compared with $125.6 million and $92.9 million in fiscal 1995 and 1994,
respectively. Investing activities in the first six months of fiscal 1997
required $70.2 million of cash compared with $35.0 million in the first six
months of fiscal 1996. Capital spending accounted for substantially all
investing activities in each of these periods.
ASP has invested heavily in facilities and production equipment in recent
years to keep pace with the rapid growth of this business and the change in
technologies. Specific investments were targeted at fluid fuel, hybrid
technologies, the new Amsterdam, the Netherlands facility, as well as the
technical research center in Germany. Capital expenditures in fiscal 1996
decreased 27 percent from the prior year reflecting the decline in capital
expenditures at the airbag facilities in Utah and an overall decrease in capital
spending levels compared with fiscal 1995 as well as the timing of certain
expenditures. The increased spending in the first six months of fiscal 1997 is
related to the introduction of new inflator technology.
FINANCING ACTIVITIES
Financing activities for fiscal 1996, 1995 and 1994 used funds of $141.8
million, $22.4 million, and $20.1 million, respectively. During the first six
months of fiscal 1997 and 1996, financing activities were a use of funds of
$33.3 million and $60.9 million, respectively. The use of funds was primarily a
net transfer of cash to Morton during these periods.
OTHER
ASP's current ratio was 1.6 at December 31 and June 30, 1996, and 2.5 at
June 30, 1995. A significant increase in current liabilities coupled with a
reduction in inventory levels were the main reasons for the decline in the
current ratio during fiscal 1996.
As of December 31, 1996, ASP had unexpended authorizations for fixed asset
and maintenance projects totaling $112.2 million. The authorizations related
primarily to the expansion of the airbag business as well as to product
improvements.
Estimated cash flow from operations and financial resources, including
financing capacity, are expected to be adequate to fund ASP's anticipated
working capital requirements and fixed asset spending in the foreseeable future.
Morton ASP is in the process of negotiating the terms of an $850 million
line of credit under the New Credit Facility, the terms of which have not been
finalized as of the date of this Proxy Statement/ Prospectus/Exchange Offer.
Initially, $750 million of borrowings will be used to fund the cash contribution
that will be made to New Morton prior to the Spinoff and which will remain the
responsibility of Morton ASP after the Spinoff. Accordingly, Morton ASP will
have available the remaining $100 million of borrowing capacity under the line
of credit facility for working capital and other general corporate purposes.
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IMPACT OF INFLATION
Inflation generally has not had a significant impact upon the results of
ASP's operations in recent years due to the relatively low rate of inflation as
well as to efforts by ASP to reduce the effects of inflation on its business.
An ongoing cost control program has contributed to reducing the influence of
inflationary costs. Further, a continuing program of investment in new and more
efficient facilities, production processes, and productivity enhancements as
well as continued implementation of operational efficiencies have made a
significant contribution in offsetting inflation.
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DESCRIPTION OF CAPITAL STOCK OF NEW AUTOLIV
Immediately prior to the Effective Time, New Autoliv will be authorized to
issue (a) 325,000,000 shares of New Autoliv Common Stock, of which a maximum of
47,803,738 will be issued in the Merger (before giving effect to the issuance of
cash in lieu of fractional shares) to Morton shareholders and 55,000,000 will be
issued in the Exchange Offer (assuming 100% acceptance) to Autoliv stockholders,
and (b) 25,000,000 shares of preferred stock, $1.00 par value per share ("New
Autoliv Preferred Stock"), no shares of which will be issued and outstanding as
of the Effective Time.
The discussion contained herein is qualified by reference to the New Autoliv
Certificate and the New Autoliv Bylaws that will be in effect as of the
Effective Time.
NEW AUTOLIV COMMON STOCK
The New Autoliv Certificate and New Autoliv Bylaws will provide that each
holder of New Autoliv Common Stock is entitled to one vote for each share of New
Autoliv Common Stock owned of record on all matters submitted to a vote of
stockholders. Except as otherwise required by law or the terms of any series of
New Autoliv Preferred Stock, the New Autoliv Common Stock will vote together
with the New Autoliv Preferred Stock on all matters submitted to a vote of
stockholders. The New Autoliv Certificate will not provide for cumulative voting
rights in the election of directors. Subject to the preferential rights of any
outstanding series of New Autoliv Preferred Stock, the holders of New Autoliv
Common Stock will be entitled to such dividends as may be declared from time to
time by the New Autoliv Board from funds legally available for such purpose, and
will be entitled, after payment of all prior claims, to receive pro rata all
assets of New Autoliv upon the liquidation, dissolution or winding up of New
Autoliv. Holders of New Autoliv Common Stock will have no redemption, conversion
or preemptive rights.
All shares of New Autoliv Common Stock to be issued in the Merger and the
Exchange Offer will be fully paid and non-assessable, and will not be subject to
any future call or assessment.
The transfer agent and registrar for the New Autoliv Common Stock will be
First Chicago Trust Company of New York.
PREFERRED STOCK
The New Autoliv Certificate authorizes the New Autoliv Board to establish
one or more series of New Autoliv Preferred Stock and to determine, with respect
to any series of New Autoliv Preferred Stock, the terms and rights of such
series, including (a) the designation of the series, (b) the number of shares of
the series, which number the New Autoliv Board may thereafter (except where
otherwise provided in the preferred stock designation) increase or decrease (but
not below the number of shares thereof then outstanding), (c) whether dividends,
if any, will be cumulative or non-cumulative and the dividend rate of the
series, (d) the dates at which dividends, if any, will be payable, (e) the
redemption rights and price or prices, if any, for shares of the series, (f) the
terms and amount of any sinking fund provided for the purchase or redemption of
shares of the series, (g) 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 New Autoliv, (h) whether the shares of the series will be
convertible into shares of any other class or series, or any other security, of
New Autoliv 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, (i) restrictions on the issuance of shares of the same
series or of any other class or series and (j) the voting rights, if any, of the
holders of such series. The authorized shares of New Autoliv Preferred Stock, as
well as the authorized shares of New Autoliv Common Stock, will be available for
issuance without further action by New Autoliv's stockholders, unless such
action is required by applicable law or the rules of any stock exchange or
automated quotation system on which New Autoliv's securities may be listed or
traded.
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Although the New Autoliv Board has no intention at the present time of doing
so, it could issue a series of New Autoliv Preferred Stock, such as pursuant to
a preferred share purchase rights plan, that could, depending on the terms of
such series, impede the completion of a merger, tender offer or other takeover
attempt. The New Autoliv Board will make any determination to issue such shares
based on its judgment as to the best interests of New Autoliv and its
stockholders. The New Autoliv Board, in so acting, could issue New Autoliv
Preferred Stock having terms that could discourage an acquisition attempt or
other transaction that some, or a majority, of New Autoliv's stockholders might
believe to be in their best interests or in which stockholders might receive a
premium for their stock over the then current market price of such stock.
CERTAIN PROVISIONS IN THE NEW AUTOLIV CERTIFICATE AND NEW AUTOLIV BYLAWS
The New Autoliv Certificate and the New Autoliv Bylaws provide for a
classified board of directors and certain other provisions that will render more
difficult certain unsolicited or hostile attempts to acquire control of New
Autoliv. The purpose of these provisions is to improve the ability of New
Autoliv's management or the New Autoliv Board to negotiate effectively, to have
the time necessary to study alternative proposals, to deter abusive takeover
practices and to help ensure that the best price is obtained in any transaction
involving New Autoliv which may ultimately be accepted. A summary of these
provisions of the New Autoliv Certificate and the New Autoliv Bylaws is set
forth below.
CLASSIFIED BOARD OF DIRECTORS AND LIMITATIONS ON REMOVAL OF DIRECTORS
Pursuant to the New Autoliv Certificate, the number of directors of New
Autoliv will be fixed by the New Autoliv Board. The New Autoliv Board will
initially consist of eight directors. The directors (other than those elected by
the holders of any series of New Autoliv Preferred Stock or any other series or
class of stock) will be divided into three classes, each class to consist as
nearly as possible of one-third of the directors. Directors elected by
stockholders at an annual meeting of stockholders will be elected by a plurality
of all votes cast at such annual meeting. Initially, the terms of office of the
three classes of directors will expire, respectively, at the Annual Meetings of
Stockholders in 1998, 1999 and 2000. The term of the successors of each such
class of directors will expire three years from the year of election. The New
Autoliv Bylaws provide that, to the extent practicable, 50% of the New Autoliv
directors will be United States citizens and 50% of such directors will be
citizens of Sweden or the European Union member states.
The New Autoliv Certificate provides that, except as otherwise provided for
or fixed by or pursuant to a Certificate of Designation setting forth the rights
of the holders of any class or series of New Autoliv Preferred Stock, newly
created directorships resulting from any increase in the number of directors and
any vacancies on the New Autoliv Board resulting from death, resignation,
disqualification, removal or other cause will be filled by the affirmative vote
of a majority of the remaining directors then in office, even though less than a
quorum of the New Autoliv Board, and not by the stockholders. Any director
elected in accordance with the preceding sentence will hold office for the
remainder of the full term of the class of directors in which the new
directorship was created or the vacancy occurred and until such director's
successor shall have been duly elected and qualified. No decrease in the number
of the directors constituting the New Autoliv Board will shorten the term of any
incumbent director. Subject to the rights of holders of New Autoliv Preferred
Stock, any director may be removed from office only for cause and by the
affirmative vote of the holders of at least 80% of the voting power of all the
outstanding capital stock of New Autoliv entitled to vote generally in the
election of directors (the "Voting Power," and such 80% affirmative vote of the
Voting Power, a "Stockholder Supermajority Vote"), voting together as a single
class.
Under the classified board provisions described above, it would take at
least two elections of directors for any individual or group to gain control of
the New Autoliv Board. The removal provisions of the New Autoliv Certificate
would preclude a third party from removing incumbent directors and
simultaneously
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gaining control of the New Autoliv Board by filling the vacancies created by
removal with its own nominees. Accordingly, these provisions could discourage a
third party from initiating a proxy contest, making a tender offer or otherwise
attempting to gain control of New Autoliv. New Autoliv believes these provisions
will help assure that the New Autoliv Board will have sufficient time to review
takeover proposals, to deter abusive takeover practices and to seek the best
available result for all stockholders.
LIMITATIONS ON SPECIAL STOCKHOLDERS' MEETINGS AND RIGHT TO ACT BY WRITTEN
CONSENT
The New Autoliv Certificate and the New Autoliv Bylaws provide that a
special meeting of stockholders may be called only by a resolution adopted by a
majority of the entire New Autoliv Board. Stockholders are not permitted to
call, or to require that the New Autoliv Board call, a special meeting of
stockholders. Moreover, the business permitted to be conducted at any special
meeting of stockholders is limited to the business brought before the meeting
pursuant to the notice of the meeting given by New Autoliv. In addition, the New
Autoliv Certificate provides that any action taken by the stockholders of New
Autoliv must be effected at an annual or special meeting of stockholders and may
not be taken by written consent in lieu of a meeting.
The provisions of the New Autoliv Certificate and the New Autoliv Bylaws
prohibiting stockholder action by written consent may have the effect of
delaying consideration of a stockholder proposal until the next annual meeting.
These provisions would also prevent the holders of a majority of the Voting
Power from unilaterally using the written consent procedure to take stockholder
action. Moreover, a stockholder could not force stockholder consideration of a
proposal over the opposition of the New Autoliv Board by calling a special
meeting of stockholders prior to the time the New Autoliv Board believes such
consideration to be appropriate.
PROCEDURES FOR STOCKHOLDER NOMINATION AND PROPOSALS
The New Autoliv Bylaws establish an advance notice procedure for
stockholders to nominate candidates for election as directors or to bring other
business before meetings of stockholders of New Autoliv (the "Stockholder Notice
Procedure").
Only those stockholder nominees who are nominated in accordance with the
Stockholder Notice Procedure will be eligible for election as directors of New
Autoliv. Under the Stockholder Notice Procedure, notice of stockholder
nominations to be made at an annual meeting (or of any other business to be
brought before such meeting) must be received by New Autoliv 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
(or, 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 (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). Notwithstanding
the foregoing, in the event that the number of directors to be elected is
increased and there is no public announcement naming all of the nominees for
director or specifying the size of the increased New Autoliv Board made by New
Autoliv at least 70 days prior to the first anniversary of the preceding year's
annual meeting, a stockholder's notice will be timely, but only with respect to
nominees for any new positions created by such increase, if it is received by
New Autoliv not later than the 10th day after such public announcement is first
made by New Autoliv.
The New Autoliv Bylaws provide that only such business may be conducted at a
special meeting of stockholders as is specified by the New Autoliv Board in the
notice of meeting. Nominations for election to the New Autoliv Board may be made
at a special meeting at which directors are to be elected only by or at the New
Autoliv Board's direction or by a stockholder who has given timely notice of
nomination. Under the Stockholder Notice Procedure, such notice must be received
by New Autoliv 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
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meeting is first made. Stockholders will not be able to bring other business
before special meetings of stockholders.
The Stockholder Notice Procedure provides that, at an annual meeting, only
such business may be conducted as has been properly brought before the meeting.
To be properly brought before an annual meeting, such business must be specified
in the notice of meeting given at the direction of the New Autoliv Board, or
otherwise properly brought before the meeting by the New Autoliv Board or by a
stockholder who has given proper and timely written notice (as set forth above)
to the Secretary of New Autoliv of such stockholder's intention to bring such
business before such meeting.
Under the Stockholder Notice Procedure, a stockholder's notice to New
Autoliv proposing to nominate an individual for election as a director must
contain certain information, including, without limitation, the identity and
address of the nominating stockholder and any person on whose behalf the
nomination is made, the class and number of shares of stock of New Autoliv
beneficially owned by such stockholder and any person on whose behalf the
nomination is made, and all information regarding the proposed nominee that
would be required to be included in a proxy statement soliciting proxies for the
proposed nominee. Under the Stockholder Notice Procedure, a stockholder's notice
relating to the conduct of business other than the nomination of directors must
contain certain information about such business and about the proposing
stockholder, including, without limitation, a brief description of the business
the stockholder proposes to bring before the meeting, the reasons for conducting
such business at such meeting, the name and address of such stockholder and any
person on whose behalf the proposal is made, the class and number of shares of
stock of New Autoliv beneficially owned by such stockholder and any person on
whose behalf the proposal is made, and any material interest of such stockholder
and any person on whose behalf the proposal is made in the business so proposed.
If the Chairman or other officer presiding at a meeting determines that an
individual was not nominated, or other business was not brought before the
meeting, in accordance with the Stockholder Notice Procedure, such individual
will not be eligible for election as a director, or such business will not be
conducted at such meeting, as the case may be.
By requiring advance notice of nominations by stockholders, the Stockholder
Notice Procedure will afford the New Autoliv Board an opportunity to consider
the qualifications of the proposed nominees, and, to the extent deemed necessary
or desirable by the New Autoliv Board, to inform stockholders about such
qualifications. By requiring advance notice of other proposed business, the
Stockholder Notice Procedure will provide a more orderly procedure for
conducting annual meetings of stockholders and, to the extent deemed necessary
or desirable by the New Autoliv Board, will provide the New Autoliv Board with
an opportunity to inform stockholders, prior to such meetings, of any business
proposed to be conducted at such meetings, together with the New Autoliv Board's
position regarding action to be taken with respect to such business, so that
stockholders can better decide whether to attend such a meeting or to grant a
proxy regarding the disposition of any such business.
Although the New Autoliv Bylaws do not give the New Autoliv Board any power
to approve or disapprove stockholder nominations for the election of directors
or proposals for action, they may have the effect of precluding a contest for
the election of directors or the consideration of stockholder proposals if the
proper procedures are not followed, and of discouraging or deterring a third
party from conducting a solicitation of proxies to elect its own slate of
directors or to approve its own proposal, without regard to whether
consideration of such nominees or proposals might be harmful or beneficial to
New Autoliv and its stockholders.
AMENDMENT OF THE NEW AUTOLIV CERTIFICATE AND NEW AUTOLIV BYLAWS
The New Autoliv Certificate provides that a Stockholder Supermajority Vote
is required to (a) amend or repeal the provisions of the New Autoliv Certificate
with respect to (i) the election of directors, and (ii) the right to call a
special stockholders' meeting and (iii) the right to act by written consent, (b)
adopt any provision inconsistent with such provisions, and (c) amend or repeal
the provisions of the New Autoliv
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Certificate with respect to amendments to the New Autoliv Certificate or the New
Autoliv Bylaws. In addition, the New Autoliv Bylaws provide that the amendment
or repeal by stockholders of any bylaws made by the New Autoliv Board would
require the affirmative vote of a majority of the Voting Power, voting together
as a single class.
OTHER PROVISIONS
The New Autoliv Certificate generally provides that, in determining whether
to take or refrain from taking corporate action on any matter, the New Autoliv
Board may take into account the interests of creditors, customers, employees and
other constituencies of New Autoliv and each of its subsidiaries and the effect
upon communities in which New Autoliv and its subsidiaries do business, as well
as the long-term interests of stockholders in addition to any other
considerations which the New Autoliv Board may lawfully take into account. The
purpose of this provision is to specifically authorize the New Autoliv Board to
consider the interests of various constituencies of the company and its
subsidiaries, in addition to the interests of stockholders, including their
long-term interests. This authorization applies to the entire range of New
Autoliv Board actions and decisions, including but not limited to
takeover-related matters. In deciding to include this provision in the New
Autoliv Certificate, New Autoliv considered that, under a number of
circumstances, certain stockholder interests may conflict with the interests of
other constituencies of the company and that this provision is desirable to
emphasize the New Autoliv Board's authority to act to maintain and protect New
Autoliv as an enterprise.
CHANGES IN THE RIGHTS OF SHAREHOLDERS RESULTING FROM THE COMBINATION
Upon consummation of the Exchange Offer, holders of Autoliv Securities who
tender such shares in the Exchange Offer will own New Autoliv Securities. Upon
consummation of the Merger, holders of Morton Common Stock will become entitled
to receive New Autoliv Securities. Autoliv is a corporation organized under the
laws of the Kingdom of Sweden, New Autoliv is a corporation incorporated under
the laws of the State of Delaware and Morton is a corporation incorporated under
the laws of the State of Indiana. The Companies Act governs Swedish companies,
the Delaware General Corporation Law (the "DGCL") is the statute which governs
Delaware corporations, and the IBCL is the statute which governs Indiana
corporations.
The following is a summary of certain significant differences between the
rights of holders of Autoliv Securities, holders of Morton Common Stock and
holders of New Autoliv Securities. These differences arise from differences
between the corporate laws of the Kingdom of Sweden, the State of Indiana and
the State of Delaware, as well as from differences between Autoliv's Articles of
Association ("Autoliv Articles"), the Morton Articles and the Morton Bylaws, on
the one hand, and the New Autoliv Certificate and the New Autoliv Bylaws, on the
other hand. See "Description of Capital Stock of New Autoliv" and Appendix H to
this Proxy Statement/Prospectus/Exchange Offer. This discussion is not, and does
not purport to be, complete, or to identify all differences that may, under
given situations, be material to shareholders. The summaries set forth herein
are qualified in their entirety by reference to the forms of New Autoliv
Certificate and New Autoliv Bylaws, which have been filed as exhibits to the New
Autoliv Registration Statement, and the Morton Articles and the Morton Bylaws.
SIZE AND CLASSIFICATION OF THE BOARD OF DIRECTORS
NEW AUTOLIV
The New Autoliv Certificate and New Autoliv Bylaws provide that the New
Autoliv Board shall be comprised of such number of directors as may be fixed
from time to time by resolution of the New Autoliv Board. New Autoliv will have,
as of the Effective Time, eight directors. See "Description of New Autoliv--
Directors and Executive Officers." As permitted under the DGCL, the New Autoliv
Board is classified into three classes which are to be as nearly equal in number
as is possible. Directors in each class will serve for a term of three years,
with the exception that the initial terms of the members of the first class will
expire at
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the 1998 Annual Meeting of Stockholders after which members of such class will
then be elected for a term of three years, and the initial terms of the members
of the second class will expire at the 1999 Annual Meeting of Stockholders,
after which members of such class will then be elected for a term of three
years. Elections are staggered such that one class is elected each year. The New
Autoliv Bylaws provide that, to the extent practicable, 50% of the New Autoliv
directors will be United States citizens and 50% of such directors will be
citizens of Sweden or the European Union member states.
AUTOLIV
The Autoliv Articles provide that the Autoliv Board shall consist of not
fewer than four and not more than eight directors with not more than three
deputy directors. Swedish law provides for the appointment of a maximum of three
additional and three deputy directors by the unions representing the company's
employees (employee representatives). Under Swedish law, the managing director
and at least half of the board members must be resident in a European Economic
Area country unless the Swedish government or an authority appointed by the
government in a particular case grants an exception. The term of office of a
director is one year. According to the Act on Board Representation for Employees
in the Private Sector, the unions may appoint employee representatives for a
period of time determined at the unions' discretion (but which will not exceed
four fiscal years). Autoliv currently has six directors elected at the annual
general meeting and no deputy director. In addition, the unions have appointed
two directors, and two deputy directors. The directors and deputy directors
(excluding those appointed by the unions) are elected at the annual meeting of
Autoliv stockholders for a term expiring at the end of the next annual meeting.
The Chairman of the Autoliv Board is appointed by the Autoliv Board.
MORTON
The Morton Articles provide that, subject to the rights of the holders of
any preferred stock of Morton ("Morton Preferred Stock"), the number of
directors is fixed by the Morton Board. Currently, the number of directors
serving on the Morton Board is 12, as fixed by a resolution of the Morton Board.
The Morton Articles provide for the Morton Board to be divided evenly into three
classes serving staggered terms, with elections staggered such that one class is
elected each year.
REMOVAL OF DIRECTORS
NEW AUTOLIV
The New Autoliv Certificate and New Autoliv Bylaws provide that directors
may be removed from office at any time, but only for cause and only by the
affirmative vote of the holders of 80% of the New Autoliv Common Stock.
Vacancies on the New Autoliv Board may be filled by the affirmative vote of a
majority of the remaining directors.
AUTOLIV
Under Swedish law, directors may be removed from office by stockholders at
any time at a meeting of stockholders, and vacancies on the Autoliv Board,
except when filled by a deputy director, may be filled only by stockholder
resolution except where statutory provisions or the Autoliv Articles prescribe
otherwise.
MORTON
Under the IBCL, directors may be removed in any manner provided in the
articles of incorporation. In addition, directors may be removed by the
shareholders or directors with or without cause unless a corporation's articles
of incorporation specify otherwise. The Morton Articles provide that directors
may be removed only for cause and only by the affirmative vote of the holders of
80% of the voting stock.
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MEETINGS OF STOCKHOLDERS
NEW AUTOLIV
The New Autoliv Certificate and the New Autoliv Bylaws provide that a
special meeting of stockholders may be called only by a resolution adopted by a
majority of the entire New Autoliv Board. Written notice of meetings of
stockholders shall be given by mail by New Autoliv to the stockholders, not less
than 10 days nor more than 60 days prior to the meeting. See "Description of
Capital Stock of New Autoliv-- Certain Provisions in the New Autoliv Certificate
and New Autoliv Bylaws--Limitations on Special Stockholders' Meetings and Right
to Act by Written Consent." The New Autoliv Bylaws also establish the
Stockholder Notice Procedure. See "Description of Capital Stock of New
Autoliv--Certain Provisions in the New Autoliv Certificate and New Autoliv
Bylaws--Procedures for Stockholder Nomination and Proposals."
AUTOLIV
Notice of a general meeting of stockholders is to be given not fewer than
two nor more than four weeks prior to the meeting. In order to be entitled to
attend and vote at a general meeting of stockholders, a stockholder must be
registered in the register of stockholders on the 10th day prior to the date of
the meeting. The Autoliv Articles provide that a stockholder must give notice to
Autoliv of his or her intention to attend the meeting not later than the date
specified in the notice of the meeting (which date may not be earlier than the
fifth day preceding the meeting). A stockholder may attend and vote at the
meeting in person or by proxy.
The Autoliv Articles provide that no participant at a general meeting of
stockholders may vote such participant's or another person's shares for a total
of more than one-fifth of the shares represented at the meeting. If anyone
participating at a general meeting of stockholders would, in the absence of the
restriction contained in the previous sentence, be able to vote more than
one-fifth of the shares represented at the meeting, the number of shares such
person will be entitled to vote will be reduced to the permitted level with the
reduction distributed across the share blocks represented.
According to the Companies Act, special meetings of stockholders will be
held whenever the board of directors deems it appropriate or when stockholders
owning one-tenth of all issued and outstanding shares of the company request the
company to do so. Notice convening such special meeting of stockholders will be
made by the company within 14 days after receipt of a written request for such
stockholder meeting. Such notice to stockholders will set the date of the
special meeting of stockholders, which shall be a date two to four weeks
(depending on the exact provisions of the company's articles of association)
from the date that such notice is given.
MORTON
The Morton Articles and the Morton Bylaws provide that, subject to the
rights of holders of any series of Morton Preferred Stock, special meetings of
shareholders can be called only by the Chairman of the Board or a majority of
the total number of directors which the Morton Board would have if there were no
vacancies. Shareholders are not permitted to call a special meeting or to
require that the Morton Board call a special meeting of shareholders. Moreover,
the business permitted to be conducted at any special meeting of shareholders is
limited to the business brought before the meeting pursuant to the notice of the
meeting.
The Morton Bylaws establish an advance notice procedure, which is
substantially the same as the Stockholder Notice Procedure, with regard to the
nomination, other than by or at the direction of the Morton Board, of candidates
for election as directors and with regard to certain matters to be brought
before an annual meeting of shareholders.
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ACTION BY WRITTEN CONSENT OF STOCKHOLDERS
NEW AUTOLIV
The New Autoliv Certificate provides that stockholders may act only by a
vote at a duly convened meeting of stockholders at which a quorum is present and
requires a Stockholder Supermajority Vote to amend this provision.
AUTOLIV
The Companies Act provides that stockholders, either personally or by a
representative pursuant to a written, dated power of attorney, may act only by a
vote at a duly convened meeting of stockholders, and regarding only matters on
the agenda for which such meeting has been convened.
MORTON
The IBCL permits shareholders to act without a meeting only by unanimous
written consent. Similar provisions are included in the Morton Articles and the
Morton Bylaws.
STOCKHOLDER VOTE REQUIRED FOR MERGERS OR CONSOLIDATIONS
NEW AUTOLIV
The DGCL requires that, before a merger or consolidation can be approved by
the stockholders, a resolution approving the merger must be adopted by the
corporation's board of directors. Pursuant to the DGCL, a merger must be
approved by the affirmative vote of at least a majority of the outstanding
shares entitled to vote thereon.
AUTOLIV
The Companies Act requires that, before a merger can be acted upon by
stockholders, the board of directors must adopt a plan of merger. The Companies
Act further provides that the plan of merger must be approved by a majority of
at least two-thirds of the votes cast, as well as at least two-thirds of the
shares represented, at the meeting. However, if the proposal would alter the
legal relationship among the existing stockholders, the unanimous approval of
the stockholders present at the meeting and who represent at least 90% of all
outstanding shares is normally required.
MORTON
The IBCL requires that, before a merger or consolidation can be acted upon
by shareholders, a board of directors must by resolution adopt an agreement and
plan of merger. The IBCL further provides that the agreement and plan of merger
must be approved by the holders of at least a majority of the outstanding shares
entitled to vote thereon.
BUSINESS COMBINATIONS WITH INTERESTED STOCKHOLDERS
NEW AUTOLIV
Section 203 of the DGCL prohibits a corporation which has securities traded
on a national securities exchange, designated on the NASDAQ National Market or
held of record by more than 2,000 stockholders from engaging in certain business
combinations, including a merger, sale of substantial assets, loan or
substantial issuance of stock, with an interested stockholder, or an interested
stockholder's affiliates or associates, for a three-year period beginning on the
date the interested stockholder acquires 15% or more of the outstanding voting
stock of the corporation. The restrictions on business combinations do not apply
if (a) the board of directors gives prior approval to the transaction in which
the 15% ownership level is exceeded, (b) the interested stockholder acquires 85%
or more of the corporation's outstanding stock in the same transaction in which
such stockholder's ownership first exceeds 15% (excluding those shares
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owned by persons who are directors and also officers as well as by employee
stock plans in which employees do not have the right to determine confidentially
whether shares held subject to such plan will be tendered in a tender or
exchange offer) or (c) the business combination is approved by the board of
directors and authorized at a meeting of stockholders by the holders of at least
two-thirds of the outstanding voting stock, excluding shares owned by the
interested stockholder. Although a Delaware corporation may elect, pursuant to
its certificate or bylaws, not to be governed by this provision, the New Autoliv
Certificate and the New Autoliv Bylaws contain no such election.
AUTOLIV
The Companies Act does not have provisions similar to those outlined above
with respect to business combinations.
MORTON
Section 23-1-43 of the IBCL ("Section 23-1-43") generally prohibits a
"resident domestic corporation" of Indiana, such as Morton, from engaging in any
Business Combination (defined generally to include mergers, certain asset or
stock sales, liquidations and other significant corporate transactions) with any
"interested shareholder" (defined generally as any person that, individually or
with or through any of its affiliates or associates, beneficially owns 10% or
more of the outstanding voting securities of the corporation) for a period of
five years after the date the person becomes an interested shareholder unless,
before such person became an interested shareholder, the board of directors of
the corporation approved either the Business Combination or the purchase of more
than 10% of the corporation's voting securities by the interested shareholder.
Section 23-1-43 also provides that a resident domestic corporation may not
engage in a merger or other Business Combination with an interested shareholder
at any time after such five-year period unless (a) certain "fair price" criteria
are satisfied (including a requirement that the interested shareholder and its
affiliates and associates have not purchased any additional shares after first
acquiring 10% of the corporation's voting securities) or (b) the Business
Combination is approved by the holders of a majority of the outstanding shares
of the corporation, excluding shares owned by the interested shareholder.
DISSENTERS' RIGHTS
NEW AUTOLIV
Under the DGCL, dissenters' rights of appraisal are limited. Rights of
appraisal are available to a stockholder of a corporation only in connection
with certain mergers or consolidations involving such corporation, amendments to
the certificate of incorporation of such corporation (if so provided in the
certificate of incorporation, which is not the case for New Autoliv) or sales of
all or substantially all of the assets of such corporation. However, appraisal
rights are not available under the DGCL if the corporation's stock is (prior to
the applicable transaction) listed on a national securities exchange or
designated on the NASDAQ National Market or held of record by more than 2,000
stockholders; provided that appraisal rights will be available if the merger or
consolidation requires stockholders to exchange their stock for anything other
than shares of the surviving corporation; shares of another corporation that
will be listed on a national securities exchange, designated on the NASDAQ
National Market or held of record by more than 2,000 stockholders; cash in lieu
of fractional shares of any such corporation; or a combination of such shares
and such cash.
AUTOLIV
Under the Companies Act, when a person alone or together with one or more
subsidiaries owns more than 90% of all the share capital in a company
representing more than 90% of the votes entitled to be cast at a general meeting
of stockholders, such person is entitled to purchase the remaining shares of
such company. A person whose shares are subject to such right of purchase may
require the 90% owner to
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purchase such person's shares. Unless the 90% owner and person whose shares are
subject to the right of purchase agree on the price to be paid for the shares,
an arbitration tribunal will determine a reasonable price. In the case of a
compulsory acquisition following an offer to purchase made to a substantial
number of persons pursuant to which the 90% owner has acquired more than the
majority of the shares, the price will usually be the same as the price paid in
the offer.
MORTON
Under the IBCL, there are no dissenters' rights for shareholders of a
company which has shares registered on a national securities exchange or traded
on the NASDAQ National Market.
DIVIDENDS
NEW AUTOLIV
Under the DGCL, a corporation may declare and pay dividends out of "surplus"
(defined as net assets minus capital) or, if there is no surplus, out of net
profits for the fiscal year in which the dividend is declared and/or for the
preceding fiscal year as long as the amount of capital of the corporation
following the declaration and payment of the dividend is not less than the
aggregate amount of the capital represented by the issued and outstanding stock
of all classes having a preference upon the distribution of assets. The New
Autoliv Bylaws further provide that dividends may be declared at the discretion
of the New Autoliv Board only after setting aside sufficient funds that the New
Autoliv Board, in its absolute discretion, deems proper as a reserve to meet
contingencies. The New Autoliv Bylaws provide that dividends may be paid to
holders of the shares of stock of New Autoliv in cash, in property, or in shares
of the capital stock.
AUTOLIV
Under the Companies Act, only stockholders at a general meeting (except,
under limited circumstances, where a demand is made by holders of at least 10%
of the total number of shares outstanding) may authorize the payment of
dividends, and such payment may not exceed the amount recommended by the Autoliv
Board. Under Swedish law, no dividends may be paid in respect of a fiscal period
for which audited financial statements have not been adopted at the annual
meeting of stockholders. It is the normal practice in Sweden to pay only annual
dividends. It has been the practice of the Autoliv Board to decide upon and
publicly announce their dividend recommendation with respect to the preceding
fiscal year not later than in February of each year. The recommendation of the
Autoliv Board is considered at Autoliv's annual meeting, which is usually held
in April of the year following the year with respect to which the dividend is
paid.
MORTON
Under the IBCL, the payment of dividends and repurchases or redemptions of
stock are permitted if, after giving effect to such action, the corporation is
able to pay its debts as they become due in the ordinary course of business and
the corporation's total assets exceed its total liabilities plus the amount that
would be needed for preferential rights upon dissolution. The board of directors
may base its determination that these requirements have been met on the
corporation's financial statements prepared on the basis of accounting practices
and principles that are reasonable under the circumstances or on a fair
valuation or other method that is reasonable under the circumstances.
PREEMPTIVE RIGHTS
NEW AUTOLIV
The New Autoliv Certificate and the New Autoliv Bylaws do not provide for
preemptive rights. In addition, the DGCL does not provide for preemptive rights
unless specifically provided for in the certificate of incorporation of a
corporation.
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AUTOLIV
Under Swedish law, stockholders must approve the issuance of new shares, and
existing stockholders have preferential rights to subscribe for a number of
shares in such issuance in proportion to their shareholdings, unless the
resolution for issuance or the company's articles of association provide
otherwise. A resolution whose terms deviate from the foregoing principles is
normally valid if stockholders in favor of the resolution represent at least
two-thirds of the votes cast and shares represented at the meeting. The Autoliv
Articles do not contain provisions inconsistent with the Companies Act with
respect to preemptive rights.
MORTON
The IBCL does not provide for preemptive rights unless specifically
authorized in a corporation's articles of incorporation. The Morton Articles do
not provide for preemptive rights.
AMENDMENT OF CHARTER DOCUMENTS
NEW AUTOLIV
See "Description of Capital Stock of New Autoliv--Certain Provisions in the
New Autoliv Certificate and New Autoliv Bylaws--Amendment of the New Autoliv
Certificate and New Autoliv Bylaws."
AUTOLIV
The Companies Act provides that the affirmative vote of two-thirds of the
votes cast as well as two-thirds of all shares represented at a stockholders
meeting is required to amend provisions of a company's articles of association.
Resolutions to amend the Autoliv Articles which reduce any stockholder's rights
to profits or assets, restrict the transferability of shares or alter the legal
relationship between different stockholders normally require the unanimous
approval of the stockholders present at a meeting, and the stockholders voting
for approval of the resolution must represent at least 90% of all issued shares.
A resolution to amend the Autoliv Articles for the purpose of limiting the
number of shares which a stockholder may vote at a general meeting or requiring
the retention of a larger amount of the net profit than required by the
Companies Act or amending the stockholders' rights in a liquidation or
dissolution normally requires the approval of the stockholders representing
two-thirds of the votes cast, and 90% of the shares represented, at the meeting.
MORTON
The IBCL reserves the power to amend or repeal bylaws solely to a
corporation's board of directors unless the articles of incorporation provide
otherwise. The Morton Articles provide that only the Morton Board has the power
to amend the Morton Bylaws. In order to amend a corporation's articles of
incorporation, the IBCL requires the board of directors' recommendation of the
amendment (unless, based on a conflict of interest, it can make no
recommendation), and the approval by a majority of the votes entitled to be cast
by shareholders, or by such higher vote as may be required by the corporation's
articles of incorporation. The Morton Articles require the vote of at least 80%
of the voting power of Morton's stock to amend provisions in the Morton Articles
relating to (a) election and removal of directors, (b) shareholder action by
written consent, (c) calling of special meetings of shareholders, and (d)
business combinations with interested shareholders.
DIRECTOR LIABILITY
NEW AUTOLIV
The DGCL permits Delaware corporations, in their certificates of
incorporation, to eliminate director liability for money damages for breach of
fiduciary duty, except for liability (a) for any breach of the
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director's duty of loyalty to the corporation or its stockholders, (b) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (c) arising from the payment of a dividend or approval
of a stock repurchase in violation of the DGCL, or (d) for any transaction from
which the director derived an improper personal benefit.
AUTOLIV
The Companies Act provides that a board member and a managing director may
be liable to compensate the company for any loss incurred as a result of a
willful act or negligence on behalf of such board member or managing director in
the performance of his or her duties. The same applies when any damage is caused
to a stockholder or a third party if such damage is a result of a violation of
the Companies Act, the applicable Act on Annual Reports or the articles of
association of the company.
MORTON
The IBCL sets standards of conduct for directors that are similar to those
established by the DGCL. Under the IBCL, however, a director is not liable for
money damages for any breach or failure to perform his or her duties unless such
breach or failure constitutes willful misconduct or recklessness. The Morton
Articles contain a provision limiting the liability of directors, officers and
others to the fullest extent provided by the IBCL.
INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS
NEW AUTOLIV
The DGCL permits indemnification of officers, directors, employees and
agents against liabilities and expenses incurred in proceedings if such person
acted in good faith and in a manner such person reasonably believed to be in or
not opposed to the best interests of the corporation and, with respect to any
criminal action, had no reasonable cause to believe such person's conduct was
unlawful. In the case of derivative actions, indemnification is limited to
expenses and no indemnification may be made in respect of any claim, issue or
matter as to which such person has been adjudged to be liable to the corporation
unless indemnification is otherwise authorized by a court. The New Autoliv
Certificate requires New Autoliv to indemnify such persons to the maximum extent
permitted by law.
AUTOLIV
The Companies Act does not contain specific provisions relating to the
indemnification of directors, officers or other persons. It is not uncommon,
however, for listed Swedish companies to enter into specific insurance
arrangements for its directors and officers.
MORTON
The IBCL permits indemnification of officers, directors, employees and
agents against liabilities and expenses incurred in proceedings if the person
acted in good faith and reasonably believed (a) in the case of conduct in such
person's official capacity with the corporation, that such person's conduct was
in its best interests, and (b) in all other cases, that such person's conduct
was at least not opposed to its best interests. In the case of any criminal
proceeding, the person must either have reasonable cause to believe the conduct
was lawful or had no reasonable cause to believe the conduct was unlawful. Both
the IBCL and the DGCL provide that the statutory indemnification is not
exclusive of rights to indemnification provided in the charter or bylaws, or
through resolutions of its board of directors or shareholders.
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ADDITIONAL PROVISIONS RELATING TO BOARD ACTION
NEW AUTOLIV
Delaware law generally permits a board of directors to consider
constituencies in addition to stockholders, even though the DGCL does not
contain specific provisions to that effect. The New Autoliv Certificate contains
a specific provision authorizing the New Autoliv Board to consider, in its
discretion and subject to the DGCL, the impact of any corporate action upon
creditors, customers, employees and other constituencies of New Autoliv and its
subsidiaries, and the effect upon communities in which New Autoliv and its
subsidiaries do business. See "Description of Capital Stock of New
Autoliv--Certain Provisions in the New Autoliv Certificate and New Autoliv
Bylaws."
AUTOLIV
Under Swedish law, the members of the board of directors are under the
obligation to act in the best interest of the company and its stockholders. The
board of directors, under Swedish law, is not under any obligation to approve
any proposed business combination or any other corporate action, unless the
board determines in good faith that such action is in the best interest of the
company and its stockholders. In making such determination, the board members
are authorized to consider both the short-term and long-term interests of the
company as well as other constituencies and other relevant factors.
MORTON
The IBCL specifically authorizes directors, in considering the best
interests of a corporation, to consider the effects of any action on
shareholders, employees, suppliers, and customers of the corporation, and
communities in which offices or other facilities of the corporation are located,
and any other factors the directors consider pertinent. The Morton Articles
contain a provision having a similar effect. Under the IBCL, the directors are
not required to approve a proposed business combination or other corporate
action if the directors determine in good faith that such approval is not in the
best interests of the corporation. In addition, the IBCL states that directors
are not required to redeem any rights under or render inapplicable a shareholder
rights plan or to take or decline to take any action solely because of the
effect such action might have on a proposed change of control of the corporation
or the amounts to be paid to shareholders upon such a change of control. The
IBCL explicitly provides that the different or higher degree of scrutiny imposed
in Delaware and certain other jurisdictions upon director actions taken in
response to potential changes in control will not apply. The Delaware Supreme
Court has held that defensive measures in response to a potential takeover must
be "reasonable in relation to the threat posed."
In taking or declining to take any action or in making any recommendation to
a corporation's shareholders with respect to any matter, directors are
authorized under the IBCL to consider both the short-term and long-term
interests of the corporation as well as interests of other constituencies and
other relevant factors. Any determination made with respect to the foregoing by
a majority of the disinterested directors shall conclusively be presumed to be
valid unless it can be demonstrated that such determination was not made in good
faith.
NO DISSENTERS' RIGHTS
Holders of Morton Common Stock will not have the right to elect to have the
fair value of their shares of Morton Common Stock judicially appraised and paid
to them in cash in connection with the Spinoff or the Merger. Section 23-1-44-8
of the IBCL ("Section 23-1-44-8") provides dissenters' rights to shareholders of
Indiana corporations in connection with certain mergers and other extraordinary
transactions. Under Section 23-1-44-8, dissenters' rights are not available to
the shareholders of a corporation in
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connection with such transactions if the corporation's shares are registered on
a U.S. securities exchange (the NYSE in the case of Morton) that is registered
under the Exchange Act.
STOCK EXCHANGE LISTINGS AND DELISTINGS
Pursuant to the Combination Agreement, New Autoliv has agreed to use
reasonable efforts to have the SDRs approved for listing prior to the Effective
Time on the SSE and the shares of New Autoliv Common Stock approved for listing
prior to the Effective Time on the NYSE and on any additional exchanges which it
deems appropriate. Morton has agreed to use reasonable efforts to have the
Morton Common Stock delisted from the NYSE and deregistered under the Exchange
Act as soon as practicable following the Effective Time if Morton and Autoliv
reasonably judge such actions to be necessary to the consummation of the
Transactions. Autoliv has agreed to use reasonable efforts to have the Autoliv
Common Stock delisted from the SSE and the quotation of the ADSs on the PORTAL
system to be terminated as soon as permitted under applicable laws.
EXPERTS
The combined financial statements of Automotive Safety Products, an
operating group of Morton International, Inc. at June 30, 1996 and 1995, and for
each of the three years in the period ended June 30, 1996, included in this
Proxy Statement/Prospectus/Exchange Offer have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report appearing elsewhere
herein, and are included in reliance upon such report given upon the authority
of such firm as experts in accounting and auditing.
The consolidated financial statements of Morton International, Inc.
incorporated by reference in Morton International, Inc.'s Annual Report (Form
10-K) for the year ended June 30, 1996, have been audited by Ernst and Young
LLP, independent auditors, as set forth in their report thereon incorporated by
reference therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
The consolidated financial statements of Autoliv and its subsidiaries at
December 31, 1996, 1995 and 1994, and for each of the three years contained in
the three-year period ended December 31, 1996, included in this Proxy
Statement/Prospectus/Exchange Offer, except as they relate to Franco Suedoise
d'Investissements SA, Livbag SA and Livbag SNC, Autoliv France SNC and Autoliv
GmbH, have been audited by Ernst & Young AB, independent auditors, and, as they
relate to Franco Suedoise d'Investissements SA, Livbag SA and Livbag SNC,
Autoliv France SNC and Autoliv GmbH, have been audited by, respectively,
Befec-Price Waterhouse and SYC SA; Serge Yablonsky; Befec-Price Waterhouse and
Serge Yablonsky; and KPMG Deutsche Treuhand-Gesellschaft AB, each independent
auditors, as set forth in their reports appearing elsewhere herein, and are
included in reliance upon such reports given upon the authority of such firms as
experts in accounting and auditing.
Representatives of Ernst & Young LLP are expected to be present at the
Morton Special Meeting. These representatives will have an opportunity to make
statements if they so desire and will be available to respond to appropriate
questions.
LEGAL MATTERS
The validity of the shares of New Autoliv Common Stock to be issued pursuant
to the Merger and the Exchange Offer will be passed upon by Wachtell, Lipton,
Rosen & Katz and by Skadden, Arps, Slate, Meagher & Flom LLP, respectively.
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SUBMISSION OF SHAREHOLDER PROPOSALS
Due to the contemplated consummation of the Merger, Morton (as it currently
exists) does not currently intend to hold a 1997 Annual Meeting of Shareholders
because, following the Merger, Morton will not be a publicly traded company. In
the event that the Transactions are not consummated and such a meeting is held,
any proposals of shareholders intended to be included in the proxy statement for
the 1997 Annual Meeting of Shareholders must have been received by the Corporate
Secretary of Morton at its principal executive offices no later than May 20,
1997. In addition, the Morton Bylaws provide that any Morton shareholder wishing
to introduce a proposal on business to be considered at the 1997 Annual Meeting
of Shareholders, if held, must notify Morton's Corporate Secretary of such
shareholder's intentions and provide certain other information in advance of
such meeting, in accordance with the procedures detailed in the Morton Bylaws. A
copy of the Morton Bylaws may be obtained from the Corporate Secretary of
Morton.
New Morton, which will be named "Morton International, Inc." at the time of
its first annual meeting, however, will hold a 1997 Annual Meeting of
Shareholders if the Transactions are consummated. For information on submitting
shareholder proposals for such meeting, see the New Morton Information
Statement.
WHERE SHAREHOLDERS CAN FIND MORE INFORMATION
Morton files annual, quarterly and special reports, proxy statements and
other information with the SEC. Following the consummation of the Transactions,
New Morton and New Autoliv will also make these filings with the SEC. You may
read and copy any reports, statements or other information that the companies
file at the SEC's public reference rooms in Washington, D.C., New York, New York
and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. In addition, Morton's SEC filings
are, and New Autoliv's filings will be, available to the public from commercial
document retrieval services and at the Internet web site maintained by the SEC
at "http://www.sec.gov."
New Autoliv has filed the New Autoliv Registration Statement to register
with the SEC the shares of New Autoliv Common Stock to be issued to Morton and
Autoliv shareholders in the Merger and the Exchange Offer. This Proxy
Statement/Prospectus/Exchange Offer is a part of the New Autoliv Registration
Statement and constitutes a prospectus of New Autoliv, as well as a proxy
statement of Morton for the Morton Special Meeting. In addition, New Morton has
filed a registration statement on Form 10 (the "New Morton Registration
Statement") of which the New Morton Information Statement is a part. The New
Morton Information Statement is being furnished to Morton shareholders along
with this Proxy Statement/Prospectus/Exchange Offer.
As allowed by SEC rules, this Proxy Statement/Prospectus/Exchange Offer does
not contain all the information that shareholders can find in the New Autoliv
Registration Statement or the exhibits to that registration statement.
Similarly, the New Morton Information Statement does not contain all the
information that shareholders can find in the New Morton Registration Statement.
The SEC allows Morton to "incorporate by reference" information into this
Proxy Statement/ Prospectus/Exchange Offer, which means that Morton can disclose
important information to you by referring you to another document filed
separately with the SEC. The information incorporated by reference is deemed to
be part of this Proxy Statement/Prospectus/Exchange Offer, except for any
information superseded by information contained directly in the Proxy
Statement/Prospectus/Exchange Offer. This Proxy Statement/Prospectus/Exchange
Offer incorporates by reference the documents set forth
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below that Morton has previously filed with the SEC. These documents contain
important information about Morton and its financial condition.
<TABLE>
<CAPTION>
MORTON SEC FILINGS (FILE NO. 1-10270) PERIOD
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Annual Report on Form 10-K.............................. Year ended June 30, 1996
Quarterly Reports on Forms 10-Q......................... Quarters ended September 30, 1996 and December 31, 1996
Current Reports on Forms 8-K............................ Dated September 30, 1996, November 22, 1996 and November
25, 1996
</TABLE>
Morton is also incorporating by reference additional documents that it files
with the SEC pursuant to Section 13(a), 13(c), 14 or 15 of the Exchange Act
between the date of this Proxy Statement/Prospectus/ Exchange Offer and the date
of the Morton Special Meeting.
Morton has supplied all information contained or incorporated by reference
in this Proxy Statement/ Prospectus/Exchange Offer relating to Morton and ASP,
and Autoliv has supplied all such information relating to Autoliv.
If you are a Morton shareholder, Morton may have sent you some of the
documents incorporated by reference, but Morton or Autoliv shareholders
(including beneficial owners) can obtain any of them through Morton or the SEC
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act. Documents
incorporated by reference are available from Morton without charge, excluding
all exhibits unless Morton has incorporated by reference in this Proxy
Statement/Prospectus/Exchange Offer any information which, in turn, specifically
incorporates by reference an exhibit. Shareholders may obtain documents
incorporated by reference in this Proxy Statement/Prospectus/Exchange Offer by
requesting them in writing or by telephone from Morton at the following address:
Morton International, Inc.
Corporate Secretary
100 North Riverside Plaza
Chicago, Illinois 60606
Tel.: (312) 807-2422
If you would like to request documents from Morton, please do so by April
17, 1997 to receive them before the Morton Special Meeting.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS/EXCHANGE OFFER TO VOTE YOUR MORTON
SHARES ON THE MERGER AND ON THE SPINOFF OR TO TENDER YOUR AUTOLIV SECURITIES IN
THE EXCHANGE OFFER. MORTON AND NEW AUTOLIV HAVE NOT AUTHORIZED ANYONE TO PROVIDE
YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS PROXY
STATEMENT/ PROSPECTUS/ EXCHANGE OFFER. THIS PROXY STATEMENT/PROSPECTUS/EXCHANGE
OFFER IS DATED MARCH 24, 1997. YOU SHOULD NOT ASSUME THAT THE INFORMATION
CONTAINED IN THE PROXY STATEMENT/PROSPECTUS/EXCHANGE OFFER IS ACCURATE AS OF ANY
DATE OTHER THAN THAT DATE, AND NEITHER THE MAILING OF THIS PROXY
STATEMENT/PROSPECTUS/EXCHANGE OFFER TO SHAREHOLDERS NOR THE ISSUANCE OF NEW
AUTOLIV COMMON STOCK IN THE MERGER AND THE EXCHANGE OFFER OR OF NEW MORTON
COMMON STOCK IN THE SPINOFF SHALL CREATE ANY IMPLICATION TO THE CONTRARY.
159
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
AUTOLIV AND ITS CONSOLIDATED SUBSIDIARIES
Independent Auditors Reports............................................................................... F-2
Consolidated Statements of Income for the years ended December 31, 1996, 1995 and 1994..................... F-7
Consolidated Balance Sheets as of December 31, 1996 and 1995............................................... F-8
Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1995 and 1994................. F-9
Notes to the Consolidated Financial Statements............................................................. F-10
ASP BUSINESS
Independent Auditors Report................................................................................ F-19
Combined Statements of Income for the years ended June 30, 1996, 1995 and 1994............................. F-20
Combined Balance Sheets as of June 30, 1996 and 1995....................................................... F-21
Combined Statements of Cash Flows for the years ended June 30, 1996, 1995 and 1994......................... F-22
Notes to Combined Financial Statements..................................................................... F-23
Combined Statements of Income (Unaudited) for the six months ended December 31, 1996 and 1995.............. F-32
Combined Balance Sheet (Unaudited) as of December 31, 1996................................................. F-33
Combined Statements of Cash Flows (Unaudited) for the six months ended December 31, 1996 and 1995.......... F-34
Combined Statements of Equity (Unaudited) for the six months ended December 31, 1996 and 1995.............. F-35
Notes to Combined Financial Statements (Unaudited)......................................................... F-36
Combined Balance Sheet (Unaudited) as of June 30, 1994..................................................... F-38
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying consolidated balance sheets of Autoliv AB
and subsidiaries as of December 31, 1995 and 1996 and the related consolidated
statements of income and shareholders' equity and cash flows for the years ended
December 31, 1994, 1995 and 1996. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits. We
did not audit the financial statements of Autoliv GmbH, Franco Suedoise
d'Investissements SA, Autoliv France SNC, Livbag SA and Livbag SNC as of
December 31, 1995 and 1996 and the related statements of income for the years
ended December 31, 1994, 1995 and 1996, which financial statements were prepared
in accordance with the standards of the International Accounting Standards
Committee ("IAS") and reflect total assets of 51% and 56% as of December 31,
1995 and 1996, respectively, and total revenues of 63%, 64% and 57% for the
years ended December 31, 1994, 1995 and 1996, respectively, of the consolidated
totals. Those statements were audited by other auditors whose reports have been
furnished to us and our opinion, insofar as it relates to the amounts included
for those entities, is based solely on the reports of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the Financial Statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts (including in the case of the subject company
the conversion of the financial statements of Autoliv GmbH, Franco Suedoise
d'Investissements SA, Autoliv France SNC, Livbag SA and Livbag SNC to United
States generally accepted accounting principles, which conversion resolved the
exceptions set forth in the third and fourth paragraphs of the accompanying
opinions, set forth on pages F-3 to F-6, with respect to these companies) and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits and the reports of the other auditors provide a reasonable basis for our
opinion.
In our opinion, based on our audits and the reports of the other auditors,
the consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Autoliv AB and
subsidiaries as of December 31, 1995 and 1996, and the consolidated results of
their operations and their consolidated cash flows for the years ended December
31, 1994, 1995 and 1996, in conformity with United States generally accepted
accounting principles.
ERNST & YOUNG AB
.
Ulf Spang
Authorized Public Accountant
Stockholm, Sweden
January 30, 1997
F-2
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors
AUTOLIV AB
Box 70381
S-107 24 Stockholm
SUEDE
We have audited the balance sheets of Autoliv France SNC (the "Company") as
of December 31, 1995 and 1996 and the related statements of income for the years
ended December 31, 1994, 1995 and 1996 (the "Financial Statements" (not
presented herein)). These Financial Statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
Financial Statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the Financial
Statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the Financial
Statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
The Financial Statements have been prepared by the Company for consolidation
purposes of Autoliv AB. The Company has not prepared statements of cash flows
and retained earnings for the years ended December 31, 1994, 1995 and 1996.
Presentation of such statements summarizing the Company's operating, investing
and financing activities and the movement in retained earnings respectively is
required by the standards of the International Accounting Standards Committee
("IAS").
Furthermore, the Company's Financial Statements omit inclusion of certain
notes to the financial statements. In our opinion, such note disclosures are
required by international accounting principles.
In our opinion, except for the omission of statements of cash flows and
retained earnings and notes to the financial statements, to be prepared at
Autoliv Group Level, which result in an incomplete presentation in accordance
with IAS, as explained in the previous two paragraphs, and except for a top
adjustment for deferred taxes accounted for at consolidation level, the
Financial Statements referred to above present fairly, for Group reporting
purposes, the financial position of the Company as of December 31, 1995 and
1996, and the results of its operations for the years ended December 31, 1994,
1995 and 1996, in conformity with IAS.
Paris, France
January 27, 1997
<TABLE>
<S> <C>
For BEFEC-PRICE WATERHOUSE S. YABLONSKY
Statutory auditor Statutory auditor
J. VANTALON
</TABLE>
F-3
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors
AUTOLIV AB
Box 70381
S-107 24 Stockholm
SUEDE
We have audited the balance sheets of Franco Suedoise d'Investissements SA
(the "Company") as of December 31, 1995 and 1996 and the related statements of
income for the years ended December 31, 1994, 1995 and 1996 (the "Financial
Statements" (not presented herein)). These Financial Statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these Financial Statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the Financial
Statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the Financial
Statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
The Financial Statements have been prepared by the Company for consolidation
purposes of Autoliv AB. The Company has not prepared statements of cash flows
and retained earnings for the years ended December 31, 1994, 1995 and 1996.
Presentation of such statements summarizing the Company's operating, investing
and financing activities and the movement in retained earnings respectively is
required by the standards of the International Accounting Standards Committee
("IAS").
Furthermore, the Company's Financial Statements omit inclusion of certain
notes to the financial statements. In our opinion, such note disclosures are
required by international accounting principles.
In our opinion, except for the omission of statements of cash flows and
retained earnings and notes to the financial statements, to be prepared at
Autoliv Group Level, which result in an incomplete presentation in accordance
with IAS, as explained in the previous two paragraphs, and except for a top
adjustment for deferred taxes accounted for at consolidation level, the
Financial Statements referred to above present fairly, for Group reporting
purposes, the financial position of the Company as of December 31, 1995 and
1996, and the results of its operations for the years ended December 31, 1994,
1995 and 1996, in conformity with IAS.
Paris, France
January 27, 1997
<TABLE>
<S> <C>
For BEFEC-PRICE WATERHOUSE For SYC SA
Statutory auditor Statutory auditor
J. VANTALON S. YABLONSKY
</TABLE>
F-4
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors
AUTOLIV AB
Box 70381
S-107 24 Stockholm
SUEDE
We have audited the balance sheets of LIVBAG SA + LIVBAG SNC (the "Company")
as of December 31, 1995 and 1996 and the related statements of income for the
years ended December 31, 1994, 1995 and 1996 (the "Financial Statements" (not
presented herein)). These Financial Statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
Financial Statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the Financial
Statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the Financial
Statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
The Financial Statements have been prepared by the Company for consolidation
purposes of Autoliv AB. The Company has not prepared statements of cash flows
and retained earnings for years ended December 31, 1994, 1995 and 1996.
Presentation of such statements summarizing the Company's operating, investing
and financing activities and the movement in retained earnings respectively is
required by the standards of the International Accounting Standards Committee
("IAS").
Furthermore, the Company's Financial Statements omit inclusion of certain
notes to the financial statements. In our opinion, such note disclosures are
required by international accounting principles.
In our opinion, except for the omission of statements of cash flows and
retained earnings and notes to the financial statements, to be prepared at
Autoliv Group Level, which result in an incomplete presentation in accordance
with IAS, as explained in the previous two paragraphs, and except for a top
adjustment for deferred taxes accounted for at consolidation level, the
Financial Statements referred to above present fairly, for Group reporting
purposes, the financial position of the Company as of December 31, 1995 and
1996, and the results of its operations for the years ended December 31, 1994,
1995 and 1996, in conformity with IAS.
Paris, France
January 27, 1997
S. YABLONSKY
Statutory auditor
F-5
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Autoliv AB
We have audited the balance sheets of Autoliv GmbH (the "Company") as of
December 31, 1995 and 1996 and the related statements of income for the years
ended December 31, 1994, 1995 and 1996 (the "Financial Statements" (not
presented herein)). These Financial Statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
Financial Statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the Financial
Statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the Financial
Statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
The Financial Statements have been prepared by the Company for consolidation
purposes of Autoliv AB. The Company has not prepared statements of cash flows
and retained earnings for the years ended December 31, 1994, 1995 and 1996.
Presentation of such statements summarizing the Company's operating, investing
and financing activities and the movement in retained earnings respectively is
required by the standards of the International Accounting Standards Committee
("IAS").
Furthermore, the Company's Financial Statements omit inclusion of certain
notes to the financial statements. In our opinion, such note disclosures are
required by international accounting principles.
In our opinion, except for the omission of statements of cash flows and
retained earnings and notes to the financial statements, to be prepared at
Autoliv Group level, which result in an incomplete presentation in accordance
with IAS, as explained in the previous two paragraphs, the Financial Statements
referred to above present fairly, for Group reporting purposes, the financial
position of the Company as of December 31, 1995 and 1996, and the results of its
operations for the years ended December 31, 1994, 1995 and 1996, in conformity
with IAS.
KPMG DEUTSCHE TREUHAND-GESELLSCHAFT AG
Hamburg, Germany
January 27, 1997
F-6
<PAGE>
AUTOLIV AND ITS CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
<S> <C> <C> <C> <C>
IN MSEK, EXCEPT PER SHARE AND SHARE AMOUNTS 1996 1995 1994
- ------------------------------------------------------------- ------------ ------------ ------------
Net sales.................................................... 11,629 10,201 8,947
Cost of sales................................................ 9,300 8,193 7,412
------------ ------------ ------------
Gross profit................................................. 2,329 2,008 1,535
Selling, administration and general expenses................. 512 467 403
Research and development expenses............................ 671 623 408
Amortization of intangibles.................................. Note 4 75 28 101
Other income--net............................................ (22) (26) (41)
------------ ------------ ------------
Operating income............................................. 1,093 916 664
Equity in net income of affiliated companies................. 50 35 15
Interest income.............................................. 38 77 46
Interest expense............................................. (36) (19) (45)
------------ ------------ ------------
Income before taxes.......................................... 1,145 1,009 680
Income taxes................................................. Note 6 (381) (360) (250)
Income before minority interest.............................. 764 649 430
Minority interests in net earnings of subsidiaries........... (4)
------------ ------------ ------------
Net income................................................... 760 649 430
------------ ------------ ------------
------------ ------------ ------------
Earnings per share (adjusted to reflect the effect of the 2
for 1 stock split effective in May 1996)................... 13.82 11.80 8.15
------------ ------------ ------------
------------ ------------ ------------
Weighted average number of shares outstanding (adjusted to
reflect the effect of the 2 for 1 stock split effective in
May 1996).................................................. 55,000,000 55,000,000 52,820,000
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these statements.
F-7
<PAGE>
AUTOLIV AND ITS CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
IN MSEK 1996 1995
- ------------------------------------------------------------------------------------ --------- ---------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents........................................................... 905 1,074
Receivables, less allowances for doubtful accounts of 32 MSEK in 1996 and 19 MSEK in
1995............................................................................... 2,635 1,961
Inventories......................................................................... Note 7 692 521
Income taxes receivable............................................................. 109 62
Prepaids............................................................................ 64 123
--------- ---------
TOTAL CURRENT ASSETS................................................................ 4,405 3,741
Investments in affiliated companies................................................. 179 477
Intangible assets (mainly acquisition goodwill) less amortization of
MSEK 291 in 1996 and MSEK 212 in 1995.............................................. 440 45
Machinery and equipment............................................................. 3,004 2,000
Buildings........................................................................... 904 412
Land and land improvements.......................................................... 84 27
Construction in progress............................................................ 246 189
--------- ---------
4,238 2,628
Less accumulated depreciation....................................................... (2,024) (1,306)
--------- ---------
2,214 1,322
--------- ---------
TOTAL ASSETS........................................................................ 7,238 5,585
--------- ---------
--------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term debt..................................................................... Note 8 426 221
Accounts payable.................................................................... 1,584 1,207
Accrued expenses.................................................................... 1,251 1,129
Other current liabilities........................................................... 348 286
Income taxes payable................................................................ 145 116
--------- ---------
TOTAL CURRENT LIABILITIES........................................................... 3,754 2,959
Long-term debt...................................................................... Note 9 88 37
Deferred income taxes............................................................... Note 6 11 --
Other noncurrent liabilities........................................................ 84 62
Minority interests in subsidiaries.................................................. 151 --
Common stock........................................................................
(200,000,000 shares, par value SEK 10 per share, authorized; 55,000,000 shares, par
value SEK 10 per share, and 27,500,000 shares, par value
SEK 20 per share, outstanding at December 31, 1996 and 1995, respectively)......... 550 550
Restricted reserves................................................................. 592 642
Retained earnings................................................................... 2,008 1,335
--------- ---------
TOTAL SHAREHOLDERS' EQUITY.......................................................... Note 10 3,150 2,527
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.......................................... 7,238 5,585
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of these statements.
F-8
<PAGE>
AUTOLIV AND ITS CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
IN MSEK 1996 1995 1994
- --------------------------------------------------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income............................................................................. 760 649 430
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization........................................................ 550 413 437
Deferred income taxes................................................................ (1) (5) (14)
Equity in net income of affiliated companies......................................... (50) (35) (15)
Changes in operating assets and liabilities:
Receivables and other assets....................................................... (91) 69 (766)
Inventories........................................................................ (31) (31) (65)
Accounts payable and accrued expenses.............................................. 20 (48) 1,396
Income taxes....................................................................... (81) 123 (262)
--------- --------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES.............................................. 1,076 1,135 1,141
INVESTING ACTIVITIES
Expenditure for property, plant and equipment.......................................... (991) (706) (588)
Acquisition of businesses and investments in affiliated companies...................... (460) (369) (12)
Other.................................................................................. 38 24 25
--------- --------- ---------
NET CASH USED FOR INVESTING ACTIVITIES................................................. (1,413) (1,051) (575)
FINANCING ACTIVITIES
Increase/(decrease) in short-term debt................................................. 133 55 (136)
Increase in long term liabilities...................................................... 20 22 21
Increase in minority interest.......................................................... 151 -- --
Dividends paid......................................................................... (124) (82) --
Proceeds from issuance of common stock................................................. -- -- 414
Other--net............................................................................. (1) (30) 22
--------- --------- ---------
NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES................................... 179 (35) 321
Effect of exchange rate changes on cash................................................ (11) (20) (1)
Increase/(decrease) in cash and cash equivalents....................................... (169) 29 886
Cash and cash equivalents at beginning of year......................................... 1,074 1,045 159
--------- --------- ---------
Cash and cash equivalents at end of year 905 1,074 1,045
--------- --------- ---------
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid.......................................................................... 34 19 44
Income taxes paid...................................................................... 399 444 85
</TABLE>
The accompanying notes are an integral part of these statements.
F-9
<PAGE>
AUTOLIV AND ITS CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. NATURE OF OPERATIONS
Autoliv AB (the "Company") produces seat belts and airbag modules for almost
all major European automobile manufacturers and seat belts for all major U.S.
automobile manufacturers. Autoliv revenues are generated exclusively by sales to
the automotive industry, which is made up of a relatively small number of
customers. A significant disruption in the industry, a significant change in
demand or pricing, or a dramatic change in technology could have a material
effect on Autoliv.
Autoliv has four significant customers whose sales represented 20%, 15%, 13%
and 10% of net sales in 1996; 25%, 15%, 11% and 11% of net sales in 1995 and
27%, 13%, 8% and 8% of net sales in 1994. A loss of any of these customers or a
substantial reduction in orders by any of these customers could have a material
adverse effect on Autoliv's operating results.
<TABLE>
<CAPTION>
SALES BY REGION IN MSEK 1996 1995 1994
- -------------------------------------------------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
Europe................................................................................ 10,320 9,224 8,160
North America......................................................................... 546 277 251
Other regions......................................................................... 763 700 536
--------- --------- ---------
Total........................................................................... 11,629 10,201 8,947
OPERATING INCOME BY REGION IN MSEK
- --------------------------------------------------------------------------------------
Europe................................................................................ 1,115 898 674
North America......................................................................... (100) (50) (76)
Other regions......................................................................... 78 68 66
--------- --------- ---------
Total........................................................................... 1,093 916 664
IDENTIFIABLE ASSETS BY REGION IN MSEK
- --------------------------------------------------------------------------------------
Europe................................................................................ 6,581 5,157
North America......................................................................... 397 274
Other regions......................................................................... 260 154
--------- ---------
Total........................................................................... 7,238 5,585
</TABLE>
NOTE 2. ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include Autoliv AB and all companies
in which the parent company, directly or indirectly, owned more than 50% of the
voting rights (the "Group").
All intercompany accounts and transactions within Autoliv have been
eliminated from the consolidated financial statements.
Investments in affiliated companies in which the Company, directly or
indirectly, owns between 20 and 50 percent of the votes at the end of each year,
are reported according to the equity method of accounting.
F-10
<PAGE>
AUTOLIV AND ITS CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2. ACCOUNTING POLICIES (CONTINUED)
TRANSLATION OF NON-SWEDISH SUBSIDIARIES
The balance sheets of non-Swedish subsidiaries are translated using year-end
rates of exchange. Income statements are translated at the average rate of
exchange for the year. Translation differences are reflected in a separate
component of shareholders' equity.
REVENUE RECOGNITION
Sales of products are recorded as of the actual date of shipment. Sales
include the sales value less value added tax.
RESEARCH AND DEVELOPMENT
Research and development expenses are charged to income as incurred.
DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT
Autoliv provides for depreciation of property, plant and equipment, all of
which are recorded at cost, by annual charges to income, computed under the
straight-line method over their estimated useful lives.
The following depreciation rates have been applied to various classes of
assets:
<TABLE>
<CAPTION>
Vehicles......................................................... 25.0%
<S> <C>
Tooling.......................................................... 33.3%
Computer hardware................................................ 33.3%
Machinery and equipment.......................................... 10.0-20.0%
Buildings and land improvements.................................. 2.0-4.0%
</TABLE>
AMORTIZATION OF INTANGIBLE ASSETS
Patents are amortized on a straight line basis over five years. Goodwill is
amortized on a straight line basis over periods ranging from 5 to 15 years.
INCOME TAXES
Current tax liabilities and assets are recognized for the estimated taxes
payable or refundable on the tax returns for the current year. Deferred tax
liabilities or assets are recognized for the estimated future tax effects
attributable to temporary differences and carry-forwards that result from events
that have been recognized in either the financial statements or the tax returns,
but not both. The measurement of current and deferred tax liabilities and assets
is based on provisions of enacted tax laws. Deferred tax assets are reduced, if
necessary, by the amount of any tax benefits that is not expected to be
realized.
IMPAIRMENT OF LONG LIVED AND IDENTIFIABLE INTANGIBLE ASSETS
The Company evaluates the carrying value of long lived assets and
identifiable intangible assets for potential impairment on an ongoing basis.
F-11
<PAGE>
AUTOLIV AND ITS CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2. ACCOUNTING POLICIES (CONTINUED)
EARNINGS PER SHARE
Earnings per share is based on the weighted average number of shares
outstanding, adjusted for the 2 for 1 stock split in May 1996.
CASH EQUIVALENTS
Autoliv considers all highly liquid investment instruments purchased with a
maturity of three months or less to be cash equivalents.
RECEIVABLES AND LIABILITIES IN FOREIGN CURRENCY
Receivables and liabilities denominated in foreign currency are remeasured
at year-end rates of exchange with unrealized gains/losses reflected in current
income. Transaction gains (losses) included in determining net income amounts to
MSEK (8) in 1996, MSEK (17) in 1995 and MSEK (2) in 1994.
INVENTORIES
Inventories are valued at the lower of cost or market. Cost is computed
according to the first-in, first-out method (FIFO).
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Among the assets and liabilities subject to estimation and
judgment are amounts related to unsettled pricing discussions with customers and
product recall and product liability accruals. Actual results could differ from
those estimates.
NOTE 3. SIGNIFICANT BUSINESS ACQUISITIONS
In January 1996, the Company purchased an additional 27% interest in
Isodelta S.A., in which the Company previously held a 49% interest since October
1, 1995. Prior to the acquisition the Company accounted for its investment on
the equity method. Additionally, in January 1996, the Company purchased 100% of
Hammarverken i Vaxjo AB (now Autoliv-Hammarverken AB) and Hassleholm Automotive
AB (now Autoliv Mekan AB). The acquisitions have been accounted for using the
purchase method of accounting, and accordingly the results of operations of the
entities have been consolidated since the respective dates of acquisition. The
total purchase price of these acquisitions amounted to MSEK 392 in 1996 and MSEK
297 in 1995. Goodwill of MSEK 428 associated with these acquisitions is being
amortized over 10-15 years.
The impact of these acquisitions on a pro forma basis would not have been
material.
F-12
<PAGE>
AUTOLIV AND ITS CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4. DEPRECIATION AND AMORTIZATION
<TABLE>
<CAPTION>
IN MSEK 1996 1995 1994
- ------------------------------------------------------------------------- ----- ----- -----
<S> <C> <C> <C>
Goodwill and patents..................................................... 75 28 101
Machinery and equipment.................................................. 425 360 317
Buildings................................................................ 50 25 19
--- --- ---
Total.............................................................. 550 413 437
</TABLE>
For 1994, amortization of patents includes an amount of MSEK 70 in
connection with a change from ten-year to five-year life to reflect the shorter
useful life of patents.
NOTE 5. FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods were used by Autoliv to estimate its fair value
disclosures for financial instruments.
CURRENT ASSETS AND LIABILITIES
The carrying amount reported in the balance sheet for current assets and
liabilities approximates their fair value because of the short maturity of these
items.
LONG-TERM DEBT AND OTHER NON-CURRENT LIABILITIES
The carrying amount reported in the balance sheet for long-term debt and
other non-current liabilities approximates their fair value because these
instruments bear rates consistent with current market interest rates.
F-13
<PAGE>
AUTOLIV AND ITS CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6. INCOME TAXES
<TABLE>
<CAPTION>
EARNINGS BEFORE INCOME TAXES
<S> <C> <C> <C>
IN MSEK 1996 1995 1994
- ------------------------------------------------------- --------- --------- ---------
Europe................................................. 1,179 994 701
Other countries........................................ (34) 15 (21)
--------- --------- ---------
Total............................................ 1,145 1,009 680
</TABLE>
<TABLE>
<CAPTION>
PROVISION FOR INCOME TAXES
<S> <C> <C> <C>
IN MSEK 1996 1995 1994
- ------------------------------------------------------- --------- --------- ---------
Current
Europe................................................. 355 341 251
Other countries........................................ 27 24 13
--------- --------- ---------
382 365 264
Deferred
Europe................................................. (1) (3) (14)
Other countries........................................ (2)
--------- --------- ---------
(1) (5) (14)
Total income taxes............................... 381 360 250
</TABLE>
<TABLE>
<CAPTION>
EFFECTIVE INCOME TAX RATE
<S> <C> <C> <C>
1996 1995 1994
--------- --------- ---------
Swedish statutory income tax rate............... 28.0% 28.0% 28.0%
Non-deductible expenses......................... 1.2% 0.6% 2.1%
Non-utilized operating loss..................... 3.0% 2.0% 2.8%
Foreign tax rate variances...................... 3.9% 5.9% 6.0%
Earnings of equity investments.................. (1.2%) (1.0%) (0.6%)
Other........................................... (1.6%) 0.2% (1.5%)
--------- --------- ---------
Effective income tax rate....................... 33.3% 35.7% 36.8%
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. At December 31, 1996,
1995 and 1994, the Company had unused tax benefits of MSEK 73, MSEK 39 and MSEK
19, respectively, related to foreign net operating loss carry-forwards for
income tax purposes, which expire on various dates through 2003. A valuation
allowance each year has been recognized to offset the total of the related
deferred assets due to the uncertainty of realizing the benefit of the loss
carry-forwards.
F-14
<PAGE>
AUTOLIV AND ITS CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6. INCOME TAXES (CONTINUED)
<TABLE>
<CAPTION>
DEFERRED TAXES
<S> <C> <C>
IN MSEK 1996 1995
- ---------------------------------------------------------------- ----- -----
ASSETS:
Insurance accruals.............................................. 59 31
Foreign net operating loss carry-forwards....................... 73 39
Other temporary differences..................................... 11 --
--
---
143 70
Valuation allowance............................................. (73) (39)
--
---
70 31
LIABILITIES:
Accelerated depreciation on machinery and building.............. (81) (25)
Other temporary differences..................................... -- (3)
--
---
Net deferred tax................................................ (11) 3
--
--
---
---
</TABLE>
NOTE 7. INVENTORIES
<TABLE>
<CAPTION>
IN MSEK 1996 1995
- -------------------------------------------------------------------------------- ----- -----
<S> <C> <C>
Raw material.................................................................... 381 268
Finished products and work in-progress.......................................... 311 253
--- ---
Total..................................................................... 692 521
</TABLE>
NOTE 8. DEBT AND CREDIT AGREEMENTS
Autoliv has credit agreements, principally in the form of overdraft
facilities, with banks in different countries. Total available facilities as of
December 31, 1996 amounted to MSEK 723, of which MSEK 426 was utilized. The
weighted average interest rate on short-term borrowings outstanding at December
31, 1996, and 1995 was 6.3% and 7.3%, respectively. The aggregate amount of
unused lines of credit at December 31, 1996 was MSEK 297.
NOTE 9. LONG-TERM DEBT
<TABLE>
<CAPTION>
IN MSEK 1996 1995 1994
- ------------------------------------------------------------------------- ----- ----- -----
<S> <C> <C> <C>
Loans.................................................................... 88 37 43
</TABLE>
Long-term debt consist of unsecured medium term bank borrowings in Europe
due in yearly instalments ranging from 5-10 MSEK through 2010. The instalment
for 1997 is MSEK 6. The loans carry floating interest rates based on various
indices and ranged from 5% to 8% at December 31, 1996.
F-15
<PAGE>
AUTOLIV AND ITS CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10. SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
NUMBER OF
SHARES SHARE RESTRICTED UNRESTRICTED NET
IN MSEK, EXCEPT SHARE NUMBERS ISSUED CAPITAL (1) RESERVES RESERVES INCOME TOTAL
- ----------------------------- ------------ ------------- ------------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Opening balance 1996......................... 27,500,000 550 642 686 649 2,527
Transfers.................................... (58) 707 (649)
Dividend..................................... (124) (124)
Stock split.................................. 27,500,000
Translation differences...................... 8 (21) (13)
Net income................................... 760 760
------------ --- --- ----- --- ---------
Closing balance 1996......................... 55,000,000 550 592 1,248 760 3,150
</TABLE>
- ------------------------
1) As of December 31, 1996, the authorized number of shares was 200,000,000,
with a par value of SEK 10 per share. A stock split of 2 for 1 was made in
May 1996.
Under Swedish law, the distribution of dividends is limited to the lesser of
the unrestricted shareholders' equity (unrestricted reserves and current period
net income) included in either the consolidated or the Autoliv AB parent company
balance sheet, after proposed appropriations to restricted shareholders' equity
(capital stock and restricted reserves). As of December 31, 1996, the amount
available for payment of dividends to shareholders of Autoliv in 1997 with
respect to fiscal 1996 was MSEK 766.
Restricted reserves are not available for distribution but are required to
be held to meet statutory requirements in Sweden and other countries where Group
companies operate.
SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
NUMBER OF
SHARES SHARE RESTRICTED UNRESTRICTED NET
IN MSEK, EXCEPT SHARE NUMBERS ISSUED CAPITAL RESERVES RESERVES INCOME
- ----------------------------- ----------- ------------- --------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Opening balance 1995............................ 27,500,000 550 605 455 430 2,040
Transfers....................................... 64 366 (430)
Dividend........................................ (82) (82)
Translation differences......................... (27) (53) (80)
Net income...................................... 649 649
------------ --- --- --- --- ---------
Closing balance 1995............................ 27,500,000 550 642 686 649 2,527
</TABLE>
F-16
<PAGE>
AUTOLIV AND ITS CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10. SHAREHOLDERS' EQUITY (CONTINUED)
SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
NUMBER OF
SHARES SHARE RESTRICTED UNRESTRICTED NET
IN MSEK, EXCEPT SHARE NUMBERS ISSUED CAPITAL RESERVES RESERVES INCOME TOTAL
- ----------------------------- ------------ ----------- ------------- --------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Opening balance 1994............................ 25,000,000 500 272 304 125 1,201
Transfers....................................... (18) 143 (125)
Equity offering in June......................... 2,500,000 50 364 414
Translation differences......................... (13) 8 (5)
Net income...................................... 430 430
------------ --- --- --- --- ---------
Closing balance 1994............................ 27,500,000 550 605 455 430 2,040
</TABLE>
NOTE 11. CONTINGENT LIABILITIES
The Company is subject to claims and legal proceedings that arise in the
ordinary course of business, principally related to alleged defects in products
manufactured by the Group. The Company diligently defends itself in such actions
and, in addition, carries insurance coverage to the extent reasonably available
against insurable risks. The Company believes, based on currently available
information, that the resolution of outstanding claims, after taking into
account available insurance coverage, should not have a material effect on the
Group's financial position or results of operations.
NOTE 12. LEASE COMMITMENTS
Autoliv leases certain offices, manufacturing and research buildings,
machinery, automobiles and data processing and other equipment. Such operating
leases, some of which are noncancelable and in many cases include renewals,
expire at various dates. The Company pays most maintenance, insurance and tax
expenses relating to leased assets. Rental expense for operating leases was MSEK
79 for 1996, MSEK 63 for 1995 and MSEK 53 for 1994.
At December 31, 1996, future minimum lease payments for noncancelable
operating leases are payable as follows: 1997: MSEK 62; 1998: MSEK 56; 1999:
MSEK 42; 2000: MSEK 34; 2001: MSEK 28 and thereafter MSEK 177.
NOTE 13. RETIREMENT PLANS
Substantially all of the Company's employees are covered by government
sponsored pension and welfare programs. Under the terms of the programs, the
Company makes periodic payments to various government agencies. In addition, in
certain countries the Company sponsors defined contribution plans. Contributions
to these defined contribution plans for the years ended December 31, 1996, 1995
and 1994 were MSEK 11, MSEK 6 and MSEK 4, respectively. The Group has no other
significant postretirement or postemployment benefit plans.
F-17
<PAGE>
AUTOLIV AND ITS CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 14. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
IN MSEK, EXCEPT PER SHARE DATA
- ------------------------------
<S> <C> <C> <C> <C>
JAN-MAR APR-JUN JUL-SEP OCT-DEC
----------- ----------- ----------- -----------
<CAPTION>
1996
<S> <C> <C> <C> <C>
Sales..................................................................... 2,983 3,044 2,525 3,077
Operating income.......................................................... 284 300 236 273
Income before taxes....................................................... 300 317 246 282
Net income................................................................ 192 211 159 198
Earnings per share (SEK).................................................. 3.50 3.84 2.89 3.59
<CAPTION>
1995
<S> <C> <C> <C> <C>
Sales..................................................................... 2,728 2,863 2,173 2,437
Operating income.......................................................... 231 258 204 223
Income before taxes....................................................... 247 279 231 252
Net income................................................................ 154 176 148 171
Earnings per share (SEK).................................................. 2.80 3.20 2.70 3.10
</TABLE>
F-18
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
Morton International, Inc.
We have audited the accompanying combined balance sheets of Automotive
Safety Products, an operating group of Morton International, Inc., as of June
30, 1996 and 1995, and the related combined statements of income and cash flows
for each of the three years in the period ended June 30, 1996. These financial
statements are the responsibility of the management of Morton International,
Inc. Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of Automotive Safety
Products, an operating group of Morton International, Inc., at June 30, 1996 and
1995, and the combined results of its operations and its cash flows for each of
the three years in the period ended June 30, 1996, in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
November 4, 1996
F-19
<PAGE>
AUTOMOTIVE SAFETY PRODUCTS
COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
-------------------------------
<S> <C> <C> <C>
1996 1995 1994
--------- --------- ---------
<CAPTION>
(IN MILLIONS)
<S> <C> <C> <C>
Net sales........................................................................ $ 1,397.5 $ 1,226.3 $ 938.5
Interest, royalties and sundry income............................................ 2.2 2.7 2.8
--------- --------- ---------
1,399.7 1,229.0 941.3
Deductions from income
Cost of products sold.......................................................... 1,055.0 924.7 703.8
Selling, administrative and general expense.................................... 75.3 63.0 61.0
Research and development expense............................................... 20.0 14.4 12.3
Interest expense............................................................... 1.9 -- --
--------- --------- ---------
1,152.2 1,002.1 777.1
--------- --------- ---------
Income before income taxes....................................................... 247.5 226.9 164.2
Income taxes..................................................................... 95.9 85.5 61.0
--------- --------- ---------
Net income....................................................................... $ 151.6 $ 141.4 $ 103.2
--------- --------- ---------
--------- --------- ---------
</TABLE>
See notes to combined financial statements.
F-20
<PAGE>
AUTOMOTIVE SAFETY PRODUCTS
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30
--------------------
1996 1995
--------- ---------
<S> <C> <C>
(IN MILLIONS)
ASSETS
CURRENT ASSETS
Cash and cash equivalents.................................................................. $ 2.2 $ --
Receivables, less allowances of $.5 and $2.3............................................... 199.9 158.0
Recoverable design and preproduction costs................................................. 23.3 23.2
Inventories................................................................................ 63.3 81.7
Refundable and deferred income tax benefits................................................ 10.9 7.3
Prepaid expenses........................................................................... 3.0 3.2
--------- ---------
Total Current Assets................................................................... 302.6 273.4
--------- ---------
OTHER ASSETS
Recoverable design and preproduction costs................................................. 33.6 22.4
Miscellaneous.............................................................................. 5.0 10.9
--------- ---------
38.6 33.3
--------- ---------
PROPERTY, PLANT AND EQUIPMENT
Land....................................................................................... 3.3 3.2
Buildings and improvements................................................................. 154.0 122.7
Machinery and equipment.................................................................... 440.6 359.1
Construction in progress................................................................... 76.8 112.1
--------- ---------
674.7 597.1
Less allowances for depreciation........................................................... (239.4) (174.8)
--------- ---------
435.3 422.3
--------- ---------
$ 776.5 $ 729.0
--------- ---------
--------- ---------
LIABILITIES AND COMBINED EQUITY
CURRENT LIABILITIES
Notes payable to affiliates................................................................ $ 51.6 $ 22.6
Advances from affiliates................................................................... 17.7 7.0
Accounts payable........................................................................... 93.8 58.2
Accrued salaries, wages and other compensation............................................. 14.1 11.1
Other accrued expenses..................................................................... 4.7 7.3
Income taxes............................................................................... 4.1 4.0
--------- ---------
Total Current Liabilities.............................................................. 186.0 110.2
--------- ---------
NONCURRENT LIABILITIES
Deferred income taxes...................................................................... 16.8 14.8
Accrued postretirement benefits other than pensions........................................ 6.1 5.5
Other noncurrent liabilities............................................................... 5.7 6.4
--------- ---------
Total Noncurrent Liabilities........................................................... 28.6 26.7
--------- ---------
COMBINED EQUITY.............................................................................. 561.9 592.1
--------- ---------
$ 776.5 $ 729.0
--------- ---------
--------- ---------
</TABLE>
See notes to combined financial statements.
F-21
<PAGE>
AUTOMOTIVE SAFETY PRODUCTS
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
CASH PROVIDED (USED)
YEAR ENDED JUNE 30
-------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
(IN MILLIONS)
OPERATING ACTIVITIES
Net income...................................................................... $ 151.6 $ 141.4 $ 103.2
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation.................................................................. 72.6 63.9 46.1
Deferred income taxes......................................................... 4.6 3.3 3.9
Undistributed (earnings) losses of affiliates................................. 2.3 (1.5) (3.1)
Changes in operating assets and liabilities:
Receivables................................................................. (41.9) (21.4) (47.3)
Recoverable design and preproduction costs.................................. (11.3) (25.6) (8.6)
Inventories................................................................. 18.5 (7.0) (6.7)
Accounts payable and accrued expenses....................................... 36.0 (11.8) 19.7
Income taxes................................................................ (6.1) 1.7 2.7
Other--net.................................................................. 4.6 4.8 3.2
--------- --------- ---------
Net cash provided by operating activities................................. 230.9 147.8 113.1
--------- --------- ---------
INVESTING ACTIVITIES
Additions to property, plant and equipment...................................... (92.0) (125.8) (94.9)
Other........................................................................... (.1) .2 2.0
--------- --------- ---------
Net cash used for investing activities.................................... (92.1) (125.6) (92.9)
--------- --------- ---------
FINANCING ACTIVITIES
Net transfers to Morton International, Inc...................................... (181.6) (49.8) (22.2)
Net borrowings on notes payable to affiliates................................... 29.0 22.6 --
Net advances from affiliates.................................................... 10.8 4.8 2.1
--------- --------- ---------
Net cash used for financing activities.................................... (141.8) (22.4) (20.1)
--------- --------- ---------
Effect of foreign exchange rate changes on cash and cash equivalents.............. 5.2 .2 (.1)
--------- --------- ---------
Increase in cash and cash equivalents............................................. 2.2 -- --
Cash and cash equivalents at beginning of year.................................... -- -- --
--------- --------- ---------
Cash and cash equivalents at end of year.......................................... $ 2.2 $ -- $ --
--------- --------- ---------
--------- --------- ---------
</TABLE>
See notes to combined financial statements.
F-22
<PAGE>
AUTOMOTIVE SAFETY PRODUCTS
NOTES TO COMBINED FINANCIAL STATEMENTS
NATURE OF OPERATIONS
The Automotive Safety Products Group (ASP), an operating group of Morton
International, Inc. (MII), produces airbag inflators and modules for all major
U.S., European and Asian automobile manufacturers.
ASP's revenues are generated exclusively by sales to the automotive
industry, which is made up of a relatively small number of end customers. A
significant disruption in the industry, a significant change in demand or
pricing, or a dramatic change in technology could have a material effect on ASP.
In addition, ASP has three significant customers whose sales represented
31%, 13% and 11% of total net sales in fiscal 1996; 34%, 12% and 10% of total
net sales in fiscal 1995; and 32%, 15% and 11% of total net sales in fiscal
1994. The loss of any of these customers or a substantial reduction in orders by
any of these customers could have a material adverse effect on ASP's operating
results.
Sales by geographic area are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
United States................................................ $ 860.7 $ 751.5 $ 615.7
Export sales:
Asia....................................................... 228.8 170.9 118.7
Europe..................................................... 97.3 154.6 98.6
Other...................................................... 140.9 143.8 105.5
--------- --------- ---------
1,327.7 1,220.8 938.5
Foreign sales................................................ 69.8 5.5 --
--------- --------- ---------
Total.................................................. $ 1,397.5 $ 1,226.3 $ 938.5
--------- --------- ---------
--------- --------- ---------
</TABLE>
PROPOSED TRANSACTIONS
On September 30, 1996, MII announced its intention to merge ASP with Autoliv
AB. The business combination will result in the formation of a new U.S. holding
company, Autoliv, Inc. The transaction is intended to be a merger of equals, in
which Autoliv AB's shareholders will exchange their Autoliv shares for 53.5
percent of the equity of Autoliv, Inc. and MII's shareholders will exchange
their interest in ASP for 46.5 percent of Autoliv, Inc. (the Merger).
Immediately prior to the business combination, MII will contribute all of
its operations not directly related to ASP, together with $750 million of cash,
less any amount paid to close indebtedness with affiliates, funded by new
indebtedness which will remain the obligation of ASP, to a new company, "New
Morton International, Inc.", which will assume the Morton International name.
Shares of New Morton International, Inc. will be distributed to MII's
shareholders on a share-for-share basis at the effective date of the
transactions (the Distribution). Old MII, then owning the operations of ASP,
will become a wholly owned subsidiary of Autoliv, Inc. in the Merger. The
distribution of New Morton International, Inc. shares and the exchange of
Autoliv, Inc. shares for MII shares are expected to be tax-free transactions for
U.S. federal income tax purposes.
The Distribution and the Merger are jointly referred to as the Transactions.
The Transactions are subject to, among other things, execution of the definitive
agreement, approval by MII stockholders, acceptance by holders of at least 90%
of Autoliv AB's outstanding shares of an exchange offer for Autoliv,
F-23
<PAGE>
AUTOMOTIVE SAFETY PRODUCTS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
Inc. shares, receipt by MII of a ruling from the U.S. Internal Revenue Service
regarding certain tax aspects of the transactions, and certain regulatory
approvals.
BASIS OF PRESENTATION
The combined financial statements of ASP represent the financial position,
results of operations and cash flows of the Automotive Safety Products Group of
MII. MII's net investment has been reflected as Combined Equity in the combined
financial statements. Historical earnings per share are not presented as ASP is
an operating group of MII.
The combined financial statements include allocations of certain MII
corporate assets (including pension assets), liabilities (including pension and
postretirement benefits) and expenses relating to ASP that will be transferred
to ASP from MII. MII also provides certain general administrative services to
ASP, including legal, tax compliance, risk management and other corporate
services. The cost of these services is not material and has not been included
in the combined financial statements of ASP. These combined financial statements
may not necessarily be representative of results that would have been attained
had ASP operated as a separate, independent entity.
Pursuant to the planned Distribution, ASP and New Morton International, Inc.
will enter into several agreements, including the Distribution Agreement,
Employee Benefits Allocation Agreement and Tax Sharing Agreement.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF COMBINATION
Investments in 50 percent or less owned companies and joint ventures, where
ASP does not effectively control the entity, are carried on the equity basis.
All intercompany accounts and transactions within ASP have been eliminated from
the combined financial statements.
CASH EQUIVALENTS
ASP considers all highly liquid investment instruments purchased with a
maturity of three months or less to be cash equivalents.
RECOVERABLE DESIGN AND PREPRODUCTION COSTS
ASP capitalizes certain recoverable design and preproduction costs incurred
for specific customer programs. These costs are amortized over future shipments
of units under the related programs and are recovered as part of the selling
price.
INVENTORIES
Inventories are stated at the lower of cost or market. The cost of
inventories is determined by the first-in, first-out (FIFO) method.
PROPERTY, PLANT AND EQUIPMENT
ASP provides for depreciation of property, plant and equipment, all of which
are recorded at cost, by annual charges to income, computed under the
straight-line method.
F-24
<PAGE>
AUTOMOTIVE SAFETY PRODUCTS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
FOREIGN CURRENCY TRANSLATION
All assets and liabilities in the balance sheet of foreign operations whose
functional currency is other than the U.S. dollar are translated at year-end
exchange rates except equity which is translated at historical rates.
Translation gains and losses are included in combined equity. Foreign currency
transaction gains and losses are included in net income. Foreign exchange gains
(losses) included in determining income were $1.4 million, $2.3 million and
$(1.8) million in 1996, 1995 and 1994.
CASH MANAGEMENT SYSTEM
ASP participates in MII's cash management system, where the banks sweep cash
receipts into a MII general account daily and send daily notification of checks
presented for payment. MII transfers funds from its general account to cover the
checks presented for payment.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
CHANGES IN ACCOUNTING PRINCIPLES
IMPAIRMENT OF LONG-LIVED ASSETS
Effective in 1996, ASP adopted Financial Accounting Standards Board
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of." This statement requires impairment losses
to be recognized for long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be generated
by those assets are less than the assets' carrying amounts. Statement No. 121
also addresses the accounting for long-lived assets that are expected to be
disposed. The adoption of this statement did not impact ASP's combined financial
position, results of operations or liquidity.
INVENTORIES
Components of inventories were as follows:
<TABLE>
<CAPTION>
JUNE 30
--------------------
<S> <C> <C>
1996 1995
--------- ---------
<CAPTION>
(IN MILLIONS)
<S> <C> <C>
Finished products and work-in-process........................................ $ 31.6 $ 48.5
Materials and supplies....................................................... 31.7 33.2
--------- ---------
$ 63.3 $ 81.7
--------- ---------
--------- ---------
</TABLE>
FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods were used by ASP to estimate its fair value
disclosures for financial instruments.
F-25
<PAGE>
AUTOMOTIVE SAFETY PRODUCTS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
CASH AND CASH EQUIVALENTS
The carrying amount reported in the balance sheet for cash and cash
equivalents approximates its fair value.
NOTES PAYABLE
The carrying amount of ASP's borrowings in the form of notes payable to
affiliates approximates its fair value.
NOTES PAYABLE TO AFFILIATES
Notes payable to affiliates at June 30, 1996 and 1995 reflected loan
agreements between ASP and certain consolidated subsidiaries of MII. The terms
of the loans do not exceed one year. Interest rates are calculated using the
average AIBOR ("Amsterdam Inter Bank Offer Rate") for a period similar to the
term of the note plus 1.25 percent. The weighted average interest rates on loans
outstanding at June 30, 1996 and 1995 were 3.76 percent and 4.63 percent.
Interest paid in 1996 was $1.7 million. No interest was paid in 1995 or 1994.
Where no formal note payable exists, MII does not charge interest on
advances to affiliates. Accordingly, no interest was charged to ASP for its
advances from affiliates. The average outstanding balance of advances from
affiliates for the years ended June 30, 1996, 1995 and 1994 was $8.2 million,
$2.7 million and $2.1 million.
INCOME TAXES
Historically, ASP's operations have been included in the tax returns of MII.
The provisions for income taxes in ASP's combined financial statements, which
were computed as if ASP filed separate income tax returns, were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
(IN MILLIONS)
Current:
Federal............................................................ $ 80.3 $ 72.3 $ 49.1
State.............................................................. 15.2 12.5 8.0
Foreign............................................................ (4.2) (2.6) --
--------- --------- ---------
91.3 82.2 57.1
--------- --------- ---------
Deferred:
Federal............................................................ 3.8 2.8 3.4
State.............................................................. .8 .5 .5
Foreign............................................................ -- -- --
--------- --------- ---------
4.6 3.3 3.9
--------- --------- ---------
$ 95.9 $ 85.5 $ 61.0
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-26
<PAGE>
AUTOMOTIVE SAFETY PRODUCTS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
A reconciliation of the United States statutory rate to the effective income
tax rate follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Statutory rate....................................................... 35.0% 35.0% 35.0%
Effect of:
State tax, net of federal tax benefit.............................. 4.2 3.8 3.4
Other.............................................................. (.5) (1.1) (1.2)
--------- --------- ---------
Effective rate....................................................... 38.7% 37.7% 37.2%
--------- --------- ---------
--------- --------- ---------
</TABLE>
Deferred income taxes reflect the impact of temporary differences between
the valuation of assets and liabilities for financial reporting and their tax
bases. Significant components of ASP's deferred tax balances were as follows:
<TABLE>
<CAPTION>
JUNE 30
--------------------
<S> <C> <C>
1996 1995
--------- ---------
<CAPTION>
(IN MILLIONS)
<S> <C> <C>
Deferred tax benefits related to:
Postretirement and postemployment benefits................................. $ 3.5 $ 2.8
Pension.................................................................... 1.3 1.3
Other...................................................................... 4.8 4.6
--------- ---------
9.6 8.7
--------- ---------
Deferred tax liabilities related to:
Tax over book depreciation................................................. 20.9 17.8
Other...................................................................... 3.7 1.3
--------- ---------
24.6 19.1
--------- ---------
Net deferred tax liability................................................... $ 15.0 $ 10.4
--------- ---------
--------- ---------
</TABLE>
No individual item included in other deferred tax benefits or deferred tax
liabilities above is material. Refundable and deferred income tax benefits at
June 30, 1996 and 1995, included $9.1 million and $2.9 million of refundable
income taxes.
Total income tax payments to MII during fiscal 1996, 1995 and 1994 were
$97.2 million, $80.4 million and $54.4 million.
Components of ASP's income (loss) before income taxes were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
(IN MILLIONS)
Domestic......................................................... $ 259.1 $ 234.0 $ 164.2
Foreign.......................................................... (11.6) (7.1) --
--------- --------- ---------
$ 247.5 $ 226.9 $ 164.2
--------- --------- ---------
--------- --------- ---------
</TABLE>
The Internal Revenue Service has completed its examination of MII
consolidated federal income tax returns through fiscal 1989, and has issued
notices of deficiency on certain issues, no one of which is significant. MII
disagrees with the proposed adjustments and is taking appropriate action to
contest such
F-27
<PAGE>
AUTOMOTIVE SAFETY PRODUCTS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
deficiency notices. Management believes the ultimate resolution of these matters
will not have a material effect upon ASP's financial position, results of
operations, or liquidity.
COMBINED EQUITY
Changes in equity are summarized below:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
-------------------------------
<S> <C> <C> <C>
1996 1995 1994
--------- --------- ---------
<CAPTION>
(IN MILLIONS)
<S> <C> <C> <C>
Balance at beginning of year..................................... $ 592.1 $ 499.9 $ 418.6
Net income..................................................... 151.6 141.4 103.2
Transfers to Morton International, Inc......................... (181.6) (49.8) (22.2)
Other.......................................................... (.2) .6 .3
--------- --------- ---------
Balance at end of year........................................... $ 561.9 $ 592.1 $ 499.9
--------- --------- ---------
--------- --------- ---------
</TABLE>
BENEFIT PLANS
As of the Transactions effective date, ASP will assume responsibility for
pension and postretirement benefits for retirees whose last work assignment was
with ASP and for employees of ASP. Until the Transactions, the combined
financial statements of ASP will reflect the costs experienced by the MII plans
for employees and retirees for whom ASP will assume responsibility.
PENSIONS
ASP participates in MII's noncontributory defined benefit pension plans
covering most domestic employees. Benefits are based on an average of the
employee's earnings in the years preceding retirement and on credited service.
Certain supplemental unfunded plan arrangements also provide retirement benefits
to specified groups of participants.
The funding policy for domestic plans is to contribute amounts sufficient to
meet the minimum funding requirements of the Employee Retirement Income Security
Act of 1974, as amended, plus any additional amounts which MII may determine to
be appropriate.
F-28
<PAGE>
AUTOMOTIVE SAFETY PRODUCTS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
The actuarially computed portion of net pension expense for MII-sponsored
pension plans allocated to ASP consisted of the following components:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
(IN MILLIONS)
Service cost--benefits earned during the
year......................................... $ 2.7 $ 1.9 $ 1.4
Interest cost on projected benefit
obligation................................... 1.6 1.3 .9
Return on plan assets:
Actual....................................... $ (2.8) $ (1.7) $ (.3)
Deferred portion............................. 1.4 .6 (.5)
--------- --------- ---
Expected return............................ (1.4) (1.1) (.8)
Net amortization............................... .2 .1 --
--------- --------- ---
Net pension expense............................ $ 3.1 $ 2.2 $ 1.5
--------- --------- ---
--------- --------- ---
</TABLE>
The reconciliation of the funded status of the portion of pension plans
allocated to ASP was as follows:
<TABLE>
<CAPTION>
JUNE 30, 1996 JUNE 30, 1995
---------------------------- ----------------------------
<S> <C> <C> <C> <C>
PLANS IN PLANS IN
PLANS IN WHICH PLANS IN WHICH
WHICH ASSETS ACCUMULATED WHICH ASSETS ACCUMULATED
EXCEED BENEFIT EXCEED BENEFIT
ACCUMULATED OBLIGATION ACCUMULATED OBLIGATION
BENEFIT EXCEEDS BENEFIT EXCEEDS
OBLIGATION ASSETS OBLIGATIONS ASSETS
------------- ------------- ------------- -------------
<CAPTION>
(IN MILLIONS)
<S> <C> <C> <C> <C>
Plan assets at fair value.................................. $ 19.0 $ -- $ 13.1 $ --
----- ----- ----- -----
Actuarial present value of projected benefit obligations:
Accumulated benefit obligation
Vested................................................. 13.4 .8 9.6 .8
Non-vested............................................. 3.6 -- 3.2 --
Provisions for future salary increases................... 8.7 .1 7.4 .1
----- ----- ----- -----
25.7 .9 20.2 .9
----- ----- ----- -----
Plan assets less than projected benefit obligation......... (6.7) (.9) (7.1) (.9)
Unrecognized net experience loss since July 1, 1986........ 3.5 .4 3.8 .6
Prior service cost not yet recognized in net pension
cost..................................................... (.1) -- -- --
Adjustment to recognize minimum liability.................. -- (.3) -- (.5)
----- ----- ----- -----
Net pension liability recognized in the combined balance
sheets................................................... $ (3.3) $ (.8) $ (3.3) $ (.8)
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
F-29
<PAGE>
AUTOMOTIVE SAFETY PRODUCTS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
The weighted averages of assumptions used in the determination of the
projected benefit obligation were:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Discount rate........................................................ 7.8% 7.5% 7.8%
Rate of increases in compensation level.............................. 4.8% 4.8% 5.0%
Expected long-term rate of return on assets.......................... 9.5% 9.5% 9.5%
</TABLE>
The assets of plans sponsored by MII are invested primarily in equities and
bonds.
Certain pension plans contain restrictions on the use of excess pension plan
assets in the event of a change in control.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
MII currently provides postretirement health care and life insurance
benefits to most U.S. retirees, including retirees of ASP's domestic operations.
In general, the terms of the plans provide that U.S. employees who retire after
attaining age 55 with five years of service are eligible for continued health
care and life insurance coverage. Dependent health care and life insurance
coverage are also available. Most retirees contribute toward the cost of health
care coverage, with the contributions generally varying based on service. In
June 1993, MII adopted a provision which caps the level of its subsidy at the
amount in effect as of the year 2000 for most U.S. employees who retire after
December 31, 1992.
Net periodic postretirement benefit cost allocated to ASP included the
following components:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- -----
<S> <C> <C> <C>
(IN MILLIONS)
Service cost--benefits earned during the year............................ $ .6 $ .4 $ .3
Interest cost on accumulated postretirement benefit obligation........... .3 .3 .1
Net amortization......................................................... (.1) (.1) --
--
--- ---
Net periodic postretirement benefit cost................................. $ .8 $ .6 $ .4
--- --- --
--- --- --
</TABLE>
At present, there is no prefunding of the postretirement benefits recognized
under FASB Statement No. 106. The following table presents the status of the
plans' liability allocated to ASP reconciled with amounts recognized in the
combined balance sheets for ASP's postretirement benefits:
<TABLE>
<CAPTION>
JUNE 30
--------------------
<S> <C> <C>
1996 1995
--------- ---------
<CAPTION>
(IN MILLIONS)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees and dependents....................................................... $ .9 $ .9
Fully eligible active plan participants....................................... .3 .2
Other active plan participants................................................ 4.3 3.3
--- ---
5.5 4.4
Unrecognized prior period gain.................................................. .4 .8
Unamortized plan amendment...................................................... .6 .6
--- ---
Postretirement benefit liability recognized in the combined balance sheets...... $ 6.5 $ 5.8
--- ---
--- ---
</TABLE>
F-30
<PAGE>
AUTOMOTIVE SAFETY PRODUCTS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
For measurement purposes, the assumed weighted average annual rate of
increase per capita cost of health care benefits was 9.5 percent for 1997 and
assumed to decrease one percent per year to 5.5 percent in 2001 and remain
constant thereafter. As noted above, for U.S. employees retiring after December
31, 1992, MII's policy is to increase retiree contributions so that MII's annual
per capita cost contribution remains constant at the level incurred in the year
2000. The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7.8 percent at June 30, 1996, and 7.5
percent at June 30, 1995. The rate of increase on compensation levels assumed
was 4.8 percent at June 30, 1996 and 1995.
A one percent increase in the annual health care cost trend rates would have
increased ASP's accumulated postretirement benefit obligation at June 30, 1996,
by approximately $.1 million and increased postretirement benefit expense for
fiscal 1996 by less than $.1 million.
OTHER
ASP contributes to savings plans sponsored by MII for eligible domestic
employees. ASP contributions to the savings plans were $3.1 million, $3.0
million and $2.4 million in 1996, 1995 and 1994.
INCENTIVE PLAN
Under MII's 1989 Incentive Plan (formerly 1989 Stock Awards Plan), grants
may be made to key employees of stock options, stock appreciation rights, shares
of restricted stock, other awards valued by reference to MII's common stock and
cash. Under the 1982 Key Employees Stock Option and Performance Unit Plan,
grants could be made to key employees of stock options, stock options with
alternative appreciation rights and appreciation rights not related to any
option.
In connection with the Merger described above, options outstanding as of the
Merger effective date which are held by an ASP employee, retiree or former
employee will be converted into options to purchase shares of Autoliv, Inc.
As of June 30, 1996, there were 232,296 options outstanding which had been
granted to ASP employees and retirees; 168,936 such options were exercisable as
of June 30, 1996. These options had exercise prices of $12.11 to $32.00 and had
expiration dates ranging from June 25, 1997, to August 24, 2005. All options
granted have an option price equal to the MII stock's fair value at date of
grant and the number of options is fixed.
LITIGATION AND REGULATION
There are judicial and administrative claims pending or contemplated against
ASP, including those of an environmental nature. Management believes that the
resolution of those claims should not have a material effect upon ASP's
financial position, results of operations, or liquidity.
Various governmental agencies have authority to limit or prohibit
distribution of ASP's products should they formally conclude that continued
distribution is unsafe to the population or the environment. There are currently
no challenges pending, the resolution of which would have a material effect upon
ASP's operations.
LEASE COMMITMENTS
ASP has commitments under operating leases primarily for building and office
space. Rental expense charged in 1996, 1995 and 1994 was $2.3 million, $1.7
million and $1.0 million. Renewal and purchase options are available on certain
of these leases.
Future minimum rental commitments under operating leases having initial or
remaining non-cancelable terms in excess of one year as of June 30, 1996, were
as follows (in millions): 1997--$1.0; 1998--$.5; 1999--$.3; 2000--$.1;
2001--$.1; thereafter--$0.
F-31
<PAGE>
AUTOMOTIVE SAFETY PRODUCTS
COMBINED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31,
--------------------
<S> <C> <C>
1996 1995
--------- ---------
(IN MILLIONS)
Net sales................................................................................... $ 732.0 $ 659.6
Interest, royalties and sundry income (loss)................................................ (2.5) 2.1
--------- ---------
729.5 661.7
Deductions from income:
Cost of products sold..................................................................... 558.0 493.9
Selling, administrative and general expense............................................... 43.0 34.1
Research and development expense.......................................................... 9.1 11.1
Interest expense.......................................................................... 1.2 .7
--------- ---------
611.3 539.8
--------- ---------
Income before income taxes.................................................................. 118.2 121.9
Income taxes................................................................................ 45.2 47.2
--------- ---------
Net income.................................................................................. $ 73.0 $ 74.7
--------- ---------
--------- ---------
</TABLE>
See notes to combined financial statements (unaudited).
F-32
<PAGE>
AUTOMOTIVE SAFETY PRODUCTS
COMBINED BALANCE SHEET (UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31,
1996
------------
<S> <C>
(IN
MILLIONS)
ASSETS
CURRENT ASSETS
Cash and cash equivalents (overdraft)............................................................. $ (10.7)
Receivables....................................................................................... 214.8
Recoverable design and preproduction costs........................................................ 22.9
Inventories....................................................................................... 77.5
Refundable and deferred income tax benefits....................................................... 7.5
Prepaid expenses.................................................................................. 4.7
------------
Total Current Assets.......................................................................... 316.7
------------
OTHER ASSETS
Recoverable design and preproduction costs........................................................ 46.5
Miscellaneous..................................................................................... 4.2
------------
50.7
------------
PROPERTY, PLANT AND EQUIPMENT, AT COST.............................................................. 732.7
Less allowances for depreciation.................................................................. (269.4)
------------
463.3
------------
$ 830.7
------------
------------
LIABILITIES AND COMBINED EQUITY
CURRENT LIABILITIES
Notes payable to affiliates....................................................................... $ 51.6
Advances from affiliates.......................................................................... 17.7
Accounts payable.................................................................................. 99.2
Accrued salaries, wages and other compensation.................................................... 18.2
Other accrued expenses............................................................................ 8.2
Income taxes...................................................................................... 6.0
------------
Total Current Liabilities..................................................................... 200.9
------------
NONCURRENT LIABILITIES
Deferred income taxes............................................................................. 16.5
Accrued postretirement benefits other than pensions............................................... 6.2
Other noncurrent liabilities...................................................................... 5.3
------------
Total Noncurrent Liabilities.................................................................. 28.0
------------
COMBINED EQUITY..................................................................................... 601.8
------------
$ 830.7
------------
------------
</TABLE>
See notes to combined financial statements (unaudited).
F-33
<PAGE>
AUTOMOTIVE SAFETY PRODUCTS
COMBINED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
CASH PROVIDED (USED)
SIX MONTHS ENDED
DECEMBER 31,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
(IN MILLIONS)
OPERATING ACTIVITIES
Net income............................................................................. $ 73.0 $ 74.7
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation......................................................................... 39.3 36.4
Deferred income taxes................................................................ (.6) --
Undistributed losses of affiliates................................................... 2.5 .2
Changes in operating assets and liabilities:
Receivables........................................................................ (14.9) (43.9)
Recoverable design and preproduction costs......................................... (12.5) (5.8)
Inventories and prepaid expenses................................................... (15.9) (2.4)
Accounts payable and accrued expenses.............................................. 13.0 35.5
Accrued income taxes............................................................... 5.3 4.9
Other--net......................................................................... .3 .7
--------- ---------
Net cash provided by operating activities........................................ 89.5 100.3
--------- ---------
INVESTING ACTIVITIES
Additions to property, plant and equipment............................................. (70.2) (35.0)
Other.................................................................................. -- --
--------- ---------
Net cash used for investing activities........................................... (70.2) (35.0)
--------- ---------
FINANCING ACTIVITIES
Net transfers to Morton International, Inc............................................. (33.3) (75.9)
Net borrowings on notes payable to affiliates.......................................... -- 18.6
Net advances from affiliates........................................................... -- (3.6)
--------- ---------
Net cash used for financing activities........................................... (33.3) (60.9)
--------- ---------
Effect of foreign exchange rate changes on cash and cash equivalents..................... 1.1 2.4
--------- ---------
Increase (decrease) in cash and cash equivalents......................................... (12.9) 6.8
Cash and cash equivalents at beginning of year........................................... 2.2 --
--------- ---------
Cash and cash equivalents at end of period............................................... $ (10.7) $ 6.8
--------- ---------
--------- ---------
</TABLE>
See notes to combined financial statements (unaudited).
F-34
<PAGE>
AUTOMOTIVE SAFETY PRODUCTS
COMBINED STATEMENTS OF EQUITY (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31,
--------------------
<S> <C> <C>
1996 1995
--------- ---------
<CAPTION>
(IN MILLIONS)
<S> <C> <C>
Balance at beginning of period................................................................. $ 561.9 $ 592.1
Net income..................................................................................... 73.0 74.7
Transfers to Morton International, Inc......................................................... (33.3) (75.9)
Other.......................................................................................... .2 .7
--------- ---------
Balance at end of period....................................................................... $ 601.8 $ 591.6
--------- ---------
--------- ---------
</TABLE>
See notes to combined financial statements (unaudited).
F-35
<PAGE>
AUTOMOTIVE SAFETY PRODUCTS
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1:
The combined interim financial statements and notes thereto do not include
all disclosures required by generally accepted accounting principles and,
therefore, should be read in conjunction with the Combined Financial Statements
and Notes thereto for the three year period ended June 30, 1996.
In the opinion of management, the interim financial statements reflect all
adjustments of a normal recurring nature necessary for a fair statement of
results for the interim periods. The current period's results are not
necessarily indicative of results to be expected for a full year.
NOTE 2:
Inventories are stated at lower of cost (first-in, first-out method) or
market. Components of inventories are as follows (in millions):
<TABLE>
<CAPTION>
DECEMBER 31 JUNE 30
1996 1996
------------- -----------
<S> <C> <C>
Finished products and work-in-process................................. $ 21.9 $ 31.6
Materials and supplies................................................ 55.6 31.7
----- -----
$ 77.5 $ 63.3
----- -----
----- -----
</TABLE>
NOTE 3:
On November 25, 1996, Morton International, Inc. (MII), Autoliv, Inc. and
Autoliv AB entered into a Combination Agreement pursuant to which MII's
Automotive Safety Products Group (ASP) will become a wholly owned subsidiary of
Autoliv, Inc. (the Merger) and Autoliv, Inc. will acquire at least 90 percent of
the outstanding capital of Autoliv AB. This transaction is intended to be a
merger of equals in which, if the Exchange Offer which is part of this
transaction is fully accepted, MII's shareholders will exchange their interest
in ASP for 46.5 percent of Autoliv, Inc. and Autoliv AB's shareholders will
exchange their Autoliv AB shares for 53.5 percent of the equity of Autoliv, Inc.
Shortly prior to the business combination, MII will contribute all of its
businesses other than ASP to a new company, New Morton, and will spin off New
Morton to MII's shareholders in a tax free distribution (the Distribution). Each
shareholder of MII common stock will receive one share of New Morton common
stock for each share of MII's stock owned prior to the combination. In addition,
in conjunction with the spin-off, MII will contribute $750 million in cash to
New Morton to be funded by debt which will be retained by ASP. MII will also
distribute to New Morton a portion of the cash generated by the ASP business
since July 1, 1996, in an amount equal to $50.0 million plus $7.2 million per
month after March 31, 1997, until the consummation of the Distribution.
Promptly following the Distribution, MII, then consisting only of the ASP
Business, will be merged with a wholly owned subsidiary of Autoliv, Inc. in the
Merger. As a result of the Merger, MII shareholders will exchange their shares
of MII common stock for Autoliv, Inc. common stock in the ratio described above.
This exchange will also be tax-free. Essentially simultaneously, Autoliv, Inc.
will complete the Exchange Offer to Autoliv AB shareholders (and holders of
related depositary receipts) in which Autoliv AB shareholders receive Autoliv,
Inc. common stock and Autoliv, Inc. will acquire at least 90 percent of the
outstanding capital stock of Autoliv AB. In substance, MII is combining its ASP
business with the businesses of Autoliv AB, which will together be conducted by
Autoliv, Inc.
F-36
<PAGE>
AUTOMOTIVE SAFETY PRODUCTS
NOTES TO COMBINED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOTE 3: (CONTINUED)
For the purposes of governing certain relationships among MII, New Morton
and Autoliv, Inc., as well as to help in the orderly separation and transition
of the ASP business, MII, New Morton, Autoliv, Inc. and Autoliv AB have entered
or will enter into numerous agreements, including the Combination Agreement, the
Distribution Agreement, Tax Sharing Agreement, Employee Benefits Allocation
Agreement and other agreements. These agreements deal with many operational
issues, including (a) the separation of the ASP business from the remaining
businesses; (b) transitional services to be provided by New Morton to the ASP
business after the Combination; (c) the sharing of certain facilities for a
limited time by the ASP business and New Morton; and (d) the allocation of
certain tax, employee benefits and other liabilities among New Morton, Autoliv,
Inc. and MII.
The transactions described above are subject to, among other things,
approval by MII's shareholders, acceptance by holders of at least 90 percent of
Autoliv AB's outstanding shares of an exchange offer for Autoliv, Inc. shares,
receipt by MII of a ruling from the U.S. Internal Revenue Service regarding
certain tax aspects of the transactions, and certain regulatory approvals.
F-37
<PAGE>
AUTOMOTIVE SAFETY PRODUCTS
COMBINED BALANCE SHEET (UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30
1994
-------------
<S> <C>
(IN MILLIONS)
ASSETS
CURRENT ASSETS
Cash and cash equivalents.......................................................................... $ --
Receivables........................................................................................ 136.5
Recoverable design and preproduction costs......................................................... 13.0
Inventories........................................................................................ 77.2
Refundable and deferred income tax benefits........................................................ 8.2
Prepaid expenses................................................................................... .7
------
Total Current Assets........................................................................... 235.6
------
OTHER ASSETS
Recoverable design and preproduction costs......................................................... 7.1
Miscellaneous...................................................................................... 11.2
------
18.3
------
PROPERTY, PLANT AND EQUIPMENT
Land............................................................................................... 1.9
Buildings and improvements......................................................................... 95.1
Machinery and equipment............................................................................ 288.6
Construction in progress........................................................................... 91.9
------
477.5
Less allowances for depreciation................................................................... 115.4
------
362.1
------
$ 616.0
------
------
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Advances from affiliates........................................................................... $ 2.1
Accounts payable................................................................................... 67.8
Accrued salaries, wages and other compensation..................................................... 8.5
Other accrued expenses............................................................................. 12.2
Income taxes....................................................................................... 1.2
------
Total Current Liabilities...................................................................... 91.8
------
NONCURRENT LIABILITIES
Deferred income taxes.............................................................................. 13.3
Accrued postretirement benefits other than pensions................................................ 5.1
Other noncurrent liabilities....................................................................... 5.9
------
Total Noncurrent Liabilities................................................................... 24.3
------
COMBINED EQUITY...................................................................................... 499.9
------
$ 616.0
------
------
</TABLE>
F-38
<PAGE>
APPENDIX A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONFORMED COPY
COMBINATION AGREEMENT
AMONG
AUTOLIV AB,
MORTON INTERNATIONAL, INC.,
AUTOLIV, INC.
AND
ASP MERGER SUB INC.
DATED AS OF NOVEMBER 25, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I
THE MERGER............................................................................ A-2
Section 1.1 The Merger.............................................................. A-2
Section 1.2 Effective Time; Closing................................................. A-2
Section 1.3 Effect of the Merger.................................................... A-3
Section 1.4 Certificate of Incorporation; By-Laws; Corporate Name................... A-3
Section 1.5 Directors and Officers of the Surviving Corporation..................... A-3
ARTICLE II
CONVERSION OF SECURITIES IN THE MERGER................................................ A-3
Section 2.1 Conversion of Capital Stock............................................. A-3
Section 2.2 Exchange of Certificates................................................ A-3
Section 2.3 Stock Transfer Books.................................................... A-6
Section 2.4 Employee/Director Stock Options......................................... A-6
ARTICLE III
ADDITIONAL TRANSACTIONS............................................................... A-7
Section 3.1 The Exchange Offer...................................................... A-7
Section 3.2 Depositary.............................................................. A-7
Section 3.3 Compulsory Acquisition.................................................. A-7
Section 3.4 Spinoff................................................................. A-8
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF MORTON.............................................. A-8
Section 4.1 Organization and Qualification; Subsidiaries............................ A-8
Section 4.2 Certificate of Incorporation and By-Laws................................ A-8
Section 4.3 Capitalization.......................................................... A-8
Section 4.4 Authority Relative to this Agreement.................................... A-9
Section 4.5 No Conflict; Required Filings and Consents.............................. A-10
Section 4.6 Permits; Compliance..................................................... A-10
Section 4.7 SEC Filings; Financial Statements....................................... A-11
Section 4.8 Absence of Certain Changes or Events.................................... A-12
Section 4.9 Employee Benefit Plans; Labor Matters................................... A-12
Section 4.10 Tax Matters............................................................. A-14
Section 4.11 Contracts; Debt Instruments............................................. A-16
Section 4.12 Litigation.............................................................. A-16
Section 4.13 Environmental Matters................................................... A-16
Section 4.14 Trademarks, Patents and Copyrights...................................... A-17
Section 4.15 No Violation of Spinco Representations.................................. A-17
Section 4.16 Rights Agreement........................................................ A-17
Section 4.17 Opinion of Financial Advisor............................................ A-17
Section 4.18 Brokers................................................................. A-17
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF AUTOLIV............................................. A-18
Section 5.1 Organization and Qualification; Subsidiaries............................ A-18
Section 5.2 Corporate Organization Documents........................................ A-18
Section 5.3 Capitalization.......................................................... A-18
Section 5.4 Authority Relative to this Agreement.................................... A-18
Section 5.5 No Conflict; Required Filings and Consents.............................. A-19
Section 5.6 Permits; Compliance..................................................... A-19
Section 5.7 Stock Exchange and SEC Filings; Financial Statements.................... A-20
Section 5.8 Absence of Certain Changes or Events.................................... A-20
Section 5.9 Employee Benefit Plans; Labor Matters................................... A-20
Section 5.10 Tax Matters............................................................. A-23
Section 5.11 Contracts; Debt Instruments............................................. A-24
Section 5.12 Litigation.............................................................. A-24
Section 5.13 Environmental Matters................................................... A-24
Section 5.14 Trademarks, Patents and Copyrights...................................... A-24
Section 5.15 Opinions of Financial Advisors.......................................... A-25
Section 5.16 Brokers................................................................. A-25
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF NEWCO AND NEWCO SUB................................. A-25
Section 6.1 Organization and Qualification; Subsidiaries............................ A-25
Section 6.2 Certificate of Incorporation and By-Laws................................ A-25
Section 6.3 Capitalization.......................................................... A-25
Section 6.4 Authority Relative to this Agreement.................................... A-26
Section 6.5 No Conflict............................................................. A-26
Section 6.6 No Activities........................................................... A-26
ARTICLE VII
COVENANTS............................................................................. A-27
Section 7.1 Conduct of Business by Morton Pending the Closing....................... A-27
Section 7.2 Conduct of Business by Autoliv Pending the Closing...................... A-29
Section 7.3 Cooperation; Liaison Committee.......................................... A-30
Section 7.4 Notices of Certain Events............................................... A-31
ARTICLE VIII
ADDITIONAL AGREEMENTS................................................................. A-31
Section 8.1 Registration Statements................................................. A-31
Section 8.2 Stockholders' Meetings.................................................. A-33
Section 8.3 Access to Information; Confidentiality.................................. A-33
Section 8.4 No Solicitation of Transactions......................................... A-34
Section 8.5 Employee Benefits Matters............................................... A-35
Section 8.6 Directors' and Officers' Indemnification and Insurance.................. A-35
Section 8.7 Affiliate Letters....................................................... A-37
Section 8.8 Letters of Accountants.................................................. A-37
Section 8.9 Further Action; Consents; Filings....................................... A-37
Section 8.10 Newco Organization...................................................... A-38
Section 8.11 Depositary Facility for Newco Common Stock.............................. A-39
</TABLE>
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<TABLE>
<S> <C> <C>
Section 8.12 Plan of Reorganization.................................................. A-39
Section 8.13 Ancillary Agreements.................................................... A-39
Section 8.14 Year-End Financial Statements........................................... A-40
Section 8.15 Public Announcements.................................................... A-40
Section 8.16 Obligations of Newco Sub................................................ A-40
Section 8.17 Stock Exchange Listings and De-listings................................. A-40
Section 8.18 Maintenance of Certain Facilities; Corporate Headquarters............... A-40
Section 8.19 Cancellation of Newco Common Stock Owned by Autoliv and Morton.......... A-41
Section 8.20 Delivery of Tax Certificates............................................ A-41
Section 8.21 Safety Credit Agreement................................................. A-41
Section 8.22 Post-Closing Transactions............................................... A-41
ARTICLE IX
CONDITIONS TO THE TRANSACTIONS........................................................ A-41
Section 9.1 Conditions to the Obligations of Each Party to Consummate the A-41
Transactions..........................................................
Section 9.2 Conditions to the Obligations of Morton................................. A-43
Section 9.3 Conditions to the Obligations of Autoliv................................ A-43
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER..................................................... A-44
Section 10.1 Termination............................................................. A-44
Section 10.2 Effect of Termination................................................... A-45
Section 10.3 Amendment............................................................... A-46
Section 10.4 Waiver.................................................................. A-46
Section 10.5 Expenses................................................................ A-46
ARTICLE XI
GENERAL PROVISIONS.................................................................... A-47
Section 11.1 Non-Survival of Representations, Warranties and Agreements.............. A-47
Section 11.2 Notices................................................................. A-47
Section 11.3 Certain Definitions..................................................... A-48
Section 11.4 Severability............................................................ A-49
Section 11.5 Assignment; Binding Effect; Benefit..................................... A-49
Section 11.6 Schedules, Annexes and Exhibits......................................... A-49
Section 11.7 Specific Performance.................................................... A-50
Section 11.8 Governing Law........................................................... A-50
Section 11.9 Submission to Jurisdiction; Venue....................................... A-50
Section 11.10 Headings................................................................ A-50
Section 11.11 Counterparts............................................................ A-50
Section 11.12 Entire Agreement........................................................ A-50
</TABLE>
<TABLE>
<S> <C> <C>
ANNEX A Employee Benefits....................................................... AA-1
Exhibit A Form of Distribution Agreement
Exhibit B Form of Certificate of Incorporation of Surviving Corporation
Exhibit C Form of Morton Affiliate Letter
Exhibit D Form of Autoliv Affiliate Letter
Schedule A Morton Disclosure Schedule
Schedule B Autoliv Disclosure Schedule
</TABLE>
iii
<PAGE>
INDEX OF DEFINED TERMS FOR COMBINATION AGREEMENT
<TABLE>
<CAPTION>
DEFINED TERM SECTION
- -------------------------------------------------------------------------------------------------- --------------
<S> <C>
ADSs.............................................................................................. Recitals
Affiliate......................................................................................... 8.7(a)
affiliate......................................................................................... 11.3(a)
Agreement......................................................................................... Recitals
Ancillary Agreements.............................................................................. Recitals
Autoliv........................................................................................... Recitals
Autoliv Authorized Agent.......................................................................... 11.9
Autoliv Disclosure Schedule....................................................................... 5.9(a)
Autoliv ERISA Affiliate........................................................................... 5.9(a)
Autoliv Foreign Benefit Plan...................................................................... 5.9(n)
Autoliv Material Adverse Effect................................................................... 5.1
Autoliv Permits................................................................................... 5.6
Autoliv Plans..................................................................................... 5.9(a)
Autoliv Reports................................................................................... 5.7(a)
Autoliv Securities................................................................................ Recitals
Autoliv Shares.................................................................................... Recitals
Autoliv Tax Certificate........................................................................... 9.1(g)(ii)(B)
Autoliv Transaction............................................................................... Recitals
beneficial owner.................................................................................. 11.3(b)
Blackstone........................................................................................ 5.15
Blue Sky Laws..................................................................................... 4.5(b)
business day...................................................................................... 11.3 (c)
CERCLA............................................................................................ 4.13(d)
Certificates...................................................................................... 2.2(a)
Code.............................................................................................. Recitals
Competing Transaction............................................................................. 8.4(d)
Confidentiality Agreements........................................................................ 8.3(b)
Contracting Subsidiary............................................................................ 4.4
control........................................................................................... 11.3(d)
controlled by..................................................................................... 11.3(d)
Costs............................................................................................. 8.6 (d)
Delaware Certificate of Merger.................................................................... 1.2
Delaware Law...................................................................................... Recitals
Depositary........................................................................................ 3.2
Distribution Agreement............................................................................ Recitals
Effective Time.................................................................................... 1.2
Employee Benefits Allocation Agreement............................................................ Recitals
Enskilda.......................................................................................... 5.15
Environmental Laws................................................................................ 4.13(d)
Environmental Permits............................................................................. 4.13(d)
Exchange Act...................................................................................... 4.5 (b)
Exchange Agent.................................................................................... 2.2(a)
Exchange Fund..................................................................................... 2.2(a)
Exchange Offer.................................................................................... Recitals
Exchange Offer Commencement Date.................................................................. 3.1(a)
Exchange Offer Conditions......................................................................... 3.1(a)
Exchange Offer Ratio.............................................................................. 3.1(a)
</TABLE>
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<TABLE>
<CAPTION>
DEFINED TERM SECTION
- -------------------------------------------------------------------------------------------------- --------------
<S> <C>
Exchange Ratio.................................................................................... 2.1(a)
Executive Management Committee.................................................................... 8.10(b)
Expenses.......................................................................................... 10.5(b)
Expiration Date................................................................................... 3.1(a)
FSA............................................................................................... 3.1(b)
Goldman Sachs..................................................................................... 4.17
Governmental Entity............................................................................... 4.5(b)
Hazardous Materials............................................................................... 4.13(d)
HSR Act........................................................................................... 4.5 (b)
Indemnified Parties............................................................................... 8.6(d)
Indiana Articles of Merger........................................................................ 1.2
Indiana Law....................................................................................... Recitals
International Prospectus.......................................................................... 5.15
knowledge......................................................................................... 11.3(e)
Law............................................................................................... 4.5(a)
Liaison Committee................................................................................. 7.3(b)
Merger............................................................................................ Recitals
Minimum Condition................................................................................. 3.1(a)
Morton............................................................................................ Recitals
Morton Disclosure Schedule........................................................................ 4.3
Morton ERISA Affiliate............................................................................ 4.9(a)
Morton Foreign Benefit Plan....................................................................... 4.9(n)
Morton Material Adverse Effect.................................................................... 4.1
Morton Material Contract.......................................................................... 4.11
Morton Option Plan................................................................................ 2.4
Morton Options.................................................................................... 2.4
Morton Permits.................................................................................... 4.6
Morton Plans...................................................................................... 4.9(a)
Morton Preferred Stock............................................................................ 4.3
Morton SEC Reports................................................................................ 4.7(a)
Morton Shares..................................................................................... Recitals
Morton Stockholder Approval Condition............................................................. 3.1(a)
Morton Stockholders' Meeting...................................................................... 8.1(a)
Morton Tax Certificate............................................................................ 9.1(g)(ii)(A)
Newco............................................................................................. Recitals
Newco Common Stock................................................................................ Recitals
Newco Option Plan................................................................................. 2.4
Newco Sub......................................................................................... Recitals
Newco Sub Common Stock............................................................................ 6.3(b)
Newco Registration Statement...................................................................... 8.1(a)
Newco Tax Certificate............................................................................. 9.1(g)(ii)(A)
NYSE.............................................................................................. 2.2(e)
Order............................................................................................. 8.9(b)(ii)
PBGC.............................................................................................. 4.9(c)
person............................................................................................ 11.3(f)
Proxy/Prospectus.................................................................................. 8.1(a)
Registration Statements........................................................................... 8.1(a)
Registration Statement Effective Date............................................................. 8.1(a)
Regulations....................................................................................... Recitals
Representatives................................................................................... 8.3(a)(i)
</TABLE>
v
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<TABLE>
<CAPTION>
DEFINED TERM SECTION
- -------------------------------------------------------------------------------------------------- --------------
<S> <C>
Retained Business................................................................................. 4.1
Retained Business Balance Sheet................................................................... 4.7(c)
Retained Business Intellectual Property........................................................... 4.14
Retained Debt..................................................................................... 7.1(e)(ii)
Retained Morton Subsidiaries...................................................................... 4.1
Rights............................................................................................ 4.16
Rights Agreement.................................................................................. 4.3
SDRs.............................................................................................. Recitals
SEC............................................................................................... 2.4
Securities Act.................................................................................... 4.5 (b)
Skadden LLP....................................................................................... 9.1(g)(ii)(B)
SPD............................................................................................... 4.9 (b)
Spinco............................................................................................ Recitals
Spinco Common Stock............................................................................... Recitals
Spinco Registration Statement..................................................................... 8.1(a)
Spinoff........................................................................................... Recitals
SSE............................................................................................... 3.1(b)
subsidiaries...................................................................................... 11.3(g)
subsidiary........................................................................................ 11.3(g)
Surviving Corporation............................................................................. 1.1
Swedish Prospectus................................................................................ 3.1(b)
Tax Return........................................................................................ 4.10(b)
Tax Sharing Agreement............................................................................. Recitals
Taxes............................................................................................. 4.10(b)
Terminating Autoliv Breach........................................................................ 10.1(h)
Terminating Morton Breach......................................................................... 10.1(g)
Third Party Provisions............................................................................ 11.5
Third-Party Transaction........................................................................... 8.4(c)
Transactions...................................................................................... Recitals
under common control with......................................................................... 11.3(d)
U.S. Offer to Purchase............................................................................ 8.1(a)
Wachtell.......................................................................................... 9.1(g)(ii)(A)
</TABLE>
vi
<PAGE>
COMBINATION AGREEMENT
COMBINATION AGREEMENT, dated as of November 25, 1996 (this "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 newly formed Delaware corporation ("Newco"), and
ASP Merger Sub Inc., a Delaware corporation and a wholly-owned subsidiary of
Newco ("Newco Sub").
WHEREAS, Autoliv and Morton have entered into a non-binding letter of
intent, dated September 30, 1996, providing for, among other things, the
creation of a new holding company, Newco, to combine Autoliv and the automotive
safety products business of Morton and in which the shareholders of Autoliv and
Morton would receive an equity interest of 53.5% and 46.5%, respectively;
WHEREAS, the Boards of Directors of Autoliv and Morton have determined that
it is in the best interests of their respective companies and stockholders to
combine Autoliv with Morton's automotive safety products businesses in a "merger
of equals" transaction to be effected as set forth in this Agreement, and the
boards of directors of Newco and Newco Sub have determined that it is also in
the respective best interests of their companies and stockholders to consummate
the transactions contemplated by this Agreement;
WHEREAS, the Board of Directors of Morton has approved a Distribution
Agreement in the form attached hereto as Exhibit A (the "Distribution
Agreement"), which will be entered into prior to the Effective Time (as defined
in Section 1.2), pursuant to which and subject to the terms of which (a) all of
the assets of Morton other than the Safety Assets (as defined in the
Distribution Agreement), together with a capital contribution or repayment in
cash of intercompany indebtedness in the aggregate amount of $750,000,000, and
the Safety Supplemental Distribution (as defined in the Distribution Agreement),
subject to adjustment in accordance with Section 2.10(b) of the Distribution
Agreement, will be contributed or paid by Morton to a newly formed, wholly owned
subsidiary of Morton ("Spinco") or a subsidiary of Spinco, (b) all of the
liabilities of Morton other than the Safety Liabilities (as defined in the
Distribution Agreement) will be assumed by Spinco, (c) all of the issued and
outstanding shares of common stock, par value $1 per share, of Spinco (the
"Spinco Common Stock"), including associated preferred share purchase rights of
Spinco, will be distributed (the "Spinoff") to the holders of common stock, par
value $1 per share, of Morton (the "Morton Shares"), and (d) Morton will be
divested of all of its businesses and operations other than those included in
the Safety Business (as defined in the Distribution Agreement), including,
without limitation, the Adhesives & Chemical Specialties Group, the Coatings
Group, the Electronic Materials Group, the Salt Group and the Corporate
Operations (as defined in the Distribution Agreement);
WHEREAS, upon the terms and subject to the conditions of this Agreement, (i)
Newco will acquire pursuant to an exchange offer (the "Exchange Offer") and, if
necessary, through compulsory acquisition proceedings in accordance with the
Swedish Companies Act or otherwise (collectively, the "Autoliv Transaction"),
all the issued and outstanding Common Shares, par value SEK 10 per share, of
Autoliv (the "Autoliv Shares") and American Depositary Shares, each representing
one Autoliv Share (the "ADSs" and, collectively with the Autoliv Shares, the
"Autoliv Securities") and (ii) Newco will acquire, pursuant to the merger (the
"Merger", and together with the Autoliv Transaction, the "Transactions") of
Newco Sub with and into Morton in accordance with the General Corporation Law of
the State of Delaware (the "Delaware Law") and the Indiana Business Corporation
Law (the "Indiana Law"), all the issued and outstanding Morton Shares;
WHEREAS, (a) as a result of the Transactions, Autoliv and Morton will
become, directly or indirectly, wholly owned subsidiaries of Newco, and (b) the
holders of Autoliv Securities (other than Autoliv Securities acquired through
compulsory acquisition proceedings or as otherwise described herein) and Morton
Shares will receive either (i) newly issued shares of Common Stock, par value
$.01 per share, of Newco (the "Newco Common Stock") or (ii) if deemed
appropriate by Autoliv, in the case of certain
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holders of Autoliv Shares, Swedish Depositary Receipts ("SDRs"), each SDR
evidencing one share of Newco Common Stock;
WHEREAS, as set forth in Section 8.13 hereof, as a condition to and in
consideration of the transactions contemplated hereby and by the Distribution
Agreement, Morton, Spinco and certain other parties are entering or will enter
into (a) a Tax Sharing Agreement in the form attached as Exhibit D to the
Distribution Agreement (the "Tax Sharing Agreement"), (b) an Employee Benefits
Allocation Agreement in the form attached as Exhibit A to the Distribution
Agreement (the "Employee Benefits Allocation Agreement" and, together with the
Distribution Agreement and the Tax Sharing Agreement, hereafter collectively
referred to as the "Ancillary Agreements");
WHEREAS, for United States federal income tax purposes, the Spinoff is
intended to qualify as a tax-free distribution under the provisions of Sections
355 and 368(a)(1)(D) of the United States Internal Revenue Code of 1986, as
amended (the "Code") and the Treasury Regulations (the "Regulations")
thereunder, the Merger is intended to qualify as a reorganization under the
provisions of Section 368(a) of the Code and Regulations thereunder, and the
Exchange Offer, together with the Merger, is intended to qualify as a transfer
of property described in Section 351(a) of the Code and Regulations thereunder,
and it is further intended that, for Swedish income tax purposes, none of Newco,
Autoliv or the Autoliv stockholders (with certain exceptions) will recognize
taxable income or gain as a result of the Exchange Offer;
WHEREAS, the Board of Directors of Autoliv has approved the Autoliv
Transaction and recommended that all the stockholders of Autoliv tender their
Autoliv Securities into the Exchange Offer;
WHEREAS, the Board of Directors of Morton has adopted this Agreement and
approved the Spinoff and recommended that the stockholders of Morton vote to
approve this Agreement, the Merger and the transactions contemplated by the
Distribution Agreement upon the terms and subject to the conditions contained
herein and therein; and
WHEREAS, this Agreement has been approved by the Boards of Directors of
Newco and Newco Sub, adopted by Autoliv and Morton as the sole stockholders of
Newco, and adopted by Newco as sole stockholder of Newco Sub in accordance with
the Delaware Law.
NOW THEREFORE, in consideration of the foregoing and the Ancillary
Agreements and the mutual covenants and agreements herein contained and
intending to be legally bound hereby, the parties hereto hereby agree as
follows:
ARTICLE I
THE MERGER
Section 1.1 THE MERGER. Provided that this Agreement shall not have been
terminated in accordance with Section 10.1, upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with Section 252 of
the Delaware Law and Section 23-1-40-7 of the Indiana Law, at the Effective Time
Newco Sub shall be merged with and into Morton. As a result of the Merger, the
separate corporate existence of Newco Sub shall cease and Morton shall be the
surviving corporation of the Merger (the "Surviving Corporation").
Section 1.2 EFFECTIVE TIME; CLOSING. Provided that this Agreement shall not
have been terminated in accordance with Section 10.1, as promptly as practicable
after the Spinoff and satisfaction or, if permissible and effected as provided
in Section 10.4, waiver of the Exchange Offer Conditions (as hereinafter
defined) (or such other date as may be agreed to in writing by Autoliv and
Morton), and substantially contemporaneously with the purchase of Autoliv
Securities by Newco pursuant to the Autoliv Transaction, the parties hereto
shall cause the Merger to be consummated by filing a certificate of merger (the
"Delaware Certificate of Merger") with the Secretary of State of the State of
Delaware in such form as required by,
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and executed in accordance with, Section 252 of the Delaware Law, and articles
of merger (the "Indiana Articles of Merger") with the Secretary of State of the
State of Indiana in such form as required by, and executed in accordance with,
Section 23-1-40-5 of the Indiana Law. The Merger shall become effective upon the
date (the "Effective Time") on which the Delaware Certificate of Merger and the
Indiana Articles of Merger have been duly filed with the Secretary of State of
the State of Delaware and the Secretary of State of the State of Indiana,
respectively, or at such later date or time as set forth therein.
Section 1.3 EFFECT OF THE MERGER. At the Effective Time, the effect of the
Merger shall be as provided in the Delaware Law and the Indiana Law. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time all the property, rights, privileges, powers and franchises of the Retained
Business (as defined in Section 4.1) and Newco Sub shall be vested in the
Surviving Corporation, and all debts, liabilities and duties of the Retained
Business and Newco Sub shall become the debts, liabilities and duties of the
Surviving Corporation.
Section 1.4 CERTIFICATE OF INCORPORATION; BY-LAWS; CORPORATE NAME. At the
Effective Time, (a) the Certificate of Incorporation of the Surviving
Corporation shall be amended and restated in its entirety to read in the form
attached hereto as Exhibit B with such changes between the date hereof and the
Effective Time as agreed to by the parties hereto, and (b) the By-laws of Newco
Sub, as in effect immediately prior to the Effective Time, shall become the
By-laws of the Surviving Corporation.
Section 1.5 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. (a) The
directors of Newco Sub at the Effective Time shall, from and after the Effective
Time, become the directors of the Surviving Corporation until their successors
shall have been elected or appointed or qualified or until their earlier death,
resignation or removal in accordance with the Surviving Corporation's
Certificate of Incorporation and By-laws and (b) the officers of Morton at the
Effective Time shall, from and after the Effective Time, be the officers of the
Surviving Corporation until their successors shall have been elected or
appointed or qualified or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's Certificate of Incorporation and
By-laws.
ARTICLE II
CONVERSION OF SECURITIES IN THE MERGER
Section 2.1 CONVERSION OF CAPITAL STOCK. At the Effective Time, by virtue of
the Merger and without any action on the part of Morton, Newco Sub, Newco or the
holders of any Morton Shares:
(a) each Morton Share issued and outstanding immediately prior to the
Effective Time (other than any Morton Shares to be cancelled pursuant to Section
2.1(b)) shall be converted, subject to Section 2.2(e), into the right to receive
a number of shares (the "Exchange Ratio") of Newco Common Stock equal to the
quotient, rounded to the nearest thousandth, or if there shall not be a nearest
thousandth, the next highest thousandth, of (i) 47,803,738 divided by (ii) the
number of Morton Shares issued and outstanding immediately prior to the
Effective Time (other than any Morton Shares to be cancelled pursuant to Section
2.1(b));
(b) each Morton Share held in the treasury of Morton and each Morton Share
owned by Autoliv or any direct or indirect wholly owned subsidiary of Autoliv or
of Morton shall be cancelled and extinguished without any conversion thereof and
no payment shall be made with respect thereto; and
(c) each issued and outstanding share of common stock, par value $.01 per
share, of Newco Sub shall be converted into one duly authorized, validly issued,
fully paid and nonassessable share of common stock of the Surviving Corporation.
Section 2.2 EXCHANGE OF CERTIFICATES.
(a) Exchange Agent. Newco shall deposit, or shall cause to be deposited,
promptly after the Effective Time with a bank trust company designated by Morton
and reasonably satisfactory to Autoliv (the
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"Exchange Agent"), for the benefit of the holders of certificates that
immediately prior to the Effective Time represented outstanding Morton Shares
(the "Certificates"), for exchange in accordance with this Article II through
the Exchange Agent, certificates representing the shares of Newco Common Stock
issuable pursuant to Section 2.1(a) (such certificates for shares of Newco
Common Stock, together with any dividends or distributions with respect thereto,
being hereinafter referred to as the "Exchange Fund"). Newco shall give the
Exchange Agent irrevocable instructions to deliver the shares of Newco Common
Stock contemplated to be issued pursuant to Section 2.1 out of the Exchange Fund
as promptly as practicable after the Effective Time. Except as contemplated by
Section 2.2(f) hereof, the Exchange Fund shall not be used for any other
purpose. Newco shall pay all charges and expenses, including those of the
Exchange Agent, in connection with the exchange of Certificates for certificates
representing shares of Newco Common Stock and cash as contemplated hereby.
(b) Exchange Procedures. As promptly as practicable after the Effective
Time, Newco shall cause the Exchange Agent to mail to each registered holder of
a Certificate (i) a letter of transmittal (which shall be in customary form and
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates to the
Exchange Agent) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing shares of Newco Common
Stock and cash in lieu of any fractional shares. Upon surrender to the Exchange
Agent of a Certificate for exchange, together with such letter of transmittal,
duly executed and completed in accordance with the instructions thereto, and
such other documents as may be reasonably required pursuant to such
instructions, the holder of such Certificate shall be entitled to receive in
exchange therefor a certificate representing that number of whole shares of
Newco Common Stock that such holder has the right to receive in respect of such
Certificate (after taking into account all Morton Shares then held by such
holder), a check in the amount of any cash in lieu of any fractional shares of
Newco Common Stock to which such holder is entitled pursuant to Section 2.2(e)
and any dividends or other distributions to which such holder is entitled
pursuant to Section 2.2(c), and the Certificate so surrendered shall forthwith
be cancelled. In the event of a transfer of ownership of Morton Shares that is
not registered in the transfer records of Morton, a certificate representing the
proper number of shares of Newco Common Stock, cash in lieu of any fractional
shares of Newco Common Stock to which such holder is entitled pursuant to
Section 2.2(e) and any dividends or other distributions to which such holder is
entitled pursuant to Section 2.2(c) may be issued to a transferee if the
Certificate representing such Morton Shares is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer and
by evidence that any applicable stock transfer taxes have been paid. Until
surrendered as contemplated by this Section 2.2, each Certificate shall be
deemed at all times after the Effective Time to represent only the right to
receive upon such surrender a certificate or certificates representing shares of
Newco Common Stock, cash in lieu of any fractional shares of Newco Common Stock
to which such holder is entitled pursuant to Section 2.2(e) and any dividends or
other distributions to which such holder is entitled pursuant to Section 2.2(c).
(c) Distributions with Respect to Unexchanged Newco Common Stock. No
dividends or other distributions declared or made after the Effective Time with
respect to the Newco Common Stock with a record date after the Effective Time
shall be paid to the holder of any unsurrendered Certificate with respect to the
Newco Common Stock represented thereby, and no cash payment in lieu of any
fractional shares shall be paid to any such holder pursuant to Section 2.2(e),
until the holder of such Certificate shall surrender such Certificate. Subject
to the effect of escheat, tax or other applicable Laws (as defined in Section
4.5(a)), following surrender of any such Certificate, there shall be paid to the
holder of the certificate representing whole shares of Newco Common Stock issued
in exchange therefor, without interest, (i) promptly, the amount of any cash
payable with respect to a fractional share of Newco Common Stock to which such
holder is entitled pursuant to Section 2.2(e) and the amount of dividends or
other distributions with a record date after the Effective Time and theretofore
declared or made with respect to such whole shares of Newco Common Stock but
unpaid because of such holder's failure to surrender such Certificate, and (ii)
at the appropriate payment date, the amount of dividends or other distributions,
with a
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record date after the Effective Time but prior to surrender and a payment date
occurring after surrender, payable with respect to such whole shares of Newco
Common Stock.
(d) No Further Rights in Morton Shares. All shares of Newco Common Stock
issued upon conversion of the Morton Shares in accordance with the terms hereof
(and any cash paid pursuant to Section 2.2(c) or (e)) shall be deemed to have
been issued in full satisfaction of all rights pertaining to such Morton Shares.
(e) No Fractional Shares. No certificates or scrip representing fractional
shares of Newco Common Stock shall be issued upon the surrender for exchange of
Certificates, and such fractional share interests will not entitle the owner
thereof to vote or to any other rights of a stockholder of Newco. Each holder of
a fractional share interest shall be paid an amount in cash representing the
product of (i) such fractional amount and (ii) the average for each of the first
five trading days beginning immediately following the Effective Time of the
average of the daily high and low trading prices on the New York Stock Exchange,
Inc. ("NYSE") of Newco Common Stock. As soon as practicable after the
determination of the amount of cash, if any, to be paid to former holders of
Morton Shares in lieu of any fractional shares of Newco Common Stock, Newco
shall deposit an estimate of such amount into the Exchange Fund, and the
Exchange Agent shall make available such amounts to such former holders of
Morton Shares without interest. For purposes of paying such cash in lieu of
fractional shares, all Certificates surrendered for exchange on the same letter
of transmittal shall be aggregated, with the holder thereof receiving the
aggregate whole number of shares of Newco Common Stock, and no Morton
stockholder will receive cash in lieu of fractional shares in an amount equal to
or greater than the value of one full share of Newco Common Stock with respect
to such surrendered Certificates. As necessary to provide sufficient funds to
make the payments in lieu of fractional shares described in this paragraph,
Newco shall deposit additional funds into the Exchange Fund so that the Exchange
Agent may promptly deliver such funds to the former holders of Morton Shares.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the former holders of Morton Shares for six months
after the Effective Time shall be delivered to Newco, upon demand, and any
holders of Certificates shall thereafter look only to Newco for Newco Common
Stock, any cash in lieu of fractional shares of Newco Common Stock to which they
are entitled pursuant to Section 2.2(e) and any dividends or other distributions
with respect to the Newco Common Stock to which they are entitled pursuant to
Section 2.2(c). Neither Newco nor the Surviving Corporation shall be liable to
any holder of Morton Shares for any shares of Newco Common Stock (or dividends
or distributions with respect thereto) or cash in lieu of fractional shares
delivered to a public official pursuant to any abandoned property, escheat or
similar Law.
(g) Withholding Rights. Each of the Surviving Corporation and Newco shall be
entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of Morton Shares such amounts as it is
required to deduct and withhold with respect to the making of such payment under
the Code, or any provision of state, local or foreign tax law. To the extent
that amounts are so withheld by the Surviving Corporation or Newco, as the case
may be, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the Morton Shares in respect of
which such deduction and withholding was made by the Surviving Corporation or
Newco, as the case may be.
(h) Lost Certificates. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by the
Surviving Corporation, the posting by such person of a bond, in such reasonable
amount as the Surviving Corporation may direct, as indemnity against any claim
that may be made against it with respect to such Certificate, the Exchange Agent
will issue in exchange for such lost, stolen or destroyed Certificate the Newco
Common Stock, any cash in lieu of fractional shares of Newco Common Stock to
which the holders thereof are entitled pursuant to Section 2.2(e) and any
dividends or other distributions to which the holders thereof are entitled
pursuant to Section 2.2(c).
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Section 2.3 STOCK TRANSFER BOOKS. At the Effective Time, the stock transfer
books of Morton shall be closed and there shall be no further registration of
transfers of Morton Shares thereafter on the records of Morton. From and after
the Effective Time, the holders of Certificates representing Morton Shares
outstanding immediately prior to the Effective Time shall cease to have any
rights with respect to Morton Shares represented thereby, except as otherwise
provided herein or by Law. On or after the Effective Time, any Certificates
presented to the Exchange Agent or Newco for any reason shall be converted into
shares of Newco Common Stock, any cash in lieu of fractional shares of Newco
Common Stock to which the holders thereof are entitled pursuant to Section
2.2(e) and any dividends or other distributions to which the holders thereof are
entitled pursuant to Section 2.2(c).
Section 2.4 EMPLOYEE/DIRECTOR STOCK OPTIONS. Morton and Newco shall
cooperate and take all action necessary (including obtaining the consent of the
holders of options to acquire Morton Shares pursuant to the Morton
International, Inc. 1989 Incentive Plan or any predecessor thereof (such
options, the "Morton Options" and such plan, the "Morton Option Plan"), if
required, and, if deemed necessary or appropriate, seeking a "no-action" letter
or interpretive advice from the Securities and Exchange Commission (the "SEC")
to amend (if necessary) the Morton Option Plan and to adopt an option plan of
Newco (the "Newco Option Plan")) so that as of the Effective Time, each Morton
Option which is outstanding and not exercised prior to the Effective Time and
which is held by a Company Individual (as defined in the Employee Benefits
Allocation Agreement) shall, without any action on the part of the holder
thereof, be converted into an option to purchase shares of Newco Common Stock,
the number of shares of Newco 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 daily high and low trading prices on the NYSE for the Morton
Shares for each of the last five trading days prior to the earlier of the
Effective Time and the Distribution Date (as defined in the Distribution
Agreement) (unless, prior thereto, the Morton Shares trade ex-dividend with
respect to either or both the Spinoff and the Merger, in which case the average
shall be based on such prices for each of the last five trading days prior to
the date on which the Morton Shares trade on the NYSE ex-dividend with respect
to either such transaction) and (b) the average of the high and low trading
prices on the NYSE for the Newco Common Stock for each of the first five trading
days following the Effective Time on which the Newco Common Stock is traded
regular way on the NYSE, such option to be subject to substantially similar
terms and conditions as in effect prior to the conversion, including, without
limitation, to the extent such option to purchase Morton Shares is exercisable
as of the Effective Time, such option to purchase shares of Newco Common Stock
shall be immediately exercisable to the same extent. 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 Company
Individuals shall be adjusted in a consistent manner and shall be assumed by,
and become the responsibility of, Newco. Morton Options held by New Morton
Individuals (as defined in the Employee Benefits Allocation Agreement) shall be
adjusted at or prior to the Effective Time to become options to acquire Spinco
Common Stock pursuant to the terms of the Employee Benefits Allocation
Agreement.
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ARTICLE III
ADDITIONAL TRANSACTIONS
Section 3.1 THE EXCHANGE OFFER.
(a) Provided that this Agreement shall not have been terminated in
accordance with Section 10.1, Newco shall commence the Exchange Offer on or as
soon as practicable after the Registration Statement Effective Date (the
"Exchange Offer Commencement Date") as contemplated by the U.S. Offer to
Purchase and the Swedish Prospectus (each as hereinafter defined) and otherwise
in accordance with applicable Laws. Pursuant to the Exchange Offer, (i) Newco
shall offer to exchange for each Autoliv Share, subject to the conditions set
forth below, one share of Newco Common Stock or, if deemed appropriate by Newco,
one SDR and (ii) Newco shall offer to exchange for each ADS, subject to the
conditions set forth below, one share of Newco Common Stock (the "Exchange Offer
Ratio"). The obligation of Newco to exchange Newco Common Stock for Autoliv
Securities tendered pursuant to the Exchange Offer shall be subject only to this
Agreement not having been terminated pursuant to Section 10.1 and the
satisfaction or waiver, if permissible and effected as provided in Section 10.4,
of (i) the condition that a number of Autoliv Securities representing more than
90% of the number of shares and voting power of the then outstanding Autoliv
Securities shall have been validly tendered and not withdrawn prior to the
expiration of the Exchange Offer (the "Minimum Condition"), (ii) the condition
that this Agreement and the transactions contemplated by the Distribution
Agreement shall have been approved by the holders of a majority of the issued
and outstanding Morton Shares in accordance with the Indiana Law and Morton's
Restated Articles of Incorporation and By-Laws (the "Morton Stockholder Approval
Condition") and (iii) the other conditions set forth in Article IX of this
Agreement occurring prior to, or substantially contemporaneously with, the
Effective Time (together with the Minimum Condition and the Morton Stockholder
Approval Condition, the "Exchange Offer Conditions"). The initial expiration
date of the Exchange Offer shall be the date which is 20 business days after the
Exchange Offer Commencement Date (such date, as it may be extended from time to
time as hereinafter provided, the "Expiration Date"). If on the initial
scheduled Expiration Date all the Exchange Offer Conditions shall not have been
satisfied and this Agreement shall not have been terminated in accordance with
Section 10.1, Newco shall, unless Morton and Autoliv otherwise agree, extend the
Expiration Date from time to time thereafter until such time as all of the
Exchange Offer Conditions have been satisfied; PROVIDED, HOWEVER, that unless a
Third-Party Transaction involving Autoliv has theretofore been proposed, neither
party shall unreasonably object if the other party determines not to extend the
Expiration Date if the Minimum Condition has not been satisfied at such time
following (i) the date of the Morton Stockholders' Meeting and (ii) the
satisfaction of the conditions set forth in Section 9.1(e), (f) and (g)(i).
Subject only to the conditions set forth above and applicable Law, Newco shall
accept for exchange and shall exchange all Autoliv Securities validly tendered
and not withdrawn pursuant to the terms of the Exchange Offer at the earliest
practicable time following the Expiration Date.
(b) Prior to or substantially contemporaneously with the Exchange Offer
Commencement Date, Newco shall file a Swedish language prospectus (the "Swedish
Prospectus") with the Stockholm Stock Exchange (the "SSE") or with the Financial
Supervisory Authority (the "FSA"), as required by the Laws of Sweden.
Section 3.2 DEPOSITARY. Newco shall appoint a bank or trust company
designated by Autoliv and reasonably satisfactory to Morton to act as depositary
for the Exchange Offer (the "Depositary").
Section 3.3 COMPULSORY ACQUISITION.
(a) As soon as practicable after the Effective Time, assuming that the
Minimum Condition has been satisfied and not waived, Newco shall take or cause
to be taken (through a Swedish subsidiary), unless the parties mutually agree
that there is a more effective method of achieving the objectives described in
this Section 3.3 (in which case such method shall be used), all actions
necessary and proper under the Swedish
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Companies Act to commence a process leading to a compulsory acquisition under
the Swedish Companies Act to acquire all the issued and outstanding Autoliv
Securities not acquired by Newco pursuant to the Exchange Offer or otherwise.
(b) In the event of consummation of the Transactions following the waiver of
the Minimum Condition effected as provided in Section 10.4, Newco shall, as
promptly as practicable following the Effective Time, conduct, directly or
indirectly, such other offers (including, without limitation, pursuant to open
market purchases) as are necessary to obtain, when aggregated with the number of
shares and voting power of Autoliv Securities already owned by it, more than 90%
of the number of shares and voting power of the then outstanding Autoliv
Securities. Thereafter, Newco shall take the actions described in Section
3.3(a).
Section 3.4 SPINOFF. Subject to Section 3.03 of the Distribution
Agreement, Morton shall use reasonable efforts to consummate as promptly as
reasonably practicable the transactions provided for in the Distribution
Agreement, including, without limitation, the Spinoff.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF MORTON
Morton hereby represents and warrants to Autoliv that:
Section 4.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of Morton and
each subsidiary of Morton that will be owned, directly or indirectly, by Newco
following the Spinoff (the "Retained Morton Subsidiaries") has been duly
organized, and is validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization, as the case may be, and has
the requisite power and authority and all necessary governmental approvals to
own, lease and operate its properties and to carry on its business as it is now
being conducted, except where the failure to be so organized, existing or in
good standing or to have such power, authority and governmental approvals would
not, individually or in the aggregate, have a Morton Material Adverse Effect
(defined below). Each of Morton and the Retained Morton Subsidiaries is duly
qualified or licensed to do business, and is in good standing, in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its business makes such qualification or licensing
necessary, except for such failures to be so qualified or licensed and in good
standing that would not, individually or in the aggregate, have a Morton
Material Adverse Effect. For purposes of this Agreement, "Morton Material
Adverse Effect" means any change in or effect on the business that will be
retained by Morton and the Retained Morton Subsidiaries following the Spinoff
(the "Retained Business"), after giving effect to the Transactions and the
provisions of the Distribution Agreement and the other Ancillary Agreements,
that is, or is reasonably likely to be, materially adverse to the business,
properties, financial condition or results of operations of the Retained
Business taken as a whole.
Section 4.2 CERTIFICATE OF INCORPORATION AND BY-LAWS. The copies of
Morton's Restated Articles of Incorporation and By-Laws that are set forth as
exhibits to Morton's Form 10-K for the year ended June 30, 1996 are complete and
correct copies thereof. Such Restated Articles of Incorporation and By-Laws are
in full force and effect. Morton is not in violation of any of the provisions of
its Restated Articles of Incorporation or By-Laws. Morton has heretofore
delivered or made available to Autoliv accurate and complete copies of the
certificates of incorporation and by-laws or equivalent organizational documents
as currently in effect of each of the Retained Morton Subsidiaries.
Section 4.3 CAPITALIZATION. The authorized capital stock of Morton
consists of (a) 300,000,000 Morton Shares and (b) 25,000,000 shares of preferred
stock, par value $1.00 per share. As of October 31, 1996 (i) 142,636,930 Morton
Shares were issued and outstanding, all of which were validly issued, fully paid
and nonassessable, (ii) 6,348,999 Morton Shares were reserved for issuance upon
exercise of outstanding stock options granted pursuant to the Morton Option Plan
and (iii) 600,000 shares of Morton Series A Junior Participating Preferred Stock
("Morton Preferred Stock") were reserved for issuance under the
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Rights Agreement (the "Rights Agreement") dated as of June 12, 1989 between
Morton and the First National Bank of Chicago, as amended on January 24, 1991
and as further amended on August 11, 1994, and November 22, 1996, as more fully
described below. As of the date of this Agreement, no shares of Morton Preferred
Stock are issued and outstanding. Except for the options granted or rights
issued pursuant to the Morton Option Plan, the Rights Agreement or pursuant to
agreements or arrangements described in Section 4.3 of the Disclosure Schedule
delivered by Morton to Autoliv prior to the execution of (and forming part of)
this Agreement (the "Morton Disclosure Schedule"), there are no options,
warrants or other rights, agreements, arrangements or commitments of any
character to which Morton is a party or by which Morton is bound relating to the
issued or unissued capital stock of Morton or any Retained Morton Subsidiary or
obligating Morton or any Retained Morton Subsidiary to issue or sell any shares
of capital stock of, or other equity interests in, Morton or any Retained Morton
Subsidiary. All Morton Shares subject to issuance as aforesaid upon issuance
prior to the Effective Time on the terms and conditions specified in the
instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and nonassessable. Except as set forth in Section 4.3
of the Morton Disclosure Schedule, there are no outstanding contractual
obligations of Morton or any Retained Morton Subsidiary to repurchase, redeem or
otherwise acquire any Morton Shares or any capital stock of any Retained Morton
Subsidiary. Each outstanding share of capital stock of each Retained Morton
Subsidiary is duly authorized, validly issued, fully paid and nonassessable and
each such share of a Retained Morton Subsidiary owned by Morton or another
Retained Morton Subsidiary is free and clear of all security interests, liens,
claims, pledges, options, rights of first refusal, agreements, limitations on
Morton's or such other Retained Morton Subsidiary's voting rights, charges and
other encumbrances of any nature whatsoever, except in connection with the
Retained Debt (as defined below) or where failure to own such shares free and
clear would not, individually or in the aggregate, have a Morton Material
Adverse Effect. Except as set forth in Section 4.3 of the Morton Disclosure
Schedule, there are no material outstanding contractual obligations of Morton or
any Retained Morton Subsidiary to provide funds to, or make any investment (in
the form of a loan, capital contribution or otherwise) in, any Retained Morton
Subsidiary or any other person with respect to the Retained Business, other than
guarantees by Morton of any indebtedness of any Retained Morton Subsidiary.
Section 4.4 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Morton and each
subsidiary of Morton which is a party to any of the Ancillary Agreements (each
such subsidiary, a "Contracting Subsidiary") has all necessary corporate power
and authority to execute and deliver this Agreement and the Ancillary
Agreements, to perform its obligations hereunder and thereunder and to
consummate the transactions (including, without limitation, the Transactions)
contemplated herein and therein (but only to the extent it is a party thereto).
The execution and delivery of this Agreement by Morton have been, and the
execution and delivery of the Ancillary Agreements by Morton and each
Contracting Subsidiary (to the extent it is a party thereto) will be, and the
consummation of the transactions contemplated hereby and thereby have been or
will be, duly and validly authorized by all necessary corporate action and no
other corporate proceedings on the part of Morton or any Contracting Subsidiary
(to the extent it is a party thereto) are necessary to authorize this Agreement
or to consummate such transactions (other than (a) the approval of this
Agreement, the Merger and the transactions contemplated by the Distribution
Agreement by the affirmative vote of the stockholders of Morton holding a
majority of the issued and outstanding Morton Shares and (b) actions to be taken
by the Boards of Directors of Morton and certain Contracting Subsidiaries in
connection with the matters contemplated by the Ancillary Agreements, which
actions described in clause (b) above will be duly and validly taken prior to
the Effective Time). This Agreement has been, and each of the Ancillary
Agreements will be, prior to the Effective Time, duly authorized and validly
executed and delivered by Morton and each Contracting Subsidiary (to the extent
it is a party thereto) and constitutes, or will constitute, the legal, valid and
binding obligation of Morton and each Contracting Subsidiary (to the extent it
is a party thereto), enforceable against Morton and each Contracting Subsidiary
(to the extent it is a party thereto) in accordance with its terms. Morton has
taken all appropriate actions so that the restrictions on business combinations
contained in Section 23-1-43-18 of
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the Indiana Law and Article Eighth of the Morton Restated Articles of
Incorporation will not apply with respect to or as a result of the Transactions.
Section 4.5 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement do not, and the execution
and delivery at or prior to the time of the Spinoff of the Ancillary Agreements
by Morton and each Contracting Subsidiary (to the extent it is a party thereto)
will not, and the performance of this Agreement and the Ancillary Agreements by
Morton and each Contracting Subsidiary (to the extent it is a party thereto)
will not, (i) conflict with or violate any provision of the articles of
incorporation or by-laws of Morton or any Contracting Subsidiary, (ii) assuming
that all consents, approvals, authorizations and other actions described in
Section 4.5(b) have been obtained and all filings and obligations described in
Section 4.5(b) have been made, conflict with or violate any foreign or domestic
law, statute, European Union legislation or Directive, ordinance, rule,
regulation, order, judgment or decree ("Law") applicable to Morton or any
Contracting Subsidiary or by which any property or asset of Morton or any
Contracting Subsidiary is bound or affected, or (iii) except as set forth in
Section 4.5(a) of the Morton Disclosure Schedule, result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any right of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or other encumbrance on any property or asset of Morton or any Contracting
Subsidiary pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation,
except, with respect to clauses (ii) and (iii), for any such conflicts,
violations, breaches, defaults, or other occurrences which would neither,
individually or in the aggregate, (A) have a Morton Material Adverse Effect nor
(B) prevent or materially delay the performance of this Agreement or any
Ancillary Agreement by Morton or any Contracting Subsidiary (to the extent it is
a party thereto).
(b) The execution and delivery of this Agreement do not, and the execution
and delivery of the Ancillary Agreements by Morton and each Contracting
Subsidiary (to the extent it is a party thereto) will not, and the performance
of this Agreement and the Ancillary Agreements by Morton and each Contracting
Subsidiary (to the extent it is a party thereto) will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
domestic or foreign governmental or regulatory authority ("Governmental
Entity"), except (i) for applicable requirements of the Securities Exchange Act
of 1934, as amended (together with the rules and regulations promulgated
thereunder, the "Exchange Act"), the Securities Act of 1933, as amended
(together with the rules and regulations promulgated thereunder, the "Securities
Act"), state securities or "blue sky" laws ("Blue Sky Laws"), the NYSE, state
takeover laws, the pre-merger notification requirements of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
thereunder (the "HSR Act"), the filing of notifications in accordance with the
antitrust laws of Sweden, Germany and Belgium, filing and recordation of the
Certificate of Merger and Articles of Merger as required by the Delaware Law and
the Indiana Law, respectively, and the regulations and guidance promulgated
thereunder, and as set forth in Section 4.5(b) of the Morton Disclosure Schedule
and (ii) where failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, would not (A) prevent or
materially delay consummation of the Transactions, (B) otherwise prevent Morton
or any Contracting Subsidiary from performing its material obligations under
this Agreement and the Ancillary Agreements (to the extent it is a party
thereto), or (C) individually or in the aggregate, have a Morton Material
Adverse Effect.
Section 4.6 PERMITS; COMPLIANCE. Each of Morton and the Retained Morton
Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exceptions, consents, certificates,
approvals and orders of any Governmental Entity necessary for Morton or any
Retained Morton Subsidiary to own, lease and operate its properties or to carry
on the Retained Business as it is now being conducted (collectively, the "Morton
Permits"), except where the failure to have, or the suspension or cancellation
of, any of the Morton Permits would neither, individually or in the aggregate,
(A) have a Morton Material Adverse Effect nor (B) prevent or materially delay
the performance of this Agreement or any of the Ancillary Agreements by Morton
or any Contracting Subsidiary (to the extent it is
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a party thereto), and, as of the date of this Agreement, no suspension or
cancellation of any of the Morton Permits is pending or, to the knowledge of
Morton, threatened, except where the failure to have, or the suspension or
cancellation of, any of the Morton Permits would neither, individually or in the
aggregate, (A) have a Morton Material Adverse Effect nor (B) prevent or
materially delay the performance of this Agreement or any of the Ancillary
Agreements by Morton or any Contracting Subsidiary (to the extent it is a party
thereto). Neither Morton nor any Retained Morton Subsidiary is in conflict with,
or in default or violation of, (i) any Law applicable to Morton or any Retained
Morton Subsidiary with respect to the Retained Business or by which any property
or asset of Morton or any Retained Morton Subsidiary is bound or affected with
respect to the Retained Business or (ii) any Morton Permits, except for any such
conflicts, defaults or violations that would neither, individually or in the
aggregate, (A) have a Morton Material Adverse Effect nor (B) prevent or
materially delay the performance of this Agreement or any of the Ancillary
Agreements or consummation of the Transactions by Morton or any Contracting
Subsidiary (to the extent it is a party thereto).
Section 4.7 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Morton has filed all forms, reports and documents required to be filed
by it under the Exchange Act since July 1, 1993 through the date of this
Agreement (collectively, the "Morton SEC Reports"). The Morton SEC Reports (i)
were prepared in accordance in all material respects with the requirements of
the Exchange Act and (ii) did not at the time they were filed contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading. No
subsidiary of Morton is subject to the periodic reporting requirements of the
Exchange Act.
(b) Each of the consolidated financial statements (including, in each case,
any notes thereto) contained in the Morton SEC Reports was prepared in
accordance with United States generally accepted accounting principles applied
on a consistent basis throughout the periods indicated (except as may be
indicated in the notes thereto) and each presented fairly, in all material
respects, the consolidated financial position of Morton and its subsidiaries as
at the respective dates thereof and for the respective periods indicated
therein, except as otherwise noted therein. Except as and to the extent set
forth on the consolidated balance sheets (including the notes thereto) included
in the financial statements contained in the Morton SEC Reports, Morton does not
have any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) that would be required to be reflected on a balance
sheet or in notes thereto prepared in accordance with United States generally
accepted accounting principles, except for (i) liabilities or obligations
incurred in the ordinary course of business since July 1, 1996, (ii) liabilities
or obligations incurred outside the ordinary course of business since July 1,
1996 that would neither, individually or in the aggregate, (A) have a Morton
Material Adverse Effect nor (B) prevent or materially delay the performance of
this Agreement or any of the Ancillary Agreements by Morton or any Contracting
Subsidiary (to the extent it is a party thereto), (iii) the Retained Debt and
(iv) liabilities or obligations incurred in connection with the execution and
delivery of this Agreement and the Ancillary Agreements and consummation of the
transactions contemplated hereby and thereby.
(c) Exhibit A to Section 4.7(c) of the Morton Disclosure Schedule contains
(i) audited consolidated balance sheets of the Retained Business as of June 30,
1996 (the "Retained Business Balance Sheet") and June 30, 1995, (ii) statements
of income and cash flow for the Retained Business for the twelve-month periods
ending June 30, 1996, June 30, 1995 and June 30, 1994. The Retained Business
Balance Sheet fairly presents in all material respects the financial position of
the Retained Business as of June 30, 1996. Except as and to the extent set forth
on the Retained Business Balance Sheet (including the notes thereto), the
Retained Business does not have any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) that would be required to
be reflected on a balance sheet or in notes thereto prepared in accordance with
United States generally accepted accounting principles, except for (i)
liabilities or obligations incurred in the ordinary course of business since
July 1, 1996, (ii) liabilities or obligations incurred outside the ordinary
course of business since July 1, 1996 that do not, individually or
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in the aggregate, (A) have a Morton Material Adverse Effect nor (B) prevent or
materially delay the performance of this Agreement or any of the Ancillary
Agreements by Morton or any Contracting Subsidiary (to the extent it is a party
thereto), (iii) the Retained Debt and (iv) liabilities or obligations incurred
in connection with the execution and delivery of this Agreement and the
Ancillary Agreements and consummation of the transactions contemplated hereby
and thereby.
Section 4.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since July 1, 1996,
except as contemplated by or as disclosed in this Agreement or the Ancillary
Agreements, as set forth in Section 4.8 of the Morton Disclosure Schedule or as
disclosed in any Morton SEC Report filed since July 1, 1996, Morton and its
subsidiaries have conducted the Retained Business only in the ordinary course
and in a manner consistent with past practice and, since such date, there has
not been (a) any Morton Material Adverse Effect other than due to events,
changes or developments relating to the economy in general, the automotive
industry (including strikes affecting one or more automotive companies) or the
automotive safety products industry in general, (b) any event that would, or is
reasonably likely to, have a material adverse effect on the ability of Morton or
any Contracting Subsidiary (to the extent it is a party thereto) to consummate
the transactions contemplated by this Agreement or the Ancillary Agreements or
perform their respective obligations thereunder, (c) any material change by
Morton in its accounting methods, principles or practices, (d) any declaration,
setting aside or payment of any dividend (other than in accordance with Morton's
regular dividend practice) or distribution (other than in connection with the
Spinoff) in respect of the Morton Shares or any redemption, purchase or other
acquisition of any of Morton's securities, other than (i) for cash or (ii) in
connection with the exercise of outstanding Morton Options, or (e) with respect
to employees engaged exclusively in the Retained Business, any increase in the
compensation or benefits or establishment of any bonus, insurance, severance,
deferred compensation, pension, retirement, profit sharing, stock option
(including, without limitation, the granting of stock options, stock
appreciation rights, performance awards or restricted stock awards), stock
purchase or other employee benefit plan, or any other increase in the
compensation payable or to become payable to any executive officers of Morton or
any of its subsidiaries who are Company Individuals (as defined in the Employee
Benefits Allocation Agreement), except in each case in the ordinary course of
business consistent with past practice or except in each case as required by
applicable Law.
Section 4.9 EMPLOYEE BENEFIT PLANS; LABOR MATTERS. Except for such
failures, liabilities, penalties, taxes, claims or other events or matters
described in subsections (c) through (n), but excluding subsection (g), below
that would not, individually or in the aggregate, have a Morton Material Adverse
Effect:
(a) Section 4.9(a) of the Morton Disclosure Schedule contains a true and
complete list of each material bonus, deferred compensation, incentive
compensation, stock purchase, stock option, severance or termination pay,
change-in-control, hospitalization or other medical, life or other insurance,
supplemental unemployment benefits, profit-sharing, pension, or retirement plan,
program, agreement or arrangement, and each other material employee benefit
plan, program, agreement or arrangement, sponsored, maintained or contributed to
or required to be contributed to by Morton, any of its subsidiaries or by any
trade or business, whether or not incorporated (a "Morton ERISA Affiliate"),
that together with Morton would be deemed a "single employer" within the meaning
of section 4001(b)(1) of ERISA, for the benefit of any employee or former
employee of Morton, any of its subsidiaries or any Morton ERISA Affiliate (the
"Morton Plans").
(b) With respect to each of the Morton Plans, Morton has heretofore
delivered or made available to Autoliv true and complete copies of each of the
following documents: a copy of each of the Morton Plans (including all
amendments thereto); a copy of the most recent annual report, if required under
ERISA or other applicable Law, with respect to each such Morton Plan; a copy of
the most recent actuarial report, if required under ERISA or other applicable
Law, with respect to each such Morton Plan; a copy of the most recent Summary
Plan Description ("SPD"), if any, together with all Summaries of Material
Modification issued with respect to each such SPD, required under ERISA or other
applicable Law with respect to such Morton Plan; if any Morton Plan is funded
through a trust or any other funding vehicle, a copy of the trust
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or other funding agreement (including all amendments thereto) and the latest
financial statements thereof; and the most recent determination letter received
from the Internal Revenue Service with respect to each Morton Plan that is
intended to be qualified under section 401 of the Code.
(c) No liability under Title IV of ERISA has been incurred by Morton, any of
its subsidiaries or any Morton ERISA Affiliate since the effective date of ERISA
that has not been satisfied in full, and no condition exists that presents a
material risk to Morton, any of its subsidiaries or any Morton ERISA Affiliate
of incurring a liability under such Title, other than liability for premiums due
the Pension Benefit Guaranty Corporation ("PBGC"), which payments have been or
will be made when due. To the extent this representation applies to sections
4064, 4069 or 4204 of Title IV of ERISA, it is made not only with respect to the
Morton Plans but also with respect to any employee benefit plan, program,
agreement or arrangement subject to Title IV of ERISA to which Morton, any of
its subsidiaries or any Morton ERISA Affiliate made, or was required to make,
contributions during the five-year period ending on the last day of Morton's
most recent fiscal year.
(d) To the knowledge of Morton, there are no proceedings pending to
terminate any of the Morton Plans and no condition exists that presents a
material risk that such proceedings will be instituted.
(e) Neither Morton, any of its subsidiaries, any Morton ERISA Affiliate, any
of the Morton Plans, any trust created thereunder nor, to the knowledge of
Morton, any trustee or administrator thereof has engaged in a transaction or has
taken or failed to take any action in connection with which Morton, any of its
subsidiaries, any Morton ERISA Affiliate, any of the Morton Plans, any such
trust, any trustee or administrator thereof, or any party dealing with the
Morton Plans or any such trust could be subject to either a civil penalty
assessed pursuant to section 409 or 502(i) of ERISA or a tax imposed pursuant to
section 4975, 4976 or 4980B of the Code.
(f) None of the Morton Plans or any trust established thereunder has
incurred any "accumulated funding deficiency" (as defined in section 302 of
ERISA and section 412 of the Code), whether or not waived, as of the last day of
the most recent fiscal year of each of the Morton Plans ended prior to the date
of this Agreement.
(g) Except as set forth in Section 4.9(g) of the Morton Disclosure Schedule,
no Morton Plan is a "multiemployer plan," as such term is defined in section
3(37) of ERISA.
(h) Except as set forth in Section 4.9(h) of the Morton Disclosure Schedule,
each of the Morton Plans has been operated and administered in accordance with
applicable Laws of each relevant jurisdiction, including but not limited to
ERISA and the Code.
(i) Each of the Morton Plans that is intended to be "qualified" within the
meaning of Section 401(a) of the Code is so qualified and the trusts maintained
thereunder are exempt from taxation under section 501(a) of the Code.
(j) Except as set forth in Section 4.9(j) of the Morton Disclosure Schedule,
no amounts payable under the Morton Plans or any other agreement or arrangement
to which Morton, any of its subsidiaries or any Morton ERISA Affiliate is a
party will, as a result of the transactions contemplated hereby, fail to be
deductible for federal income tax purposes by virtue of section 280G of the
Code.
(k) Except as set forth in Section 4.9(k) of the Morton Disclosure Schedule,
no Morton Plan provides benefits, including without limitation death or medical
benefits (whether or not insured), with respect to current or former employees
after retirement or other termination of service (other than (i) coverage
mandated by applicable law, (ii) death benefits or retirement benefits under any
"employee pension plan," as that term is defined in section 3(2) of ERISA, or
(iii) benefits, the full cost of which is borne by the current or former
employee (or beneficiary thereof)).
(l) Except as set forth in Section 4.9(l) of the Morton Disclosure Schedule,
the consummation of the transactions contemplated by this Agreement will not (i)
entitle any current or former employee or officer
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of Morton, any of its subsidiaries or any Morton ERISA Affiliate to severance
pay, unemployment compensation or any other payment, except as expressly
provided in this Agreement or (ii) accelerate the time of payment or vesting, or
increase the amount of compensation due any such employee or officer.
(m) There are no pending or threatened claims by or on behalf of any Morton
Plan, by any employee or beneficiary covered under any such Morton Plan, or
otherwise involving any such Morton Plan (other than routine claims for
benefits).
(n) With respect to each Morton Plan that is not subject to United States
Law (a "Morton Foreign Benefit Plan"):
(i) all employer and employee contributions to each Morton Foreign
Benefit Plan required by Law or by the terms of such Morton Foreign Benefit
Plan have been made, or if applicable, accrued in accordance with normal
accounting practices;
(ii) the fair market value of the assets of each funded Morton Foreign
Benefit Plan, the liability of each insurer for any Morton Foreign Benefit
Plan funded through insurance or the book reserve established for any Morton
Foreign Benefit Plan, together with any accrued contributions, is sufficient
to procure or provide for the accrued benefit obligations, as of the
Effective Time, with respect to all current and former participants in such
plan according to the actuarial assumptions and valuations most recently
used to determine employer contributions to such Morton Foreign Benefit Plan
and no transaction contemplated by this Agreement shall cause such assets or
insurance obligations to be less than such benefit obligations; and
(iii) each Morton Foreign Benefit Plan required to be registered has
been registered and has been maintained in good standing with applicable
regulatory authorities.
(o) Except as set forth in Section 4.9(o) of the Morton Disclosure Schedule,
and except for country-wide collective bargaining or other country-wide labor
union contracts, as of the date of this Agreement, neither Morton nor any of its
subsidiaries is a party to any collective bargaining or other labor union
contract applicable to persons employed by Morton or any of its subsidiaries and
no collective bargaining agreement or other labor union contract is being
negotiated by Morton or any of its subsidiaries. As of the date of this
Agreement, there is no labor dispute, litigation, arbitration, strike or work
stoppage against the Retained Business pending or threatened in writing which
may interfere with the business activities of the Retained Business, except
where such dispute, litigation, arbitration, strike or work stoppage would not
have a Morton Material Adverse Effect. As of the date of this Agreement, to the
knowledge of Morton, none of Morton, any of its subsidiaries, or their
respective representatives or employees, has committed any unfair labor
practices in connection with the operation of the Retained Business, and there
is no charge or complaint against Morton or any of its subsidiaries in
connection with the operation of the Retained Business by or before the National
Labor Relations Board or any comparable state or foreign governmental authority
or agency pending or threatened in writing, except where such unfair labor
practice, charge or complaint would not have a Morton Material Adverse Effect.
Section 4.10 TAX MATTERS.
(a) Neither Morton nor, to the knowledge of Morton, any of its affiliates
has taken or agreed to take any action except pursuant to the terms of this
Agreement or the Ancillary Agreements that would prevent the Spinoff from
constituting a transaction qualifying under Sections 355 and 368(a)(1)(D) of the
Code or the Merger from constituting a transaction qualifying under Section
368(a) of the Code or (in conjunction with the acquisition of Autoliv Securities
pursuant to the Exchange Offer) from constituting a transaction qualifying under
Section 351(a) of the Code, or would prevent the Exchange Offer (in conjunction
with the acquisition of Morton Shares pursuant to the Merger) from constituting
a transaction qualifying under Section 351(a) of the Code or a transaction in
which, for Swedish income tax purposes, neither Newco, Autoliv nor the Autoliv
stockholders will recognize taxable income or gain. Morton is not aware of any
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agreement, plan or other circumstance that would prevent the Merger or the
Exchange Offer from so qualifying under Section 368(a) or Section 351(a) of the
Code or under applicable Swedish tax Laws.
(b) Except for such matters that would not have a Morton Material Adverse
Effect or as set forth in Section 4.10(b) of the Morton Disclosure Schedule, (i)
Morton and its subsidiaries have timely filed all Tax Returns due to be filed
with any taxing authority with respect to Taxes on or before the Effective Time,
taking into account any extension of time to file granted to or obtained on
behalf of Morton and its subsidiaries, and such Tax Returns are true, correct
and complete in all material respects, (ii) all Taxes shown to be payable on
such Tax Returns that are due prior to the Effective Time have been paid, (iii)
no deficiency for any material amount of Tax has been asserted or assessed by a
taxing authority against Morton or any of its subsidiaries, (iv) Morton and its
subsidiaries have provided adequate reserves in their financial statements for
any Taxes that have not been paid, whether or not shown as being due on any
returns, (v) neither Morton nor any of its subsidiaries has made any change in
accounting methods, received a ruling from any taxing authority or signed an
agreement with any taxing authority which is reasonably likely to have a Morton
Material Adverse Effect, (vi) Morton and its subsidiaries have complied with all
applicable laws, rules and regulations relating to the payment and withholding
of Taxes (including, without limitation, withholding of Taxes pursuant to
Sections 1441 and 1442 of the Code or similar provisions under foreign laws) and
have, within the time and manner prescribed by law, withheld from employee wages
and paid over to the proper governmental authorities all amounts required to be
so withheld and paid over under applicable laws, (vii) no federal, state, local
or foreign audits or other administrative proceedings or court proceedings have
been initiated or are presently pending with regard to any Taxes or Tax Returns
of Morton or its subsidiaries, and neither Morton nor its subsidiaries have
received any notice of any such audits or proceedings, (viii) the federal income
Tax Returns of Morton and its subsidiaries have been examined by the Internal
Revenue Service (or the applicable statute of limitations for the assessment of
Taxes for such periods has expired) for all periods through and including June
30, 1992, (ix) there are no outstanding requests, agreements, consents or
waivers to extend the statutory period of limitations applicable to the
assessment of any Taxes or deficiencies against Morton or any of its
subsidiaries, and no power of attorney granted by either Morton or any of its
subsidiaries with respect to any Taxes is currently in force, (x) neither Morton
nor any of its subsidiaries has, with regard to any assets or property held,
acquired or to be acquired by any of them, filed a consent to the application of
Section 341(f) of the Code, or agreed to have Section 341(f)(2) of the Code
apply to any disposition of a subsection (f) asset (as such term is defined in
Section 341(f)(4) of the Code) owned by Morton or any of its subsidiaries and
(xi) neither Morton nor any of its subsidiaries has any deferred gain from a
deferred intercompany transaction within the meaning of Treasury Regulation
Section 1.1502-13 (or any similar provision under state, local or foreign law).
As used in this Agreement, "Taxes" shall mean any and all taxes, fees, levies,
duties, tariffs, imposts, and other charges of any kind (together with any and
all interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any government or taxing authority, including,
without limitation, taxes or other charges on or with respect to income,
franchises, windfall or other profits, gross receipts, property, sales, use,
capital stock, payroll, employment, social security, workers' compensation,
unemployment compensation, or net worth; taxes or other charges in the nature of
excise, withholding, ad valorem, stamp, transfer, value added, or gains taxes;
license, registration and documentation fees; and customers' duties, tariffs,
and similar charges. "Tax Return" shall mean any return, report, document,
declaration or other information or filing required to be supplied to any taxing
authority or jurisdiction (foreign or domestic) with respect to Taxes,
including, without limitation, information returns, any documents with respect
to or accompanying payments of estimated Taxes, or with respect to or
accompanying requests for the extension of time in which to file any such
report, return, document, declaration or other information.
(c) Except as set forth in Section 4.10(c) of the Morton Disclosure
Schedule, none of Morton or its subsidiaries is a party to, is bound by, or has
any obligation under, a tax sharing contract, other than the Tax Sharing
Agreement.
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Section 4.11 CONTRACTS; DEBT INSTRUMENTS. Except as disclosed in Section
4.9(a) or 4.11 of the Morton Disclosure Schedule, there is no contract or
agreement as of the date hereof that is material to the business, financial
condition or results of operations of the Retained Business (each, a "Morton
Material Contract") which would be required to be filed as an exhibit to
Morton's annual report on Form 10-K pursuant to applicable SEC regulations if
Morton's only business were the Retained Business. Except as disclosed in the
Morton SEC Reports or in Section 4.11 of the Morton Disclosure Schedule, neither
Morton nor any of the Retained Subsidiaries is in violation of or in default
under (nor does there exist any condition which with the passage of time or the
giving of notice would cause such a violation of or default under) any loan or
credit agreement, note, bond, mortgage, indenture or lease, or any other
contract, agreement, arrangement or understanding with respect to the Retained
Business to which it is a party or by which it or any of its properties or
assets is bound with respect to the Retained Business, except for violations or
defaults that would not, individually or in the aggregate, result in a Morton
Material Adverse Effect.
Section 4.12 LITIGATION. Except as disclosed in the Morton SEC Reports or
in Section 4.12 of the Morton Disclosure Schedule, there is no suit, claim,
action, proceeding, investigation or product recall pending or, to the knowledge
of Morton, threatened in writing against Morton or any of its subsidiaries that,
individually or in the aggregate, is reasonably likely to have a Morton Material
Adverse Effect. Except as disclosed in the Morton SEC Reports or in Section 4.12
of the Morton Disclosure Schedule, neither Morton nor any of its subsidiaries is
subject to any outstanding Order (as defined in Section 8.9(b)), writ,
injunction or decree which, individually or in the aggregate, would have a
Morton Material Adverse Effect.
Section 4.13 ENVIRONMENTAL MATTERS. Except as disclosed in the Morton SEC
Reports or in Section 4.13 of the Morton Disclosure Schedule or as would not,
individually or in the aggregate, have a Morton Material Adverse Effect:
(a) The Retained Business (i) is in compliance with all applicable
Environmental Laws (defined below), (ii) holds all required Environmental
Permits (defined below) for the operation of the Retained Business as currently
conducted, and (iii) is in compliance with its required Environmental Permits.
(b) The Retained Business has not received any written request for
information that is outstanding, or been notified that it is a potentially
responsible party, under CERCLA (defined below) or any similar state, local or
foreign Law or applicable Environmental Law.
(c) The Retained Business has not entered into or agreed to any consent
decree or order and is not subject to any judgment, decree or judicial order
relating to compliance with all applicable Environmental Laws, Environmental
Permits or the investigation, sampling, monitoring, treatment, remediation,
removal or cleanup of Hazardous Materials (defined below).
(d) None of the real property owned or leased by the Retained Business is
listed or, to the best knowledge of Morton, proposed for listing on the
"National Priorities List" under CERCLA, as updated through the date hereof, or
any similar state or foreign list of sites requiring investigation or cleanup.
For purposes of this Agreement:
"CERCLA" means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended as of the date hereof.
"Environmental Laws" means any federal, state, local or foreign statute,
law, European Union legislation or directive, ordinance, regulation, rule, code
or order and any enforceable judicial or administrative interpretation thereof,
including any judicial or administrative order, consent decree or judgment,
relating to pollution or protection of the environment or natural resources,
including, without limitation, those relating to the use, handling,
transportation, treatment, storage, disposal, release or discharge of Hazardous
Materials, as in effect as of the date hereof.
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"Environmental Permits" means any permit, approval, identification number,
license and other authorization required under any applicable Environmental Law.
"Hazardous Materials" means (a) any petroleum, petroleum products,
by-products or breakdown products, radioactive materials, asbestos-containing
materials or polychlorinated biphenyls or (b) any chemical, material or
substance defined or regulated as toxic or hazardous or as a pollutant or
contaminant or waste under any applicable Environmental Law.
Section 4.14 TRADEMARKS, PATENTS AND COPYRIGHTS. Except (i) as set forth
in Section 4.12 or 4.14 of the Morton Disclosure Schedule, (ii) with respect to
the "Morton" name and related trademarks and trade names, or (iii) to the extent
the inaccuracy of any of the following (or the circumstances giving rise to such
inaccuracy), individually or in the aggregate, would not have a Morton Material
Adverse Effect, Morton and each of the Retained Morton Subsidiaries own or
possess, or prior to the Spinoff will own or possess, adequate licenses or other
legal rights to use all patents, patent rights, trademarks, trademark rights,
trade names, trade dress, trade name rights, copyrights, servicemarks, trade
secrets, applications for trademarks and for servicemarks, mask works and
know-how used in connection with the Retained Business as currently conducted
(the "Retained Business Intellectual Property"), and to Morton's knowledge, as
of the date hereof, there is no claim challenging the validity of any of the
foregoing. Except as set forth in the Ancillary Agreements, there are no
contracts, agreements or licenses pursuant to which Spinco or any of its
subsidiaries will possess rights or interests of any kind in or affecting the
Retained Business Intellectual Property. The conduct of the Retained Business as
currently conducted does not infringe any patent, patent right, license,
trademark, trademark right, trade dress, trade name, trade name right, service
mark, mask work or copyright of any third party, except for such infringements
that, individually or in the aggregate, would not have a Morton Material Adverse
Effect. To Morton's knowledge, there are no infringements of any proprietary
rights owned by or licensed by or to the Retained Business that, individually or
in the aggregate, would have a Morton Material Adverse Effect.
Section 4.15 NO VIOLATION OF SPINCO REPRESENTATIONS. Spinco has not
breached in any material respect any of the representations or warranties made
by it in the Distribution Agreement.
Section 4.16 RIGHTS AGREEMENT. The Board of Directors of Morton has taken
all requisite action in order to amend the Rights Agreement so as to render the
preferred share purchase rights (the "Rights") issued pursuant to the Rights
Agreement inapplicable to the Merger and the other transactions contemplated by
this Agreement and the Distribution Agreement and to extinguish the Rights in
connection with such transactions.
Section 4.17 OPINION OF FINANCIAL ADVISOR. Goldman, Sachs & Co. ("Goldman
Sachs") has delivered to Morton its opinion to the effect that, as of the date
of its delivery, the consideration to be received by Morton's stockholders in
the Spinoff and the Merger, taken as a whole, is fair to Morton's stockholders.
Goldman Sachs has authorized the inclusion in its entirety of its written
opinion (dated the date of this Agreement) in the Proxy/Prospectus, and Morton
will promptly deliver a signed copy of such opinion to Autoliv upon its receipt.
Section 4.18 BROKERS. No broker, finder or investment banker (other than
Goldman Sachs) is entitled to any brokerage, finder's or other fee or commission
in connection with the Transactions based upon arrangements made by or on behalf
of Morton or any subsidiary of Morton. Morton has heretofore made available to
Autoliv a complete and correct copy of all agreements between Morton and Goldman
Sachs pursuant to which such firm would be entitled to any payment relating to
the Transactions.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF AUTOLIV
Autoliv hereby represents and warrants to Morton that:
Section 5.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of Autoliv
and its subsidiaries has been duly organized and is validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
organization, as the case may be, and has the requisite power and authority and
all necessary governmental approvals to own, lease and operate its properties
and to carry on its business as it is now being conducted, except where the
failure to be so organized, existing or in good standing or to have such power,
authority and governmental approvals would not, individually or in the
aggregate, have an Autoliv Material Adverse Effect (defined below). Each of
Autoliv and its subsidiaries is duly qualified or licensed to do business, and
is in good standing, in each jurisdiction where the character of the properties
owned, leased or operated by it or the nature of its business makes such
qualification or licensing necessary, except for such failures to be so
qualified or licensed and in good standing that would not, individually or in
the aggregate, have an Autoliv Material Adverse Effect. For purposes of this
Agreement, "Autoliv Material Adverse Effect" means any change in or effect on
the business, after giving effect to the Transactions and the provisions of the
Distribution Agreement and the other Ancillary Agreements, of Autoliv and its
subsidiaries that is, or is reasonably likely to be, materially adverse to the
business, properties, financial condition or results of operations of Autoliv
and its subsidiaries taken as a whole.
Section 5.2 CORPORATE ORGANIZATION DOCUMENTS. Autoliv has heretofore
delivered or made available to Morton accurate and complete copies of its
Articles of Association and By-laws or equivalent organizational documents, as
currently in effect. Such Articles of Association, By-laws and all other
corporate organization documents are in full force and effect. Autoliv is not in
violation of any of the provisions of its Articles of Association or other
corporate organization documents.
Section 5.3 CAPITALIZATION. Autoliv's Articles of Association provide that
Autoliv's authorized share capital may not exceed 200,000,000 shares, par value
SEK 10 per share. As of the date hereof, 55,000,000 Autoliv Shares are issued
and outstanding, all of which are validly issued and fully paid. There are no
warrants or other rights, arrangements or commitments of any character to which
Autoliv is a party or by which Autoliv is bound relating to the issued or
unissued capital stock of Autoliv or any subsidiary of Autoliv or obligating
Autoliv or any subsidiary of Autoliv to issue or sell any shares of capital
stock of, or other equity interests in, Autoliv or any subsidiary of Autoliv.
There are no outstanding contractual obligations of Autoliv or any subsidiary of
Autoliv to redeem or otherwise acquire any Autoliv Securities or any capital
stock of any subsidiary of Autoliv. Each outstanding share of capital stock of
each subsidiary of Autoliv is duly authorized, validly issued and fully paid and
each such share of an Autoliv subsidiary owned by Autoliv or another subsidiary
of Autoliv is free and clear of all security interests, liens, claims, pledges,
options, rights of first refusal, agreements, limitations on the voting rights,
charges and other encumbrances of any nature whatsoever, except where failure to
own such shares free and clear would not, individually or in the aggregate, have
an Autoliv Material Adverse Effect. There are no material outstanding
contractual obligations of Autoliv or any subsidiary of Autoliv to provide funds
to, or make any investment (in the form of a loan, capital contribution or
otherwise) in, any subsidiary of Autoliv or any other person, other than
guarantees by Autoliv of any indebtedness of any subsidiary of Autoliv.
Section 5.4 AUTHORITY RELATIVE TO THIS AGREEMENT. Autoliv has all necessary
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder and to consummate the transactions
contemplated herein to be consummated by Autoliv. The execution and delivery of
this Agreement by Autoliv and the consummation by Autoliv of such transactions
have been duly and validly authorized by all necessary corporate action and no
other corporate proceedings on the part of Autoliv are necessary to authorize
this Agreement or to consummate such transactions. This Agreement has been duly
authorized and validly executed and delivered by Autoliv and constitutes a
legal, valid and binding obligation of Autoliv, enforceable against Autoliv in
accordance with its terms.
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Section 5.5 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Autoliv do not, and the
performance of this Agreement by Autoliv will not, (i) conflict with or violate
any provision of the Articles of Association or other corporate organizational
documents of Autoliv or any equivalent organizational documents of any
subsidiary of Autoliv, (ii) assuming that all consents, approvals,
authorizations and other actions described in Section 5.5(b) have been obtained
and all filings and obligations described in Section 5.5(b) have been made,
conflict with or violate any Law applicable to Autoliv or any subsidiary of
Autoliv or by which any property or asset of Autoliv or any subsidiary of
Autoliv is bound or affected, or (iii) result in any breach of or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any right of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or other
encumbrance on any property or asset of Autoliv or any subsidiary of Autoliv
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation, except, with
respect to clauses (ii) and (iii), for any such conflicts, violations, breaches,
defaults, or other occurrences which would neither, individually or in the
aggregate, (A) have an Autoliv Material Adverse Effect nor (B) prevent or
materially delay the performance of this Agreement by Autoliv.
(b) The execution and delivery of this Agreement by Autoliv do not, and the
performance of this Agreement by Autoliv will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
Governmental Entity, except (i) for applicable requirements of the SSE, the FSA,
the Exchange Act, the Securities Act, Blue Sky Laws, the NYSE and state takeover
laws, the pre-merger notification requirements of the HSR Act, the filing of
notifications in accordance with the antitrust laws of Sweden, Germany and
Belgium, and the filing of a request with the Stockholm District Court with
regard to the compulsory acquisition described in Section 3.3 and (ii) where
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not (A) prevent or materially delay
consummation of the Transactions, (B) otherwise prevent Autoliv from performing
its material obligations under this Agreement, or (C) individually or in the
aggregate, have an Autoliv Material Adverse Effect.
Section 5.6 PERMITS; COMPLIANCE. Each of Autoliv and its subsidiaries is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exceptions, consents, certificates, approvals and orders
of any Governmental Entity necessary for Autoliv or any subsidiary of Autoliv to
own, lease and operate its properties or to carry on its business as it is now
being conducted (collectively, the "Autoliv Permits"), except where the failure
to have, or the suspension or cancellation of, any of the Autoliv Permits would
neither, individually or in the aggregate, (A) have an Autoliv Material Adverse
Effect nor (B) prevent or materially delay the performance of this Agreement by
Autoliv, and, as of the date of this Agreement, no suspension or cancellation of
any of the Autoliv Permits is pending or, to the knowledge of Autoliv,
threatened, except where the failure to have, or the suspension or cancellation
of, any of the Autoliv Permits would neither, individually or in the aggregate,
(A) have an Autoliv Material Adverse Effect nor (B) prevent or materially delay
the performance of this Agreement by Autoliv. Neither Autoliv nor any subsidiary
of Autoliv is in conflict with, or in default or violation of, (i) any Law
applicable to Autoliv or any subsidiary of Autoliv or by which any property or
asset of Autoliv or any subsidiary of Autoliv is bound or affected or (ii) any
Autoliv Permits, except for any such conflicts, defaults or violations that
would neither, individually or in the aggregate, (A) have an Autoliv Material
Adverse Effect nor (B) prevent or materially delay the performance of this
Agreement or consummation of the Transactions by Autoliv or any of its
subsidiaries.
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Section 5.7 STOCK EXCHANGE AND SEC FILINGS; FINANCIAL STATEMENTS.
(a) Autoliv has filed all forms, reports and documents required to be filed
by it under Rule 12g 3-2(B) of the Exchange Act or with the SSE since June 30,
1994 through the date of this Agreement (collectively, the "Autoliv Reports").
The Autoliv Reports (i) were prepared in accordance in all material respects
with the requirements of the Exchange Act, the SSE or Swedish Laws or
regulations, as the case may be, and (ii) did not at the time they were filed
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading. No subsidiary of Autoliv is subject to the periodic reporting
requirements of the Exchange Act or required to file any form, report or other
document with the SEC, the FSA, the SSE or any other comparable Governmental
Entity.
(b) Each of the consolidated financial statements (including, in each case,
any notes thereto) contained in the Autoliv Reports conform in all material
respects with International Accounting Standards, in each case applied on a
consistent basis throughout the periods indicated (except as may be indicated in
the notes thereto) and each presented fairly, in all material respects, the
consolidated financial position of Autoliv and its consolidated subsidiaries as
at the respective dates thereof and for the respective periods indicated
therein.
(c) Except as and to the extent set forth on the consolidated balance sheet
of Autoliv and its consolidated subsidiaries as of December 31, 1995, including
the notes thereto, neither Autoliv nor any of its subsidiaries has any
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) that would be required to be reflected on a balance sheet or in
notes thereto prepared in accordance with International Accounting Standards,
except for (i) liabilities or obligations incurred in the ordinary course of
business since December 31, 1995, (ii) liabilities or obligations incurred
outside the ordinary course of business since December 31, 1995 that would
neither, individually or in the aggregate, (A) have an Autoliv Material Adverse
Effect nor (B) prevent or materially delay the performance of this Agreement by
Autoliv and (iii) liabilities and obligations incurred in connection with the
execution and delivery of this Agreement and consummation of the Transactions
contemplated hereby.
Section 5.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since January 1, 1996,
except as contemplated by or as disclosed in this Agreement or as disclosed in
any Autoliv Report filed since January 1, 1996, Autoliv and its subsidiaries
have conducted their businesses only in the ordinary course and in a manner
consistent with past practice and, since such date, there has not been (a) any
Autoliv Material Adverse Effect, other than due to events, changes or
developments relating to the economy in general, the automotive industry
(including strikes affecting one or more automotive companies) or the automotive
safety products industry in general, (b) any event that would, or is reasonably
likely to, have a material adverse effect on the ability of Autoliv to
consummate the transactions contemplated by this Agreement or perform its
obligations hereunder, (c) any material change by Autoliv in its accounting
methods, principles or practices, (d) any declaration, setting aside or payment
of any dividend (other than in accordance with Autoliv's regular dividend
practice) or distribution in respect of the Autoliv Securities or any
redemption, purchase or other acquisition of any of Autoliv's securities, or (e)
any increase in the compensation or benefits or establishment of any bonus,
insurance, severance, deferred compensation, pension, retirement, profit
sharing, stock option (including, without limitation, the granting of stock
options, stock appreciation rights, performance awards or restricted stock
awards), stock purchase or other employee benefit plan, or any other increase in
the compensation payable or to become payable to any executive officers of
Autoliv or any subsidiary of Autoliv except in each case in the ordinary course
of business consistent with past practice or except in each case as required by
applicable law.
Section 5.9 EMPLOYEE BENEFIT PLANS; LABOR MATTERS.
Except for such failures, liabilities, penalties, taxes, claims or other
events or matters described in subsections (c) through (n), but excluding
subsection (g), below that would not, individually or in the aggregate, have an
Autoliv Material Adverse Effect:
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(a) Section 5.9(a) of the Disclosure Schedule delivered by Autoliv to Morton
prior to the execution of (and forming part of) this Agreement (the "Autoliv
Disclosure Schedule") contains a true and complete list of each material bonus,
deferred compensation, incentive compensation, stock purchase, stock option,
severance or termination pay, change-in-control, hospitalization or other
medical, life or other insurance, supplemental unemployment benefits,
profit-sharing, pension, or retirement plan, program, agreement or arrangement,
and each other material employee benefit plan, program, agreement or
arrangement, sponsored, maintained or contributed to or required to be
contributed to by Autoliv, any of its subsidiaries or by any trade or business,
whether or not incorporated (an "Autoliv ERISA Affiliate"), that together with
Autoliv would be deemed a "single employer" within the meaning of section
4001(b)(1) of ERISA, for the benefit of any employee or former employee of
Autoliv, any of its subsidiaries or any Autoliv ERISA Affiliate (the "Autoliv
Plans").
(b) With respect to each of the Autoliv Plans, Autoliv has heretofore
delivered or made available to Morton true and complete copies of each of the
following documents: (A) a copy of each of the Autoliv Plans (including all
amendments thereto); (B) a copy of the most recent annual report, if required
under ERISA or other applicable Law, with respect to each such Autoliv Plan; (C)
a copy of the most recent actuarial report, if required under ERISA or other
applicable Law, with respect to each such Autoliv Plan; (D) a copy of the most
recent SPD, if any, together with all Summaries of Material Modification issued
with respect to such SPD, required under ERISA or other applicable Law with
respect to each such Autoliv Plan; (E) if any Autoliv Plan is funded through a
trust or any other funding vehicle, a copy of the trust or other funding
agreement (including all amendments thereto) and the latest financial statements
thereof; and (F) the most recent determination letter received from the Internal
Revenue Service with respect to each Autoliv Plan that is intended to be
qualified under section 401 of the Code.
(c) No liability under Title IV of ERISA has been incurred by Autoliv, any
of its subsidiaries or any Autoliv ERISA Affiliate since the effective date of
ERISA that has not been satisfied in full, and no condition exists that presents
a material risk to Autoliv, any of its subsidiaries or any Autoliv ERISA
Affiliate of incurring a liability under such Title, other than liability for
premiums due the PBGC, which payments have been or will be made when due. To the
extent this representation applies to sections 4064, 4069 or 4204 of Title IV of
ERISA, it is made not only with respect to the Autoliv Plans but also with
respect to any employee benefit plan, program, agreement or arrangement subject
to Title IV of ERISA to which Autoliv, any of its subsidiaries or any Autoliv
ERISA Affiliate made, or was required to make, contributions during the
five-year period ending on the last day of Autoliv's most recent fiscal year.
(d) To the knowledge of Autoliv, there are no proceedings pending to
terminate any of the Autoliv Plans and no condition exists that presents a
material risk that such proceedings will be instituted.
(e) Neither Autoliv, any of its subsidiaries, any Autoliv ERISA Affiliate,
any of the Autoliv Plans, any trust created thereunder nor, to the knowledge of
Autoliv, any trustee or administrator thereof has engaged in a transaction or
has taken or failed to take any action in connection with which Autoliv, any of
its subsidiaries, any Autoliv ERISA Affiliate, any of the Autoliv Plans, any
such trust, any trustee or administrator thereof, or any party dealing with the
Autoliv Plans or any such trust could be subject to either a civil penalty
assessed pursuant to section 409 or 502(i) of ERISA or a tax imposed pursuant to
section 4975, 4976 or 4980B of the Code.
(f) None of the Autoliv Plans or any trust established thereunder has
incurred any "accumulated funding deficiency" (as defined in section 302 of
ERISA and section 412 of the Code), whether or not waived, as of the last day of
the most recent fiscal year of each of the Autoliv Plans ended prior to the date
of this Agreement.
(g) Except as set forth in Section 5.9(g) of the Autoliv Disclosure
Schedule, no Autoliv Plan is a "multiemployer plan," as such term is defined in
section 3(37) of ERISA.
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(h) Except as set forth in Section 5.9(h) of the Autoliv Disclosure
Schedule, each of the Autoliv Plans has been operated and administered in all
material respects in accordance with applicable Laws of each relevant
jurisdiction, including but not limited to ERISA and the Code.
(i) Each of the Autoliv Plans that is intended to be "qualified" within the
meaning of section 401(a) of the Code is so qualified and the trusts maintained
thereunder are exempt from taxation under section 501(a) of the Code.
(j) Except as set forth in Section 5.9(j) of the Autoliv Disclosure
Schedule, no amounts payable under the Autoliv Plans or any other agreement or
arrangement to which Autoliv, any of its subsidiaries or any Autoliv ERISA
Affiliate is a party will, as a result of the transactions contemplated hereby,
fail to be deductible for federal income tax purposes by virtue of section 280G
of the Code.
(k) Except as set forth in Section 5.9(k) of the Autoliv Disclosure
Schedule, no Autoliv Plan provides benefits, including without limitation death
or medical benefits (whether or not insured), with respect to current or former
employees after retirement or other termination of service (other than (i)
coverage mandated by applicable law, (ii) death benefits or retirement benefits
under any "employee pension plan," as that term is defined in section 3(2) of
ERISA, or (iii) benefits, the full cost of which is borne by the current or
former employee (or beneficiary thereof)).
(l) Except as set forth in Section 5.9(l) of the Autoliv Disclosure
Schedule, the consummation of the transactions contemplated by this Agreement
will not (i) entitle any current or former employee or officer of Autoliv, any
of its subsidiaries or any Autoliv ERISA Affiliate to severance pay,
unemployment compensation or any other payment, except as expressly provided in
this Agreement or (ii) accelerate the time of payment or vesting, or increase
the amount of compensation due any such employee or officer.
(m) There are no pending or threatened claims by or on behalf of any Autoliv
Plan, by any employee or beneficiary covered under any such Autoliv Plan, or
otherwise involving any such Autoliv Plan (other than routine claims for
benefits).
(n) With respect to each Autoliv Plan that is not subject to United States
Law (an "Autoliv Foreign Benefit Plan"):
(i) all employer and employee contributions to each Autoliv Foreign
Benefit Plan required by Law or by the terms of such Autoliv Foreign Benefit
Plan have been made, or if applicable, accrued in accordance with normal
accounting practices;
(ii) the fair market value of the assets of each funded Autoliv Foreign
Benefit Plan, the liability of each insurer for any Autoliv Foreign Benefit
Plan funded through insurance or the book reserve established for any
Autoliv Foreign Benefit Plan, together with any accrued contributions, is
sufficient to procure or provide for the accrued benefit obligations, as of
the Effective Time, with respect to all current and former participants in
such plan according to the actuarial assumptions and valuations most
recently used to determine employer contributions to such Autoliv Foreign
Benefit Plan and no transaction contemplated by this Agreement shall cause
such assets or insurance obligations to be less than such benefit
obligations; and
(iii) each Autoliv Foreign Benefit Plan required to be registered has
been registered and has been maintained in good standing with applicable
regulatory authorities.
(o) Except as set forth in Section 5.9(o) of the Autoliv Disclosure
Schedule, and except for country-wide collective bargaining or other
country-wide labor union contracts, as of the date of this Agreement, neither
Autoliv nor any subsidiary of Autoliv is a party to any collective bargaining or
other labor union contract applicable to persons employed by Autoliv or any
subsidiary of Autoliv and no collective bargaining agreement or other labor
union contract is being negotiated by Autoliv or any subsidiary of Autoliv. As
of the date of this Agreement, there is no labor dispute, litigation,
arbitration, strike or work stoppage against Autoliv or any subsidiary of
Autoliv pending or threatened in writing that may interfere
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with the respective business activities of Autoliv or any subsidiary of Autoliv,
except where such dispute, litigation, arbitration, strike or work stoppage
would not have an Autoliv Material Adverse Effect. As of the date of this
Agreement, to the knowledge of Autoliv, none of Autoliv, any subsidiary of
Autoliv, or their respective representatives or employees, has committed any
unfair labor practices in connection with the operation of the respective
businesses of Autoliv or any subsidiary of Autoliv, and there is no charge or
complaint against Autoliv or any subsidiary of Autoliv by or before the National
Labor Relations Board or any comparable state or foreign governmental authority
or agency pending or threatened in writing, except where such unfair labor
practice, charge or complaint would not have an Autoliv Material Adverse Effect.
Section 5.10 TAX MATTERS.
(a) Neither Autoliv nor, to the knowledge of Autoliv, any of its affiliates
has taken or agreed to take any action that would prevent the Spinoff from
constituting a transaction qualifying under Sections 355 and 368(a)(1)(D) of the
Code or the Merger from constituting a transaction qualifying under Section
368(a) of the Code or (in conjunction with the acquisition of Autoliv Securities
pursuant to the Exchange Offer) from constituting a transaction qualifying under
Section 351(a) of the Code, or would prevent the Exchange Offer (in conjunction
with the acquisition of Morton Shares pursuant to the Merger) from constituting
a transaction qualifying under Section 351(a) of the Code or a transaction in
which, for Swedish income tax purposes, neither Newco, Autoliv nor the Autoliv
stockholders will recognize taxable income or gain. Autoliv is not aware of any
agreement, plan or other circumstance that would prevent the Merger or the
Exchange Offer from so qualifying under Section 368(a) or Section 351(a) of the
Code or under applicable Swedish tax Laws.
(b) Except for such matters that would not have an Autoliv Material Adverse
Effect or as set forth in Section 5.10(b) of the Autoliv Disclosure Schedule,
(i) Autoliv and its subsidiaries have timely filed all Tax Returns due to be
filed with any taxing authority with respect to Taxes on or before the Effective
Time, taking into account any extension of time to file granted to or obtained
on behalf of Autoliv and its subsidiaries, and such Tax Returns are true,
correct and complete in all material respects, (ii) all Taxes shown to be
payable on such Tax Returns that are due prior to the Effective Time have been
paid, (iii) no deficiency for any material amount of Tax has been asserted or
assessed by a taxing authority against Autoliv or any of its subsidiaries, (iv)
Autoliv and its subsidiaries have provided adequate reserves in their financial
statements for any Taxes that have not been paid, whether or not shown as being
due on any returns, (v) neither Autoliv nor any of its subsidiaries has made any
change in accounting methods, received a ruling from any taxing authority or
signed an agreement with any taxing authority which is reasonably likely to have
an Autoliv Material Adverse Effect, (vi) Autoliv and its subsidiaries have
complied in all respects with all applicable laws, rules and regulations
relating to the payment and withholding of Taxes (including, without limitation,
withholding of Taxes pursuant to Sections 1441 and 1442 of the Code or similar
provisions under foreign laws) and have, within the time and manner prescribed
by law, withheld from employee wages and paid over to the proper governmental
authorities all amounts required to be so withheld and paid over under
applicable laws, (vii) no federal, state, local or foreign audits or other
administrative proceedings or court proceedings have been initiated or are
presently pending with regard to any Taxes or Tax Returns of Autoliv or its
subsidiaries, and neither Autoliv nor its subsidiaries have received any notice
of any such audits or proceedings, (viii) no federal income Tax Returns of
Autoliv subsidiaries that are United States corporations have been examined by
the Internal Revenue Service, (ix) there are no outstanding requests,
agreements, consents or waivers to extend the statutory period of limitations
applicable to the assessment of any Taxes or deficiencies against Autoliv or any
of its subsidiaries, and no power of attorney granted by either Autoliv or any
of its subsidiaries with respect to any Taxes is currently in force, and (x)
neither Autoliv nor any of its subsidiaries has, with regard to any assets or
property held, acquired or to be acquired by any of them, filed a consent to the
application of Section 341(f) of the Code, or agreed to have Section 341(f)(2)
of the Code apply to any disposition of a subsection (f) asset (as such term is
defined in Section 341(f)(4) of the Code) owned by Autoliv or any of its
subsidiaries.
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Section 5.11 CONTRACTS; DEBT INSTRUMENTS. Except as disclosed in Section
5.9(a) or 5.11 of the Autoliv Disclosure Schedule, there is no contract or
agreement, as of the date hereof, that is material to the business, financial
condition or results of operations of Autoliv and its subsidiaries, taken as a
whole, which, if Autoliv and its subsidiaries, taken as a whole, were subject to
the reporting requirements under the Exchange Act as of the date hereof, would
be required to be filed by Autoliv as an exhibit to its annual report on Form
10-K. Except as disclosed in the Autoliv Reports or in Section 5.11 of the
Autoliv Disclosure Schedule, neither Autoliv nor any subsidiary of Autoliv is in
violation of or in default under (nor does there exist any condition which upon
the passage of time or the giving of notice would cause such a violation of or
default under) any loan or credit agreement, note, bond, mortgage, indenture or
lease, or any other contract, agreement, arrangement or understanding to which
it is a party or by which it or any of its properties or assets is bound, except
for violations or defaults that would not, individually or in the aggregate,
result in an Autoliv Material Adverse Effect.
Section 5.12 LITIGATION. Except as disclosed in Autoliv Reports or in
Section 5.12 of the Autoliv Disclosure Schedule, there is no suit, claim,
action, proceeding, investigation or product recall pending or, to the knowledge
of Autoliv, threatened in writing against Autoliv or any subsidiary of Autoliv
which, individually or in the aggregate, is reasonably likely to have an Autoliv
Material Adverse Effect. Except as disclosed in the Autoliv Reports or in
Section 5.12 of the Autoliv Disclosure Schedule, neither Autoliv nor any
subsidiary of Autoliv is subject to any outstanding Order, writ, injunction or
decree which, individually or in the aggregate, would have an Autoliv Material
Adverse Effect.
Section 5.13 ENVIRONMENTAL MATTERS. Except as disclosed in the Autoliv
Reports or as would not, individually or in the aggregate, have an Autoliv
Material Adverse Effect:
(a) Autoliv and its subsidiaries (i) are in compliance with all applicable
Environmental Laws, (ii) hold all required Environmental Permits for the
operation of Autoliv's business as currently conducted, and (iii) are in
compliance with their required Environmental Permits.
(b) None of Autoliv or any subsidiary of Autoliv has received any written
request for information that is outstanding, or been notified that it is a
potentially responsible party, under CERCLA or any similar state, local or
foreign Law or applicable Environmental Law.
(c) None of Autoliv or any subsidiary of Autoliv has entered into or agreed
to any consent decree or order or is subject to any judgment, decree or judicial
order relating to compliance with all applicable Environmental Laws,
Environmental Permits or the investigation, sampling, monitoring, treatment,
remediation, removal or cleanup of Hazardous Materials.
(d) None of the real property owned or leased by Autoliv or any subsidiary
of Autoliv is listed or, to the best knowledge of Autoliv, proposed for listing
on the "National Priorities List" under CERCLA, as updated through the date
hereof, or any similar state or foreign list of sites requiring investigation or
cleanup.
Section 5.14 TRADEMARKS, PATENTS AND COPYRIGHTS. Except (i) as set forth in
Section 5.12 or 5.14 of the Autoliv Disclosure Schedule, or (ii) to the extent
the inaccuracy of any of the following (or the circumstances giving rise to such
inaccuracy), individually or in the aggregate, would not have an Autoliv
Material Adverse Effect, Autoliv and its subsidiaries own or possess adequate
licenses or other legal rights to use all patents, patent rights, trademarks,
trademark rights, trade names, trade dress, trade name rights, copyrights,
servicemarks, trade secrets, applications for trademarks and for servicemarks,
mask works and know-how used in connection with the business of Autoliv and its
subsidiaries as currently conducted and, to Autoliv's knowledge, as of the date
hereof, there is no claim challenging the validity of any of the foregoing. The
conduct of the business of Autoliv and its subsidiaries as currently conducted
does not infringe any patent, patent right, license, trademark, trademark right,
trade dress, trade name, trade name right, service mark, mask work or copyright
of any third party except for such infringements that, individually or in the
aggregate, would not have an Autoliv Material Adverse Effect. To Autoliv's
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knowledge, there are no infringements of any proprietary rights owned by or
licensed by or to Autoliv or any subsidiary of Autoliv that, individually or in
the aggregate, would have an Autoliv Material Adverse Effect.
Section 5.15 OPINIONS OF FINANCIAL ADVISORS. Each of Enskilda Securities
("Enskilda") and The Blackstone Group L.P. ("Blackstone") has delivered to
Autoliv its written opinion to the effect that, as of the date of this
Agreement, the consideration to be received by Autoliv's stockholders in the
Exchange Offer is fair to Autoliv's stockholders from a financial point of view.
Each of Enskilda and Blackstone has authorized the inclusion of its opinion in
the Proxy/Prospectus, the Swedish Prospectus and the English translation of the
Swedish Prospectus to be provided to Autoliv's stockholders located outside of
Sweden, the United States and Canada (the "International Prospectus"), and
Autoliv will promptly, after the date of this Agreement, deliver signed copies
of such opinions to Morton.
Section 5.16 BROKERS. Except as set forth in Section 5.16 of the Autoliv
Disclosure Schedule, no broker, finder or investment banker (other than Enskilda
and Blackstone) is entitled to any brokerage, finder's or other fee or
commission in connection with the Transactions based upon arrangements made by
or on behalf of Autoliv or any subsidiary of Autoliv. Autoliv has heretofore
made available to Morton a complete and correct copy of all agreements between
Autoliv and Enskilda and between Autoliv and Blackstone or any other person
listed in Section 5.16 of the Autoliv Disclosure Schedule pursuant to which such
firms would be entitled to any payment relating to the Transactions.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF NEWCO AND NEWCO SUB
Newco and Newco Sub hereby jointly and severally represent and warrant to
Autoliv and Morton that:
Section 6.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of Newco and
Newco Sub is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has the requisite power and
authority and all necessary governmental approvals to own, lease and operate its
properties and to carry on its business as it is now being conducted. Each of
Newco and Newco Sub is duly qualified or licensed to do business, and is in good
standing, in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its business makes such qualification
or licensing necessary. Neither Newco nor Newco Sub has any subsidiaries other
than, in the case of Newco, Newco Sub. Upon formation or organization, the
entities to be formed in connection with the actions contemplated by Section
3.3(a) will be duly incorporated or organized.
Section 6.2 CERTIFICATE OF INCORPORATION AND BY-LAWS. Each of Newco and
Newco Sub has heretofore made available to each of Autoliv and Morton a complete
and correct copy of its Certificate of Incorporation and By-Laws. Such
Certificates of Incorporation and By-Laws are in full force and effect. Neither
Newco nor Newco Sub is in violation of any of the provisions of its Certificate
of Incorporation or By-Laws.
Section 6.3 CAPITALIZATION.
(a) As of the date of this Agreement, (i) the authorized capital stock of
Newco consists of 1,000 shares of Newco Common Stock, (ii) 1,000 shares of Newco
Common Stock are issued and outstanding, all of which are validly issued, fully
paid and nonassessable, and (iii) each of Autoliv and Morton own 500 shares of
Newco Common Stock free and clear of all encumbrances of any kind. No shares of
Newco capital stock are held in the treasury of Newco. On or prior to the
Effective Time, the Certificate of Incorporation of Newco will be amended to
provide that the authorized capital stock of Newco will consist of (i)
250,000,000 shares of Newco Common Stock and (ii) 40,000,000 shares of preferred
stock. As of the Registration Statement Effective Date, 1,000 shares of Newco
Common Stock will be issued and outstanding, all of which will be validly
issued, fully paid and nonassessable and no shares of preferred stock of Newco
will be issued or outstanding. Except as provided in this Agreement, there are
no options, warrants
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or other rights, agreements, arrangements or commitments of any character
relating to the issued or unissued capital stock of Newco or obligating Newco to
issue or sell any shares of capital stock of, or other equity interests in,
Newco. The Newco Common Stock to be issued in connection with the Transactions,
when issued as contemplated herein, will be duly authorized, validly issued,
fully paid and nonassessable and will not be issued in violation of any
preemptive rights. Should SDRs be issued in connection with the Exchange Offer,
such SDRs, when issued as contemplated herein will be validly issued. Should
SDRs be issued, the depositary agreement under which such SDRs are to be issued
will have been duly authorized, executed and delivered by Newco and will
constitute a legal, valid and binding obligation of Newco enforceable against
Newco in accordance with its terms.
(b) The authorized capital stock of Newco Sub consists of 1,000 shares of
common stock, par value $.01 per share, of Newco Sub (the "Newco Sub Common
Stock"). As of the date of this Agreement, 1,000 shares of Newco Sub Common
Stock are issued and outstanding, all of which are validly issued, fully paid
and nonassessable. Each issued and outstanding share of Newco Sub Common Stock
is owned by Newco, free and clear of all encumbrances of any kind. No shares of
Newco Sub Common Stock are held in the treasury of Newco Sub. There are no
options, warrants or other rights, agreements, arrangements or commitments of
any character relating to the issued or unissued capital stock of Newco Sub or
obligating Newco or Newco Sub to issue or sell any shares of capital stock of,
or other equity interests in, Newco Sub. As of the Effective Time, all of the
outstanding shares of capital stock of the Surviving Corporation will be duly
authorized, validly issued, fully paid and nonassessable and will be owned by
Newco, free and clear of all encumbrances of any kind.
Section 6.4 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Newco and Newco
Sub has all necessary corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions (including, without limitation, the Transactions) contemplated
herein to be consummated by it. The execution and delivery of this Agreement by
each of Newco and Newco Sub and the consummation by each of Newco and Newco Sub
of such transactions have been duly and validly authorized by all necessary
corporate action (including, in the case of Newco Sub, the approval of Newco as
sole stockholder of Newco Sub) and no other corporate proceedings on the part of
either Newco or Newco Sub are necessary to authorize this Agreement or to
consummate such Transactions. This Agreement has been duly authorized and
validly executed and delivered by each of Newco and Newco Sub and constitutes a
legal, valid and binding obligation of each of Newco and Newco Sub, enforceable
against each of Newco and Newco Sub in accordance with its terms.
Section 6.5 NO CONFLICT. The execution and delivery of this Agreement by
each of Newco and Newco Sub do not, and the performance of this Agreement by
each of Newco and Newco Sub will not, conflict with or violate any provision of
the Newco or Newco Sub Certificate of Incorporation or By-laws.
Section 6.6 NO ACTIVITIES. Except for obligations or liabilities incurred in
connection with its respective incorporation or organization and the
Transactions, neither Newco nor Newco Sub has incurred, directly or indirectly,
through any subsidiary or affiliate, any obligations or liabilities or engaged
in any business activities of any type or kind whatsoever or entered into any
agreements or arrangements with any person.
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ARTICLE VII
COVENANTS
Section 7.1 CONDUCT OF BUSINESS BY MORTON PENDING THE CLOSING. Morton agrees
that, between the date of this Agreement and the Effective Time, except as set
forth in Section 7.1 of the Morton Disclosure Schedule or as contemplated by any
other provision of this Agreement or the Ancillary Agreements, unless Autoliv
shall otherwise agree in writing, which agreement shall not be unreasonably
withheld or delayed, (1) the operations of the Retained Business shall be
conducted only in, and neither Morton nor any of its subsidiaries shall take any
action with respect to the operations of the Retained Business except in, the
ordinary course of business consistent with past practice, and except that
solely for purposes of the Distribution Agreement, the Retained Business shall
to the fullest extent reasonably practicable be treated as if it were a
stand-alone, self-financed entity as provided for in accordance with Section
2.01(c) of the Distribution Agreement, (2) Morton and its subsidiaries will
conduct the operations of all businesses other than the Retained Business in the
ordinary course of business except where the failure to so conduct would not
have a Morton Material Adverse Effect, (3) Morton and its subsidiaries will
prepare and file all Tax Returns due on or before the Effective Time on a basis
consistent with the elections, conventions, accounting methods and principles of
taxation used for the most recent periods for which Tax Returns have been filed,
and (4) with respect to the Retained Business, Morton and its subsidiaries shall
each use their respective reasonable efforts to keep available the services of
such of the current officers, significant employees and consultants of Morton
and its subsidiaries and to preserve the current relationships of Morton and its
subsidiaries with such of the customers, suppliers and other persons with which
Morton or any subsidiary of Morton has significant business relations as Morton
deems reasonably necessary in order to preserve substantially intact the
Retained Business. By way of amplification and not limitation, except as set
forth in Section 7.1 of the Morton Disclosure Schedule or as contemplated by any
other provision of this Agreement or the Ancillary Agreements, neither Morton
nor any Retained Morton Subsidiaries shall, between the date of this Agreement
and the Effective Time, directly or indirectly, do, or agree to do, any of the
following, without the prior written consent of Autoliv, which consent shall not
be unreasonably withheld or delayed:
(a) amend or otherwise change the Restated Certificate of Incorporation or
By-laws or equivalent organizational documents of Morton or any Retained Morton
Subsidiaries;
(b) issue, sell, pledge, dispose of, grant, transfer, guarantee, encumber,
or authorize the issuance, sale, pledge, disposition, grant, transfer, guarantee
or encumbrance of any stock of any class, or securities convertible or
exchangeable or exercisable for any shares of such capital stock, or any
options, warrants or other rights of any kind to acquire any shares of such
capital stock, or any other ownership interest (including, without limitation,
any phantom interest), of Morton or any Retained Morton Subsidiary, except for
(i) issuance and sale of Morton Preferred Stock pursuant to the Rights
Agreement; (ii) issuance and sale of Morton Shares; (iii) issuance of rights to
purchase shares of Morton Preferred Stock issuable in connection with issuances
of Morton Shares; (iv) grants of options to purchase Morton Shares pursuant to
the Morton Option Plan to persons who are not Company Individuals (as defined in
the Employee Benefits Allocation Agreement); (v) issuance, sale or other
transfer or disposition by a wholly-owned subsidiary of its capital stock to its
parent; and (vi) in connection with newly hired Company Individuals, grants of
options to purchase up to 3,000 Morton Shares per newly hired employee
consistent with past practice;
(c) declare, set aside, make or pay any dividend or other distribution,
other than (i) quarterly cash dividends in the ordinary course in an amount
consistent with past practice and not in excess of $.15 per Morton Share (other
than dividends to be paid after August 31, 1997), (ii) the Spinoff or (iii)
dividends from a wholly-owned subsidiary to its parent, with respect to any of
its capital stock;
(d) reclassify, combine, split, subdivide or redeem, purchase or otherwise
acquire, directly or indirectly, any of its capital stock other than for cash;
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(e) (i) acquire (including, without limitation, by merger, consolidation, or
acquisition of stock or assets) any interest in any corporation, partnership,
other business organization, person or any division thereof or any assets, in
each case which would become part of the Retained Business, other than
acquisitions of assets in the ordinary course of business and any other
acquisitions which would not, individually, be material to the Retained
Business;
(ii) incur any indebtedness for borrowed money, issue any debt
securities, make any loans, advances or capital contributions to any other
person or assume, guarantee or endorse, or otherwise as an accommodation
become responsible for, the obligations of any person for borrowed money
which, in each case, would become a Safety Liability (as defined in the
Distribution Agreement), that would not be eliminated as of the Effective
Time, except for $750 million in indebtedness (the "Retained Debt") in
connection with the Safety Credit Agreement (as defined in the Distribution
Agreement);
(iii) terminate, cancel, or agree to any material change in, or enter
into any contract or agreement, other than the Retained Debt, material to
the business, results of operations or financial condition of the Retained
Business, in either case other than in the ordinary course of business;
(iv) make or authorize any capital expenditure with respect to the
Retained Business, other than capital expenditures that are not, in the
aggregate, in excess of the amount set forth in the capital budget through
June 30, 1997 for Morton and its subsidiaries, described in Section 7.1 of
the Morton Disclosure Schedule, or authorized under a prior year's capital
budget;
(v) change the Retained Business' practices with respect to the timing
of payments or collections in any material respect; or
(vi) enter into any contract, agreement, commitment or arrangement that,
if fully performed, would not be permitted under this Section 7.1(e);
(f) (i) except in the ordinary course of business in accordance with past
practices or Morton's severance policy in effect as of the date of this
Agreement, increase the compensation payable or to become payable to any Company
Individual (as defined in the Employee Benefits Allocation Agreement) (or any
other person for whom the Retained Business will have liability) or grant any
rights to severance or termination pay to, or enter into any employment or
severance agreement with, any Company Individual (or any other person for whom
the Retained Business will have liability), or (ii) establish, terminate, adopt,
enter into or amend any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any Company Individual (or
any other person for whom the Retained Business will have liability), that will
create or materially increase any material liability of Morton and its
subsidiaries, taken as a whole, except as contemplated by this Agreement or the
Ancillary Agreements or to the extent required by applicable Law or the terms of
a collective bargaining agreement;
(g) transfer, sell, lease, license, encumber or otherwise dispose of any
material assets relating to the Retained Business outside the ordinary course of
business;
(h) adopt or change any accounting policies or procedures relating to or
materially affecting the Retained Business, other than actions in the ordinary
course of business and consistent with past practice, except as may be required
by Regulation S-X of the SEC;
(i) waive, release, assign, settle or compromise any material claims or
litigation relating to the Retained Business other than in the ordinary course
of business;
(j) make any material tax election, settle or compromise any material
federal, state, local or foreign income tax liability, file any amended Tax
Returns containing any material amendment or change any material method of tax
accounting, in each case that would be materially adverse to the Retained
Business;
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(k) engage in or allow transfers of assets or liabilities or engage or enter
into other transactions between the Retained Business on the one hand, and
Spinco and its subsidiaries on the other hand, other than in the ordinary course
of business or as contemplated by the Ancillary Agreements; or
(l) fail to abide or fail to cause Spinco to abide by their respective
obligations under the Ancillary Agreements.
Section 7.2 CONDUCT OF BUSINESS BY AUTOLIV PENDING THE CLOSING. Autoliv
agrees that, between the date of this Agreement and the Effective Time, except
as set forth in Section 7.2 of the Autoliv Disclosure Schedule or as
contemplated by any other provision of this Agreement, unless Morton shall
otherwise agree in writing (which agreement shall not be unreasonably withheld
or delayed) or unless prohibited by any applicable Swedish Law, (1) the business
of Autoliv and its subsidiaries shall be conducted only in, and Autoliv and its
subsidiaries shall not take any action except in, the ordinary course of
business consistent with past practice and (2) Autoliv shall use reasonable
efforts to keep available the services of such of the current officers,
significant employees and consultants of Autoliv and its subsidiaries and to
preserve the current relationships of Autoliv and its subsidiaries with such of
the customers, suppliers and other persons with which Autoliv or any subsidiary
of Autoliv has significant business relations as Autoliv deems reasonably
necessary in order to preserve substantially intact its business organization.
By way of amplification and not limitation, except as set forth in Section 7.2
of the Autoliv Disclosure Schedule or as contemplated by any other provision of
this Agreement, neither Autoliv nor any subsidiary of Autoliv shall, between the
date of this Agreement and the Effective Time, directly or indirectly, do, or
agree to do, any of the following without the prior written consent of Morton,
which consent shall not be unreasonably withheld or delayed:
(a) amend or otherwise change its Articles of Association or equivalent
organizational documents;
(b) issue, sell, pledge, dispose of, grant, transfer, guarantee, encumber,
or authorize the issuance, sale, pledge, disposition, grant, transfer, guarantee
or encumbrance of, any shares of capital stock of Autoliv or any subsidiary of
Autoliv of any class, or securities convertible or exchangeable or exercisable
for any shares of such capital stock, or any options, warrants or other rights
of any kind to acquire any shares of such capital stock, or any other ownership
interests (including, without limitation, any phantom interest), of Autoliv or
any subsidiary of Autoliv, provided, however, that nothing in this Section
7.2(b) shall prevent a wholly-owned subsidiary of Autoliv from issuing, selling
or otherwise transferring or disposing of its capital stock to its parent;
(c) recommend to its stockholders that the stockholders declare, set aside,
make or pay any dividend or other distribution other than (i) regular annual
cash dividends in the ordinary course consistent with past practice and, in the
aggregate, not in excess of the lesser of (x) 20% of Autoliv's net income per
share for fiscal year 1996 and (y) SEK 2.75 per Autoliv Share (other than
dividends to be declared and paid after August 31, 1997), or (ii) dividends from
a wholly-owned subsidiary to its parent, with respect to any of its capital
stock;
(d) reclassify, combine, split, subdivide or redeem, purchase or otherwise
acquire, directly or indirectly, any of its capital stock;
(e) (i) acquire (including, without limitation, by merger, consolidation, or
acquisition of stock or assets) any interest in any corporation, partnership,
other business organization, person or any division thereof or any assets, other
than acquisitions of assets in the ordinary course of business consistent with
past practice, which are disclosed in Section 7.2(e) of the Autoliv Disclosure
Schedule, or any other acquisitions which would not, individually, be material
to Autoliv;
(ii) incur any indebtedness for borrowed money, issue any debt securities,
make any loans, advances or capital contributions to any other person or assume,
guarantee or endorse, or otherwise as an accommodation become responsible for,
the obligations of any person for borrowed money.
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(iii) terminate, cancel or agree to any material change in, or enter into
any, contract or agreement material to the business, results of operations or
financial condition of Autoliv and its subsidiaries taken as a whole, in either
case other than in the ordinary course of business, consistent with past
practice;
(iv) make or authorize any capital expenditure, other than capital
expenditures that are not, in the aggregate, in excess of the amount set forth
in Section 7.2 of the Autoliv Disclosure Schedule, or authorized under a prior
year's capital budget; or
(v) enter into any contract, agreement, commitment or arrangement that, if
fully performed, would not be permitted under this Section 7.2(e);
(f) (i) except in the ordinary course of business in accordance with past
practices or Autoliv's severance policy in effect on the date of this Agreement,
increase the compensation payable or to become payable to its officers or
employees in salaries or wages of employees of Autoliv or any subsidiary of
Autoliv who are not officers of Autoliv or grant any rights to severance or
termination pay to, or enter into any employment or severance agreement with,
any director, officer or other employee of Autoliv or any subsidiary of Autoliv,
or (ii) establish, adopt, enter into or amend any collective bargaining, bonus,
profit sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment, termination, severance or other
plan, agreement, trust, fund, policy or arrangement for the benefit of any
director, officer or employee, that will create or materially increase any
material liability of Autoliv and its subsidiaries, taken as a whole, except to
the extent required by applicable Law or the terms of a collective bargaining
agreement;
(g) transfer, sell, lease, license, encumber or otherwise dispose of any
material assets of Autoliv or any subsidiary of Autoliv outside the ordinary
course of business;
(h) adopt or change any accounting policies or procedures, other than
actions in the ordinary course of business and consistent with past practice
except as may be required by applicable Law or stock exchange regulation;
(i) waive, release, assign, settle or compromise any material claims or
litigation other than in the ordinary course of business;
(j) make any material tax election, settle or compromise any material
federal, state, local or foreign income tax liability, file any amended Tax
Returns containing any material amendment or change any material method of tax
accounting, in each case which would be materially adverse to Autoliv and its
subsidiaries, taken as a whole; or
(k) engage in or allow transfers of assets or liabilities or engage or enter
into other transactions between Autoliv and its subsidiaries other than in the
ordinary course of business.
Section 7.3 COOPERATION; LIAISON COMMITTEE.
(a) To the extent permitted by applicable Laws, Autoliv and Morton shall
coordinate and cooperate in connection with (i) the preparation of the Newco
Registration Statement (as defined in Section 8.1(a)), (ii) determining whether
any action by or in respect of, or filing with, any Governmental Entity is
required, or any actions, consents, approvals or waivers are required to be
obtained from parties to any material contracts of Morton (including the Morton
Material Contracts) or Autoliv Material Contracts, in connection with the
consummation of the Transactions and (iii) seeking any such actions, consents,
approvals or waivers.
(b) To the extent permitted by applicable Laws, upon the execution and
delivery of this Agreement, Autoliv and Morton will establish a committee (the
"Liaison Committee") for the purpose of facilitating the consummation of the
transactions contemplated hereby. The Liaison Committee will consist of four
members, two of whom will be designated by Autoliv, and two of whom will be
designated by Morton. The Liaison Committee will be dissolved as of the
Effective Time.
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Section 7.4 NOTICES OF CERTAIN EVENTS. Prior to the Effective Time, each of
Autoliv and Morton shall give prompt notice to the other of (a) any notice or
other communication from any person alleging that the consent of such person is
or may be required in connection with the Transactions, where the failure to
obtain such consent (if required) would have a Morton Material Adverse Effect or
Autoliv Material Adverse Effect, respectively, (b) any notice or other
communication from any Governmental Entity in connection with the Transactions,
(c) any actions, suits, claims, investigations or proceedings commenced or, to
its knowledge, threatened in writing against, relating to or involving or
otherwise affecting Autoliv, Morton or their subsidiaries that relate to the
consummation of the Transactions, (d) the occurrence of a default or event that,
with notice or lapse of time or both, will become a default under any material
contract of Morton or any material contract of Autoliv, which event or default
would have a Morton Material Adverse Effect or Autoliv Material Adverse Effect,
respectively, and (e) any change that is reasonably likely to result in a Morton
Material Adverse Effect or an Autoliv Material Adverse Effect or is likely to
materially delay or impede the ability of either Morton or Autoliv to consummate
the transactions contemplated by this Agreement or to fulfill its obligations
set forth herein.
ARTICLE VIII
ADDITIONAL AGREEMENTS
Section 8.1 REGISTRATION STATEMENTS.
(a) As promptly as practicable after the execution of this Agreement,
Autoliv and Morton shall jointly prepare and file (or cause Newco to file) with
the SEC a single document that will constitute (i) the proxy statement of Morton
relating to the special meeting of Morton's stockholders (the "Morton
Stockholders' Meeting") to be held to consider approval of this Agreement, the
Merger, and the transactions contemplated by the Distribution Agreement, (ii)
the prospectus forming part of the registration statement on Form S-4 of Spinco
(together with all amendments thereto, the "Spinco Registration Statement"), in
connection with the registration under the Securities Act of the Spinco Common
Stock to be issued to Morton stockholders pursuant to the Spinoff, (iii) the
prospectus forming part of the registration statement on Form S-4 of Newco
(together with all amendments thereto, the "Newco Registration Statement" and,
collectively with the Spinco Registration Statement, the "Registration
Statements"), in connection with the registration under the Securities Act of
the Newco Common Stock to be issued to the stockholders of Autoliv and Morton
pursuant to the Exchange Offer in the United States and the Merger,
respectively, and (iv) the offer to purchase (the "U.S. Offer to Purchase") to
be used by Newco in connection with the Exchange Offer in the United States
(such document, together with any amendments thereof or supplements thereto, the
"Proxy/Prospectus"). Autoliv, Morton and Newco each shall use reasonable efforts
to cause the Registration Statements to become effective as promptly as
practicable, and, prior to the effective date of the Registration Statements
(the "Registration Statement Effective Date"), Newco shall take all or any
action required under any applicable Laws in connection with the issuance of
Newco Common Stock and, if applicable, SDRs pursuant to the Merger and the
Exchange Offer. Autoliv or Morton, as the case may be, shall furnish all
information concerning Autoliv or Morton as the other party may reasonably
request in connection with such actions and the preparation of the Registration
Statements, the Swedish Prospectus and the International Prospectus. As promptly
as practicable after the Registration Statement Effective Date, the
Proxy/Prospectus will be mailed to the stockholders of Morton and the U.S. and
Canadian stockholders of Autoliv and provided to the NYSE and SSE. In addition,
as promptly as practicable after the Registration Statement Effective Date,
Newco will mail the Swedish Prospectus to Autoliv stockholders located in Sweden
and the International Prospectus to Autoliv stockholders located outside of the
United States, Canada and Sweden. Autoliv, Morton and Newco shall cause the
Newco Registration Statement, the Swedish Prospectus and the International
Prospectus to comply as to form and substance in all material respects with the
applicable requirements of (i) the Exchange Act, including, without limitation,
Section 14(e) thereof and the respective regulations promulgated thereunder,
(ii) the NYSE and the SSE or the FSA, (iii) the Securities Act, (iv) the NBK
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("Naringslivets Borskommittes") Recommendations Concerning Public Offers for the
Acquisition of Shares (1988) and (v) the Indiana Law.
(b) (i) The Proxy/Prospectus shall include the unanimous recommendation of
the Board of Directors of Morton to the stockholders of Morton that they vote in
favor of approval of this Agreement and the Distribution Agreement; provided,
however, that if a Competing Transaction (as defined in Section 8.4 (d)) shall
have been made for Morton, the Board of Directors of Morton may, at any time
prior to the Effective Time, withdraw, modify or change any such recommendation
if the Board of Directors of Morton determines in good faith that failure to so
withdraw, modify or change its recommendation would cause the Board of Directors
of Morton to breach its fiduciary duties to Morton's stockholders under
applicable Laws after consultation with independent legal counsel (who may be
Morton's regularly engaged independent legal counsel). In addition, the
Proxy/Prospectus will include the opinion of Goldman Sachs referred to in
Section 4.17.
(ii) The Proxy/Prospectus, the Swedish Prospectus and the International
Prospectus shall include the unanimous recommendation of the Board of
Directors of Autoliv to the stockholders of Autoliv that they accept the
Exchange Offer; provided, however, that if a Competing Transaction shall
have been made for Autoliv, the Board of Directors of Autoliv may, at any
time prior to the Effective Time, withdraw, modify or change any such
recommendation if the Board of Directors of Autoliv determines in good faith
that failure to so withdraw, modify or change its recommendation would cause
the Board of Directors of Autoliv to breach its fiduciary duties to Autoliv
or Autoliv's stockholders under applicable Laws after consultation with
independent legal counsel (who may be Autoliv's regularly engaged
independent legal counsel). In addition, the Proxy/Prospectus, the Swedish
Prospectus and the International Prospectus will include the opinions of
Enskilda and Blackstone referred to in Section 5.15.
(c) No amendment or supplement to the Registration Statements will be made
without the approval of Autoliv and Morton, which approval shall not be
unreasonably withheld or delayed. Each of Newco, Autoliv and Morton will advise
the others, promptly after it receives notice thereof, of the time when the
Newco Registration Statement has become effective or any supplement or amendment
has been filed, of the issuance of any stop order, of the suspension of the
qualification of Newco Common Stock or, if applicable, the SDRs issuable in
connection with the Merger and the Exchange Offer for offering or sale in any
jurisdiction, or of any request by the SEC, the NYSE, the SSE or the FSA for
amendment of the Newco Registration Statement or comments thereon and responses
thereto or requests by the SEC, the SSE or the FSA for additional information.
(d) The information supplied by Autoliv for inclusion in the Registration
Statements, the Swedish Prospectus and/or the International Prospectus shall
not, at (i) the time the Registration Statements are declared effective, (ii)
the time the Proxy/Prospectus, the Swedish Prospectus and the International
Prospectus (or any amendment thereof or supplement thereto) is first mailed to
the stockholders of Autoliv or Morton, as the case may be, (iii) the time of the
Morton Stockholders' Meeting, (iv) the Effective Time and (v) the Expiration
Date, contain any untrue statement of a material fact or fail to state any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading. If at any time prior to the Effective Time,
any event or circumstance relating to Autoliv or any subsidiary of Autoliv, or
their respective officers or directors, should be discovered by Autoliv that
should be set forth in an amendment or a supplement to either of the
Registration Statements, Autoliv shall promptly inform Morton. Autoliv agrees
that all documents that Autoliv or Newco is responsible for filing in connection
with the Transactions will comply as to form and substance in all material
respects with the applicable requirements of the SSE or the FSA, the Delaware
Law, the Securities Act and the Exchange Act.
(e) The information supplied by Morton for inclusion in the Registration
Statements, the Swedish Prospectus and/or the International Prospectus shall
not, at (i) the time the Registration Statements are
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declared effective, (ii) the time the Proxy/Prospectus, the Swedish Prospectus
and the International Prospectus (or any amendment thereof or supplement
thereto) is first mailed to the stockholders of Morton or Autoliv, as the case
may be, (iii) the time of the Morton Stockholders' Meeting, (iv) the Effective
Time, and (v) the Expiration Date, contain any untrue statement of a material
fact or fail to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading. If at any time
prior to the Effective Time any event or circumstance relating to Morton or any
subsidiary of Morton, or their respective officers or directors, should be
discovered by Morton that should be set forth in an amendment or a supplement to
either of the Registration Statements, the Swedish Prospectus or the
International Prospectus, Morton shall promptly inform Autoliv. Morton agrees
that all documents that Morton is responsible for filing with the SEC in
connection with the Transactions will comply as to form and substance in all
material respects with the applicable requirements of the Indiana Law, the
Securities Act and the Exchange Act.
Section 8.2 STOCKHOLDERS' MEETINGS. (a) Morton shall call and hold the
Morton Stockholders' Meeting as promptly as practicable after the Registration
Statement Effective Date for the purpose of voting upon approval of this
Agreement and the Distribution Agreement and Autoliv, Morton and Newco will
cooperate with one another to cause the Morton Stockholders' Meeting to be held
prior to and proximate to the Expiration Date of the Exchange Offer. Morton
shall use its reasonable efforts (through its agents or otherwise) to solicit
from its stockholders proxies in favor of approval of this Agreement and the
Distribution Agreement, and shall take all other action necessary or advisable
to secure the affirmative vote of its stockholders required by the Indiana Law
to secure such approval, except to the extent that the Board of Directors of
Morton determines in good faith that doing so would cause the Board of Directors
of Morton to breach its fiduciary duties to Morton's stockholders under
applicable Laws after consultation with independent legal counsel (who may be
Morton's regularly engaged independent legal counsel).
(b) In the event that Autoliv shall call and hold an annual general meeting
or an extraordinary meeting to be held prior to the Effective Time, Autoliv
shall use its reasonable efforts to cause such meeting to be held and concluded
in a manner that will not delay materially the consummation of the transactions
contemplated by this Agreement and the Ancillary Agreements. To the extent any
matters to be proposed relate to this Agreement or the transactions contemplated
hereby, Autoliv shall consult in advance with Morton as to such matters.
Section 8.3 ACCESS TO INFORMATION; CONFIDENTIALITY.
(a) Except as required pursuant to any confidentiality agreement or similar
agreement or arrangement to which Autoliv or Morton or any of their respective
subsidiaries is a party or pursuant to applicable Law or the regulations or
requirements of any stock exchange or other regulatory organization with whose
rules the parties are required to comply, from the date of this Agreement to the
Effective Time:
(i) Autoliv shall (and shall cause its subsidiaries to): (A) provide to
Morton (and its officers, directors, employees, accountants, consultants,
legal counsel, agents and other representatives, collectively,
"Representatives") reasonable access at reasonable times, upon reasonable
prior notice, to its officers, employees, agents, properties, offices and
other facilities of it and its subsidiaries and to the books and records
thereof and (B) furnish promptly such information concerning its business,
properties, contracts, assets, liabilities, personnel and other aspects of
it and its subsidiaries as Morton or Morton's Representatives may reasonably
request.
(ii) Morton shall (and shall cause its subsidiaries to): provide to
Autoliv and Autoliv's Representatives reasonable access at reasonable times,
upon reasonable prior notice, (A) to the officers, employees, agents,
properties, offices and other facilities and the books and records relating
to the Retained Business, (B) to personnel at Morton's corporate
headquarters to the extent necessary to confirm the proper division of
assets and liabilities between Spinco and Morton pursuant to the
Distribution Agreement and the other Ancillary Agreements and (C) to
personnel at Morton's corporate headquarters (and counsel, consultants and
divisional Morton managers if appropriate),
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with respect to Morton's contingent liabilities in a manner consistent
generally with the approach taken by Morton and Autoliv prior to the date of
this Agreement. Morton shall (and shall cause its subsidiaries to) furnish
promptly such information as Autoliv or Autoliv's Representatives may
reasonably request concerning the business, properties, contracts, assets,
liabilities, personnel and other aspects relating to (1) the Retained
Business and (2) Morton, to the extent necessary to confirm the proper
division of assets and liabilities between Spinco and Morton pursuant to the
Distribution Agreement and the other Ancillary Agreements.
No investigation conducted pursuant to this Section 8.3 shall affect or be
deemed to modify any representation or warranty made in this Agreement.
(b) The parties shall comply with, and shall cause their respective
Representatives to comply with, all of their respective obligations under the
reciprocal Confidentiality Agreements dated July 18, 1996 (the "Confidentiality
Agreements") between Autoliv and Morton with respect to the information
disclosed pursuant to this Section 8.3 or any information disclosed by the other
party prior to the date hereof.
(c) Effective upon the Spinoff, Morton will (i) assign all of its rights
under the Confidentiality Agreements, other than with respect to the Retained
Business and (ii) cause Spinco to assume all of the obligations of Morton under
the Confidentiality Agreements from and after the Spinoff, other than with
respect to the Retained Business.
Section 8.4 NO SOLICITATION OF TRANSACTIONS.
(a) Prior to the Effective Time, each party to this Agreement (i) will not,
directly or indirectly, and will not authorize or permit its officers,
directors, employees, subsidiaries, agents or advisors or other representatives
(including, without limitation, any investment banker, attorney or accountant
retained by it), to, directly or indirectly, solicit, initiate or knowingly
encourage (including by way of furnishing non-public information), or take any
other action knowingly to facilitate, any inquiries or the making of any
proposal or offer (including, without limitation, any proposal or offer to its
stockholders) that constitutes, or may reasonably be expected to lead to, any
Third-Party Transaction, or enter into or maintain or continue discussions or
negotiate with any person or entity in furtherance of such inquiries or to
obtain a Third-Party Transaction, or agree to or endorse any Third-Party
Transaction; (ii) shall notify the other parties promptly if any proposal or
offer, or any inquiry or contact with any person with respect thereto, regarding
a Third-Party Transaction is made; (iii) shall immediately cease and cause to be
terminated all existing discussions or negotiations with any parties conducted
heretofore with respect to a Third-Party Transaction and promptly request that
all confidential information furnished on behalf of such party be returned; and
(iv) agrees not to release any third party from, or waive any provision of, any
confidentiality or standstill agreement to which it is a party.
(b) Notwithstanding anything to the contrary in Section 8.4(a), each party
to this Agreement may furnish information to, and may participate in discussions
or negotiations with, any person that, unsolicited by such party, has delivered
a bona fide written proposal with respect to a Competing Transaction, in each
case to the extent that the Board of Directors of such party determines in good
faith that the failure to do so would cause the Board of Directors of such party
to breach its fiduciary duties to such party or its stockholders under
applicable Laws after consultation with independent legal counsel (who may be
such party's regularly engaged independent legal counsel) and, notwithstanding
anything to the contrary contained in this Agreement or the Ancillary
Agreements, any such furnishing of information and participation in discussions
or negotiations shall not constitute a breach of this Agreement or the Ancillary
Agreements by such party; provided, however, that any party furnishing such
information, or participating in such discussions or negotiations shall notify
the other promptly of such action and shall, in any such notice, indicate the
identity of the person making the written proposal referred to in this Section
8.4(b) and, in reasonable detail, the terms and conditions of such written
proposal.
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(c) A "Third-Party Transaction" means any of the following involving Autoliv
or Morton, as the case may be (other than the transactions contemplated by this
Agreement): (i) a merger, consolidation, share exchange, business combination or
other similar transaction; (ii) any sale, lease, exchange, transfer or other
disposition of 10% or more of the assets of such party and its subsidiaries,
taken as a whole or (iii) a tender offer or exchange offer for, or any other
acquisition of 10% or more of the outstanding voting securities of such party;
provided, however, that the term "Third-Party Transaction" shall not include any
transactions which relate solely to the businesses to be owned by Spinco and its
subsidiaries following the Spinoff and which would not prevent or materially
delay consummation of the Transactions.
(d) A "Competing Transaction" means a bona fide Third-Party Transaction
relating to a merger, consolidation, share exchange, tender or exchange offer,
business combination or other similar transaction involving all or substantially
all of the assets (and in any event, for the avoidance of doubt, more than 50%
of the assets) or more than 50% of the voting securities of Morton or Autoliv.
(e) Nothing contained in this Section 8.4 will prohibit Morton or Autoliv
from making any disclosure to their stockholders if, in the good faith judgment
of its Board of Directors, after consultation with independent legal counsel
(who may be such party's regularly engaged independent legal counsel), failure
so to disclose would be inconsistent with applicable Law; provided, however,
neither Morton nor Autoliv, nor their respective Boards of Directors or any
committee thereof shall, except as permitted by Section 8.1(b), withdraw, modify
or change its recommendation with respect to the transactions contemplated by
this Agreement.
Section 8.5 EMPLOYEE BENEFITS MATTERS. Annex A hereto sets forth certain
agreements among the parties hereto with respect to employee benefits matters
and is incorporated herein by this reference.
Section 8.6 DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE.
(a) The Certificate of Incorporation and By-Laws of the Surviving
Corporation shall contain the provisions that are set forth, as of the date of
this Agreement, in the Restated Articles of Incorporation and the By-Laws,
respectively, of Morton, which provisions shall not be amended, repealed or
otherwise modified for a period of six years from the Effective Time in any
manner that would affect adversely the rights thereunder of individuals who at
or at any time prior to the Effective Time were directors, officers, employees,
fiduciaries or agents of Morton.
(b) Subject to commercial availability, for a period of six years after the
Effective Time, Newco shall cause to be maintained in effect the current
directors' and officers' liability insurance policies maintained by Morton and
Autoliv (provided that Newco may, and in the event of the cancellation or
termination of such policies, Newco shall, substitute therefor policies
reasonably satisfactory to the indemnified parties of at least the same coverage
containing terms and conditions which are no less advantageous) with respect to
claims arising from facts or events that occurred prior to the Effective Time.
(c) This Section 8.6 is intended to be for the benefit of, and shall be
enforceable by, the indemnified parties, their heirs and personal
representatives and shall be binding on Newco and the Surviving Corporation and
their respective successors and assigns.
(d) From and after the Effective Time, Newco agrees that it shall indemnify
and hold harmless each present and former director and officer of Morton or
Autoliv, determined as of the Effective Time (the "Indemnified Parties"),
against any costs or expenses (including reasonable attorneys' fees), judgments,
fines, losses, claims, damages or liabilities (collectively, "Costs") incurred
in connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of or pertaining
to matters existing or occurring at or prior to the Effective Time, whether
asserted or claimed prior to, at or after the Effective Time, to the fullest
extent that Morton or Autoliv would have been permitted under applicable Indiana
or Swedish law, as the case may be, and their charter documents (each as in
effect on the date hereof) to indemnify such Indemnified Parties (and Newco
shall also advance expenses as incurred to the fullest extent permitted under
applicable Law; provided that the Indemnified
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Party to whom expenses are advanced provides an undertaking to repay such
advances if it is ultimately determined that such Indemnified Party is not
entitled to indemnification); and provided, further, that any determination
required to be made with respect to whether an officer's or director's conduct
complies with the standards set forth under applicable Indiana or Swedish law
and Morton or Autoliv's charter documents shall be made by independent counsel
selected by Newco.
(e) To the extent paragraph (d) shall not serve to indemnify and hold
harmless an Indemnified Party, for a period of six years after the Effective
Time, Newco shall, subject to the terms set forth herein, indemnify and hold
harmless, to the fullest extent permitted under applicable Law (and Newco shall
also advance expenses as incurred to the fullest extent permitted under
applicable Law; provided that the Indemnified Party to whom expenses are
advanced provides an undertaking to repay such advances if it is ultimately
determined that such Indemnified Party is not entitled to indemnification), each
Indemnified Party against any Costs incurred in connection with any claim,
action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of or pertaining to the
transactions contemplated by this Agreement; provided, however, that Newco shall
not be required to indemnify any Indemnified Party pursuant hereto if it shall
be determined that the Indemnified Party acted in bad faith and not in a manner
such Indemnified Party believed to be in or not opposed to the best interests of
Morton or Autoliv, as the case may be.
(f) Any Indemnified Party wishing to claim indemnification under paragraphs
(d) or (e) of this Section 8.6, upon learning of any such claim, action, suit,
proceeding or investigation, shall promptly notify Newco thereof, but the
failure to so notify shall not relieve Newco of any liability it may have to
such Indemnified Party if such failure does not materially prejudice Newco. In
the event of any such claim, action, suit, proceeding or investigation (whether
arising before or after the Effective Time), (i) Newco shall have the right to
assume the defense thereof and Newco shall not be liable to such Indemnified
Parties for any legal expenses of other counsel or any other expenses
subsequently incurred by such Indemnified Parties in connection with the defense
thereof, except that if Newco elects not to assume such defense or counsel for
the Indemnified Parties advises that there are issues which may raise conflicts
of interest between Newco and the Indemnified Parties, the Indemnified Parties
may retain counsel satisfactory to them, and Newco shall pay all reasonable fees
and expenses of such counsel for the Indemnified Parties promptly as statements
therefor are received; provided, however, that Newco shall be obligated pursuant
to this paragraph (f) to pay for only one firm of counsel for all Indemnified
Parties in any jurisdiction unless the use of one counsel for such Indemnified
Parties would present such counsel with a conflict of interest, (ii) the
Indemnified Parties will reasonably cooperate in the defense of any such matter
and (iii) Newco shall not be liable for any settlement effected without its
prior written consent; and provided, further, that Newco shall not have any
obligation hereunder to any Indemnified Party when and if a court of competent
jurisdiction shall ultimately determine, and such determination shall have
become final, that the indemnification of such Indemnified Party in the manner
contemplated hereby is prohibited by applicable Law. If such indemnity is not
available with respect to any Indemnified Party, then Newco and the Indemnified
Party shall contribute to the amount payable in such proportion as is
appropriate to reflect relative faults and benefits.
(g) If Newco or any of its successors or assigns (i) shall consolidate with
or merge into any other corporation or entity and shall not be the continuing or
surviving corporation or entity of such consolidation or merger or (ii) shall
transfer all or substantially all of its properties and assets to any
individual, corporation or other entity, then and in each such case, proper
provisions shall be made so that the successors and assigns of Newco shall
assume all of the obligations set forth in this Section 8.6.
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Section 8.7 AFFILIATE LETTERS.
(a) Not fewer than 30 days prior to the Effective Time, Morton shall deliver
to Autoliv a list of names and addresses of those persons who were, in Morton's
reasonable judgment, at the record date for the Morton Stockholders' Meeting,
affiliates within the meaning of Rule 145 of the rules and regulations
promulgated under the Securities Act (each such person, an "Affiliate") of
Morton. Morton shall provide Autoliv with such information and documents as
Autoliv shall reasonably request for purposes of reviewing such list. Morton
shall use reasonable efforts to deliver or cause to be delivered to Autoliv,
prior to the Effective Time, an affiliate letter in the form attached hereto as
Exhibit C, executed by each of the Affiliates of Morton identified in the
foregoing list.
(b) Not fewer than 30 days prior to the Effective Time, Autoliv shall
deliver to Morton a list of names and addresses of those persons who were, in
Autoliv's reasonable judgment, at the record date for the Morton Stockholders'
Meeting, Affiliates of Autoliv. Autoliv shall provide Morton such information
and documents as Morton shall reasonably request for purposes of reviewing such
list. Autoliv shall use reasonable efforts to deliver or cause to be delivered
to Morton, prior to the Effective Time, an affiliate letter in the form attached
hereto as Exhibit D, executed by each of the Affiliates of Autoliv identified in
the foregoing list.
Section 8.8 LETTERS OF ACCOUNTANTS.
(a) Morton shall use reasonable efforts to cause to be delivered to Autoliv
"comfort" letters of Ernst & Young LLP, Morton's independent public accountants,
dated and delivered on the Registration Statement Effective Date and as of the
Effective Time, and addressed to Autoliv, in form and substance reasonably
satisfactory to Autoliv and reasonably customary in scope and substance for
letters delivered by independent public accountants in connection with
transactions such as those contemplated by this Agreement. At the request of
Ernst & Young LLP, Autoliv shall deliver a customary letter to Ernst & Young LLP
in connection with Autoliv's receipt of such "comfort" letters.
(b) Autoliv shall use reasonable efforts to cause to be delivered to Morton
"comfort" letters of Ernst & Young AB (or of an affiliated entity within the
Ernst & Young group), Autoliv's independent public accountants, dated and
delivered on the Registration Statement Effective Date and as of the Effective
Time, and addressed to Morton, in form and substance reasonably satisfactory to
Morton and reasonably customary in scope and substance for letters delivered by
independent public accountants in connection with transactions such as those
contemplated by this Agreement. At the request of Ernst & Young LLP, Morton
shall deliver a customary letter to Ernst & Young AB in connection with Morton's
receipt of such letters.
Section 8.9 FURTHER ACTION; CONSENTS; FILINGS.
(a) Upon the terms and subject to the conditions hereof, including, without
limitation, the respective rights of the parties under Sections 8.4(b) and 10.1,
each of the parties hereto shall use reasonable efforts to (i) take, or cause to
be taken, all appropriate action, and do, or cause to be done, all things
necessary, proper or advisable under applicable Law or otherwise to consummate
and make effective the Transactions, (ii) obtain from Governmental Entities any
consents, licenses, permits, waivers, approvals, authorizations or orders
required to be obtained or made by Autoliv or Morton or any of their
subsidiaries in connection with the authorization, execution and delivery of
this Agreement and the Ancillary Agreements and the consummation of the
Transactions, (iii) make all necessary filings, and thereafter make any other
submissions either required or deemed appropriate by each of the parties, with
respect to this Agreement, the Ancillary Agreements and the Transactions
required under (A) the rules and regulations of the SSE or the FSA, (B) the
Securities Act, the Exchange Act and any other applicable federal or Blue Sky
Laws, (C) the HSR Act, (D) the filing of notifications in accordance with the
antitrust laws of Sweden, Germany and Belgium and (E) any other applicable Law
and (iv) procure any third-party consents, required to consummate the
Transactions and the Spinoff, relating to any material contract, agreement,
lease, license,
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permit, franchise or other instrument or obligation to which it or any of its
subsidiaries is a party. The parties hereto shall cooperate and consult with one
another in connection with the making of all such filings with Governmental
Entities, including by providing copies of all such documents to the nonfiling
party and its advisors prior to filing, and none of the parties will file any
such document if any of the other parties shall have reasonably objected to the
filing of such document. No party to this Agreement shall consent to any
voluntary extension of any statutory deadline or waiting period or to any
voluntary delay of the consummation of the Transactions at the behest of any
Governmental Entity without the consent and agreement of the other parties to
this Agreement, which consent shall not be unreasonably withheld or delayed.
(b) Without limiting the generality of Section 8.9(a), each of Autoliv and
Morton shall use reasonable efforts to:
(i) take promptly any or all of the following actions to the extent
necessary to obtain the approval of any Governmental Entity with
jurisdiction over the enforcement of any applicable Laws regarding the
legality of the Transactions and the Spinoff: entering into negotiations,
providing information, making proposals, entering into and performing
agreements or submitting to judicial or administrative orders, or selling or
otherwise disposing of, or holding separate (through the establishment of a
trust or otherwise) particular assets or categories of assets, or
businesses, of Autoliv, Morton or any of their affiliates; provided,
however, neither Autoliv nor Morton shall be obligated to take any action
that would have an Autoliv Material Adverse Effect or a Morton Material
Adverse Effect, as the case may be, assuming for purposes of this proviso
that the Transactions and the Spinoff have been consummated;
(ii) prevent the entry in a judicial or administrative proceeding
brought under any Law by any Governmental Entity or any other party of any
permanent or preliminary injunction or other order (an "Order") that would
make consummation of any of the Transactions or the Spinoff in accordance
with the terms of this Agreement or the Ancillary Agreements unlawful or
that would prevent or delay such consummation, including, without
limitation, taking the steps contemplated by Section 8.9(b)(i); and
(iii) take promptly, in the event that such an Order has been issued in
such a proceeding, any and all steps, including, without limitation, the
appeal thereof, the posting of a bond or the steps contemplated by Section
8.9(b)(i), necessary to vacate, modify or suspend such injunction or order
so as to permit such consummation on a schedule as close as possible to that
contemplated by this Agreement.
Section 8.10 NEWCO ORGANIZATION.
(a) Immediately prior to the Effective Time, Newco shall, and Autoliv and
Morton shall cause Newco to, take action to (i) cause the full Board of
Directors of Newco at the Effective Time to consist of Gunnar Bark (who will be
Chairman of the Board), Paul Charlety, Jay Stewart, Fred Musone, two additional
non-executive directors designated by Morton and two additional non-executive
directors designated by Autoliv and (ii) cause to be confirmed as (w) the senior
executive officer of Newco in the position as Chief Executive Officer, Fred
Musone, (x) President and Chief Operating Officer, Paul Charlety, and such
others as Morton and Autoliv shall agree. Autoliv and Morton shall designate the
persons who will be the directors of Newco at the Effective Time no later than
the Registration Statement Effective Date. Notwithstanding anything to the
contrary in this Section 8.10(a), at any time prior to the Effective Time, each
of Morton and Autoliv may, at its election, replace its respective designees to
the Board of Directors, and upon the request of Morton or Autoliv, as the case
may be, the Board shall replace such party's respective designees to the officer
positions, of Newco.
(b) At the Effective Time, Autoliv and Morton shall cause Newco to have an
Executive Management Committee (the "Executive Management Committee") consisting
of such members as Morton and Autoliv
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shall agree. The CEO shall be the chairman of the Executive Management
Committee. The purpose and function of the Executive Management Committee shall
be set forth in the Restated Certificate of Incorporation and By-laws of Newco,
but in any event shall be intended to enhance communication, coordination, and
effective shared decision making among the senior executives of Newco.
(c) Autoliv, Morton and Newco shall take all action necessary to cause the
Restated Certificate of Incorporation and By-laws of Newco, as of the Effective
Time, to be in the forms agreed to by the parties hereto between the date hereof
and the Effective Time.
Section 8.11 DEPOSITARY FACILITY FOR NEWCO COMMON STOCK. As soon as
practicable after the date hereof, Newco will use reasonable efforts to cause a
commercial bank to operate a depositary facility in Sweden for the Newco Common
Stock. Newco shall pay all fees of such commercial bank relating to the
establishment and operation of such depositary facility, including, without
limitation, any fees payable in connection with the trading of the SDRs, if SDRs
are issued in connection with the Autoliv Transaction, and the distribution of
dividends.
Section 8.12 PLAN OF REORGANIZATION. This Agreement and the Ancillary
Agreements are intended to constitute a "plan of reorganization" within the
meaning of Section 1.368-2(g) of the Treasury regulations promulgated under the
Code. From and after the date of this Agreement and until the Effective Time,
each party hereto shall use reasonable efforts to cause the Merger to qualify as
a reorganization under Section 368(a) of the Code, and will not, without the
prior written consent of the parties hereto, knowingly take any actions or cause
any actions to be taken except pursuant to the terms of this Agreement or the
Ancillary Agreements which could prevent the Spinoff from constituting a
transaction qualifying under Sections 355 and 368(a)(1)(D) of the Code or the
Merger from qualifying, as a reorganization under the provisions of Section
368(a) of the Code or (in conjunction with the acquisition of Autoliv Securities
pursuant to the Exchange Offer) as a transfer of property described in Section
351(a) of the Code. From and after the date of this Agreement and until the
Effective Time, each party hereto shall use reasonable efforts to cause the
Exchange Offer (in conjunction with the acquisition of Morton Shares pursuant to
the Merger) to qualify, and will not, without the prior written consent of the
parties hereto, knowingly take any actions or cause any actions to be taken
which could prevent the Exchange Offer from qualifying, as a transfer of
property described in Section 351(a) of the Code. Following the Effective Time,
and in accordance with the Distribution Agreement, none of the Surviving
Corporation, Newco, Autoliv or any of their affiliates shall knowingly take any
action or knowingly cause any action to be taken which would prevent the Spinoff
from constituting a transaction qualifying under Sections 355 and 368(a)(1)(D)
of the Code or the Merger or the Exchange Offer to fail to so qualify as a
reorganization under Section 368(a) of the Code or as a transfer of property
described in Section 351(a) of the Code, as the case may be.
Section 8.13 ANCILLARY AGREEMENTS.
(a) Prior to the Spinoff, Morton and certain of its subsidiaries will enter
into the Distribution Agreement and each of the other Ancillary Agreements.
(b) Morton shall not waive or amend any terms of the Distribution Agreement
or any of the other Ancillary Agreements without the consent of Autoliv, which
consent shall not be unreasonably withheld.
(c) The parties hereto acknowledge that the indemnities of Spinco contained
in the Distribution Agreement and the other Ancillary Agreements shall inure to
the benefit of the Surviving Corporation and Newco. Newco shall not, and shall
not permit any of its subsidiaries to, take any action which would or would be
reasonably likely to adversely affect the ability of the Surviving Corporation
to perform its obligations under the Ancillary Agreements.
(d) Autoliv accepts and agrees that the form of certificate of incorporation
and by-laws of Spinco adopted in contemplation of the Spinoff shall be as agreed
to by Morton and Spinco in their sole discretion, provided that nothing in the
charter and by-laws shall adversely affect Spinco's performance of its
obligations under the Ancillary Agreements.
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Section 8.14 YEAR-END FINANCIAL STATEMENTS.
(a) The parties hereto acknowledge that Ernst & Young LLP will audit the
consolidated balance sheet of the Retained Business as of December 31, 1996.
Morton hereby agrees to use its reasonable efforts to take, or cause to be
taken, all action, and to do, or cause to be done, all things necessary, proper
or advisable to assist and otherwise cause Ernst & Young LLP to complete the
audit of such balance sheet as promptly as practicable and no later than by
February 28, 1997. Prior to the Effective Time, Morton also agrees to provide
Autoliv as promptly as reasonably practicable such quarterly unaudited financial
information relating to the Retained Business and covering periods following the
date hereof as may be prepared by Morton in the ordinary course.
(b) The parties hereto acknowledge that Ernst & Young AB will audit the
consolidated balance sheet of Autoliv as of December 31, 1996. Autoliv hereby
agrees to use its reasonable efforts to take, or cause to be taken, all action,
and to do, or cause to be done, all things necessary, proper or advisable to
assist and otherwise cause Ernst & Young AB to complete the audit of such
balance sheet by January 30, 1997, but in no event shall such audit be completed
later than February 15, 1997. Prior to the Effective Time, Autoliv also agrees
to provide Morton as promptly as reasonably practicable such quarterly unaudited
financial information relating to Autoliv and covering periods following the
date hereof as may be prepared by Autoliv in the ordinary course.
Section 8.15 PUBLIC ANNOUNCEMENTS. The initial press release relating to the
execution of this Agreement shall be a joint press release and, thereafter until
the Effective Time, Autoliv and Morton shall consult with each other before
issuing any press release and shall use reasonable efforts to consult with each
other before otherwise making any public statements with respect to this
Agreement, the Ancillary Agreements, the Spinoff or any Transaction and shall
not issue any such press release, and shall use reasonable efforts not to make
any such public statement, prior to such consultation, except to the extent
required by applicable Law or the requirements of the SSE or the NYSE, in which
case the issuing party shall use reasonable efforts to consult with the other
party before issuing any such release or making any such public statement.
Section 8.16 OBLIGATIONS OF NEWCO SUB. Newco shall take all action necessary
to cause Newco Sub to perform its obligations under this Agreement and to
consummate the Merger on the terms and subject to the conditions set forth in
this Agreement.
Section 8.17 STOCK EXCHANGE LISTINGS AND DE-LISTINGS. Newco shall use its
reasonable efforts to cause the shares of Newco Common Stock to be issued in the
Merger and the Autoliv Transaction to be approved for listing on the NYSE, the
SSE and such other exchange(s) that Newco deems to be appropriate, subject to
official notice of issuance, prior to the Effective Time. If SDRs are issued in
connection with the Autoliv Transaction, Newco shall use its reasonable efforts
to cause such SDRs to be approved for listing on the SSE, subject to official
notice of issuance, prior to the Effective Time. Morton shall use its reasonable
efforts to cause the Morton Common Stock to be de-listed from the NYSE and
de-registered under the Exchange Act as soon as practicable following the
Effective Time if such actions are determined prior to the Effective Time in the
reasonable judgment of Morton and Autoliv to be necessary to the consummation of
the Transactions. Autoliv shall use its reasonable efforts to cause (i) the
Autoliv Shares to be delisted from the SSE and (ii) the quotation of the ADSs on
the Private Offerings, Resales and Trading through Automated Linkages system to
be terminated, in each case as soon as permitted under applicable Laws.
Section 8.18 MAINTENANCE OF CERTAIN FACILITIES; CORPORATE HEADQUARTERS. As
part of its global capability, Newco intends to retain and develop regional
operating centers in each of Ogden, Utah and Stockholm, Sweden. It is intended
that the executive headquarters of Newco shall be in either Amsterdam or London.
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Section 8.19 CANCELLATION OF NEWCO COMMON STOCK OWNED BY AUTOLIV AND MORTON.
The shares of Newco Common Stock owned by Autoliv and Morton immediately prior
to the consummation of the Transactions will be cancelled immediately upon
consummation of the Transactions.
Section 8.20 DELIVERY OF TAX CERTIFICATES. On or prior to the Effective
Time, Newco, Morton and Autoliv shall each deliver the tax certificates
described in Section 9.1(g)(ii) (A) and (B) as provided in such sections.
Section 8.21 SAFETY CREDIT AGREEMENT. Autoliv and Newco will use their
reasonable efforts, to cooperate with Morton in Morton's obtaining and entering
into the Safety Credit Agreement (as defined in the Distribution Agreement).
Section 8.22 POST-CLOSING TRANSACTIONS. Newco shall not for a period of one
year following the Effective Time engage or agree to engage or cause its
subsidiaries to engage in any of the following transactions, unless (a) an
opinion in form and substance reasonably satisfactory to Spinco is obtained from
nationally recognized tax counsel to Newco and/or (b) a supplemental ruling is
obtained from the Internal Revenue Service, in either case to the effect that
such transaction(s) would not adversely affect the tax consequences of the
contributions, transfers, assumptions, Merger and Spinoff to Spinco, any
subsidiary thereof, or any shareholder of Spinco. The transactions subject to
this provision are: (i) causing the Surviving Corporation to cease 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; (ii) disposing of any of the historic business assets of Morton that
would result in the Surviving Corporation failing the continuity of business
enterprise test of Treasury Regulation Section 1.368-1(d); (iii) transferring or
causing the Surviving Corporation to issue shares of capital stock of the
Surviving Corporation that would cause Newco to fail to be in control of the
Surviving Corporation within the meaning of Section 368(c) of the Code; (iv)
reacquiring any of the Newco Common Stock issued in the Merger; or (v)
liquidating or merging with or into any other entity (including a subsidiary of
either Newco or the Surviving Corporation). Newco hereby represents and warrants
that Newco has no plan or intention to undertake or cause its subsidiaries to
undertake any of the transactions set forth in (i), (ii), (iii), (iv) or (v)
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 Internal Revenue Service in connection with
the Spinoff or (y) the tax certificates described in Section 9.2(g)(ii) hereof
relating to the opinions of counsel to be rendered in connection with the Merger
or the Exchange Offer, shall not be subject to the provisions of this Section
8.22.
ARTICLE IX
CONDITIONS TO THE TRANSACTIONS
Section 9.1 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY TO CONSUMMATE THE
TRANSACTIONS. The obligations of Autoliv, Morton, Newco and Newco Sub to
consummate the Transactions, or to permit the consummation of the Transactions,
are subject to the satisfaction or, if permitted by applicable Law, waiver, of
the following conditions:
(a) the Registration Statements shall have been declared effective by the
SEC under the Securities Act and no stop order suspending the effectiveness of
the Registration Statements shall have been issued by the SEC and no proceeding
for that purpose shall have been initiated by the SEC;
(b) the Spinoff shall have been consummated in accordance with the terms of
the Distribution Agreement;
(c) the Morton Stockholder Approval Condition;
(d) no court of competent jurisdiction shall have issued or entered any
Order which is then in effect and has the effect of making any of the
Transactions illegal or otherwise prohibiting their consummation;
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(e) any waiting period (and any extension thereof) applicable to the
consummation of the Transactions under the HSR Act and any other competition,
merger control or similar Law, including any waiting periods arising from the
filing of notification in accordance with the antitrust laws of Sweden, Germany
and Belgium, shall have expired or been terminated;
(f) all consents, approvals and authorizations required to be obtained to
consummate the Transactions shall have been obtained from all Governmental
Entities, except where the failure to obtain any such consents, approvals and
authorizations would not result in a change in or effect on the Retained
Business or the business of Autoliv, in each case after giving effect to the
Transactions and provisions of the Distribution Agreement and the other
Ancillary Agreements, that is, or is reasonably likely to be, materially adverse
to the business, properties, financial condition or results of operations of
Autoliv and its subsidiaries and the Retained Business, taken as a whole;
(g) (i) Morton shall have received, and provided a copy thereof to Newco and
Autoliv, in form and substance reasonably satisfactory to Morton and Autoliv, a
ruling from the Internal Revenue Service substantially to the effect that no
gain or loss will be recognized by Morton or Morton's stockholders as a result
of the Spinoff;
(ii) Autoliv, Morton and Newco shall have received the following
opinions:
(A) Wachtell, Lipton, Rosen & Katz ("Wachtell") shall have issued its
opinion, addressed to Morton, based upon (1) customary representations of
Morton and Newco contained in customary tax certificates (the "Morton Tax
Certificate" and the "Newco Tax Certificate") to be delivered by Morton
and Newco, respectively, to Wachtell prior to the Effective Time, and (2)
customary assumptions, substantially to the effect that the Merger will
be treated for U.S. federal income tax purposes as a reorganization
qualifying under the provision of Section 368(a) of the Code and that
each of Morton, Newco and Newco Sub will be a party to the reorganization
within the meaning of Section 368(b) of the Code, such opinion to be
dated as of the Effective Time; and
(B) Skadden, Arps, Slate, Meagher & Flom LLP ("Skadden LLP") shall
have issued its opinion, addressed to Autoliv, based upon (1) customary
representations of Autoliv, Newco and Morton contained in the Morton Tax
Certificate, the Newco Tax Certificate and a customary tax certificate to
be delivered by Autoliv to Skadden LLP prior to the Effective Time (the
"Autoliv Tax Certificate"), and (2) customary assumptions, substantially
to the effect that the Exchange Offer (in conjunction with the
acquisition of Morton Shares pursuant to the Merger) will be treated for
U.S. federal income tax purposes as a transfer of property described in
Section 351(a) of the Code, such opinion to be dated as of the Effective
Time;
(h) (i) There shall be no proposed legislation introduced and pending in
bill form and pending action in the United States Congress which, if enacted
into law, would have the effect of amending the Code so as to alter in any
materially adverse respect any of the United States federal income tax
consequences described in the private letter ruling or the tax opinions of
counsel described in paragraph (g) above.
(ii) There shall be no proposed legislation introduced and pending in
the Swedish Parliament which, if enacted into law, would have the effect of
materially adversely affecting the Swedish income tax consequences of the
Exchange Offer to be described in the tax opinion of Ernst & Young AB
pursuant to Paragraph (i) below.
(i) Ernst & Young AB shall have issued their opinion, addressed to Newco,
Autoliv and Morton, based upon representations of Autoliv and assumptions
concerning, among other things, the actions of holders of Autoliv Securities, to
the effect that, under the income tax laws of Sweden, none of Newco, Autoliv or
the Autoliv stockholders (with certain exceptions) will recognize taxable income
or gain as a result of the Exchange Offer.
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(j) the shares of Newco Common Stock to be issued pursuant to the Merger and
the Exchange Offer shall have been authorized for listing on the NYSE, subject
to official notice of issuance, and the shares of Newco Common Stock or SDRs to
be issued in connection with the Autoliv Transaction shall have been authorized
for listing on the SSE;
(k) the Minimum Condition; and
(l) Morton shall have established a credit facility or entered into other
financial arrangements providing for the Retained Debt on terms acceptable in
the reasonable judgment of Autoliv and Morton the liability for which will be
retained by the Surviving Corporation, and shall have made the New Morton
Capital Contribution (as defined in the Distribution Agreement) immediately
prior to the Distribution Date (as defined in the Distribution Agreement) to
Spinco, pursuant to the Distribution Agreement.
Section 9.2 CONDITIONS TO THE OBLIGATIONS OF MORTON. The obligations of
Morton to consummate the Transactions, or to permit the consummation of the
Transactions, are subject to the satisfaction or, if permitted by applicable
Law, waiver of the following further conditions:
(a) each of the representations and warranties of Autoliv contained in this
Agreement shall be true and correct as of the date hereof and as of the
Effective Time as though made on and as of the Effective Time, except where any
such failure or failures to be so true and correct, in the aggregate, would not
have an Autoliv Material Adverse Effect, and except that those representations
and warranties that address matters only as of a particular date shall remain
true and correct as of such date, except where any such failure or failures to
be so true and correct, in the aggregate, would not have an Autoliv Material
Adverse Effect, and Morton shall have received a certificate of Autoliv,
executed on its behalf by the Chairman, President or Chief Financial Officer of
Autoliv to such effect;
(b) Autoliv shall have performed or complied in all material respects with
all agreements and covenants required by this Agreement to be performed or
complied with by it on or prior to the Effective Time, and the conditions set
forth in Section 9.2(c) shall have been satisfied, and Morton shall have
received a certificate of Autoliv, executed on its behalf by the Chairman,
President or Chief Financial Officer of Autoliv to that effect; and
(c) Autoliv and its subsidiaries shall own or possess adequate licenses or
other legal rights to use all patents, patent rights, trademarks, trademark
rights, trade names, trade dress, trade name rights, copyrights, servicemarks,
trade secrets, applications for trademarks and for servicemarks, mask works and
know-how used in connection with the business of Autoliv and its subsidiaries as
currently conducted, except where the failure to own or possess any of the
foregoing, individually or in the aggregate, would not have an Autoliv Material
Adverse Effect.
Section 9.3 CONDITIONS TO THE OBLIGATIONS OF AUTOLIV. The obligations of
Autoliv to consummate the Transactions, or to permit the consummation of the
Transactions, are subject to the satisfaction or, if permitted by applicable
Law, waiver of the following further conditions:
(a) each of the representations and warranties of Morton contained in this
Agreement shall be true and correct as of the date hereof and as of the
Expiration Date, as though made on and as of the Expiration Date, except where
any such failure or failures to be so true and correct, in the aggregate, would
not have a Morton Material Adverse Effect, and except that those representations
and warranties that address matters only as of a particular date shall remain
true and correct as of such date, except where any such failure or failures to
be so true and correct, in the aggregate, would not have a Morton Material
Adverse Effect, and Autoliv shall have received a certificate of Morton,
executed on its behalf by the Chairman, President or Chief Financial Officer of
Morton to such effect;
(b) Morton shall have performed or complied in all material respects with
all agreements and covenants required by this Agreement to be performed or
complied with by it on or prior to the Effective Time, and the conditions set
forth in Section 9.3(e) shall have been satisfied, and Autoliv shall have
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received a certificate of Morton, executed on its behalf by the Chairman,
President or Chief Financial Officer of Morton to that effect;
(c) the Ancillary Agreements shall have been executed and delivered
substantially in the form of Exhibit A attached hereto and Exhibits A and D to
the Distribution Agreement (except for changes that have been mutually agreed
upon by the parties hereto);
(d) the indebtedness for borrowed money of the Retained Business shall not
exceed $750 million in addition to indebtedness (not to exceed $1.1 million)
incurred prior to the date hereof related to the Ogden, Utah facility of the
Retained Business; and
(e) except with regard to the "Morton" name and related trademarks and trade
names, Morton and the Retained Morton Subsidiaries shall own or possess adequate
licenses or other legal rights to use all patents, patent rights, trademarks,
trademark rights, trade names, trade dress, trade name rights, copyrights,
servicemarks, trade secrets, applications for trademarks and for servicemarks,
mask works and know-how used in connection with the Retained Business as
currently conducted, except where the failure to own or possess any of the
foregoing, individually or in the aggregate, would not have a Morton Material
Adverse Effect.
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
Section 10.1 TERMINATION. This Agreement may be terminated and the Merger
and the Exchange Offer may be abandoned at any time prior to the Effective Time,
notwithstanding any requisite approval and adoption of this Agreement, as
follows:
(a) by mutual written consent duly authorized by the Board of Directors of
each of Autoliv and Morton;
(b) by either Autoliv or Morton, if the Effective Time shall not have
occurred on or before August 31, 1997; provided, however, that the right to
terminate this Agreement under this Section 10.1(b) shall not be available to
the party whose failure to fulfill any obligation under this Agreement shall
have been the cause of, or resulted in, the failure of the Effective Time to
occur on or before such date;
(c) by either Autoliv or Morton, if any Order preventing the consummation of
the Merger or the Autoliv Transaction shall have been entered by any court of
competent jurisdiction and shall have become final and nonappealable;
(d) by Autoliv, if (i) the Board of Directors of Morton withdraws, modifies
or changes its recommendation of this Agreement, (ii) the Board of Directors of
Morton shall have recommended to the stockholders of Morton a Third-Party
Transaction or shall have resolved to do so, or (iii) a tender offer or exchange
offer for 10% or more of the outstanding shares of capital stock of Morton is
commenced, and the Board of Directors of Morton fails to recommend against
acceptance of such tender offer or exchange offer by its stockholders (including
by taking no position with respect to the acceptance of such tender offer or
exchange offer by its stockholders);
(e) by Morton, if (i) the Board of Directors of Autoliv withdraws, modifies
or changes its recommendation of the Exchange Offer, (ii) the Board of Directors
of Autoliv shall have recommended to the stockholders of Autoliv a Third-Party
Transaction or shall have resolved to do so, or (iii) a public announcement is
made with regard to a bid for 10% or more of the outstanding shares of capital
stock of Autoliv (other than the Exchange Offer), and the Board of Directors of
Autoliv fails to recommend against acceptance of such tender offer or exchange
offer by its stockholders (including by taking no position with respect to the
acceptance of such tender offer or exchange offer by its stockholders);
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(f) by Autoliv or Morton if (i) this Agreement and the Distribution
Agreement shall fail to receive the vote for approval by the holders of a
majority of the outstanding Morton Shares at the Morton Stockholders' Meeting,
unless such meeting is adjourned or postponed, in which case at any adjournment
or postponement thereof or (ii) the Exchange Offer expires pursuant to Section
3.1(a) without any Autoliv Securities having been accepted for payment;
(g) by Autoliv upon 10 days' written notice, upon a breach of any material
representation, warranty, covenant or agreement on the part of Morton set forth
in this Agreement, or if any material representation or warranty of Morton shall
have become untrue, in either case such that the conditions set forth in Section
9.3 cannot be satisfied ("Terminating Morton Breach"); provided, however, that,
if such Terminating Morton Breach is curable by Morton through the exercise of
reasonable efforts and for so long as Morton continues to exercise such
reasonable efforts, Autoliv may not terminate this Agreement under this Section
10.1(g);
(h) by Morton upon 10 days' written notice, upon breach of any material
representation, warranty, covenant or agreement on the part of Autoliv set forth
in this Agreement, or if any material representation or warranty of Autoliv
shall have become untrue, in either case such that the conditions set forth in
Section 9.2 cannot be satisfied ("Terminating Autoliv Breach"); provided,
however, that, if such Terminating Autoliv Breach is curable by Autoliv through
reasonable efforts and for so long as Autoliv continues to exercise such
reasonable efforts, Morton may not terminate this Agreement under this Section
10.1(h);
(i) by Autoliv, if the Board of Directors of Autoliv, following consultation
with independent legal counsel (who may be Autoliv's regularly engaged
independent legal counsel) determines in good faith that failure to so terminate
would cause the Board of Directors of Autoliv to breach its fiduciary duties
under applicable Laws, shall have withdrawn, modified or changed its
recommendation of the approval of the Exchange Offer in a manner adverse to
Newco or Morton and, on or prior to such date, any person (other than Newco or
Morton) shall have made a public announcement with respect to a Competing
Transaction that the Board of Directors of Autoliv determines in its good faith
judgment (based upon the advice of Enskilda and Blackstone) may be more
favorable to their stockholders than the transactions contemplated by this
Agreement; provided, however, that Autoliv may not terminate this Agreement
pursuant to this subsection (i) until three business days have elapsed following
delivery to Morton of written notice of such determination of Autoliv (which
written notice will inform Morton of the material terms and conditions of the
Competing Transaction); provided, further, however, that such termination under
this Section 10.1(i) shall not be effective until Autoliv has made payment to
Morton of the amounts required to be paid pursuant to Section 10.5(c); or
(j) by Morton, if the Board of Directors of Morton, following consultation
with independent legal counsel (who may be Morton's regularly engaged
independent legal counsel) determines in good faith that failure to so terminate
would cause the Board of Directors of Morton to breach its fiduciary duties
under applicable Laws, shall have withdrawn, modified or changed its
recommendation of the adoption of this Agreement in a manner adverse to Newco or
Autoliv and, on or prior to such date, any person (other than Newco or Autoliv)
shall have made a public announcement with respect to a Competing Transaction
that the Board of Directors of Morton determines in its good faith judgment
(based upon the advice of Goldman Sachs) may be more favorable to their
stockholders than the transactions contemplated by this Agreement; provided,
however, that Morton may not terminate this Agreement pursuant to this
subsection (j) until three business days have elapsed following delivery to
Autoliv of written notice of such determination of Morton (which written notice
will inform Autoliv of the material terms and conditions of the Competing
Transaction); provided, further, however, that such termination under this
Section 10.1(j) shall not be effective until Morton has made payment to Autoliv
of the amounts required to be paid pursuant to Section 10.5(b).
Section 10.2 EFFECT OF TERMINATION. Except as provided in Section 11.1, in
the event of termination of this Agreement pursuant to Section 10.1, this
Agreement shall forthwith become void, there shall be no
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liability under this Agreement on the part of Autoliv, Morton, Newco or Newco
Sub or any of their respective officers or directors, and all rights and
obligations of each party hereto (other than with respect to any confidentiality
obligations on the part of any party contained herein or in the Confidentiality
Agreements entered into between the parties) shall cease, subject to the
remedies of the parties set forth in Sections 10.5(b), (c) and (d); provided,
however, that nothing herein shall relieve any party from liability for the
willful breach of any of its representations and warranties or the breach of any
of its covenants or agreements set forth in this Agreement.
Section 10.3 AMENDMENT. This Agreement may be amended by the parties hereto
by action taken by or on behalf of their respective Boards of Directors at any
time prior to the Effective Time; provided, however, that, after the approval of
this Agreement by the stockholders of Morton, no amendment may be made that
would reduce the amount or change the type of consideration into which each
Morton Share shall be converted upon consummation of the Merger. This Agreement
may not be amended except by an instrument in writing signed by the parties
hereto.
Section 10.4 WAIVER. At any time prior to the Effective Time, any party
hereto may (a) extend the time for the performance of any obligation or other
act of any other party hereto, (b) waive any inaccuracy in the representations
and warranties contained herein or in any document delivered pursuant hereto,
and (c) waive compliance with any agreement or condition contained herein;
provided, however, that the Minimum Condition may be waived only with the mutual
consent of Autoliv and Morton, which consent may not be unreasonably withheld by
either party, and provided further, that Newco and Newco Sub (x) will waive any
of the conditions to the Transactions contained in Article IX if so directed by
Autoliv and Morton, jointly, and (y) may not waive any of such conditions
without the prior written consent of each of Morton and Autoliv. Any waiver of a
condition set forth in Section 9.1, or any determination that such a condition
has been satisfied, will be effective only if made in writing by each of Morton
and Autoliv and, unless otherwise specified in such writing, shall thereafter
operate as a waiver (or satisfaction) of such condition for any and all purposes
of this Agreement. Any such extension or waiver shall be valid if set forth in
an instrument in writing signed by the party or parties to be bound thereby.
Section 10.5 EXPENSES.
(a) Except as set forth in this Section 10.5 and except as otherwise
specifically provided in the Ancillary Agreements, all Expenses (as defined
below) incurred in connection with this Agreement and the Transactions shall be
paid by the party incurring such expenses, whether or not the Merger or the
Exchange Offer is consummated, except that Autoliv and Morton each shall pay
one-half of all expenses relating to printing, filing and mailing the Proxy
Statement/Prospectus, the Newco Registration Statement, the Swedish Prospectus
and the International Prospectus and all SEC and other regulatory filing fees
incurred in connection with the Proxy Statement/Prospectus, the Newco
Registration Statement, the Swedish Prospectus and the International Prospectus
and all filing fees in connection with the HSR Act and regulatory filings in
other jurisdictions in connection with the Transactions.
(b) Morton agrees that, if this Agreement is terminated pursuant to Section
10.1(d) or Section 10.1(j), then promptly after such termination, Morton shall
reimburse Autoliv for all of its Expenses (in each case, upon receipt of
documentation in respect thereof which, in the case of out-of-pocket expenses,
shall consist of copies of invoices, and for all other expenses shall consist of
a certificate of the Chief Financial Officer of Autoliv certifying as to the
accuracy of such expenses) up to an aggregate amount of $20 million. "Expenses"
as used in this Agreement shall consist of all expenses (including, without
limitation, all fees and expenses of counsel, accountants, investment bankers,
financial institutions, experts and consultants to a party hereto and its
affiliates and other direct and indirect costs) incurred by a party or on its
behalf in connection with or related to the authorization, preparation,
negotiation, execution and performance of this Agreement, the transactions
contemplated hereby, the preparation, printing, filing and mailing of the Proxy
Statement/Prospectus, the Registration Statements, the Swedish Prospectus and
the International
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Prospectus, the solicitation of stockholder approvals and all other matters
related to the consummation of the transactions contemplated hereby.
(c) Autoliv agrees that, if this Agreement is terminated pursuant to Section
10.1(e) or Section 10.1(i), then promptly after such termination, Autoliv shall
reimburse Morton for all its Expenses (upon receipt of documentation in respect
thereof which, in the case of out-of-pocket expenses, shall consist of copies of
invoices, and for all other expenses shall consist of a certificate of the Chief
Financial Officer of Morton certifying as to the accuracy of such expenses) up
to an aggregate amount of $20 million.
(d) Each of Autoliv and Morton agrees that the payments provided for in
Sections 10.5(b) and (c) shall be the sole and exclusive remedies of the parties
upon a termination of this Agreement pursuant to Section 10.1(d), (e), (i), or
(j), as the case may be, and such remedies shall be limited to the payments
stipulated in Sections 10.5(b) and (c); provided, however, that nothing herein
shall relieve any party from liability for the willful breach of any of its
representations and warranties or the breach of any of its covenants or
agreements set forth in this Agreement.
(e) Any payment required to be made pursuant to Section 10.5(b) or (c) shall
be made to the party entitled to receive such payment not later than two
business days after delivery to the other party of notice of demand for payment
and shall be made by wire transfer of immediately available funds to an account
designated by the party entitled to receive payment in the notice of demand for
payment delivered pursuant to this Section 10.5(e).
(f) In the event that Autoliv or Morton, as the case may be, shall fail to
pay any expenses described in this Section 10.5 when due, the amount of any such
expenses shall be increased to include the costs and expenses actually incurred
or accrued by the other (including, without limitation, fees and expenses of
counsel) in connection with the collection under and enforcement of this Section
10.5, together with interest on such unpaid expenses, commencing on the date
that such expenses became due, at a rate equal to the rate of interest publicly
announced by Bank of America, Illinois, from time to time, in the City of
Chicago, as such bank's Reference Rate plus 1.00%.
ARTICLE XI
GENERAL PROVISIONS
Section 11.1 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
Except as otherwise expressly set forth in the Distribution Agreement, the
representations, warranties and agreements in this Agreement and in any
certificate delivered pursuant hereto shall terminate at the Effective Time or
upon the termination of this Agreement pursuant to Section 10.1, as the case may
be, except that the agreements set forth in Articles I, II and III and Sections
8.3(b), 8.3(c), 8.5, 8.6, 8.12, 8.13(c), the last two sentences of 8.17, 8.18,
8.22, 10.5(a) and this Article XI and the representations and warranties and
agreements contained in the Morton Tax Certificate, Autoliv Tax Certificate and
the Newco Tax Certificate shall survive the Effective Time, and those set forth
in Sections 8.3(b) and 10.5 and this Article XI shall survive termination. The
obligation of the parties to maintain the confidentiality of information related
to Spinco and its subsidiaries shall survive the Effective Time. Each party
agrees that, except for the representations and warranties contained in this
Agreement and the Ancillary Agreements, no party hereto has made any other
representations and warranties, express or implied, and each party hereby
disclaims any other representations and warranties made by itself or any of its
officers, directors, employees, agents, financial and legal advisors or other
representatives with respect to the accuracy or completeness of any information
regarding Morton or Autoliv, the execution and delivery of this Agreement or the
transactions contemplated herein, notwithstanding the delivery or disclosure to
any other party or any party's representatives of any documentation or other
information with respect to any one or more of the foregoing.
Section 11.2 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by
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delivery in person, by telecopy and facsimile or by registered or certified mail
(postage prepaid, return receipt requested) to the respective parties at the
following addresses (or at such other address for a party as shall be specified
in a notice given in accordance with this Section 11.2):
If to Autoliv:
Autoliv AB
Box 703 81
S-107 24 Stockholm
Sweden
Attention: Jorgen Svensson, Vice President, General Counsel
Telecopier: 46-8-24-44-93
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
25 Bucklersbury
London EC4N 8DA, England
Attention: Scott V. Simpson, Sr., Esq.
Telecopier: 44-171-489-8533
If to Morton:
Morton International, Inc.
100 North Riverside Plaza
Chicago, IL 60606
Attention: Corporate Secretary
Telecopier: 1-312-807-2101
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Attention: Eric S. Robinson, Esq.
Telecopier: 1-212-403-2000
Notices to Newco or Newco Sub shall be delivered to each of Autoliv and Morton
as provided herein.
Section 11.3 CERTAIN DEFINITIONS. For purposes of this Agreement, the term:
(a) "affiliate" of a specified person means a person who directly or
indirectly through one or more intermediaries controls, is controlled by, or is
under common control with, such specified person;
(b) "beneficial owner" with respect to any shares of capital stock means a
person who shall be deemed to be the beneficial owner of such shares (i) which
such person or any of its affiliates or associates (as such term is defined in
Rule 12b-2 promulgated under the Exchange Act) beneficially owns, directly or
indirectly, (ii) which such person or any of its affiliates or associates has,
directly or indirectly, (A) the right to acquire (whether such right is
exercisable immediately or subject only to the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of consideration
rights, exchange rights, warrants or options, or otherwise, or (B) the right to
vote pursuant to any agreement, arrangement or understanding, or (iii) which are
beneficially owned, directly or indirectly, by any other persons with whom such
person or any of its affiliates or associates or person with whom such person or
any of its affiliates or associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of any
shares of capital stock;
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(c) "business day" means any day on which the principal offices of the SEC
in Washington, D.C. are open to accept filings, or, in the case of determining a
date when any payment is due, any day on which banks are not required or
authorized to close in the City of New York, USA or in Stockholm, Sweden;
(d) "control" (including the terms "controlled by" and "under common control
with") means the possession, directly or indirectly or as trustee or executor,
of the power to direct or cause the direction of the management and policies of
a person, whether through the ownership of voting securities, as trustee or
executor, by contract or credit arrangement or otherwise;
(e) "knowledge" means, with respect to any matter in question, that the
senior executive officers of Autoliv or Morton, as the case may be, after due
inquiry of the senior officers of the Retained Business and the executive
officers of Morton (in the case of Morton) or the senior officers of Autoliv and
the managing directors or other senior officers of the material subsidiaries of
Autoliv and its affiliates (in the case of Autoliv), have actual knowledge of
such matter;
(f) "person" means an individual, corporation, company, limited liability
company, partnership, limited partnership, syndicate, person (including, without
limitation, a "person" as defined in Section 13(d)(3) of the Exchange Act),
trust, association or entity or government, political subdivision, agency or
instrumentality of a government; and
(g) "subsidiary" or "subsidiaries" of any person means any corporation,
limited liability company, partnership, joint venture or other legal entity of
which such person (either alone or through or together with any other
subsidiary) owns, directly or indirectly, more than 50% of the stock or other
equity interests, the holders of which are generally entitled to vote for the
election of the board of directors or other governing body of such corporation
or other legal entity.
Section 11.4 SEVERABILITY. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of Law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the Transactions is not affected in any manner materially adverse to any party.
Upon such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in a mutually acceptable manner in order that the
Transactions be consummated as originally contemplated to the fullest extent
possible.
Section 11.5 ASSIGNMENT; BINDING EFFECT; BENEFIT. Neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by any
of the parties hereto (whether by operation of Law or otherwise) without the
prior written consent of the other parties. Subject to the preceding sentence,
this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns. Notwithstanding
anything contained in this Agreement to the contrary, except for the provisions
of Sections 8.3(c), 8.5, 8.6, the last sentence of 8.12, 8.13(c) and 8.22 (the
"Third Party Provisions"), nothing in this Agreement, express or implied, is
intended to confer on any person other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement. The Third Party Provisions may
be enforced by the beneficiaries thereof. The provisions of Sections 8.3(c),
8.12, 8.13(c), and 8.22 shall inure to the benefit of Spinco.
Section 11.6 SCHEDULES, ANNEXES AND EXHIBITS. The Autoliv Disclosure
Schedule, the Morton Disclosure Schedule, Annex A and all Exhibits attached
hereto and referred to herein are hereby incorporated herein and made a part of
this Agreement for all purposes as if fully set forth herein. Matters reflected
on the Autoliv Disclosure Schedule or the Morton Disclosure Schedule are not
necessarily limited to matters required by this Agreement to be reflected on
such Schedules and shall not be deemed to be a representation that a matter set
forth therein, or omitted therefrom, is or is not material in any respect. Such
additional matters are set forth for informational purposes only and do not
necessarily include other matters of a similar nature.
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Section 11.7 SPECIFIC PERFORMANCE. The parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
Section 11.8 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the Laws of the State of Delaware to the greatest
extent permissible by law; provided, however, that the parties specifically
agree that (i) all questions of Swedish corporate or securities law and the
interpretation thereof (including, without limitation, questions relating to the
fiduciary duties of the directors of Autoliv) shall be governed by the Laws of
the Kingdom of Sweden and (ii) all questions of Delaware and Indiana corporate
or securities law and the interpretation thereof (including, without limitation,
questions relating to the fiduciary duties of the directors of Morton, which
shall be governed by the laws of Indiana) shall be governed by the laws of
Delaware and Indiana, respectively.
Section 11.9 SUBMISSION TO JURISDICTION; VENUE. The parties hereto
unconditionally and irrevocably agree and consent to the exclusive jurisdiction
of, and service of process, and venue in, any state or federal court located in
the State of Delaware and waive any objection with respect thereto, for the
purpose of any action, suit or proceeding arising out of or relating to this
Agreement or the transactions contemplated hereby and further agree not to
commence any such action, suit or proceeding except in any such court. Each
party irrevocably waives any objections or immunities to jurisdiction to which
it may otherwise be entitled or become entitled (including sovereign immunity)
in any legal suit, action or proceeding against it arising out of or relating to
this Agreement or the transactions contemplated hereby which is instituted in
any such court. Autoliv hereby appoints CT Corporation as its authorized agent
(the "Autoliv Authorized Agent") upon whom process may be served in any such
action arising out of or relating to this Agreement or the transactions
contemplated hereby which may be instituted in any federal or state court
located in the State of Delaware by any other party hereto. Such appointment
shall be irrevocable. Autoliv agrees to take any and all action, including the
filing of any and all documents and instruments, that may be necessary to
continue such appointment in full force and effect as aforesaid. Service of
process upon the Autoliv Authorized Agent and written notice of such service to
Autoliv shall be deemed, in every respect, effective service of process upon
Autoliv.
Section 11.10 HEADINGS. The descriptive headings contained in this Agreement
are included for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
Section 11.11 COUNTERPARTS. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
and delivered shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement.
Section 11.12 ENTIRE AGREEMENT. This Agreement (including Annex A, the
Exhibits, the Autoliv Disclosure Schedule, the Morton Disclosure Schedule) and
the agreements and other documents referred to herein, including, without
limitation, the Ancillary Agreements and the Confidentiality Agreements
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings among the
parties with respect thereto.
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IN WITNESS WHEREOF, Autoliv, Morton, Newco and Newco Sub have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
AUTOLIV AB
By: /s/ PER HAKAN OSVALD
-----------------------------------------
Name: Per Hakan Osvald
Title: Chairman
AUTOLIV, INC.
By: /s/ PAUL CHARLETY
-----------------------------------------
Name: Paul Charlety
Title: Treasurer
ASP MERGER SUB, INC.
By: /s/ PAUL CHARLETY
-----------------------------------------
Name: Paul Charlety
Title: Treasurer
MORTON INTERNATIONAL, INC.
By: /s/ S. JAY STEWART
-----------------------------------------
Name: S. Jay Stewart
Title: Chairman and Chief Executive
Officer
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ANNEX A
EMPLOYEE BENEFITS
Autoliv, Morton and Newco agree to the following with respect to the
compensation and benefits programs of Autoliv and the Surviving Corporation and
their respective subsidiaries:
1. Continuation of Benefits. Except as contemplated by the Agreement or
this Annex A, for a period of one year following the Effective Time, Autoliv
and the Surviving Corporation shall each maintain employee benefit plans and
arrangements (directly or in conjunction with Newco) which in the aggregate
will provide a level of benefits to active and retired employees of Autoliv
and its subsidiaries at least comparable, when taken as a whole, to those
provided under Autoliv Plans and arrangements as in effect immediately prior
to the Effective Time and a level of benefits to Company Individuals (as
defined in the Employee Benefits Allocation Agreement) at least comparable,
when taken as a whole, to those provided under Morton Plans and arrangements
as in effect immediately prior to the Effective Time; provided, however,
that changes may be made to such employee benefit plans and arrangements to
the extent necessary to comply with applicable Law. From and after the
Effective Time, Newco shall honor, and shall cause the Surviving Corporation
or Autoliv, as the case may be, to honor in accordance with their terms, the
Morton Plans and the Autoliv Plans, including without limitation, all
existing employment and severance agreements and plans providing severance
benefits which apply to current or former employees or directors of Autoliv
or its subsidiaries or Morton or its subsidiaries.
2. Service Recognition. To the extent that service is relevant for
purposes of eligibility, participation, vesting or benefit accrual under any
employee benefit plan, program or arrangement established or maintained by
Newco, Autoliv, Morton or any subsidiary of Autoliv or Morton, employees of
Autoliv and its subsidiaries and Company Individuals shall be credited for
service accrued or deemed accrued prior to the Effective Time with Autoliv,
a subsidiary of Autoliv, Morton or a subsidiary of Morton, as the case may
be; provided, however, that such crediting of service does not result in the
duplication of benefits or an unintended windfall with respect to the
accrual of benefits.
AA-1
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APPENDIX B
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- --------------------------------------------------------------------------------
DISTRIBUTION AGREEMENT
DATED AS OF [ ], 1997
BY AND BETWEEN
MORTON INTERNATIONAL, INC.,
AN INDIANA CORPORATION
(TO BE RENAMED "[ ]")
AND
NEW MORTON INTERNATIONAL, INC.,
AN INDIANA CORPORATION
(TO BE RENAMED "MORTON INTERNATIONAL, INC.")
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
ARTICLE I
DEFINITIONS
Section 1.01 General................................................................................... B-2
Section 1.02 Exhibits, Etc. ........................................................................... B-7
ARTICLE II
CERTAIN TRANSACTIONS PRIOR TO THE DISTRIBUTION DATE
Section 2.01 Financing................................................................................. B-7
Section 2.02 Transfer of New Morton Assets............................................................. B-9
Section 2.03 Transfers Not Effected Prior to the Distribution; Transfers Deemed
Effective as of the Distribution Date................................................... B-10
Section 2.04 No Representations or Warranties; Consents................................................ B-10
Section 2.05 Assumption and Satisfaction of New Morton Liabilities; Retention of
Safety Liabilities...................................................................... B-10
Section 2.06 Financial Representations and Warranties.................................................. B-10
Section 2.07 Conveyancing and Assumption Instruments................................................... B-11
Section 2.08 Certificate of Incorporation; By-laws; Share Purchase Rights Plan......................... B-11
Section 2.09 New Morton Capitalization................................................................. B-11
Section 2.10 Certain Pre-Distribution Transactions..................................................... B-11
ARTICLE III
THE DISTRIBUTION
Section 3.01 Cooperation Prior to the Distribution..................................................... B-12
Section 3.02 Company Board Action; Distribution Procedures............................................. B-12
Section 3.03 Conditions Precedent to the Distribution.................................................. B-12
Section 3.04 The Distribution.......................................................................... B-13
ARTICLE IV
SERVICES
Section 4.01 Provision of Management Services.......................................................... B-13
Section 4.02 Fee for Services; Expenses................................................................ B-14
Section 4.03 Independent Contractor Status............................................................. B-14
Section 4.04 Disclaimer; Limited Liability............................................................. B-14
ARTICLE V
INDEMNIFICATION
Section 5.01 Indemnification by Safety................................................................. B-14
Section 5.02 Indemnification by New Morton............................................................. B-15
Section 5.03 Limitations on Indemnification Obligations................................................ B-15
Section 5.04 Procedure for Indemnification............................................................. B-16
Section 5.05 Remedies Cumulative....................................................................... B-18
Section 5.06 Survival of Indemnities................................................................... B-18
Section 5.07 Right of Inquiry.......................................................................... B-18
</TABLE>
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<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
ARTICLE VI
CERTAIN ADDITIONAL MATTERS AND COVENANTS
Section 6.01 The New Morton Board...................................................................... B-19
Section 6.02 Resignations; Safety Board................................................................ B-19
Section 6.03 Certain Post-Distribution Transactions.................................................... B-19
Section 6.04 Use of Names.............................................................................. B-20
Section 6.05 Restrictions on Hiring of Other Party's Employees......................................... B-20
Section 6.06 Further Assurances; Cooperation........................................................... B-20
Section 6.07 Guarantees................................................................................ B-21
Section 6.08 Shared Facilities......................................................................... B-21
Section 6.09 Thiokol-Morton Spinoff.................................................................... B-21
Section 6.10 Non-Competition........................................................................... B-21
ARTICLE VII
ACCESS TO INFORMATION AND SERVICES
Section 7.01 Provision of Corporate Records............................................................ B-22
Section 7.02 Access to Information..................................................................... B-23
Section 7.03 Production of Witnesses................................................................... B-24
Section 7.04 Reimbursement............................................................................. B-24
Section 7.05 Retention of Records...................................................................... B-24
Section 7.06 Confidentiality........................................................................... B-24
ARTICLE VIII
INSURANCE
Section 8.01 Policies and Rights....................................................................... B-25
Section 8.02 Post-Distribution Date Claims............................................................. B-25
Section 8.03 Administration and Reserves............................................................... B-25
Section 8.04 Agreement for Waiver of Conflict and Shared Defense....................................... B-26
Section 8.05 Cooperation with Respect to Insurance..................................................... B-26
ARTICLE IX
MISCELLANEOUS
Section 9.01 Complete Agreement; Construction.......................................................... B-26
Section 9.02 Survival of Agreements.................................................................... B-26
Section 9.03 Expenses.................................................................................. B-27
Section 9.04 Governing Law............................................................................. B-27
Section 9.05 Notices................................................................................... B-27
Section 9.06 Amendments................................................................................ B-27
Section 9.07 Successors and Assigns.................................................................... B-27
Section 9.08 Counterparts.............................................................................. B-28
Section 9.09 Subsidiaries.............................................................................. B-28
Section 9.10 Third Party Beneficiaries................................................................. B-28
Section 9.11 Titles and Headings....................................................................... B-28
Section 9.12 Exhibits and Schedules.................................................................... B-28
Section 9.13 Legal Enforceability...................................................................... B-28
Section 9.14 Consent to Jurisdiction................................................................... B-28
</TABLE>
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SCHEDULES AND EXHIBITS
<TABLE>
<S> <C>
Schedule 1.01(a) Safety Business, Retained Subsidiary and Other Safety Interests and
Investments
Schedule 1.01(b) Safety Liabilities
Schedule Company Policies
1.01(c)(1)
Schedule New Morton Policies
1.01(c)(2)
Schedule Safety Policies
1.01(c)(3)
Schedule New Morton Real Property
1.01(d)(1)
Schedule Safety Real Property
1.01(d)(2)
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 New Morton Intellectual Property
1.01(g)(1)
Schedule Safety Intellectual Property
1.01(g)(2)
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 (to be provided prior to signing)
Exhibit C New Morton Articles of Incorporation (to be provided prior to signing)
Exhibit D Form of Tax Sharing Agreement
Exhibit E Form of New Morton Share Purchase Rights Plan (to be provided prior to
signing)
Exhibit F Records Retention Policy
</TABLE>
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<PAGE>
DISTRIBUTION AGREEMENT
DISTRIBUTION AGREEMENT (this "Agreement"), dated as of [ ],
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:
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ARTICLE I
DEFINITIONS
SECTION 1.01 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;
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(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 March 31,
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.
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-
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<PAGE>
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
Liabilities 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.
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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 and (iii) 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 to be
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 [ ], by
and between New Morton and The First National Bank of Chicago, 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: [Name to come], 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
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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.
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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 1.02 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 2.01 FINANCING.
(A) SAFETY CREDIT AGREEMENT; NEW MORTON CAPITAL CONTRIBUTION; SAFETY
SUPPLEMENTAL DISTRIBUTION. On or immediately 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.
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(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,
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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 2.02 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.
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SECTION 2.03 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 2.04 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 2.05 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 2.06 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.
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(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 2.07 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 2.08 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 2.09 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.
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ARTICLE III
THE DISTRIBUTION
SECTION 3.01 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 3.02 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 3.03 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;
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(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 shall have been declared effective under the
Securities Act by the Commission and no stop order suspending the
effectiveness of the Form S-4 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 3.04 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 4.01 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.
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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 4.02 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 4.03 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 4.04 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 5.01 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
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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 5.02 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 5.03 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
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(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 5.04 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
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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
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claimant(s) in such potential litigation of its indemnification obligation in
favor of Safety under this Agreement.
SECTION 5.05 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 5.06 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 5.07 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.
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ARTICLE VI
CERTAIN ADDITIONAL MATTERS AND COVENANTS
SECTION 6.01 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 6.02 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 6.03 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.
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SECTION 6.04 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 6.05 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 6.06 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.
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SECTION 6.07 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 6.08 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 6.09 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");
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(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 7.01 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.
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SECTION 7.02 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
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<PAGE>
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 7.03 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 7.04 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 7.05 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 7.06 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
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<PAGE>
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 8.01 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 8.02 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 8.03 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
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<PAGE>
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 8.04 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 8.05 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 9.01 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 9.02 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.
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<PAGE>
SECTION 9.03 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 9.04 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 9.05 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:
[Name to come]
[3350 Airport Road]
[Ogden, Utah 84409]
Attention: Corporate Secretary
with a copy to:
Autoliv, Inc.
[Address To Come]
Attention: Corporate Secretary
and
Skadden, Arps, Slate, Meagher & Flom
25 Bucklersbury
London EC4N 8DA, England
Attention: Scott V. Simpson, Sr., Esq.
To New Morton or any New Morton Subsidiary which is a party hereto:
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 9.06 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 9.07 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.
B-27
<PAGE>
SECTION 9.08 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 9.09 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.
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<PAGE>
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:
-----------------------------------------
Name:
Title:
NEW MORTON INTERNATIONAL, INC.
By:
-----------------------------------------
Name:
Title:
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<PAGE>
APPENDIX C
- --------------------------------------------------------------------------------
[LETTERHEAD OF GOLDMAN, SACHS & CO.]
- --------------------------------------------------------------------------------
PERSONAL AND CONFIDENTIAL
November 25, 1996
Board of Directors
Morton International, Inc.
100 North Riverside Plaza
Chicago, IL 60606
Gentlemen:
We understand that Morton International, Inc. ("Morton" or the "Company"),
Autoliv AB ("Autoliv"), Autoliv, Inc., a newly formed Delaware corporation
("Newco") and ASP Merger Sub Inc., a newly formed Delaware corporation and
wholly-owned subsidiary of Newco ("Newco Sub"), have entered into a Combination
Agreement dated as of November 25, 1996 (the "Combination Agreement"). Pursuant
to and subject to the terms and conditions of the Combination Agreement,
following the Spinoff (as defined below) Morton's Automotive Safety Products
unit will be combined with Autoliv through: (i) a merger (the "Merger") of Newco
Sub with and into Morton pursuant to which each outstanding share of common
stock, par value $1.00 per share, of Morton ("Morton Shares") (other than Morton
Shares held in the treasury of Morton and Morton Shares owned by Autoliv or any
direct or indirect wholly-owned subsidiary of Autoliv or Morton (collectively,
"Cancelled Shares")) will be converted into the right to receive a number of
shares of common stock, par value $.01 per share, of Newco ("Newco Shares")
equal to the quotient, rounded as set forth in the Combination Agreement, of (a)
47,803,738 divided by (b) the number of Morton Shares issued and outstanding
immediately prior to the effective time of the Merger (other than any Cancelled
Shares); (ii) an offer (the "Exchange Offer") by Newco to exchange for each
outstanding share of common stock, par value SEK 10 per share, of Autoliv
("Autoliv Shares") and each outstanding American Depositary Share representing
one Autoliv Share, one Newco Share or one Swedish Depositary Receipt
representing one Newco Share; and (iii) the acquisition by Newco of any Autoliv
Shares not tendered in the Exchange Offer pursuant to compulsory acquisition
procedures under Swedish law or other methods to which the parties may agree
(the "Compulsory Acquisition").
We further understand that prior to the Merger, Morton and New Morton
International, Inc., to be formed a wholly-owned subsidiary of Morton ("New
Morton"), propose to enter into a Distribution Agreement, an Employee Benefits
Allocation Agreement and a Tax Sharing Agreement in substantially the forms
attached to the Combination Agreement (collectively, including the Combination
Agreement, the "Agreements") which provide, among other things, for: (i) Morton
to make a capital contribution or repayment of intercompany indebtedness in cash
of $750,000,000 to New Morton; (ii) Morton to contribute the New Morton Assets,
the Safety Supplemental Distribution (as such terms are defined in the
Distribution Agreement) and the capital stock of certain subsidiaries to New
Morton; (iii) New Morton to assume the New Morton Liabilities (as defined in the
Distribution Agreement); and (iv) after the
<PAGE>
consummation of the transactions described in clauses (i) through (iii) above,
Morton to distribute on a pro rata and tax-free basis to the holders of the
Morton Shares all of the issued and outstanding shares of common stock, par
value $1.00 per share, of New Morton (together with associated preferred share
purchase rights) (the "Spinoff"). The transactions described in this paragraph
together with the Merger, the Exchange Offer and the Compulsory Acquisition are
collectively referred to as the "Transactions". The terms and conditions of the
Transactions are more fully set forth in the Agreements.
You have asked for our opinion as to whether the consideration to be received by
the holders of Morton Shares in the Spinoff and Merger, taken as a whole, is
fair to such holders.
Goldman, Sachs & Co. ("Goldman Sachs"), as part of its investment banking
business, is continually engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate and
other purposes. We are familiar with the Company having provided certain
investment banking services to the Company from time to time including having
acted as advisor in the spinoff of Morton from Morton Thiokol, Inc. in 1989 and
having acted as lead managing underwriter in the private placement of $120
million of senior notes in 1989 and the public offering of $200 million of
credit sensitive debentures in 1990; and having acted as its financial advisor
in connection with, and having participated in certain of the negotiations
leading to, the Transactions. We may provide investment banking services to New
Morton or Newco (which is to be called Autoliv, Inc.) or certain of their
respective subsidiaries in the future.
In the ordinary course of the trading activities of Goldman Sachs, Goldman Sachs
actively trades the debt and equity securities of Morton and Autoliv for its own
account and for the accounts of customers of Goldman Sachs and may, therefore,
at any time hold a long or short position in such securities.
In connection with this opinion, we have reviewed, among other things, the
Combination Agreement; the form of Distribution Agreement attached as Exhibit A
to the Combination Agreement; Annual Reports to Stockholders and Annual Reports
on Form 10-K of the Company for the five fiscal years ended June 30, 1996; the
Initial Public Offering Prospectus of Autoliv dated May 26, 1994 and Annual
Reports to Stockholders of Autoliv for the two years ended December 31, 1995;
certain interim reports to Stockholders of Autoliv and Quarterly Reports on Form
10-Q of the Company; certain other communications from the Company and Autoliv
to their respective stockholders; and certain internal financial analyses and
forecasts for the Company and Autoliv prepared by their respective managements.
We also have held discussions with members of the senior managements of the
Company and Autoliv regarding the past and current business operations,
financial condition and future prospects of their respective companies and the
future prospects of Newco and New Morton. In addition, we have reviewed the
reported price and trading activity for the Morton Shares and the Autoliv
Shares, compared certain financial and stock market information for the Company
and Autoliv with similar information for certain other companies the securities
of which are publicly traded, reviewed the financial terms of certain recent
business combinations in the automotive original equipment manufacturer parts
supply industry specifically and in other industries generally and performed
such other studies and analyses as we considered appropriate.
We have relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by us for
purposes of this opinion. In that regard, we have assumed, with your consent,
that the financial forecasts provided by the respective managements of the
Company and Autoliv have been reasonably prepared on a basis reflecting the best
currently available judgments and estimates of the managements of the Company
and Autoliv as to the future financial and other performance of the Company and
Autoliv, as applicable. Further, in that regard, we have assumed, with your
consent, that the forecasts as to the future financial performance of Newco and
the estimates of synergies for Newco have been reasonably prepared on a basis
reflecting the best currently available judgments and estimates of the
managements of the Company and Autoliv. You have instructed us to assume, and we
have assumed that obtaining any necessary regulatory or third-party approvals
for the Transactions will not
C-2
<PAGE>
have an adverse effect on the Company or Autoliv, as applicable. In addition, we
have not made an independent evaluation or appraisal of the assets and
liabilities of the Company or Autoliv or any of their respective subsidiaries or
divisions, and we were not furnished with any such evaluation or appraisal. With
your consent, we have assumed that the Transactions will be treated as tax-free
to both the Company and the holders of Morton Shares (other than with respect to
any cash received in lieu of fractional Newco Shares). We are not expressing any
opinion herein as to the prices at which the Newco Shares or shares of New
Morton may trade if and when they are issued, and we express no recommendation
as to how the holders of Morton Shares should vote at the shareholders' meeting
held in connection with the Transactions. Our advisory services and the opinion
expressed herein are provided for the information and assistance of the Board of
Directors of the Company in connection with its consideration of the
Transactions.
Based upon and subject to the foregoing and based upon such other matters as we
considered relevant, it is our opinion that as of the date hereof the
consideration to be received by the holders of Morton Shares in the Spinoff and
Merger, taken as a whole, is fair to such holders.
Very truly yours,
[/S/ GOLDMAN, SACHS & CO.]
- ------------------------------------
(Goldman, Sachs & Co.)
C-3
<PAGE>
APPENDIX D
[LOGO]
[LOGO]
November 25, 1996
Board of Directors
Autoliv AB (publ)
Klarabergsviadukten 70
107 24 Stockholm
Sweden
Ladies and Gentlemen:
You have asked our opinion with respect to the fairness, from a financial
point of view, to the holders of the common stock, par value SEK 10 per share
(the "SHARES"), of Autoliv AB, a Swedish corporation (the "COMPANY"), of the
Exchange Ratio (defined below) pursuant to the Combination Agreement, to be
dated as of November 25, 1996 (the "AGREEMENT"), by and among the Company,
Morton International, Inc., an Indiana corporation ("MORTON"), Autoliv, Inc., a
newly formed Delaware corporation ("NEW AUTOLIV"), and ASP Merger Sub, a
Delaware corporation and a wholly owned subsidiary of New Autoliv ("NEW AUTOLIV
SUB"). The Agreement provides, among other things, for a combination of the
Company and Morton as more fully set forth below (the "COMBINATION").
Immediately prior to the Combination, (i) Morton will contribute all of its
operations not directly related to Morton's Automotive Safety Products business
("ASP"), together with $750 million of cash, less any amount paid to close
indebtedness with affiliates, funded by new indebtedness which will remain the
obligation of Morton, to New Morton International, Inc. ("NEW MORTON
INTERNATIONAL"), an Indiana corporation to be formed as a wholly owned
subsidiary of Morton (which will be renamed Morton International, Inc.) and (ii)
shares of New Morton International will be distributed to Morton's shareholders
on a pro rata basis based on the number of Morton Shares (defined below) then
held by each Morton shareholder (the "DISTRIBUTION"), as more fully set forth in
the draft Distribution Agreement in the form attached to the Agreement (the
"DISTRIBUTION AGREEMENT"). Promptly after the Distribution, the Agreement
provides that the Combination will be effected by (i) a merger of New Autoliv
Sub with and into Morton (the "MERGER") in which each share of the common stock,
par value $1.00 per share, of Morton ("MORTON SHARES") will be exchanged for a
number of shares of the common stock, par value $0.01 per share, of New Autoliv
(the "NEW AUTOLIV COMMON STOCK") based on the "Exchange Ratio" set forth in the
Agreement (the "EXCHANGE RATIO") and (ii) an exchange offer by New Autoliv
pursuant to which each issued and outstanding Share will be exchanged for one
share of New Autoliv Common Stock or one Swedish Depositary Receipt representing
one share of New Autoliv Common Stock (the "EXCHANGE OFFER"). As soon as
practicable after the consummation of the Exchange Offer (assuming that New
Autoliv has acquired Shares representing more than 90 percent of the total
outstanding Shares and voting rights relating thereto), New Autoliv will
commence a compulsory acquisition proceeding under Swedish law to acquire all of
the Shares not acquired by New Autoliv pursuant to the Exchange Offer. After
this proceeding, the Company and Morton will become wholly owned subsidiaries of
New Autoliv. The terms and conditions of the Combination are set forth in more
<PAGE>
detail in the Agreement (capitalized terms used herein and not defined herein
shall have the meanings set forth in the Agreement).
In arriving at our opinion, we have reviewed and analyzed: (1) drafts of the
Agreement and the Distribution Agreement, together with certain other related
documents, (2) certain publicly available information concerning the business,
financial condition, assets and liabilities, and operations of the Company and
Morton (including ASP) which we believe to be relevant to our inquiry, (3)
certain publicly available information relating to financial markets, industry
and economic conditions, (4) financial and operating information with respect to
the business, operations and prospects of the Company and Morton (including ASP)
furnished to us by the Company and Morton and (5) publicly available historical
and current financial information and stock price data with respect to certain
public companies that we considered relevant to our inquiry. In addition, we
have had discussions with the management of the Company and Morton concerning
their respective business, operations, assets and liabilities, financial
conditions and prospects and undertook such other studies, analyses and
investigations as we deemed appropriate in arriving at our opinion. We were not
requested, nor did we, solicit third party indications of interest in acquiring
the Company or any of its assets.
In the course of our investigation, we have assumed and relied upon the
accuracy and completeness of the financial and other information supplied to us,
and have not assumed any responsibility for independent verification of such
information. We have also assumed that the terms of the Agreement, as executed,
did not vary in any material respect from the terms of the draft thereof
reviewed by us and that the Combination will be consummated upon such terms.
Moreover, we have relied upon the assurances of management of the Company and
Morton that they are not aware of any facts that would make such information
inaccurate, incomplete or misleading. With respect to the financial projections
of each of the Company and ASP, the pro forma financial projections of New
Autoliv and the projected transaction synergies as a result of the Combination,
we have relied upon the assurances of the management of the Company and Morton
that such projections have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the management of the Company and
Morton as to their future financial performance. We express no view as to such
financial projections or projected transaction synergies or the assumptions on
which they are based. In arriving at our opinion, we have not conducted a
physical inspection of the properties and facilities of the Company or Morton
(including ASP) and have not made nor obtained any independent evaluations or
appraisals of the assets or liabilities of the Company or Morton (including
ASP). Our opinion is necessarily based upon business, market, economic,
regulatory, tax and other conditions as they exist on and can be evaluated as
of, the date hereof.
We have acted as financial advisor to the Company in connection with the
Combination and will receive a fee for our services, which is contingent in part
upon the consummation of the Combination. In addition, the Company has agreed to
indemnify us for certain liabilities arising out of the performance of such
services (including, the rendering of this opinion). In the past, Enskilda
Securities and its affiliates have received customary fees for performing
investment banking, commercial lending and other services to the Company.
Enskilda Law, a division of an affiliate of Enskilda Securities, has performed
various legal services for the Company, including services in connection with
the Combination. Enskilda Securities, in the ordinary course of its business,
actively trades in the equity securities of the Company for its own account and
for the accounts of its customers and accordingly may at any time hold a long or
short position in such securities.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Exchange Ratio is fair to the holders of the Shares from a
financial point of view.
D-2
<PAGE>
This opinion is solely for the use and benefit of the Board of Directors of
the Company and shall not be disclosed publicly or made available to, or relied
upon by, any third party without our prior written approval. Our opinion does
not constitute a recommendation to any stockholder of the Company as to whether
such stockholder should take any action with respect to the Combination (or any
part thereof).
Very truly yours,
ENSKILDA SECURITIES
By: /s/ Stefan Erneholm
By: /s/ Stein Petter Ski
THE BLACKSTONE GROUP L.P.
By: /s/ Anthony Grillo
Title: Senior Managing Director
D-3
<PAGE>
APPENDIX E
AUTOLIV MANUFACTURING FACILITIES
<TABLE>
<CAPTION>
COUNTRY PRODUCTION FACILITY CURRENT PRIMARY ACTIVITIES OWNERSHIP*
- --------------- ---------------------------------------- ---------------------------------------- ---------------
<S> <C> <C> <C>
Argentina Autoliv Slowik, Buenos Aires Seat belts JV
Australia Autoliv Australia, Melbourne Seat belts 100%
China CHA, Changchun Seat belts JV
NHA, Nanjing Seat belts JV
France Autoliv France, Gournay-en-Bray Seat belts and airbags 100%
Autoliv Automation, Gournay Production machinery equipment 100%
Autoliv Composants, Caudebec Metal components for seat belts 100%
EAK, Mulhouse Seat belts and airbags JV
Isodelta, Poitiers Steering wheels and covers 77%
Livbag, Brest Pyrotechnical gas generators 51%
NCS, Survillier Initiators for airbag gas generators 51%
Sagem-Autoliv, Rouen Airbags and electronics JV
Germany Autoliv, Dachau Airbags and pretensioners 100%
Autoliv, Elmshorn Seat belts 100%
Autoliv, Dobeln Seat belts 100%
Stakupress, Norderstedt Metal and plastic components 100%
Great Britain Autoliv, Havant Seat belts and airbags 100%
Precision Components, Chichester Metal and plastic components 100%
Tensator, Milton Keynes Springs for belt retractors and height 100%
adjusters
Airbags International, Congleton Textile airbags 100%
Hungary Autoliv, Sopron Seat belts 100%
India RHW-Autoliv, Bangalore Seat belts JV
Indonesia Autoliv Indonesia, Jakarta Seat belts JV
Italy Cosma, Torino Injection-moulded components 100%
Japan Autoliv Japan, Kirihama Airbags 100%
Malaysia Autobelt, Kuala Lumpur Seat belts JV
Airbag Systems Malaysia, Kuala Lumpur Airbags JV
Mexico Autoliv Mexico, Toluca Seat belts 100%
Netherlands Autoliv, Landgraaf Seat belts and integrated child seats 100%
New Zealand Autoliv NZ, Auckland Seat belts 100%
Philippines Autoliv QB, Manila Seat belts JV
South Africa Autoflug, Johannesburg Seat belts JV
</TABLE>
E-1
<PAGE>
<TABLE>
<CAPTION>
COUNTRY PRODUCTION FACILITY CURRENT PRIMARY ACTIVITIES OWNERSHIP*
- --------------- ---------------------------------------- ---------------------------------------- ---------------
<S> <C> <C> <C>
Spain Autoliv-KLE, Barcelona Seat belts and airbags 100%
Autoliv-BKI, Valencia Seat belts and airbags 100%
Sweden Autoliv Sverige, V argarda Airbags, seat belts and integrated 100%
child seats
Autoflator, V argarda Cold gas generators 51%
Autoliv Hammarverken, V axjo Components for car seats and knee 100%
protection
Autoliv Mekan, Hassleholm Components for car seats 100%
Autoliv Nokia, Motala Airbag electronics JV
Svensk Airbag, Kungalv Textile airbags 100%
Taiwan Mei-An Autoliv, Taipei Seat belts JV
Thailand Autoliv Thailand, Bangkok Seat belts JV
Turkey Autoliv Cankor, Istanbul Seat belts JV
USA Autoliv North America, Indianapolis Seat belts 100%
Autoliv North America, Detroit Airbags (under construction) 100%
</TABLE>
- ------------------------
* See "Autoliv and its Consolidated Subsidiaries--Notes to the Consolidated
Financial Statements" for data regarding Autoliv's ownership interest in its
joint ventures.
E-2
<PAGE>
APPENDIX F
AUTOLIV ADDRESSES
HEADQUARTERS
Autoliv AB
World Trade Center
Klarabergsviadukten 70
Box 70381
S-107 24 STOCKHOLM
Tel: +46 (8) 402 0600
Fax: +46 (8) 24 44 79/24 44 93
PAUL CHARLETY
ARGENTINA
Autoliv Slowik S.A.*
Santiago de Chile 6475
Capital Federal
(1408) Buenos Aires
Tel: +54 (1) 641 0853
Fax: +54 (1) 642 7454
CLAUDIO SIRACUSANO
AUSTRALIA
Autoliv Australia Pty. Ltd.
1521 Hume Highway
Campbellfield
Victoria 3061
Tel: +61 (3) 9359 9822
Fax: +61 (3) 9359 9811
ROBERT FRANKLIN
BRAZIL
Autoliv do Brazil Ltda
Rua Oscar Freire, 379
No. 12 Andar CJ 122B
01426001 Sao Paulo
Tel: +55 (11) 280 6372
Fax: +55 (11) 280 5931
JAVIER GARCIA CONDE
CHINA
Changchun Hongguang Autoliv
Ltd*
67-19 the Fourth Street
North Railroad
Postcode 130052
Changchun, Jilin Province
Tel: +86 (431) 292 8968
Fax: +86 (431) 292 8967
DES MCMASTER
Nanjing Hongguang Autoliv Ltd*
Yu Hua Men Wai
P.O. Box 1204
Nanjing
Tel: +86 (25) 241 0727
Fax: +86 (25) 241 2149
DES MCMASTER
(Autoliv Shanghai Representative
Office)
German Center
1233 Si Ping Lu, Suite 404
Shanghai 200092
Tel: +86 (21) 6501 2976
Fax: +86 (21) 6501 2977
PHILLIP F. PANG
FRANCE
Autoliv France SNC
(Headquarters)
2, rue Villaret-de-Joyeuse
F-75017 Paris
Tel: +33 (1) 53 81 21 00
Fax: +33 (1) 53 81 21 19
BENOIT MARSAUD
(Factory)
Z.I. Avenue de l'Europe
B.P. 99
F-76220 Gournay-en-Bray
Tel: +33 (2) 32 89 4000
Fax: +33 (2) 35 90 12 50
BENOIT MARSAUD
Autoliv Composants SNC
6, rue Lesage Maille
F-76320 Caudebec-les-Elbeuf
Tel: +33 (2) 32 96 53 00
Fax: +33 (2) 35 77 58 86
MICHEL MARION
Autoliv Inflators
2, rue Villaret-de-Joyeuse
F-75017 Paris
Tel: +33 (1) 53 81 21 00
Fax: +33 (1) 53 81 21 29
BENOIT MARSAUD
EAK-Composants pour l'automobile*
ZAC des Combottes
F-25700 Valentigney
Tel: +33 (3) 81 36 20 20
Fax: +33 (3) 81 36 20 00
DANIEL NYONS
Isodelta S.A.
Z.I. Chire-en-Montreuil
F-86190 Vouille
Tel: +33 (5) 49 39 36 00
Fax: +33 (5) 49 51 81 85
JEAN GERON
Livbag SNC
Route du Beuzit
F-29590 Pont-de-Buis
Tel: +33 (1) 298 81 30 00
Fax: +33 (1) 298 73 05 04
BENOIT MARSAUD
N.C.S.
Rue de la Cartoucherie
B.P. No. 10
F-95471 Survilliers
Tel: +33 (1) 34 68 57 57
Fax: +33 (1) 34 68 57 62
JEAN-NOEL MOISSET
Sagem-Autoliv SNC*
Bd. Lenine
B.P. No. 506
F-76807 St. Etienne du Rouvray
Tel: +33 (2) 35 64 54 56
Fax: +33 (2) 35 64 53 61
PASCAL MUIS
GERMANY
Autoliv GmbH
(Werk Sud)
Theodor-Heuss-Strasse 2
P.O. Box 1320
D-85203 Dachau
Tel: +49 (8131) 295-0
Fax: +49 (8131) 295-136
BO CAVELL
Autoliv GmbH
(Werk Nord)
Otto-Hahn-Strasse 4
P.O. Box 109
D-25333 Elmshorn
Tel: +49 (4121) 797-0
Fax: +49 (4121) 757-76
ROLF HENKE
Autoliv Sicherheitstechnik GmbH
Eichbergstrasse 10-13
D-04720 Dobeln
Tel: +49 (3431) 6601-0
Fax: +49 (3431) 6601-14
HELMUT STRADEN
* Autoliv's holding between 20-50%
F-1
<PAGE>
Autoliv Stakupress GmbH
In de Tarpen 71-99
D-22848 Norderstedt
Tel: +49 (40) 523 060-0
Fax: +49 (40) 523 060-19
ROLF HENKE
GREAT BRITAIN
Autoliv Ltd.
Penner Road
Havant, Hampshire PO9 1QH
Tel: +44 (1705) 483 333
Fax: +44 (1705) 459 102
TONY KING
Autoliv Ltd.
Precision Components Division
Terminus Road
Chichester, West Sussex PO19 2TX
Tel: +44 (1243) 788 141
Fax: +44 (1243) 813 009
TERRY GOLDING
Autoliv Textiles
Bromley Road
Congleton
Cheshire CW12 1TT
Tel: +44 (1260) 29 43 00
Fax: +44 (1260) 29 88 36
LARS-ERIC FLORBERGER
Airbags International Ltd.
Bromley Road
Congleton
Cheshire CW12 1TT
Tel: +44 (1260) 29 43 00
Fax: +44 (1260) 29 88 36
LARS-ERIC FLORBERGER
Tensator Ltd.
Continental House
Sherbourne Drive
Tilbrook, Milton Keynes MK7 8BW
Tel: +44 (1908) 27 11 53
Fax: +44 (1908) 27 45 72
ERNIE READING
HUNGARY
Autoliv Kft
Zerge u. 11
H-9400 Sopron
Tel: +36 (99) 363 079
Fax: +36 (99) 363 313
WOLFGANG HECHT
INDIA
RHW-Autoliv India Private Ltd*
16, Visveswaraiah Industrial Estate
1st Main Road, off Whitefield Road
Mahadevapura Post
Bangalore--560 048
Tel: +91 (80) 851 0452/2392
Fax: +91 (80) 851 1215
V. RAGHU
INDONESIA
P.T. Autoliv Indonesia*
Jalan Haji Wahab
Affam Km 28
Pondok Ungu
Bikasa Berat
Tel: +62 (21) 885 9730
Fax: +62 (21) 885 4210
SEDIA KEMBAREN
ITALY
Cosma S.p.A.
Via Einaudi 4
I-100 70 Robassomero (To)
Tel: +39 (11) 924 1187
Fax: +39 (11) 924 1018
RICCARDO CAPPATO
JAPAN
Autoliv Japan Ltd.
Dai-Ichi Seimei Bldg. 8F
4-59 Bentendori, Naka-ku
Yokohama 231
Tel: +81 (45) 680 1321
Fax: +81 (45) 663 5745
DAVID GOODSON
(Factory)
12 Kirihara-cho
Fujisawa-shi
Kanagawa 252
Tel: +81 (466) 45 46 90
Fax: +81 (466) 43 78 40
KIKUO YAMAMOTO
MALAYSIA
Autoliv Asia Pacific
Suite 25-03, 25th Floor
Menara Keck Seng
203 Jalan Bukit Bintang
55100 Kuala Lumpur
Tel: +60 (3) 466 7666
Fax: +60 (3) 466 2066
GUNNAR DAHLEN
Autobelt Sdn. Bhd*
Lot 1, Persiaran Kemajuan
Seksyen 16
40200 Shah Alam
Selangor Darul Ehsan
Tel: +60 (3) 541 7486
Fax: +60 (3) 541 7585/71
M. YUSEFF GHANI
Airbag Systems Malaysia Sdn. Bhd*
Lot 1, Persiaran Kemajuan
Seksyen 16
40200 Shah Alam
Selangor Darul Ehsan
Tel: +60 (3) 541 7486
Fax: +60 (3) 541 7585
FARIZA NOREHAN GHAZALI
MEXICO
Autoliv Mexico S.A. de C.V.
Av. de Los Sauces No. 9
Parque Industrial Lerma
C.P. 52000 Lerma
EDO. de Mexico
Tel: +52 (728) 50844
Fax: +52 (728) 50802
GUSTAVO LICHTENBERGER
NETHERLANDS
Autoliv BV
Einsteinstraat 3
P.O. Box 31127
NL-6370 AC Landgraaf
Tel: +31 (45) 532 6699
Fax: +31 (45) 532 6623
BENGT ANDERSSON
NEW ZEALAND
Autoliv N.Z. Ltd.
74-82 Richmond Road, Ponsonby
P.O. Box 1761
Auckland
Tel: +64 (9) 376 4068
Fax: +64 (9) 378 0942
ALAN FLETCHER
PHILIPPINES
Autoliv QB Inc.*
8/F Unit 804
Centerpoint Building
Dna. J. Vargas St. cor. Garnet St.
Ortigas Center, Pasig City 1605
Tel: +63 (92) 467 2962
Fax: +63 (92) 467 2961
MANUEL ABISANA
* Autoliv's holding between 20-50%
F-2
<PAGE>
RUSSIA
A.O. Autoliv*
Leningradskaya str. 27
141980 Dubna, Moscow region
Tel: +7 (09621) 22817/22835
Fax: +7 (09621) 22834
ALEXANDER KORNEYTCHUK
SOUTH AFRICA
Autoflug S.A. (Pty) Ltd*
P.O. Box 3058
Kenmare 1745
Gauteng
Tel: +27 (11) 762 1067
Fax: +27 (11) 762 5635
CHRIS BIDDLE
SPAIN
Autoliv-BKI S.A.
Poligono Industrial
"Fuente del Jarro"
Villa de Bilbao, 3 Parc. 84
E-46988 Paterna (Valencia)
Tel: +34 (6) 134 0127
Fax: +34 (6) 134 0858
ARTURO LOPEZ-ABENTE
Autoliv-KLE S.A.
Carretera Nacional 152, Km 24
Poligono Industrial Batzacs
E-08400 Granollers (Barcelona)
Tel: +34 (3) 849 3211
Fax: +34 (3) 849 8582
ARTURO LOPEZ-ABENTE
SWEDEN
Autoliv Sverige AB
Wallentinsvagen 22
S-447 83 Vargarda
Tel: +46 (322) 262 00
Fax: +46 (322) 234 07
JAN OLSSON
Autoliv Research
Wallentinsvagen 22
S-447 83 Vargarda
Tel: +46 (322) 263 00
Fax: +46 (322) 201 18
YNGVE HALAND
Autoflator AB*
Gjuterigatan 1
Box 23
S-447 21 Vargarda
Tel: +46 (322) 261 00
Fax: +46 (322) 215 10
TORBJORN SKANBERG
Autoliv Electronics
Medevivagen 55
S-591 83 Motala
Tel: +46 (141) 22 80 00
Fax: +46 (141) 57 200
ROLAND ALLARDH
Autoliv-Hammarverken AB
Box 3044
Stinavagen 1
S-350 33 Vaxjo
Tel: +46 (470) 747 300
Fax: +46 (470) 747 399
JAN AHLQVIST (AS OF
APRIL 1, 1997)
Autoliv Mekan AB
Box 34
S-281 21 Hassleholm
Tel: +46 (451) 425 00
Fax: +46 (451) 159 13
BERTIL NORDQVIST
Autoliv Nokia AB*
S-591 83 Motala
Tel: +46 (141) 22 80 00
Fax: +46 (141) 528 57
LEIF LUNDBERG
Autoliv Seat Sub-Systems
Box 3044
Stinavagen 1
S-350 33 Vaxjo
Tel: +46 (470) 747 300
Fax: +46 (470) 747 399
JAN AHLQVIST (AS OF
APRIL 1, 1997)
Autoliv Steel & Plastics
Klorabergsviadukten 70
Box 70381
S-107 24 Stockholm
Tel: +46 (8) 402 0600
Fax: +46 (8) 24 4459
GUSTAF BRAKENHIELM
Svensk Airbag AB
Smedmastaregatan 3
S-442 34 Kungalv
Tel: +46 (303) 204 500
Fax: +46 (303) 642 30
LARS-ERIC FLORBERGER
TAIWAN
Mei-An Autoliv Co., Ltd.*
No. 706, Fu-Kai Road
Taoyuan City, Taiwan, R.O.C.
Tel: +886 (3) 325 2612
Fax: +886 (3) 325 0304
WEN-TSUNG CHIANG
THAILAND
Autoliv Thailand Limited*
700/415 Moo 7
Bangpakong Industrial Park 2
Bangna-Trad Road, Km. 57
T. Donhualoh, A. Muang
Chonburi 20000
Tel: +66 (38) 213 014/5
Fax: +66 (38) 213 016
WEERAWAT TUNGAVICHITWAT
TURKEY
Autoliv Cankor A.S.*
Inonu Mahallesi
Papaz Kopru Mevkii
Tem Havaalani Yan Yolbasi
Sefakoy--34620 Istanbul
Tel: +90 (212) 698 4751/57
Fax: +90 (212) 698 4704
MUSTAFA ALACA
U.S.A.
(Headquarters)
Autoliv North America, Inc.
1320 Pacific Drive
Auburn Hills, MI 48326-1569
Tel: +1 (810) 475 9000
Fax: +1 (810) 475 9832
GUSTAF CELSING
(Factory)
Autoliv North America, Inc.
5851 West 80th Street
Indianapolis, IN 46278-1321
Tel: +1 (317) 875 7579
Fax: +1 (317) 875 8171
JIM ROSS
* Autoliv's holding between 20-50%
F-3
<PAGE>
APPENDIX G
AUTOLIV BOARD OF DIRECTORS, AUDITORS
AND EXECUTIVE OFFICERS
AUTOLIV'S BOARD OF DIRECTORS
GUNNAR BARK
Chairman since March 1997. Born 1939. Graduate Engineer. Chairman of Allgon
AB, Vice Chairman of Spectra-Physics AB, Chairman and Chief Executive Officer of
Spectra-Physics, Inc., Director of Esselte AB. Shareholding: 0.
PER-OLOF ARONSON
Born 1930. Elected May 4, 1994. Graduate Engineer, Chairman of Componenta
AB, Vice Chairman of Granges AB. Shareholding: 4,000.
EBBE BENGTSSON
Born 1933. Elected April 26, 1995. Chairman of Seco Tools AB, Director of
Sandblom & Stohne AB and VBB Gruppen AB. Shareholding: 0.
PAUL CHARLETY
President and Chief Executive Officer. Born 1944. Elected April 23, 1996.
Graduate Engineer, Doctor of Engineering, M.B.A. Shareholding: 0.
PER HAKAN OSVALD
Elected 1994. Chairman from 1994 until March 1997. Born 1928. Elected May 4,
1994. Degree of Master of Law, Attorney, Partner in Mannheimer Swartling
Advokatbyra. Shareholding: 400.
PER WELIN
Born 1936. Elected April 26, 1995. Techn. Lic., MBA, Executive Vice
President of L-E Lundberg-foretagen AB. Vice Chairman of Ostgota Enskilda Bank.
Director of Allgon AB, L-E Lundberg-foretagen, MoDo AB and Siab. Shareholding:
0.
LEIF VICTORIN
Born 1940. Elected April 26, 1995. Techn. Lic., Executive Vice President of
Forsakrings AB Skandia and President of Livforsakrings AB Skandia. Shareholding:
0.
GORAN HALLKVIST
Employee representative. Born 1940. Appointed October 6, 1993. Shareholding:
0.
MARGARETA JOHANSSON
Employee representative. Born 1956. Appointed March 25, 1991. Shareholding:
0.
G-1
<PAGE>
DEPUTY DIRECTORS
ROGER JOHANSSON
Employee representative. Born 1966. Appointed May 7, 1996. Shareholding: 0.
KJELL SMEDVALL
Employee representative. Born 1953. Appointed October 6, 1993. Shareholding:
100.
AUTOLIV'S AUDITORS
ERNST & YOUNG AB:
Ulf Spang (Partner in charge of auditing) Authorized Public Accountant. Born
1948. Mr. Spang has been Autoliv's auditor since 1996.
AUTOLIV'S EXECUTIVE OFFICERS
GROUP MANAGEMENT
PAUL CHARLETY
President and Chief Executive Officer. Born 1944. Employed 1985.
Shareholding: 0.
STURE ANDERSSON
Senior Vice President Engineering. Born 1939. Employed 1982. Shareholding:
200.
LEIF BERNTSSON
Vice President Quality and Purchasing. Born 1955. Employed 1988.
Shareholding: 200.
CLAES HUMBLA
Senior Vice President Human Resources. Born 1940. Employed 1989.
Shareholding: 0.
YNGVE HALAND
Vice President Research. Born 1945. Employed 1984. Shareholding: 0.
WILHELM KULL
Senior Vice President and CFO. Born 1936. Employed 1975. Shareholding: 0.
JORGEN SVENSSON
Vice President and General Counsel. Born 1962. Employed 1989. Shareholding:
0.
MATS ODMAN
Manager of Investor Relations. Born 1950. Employed 1994. Shareholding: 400.
G-2
<PAGE>
MANAGERS OF MAJOR SUBSIDIARIES
BO CAVELL
Autoliv GmbH, Germany. Born 1935. Employed 1986. Shareholding: 0.
GUSTAF CELSING
Autoliv North America Inc., USA. Born 1944. Employed 1986. Shareholding:
740.
GUNNAR DAHLEN
Autoliv Asia Pacific. Born 1946. Employed 1989. Shareholding: 0.
ROLF HENKE
Autoliv GmbH, Germany. Born 1944. Employed 1990. Shareholding: 0.
ANTHONY N. KING
Autoliv Ltd., Great Britain. Born 1941. Employed 1988. Shareholding: 0.
Options: 10,000.
ARTURO LOPEZ-ABENTE
Autoliv BKI and Autoliv KLE, Spain. Born 1950. Employed 1981. Shareholding:
0.
BENOIT MARSAUD
Autoliv France S.A. Born 1952. Employed 1980. Shareholding: 0.
JAN OLSSON
Autoliv Sverige AB, Sweden. Born 1954. Employed 1987. Shareholding: 500.
MANAGERS OF THE KEY COMPONENT UNITS
JAN AHLQVIST
Autoliv Seat Sub-Systems. Born 1946. Employed 1997. Shareholding: 0.
ROLAND ALLARDH
Autoliv Electronics. Born 1942. Employed 1978. Shareholding: 120.
GUSTAF BRAKENHIELM
Autoliv Steel & Plastics. Born 1944. Employed 1995. Shareholding: 0.
LARS-ERIC FLORBERGER
Autoliv Textiles. Born 1951. Employed 1990. Shareholding: 0.
JEAN GERON
Isodelta S.A. Born 1943. Employed 1967. Shareholding: 0.
BENOIT MARSAUD
Autoliv Inflators. Born 1952. Employed 1980. Shareholding: 0.
G-3
<PAGE>
APPENDIX H
EXTRACTS FROM THE AUTOLIV ARTICLES OF ASSOCIATION
NAME AND REGISTERED OFFICE
Autoliv, whose full name is Autoliv Aktiebolag, is a public (publ) company.
The board of directors of Autoliv shall have its registered office in the
municipality of Stockholm.
OBJECT
The objects of Autoliv are--directly or indirectly through subsidiaries--to
develop, manufacture and sell car safety belts, airbags and other equipment for
personal safety to be used in automobiles, to acquire and administer real and
moveable property, and to carry on other activities that are comparable with the
operations listed above.
SHARES
The share capital of Autoliv shall be not less than SEK 500,000,000 and not
more than SEK 2,000,000,000.
The shares shall have a par value of SEK 10 each.
BOARD OF DIRECTORS AND AUDITORS
The board of directors shall, in addition to those members who pursuant to
Swedish law may be appointed by a body other than the General Meeting, consist
of not less than four and not more than eight directors and not more than three
deputy directors. These directors, and deputy directors, shall be elected at the
Annual General Meeting of Shareholders for the period up to and including the
next Annual General Meeting of Shareholders.
For examination of the financial statements and the accounts as well as the
administration of Autoliv's business by the board of directors and the managing
director, one or two auditors and one or two deputy auditors or one firm of
charged public accountants shall be appointed at the Annual General Meeting of
Shareholders for the period up to and including the next Annual General Meeting
of Shareholders.
GENERAL MEETING
A notice convening a General Meeting of Shareholders shall be sent by
ordinary mail to the shareholders listed in the share register or be published
in at least two daily newspapers in Stockholm no sooner than four weeks, and not
later than two weeks, prior to the Meeting.
The Annual General Meeting of Shareholders shall be held in Stockholm not
later than six months after the expiration of each financial year.
VOTING RIGHTS
At the General Meeting of Autoliv, no participant may vote for his or
another party's shares for a total of more than one fifth of the shares
represented at the Meeting. If anyone participating in the Meeting should
represent more shares than the amount permitted by this ruling, the Voting List
shall also specify the number of votes after the appropriate reduction in such
cases, with the reduction distributed across the share blocks represented.
H-1
<PAGE>
If two or more companies in the same group are represented by different
persons at the meeting, the limitation ruling contained in the first paragraph
will apply, both in the special case of each such representative and for the
representatives in the aggregate.
FINANCIAL YEAR
Autoliv's financial year shall be the calendar year.
REGISTRATION AND GOVERNING LAW
Autoliv's registration number is 556036-1981. The Company's legal form of
business is governed by the Swedish Companies Act (1975:1385). The Company was
registered at the National Patent and Registration Office on June 11, 1937.
H-2
<PAGE>
APPENDIX I
MORTON AUTOMOTIVE SAFETY PRODUCTS PRODUCTION FACILITIES
<TABLE>
<CAPTION>
COUNTRY PRODUCTION FACILITY CURRENT PRIMARY ACTIVITIES OWNERSHIP
- ----------------------- ------------------------------------- ------------------------------------- -------------
<S> <C> <C> <C>
Germany Braunschweig Airbag module assembly 100%
Netherlands Amsterdam Airbag module assembly 100%
USA Maryville, Tennessee Airbag module assembly 50%
Brigham City, Utah Inflators 100%
North Ogden, Utah Component subassembly 100%
Ogden, Utah Modules 100%
Ogden, Utah Cushions 100%
Ogden, Utah Inflators 100%
Ogden, Utah Pilot production 100%
Promontory, Utah Gas generant 100%
</TABLE>
I-1
<PAGE>
APPENDIX J
MORTON AUTOMOTIVE SAFETY PRODUCTS SENIOR EXECUTIVES*
FRED J. MUSONE
President. Born 1944. Employed 1995. Shareholding: 2,796. Options: 56,100.
GEORGE KIRCHOFF
Vice President/Director Europe. Born 1932. Employed 1984. Shareholding:
4,517. Options: 38,724.
ROBERT RAPONE
Vice President Operations. Born 1956. Employed 1995. Shareholding: 291.
Options: 15,385.
JACQUES M. CROISETIERE
Vice President Finance. Born 1954. Employed 1990. Shareholding: 0. Options:
21,710.
H. STEVEN HOISINGTON
Vice President Legal. Born 1950. Employed 1977. Shareholding: 921. Options:
22,870.
ROGER D. TEA
Vice President Human Resources. Born 1951. Employed 1987. Shareholding: 246.
Options: 3,425.
DAVID DAHLE
Vice President Design Engineering. Born 1944. Employed 1969. Shareholding:
1,361. Options: 14,530.
THOMAS G. HARTMAN
Vice President, Design Engineering and Product Development. Born 1953.
Employed 1996. Shareholding: 0. Options: 0.
MICHAEL WARD
Director North American Business Development. Born 1957. Employed 1985.
Shareholding: 498. Options: 8,115.
BRADLEY J. MURRAY
Director Asian Business Development. Born 1959. Employed 1987. Shareholding:
336. Options: 4,525.
- ------------------------
* Shareholdings include shares held in Morton's Employee Savings Incentive
Plan.
J-1
<PAGE>
APPENDIX K
AUTOLIV AB (PARENT COMPANY) FINANCIAL STATEMENTS
The following financial statements of Autoliv AB ("Parent Company"), the
parent company of all companies in which Autoliv AB as of December 31, 1996,
directly or indirectly, owned more than 50 percent of the voting rights
(collectively, the "Autoliv Group"), are being provided to holders of shares of
Autoliv AB common stock and to holders of American Depositary Shares
representing shares of Autoliv AB common stock pursuant to requirements of the
Stockholm Stock Exchange in connection with the Exchange Offer. The financial
statements conform in all material respects to International Accounting
Standards.
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Statements of Income for the years ended December 31, 1996, 1995 and 1994.................................. K-2
Balance Sheets as of December 31, 1996, 1995 and 1994...................................................... K-3
Statements of Changes in Financial Position for the years ended December 31, 1996, 1995 and 1994........... K-4
Notes to the Consolidated Financial Statements............................................................. K-6
</TABLE>
K-1
<PAGE>
AUTOLIV AB
(PARENT COMPANY)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C> <C>
(SEK THOUSAND)
Sales............................................................... 168,412 174,204 198,943
Other revenue....................................................... 111,474 26,140 75,507
---------- ---------- ----------
Operating revenue................................................... Note 1 279,886 200,344 274,450
Operating expenses.................................................. Note 1 (147,649) (160,403) (148,802)
Depreciation and amortization....................................... Note 2 (23,017) (25,492) (99,471)
---------- ---------- ----------
Operating income after depreciation and amortization................ 109,220 14,449 26,177
Interest from subsidiaries.......................................... 21,768 14,805 10,802
Dividend income from subsidiaries................................... 606,178 82,008 457
Other dividend income............................................... 7,811 7,287 3,647
Other interest income............................................... 11,062 49,805 30,658
Interest to subsidiaries............................................ (25,397) (14,825) (9,255)
Depreciation of shares and receivables in subsidiaries.............. (278,880)
Other interest expense.............................................. (5,036) (374) (3,907)
---------- ---------- ----------
Income after financial items........................................ 446,726 153,155 58,579
Change in tax equalization reserve.................................. 151 151 226
Change in accelerated depreciation and amortization................. Note 2 -- -- 51,619
Year's allocation to timing difference reserve...................... (26,838) (17,570) (43,998)
---------- ---------- ----------
Income before taxes................................................. 420,039 135,736 66,426
Taxes............................................................... (26,017) (15,542) (36,642)
---------- ---------- ----------
Net income for the year............................................. 394,022 120,194 29,784
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
K-2
<PAGE>
AUTOLIV AB
(PARENT COMPANY)
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
----------------------------------------------------------------
1996 1995 1994
-------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C>
(SEK THOUSAND)
ASSETS
Liquid funds (whereof Treasury Notes 0 at December 31,
1996, 181,281 at December 31, 1995 and 181,281 at
December 31, 1994)................................... 84,294 384,755 550,227
Short-term receivables:
Due from subsidiaries................................ 802,488 402,717 342,940
Accounts receivable.................................. 164 2,020 402
Prepaid expenses and accrued revenue................. 11,097 44,730 24,747
Other receivables (tax receivable 14,459 at December
31, 1996, 0 at December 31, 1995 and 0 at December
31, 1994).......................................... 42,563 8,360 6,559
--------- --------- ---------
TOTAL CURRENT ASSETS................................... 940,606 842,582 924,875
Shares:................................................ Note 3
in subsidiaries...................................... 1,724,452 785,414 715,516
in other companies................................... 88,675 386,973 57,891
--------- --------- ---------
TOTAL SHARES........................................... 1,813,127 1,172,387 773,407
Facilities:
Machinery, equipment and patents..................... Note 4 8,472 47,482 52,911
Building............................................. Note 4 5,055 4,761
Land................................................. Note 4 868 523
--------- --------- ---------
Total facilities....................................... 8,472 53,405 58,195
--------- --------- ---------
Total fixed assets..................................... 1,821,599 1,225,792 831,602
--------- --------- ---------
TOTAL ASSETS........................................... 2,762,205 2,068,374 1,756,477
--------- --------- ---------
--------- --------- ---------
Assets pledged......................................... None None None
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable to subsidiaries..................... 22,446 23,510 17,356
Accounts payable, external........................... 3,034 13,608 5,033
Tax liability........................................ -- 13,459 35,970
Accrued expenses and prepaid revenue................. 116,363 147,306 149,987
Other operating liabilities.......................... 15,199 2,407 2,390
Due to subsidiaries.................................. 494,408 287,067 20,000
Other current liabilities............................ 148,631 75 75
--------- --------- ---------
TOTAL CURRENT LIABILITIES.............................. 800,081 487,432 230,811
Long-term liabilities:
Due to subsidiaries.................................. 1,993 4,201 4,201
Other long-term liabilities.......................... 86,241 54 128
Provision for pensions (whereof PRI 4,058 at December
31, 1996, 3,815 at December 31, 1995 and 3,578 at
December 31, 1994)................................. 4,067 3,824 3,587
--------- --------- ---------
Total long-term liabilities............................ 92,301 8,079 7,916
TOTAL LIABILITIES...................................... 892,382 495,511 238,727
Untaxed reserves:
Tax equalization reserve............................. 603 754 905
Timing difference (reserve allocated 26,838 at
December 31, 1996, 17,570 at December 31, 1995 and
43,998 at December 31, 1994)....................... 88,407 61,568 43,998
--------- --------- ---------
TOTAL UNTAXED RESERVES................................. 89,010 62,322 44,903
Stockholders' equity:.................................. Note 5
Restricted stockholders' equity:
Share capital (55,000,000 shares, par value of SEK 10
each)*............................................. 550,000 550,000 550,000
Legal reserve........................................ 464,373 1,014,373 464,373 1,014,373 464,373 1,014,373
--------- --------- ---------
Unrestricted equity:
Retained earnings.................................... 372,418 375,974 428,690
Net income for the year.............................. 394,022 766,440 120,194 496,168 29,784 458,474
--------- --------- --------- --------- --------- ---------
Total stockholders' equity............................. 1,780,813 1,510,541 1,472,847
--------- --------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY............. 2,762,205 2,068,374 1,756,477
--------- --------- ---------
--------- --------- ---------
Guarantees and other contingent liabilities............ 334,583 17,473 100,570
Whereof for subsidiaries............................... 332,232 15,547 100,498
</TABLE>
- ------------------------------
* Adjusted to reflect a 2 for 1 stock split which occurred in May 1996.
K-3
<PAGE>
AUTOLIV AB
(PARENT COMPANY)
STATEMENTS OF CHANGES IN FINANCIAL POSITION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------------------------------------------------
1996 1995 1994
---------------------- ------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C>
(SEK THOUSAND)
FUNDS GENERATED BY OPERATIONS
Income before depreciation
and amortization.............. 132,237 39,941 125,648
Financial items, excl.
dividends..................... 2,397 49,411 28,298
Dividends....................... 613,989 89,295 4,104
Taxes........................... (26,017) 722,606 (15,542) 163,105 (36,642) 121,408
---------- ------------ ------------
Changes in short-term
receivables................... (398,485) (83,179) (122,425)
Changes in operating
liabilities................... (90,247) (488,732) (10,446) (93,625) 48,550 (73,875)
---------- ------------ ------------
INVESTMENTS
Machinery, equipment, building
and land...................... (1,927) (20,797) (9,240)
Sales of facilities............. 23,843 95 --
Shares.......................... (872,620) (850,704) (398,980) (419,682) (676,169) (685,409)
---------- ------------ ------------
Dividend........................ (123,750) (82,500)
FINANCING
New share issue................. 1,224,374
Change in long-term
liabilities................... 84,222 163 (36)
Change in short-term loan
liabilities................... 355,897 440,119 267,067 267,230 (36,254) 1,188,083
---------- ---------- ------------ ----------- ------------ ------------
Change in liquid funds.......... (300,461) (165,472) 550,207
---------- ----------- ------------
---------- ----------- ------------
</TABLE>
K-4
<PAGE>
AUTOLIV AB
(PARENT COMPANY)
COMMENTS
The commission company Autoliv Development AB is included in Parent Company.
The commission company conducts business in its own name, but for account of the
Parent Company, which means that its results, and its operating assets and
liabilities are reported in the Parent Company.
PRINCIPLES FOR VALUATION OF ASSETS AND LIABILITIES
Facilities are valued at cost, less depreciation. Regular depreciation is
based on the original cost of all operating facilities not fully depreciated and
depreciation rates based on individually estimated economic lives. Short-term
receivables and liabilities in non-Swedish currencies are valued using year-end
rates of exchange.
K-5
<PAGE>
AUTOLIV AB
(PARENT COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
PERSONNEL
<TABLE>
<CAPTION>
PAYROLL (SEK MILLION)
------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
AVERAGE NUMBER PRESIDENT, BOARD
OF EMPLOYEES OF DIRECTORS OTHER
------------------------------- ------------------------------- ---------
<CAPTION>
COUNTRY 1996 1995 1994 1996 1995 1994 1996
- ------------------------------------------------ --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
SWEDEN
Parent Company:
Stockholm..................................... 27 25 17
Vargarda...................................... 27 53 15
--------- --------- --------- --- --- --- ---------
Total........................................... 54 78 32 4.1 5.1 4.2 21.3
Women included in total line.................... 17 21 8
Subsidiaries in Sweden: 2.9 0.7 0.9
Vargarda...................................... 624 484 394 152.2
Kungalv....................................... 239 26 51.6
Hassleholm.................................... 188 32.7
Vaxjo......................................... 256 45.3
Non-Swedish subsidiaries
Australia..................................... 250 221 228 1.3 1.3 1.3 49.9
France........................................ 2,382 1,115 941 3.7 2.5 1.8 451.4
Italy......................................... 56 54 54 0.2 0.2 0.2 16.1
Mexico........................................ 35 5 1.0 1.6
Netherlands................................... 82 65 57 0.7 13.4
New Zealand................................... 57 59 60 0.6 0.5 0.5 8.0
Spain......................................... 721 539 450 2.0 2.2 2.2 97.2
Great Britain................................. 1,322 1,174 952 2.4 2.6 2.3 221.6
Germany....................................... 1,932 1,888 1,861 4.0 3.3 2.5 575.0
Hungary....................................... 80 43 34 0.7 2.0
U.S.A......................................... 368 342 241 1.7 1.9 1.3 90.1
Russia........................................ 2 0
Japan......................................... 14 1.2 4.5
--------- --------- --------- --- --- --- ---------
Total........................................... 8,662 6,093 5,304 26.5 20.3 17.2 1,833.9
Women included in total line.................... 2,928 3,189 2,702
<CAPTION>
<S> <C> <C>
COUNTRY 1995 1994
- ------------------------------------------------ --------- ---------
<S> <C> <C>
SWEDEN
Parent Company:
Stockholm.....................................
Vargarda......................................
--------- ---------
Total........................................... 22.2 13.2
Women included in total line....................
Subsidiaries in Sweden:
Vargarda...................................... 115.4 85.3
Kungalv....................................... 0.4
Hassleholm....................................
Vaxjo.........................................
Non-Swedish subsidiaries
Australia..................................... 43.8 44.3
France........................................ 237.1 191.2
Italy......................................... 15.0 15.6
Mexico........................................ 0.1
Netherlands................................... 11.0 8.8
New Zealand................................... 7.1 7.8
Spain......................................... 74.9 62.1
Great Britain................................. 201.6 165.2
Germany....................................... 593.0 555.4
Hungary....................................... 1.8 1.5
U.S.A......................................... 85.3 46.1
Russia........................................
Japan.........................................
--------- ---------
Total........................................... 1,408.7 1,196.5
Women included in total line....................
</TABLE>
In 1994, members of senior management were offered a right to acquire
synthetic options on market terms, the value of which fluctuate with the market
price for the Parent Company's shares. The number of options awarded to each
individual was decided by the Parent Company's Board of Directors. Thirty-six
persons accepted the offer. These options cannot be used to acquire shares in
the Parent Company. Instead, settlement is in cash. The proceeds, SEK 20.00 per
option, were recognized as revenue in the Parent Company during 1994. During the
life of the options (five years with a redemption price of SEK 149.50 per
option), the Parent Company will record a liability equivalent to an estimated
market value of the options. The book liability as of December 31, 1996 amounts
to MSEK 4. The cost charged to the year's income amounts to MSEK 0.1.
K-6
<PAGE>
AUTOLIV AB
(PARENT COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1 OPERATING REVENUES AND EXPENSES
The proportion of purchases and sales relating to other companies in the
Autoliv Group is for sales; 91 percent in 1996, 93 percent in 1995 and 93
percent in 1994; there were no purchases relating to other companies in the
Autoliv Group in 1996 and 1995. Income was affected by a settlement received for
patent infringement in the amount of MSEK 18 for 1996, MSEK 26 for 1995 and MSEK
70 for 1994. For 1996, income was also positively affected by MSEK 89 from sales
of shares.
NOTE 2 DEPRECIATION AND AMORTIZATION
<TABLE>
<CAPTION>
ACCELERATED DEPRECIATION
DEPRECIATION AND AMORTIZATION AND AMORTIZATION
---------------------------------- -----------------------------------
<S> <C> <C> <C> <C> <C> <C>
1996 1995 1994 1996 1995 1994
---------- ---------- ---------- ----- ----- ---------
<CAPTION>
(SEK THOUSAND)
<S> <C> <C> <C> <C> <C> <C>
Machinery and equipment............................... (1,237) (3,483) (961)
Patents............................................... (21,780) (21,780) (98,510) 51,619
Building.............................................. (211)
Land improvements..................................... (18)
-- --
---------- ---------- ---------- ---------
Total................................................. (23,017) (25,492) (99,471) 51,619
-- --
-- --
---------- ---------- ---------- ---------
---------- ---------- ---------- ---------
</TABLE>
In 1994, amortization of patents includes extra amortization in the amount
of MSEK 70, referring to an abbreviation from ten to five years computed based
on the Autoliv Group's time of acquisition.
K-7
<PAGE>
AUTOLIV AB
(PARENT COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3 SHARES 1996
<TABLE>
<CAPTION>
PAR VALUE
NUMBER (000') OWNERSHIP BOK V
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
(SEK
THOUSANDS)
SUBSIDIARIES
Autoliv Sverige AB, Sweden................................ 2,400 SEK 2,400 100% 75,750
Svensk Airbag AB, Sweden.................................. 8,500 SEK 850 100% 1,020
Autoliv Hammarverken AB, Sweden........................... 45,000 SEK 4,500 100% 116,773
Autoliv Mekan AB, Sweden.................................. 1,500 SEK 1,500 100% 211,943
Autoliv Seat Sub-Systems AB, Sweden....................... 1,000 SEK 100 100% 120
Autoliv Autosicherheitstechn. GmbH, Germany............... DEM 25,000 100% 245,078
Autoliv North America Inc., USA........................... 100 USD 1 100% 37
Autoliv Ltd, Great Britain................................ 9,025,000 GBP 9,250 100% 114,052
Tensator Ltd, Great Britain............................... 25,500 GBP 25 100% 309
Airbags International Ltd, Great Britain.................. 1,420,000 GBP 1,420 100% 39,281
Autoliv Australia Pty Ltd, Australia...................... 2,000,000 AUD 2,000 100% 11,860
Autoliv N.Z., New Zealand................................. 300,000 NZD 300 100% 1,390
Societe Franco Suedoise d'Investissements SA, France...... 76,000 FRF 152,000 100% 269,759
Isodelta S.A., France..................................... 30,700 FRF 9,210 77% 543,473
Autoliv BKI SA, Spain..................................... 4,620 ESP 35,000 100% 13,776
Autoliv BV, Netherlands................................... 400 NLG 400 100% 7,248
Autosafety Holdings BV, Netherlands....................... 40 NLG 40 100% 35,569
Autoliv Japan Ltd., Japan................................. 11,200 JPY 560 100% 34,567
Autoliv Development AB, Sweden............................ 2,550 SEK 255 100% 496
Autoliv Cipro AB, (inactive).............................. 10,000 SEK 1,000 100% 1,200
Autoliv East Europe AB, (inactive)........................ 600 SEK 60 100% 102
Skultuna Bruk AB, (inactive).............................. 1,000 SEK 50 100% 60
Airbags International AB, (inactive)...................... 2,000 SEK 200 100% 106
Swesafe AB, (inactive).................................... 100 SEK 100 100% 142
Autoliv Development GmbH, Germany......................... DEM 100 100% 341
----------
Total book value.......................................... 1,724,452
OTHER COMPANIES .......................................... 88,675
</TABLE>
During 1996, the shares of certain subsidiaries were written down by MSEK
279, while other shares in subsidiaries were written up by MSEK 48.
K-8
<PAGE>
AUTOLIV AB
(PARENT COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4 FACILITIES
<TABLE>
<CAPTION>
COST ACCUMULATED DEPRECIATION RESIDUAL VALUE
------------------------------- ------------------------------- -------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 1995 1994 1996 1995 1994 1996 1995 1994
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<CAPTION>
(SEK THOUSAND)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Machinery and equipment......... 6,548 25,533 6,043 3,521 5,276 2,137 3,027 20,257 3,906
Patents......................... 229,279 229,279 229,279 223,834 202,054 180,274 5,445 27,225 49,005
Buildings....................... 5,266 4,761 211 5,055 4,761
Land............................ 886 523 18 868 523
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Total........................... 235,827 260,964 240,606 227,355 207,559 182,411 8,472 53,405 58,195
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
</TABLE>
Tax assessment 1995 of property SEK 1,600,000 whereof building SEK
1,200,000.
NOTE 5 SHAREHOLDERS' EQUITY
1996
<TABLE>
<CAPTION>
NET INCOME
SHARE LEGAL RETAINED FOR THE
CAPITAL RESERVE EARNINGS YEAR TOTAL
--------- --------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
(SEK THOUSAND)
Opening balance 1996.................................. 550,000 464,373 375,974 120,194 1,510,541
Transfer of result.................................... 120,194 (120,194)
Dividend.............................................. (123,750) (123,750)
Net income for the year............................... 394,022 394,022
--------- --------- ---------- ----------- ----------
Closing balance 1996.................................. 550,000 464,373 372,418 394,022 1,780,813
</TABLE>
1995
<TABLE>
<CAPTION>
NET INCOME
SHARE LEGAL RETAINED FOR THE
CAPITAL RESERVE EARNINGS YEAR TOTAL
--------- --------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C>
(SEK THOUSAND)
Opening balance 1995................................... 550,000 464,373 428,690 29,784 1,472,847
Transfer of result..................................... 29,784 (29,784)
Dividend............................................... (82,500) (82,500)
Net income for the year................................ 120,194 120,194
--------- --------- --------- ----------- ----------
Closing balance 1995................................... 550,000 464,373 375,974 120,194 1,510,541
</TABLE>
1994
<TABLE>
<CAPTION>
NET INCOME
SHARE LEGAL RETAINED FOR THE
CAPITAL RESERVE EARNINGS YEAR TOTAL
--------- --------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C>
(SEK THOUSAND)
Opening balance 1994................................... 40,000 8,000 16,464 154,226 218,690
Transfer of result..................................... 154,226 (154,226)
Non-cash equity offering............................... 300,000 60,000 360,000
Capital Contribution................................... 258,000 258,000
Equity offering April.................................. 160,000 32,000 192,000
Equity offering June (2,500,000 shares)................ 50,000 364,373 414,373
Net income for the year................................ 29,784 29,784
--------- --------- --------- ----------- ----------
Closing balance 1994................................... 550,000 464,373 428,690 29,784 1,472,847
</TABLE>
K-9
<PAGE>
Facsimile copies of the Offer Letter of Transmittal, properly completed and
duly signed, will be accepted. The Offer Letter of Transmittal, and, in the case
of holders of ADSs only, certificates evidencing tendered ADSs, and any other
required documents should be sent by each stockholder or his broker, dealer,
commercial bank, trust company or other nominee to the Depositary as follows:
THE DEPOSITARY FOR THE U.S. OFFER IS:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<CAPTION>
BY MAIL: BY FACSIMILE TRANSMISSION: BY HAND:
<S> <C> <C>
First Chicago Trust Company (201) 222-4720 First Chicago Trust Company
of New York or of New York
Attention: Tenders & Exchanges (201) 222-4721 Attention: Tenders & Exchanges
P.O. Box 2565, Suite 4660 c/o THE DEPOSITORY
Jersey City, NJ 07303-2565 TRUST COMPANY
55 Water Street, DTC TAD
Vietnam Veterans Memorial Plaza
New York, NY 10041
<CAPTION>
BY OVERNIGHT COURIER: CONFIRM BY TELEPHONE:
<S> <C> <C>
First Chicago Trust Company (201) 222-4707
of New York
Attention: Tenders & Exchanges
Suite 4680-CBE
14 Wall Street, 8th Floor
New York, NY 10005
</TABLE>
---------------------
Any questions or requests for assistance or additional copies of the
Prospectus/U.S. Exchange Offer, the Offer Letter of Transmittal and the Notice
of Guaranteed Delivery may be directed to the Information Agent or the Dealer
Managers at their respective telephone numbers and locations listed below. You
may also contact your broker, dealer, commercial bank or trust company or other
nominee for assistance concerning the U.S. Offer.
THE INFORMATION AGENT FOR THE U.S. OFFER IS:
SHAREHOLDER COMMUNICATIONS CORPORATION
17 State Street
New York, NY 10004
(212) 805-7000
(Call Collect)
or
Call Toll Free 1-800-511-2024
THE DEALER MANAGERS FOR THE U.S. OFFER ARE:
<TABLE>
<S> <C> <C>
ENSKILDA SECURITIES THE BLACKSTONE GROUP L.P. GOLDMAN, SACHS
P.O. Box 16067 345 Park Avenue, 31st Floor & CO.
S-103 22 Stockholm New York, NY 10154 85 Broad Street
Sweden (212) 935-2626 (Call Collect) New York, NY 10004
46 (8) 763-8000 (Call Collect) (212) 902-1000 (Call Collect)
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware (the
"DGCL") sets forth conditions and limitations governing the indemnification of
officers, directors, and other persons.
The Registrant's Restated Certificate of Incorporation provides as follows:
(a) The Registrant shall, to the fullest extent permitted by Section 145 of
the DGCL, 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 Registrant to provide broader indemnification
rights than said law permitted the Registrant 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 Registrant) 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 executors, heirs 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 Registrant or is or was serving
at the request of the Registrant 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 Registrant, and, with respect to any
criminal action or proceedings, had no reasonable cause to believe such conduct
was unlawful; provided, that, with certain exceptions, the Registrant 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 of the Registrant.
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 Registrant, 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 section (including advancement of
expenses) shall be a contract right.
(b) Any indemnification under subsection (a) (unless ordered by a court)
shall be made by the Registrant 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 (a) above. Such determination shall be made (1)
by a majority vote of the directors who are not parties to such action, suit or
proceeding, even though less than a quorum or (2) if there are no such directors
or such directors so direct, by independent legal counsel in a written opinion,
or (3) by the stockholders.
(c) 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 Registrant in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking
(to the extent required by the DGCL) 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 Registrant as authorized in this section.
Such expenses (including attorneys' fees) incurred by other employees and agents
may be so paid upon such terms and conditions, if any, as the Board of Directors
of the Registrant deems appropriate.
II-1
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS (CONTINUED)
(d) The indemnification and advancement of expenses provided by, or granted
pursuant to, the other subsections of this section 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.
(e) The Registrant shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Registrant, or is or was serving at the request of the Registrant 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 Registrant would have the power to indemnify such
person against such liability under the provisions of this section.
(f) The indemnification and advancement of expenses provided by, or granted
pursuant to, this section shall continue as to a person who has ceased to be a
director or officer and shall inure to the benefit of the heirs, executors and
administrators of such a person. The indemnification and advancement of expenses
provided by, or granted pursuant to, this section shall, unless otherwise
provided when authorized or ratified, continue as to a person who has ceased to
be an employee or agent (other than as an officer or director), and shall inure
to the benefit of the heirs, executors and administrators of such a person.
The Registrant's Restated Certificate of Incorporation provides that a
director of the Registrant shall not be personally liable to the Registrant or
its stockholders for monetary damages for breach of fiduciary duty as a director
for any action or omission, except to the extent such exemption from liability
or limitation thereof is not permitted under the DGCL. If the DGCL is hereafter
amended to permit further elimination or limitation of the personal liability of
directors, then the liability of a director of the Registrant shall be
eliminated or limited to the fullest extent permitted by the DGCL as so amended.
Any repeal or modification of this provision by the stockholders of the
Registrant or otherwise shall not apply to or have any adverse effect on any
right or protection of a director of the Registrant existing hereunder for or
with respect to any acts or omissions of such director occurring prior to such
amendment or repeal.
The Registrant may elect to have insurance, as of the effective time of the
Merger, to indemnify its directors and officers, within the limits of the
Registrant's insurance policies, for those liabilities in respect of which such
indemnification insurance is permitted under the laws of the State of Delaware.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS. See Exhibit Index.
(b) FINANCIAL STATEMENT SCHEDULES. None
(c) REPORT, OPINION OR APPRAISAL. Not Applicable.
ITEM 22. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the provisions described under Item 20, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore,
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 22. UNDERTAKINGS (CONTINUED)
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) The undersigned Registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(d) The Registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (c) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offering
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(e) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the Registration Statement through the date
of responding to the request.
(f) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Ogden, state of Utah on
March 24, 1997.
AUTOLIV, INC.
By: /s/ FRED J. MUSONE
-----------------------------------------
Fred J. Musone
President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated, on March 24, 1997.
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
Director, Treasurer,
/s/ PAUL CHARLETY Principal
- ------------------------------ Financial Officer, March 24, 1997
Paul Charlety Principal
Accounting Officer
/s/ FRED J. MUSONE
- ------------------------------ Director, President March 24, 1997
Fred J. Musone
/s/ PER HAKAN OSVALD
- ------------------------------ Director March 24, 1997
Per Hakan Osvald
/s/ S. JAY STEWART
- ------------------------------ Director March 24, 1997
S. Jay Stewart
II-4
<PAGE>
EXHIBIT INDEX
Exhibits required by Item 601 of Regulation S-K:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ----------- ---------------------------------------------------------------------------------------------------------
<C> <S>
2.1 Combination Agreement, dated as of November 25, 1996, by and among Autoliv AB ("Autoliv"), Morton
International, Inc. ("Morton"), the Registrant and ASP Merger Sub Inc., included as Annex A to the Proxy
Statement/Prospectus/Exchange Offer included as part of this Registration Statement. The Registrant
agrees to furnish supplementally a copy of any omitted exhibit or schedule to the Commission upon
request.
2.2 Form of Distribution Agreement by and between Morton and New Morton International, Inc. ("New Morton")
included as Annex B to the Proxy Statement/Prospectus/Exchange Offer included as part of this
Registration Statement. The Registrant agrees to furnish supplementally a copy of any omitted exhibit or
schedule to the Commission upon request.
2.3 Form of Tax Sharing Agreement 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.
2.4 Form of Employee Benefits Allocation Agreement 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 Form of Registrant's Restated Certificate of Incorporation.
3.2 Form of Registrant's Restated By-Laws.
5.1 Opinion of Wachtell, Lipton, Rosen & Katz as to the legality of the shares of common stock of the
Registrant being issued in the Merger.
5.2 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP as to the legality of the shares of common stock of
the Registrant being issued in the Exchange Offer.
8.1 Form of Opinion of Wachtell, Lipton, Rosen & Katz as to certain tax matters.
8.2 Form of Opinion of Skadden, Arps, Slate, Meagher & Flom LLP as to certain tax matters.
8.3 Form of Opinion of Ernst & Young AB as to certain tax matters.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Ernst & Young LLP (Morton).
23.2 Consent of Ernst & Young AB (Autoliv).
23.3 Consent of Wachtell, Lipton, Rosen & Katz (additional consent included in Exhibit 5.1).
23.4 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (additional consent included in Exhibit 5.2).
23.5 Consent of Ernst & Young AB.
23.6 Consent of Befec-Price Waterhouse and SYC SA.
23.7 Consent of Serge Yablonsky.
23.8 Consent of KPMG Deutsche Treuhand-Gesellschaft AG.
23.9 Consent of Befec-Price Waterhouse and Serge Yablonsky.
99.1 Consent of Goldman, Sachs & Co.
99.2 Consent of Enskilda Securities and The Blackstone Group L.P.
99.3 Consent of Persons named as about to become directors of the Registrant.
99.4 Private Letter Ruling from the Internal Revenue Service, dated March 20, 1997, to Morton International,
Inc.
</TABLE>
<PAGE>
Exhibit 2.3
Form of Agreement
================================================================================
TAX SHARING AGREEMENT
dated as of [________], 1997
by and between
Morton International, Inc.,
an Indiana corporation
and
New Morton International, Inc.,
an Indiana corporation
<PAGE>
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
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<PAGE>
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
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<PAGE>
TAX SHARING AGREEMENT
Tax Sharing Agreement (the "Agreement"), dated as of [________],
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 [________], 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
<PAGE>
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
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<PAGE>
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 [ ], 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
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<PAGE>
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.
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<PAGE>
"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
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<PAGE>
New Morton Group, the Company Group or any of their respective members,
divisions, assets or branches.
ARTICLE II
FILING OF TAX RETURNS
Section 2.01. 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.
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<PAGE>
Section 2.02. 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
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<PAGE>
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
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<PAGE>
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 2.03. 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
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<PAGE>
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 3.01. 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.
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<PAGE>
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 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
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<PAGE>
such Pre-Distribution Federal Period shall (A) with respect to any such payment
made on or before June 30, 1996, be an amount equal to the product of (r) all
such payments and (s) the relevant New Morton Pre-Distribution Federal Tax Ratio
(as defined below) 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. The "New Morton Pre-Distribution
Federal Tax Ratio" for any Pre-Distribution Federal Period shall be the ratio of
New Morton's allocated federal income tax liability for such Pre-Distribution
Federal Period under Section 3.01(a)(i) above to the sum of the total tax
liability of the New Morton Group and the Company Group for such
Pre-Distribution Federal Period.
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).
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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
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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
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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).
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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
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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
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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,
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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
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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
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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 3.02. (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
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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
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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
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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
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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").
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(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.
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(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 3.03. 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
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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 3.04. 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
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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 3.05. (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. ss. 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
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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 3.06. 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
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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
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"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
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10 days shall thereafter bear interest at the Federal short-term rate
established pursuant to Section 6621 of the Code.
Section 3.07. 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
sume 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 3.08. 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
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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 4.01. 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.
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Section 4.02. 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
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<PAGE>
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:
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<PAGE>
(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
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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.
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<PAGE>
(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 4.03. 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
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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
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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
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hours, and to reimburse or pay directly all costs and expenses in connection
with the engagement of such public accountant.
ARTICLE V
MISCELLANEOUS
Section 5.01. 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 5.02. 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.
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<PAGE>
Section 5.03. 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.
[Address To Come]
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.
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<PAGE>
Section 5.04. 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 5.05. 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
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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 5.06. 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 5.07. 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 5.08. 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.
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Section 5.09. 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 [____________] day of [____________], 1996.
MORTON INTERNATIONAL, INC. NEW MORTON INTERNATIONAL, INC.
By ________________________________ By ___________________________________
<PAGE>
Exhibit 2.4
Form of Agreement
================================================================================
EMPLOYEE BENEFITS ALLOCATION AGREEMENT
dated as of [ ], 1997
by and between
MORTON INTERNATIONAL, INC.,
an Indiana corporation
and
NEW MORTON INTERNATIONAL, INC.,
an Indiana corporation
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
Section 1.01 General.......................................... 2
Section 1.02 Schedules, Etc................................... 11
Section 1.03 Certain Constructions............................ 11
ARTICLE II
EMPLOYEE BENEFITS; LABOR MATTERS
Section 2.01 New Morton Free-Standing Qualified Plan.......... 12
Section 2.02 Company Retained Qualified Plans................. 14
Section 2.03 Company-New Morton Joint Qualified Plans......... 15
Section 2.04 Foreign Plans.................................... 22
Section 2.05 Welfare Plans.................................... 24
Section 2.06 Stock Option Plans............................... 26
Section 2.07 Company Incentive Plans.......................... 27
Section 2.08 Severance Pay.................................... 29
Section 2.09 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 3.01 Complete Agreement; Construction................. 35
Section 3.02 Guarantee of Subsidiaries' Obligations........... 35
Section 3.03 Failure of the Company and New Morton
To Agree on Certain Determinations............. 36
Section 3.04 Governing Law.................................... 36
Section 3.05 Notices.......................................... 37
Section 3.06 Amendments....................................... 38
Section 3.07 Successors and Assigns........................... 38
Section 3.08 Termination...................................... 38
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Section 3.09 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
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EMPLOYEE BENEFITS ALLOCATION AGREEMENT
Employee Benefits Allocation Agreement (the "Agreement"), dated as
of [ ], 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 [ ], 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
<PAGE>
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 1.01 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.
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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.
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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").
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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).
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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
[March 31, 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
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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
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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.
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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,
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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
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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 1.02 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 1.03 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
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conjunctive and vice-versa and references to the masculine shall refer to the
feminine and vice-versa.
ARTICLE II
EMPLOYEE BENEFITS; LABOR MATTERS
Section 2.01 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
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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
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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 2.02 Company Retained Qualified Plans. Effective as of the
Cut-off Date, the Company shall or shall
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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 2.03 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
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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
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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
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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
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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
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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
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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
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balance sheet rather than the Company's consolidated balance sheet as of the
Cut-off Date.
Section 2.04 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
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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
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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 2.05 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
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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
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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 2.06 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
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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 2.07 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
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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
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with New Morton shall be deemed continuous service with the Company.
Section 2.08 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.
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Section 2.09 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.
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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
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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
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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
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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
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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 3.01 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 3.02 Guarantee of Subsidiaries' Obligations. The Company
shall cause to be performed, and hereby guarantees
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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 3.03 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 3.04 Governing Law. Subject to applicable federal law, this
Agreement shall be governed by and construed
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in accordance with the laws of the State of Delaware, without regard to the
principles of conflicts of laws thereof.
Section 3.05 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:
[Name to come]
[3350 Airport Road]
[Ogden, Utah 84409]
Attention: Corporate Secretary
with a copy to:
Autoliv, Inc.
[Address To Come]
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
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Section 3.06 Amendments. This Agreement may not be modified or
amended except by an agreement in writing signed by the parties.
Section 3.07 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 3.08 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 3.09 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.
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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.
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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 ________________________________
Title:
NEW MORTON INTERNATIONAL, INC.
By ________________________________
Title:
<PAGE>
Exhibit 3.1
FORM OF CHARTER
RESTATED CERTIFICATE OF INCORPORATION
OF
AUTOLIV, INC.
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
<PAGE>
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
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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.
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(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,
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<PAGE>
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 proceeding, 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 (including 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
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<PAGE>
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 granted 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, executor 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
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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 the
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.
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<PAGE>
Exhibit 3.2
FORM OF BY-LAWS
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
<PAGE>
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 stockholders, 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 announcement 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
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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
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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 residence 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
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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
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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
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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
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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. EXECUTIVE COMMITTEE. The Board of Directors may,
immediately following each annual meeting of stockholders, meet and appoint
from its number by a majority vote of the Whole Board an Executive Committee,
including a chairman thereof, of such number of members as from time to time
may be selected by the Board of Directors, to serve until the next annual
meeting. The Executive Committee shall possess and may exercise all powers
and authority of the Board of Directors as the Board of Directors, by
resolution adopted by a majority of the Whole Board, shall from time to time
delegate to the Executive Committee.
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A majority of the Executive Committee may determine the actions of the
Executive Committee 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 Executive Committee in the manner provided in
Article III, Section 6. The Board of Directors shall have the power at any
time to change the membership of the Executive Committee, to fill vacancies
in it, to change the powers delegated to it, to make rules for the conduct of
its business, or to dissolve it.
SECTION 11. OTHER COMMITTEES. The Board of Directors may, by
resolution adopted by a majority of the Whole Board, designate one or more
other 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 disqualified member at any meeting of any such committee. In
the absence or disqualification of a member of such other 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 other 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 12. 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
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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 and such
other officers (including, without limitation, a President, a Chief Financial
Officer, a Chief Operating Officer, a Secretary 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
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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.
SECTION 5. 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 which may be authorized by the Board of
Directors. 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. 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 or by the Board of Directors.
SECTION 6. 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
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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
perform the duties of the President, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the President. 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 in the event of the
inability or refusal of the President to act, shall perform the duties of the
President, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the President.
SECTION 7. CHIEF FINANCIAL OFFICER. The Chief Financial Officer (if
any) shall act in an executive financial capacity. He shall assist the Chief
Executive Officer and the President in the general supervision of the
Corporation's financial policies and affairs.
SECTION 8. 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 9. TREASURER. The Treasurer (if any) shall have the custody
of the corporate funds and securities and
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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 10. 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 11. 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 12. 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
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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 13. 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,
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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
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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 semiannual or quarterly reports of the Corporation.
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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.
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Exhibit 5.1
[LETTERHEAD OF
WACHTELL, LIPTON, ROSEN & KATZ]
March 24, 1997
Autoliv, Inc.
3350 Airport Road
Ogden, Utah 84405
Re: Registration Statement on Form S-4 of
Autoliv, Inc.
Members of the Board of Directors:
We are acting as special counsel to Morton International, Inc., an
Indiana corporation ("Morton"), in connection with the above captioned
Registration Statement filed by Autoliv, Inc., a Delaware corporation ("New
Autoliv"), with the Securities and Exchange Commission on March 24, 1997 (the
"Registration Statement") with respect to the shares of common stock, par value
$1.00 per share, of New Autoliv ("New Autoliv Shares"), proposed to be issued in
connection with the merger (the "Merger") of ASP Merger Sub Inc., a Delaware
corporation and a wholly owned subsidiary of New Autoliv ("ASP Merger Sub"),
with and into Morton upon the terms and subject to the conditions of the
Combination Agreement (the "Combination Agreement"), dated as of November 25,
1996, filed as Exhibit 2.1 to the Registration Statement, among Autoliv AB, a
corporation organized under the laws of the Kingdom of Sweden ("Autoliv"),
Morton, New Autoliv and ASP Merger Sub.
In connection with this opinion, we have reviewed the Restated
Certificate of Incorporation and Restated By-Laws of New Autoliv in the
respective forms contemplated to be in effect at the time that the New Autoliv
Shares are issued, the Registration Statement and the exhibits thereto, and we
have examined originals or copies, certified or otherwise identified to our
satisfaction, of such corporate records, agreements,
<PAGE>
Autoliv, Inc.
March 24,1997
Page 2
certificates of public officials and of officers of New Autoliv, and other
instruments, and such matters of law and fact as we have deemed necessary to
render the opinion contained herein.
In giving the opinion contained herein, we have, with your approval,
relied upon representations of officers of New Autoliv and certificates of
public officials with respect to the accuracy of the material factual matters
addressed by such representations and certificates. We have, with your
approval, assumed the genuineness of all signatures or instruments submitted to
us, and the conformity of certified copies submitted to us with the original
documents to which such certified copies relate.
We are members of the Bar of the State of New York and we express no
opinion as to the laws of any jurisdiction other than the federal laws of the
United States, the General Corporation Law of the State of Delaware and the laws
of the State of New York.
Based upon and subject to the foregoing, and assuming (i) the
certificate representing the New Autoliv Shares will be manually signed by one
of the authorized officers of First Chicago Trust Company of New York, as
transfer agent and registrar (the "Transfer Agent and Registrar"), and
registered by the Transfer Agent and Registrar and (ii) consummation of the
Merger as contemplated by the Combination Agreement, we are of the opinion that
the New Autoliv Shares being registered under the Registration Statement, when
issued in connection with the Merger pursuant to the terms of the Combination
Agreement following approval of the Combination Agreement by Morton
shareholders, will be validly issued, fully paid, and non-assessable.
We hereby consent to the filing of this opinion with the Securities
and Exchange Commission as an exhibit to the Registration Statement, and to the
reference to our firm under the caption "LEGAL MATTERS" in the Proxy
Statement/Prospectus/Exchange Offer that is a part of the Registration
Statement. In giving such consent, we do not hereby admit that we are in the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933, as amended, and the rules and regulations of the Securities and
Exchange Commission promulgated thereunder.
Very truly yours,
/s/ WACHTELL, LIPTON, ROSEN & KATZ
ESR:nbg
<PAGE>
Exhibit 5.2
[LETTERHEAD OF
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP]
March 24, 1997
Autoliv, Inc.
World Trade Center
Klarabergsviadukten 70, Section C
Stockholm, Sweden
Re: Autoliv, Inc. Registration
Statement on Form S-4
Ladies and Gentlemen:
We have acted as special counsel to Autoliv, Inc., a Delaware
corporation (the "Company"), in connection with the combination (the
"Combination") of Autoliv AB, a corporation organized under the laws of the
Kingdom of Sweden ("Autoliv"), and the Automotive Safety Products group of
Morton International, Inc., an Indiana corporation ("Morton"). The
Combination is to be effected pursuant to the Combination Agreement, dated as
of November 25, 1996 (the "Combination Agreement") among Autoliv, Morton, the
Company and ASP Merger Sub Inc., a Delaware corporation and a wholly-owned
subsidiary of the Company ("ASP Merger Sub"). Pursuant to the Combination
Agreement, (i) promptly following the Spinoff (as defined in the Combination
Agreement), ASP Merger Sub will be merged with and into Morton (the "Merger")
and each outstanding share of common stock, par value $1.00 per share, of
Morton (the "Morton Common Stock"), will be converted into the right to
receive a number of shares of common stock, par value $1.00 per share, of the
Company (the "Company Common Stock"), as shall equal the Exchange Ratio (as
defined in the Combination Agreement) and (ii) the Company will offer to
exchange one share of Company Common Stock for (x) each outstanding share of
common stock, par value Swedish kroner 10 per share, of Autoliv ("Autoliv
Common Stock") and (y) each American Depositary Share representing one share
of Autoliv Common Stock ("ADSs," and, together with the Autoliv Common Stock,
the "Autoliv Securities") in an exchange offer which will be conducted in two
parts: (a) the offer made by the Company to purchase shares of Autoliv Common
Stock that are beneficially owned by U.S. Persons, Canadian Persons and
Australian Persons (as such terms are defined in the Proxy
Statement/Prospectus/Exchange Offer constituting part of the
<PAGE>
Company's Registration Statement on Form S-4 (the "Registration Statement") to
which this opinion is attached as an exhibit and all outstanding ADSs (the
"U.S. Offer"), and (b) the offer made outside the United States, Canada and
Australia (the "Swedish and International Offer" and, together with the U.S.
Offer, the "Exchange Offer") to purchase all the Autoliv Securities that are
not beneficially owned by U.S. Persons, Canadian Persons or Australian Persons.
This opinion is being rendered in connection with Item 601(b)(5) of
Regulation S-K under the Securities Act of 1933, as amended. In connection with
this opinion, we have examined and are familiar with originals or copies,
certified or otherwise identified to our satisfaction, of (i) the Combination
Agreement; (ii) the Registration Statement; (iii) the form of certificate to be
used to represent the shares of Company Common Stock; (iv) the Restated
Certificate of Incorporation and the Restated By-Laws of the Company, as in
effect on the date hereof; (v) resolutions adopted by the Board of Directors of
the Company relating to the Combination; and (vi) such other documents as we
have deemed necessary or appropriate as a basis for the opinion set forth below.
In our examination, we have assumed the genuineness of all signatures,
the legal capacity of all natural persons, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified, conformed or photostatic copies, and the
authenticity of the originals of such copies. As to any other facts material to
this opinion which we did not independently establish or verify, we have relied
upon statements or representations of officers and other representatives of the
Company and others.
Members of this firm are admitted to the bar in the States of New York
and Delaware, and we do not express any opinion as to the laws of any other
jurisdiction except the laws of the United States of America to the extent
referred to specifically herein.
Based upon the foregoing and assuming (i) the certificate representing
the Company Common Stock will be manually signed by one of the authorized
officers of First Chicago Trust Company of New York, as transfer agent and
registrar (the "Transfer Agent and Registrar"), and registered by the Transfer
Agent and Registrar, and conform to the specimen thereof examined by us and (ii)
the Merger and the Exchange Offer are consummated as contemplated by the
Combination Agreement, we are of the opinion that the shares of Company Common
Stock registered on the Registration Statement and to be issued by
-2-
<PAGE>
the Company in exchange for the Autoliv Securities in the Exchange Offer have
been duly authorized and, when issued and delivered in accordance with the terms
of the Combination Agreement and the resolutions described in the second
paragraph of this opinion upon effectiveness of the Exchange Offer, will be
validly issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion with the Securities
and Exchange Commission as Exhibit 5.2 to the Registration Statement and to the
reference to our firm under the captions "Legal Matters" and "Certain Tax
Consequences of the Transactions" in the Proxy Statement/Prospectus/Exchange
Offer constituting a part thereof. In giving such consent we do not thereby
admit that we are in the category of persons whose consent is required under
Section 7 of the Securities Act of 1933, as amended.
Very truly yours,
/s/ SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP
-3-
<PAGE>
Exhibit 8.1
Form of Opinion
[LETTERHEAD OF
WACHTELL, LIPTON, ROSEN & KATZ]
______ , 1997
Morton International, Inc.
100 North Riverside Plaza
Chicago, Illinois 60606
Ladies and Gentlemen:
We have acted as special counsel to Morton International, Inc., an
Indiana corporation ("Morton ASP"), in connection with the Combination
Agreement, dated as of November 25, 1996 (the "Merger Agreement"), by and among
Morton ASP, 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 subsidiary of New Parent
("Merger Sub"), pursuant to which Merger Sub will be merged with and into
Morton ASP with Morton ASP being the surviving corporation and a subsidiary of
New Parent (the "Merger"). At your request and pursuant to Section
9.1(g)(ii)(A) of the Merger Agreement, we are rendering our opinion concerning
the material federal income tax consequences of the Merger.
For purposes of the opinion set forth below, we have relied, with the
consent of Morton ASP, New Parent and Merger Sub, upon the accuracy and
completeness of the statements and representations (which statements and
representations we have neither investigated nor verified) contained,
respectively, in
<PAGE>
Morton International, Inc.
_________________,1997
Page 2
the certificates of the officers of Morton ASP, New Parent and Merger Sub
(copies of which are attached hereto and which are incorporated herein by
reference), and we have assumed that such certificates will be complete and
accurate as of the Effective Time. Any capitalized term used and not defined
herein has the meaning given to it in the Proxy Statement/Prospectus/Exhange
Offer of Morton ASP and New Parent, dated _____, 1997.
We have also assumed that the transactions contemplated by the
Merger Agreement will be consummated in accordance with the Merger Agreement
and as described in the Proxy Statement/Prospectus/Exchange Offer and that
the Merger will qualify as a merger under the applicable laws of the States
of Delaware and Indiana.
Based upon and subject to the foregoing, it is our opinion that
under currently applicable law, the Merger will constitute a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended, and that Morton ASP, New Parent and Merger Sub will each be parties
to the reorganization within the meaning of Section 368(b).
This opinion does not address the various state, local and foreign tax
consequences that may result from the Merger. In addition, no opinion is
expressed as to any federal income tax consequences of the Merger except as
specifically set forth herein, and this opinion may not be relied upon except
with respect to the consequences specifically discussed herein.
We hereby consent to the use of our name in the Proxy Statement/
Prospectus/Exchange Offer under the caption "Certain Tax Consequences of the
Transactions" in the Proxy Statement/Prospectus/Exchange Offer and to the
filing of this letter (or a form thereof) as an exhibit to the Registration
Statement on Form S-4 filed with the Securities and Exchange Commission with
respect to, among other things, the shares of common stock, par value $1.00
per share, of New Parent to be issued in connection with the Merger. In
giving this consent, however, we do not hereby admit that we are within the
category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, and the rules and regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
JJS:ajn
<PAGE>
Exhibit 8.2
Form of Opinion
[LETTERHEAD OF
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP]
_______________ __, 1997
Autoliv AB
World Trade Center
Klarabergsviadukten 70, Section C
Stockholm, Sweden
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 organized under the laws of the Kingdom of
Sweden ("Autoliv"), for shares of New Autoliv pursuant to an exchange offer (the
"Exchange Offer") and (iii) compulsory acquisition by a wholly-owned subsidiary
of New Autoliv 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 provided for in the Combination Agreement dated as of
November 25, 1996, among New Autoliv, Morton, Merger Sub and Autoliv (the
"Combination Agreement"), you have requested our opinion as to whether the
Exchange Offer, in conjunction with the Merger, will be treated for United
States federal income tax purposes as a transfer of property described in
Section 351(a) of the Internal Revenue Code of 1986, as amended (the "Code").
The terms of the Exchange Offer, the Merger and certain related
transactions (the "Related Transactions") are set forth in the Combination
Agreement and described in the Joint Proxy Statement/Prospectus/Exchange Offer,
dated [ ], 1997 (the "Proxy Statement/Prospectus/Exchange Offer"),
filed with the Securities and Exchange Commission (the "Commission") on March
[ ], 1997 as part of New Autoliv's Registration Statement on Form S-4.
Capitalized terms used herein and not otherwise defined have the meanings
ascribed to them in the Combination Agreement.
In rendering our opinion, we have examined and relied upon the
accuracy and completeness of the facts, information,
<PAGE>
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 and such other
documents as we have deemed necessary or appropriate. We have assumed that the
facts and information contained in the Proxy Statement/Prospectus/Exchange Offer
were true, correct and complete in all material respects as of March [ ], 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) set forth in certificates dated the date hereof
delivered by officers of Autoliv, Morton and New Autoliv (the "Officers'
Certificates").
Our opinion is conditioned on, among other things, (i) the initial and
continuing accuracy of the facts, information, covenants, statements and
representations set forth in the documents referred to above and (ii) the
consummation of the Exchange Offer, the Merger and the Related Transactions in
accordance with the terms of the Combination Agreement and as described in the
Proxy Statement/Prospectus/Exchange Offer, including the substantially
contemporaneous consummation of the Exchange Offer and the Merger. In our
examination, we have assumed the genuineness of all signatures, the authenticity
of all documents submitted to us as originals, the legal capacity of natural
persons, the conformity to original documents of all documents submitted to us
as certified or photostatic copies thereof and the authenticity of the originals
of such latter documents.
In rendering our opinion, we have considered applicable provisions of
the Code, Treasury Regulations promulgated thereunder, pertinent judicial
authorities, interpretive rulings of the Internal Revenue Service, and such
other authorities as we have deemed appropriate under the circumstances. All
such authorities are subject to change, possibly with retroactive effect. A
change in the authorities upon which our opinion is based could affect our
conclusions. Moreover, there can be no assurance that positions contrary to
those stated in this opinion will not be asserted by the Internal Revenue
Service or, if challenged, by a court.
Based solely upon and subject to the foregoing, we are of the opinion
that under United States federal income tax law as in effect on the date hereof,
the Exchange Offer, in conjunction with New Autoliv's acquisition of Morton
Shares pursuant to the Merger will be treated for United States federal income
tax purposes as a transfer of property described in section 351(a) of the Code.
-2-
<PAGE>
Except as set forth above, we express no opinion to any party as to
the tax consequences, whether United States federal, state, local or foreign, of
the Merger, the Exchange Offer and the Related Transactions. This opinion is
furnished to you solely for your benefit pursuant to Section 9.1(g)(ii)(B) of
the Combination Agreement and is not to be used, circulated, quoted or otherwise
referred to for any purpose 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.
We hereby consent to the use of our name in the Proxy
Statement/Prospectus/Exchange Offer and to the filing of this letter (or a form
thereof) as an exhibit to New Autoliv's Registration Statement on Form S-4 filed
with the Commission with respect to, among other things, the Exchange Offer. In
giving this consent, however, we do not hereby admit that we are within the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933, as amended, and the rules and regulations of the Commission
thereunder.
Very truly yours,
-3-
<PAGE>
Exhibit 8.3
Form of Opinion
[LETTERHEAD OF ERNST & YOUNG]
Autoliv AB
Box 703 81
107 24 Stockholm
Stockholm March , 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 exchange 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 [ ], 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 [ ], 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)
set
<PAGE>
forth in the certificates dated the date hereof delivered 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,
-2-
<PAGE>
Exhibit 21.1
SUBSIDIARIES OF AUTOLIV, INC.
ASP Merger Sub Inc.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated November 4, 1996, with respect to the combined financial
statements of Automotive Safety Products, an operating group of Morton
International, Inc., as of June 30, 1996 and 1995 and for each of the three
years in the period ended June 30, 1996, included in the Proxy
Statement/Prospectus/Exchange Offer that is made part of the Registration
Statement (Form S-4) of Autoliv, Inc.
We also consent to the incorporation by reference therein of our report dated
July 31, 1996, with respect to the consolidated financial statements of Morton
International, Inc. incorporated by reference in its Annual Report (Form 10-K)
for the year ended June 30, 1996, filed with the Securities and Exchange
Commission.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Chicago, Illinois
March 21, 1997
<PAGE>
Exhibit 23.2
[LETTERHEAD OF
ERNST & YOUNG]
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated January 30, 1997, with respect to the consolidated
financial statements of Autoliv AB, as of December 31, 1996, included in the
Proxy Statement/Prospectus/Exchange Offer that is made a part of the
Registration Statement on Form S-4 of Autoliv, Inc. (Form S-4 No. 333- ).
Stockholm, Sweden
March 23, 1997
ERNST & YOUNG AB
/s/ Ulf Spang
Ulf Spang
Authorized public accountant
<PAGE>
Exhibit 23.3
[LETTERHEAD OF
WACHTELL, LIPTON, ROSEN & KATZ]
CONSENT OF WACHTELL, LIPTON, ROSEN & KATZ
We hereby consent to the use of our name in the Proxy
Statement/Prospectus/Exchange Offer filed with the Securities and Exchange
Commission (the "Commission") on the date hereof as part of the Registration
Statement on Form S-4 of Autoliv, Inc. (File No. 333- ) (the "Registration
Statement") and to the filing of our opinion, and a form thereof, as Exhibit 8.1
to the Registration Statement filed with the Commission. In giving this
consent, however, we do not hereby admit that we are within the category of
persons whose consent is required under Section 7 of the Securities Act of 1933,
as amended, and the rules and regulations of the Commission promulgated
thereunder.
/s/ Wachtell, Lipton, Rosen & Katz
March 24, 1997
<PAGE>
Exhibit 23.4
[LETTERHEAD OF
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP]
CONSENT OF
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
We hereby consent to the use of our name in the Proxy
Statement/Prospectus/Exchange Offer filed with the Securities and Exchange
Commission (the "Commission") on the date hereof as part of Autoliv, Inc.'s
Registration Statement on Form S-4 (the "Registration Statement") and to the
filing of our opinion letter (or form thereof) as Exhibit 8.2 to the
Registration Statement filed with the Commission with respect to, among other
things, the Exchange Offer described in the Registration Statement. In giving
this consent, however, we do not hereby admit that we are within the category of
persons whose consent is required under Section 7 of the Securities Act of 1933,
as amended, and the rules and regulations of the Commission thereunder.
Very truly yours,
/s/ Skadden, Arps, Slate,
Meagher & Flom LLP
March 24, 1997
<PAGE>
Exhibit 23.5
[LETTERHEAD OF ERNST & YOUNG AB]
CONSENT OF ERNST & YOUNG
We hereby consent to the use of our name in the Proxy
Statement/Prospectus/Exchange Offer filed with the Securities and Exchange
Commission (the "Commission") on the date hereof as part of Autoliv, Inc.'s
Registration Statement on Form S-4 (the "Registration Statement") and to the
filing of our opinion letter (or form thereof) as Exhibit 8.3 to the
Registration Statement filed with the Commission with respect to, among other
things, the Exchange Offer described in the Registration Statement. In giving
this consent, however, we do not hereby admit that we are within the category of
persons whose consent is required under Section 7 of the Securities Act of 1933,
as amended, and the rules and regulations of the Commission thereunder.
Stockholm March 24, 1997
/s/ Staffan Estberg
Ernst & Young AB
<PAGE>
Exhibit 23.6
BEFEC-PRICE WATERHOUSE SYC SA
34, Place des Corolles 6 rue Le Sueur
Tour AIG - Cedex 105 75116 PARIS
92908 Paris La Defense 2
CONSENT OF INDEPENDENT AUDITORS
Board of Directors
AUTOLIV AB
Box 70381
S-107 24 Stockholm
SUEDE
We consent to the reference to our firms under the caption "Experts" and to the
use of our report dated January 27, 1997 with respect to the financial
statements of Franco Suedoise d'Investissements SA, as of December 31, 1996,
included in the Proxy Statement/Prospectus/Exchange Offer that is made a part of
the Registration Statement on Form S-4 of Autoliv, Inc. (Form S-4 No.
333- ).
Paris, France
March 24, 1997
For BEFEC-PRICE WATERHOUSE For SYC SA
Statutory auditor Statutory auditor
/s/ J. Vantalon /s/ S. Yablonsky
J. VANTALON S. YABLONSKY
<PAGE>
Exhibit 23.7
[Letterhead of
SERGE YABLONSKY]
CONSENT OF INDEPENDENT AUDITORS
Board of Directors
AUTOLIV AB
Box 70381
S-107 24 Stockholm
SUEDE
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated January 27, 1997 with respect to the financial
statements of LIVBAG SA and LIVBAG SNC, as of December 31, 1996, included in the
Proxy Statement/Prospectus/Exchange Offer that is made a part of the
Registration Statement on Form S-4 of Autoliv, Inc. (Form S-4 No. 333- ).
Paris, France
March 24, 1997
/s/ S. Yablonsky
S. YABLONSKY
Statutory auditor
<PAGE>
Exhibit 23.8
[LETTERHEAD OF
KPMG DEUTSCHE TREUHAND-GESELLSCHAFT AG]
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "experts" and to the
use of our report dated January 27, 1997, with respect to the financial
statements of Autoliv GmbH, as of December 31, 1996, included in the Proxy
Statement/Prospectus/Exchange Offer that is made a part of the Registration
Statement on Form S-4 of Autoliv, Inc. (Form S-4 No. 333- ).
March 23, 1997
/s/ KPMG DEUTSCHE TREUHAND-GESELLSCHAFT AG
<PAGE>
Exhibit 23.9
BEFEC-PRICE WATERHOUSE Serge YABLONSKY
34, Place des Corrolles 6 rue Le Sueur
Tour AIG - Cedex 105 75116 PARIS
92908 Paris La Defense 2
CONSENT OF INDEPENDENT AUDITORS
Board of Directors
AUTOLIV AB
Box 70381
S-107 24 Stockholm
SUEDE
We consent to the reference to our firms under the caption "Experts" and to the
use of our report dated January 27, 1997 with respect to the financial
statements of Autoliv France SNC as of December 31, 1996, included in the Proxy
Statement/Prospectus/Exchange Offer that is made a part of the Registration
Statement on Form S-4 of Autoliv, Inc. (Form S-4 No. 333- ).
Paris, France
March 24, 1997
For BEFEC-PRICE WATERHOUSE S. YABLONSKY
Statutory auditor Statutory auditor
/s/ J. Vantalon /s/ S. Yablonsky
J. VANTALON
<PAGE>
Exhibit 99.1
[Letterhead of
Goldman, Sachs & Co.]
March 21, 1997
Board of Directors
Morton International, Inc.
100 North Riverside Plaza
Chicago, IL 60606
Re: Registration Statement on Form S-4 of Autoliv, Inc. (the
"Registration Statement"), relating to Common Stock being registered
in connection with the proposed merger of Morton International, Inc.
(the "Company") and ASP Merger Sub Inc., a newly-formed subsidiary of
Autoliv, Inc., pursuant to the Combination Agreement dated as of
November 25, 1996 by and among Autoliv AB, the Company, Autoliv, Inc.
and ASP Merger Sub Inc.
Dear Gentlemen:
Reference is made to our opinion letter dated as of November 25, 1996 with
respect to the fairness of the consideration to be received by the holders
(other than the Company, Autoliv AB or any direct or indirect wholly owned
subsidiary of Autoliv AB or of the Company) of the outstanding shares of Common
Stock, par value $1.00 per share, of the Company in the Spinoff and Merger (as
such terms are defined in the above-referenced opinion letter), taken as a
whole.
The foregoing opinion letter was provided for the information and assistance of
the Board of Directors of the Company in connection with its consideration of
the Spinoff and Merger and is not to be used, circulated, quoted or otherwise
referred to for any other purpose, nor is it to be filed with,
<PAGE>
Morton International, Inc.
March [], 1997
Page Two
included in or referred to in whole or in part in any registration statement,
proxy statement or any other document, except in accordance with our prior
written consent. We understand that the Company has determined to include our
opinion in the above-referenced Registration Statement.
In that regard, we hereby consent to the reference to the opinion of
our firm under the captions "SUMMARY -- The Spinoff, the Merger and the Exchange
Offer -- Opinions of Financial Advisors," "BACKGROUND, REASONS AND
RECOMMENDATIONS -- Background of the Transactions" and "-- Reasons for the
Spinoff and the Merger; Recommendations of the Morton Board" and "OPINIONS OF
FINANCIAL ADVISORS -- Opinion of Goldman Sachs" in the Proxy
Statement/Prospectus/Exchange Offer included in the above-referenced
Registration Statement and to the inclusion of the foregoing opinion in such
Proxy Statement/Prospectus/Exchange Offer. In providing such consent, except as
may be required by federal securities laws, we do not intend that any person
other than the Board of Directors of the Company rely upon such opinion. In
giving such consent, we do not thereby admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act of 1933
or the rules and regulations of the Securities and Exchange Commission
thereunder.
Sincerely,
/s/ Goldman, Sachs & Co.
- ---------------------------
(GOLDMAN, SACHS & CO.)
<PAGE>
Exhibit 99.2
[ENSKILDA SECURITIES LOGO] [THE BLACKSTONE GROUP LOGO]
Consent of
Enskilda Securities and The Blackstone Group L.P.
March 24, 1997
Autoliv, Inc.
Ladies and Gentlemen:
We hereby consent to the inclusion in the Registration Statement on
Form S-4, relating to the proposed combination of Autoliv AB and the Automotive
Safety Products business of Morton International, Inc., of our opinion letter
appearing as Appendix D to the Proxy Statement/Prospectus/Exchange Offer filed
with the Securities and Exchange Commission on March 24, 1997 which comprises
part of the Registration Statement, and to the references to our respective
firm's name therein. In giving such consent, we do not thereby admit that we
come within the category of persons whose consent is required under Section 7 of
the Securities Act of 1933, as amended, or the rules and regulations adopted by
the Securities and Exchange Commission thereunder.
Very truly yours,
ENSKILDA SECURITIES
By: /s/ Stefan Erneholm
---------------------
By: /s/ Stein Petter Ski
---------------------
THE BLACKSTONE GROUP L.P.
By: /s/ Anthony Grillo
---------------------
<PAGE>
Exhibit 99.3
March 24, 1997
Autoliv, Inc.
3350 Airport Road
Ogden, Utah 84405
Ladies and Gentlemen:
I hereby consent to being named as a person about to become a director
of Autoliv, Inc., a Delaware corporation ("New Autoliv") in connection with the
consummation of the transactions (the "Transactions") contemplated by the
Combination Agreement, dated as of November 25, 1996, among Autoliv AB, a
corporation organized under the laws of the Kingdom of Sweden, Morton
International, Inc., an Indiana corporation, New Autoliv and ASP Merger Sub
Inc., a Delaware corporation and a wholly owned subsidiary of New Autoliv, in
the Registration Statement on Form S-4 filed by New Autoliv with the Securities
and Exchange Commission in connection with the Transactions (the "Registration
Statement"), and to the filing of this Consent as an exhibit to the Registration
Statement.
Sincerely,
/s/ Per-Olaf Aronson
Per-Olaf Aronson
<PAGE>
March 24, 1997
Autoliv, Inc.
3350 Airport Road
Ogden, Utah 84405
Ladies and Gentlemen:
I hereby consent to being named as a person about to become a director
of Autoliv, Inc., a Delaware corporation ("New Autoliv") in connection with the
consummation of the transactions (the "Transactions") contemplated by the
Combination Agreement, dated as of November 25, 1996, among Autoliv AB, a
corporation organized under the laws of the Kingdom of Sweden, Morton
International, Inc., an Indiana corporation, New Autoliv and ASP Merger Sub
Inc., a Delaware corporation and a wholly owned subsidiary of New Autoliv, in
the Registration Statement on Form S-4 filed by New Autoliv with the Securities
and Exchange Commission in connection with the Transactions (the "Registration
Statement"), and to the filing of this Consent as an exhibit to the Registration
Statement.
Sincerely,
/s/ Gunnar Bark
Gunnar Bark
<PAGE>
March 24, 1997
Autoliv, Inc.
3350 Airport Road
Ogden, Utah 84405
Ladies and Gentlemen:
I hereby consent to being named as a person about to become a director
of Autoliv, Inc., a Delaware corporation ("New Autoliv") in connection with the
consummation of the transactions (the "Transactions") contemplated by the
Combination Agreement, dated as of November 25, 1996, among Autoliv AB, a
corporation organized under the laws of the Kingdom of Sweden, Morton
International, Inc., an Indiana corporation, New Autoliv and ASP Merger Sub
Inc., a Delaware corporation and a wholly owned subsidiary of New Autoliv, in
the Registration Statement on Form S-4 filed by New Autoliv with the Securities
and Exchange Commission in connection with the Transactions (the "Registration
Statement"), and to the filing of this Consent as an exhibit to the Registration
Statement.
Sincerely,
/s/ Wilhelm Kull
Wilhelm Kull
<PAGE>
March 24, 1997
Autoliv, Inc.
3350 Airport Road
Ogden, Utah 84405
Ladies and Gentlemen:
I hereby consent to being named as a person about to become a director
of Autoliv, Inc., a Delaware corporation ("New Autoliv") in connection with the
consummation of the transactions (the "Transactions") contemplated by the
Combination Agreement, dated as of November 25, 1996, among Autoliv AB, a
corporation organized under the laws of the Kingdom of Sweden, Morton
International, Inc., an Indiana corporation, New Autoliv and ASP Merger Sub
Inc., a Delaware corporation and a wholly owned subsidiary of New Autoliv, in
the Registration Statement on Form S-4 filed by New Autoliv with the Securities
and Exchange Commission in connection with the Transactions (the "Registration
Statement"), and to the filing of this Consent as an exhibit to the Registration
Statement.
Sincerely,
/s/ Fred J. Musone
Fred J. Musone
<PAGE>
March 24, 1997
Autoliv, Inc.
3350 Airport Road
Ogden, Utah 84405
Ladies and Gentlemen:
I hereby consent to being named as a person about to become a director
of Autoliv, Inc., a Delaware corporation ("New Autoliv") in connection with the
consummation of the transactions (the "Transactions") contemplated by the
Combination Agreement, dated as of November 25, 1996, among Autoliv AB, a
corporation organized under the laws of the Kingdom of Sweden, Morton
International, Inc., an Indiana corporation, New Autoliv and ASP Merger Sub
Inc., a Delaware corporation and a wholly owned subsidiary of New Autoliv, in
the Registration Statement on Form S-4 filed by New Autoliv with the Securities
and Exchange Commission in connection with the Transactions (the "Registration
Statement"), and to the filing of this Consent as an exhibit to the Registration
Statement.
Sincerely,
/s/ George A. Schaefer
George A. Schaefer
<PAGE>
March 24, 1997
Autoliv, Inc.
3350 Airport Road
Ogden, Utah 84405
Ladies and Gentlemen:
I hereby consent to being named as a person about to become a director
of Autoliv, Inc., a Delaware corporation ("New Autoliv") in connection with the
consummation of the transactions (the "Transactions") contemplated by the
Combination Agreement, dated as of November 25, 1996, among Autoliv AB, a
corporation organized under the laws of the Kingdom of Sweden, Morton
International, Inc., an Indiana corporation, New Autoliv and ASP Merger Sub
Inc., a Delaware corporation and a wholly owned subsidiary of New Autoliv, in
the Registration Statement on Form S-4 filed by New Autoliv with the Securities
and Exchange Commission in connection with the Transactions (the "Registration
Statement"), and to the filing of this Consent as an exhibit to the Registration
Statement.
Sincerely,
/s/ S. Jay Stewart
S. Jay Stewart
<PAGE>
March 24, 1997
Autoliv, Inc.
3350 Airport Road
Ogden, Utah 84405
Ladies and Gentlemen:
I hereby consent to being named as a person about to become a director
of Autoliv, Inc., a Delaware corporation ("New Autoliv") in connection with the
consummation of the transactions (the "Transactions") contemplated by the
Combination Agreement, dated as of November 25, 1996, among Autoliv AB, a
corporation organized under the laws of the Kingdom of Sweden, Morton
International, Inc., an Indiana corporation, New Autoliv and ASP Merger Sub
Inc., a Delaware corporation and a wholly owned subsidiary of New Autoliv, in
the Registration Statement on Form S-4 filed by New Autoliv with the Securities
and Exchange Commission in connection with the Transactions (the "Registration
Statement"), and to the filing of this Consent as an exhibit to the Registration
Statement.
Sincerely,
/s/ Roger W. Stone
Roger W. Stone
<PAGE>
March 24, 1997
Autoliv, Inc.
3350 Airport Road
Ogden, Utah 84405
Ladies and Gentlemen:
I hereby consent to being named as a person about to become a director
of Autoliv, Inc., a Delaware corporation ("New Autoliv") in connection with the
consummation of the transactions (the "Transactions") contemplated by the
Combination Agreement, dated as of November 25, 1996, among Autoliv AB, a
corporation organized under the laws of the Kingdom of Sweden, Morton
International, Inc., an Indiana corporation, New Autoliv and ASP Merger Sub
Inc., a Delaware corporation and a wholly owned subsidiary of New Autoliv, in
the Registration Statement on Form S-4 filed by New Autoliv with the Securities
and Exchange Commission in connection with the Transactions (the "Registration
Statement"), and to the filing of this Consent as an exhibit to the Registration
Statement.
Sincerely,
/s/ Per Welin
Per Welin
<PAGE>
Exhibit 99.4
Internal Revenue Service Department of the Treasury
Index Number: 0355.01-00 Washington, DC 20224
0367.40-01 954.02-00
0368.04-00 1248.06-00
Person to Contact:
Thomas F. McDevitt Robert T. Hawkes
Vice President/CFO Telephone Number:
Morton International, Inc. (202) 622-7530
100 North Riverside Plaza Refer Reply to:
Chicago, IL 60606-1596 CC:DOM:CORP:4 PLR-253482-96
Date:
March 20, 1997
Distributing = Morton International, Inc.
an Indiana corporation
EIN: 36-3640053
FSub 1 = Morton Service B.V.
a Netherlands corporation
FSub 2 = Morton Manufacturing B.V.
a Netherlands corporation
FSub 3 = Morton International B.V.
a Netherlands corporation
FSub 4 = Morton International GmbH
a German corporation
Acquiring = Autoliv Aktiebolag
a Kingdom of Sweden corporation
Controlled = New Morton International, Inc.
an Indiana corporation
EIN: 36-4140798
New Parent = Autoliv, Inc.
a Delaware corporation
EIN: 51-0378542
New FSub = Safety GmbH
a proposed German corporation
Merger Sub = ASP Merger Sub, Inc.
a Delaware corporation
EIN: 51-0378544
Business A = manufacture and marketing of specialty
chemicals
<PAGE>
-2-
Business B = manufacture and marketing of salt
Business C = manufacture and marketing of airbags and
other automotive safety products
Country X = the Netherlands
Country Y = Germany
Country Z = the Kingdom of Sweden
a = 142,636,930
- -
b = 5,888,376
- -
c = 218.5 million
- -
d = 200 million
- -
e = 10 million
- -
f = 6.6
- -
g = 7.3 million
- -
h = 750 million
- -
i = 51.6 million
- -
j = 698.4 million
- -
k = 5,837,560
- -
l = 6
- -
m = 90
- -
n = 46.5
- -
o = 53.5
- -
Date 1 = October 31, 1996
Date 2 = July 1, 1989
Date 3 = June 30, 1996
Date 4 = September 30, 1996
Date 5 = June 1, 2020
<PAGE>
-3-
Date 6 = June 12, 1989
Date 7 = October 26, 1995
Date 8 = December 31, 1996
Date 9 = July 1, 1996
Dear Mr. McDevitt:
This letter responds to your December 4, 1996 request that we rule
on certain federal income tax consequences of a proposed transaction. The
information submitted is summarized below.
SUMMARY OF FACTS
Distributing has one class of common stock a shares of which were
-
outstanding as of Date 1. Distributing's stock has been publicly traded in
the United States since Date 2, and no Distributing shareholder owns five
percent or more. As of Date 3, Distributing had b employee stock options
-
outstanding (the "Employee Options"). As of Date 4, Distributing had
approximately c dollars of long-term debt, including d dollars of debentures
- -
due on Date 5. Under an agreement dated as of Date 6 (the "Rights
Agreement"), Distributing distributed one stock purchase right (a "Right")
for each outstanding share of its common stock. The Rights are attached to,
and trade with, the common stock and are exercisable only upon the occurrence
of certain triggering events. The Rights Agreement has been amended to
provide that the proposed transaction described below is not a triggering
event.
On Date 7, Distributing's board of directors authorized the repurchase of
up to e shares of its common stock, representing approximately f percent of
- -
its outstanding stock, in the open market (the "Share Repurchase Program").
Distributing had repurchased approximately g shares under the Share
-
Repurchase Program as of Date 8.
Distributing conducts Business A, Business B, and Business C both
directly and through entities in which it holds an interest. We have
received financial information indicating that each business has had gross
receipts and operating expenses representing the active conduct of a trade or
business for each of the past five years.
<PAGE>
-4-
Distributing owns all the stock of FSub 1, a Country X corporation. FSub
1 owns all the stock of Country X corporations FSub 2 and FSub 3. FSub 2
conducts Business C, and FSub 3 conducts Business A, in Country X.
Distributing owns all the stock of FSub 4, a Country Y corporation. FSub 4
conducts both Business A and Business C in Country Y. Each of FSub 1 and
FSub 4 is a controlled foreign corporation ("CFC") under Section 957(a) of
the Internal Revenue Code.
Publicly traded and widely held Acquiring, a Country Z corporation,
engages in Business C. Acquiring wishes to acquire Distributing's Business C
operations (the "Acquisition") but has no interest in Distributing's Business
A or Business B operations. To accommodate Acquiring, Distributing proposes
to divest itself of its Business A and Business B assets by conveying them to
its recently formed wholly owned subsidiary, Controlled, and distributing the
stock of Controlled pro rata (the "Distribution"). For what are represented
to be valid business purposes, Acquiring and Distributing propose to conduct
their Business C operations under a recently formed holding corporation, New
Parent, which will own (directly or indirectly) all the stock of Acquiring
and Distributing.
PROPOSED TRANSACTION
Distributing and Acquiring propose the following series of transactions
to accomplish the Distribution and Acquisition (collectively, the
"Transaction"):
(i) New Parent will commence an exchange offer of its stock for
Acquiring common stock under Country Z law (the "Exchange Offer").
(ii) Distributing will borrow h dollars from third party lenders (the
-
"Loan"). The Loan will be consummated on the basis that neither New Parent,
nor Acquiring, nor any person or entity other than Distributing will have,
assume, or guaranty liability for repayment of the Loan.
(iii) Distributing will loan approximately i dollars of the Loan
-
proceeds to FSub 2 for use in repaying loans owed FSub 1 and FSub 3. FSub 1
will then distribute FSub 2 to Distributing in a transaction described in
Section 311(b) (the "Foreign Distribution").
(iv) Distributing will form and contribute cash to New FSub, a Country Y
corporation. New FSub will use the cash to purchase FSub 4's Business C
assets for fair market value and will assume related liabilities.
<PAGE>
-5-
(v) Distributing will contribute to Controlled all of the Business A
and Business B assets, including the stock of FSub 1 and FSub 4 and certain
assets associated with corporate headquarters operations, as a capital
contribution, and Controlled will assume related liabilities (the "Asset
Contribution"). Distributing will also contribute to Controlled (i) the
remainder of the Loan proceeds (approximately j dollars) (the "Loan Proceeds
-
Contribution") and (ii) certain cash generated from the operations of
Business C from Date 9 (the "Retained Earnings Contribution"). Together, the
Asset Contribution, Loan Proceeds Contribution, and Retained Earnings
Contribution are referred to as the "Contribution." Distributing represents
that the Loan Proceeds Contribution will be made to (a) provide cash to (i)
expand Business A and Business B through an active acquisition strategy, (ii)
make capital investments in Business A and Business B, and (iii) permit
Controlled to continue Distributing's Share Repurchase Program; and (b)
allocate to Distributing an appropriate amount of indebtedness consistent
with industry norms, cash flow projections, and market expectations.
Distributing has provided evidence substantiating these purposes, including a
detailed and reasoned letter from its investment banker and confirmation of
the existence of definitive acquisition agreements. That evidence supports
Distributing's contentions that (i) the Loan Proceeds Contribution is related
to the reasonable needs of Business A and Business B and (ii) Distributing,
Controlled, and New Parent will each be able to finance its current
operations and capital requirements while receiving investment grade credit
ratings that will be consistent with those of industry competitors.
(vi) Controlled will be recapitalized so that the number of its
outstanding shares equals the number of outstanding Distributing shares.
Distributing then will distribute all of the outstanding Controlled stock pro
rata in the Distribution. Employee Options held by current and former
employees of Businesses A and B (approximately k as of Date 8) will be
-
converted into options to purchase approximately l percent of Controlled's
-
stock. Controlled is expected to adopt a shareholder rights agreement
similar to the Rights Agreement.
(vii) On the day after the Distribution, New Parent's recently formed
subsidiary, Merger Sub, will merge into Distributing under state law (the
"Merger"). In the Merger, each Distributing shareholder will receive solely
New Parent voting stock in exchange for his, her, or its Distributing stock,
and Distributing will become New Parent's wholly owned subsidiary. Instead
of issuing fractional shares, New Parent will provide funds for paying cash
in lieu of such shares. Employee Options held by current and former
employees of Business C will be converted into options to purchase New Parent
stock.
<PAGE>
-6-
(viii) Provided that New Parent obtains less than all but more than m
-
percent of Acquiring's common stock in the Exchange Offer, New Parent will
initiate proceedings under Country Z law to acquire (directly or indirectly)
the remaining Acquiring stock for cash.
Following the Transaction, former Distributing shareholders will own
approximately n percent, and former Acquiring shareholders will own
-
approximately o percent, of New Parent's outstanding stock, assuming the
-
Exchange Offer is fully subscribed. Also following the Transaction,
controlled may repurchase some of its stock either through open market
purchases or pursuant to a self-tender offer (the "Tender Offer").
Controlled's officers and directors will agree not to participate in any
Tender Offer.
For a period not to exceed one year following the Distribution,
Controlled will make certain administrative services (the "Services")
available to Distributing. Distributing will pay for the Services at rates
based on a formula that includes all direct and indirect costs for the
Services together with a surcharge. Controlled will lease part of a facility
from Distributing under a two-year lease, with one two-year renewal option,
at a rent and on other terms negotiated by the parties at arm's length (the
"Lease"). For a period of eight months following the Distribution,
Distributing may use certain trade names and trademarks (the "Transitional
Rights"), which will thereafter belong exclusively to Controlled.
REPRESENTATIONS
Distributing has made the following representations concerning the
Transaction:
(a) The indebtedness, if any, owed by Controlled to Distributing after
the Distribution will not be stock or securities.
(b) No part of the consideration distributed by Distributing will be
received by a shareholder as a creditor, employee, or in any capacity other
than that of a shareholder of Distributing.
(c) The five years of financial information submitted on behalf of
Distributing represents the corporation's present operations, and with regard
to such corporation, there have been no substantial operational changes since
the date of the last financial statements submitted.
<PAGE>
-7-
(d) Following the Transaction, and except for the Services, the Lease,
and the Transitional Rights, Distributing and Controlled will each continue
the active conduct of its business, independently and with its separate
employees.
(e) Except for the Services, the Lease, and the Transitional Rights, New
Parent (through Distributing) will continue the active conduct of Business C
conducted by Distributing after the Distribution as such business was
conducted immediately before the Merger, independently and with
Distributing's separate employees.
(f) Following the Transaction, the gross assets of Business A and
Business B conducted directly by Controlled, and not by Controlled
subsidiaries, will together have a fair market value of at least five percent
of the total fair market value of Controlled's gross assets, including the
stock of subsidiaries.
(g) Following the Transaction, the gross assets of Business C conducted
directly by Distributing, and not by Distributing subsidiaries, will have a
fair market value of at least five percent of the total fair market value of
Distributing's gross assets, including the stock of subsidiaries.
(h) The Distribution is carried out for the following corporate business
purpose (among others): to facilitate the combining of Distributing's
Business C with Acquiring's Business C under New Parent. The Distribution is
motivated, in whole or substantial part, by this corporate business purpose.
(i) No shareholder owns five percent or more of Distributing's stock.
The management of Distributing, to its best knowledge, is not aware of any
plan or intention on the part of any particular shareholder or security
holder of Distributing to sell, exchange, transfer by gift, or otherwise
dispose of any stock in, or securities of, any of Distributing, Controlled,
or New Parent during or after the Transaction, except for (i) the planned
exchange of Distributing stock for New Parent stock in the Merger and (ii)
ordinary market trading.
(j) There is no plan or intention by either Distributing or Controlled,
directly or through any subsidiary corporation, to purchase any of its
outstanding stock after the Transaction, other than through stock purchases
meeting the requirements of Section 4.05(1)(b)(i), (ii), and (iv) of Rev.
Proc. 96-30, 1996-1 C.B. 696, 705. Those stock purchases will be made either
(i) in the open market or (ii) through the Tender Offer. To the best of
Distributing's knowledge, stock purchases will not be
<PAGE>
-8-
made in the Tender Offer from (i) Controlled's officers or directors or (ii)
any shareholder owning one percent or more of Controlled's outstanding stock.
(k) Except in the Merger, there is no plan or intention to liquidate
either Distributing or Controlled, to merge either corporation with any other
corporation, or to sell or otherwise dispose of the assets of either
corporation during or after the Transaction, except in the ordinary course of
business.
(l) The total adjusted basis and the fair market value of the assets
transferred to Controlled by Distributing each equals or exceeds the sum of
the liabilities assumed by Controlled plus any liabilities to which the
transferred assets are subject.
(m) The liabilities assumed in the Contribution and the liabilities to
which the transferred assets are subject were incurred in the ordinary course
of business and are associated with the assets being transferred.
(n) No investment credit determined under Section 46 has been (or will
be) claimed for any property being transferred by Distributing to Controlled.
(o) Except for intercompany indebtedness that is not stock or a security
and that may arise at arm's length under certain intercompany agreements
entered into in the Distribution and Merger, no intercorporate debt will
exist between Distributing and its subsidiaries, on the one hand, and
Controlled and its subsidiaries, on the other hand, at the time of, or after,
the Distribution.
(p) Immediately before the Distribution, items of income, gain, loss,
deduction, and credit will be taken into account as required by the
applicable intercompany transaction regulations (see Section 1.1502-13 and
Section 1.1502-14 as in effect before the publication of T.D. 8597, 1995-2
C.B. 147, and as currently in effect; Section 1.1502-13 as published by T.D.
8597). Further, Distributing's excess loss account, if any, in the
controlled stock will be included in income immediately before the
Distribution (see Section 1.1502-19).
(q) Payments made in all continuing transactions, if any, between
Distributing and Controlled will be for fair market value based on terms and
conditions arrived at by the parties bargaining at arm's length.
(r) No two parties to the Contribution are investment companies as
defined in Section 368(a)(2)(F)(iii) and (iv).
<PAGE>
-9-
(s) To the best of Distributing's knowledge and belief, the Merger will
qualify as a reorganization under Section 368(a)(1)(B).
(t) The contribution by Distributing of its stock in CFCs, including
without limitation the stock of FSub 1 and FSub 4, to Controlled is not an
exchange described in Section 354.
(u) FSub 1 and FSub 4 are corporations under Section 7701(a)(3).
(v) To the best of Distributing's knowledge, no person who is not a
qualified U.S. person (under Section 1.367(e)-1T of the Income Tax
Regulations) owns, directly or constructively (under Section
1.367(e)-1T(c)(2)), five percent or more of the Distributing stock.
(w) As of the date of the Distribution, Distributing will not have been
a United States real property holding corporation (under Section 897(c)(2))
at any time during the preceding five years, nor will Distributing or
Controlled be a United States real property holding corporation (under
Section 897(c)(2)) following the Distribution,
RULINGS
Based solely on the information submitted and the representations set
forth above, and provided the Merger qualifies as a reorganization described
in Section 368(a)(1)(B), we rule as follows on the Transaction:
(1) The Contribution followed by the Distribution will be a
reorganization under Section 368(a)(1)(D). Distributing and Controlled will
each be "a party to a reorganization" under Section 368(b).
(2) No gain or loss will be recognized by Distributing on the
Contribution (Sections 361(a) and 357(a)).
(3) No gain or loss will be recognized by Controlled on the Contribution
(Section 1032(a)).
(4) The basis of each asset received by Controlled in the Asset
Contribution will equal the basis of that asset in the hands of Distributing
immediately before the transfer (Section 362(b)).
(5) The holding period of each asset received by Controlled in the Asset
Contribution will include the period during which Distributing held that
asset (Section 1223(2)).
<PAGE>
-10-
(6) No gain or loss will be recognized by Distributing on the
Distribution (Section 361(c)(1)).
(7) No gain or loss will be recognized by (and no amount will otherwise
be included in the income of) the shareholders of Distributing on receipt of
the Controlled stock in the Distribution (Section 355(a)(1)).
(8) The aggregate basis of Distributing and Controlled stock in the
hands of each Distributing shareholder immediately after the Distribution
will equal the aggregate basis of the Distributing stock held immediately
before the Distribution, allocated between the Distributing stock and the
Controlled stock in proportion to the fair market value of each in accordance
with Section 1.358-2(a)(2) (Section 358(a)(1), (b)(2) and (c)).
(9) The holding period of the Controlled stock received by each
Distributing shareholder will include the holding period of the Distributing
stock on which the Distribution is made, provided the Distributing stock is
held as a capital asset on the date of the Distribution (Section 1223(1)).
(10) As provided in Section 312(h), proper allocation of earnings and
profits between Distributing and Controlled will be made under Section
1.312-10(a).
(11) Provided Distributing (i) satisfies the requirements of Section
1.367(e)-1T(c)(2)(i) (which includes the reporting requirement of Section
1.367(e)-1T(c)(2)(iii)) and (ii) does not know or have reason to know that
any shareholder of Distributing who is not a qualified U.S. person (under
Section 1.367(e)-1T(b)(1)(i)) is a "5-percent shareholder" (under Section
1.367(e)-1T(c)(2)(ii)), no gain will be recognized by Distributing under
Section 367(e)(1) on the Distribution.
(12) The earnings and profits attributable to the stock of any CFC
contributed by Distributing to Controlled, to the extent attributable to the
stock of such corporation, under Section 1.1248-2 or Section 1.1248-3,
whichever is applicable, that were accumulated in taxable years of such
corporation beginning after December 31, 1962, during the period or periods
such stock was held by Distributing while the corporation was a CFC shall be
attributable to the stock in such corporation received by Controlled (Section
1.1248-1(a)(1)).
(13) FSub 1 will recognize gain under Section 311(b) on the Foreign
Distribution. Any gain recognized will be treated as foreign personal
holding company income under Section 954(c) and includible in Distributing's
income under Section 951.
<PAGE>
-11-
CAVEATS
We express no opinion about the tax treatment of the Transaction under
other provisions of the Code and regulations or the tax treatment of any
conditions existing at the time of, or effects resulting from, the
Transaction that are not specifically covered by the above rulings. In
particular, we express no opinion regarding:
(i) Qualification of the Merger as a reorganization under Section
368(a)(1)(B);
(ii) The transactions described in paragraphs (i), (ii), (iv), (vii), and
(viii) under the "Proposed Transaction" section of this letter;
(iii) The Share Repurchase Program or any repurchases of Controlled
stock through open market purchases or a Tender Offer;
(iv) The conversion of Employee Options held by current and former
employees of Business A, Business B, or Business C to options in Controlled
or New Parent;
(v) The Rights Agreement, or any similar arrangement adopted by
Controlled; or
(vi) The tax consequences of the Services, the Lease, or the
Transitional Rights.
The rulings in this letter are based on the provisions of Section 355 as
currently in effect and are subject to change should Section 355 be
retroactively amended.
Final regulations pertaining to one or more of the issues addressed in
this ruling letter have not yet been adopted. Therefore this ruling letter
will be modified or revoked by adoption of final regulations to the extent
the regulations are inconsistent with any conclusions stated herein. See
Section 12.04 of Rev. Proc. 97-1, 1997-1 I.R.B. 11, 43. However, when the
criteria in Section 12.05 of Rev. Proc. 97-1 are satisfied, the revocation
or modification of a ruling will not be applied retroactively except in rare
or unusual circumstances.
The rulings in this letter are based on the facts and representations
submitted under penalties of perjury in support of the request for rulings.
Verification of that information may be required as part of the audit process.
<PAGE>
-12-
PROCEDURAL MATTERS
This letter has no effect on any earlier documents and is directed only
to the taxpayer who requested it. Section 6110(j)(3) provides that it may
not be used or cited as precedent.
Each taxpayer involved in this transaction must attach a copy of this
letter to the federal income tax return of the taxpayer for the taxable year
in which the transaction is completed.
Under a power of attorney on file in this office, we are forwarding a
copy of this letter to each of your authorized representatives.
Sincerely yours,
Assistant Chief Counsel (Corporate)
By /s/
------------------------------------
Wayne T. Murray
Senior Technical Reviewer
Branch 4
