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AUTOLIV INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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pursuant to Exchange Act Rule 0-11 (Set forth the amount on
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Our date March 12, 1998
Our ref Gunnar Bark
Department Chairman and Chief Executive Officer
Telephone +46 (8) 402 06 60
Dear Stockholder,
It is my pleasure to invite you to the 1998 Annual Meeting of
Stockholders of Autoliv, Inc. which will be held on Tuesday, April 21,
1998 at The Banquet Room, 57th floor,
The First National Bank of Chicago, One First National Plaza, Chicago,
Illinois 60602,
commencing at 9.00 a.m. local time.
_____________________________________________________
Information regarding the matters to be voted upon at the meeting is
contained in the formal notice of the meeting and proxy statement on the
following pages.
It is important that your shares be represented at this meeting,
therefore, please mark, sign, date and return your proxy promptly in the
enclosed envelope.
A public news release covering voting results will be available after the
meeting.
The Autoliv, Inc. Annual Report for the fiscal year ended December 31,
1997 is being distributed to stockholders with this proxy statement.
Sincerely,
Gunnar Bark
Chairman of the Board and CEO
AUTOLIV, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders of Autoliv, Inc. (the "Company") will
be held on Tuesday, April 21, 1998, at The Banquet Room, 57th floor, The
First National Bank of Chicago, One First National Plaza, Chicago,
Illinois at 9.00 a.m. local time to consider and vote upon:
1. Election of one director for a term of office expiring on the Annual
Meeting of Stockholders in 2001 (see page 2).
2. Approval of the Company's 1997 Stock Incentive Plan (see pages 9-12).
3. Ratification of the appointment of Ernst & Young AB as the
Company's independent auditing firm for the fiscal year ending December
31, 1997 and the fiscal year ending December 31, 1998 (see page 12).
4. Any other business that may properly come before the meeting and/or
any adjournment thereof.
The close of business of February 20, 1998 has been fixed as the record
date for the meeting. All stockholders of record at the close of business
on that date are entitled to be present and vote at the meeting and/or
any adjournment thereof.
Attendance at the annual meeting will be limited to stockholders of
record, beneficial owners of Company common stock entitled to vote at the
meeting having evidence of ownership, the authorized representative (one
only) of an absent stockholder, and invited guests of management. Any
person claiming to be an authorized representative of a stockholder must,
upon request, produce written evidence of such authorization.
The meeting will be conducted pursuant to the Company's by-laws and rules
of order prescribed by the Chairman of the meeting.
By order of the Board of Directors
Jorgen I. Svensson
Vice President for Legal Affairs,
General Counsel and Secretary
March 10, 1998
AUTOLIV, INC.
Box 70381
SE-107 24 Stockholm
Sweden
PROXY STATEMENT
March 10, 1998
INTRODUCTION
Autoliv, Inc., a Delaware holding corporation (the "Company"), was formed
in October 1996 for the purpose of effecting the combination of Autoliv
AB and the automotive safety products business of Morton International,
Inc. Effective April 30, 1997, Morton International, Inc. (subsequently
renamed Autoliv ASP, Inc.) contributed its businesses other than the
automotive safety products business to a newly created subsidiary and all
the outstanding common stock of this newly created subsidiary
(subsequently renamed Morton International, Inc.)was spun off on a share
for share basis to the shareholders of Morton International, Inc.
Pursuant to the combination Autoliv AB shareholders exchanged their
shares in Autoliv AB for 53.2 percent of the Company's shares and Morton
International, Inc.'s shareholders received 46.8 percent of the Company's
shares.
Since the foregoing transactions, the Company and Morton International,
Inc. have been independent publicly owned companies with separate,
independent boards of directors and management.
SOLICITATION OF PROXIES
This Proxy Statement is furnished in connection with the solicitation by
the Company's Board of Directors (the "Board") of proxies for use at its
Annual Meeting of Stockholders, to be held on Tuesday, April 21, 1998,
and at any adjournment thereof (the "1998 Annual Meeting" or the
"meeting").
The shares represented by all properly executed and unrevoked proxies
received in proper form in time for the meeting will be voted. Shares
will be voted in accordance with stockholders' instructions in the
accompanying proxy. If no instructions are given, the shares will be
voted in accordance with the Board's recommendations, which are noted
herein. Any proxy given may be revoked at any time before it is voted at
the meeting.
Directors will be elected by a plurality of the votes of the shares
present at the meeting in person or by proxy and entitled to vote
thereon. Votes withheld as to one or more nominees will not be counted as
votes cast for such individuals. Any other proposal brought before the
meeting will be decided by a majority of votes represented at the meeting
and entitled to vote thereat. Consequently, abstentions and broker non-
votes (votes withheld by brokers in the absence of instructions from
street-name holders) are not counted for purposes of determining whether
a proposal has been approved, but they are counted for purposes of
establishing a quorum at the meeting.
The Company will bear the cost of the solicitation. In addition to
solicitation by mail, the Company will request banks, brokers and other
custodian nominees and fiduciaries to supply proxy material to the
beneficial owners of the Company's common stock of whom they have
knowledge, and will reimburse them for their expenses in so doing; and
certain directors, officers and other employees of the Company, not
specially employed for the purpose, may solicit proxies, without
additional remuneration therefor, by personal interview, mail, telephone
or telegraph.
In addition, the Company has retained Shareholder Communications
Corporation to assist in the solicitation for a fee of $ 7,500 plus
expenses.
1. ELECTION OF DIRECTORS
The Company's by-laws provide that the size of the Board shall be fixed
from time to time exclusively by the Board. To the extent practicable,
one-half of the directors are to be citizens of the United States and
one-half of the directors are to be nationals of Sweden or member states
of the European Union. The Board presently consists of seven members,
divided into three classes. Directors in each class are elected on a
rotating basis at the annual stockholders meeting at which the term for
such class expires, for terms expiring at the third subsequent annual
meeting of stockholders.
Listed below as nominee for election at the 1998 Annual Meeting for a
three-year term is Per-Olof Aronson whose present term will expire at
that time. Mr. Aronson is presently serving as director, and the Company
has not been advised by Mr. Aronson that he will not serve if elected.
The other director whose present term will expire at the 1998 Annual
Meeting, Mr. George A. Schaefer, who will reach the age of 70 in 1998,
has advised that he will not stand for reelection.
THE BOARD RECOMMENDS A VOTE "FOR" THE NOMINEE FOR DIRECTOR.
BOARD MEETING ATTENDANCE AND COMPENSATION OF DIRECTORS
The Board met four times during the year ended December 31, 1997. All of
the incumbent directors were present at all meetings of the Board and
Board committees of which they were members.
Directors who are employees of the Company or any subsidiary thereof do
not receive any compensation for service on the Board or Board
committees. Non-employee directors receive for their services a retainer
of $ 35,000 per year, plus a fee of $ 1,200 for each Board meeting
attended.
In addition, non-employee directors who are chairmen of the Audit and
Compensation Committees each receive additional annual retainers of
$ 3,000; and all committee chairmen and members receive $ 800 for
attendance at each meeting of their particular committees.
Non-employee directors who are elected or continuing as such at annual
stockholders meetings also receive annual grants of shares of Company
common stock with a market value of $ 15,000.
NOMINEE FOR DIRECTOR AT THE APRIL 1998 ANNUAL MEETING
PER-OLOF ARONSON, age 67, has been a director of Autoliv, Inc. since May
1997. He has been a director of Autoliv AB 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. Mr.
Aronson holds a graduate degree in chemical engineering from the Royal
Institute of Technology (KTH) in Stockholm.
INCUMBENT DIRECTORS - TERMS EXPIRING AT THE 1999 ANNUAL MEETING
WILHELM KULL, age 61, has been a director and Chief Financial Officer of
Autoliv, Inc. since May 1997. He has been Vice President and Chief
Financial Officer of Autoliv AB since 1975, when the company under the
name Granges Weda was a subsidiary of Granges AB, a publicly listed
company. Mr. Kull served as the Deputy Chief Financial Officer of Granges
AB from 1969 to 1974. Prior to that 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 in the United
States.
S. JAY STEWART, age 59, has been a director of Autoliv, Inc. since May
1997. He has served as Chairman and Chief Executive Officer of Morton
since April 1994 and has been a director of Morton since 1989. Mr.
Stewart 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 63, has been a director of Autoliv, Inc. since May
1997. He 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 and has also been a
director of McDonald's Corporation and Option Care, Inc. He is a graduate
of the University of Pennsylvania Wharton School of Finance.
INCUMBENT DIRECTORS - TERMS EXPIRING AT THE 2000 ANNUAL MEETING
GUNNAR, BARK, age 58, Chairman and CEO of the Company, was elected a
director of Autoliv AB and appointed Chairman of the Autoliv AB Board in
March 1997. Mr. Bark had previously served as President and Chief
Executive Officer of Autoliv AB and as a member of the Autoliv AB Board
from 1982 until he retired from his position as President of Autoliv AB
and member of the Autoliv AB Board in April 1996 and as Chief Executive
Officer of Autoliv AB in August 1996. Mr. Bark serves as Chairman of
Allgon AB and of Spectra-Physics AB. Mr. Bark also serves as a director
of Esselte AB. Mr. Bark has a Master of Science in Engineering Physics
from the Royal Institute of Technology (KTH) in Stockholm. The Chalmers
Institute of Technology in Gothenburg has awarded him the title of
Honorary Doctor of Engineering in May 1997.
PER WELIN, age 61, has been a director of Autoliv, Inc. since May 1997
and of Autoliv AB since 1995. Mr. Welin has served as Executive Vice
President and director of the investment company L-E Lundberg-foretagen
AB since 1991. He also holds the position of director of Allgon AB, MoDo
AB and NCC AB. Mr. Welin has a Master of Science in Engineering 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.
COMMITTEES OF THE BOARD
There are three standing committees of the Board: the Audit Committee,
Compensation Committee and Nominating Committee.
The Audit Committee recommends to the Board the independent auditors to
be selected to audit the Company's annual financial statements and
reviews the fees charged for such audits and for any special assignments
given such auditors. The committee also reviews the annual audit and its
scope, including the independent auditors' letter of comments and
management's responses thereto; possible violations of the Company's
business ethics and conflicts of interest policies; and any major
accounting changes made or contemplated. In addition, the committee
confirms that no restrictions have been imposed by Company personnel on
the scope of the independent auditors' examinations. Members of this
committee are Messrs. Welin (Chairman), Aronson, Schaefer and Stewart.
The committee met twice in 1997.
The Compensation Committee advises the Board of the Company with respect
to the compensation to be paid to the directors of the Company and
approves and advises the Board with respect to the terms of contracts to
be entered into with the senior executives of the Company. The Committee
also administers the Company's stock incentive plan. Members of this
committee are Messrs. Stewart (Chairman), Aronson, Stone and Welin. The
committee met three times in 1997.
The Nominating Committee nominates new members of the Board of the
Company and also of the subsidiaries of the Company. This committee
consists of all the members of the Board of the Company. The committee
met once in 1997.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
On February 20, 1998, the record date for the 1998 Annual Meeting, there
were 102,201,288 shares of common stock outstanding, each entitled to one
vote. Only stockholders of record on that date will be entitled to vote
at the meeting. The Company has no other class of equity securities
outstanding. As of the date of this proxy statement, no stockholder was
known to the Company to beneficially own more than 5% of the Company's
common stock.
The following table shows the Company's common stock beneficially owned
as of February 20, 1998 by each present director and each executive
officer named in the Summary Compensation Table on page 7; and by all
present directors and executive officers of the Company as a group. Each
named person has sole voting and investment power with respect to the
shares shown.
Shares
beneficially
owned (1)
Sture Anderson 200
Per-Olof Aronson 4,260
Gunnar Bark 25,000
Claes Humbla 0
Wilhelm Kull 0
George A. Schaefer 2,817
S. Jay Stewart 68,747
Roger W. Stone 1,794
Jorgen I.Svensson 0
Per Welin 260
All directors, nominees and
executive officers as a group 103,078
(1) All amounts shown represent less than 1% of the outstanding share of
the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is comprised exclusively of directors who are
not and have never been Company employees. No Company executive officer
serves on the compensation committee of another company for which any
member of the Company's Compensation Committee serves as an executive
officer.
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board (the "Committee") advises the
Board regarding senior officers, compensation and administers the
Company's cash and stock incentive compensation plan. The purpose of this
plan and the objectives of the Committee are to:
- - provide competitive compensation programs so as to be able to
attract, retain and motivate top management talent,
- - pay for performance, motivating both long- and short-term
performance on behalf of Company stockholders,
- - place greater emphasis on at - risk incentive compensation than on
fixed salaries, particularly for senior executives,
- - base the incentive compensation of business unit or subsidiary
executives on the performance of their operations, while including a
component which recognizes overall Company performance, and
- - join shareholder and management interests.
To further these objectives, the compensation of senior executive
officers includes three components: (1) base salaries, (2) annual bonus
programs, and (3) a stock incentive program.
The Committee has consulted with an independent compensation consulting
firm for advice in regard to the total compensation of the Company's
senior executive officers.
BASE SALARIES
The Committee recommends salaries for senior executive officers based on
data on competitive salaries received from independent compensation
consultants, position and individual performance.
ANNUAL BONUS PROGRAMS
The Committee determined annual bonus payments for 1997 based on
performance during the period May 1, 1997 to December 31, 1997. Under the
annual bonus program applicable to senior executive officers, award
levels may range from zero to 48% of their base salaries as of the
beginning of the performance periods, depending on salary grade and
attainment of Company and applicable business unit and subsidiary profit
targets as approved by the Committee. Based on these factors and the
terms of such annual bonus programs, the Committee approved bonus
payments to senior executive officers varying from 22% to 48% of their
base salaries.
STOCK INCENTIVE PLAN
The Committee authorized stock option grants to selected officers of
Autoliv ASP, Inc. and stock appreciation rights ("SARs") payable in cash
to the senior executive officers of the Company located in Sweden with
the exception of the Chairman and Chief Executive Officer. All options
and rights granted in 1997 are for 10 year terms with an exercise price
equal to the stock market price on the date of grant, and become
exercisable after one year of continued employment following the grant
date. Executive officers received option or right grants in August 1997
ranging from 2,000 shares to 20,000 shares.
CHIEF EXECUTIVE OFFICER
The compensation for the period May 1, 1997 to May 1, 1998 of the
Company's Chairman and Chief Executive Officer, Mr. Gunnar Bark, was
determined based on information on competitive compensation levels
received from an independent compensation consultant.
In August 1997, the Committee approved a stock grant of 25,000 shares of
common stock of the Company to Mr. Bark, and an annual cash compensation
of SEK 4,500,000 (USD 582,223). The Committee also approved the payment
to Mr. Bark of SEK 2,000,000 (USD 258,766) as a partial tax offset
against income tax liability related to the stock grant.
LIMITATION ON DEDUCTIBILITY OF CERTAIN COMPENSATION
Section 162 (m) of the Internal Revenue Code (the "Code") generally
disallows a tax deduction to public companies for annual compensation
over $1 million paid to their chief executive officers and the four other
most highly compensated executive officers that is not "performance-
based" (as defined in the Code). It is the Committee's general policy to
avoid the loss of tax deductibility whenever compliance with Section 162
(m) would be consistent with the Company's incentive compensation
objectives.
Consequently, the employee incentive compensation programs in which the
Company's most highly compensated officers participate have been
structured to comply with the Code's definition of performance-based
compensation. To qualify as performance-based under the Code,
compensation payments must be made pursuant to a plan that is
administered by a committee of outside directors and must be based on
achieving objective performance goals. In addition, the material terms of
the plan must be disclosed to and approved by stockholders, and the
Committee must certify that the performance goals were achieved before
payments can be awarded.
Notwithstanding its general policy, however, the Committee retains the
discretion to authorize incentive payments that may not be deductible if
it believes that doing so would be in the best interest of the Company
and its stockholders.
S. Jay Stewart, Chairman
Per-Olof Aronson
Roger W. Stone
Per Welin
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative stockholder returns on the
Company's common stock with Standard & Poors 500 Index and Standard &
Poors Automobiles Index.
GRAPH
EDGAR representation of data used in printed graphic.
1997: May 1 July 1 Oct 1 Dec 31
Autoliv, Inc. $35.5 $39.5 $43.2 $32.8
S&P 500 Index $35.5 $39.6 $42.5 $43.1
S&P Automobiles Index $35.5 $37.4 $44.2 $44.2
(1) Public trading of the Company stock began on May 1, 1997 on the New
York Stock Exchange and on May 2, 1997 on the Stockholm Stock Exchange
in the form of Swedish Depositary Receipts. Consequently, the period
covered on the graph is limited to the Company's returns from May 1, 1997
through December 31, 1997.
(2) Dividend at a rate of $ 0.22 per share of common stock was paid
during the period and is included in the cumulative return on the
Company's common stock.
SUMMARY COMPENSATION TABLE
(USD) (1)
Annual Compensation Long-Term All Other
Compensation Compensation
Name and Principal Fiscal Salary Bonus Other Awards (4)
Function year (2) Annual Securities
Compensa- Underlying
tion Options (3)
Gunnar Bark 1997 388,149 0 0 0 3,031,052
Chairman and 1996 450,110 146,520 0 0 182,344
Chief Executive 1995 512,821 219.780 0 0 119,780
Officer
Wilhelm Kull 1997 284,642 315,940 0 20,000
Chief Financial 1996 163,516 21,832 0 0
Officer 1995 131,136 27,985 0 0
Sture Andersson 1997 153,099 181,408 0 5,500
Vice President 1996 144,762 21,832 0 0
Engineering 1995 131,136 27,985 0 0
Claes Humbla 1997 153,099 181,408 0 5,500
Vice President 1996 144,762 21,832 0
Human Resources 1995 131,136 27,985 0
Jorgen Svensson 1997 130,250 151,650 0 5,200
Vice President 1996 82,637 21,832 0
Legal Affairs, 1995 73,846 27,985 0
General Counsel
and Secretary
(1) The amounts contained in the table below were paid either in Swedish
Kronor, French Francs or German Marks. All amounts have been converted to
dollars using the following exchange rates: 1997 - 1 US = 7.729 SEK,
1996 - 1 USD = 6.825 SEK, 1 FRF = 1.31 SEK and 1 DEM = 4.42 SEK,
1995 - 1 USD = 6.825 SEK and 1 FRF = 1.36 SEK.
(2) The bonuses for 1997 include a one-time stay and performance bonus.
(3) All awards granted pursuant to the Autoliv, Inc. 1997 Stock Incentive
Plan are subject to stockholder approval at the 1998 Annual Meeting.
(4) The amount for 1997 consists of the value of 25,000 shares of common
stock of the Company when granted in August 1997, a lump sum amount to
partially offset the tax payable in connection with the stock grant, a
pension payment from Autoliv AB and a consultancy fee of $ 1,293,828 paid
by Autoliv AB to Kanoe AB, a company controlled by Mr. Bark, for services
when Mr. Bark was not employed by Autoliv AB or the Company. The amounts
for 1996 and 1995 consist of board fees received from Autoliv AB
subsidiaries in the US, France and Germany.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants(1)(2) Expiration Potential
Number of % of Total Exercise Date Realizable Value
Securities Options/SAR or Base at assumed Annual
Underlying Granted Price Rates of Stock
Options/SAR to Employees (per share) Price Appreciation
Granted in Fiscal year for Option Term(3)
5% 10%
Gunnar Bark 0 0
Chairman and
Chief Executive
Officer
Wilhelm Kull 20,000 25.49 $35.75 8/5/07 $449,660 $1,139,526
Chief Financial
Officer
Sture Andersson 5,500 7.01 $35.75 8/5/07 $123,656 $313,370
Vice President
Engineering
Claes Humbla 5,500 7.01 $35.75 8/5/07 $123,656 $313,370
Vice President
Human Resources
Jorgen Svensson 5,200 6.63 $35.75 8/5/07 $116,912 $296,277
Vice President
Legal Affairs,
General Counsel
and Secretary
(1) The options/SAR granted will become exercisable in August 1998. As of
December 31, 1997 none of such options/SAR were in the money.
(2) In 1997 all executive officers of the Company as a group received
52,250 options/SAR and all employees of the Company (other than executive
officers) as a group received 28,200 options/SAR.
(3) The amounts shown in these two columns represent potential realizable
values using the converted options and exercise prices. The assumed rates
of stock price appreciation are set by SEC rules and are not intended to
forecast the future appreciation of the Company's common stock.
CHANGE OF CONTROL SEVERANCE AGREEMENTS
All individuals named in the Summary Compensation Table except Messrs.
Bark and Kull have change of control severance agreements with the
Company ("agreements") which are effective until December 31, 1998 and
will be automatically extended annually for additional 1-year periods
unless notice to the contrary is given. The agreements are otherwise
terminable during their periods of effectiveness only by termination of
the executives' employment. Such termination in connection with a change
in control of the Company (as defined in the agreements) will entitle an
executive to benefits under the agreements. The agreements require
continued employment of the executive following a change of control on an
equivalent basis to employment immediately before such change of control.
In the event that during the two-year period following a change of
control, the executive terminates the executive's employment for Good
Reason (as defined in the agreements) or, during the 30-day period
commencing one year after the change of control, for any reason, or the
Company terminates the executive's employment without cause (as defined
in the agreements), the executive would be entitled to receive an
immediate lump sum payment in an amount equal to between two and half and
three times the sum of (i) such executive's then current annual salary,
(ii) the average of the bonuses received for the two most recent fiscal
years and (iii) the taxable value of the benefit of a company car.
PENSION PLANS
The Company has paid pension benefit premiums for Messrs. Kull,
Andersson, Humbla and Svensson in accordance with customary Swedish
practice. Normal retirement age is the age of 65. Mr. Kull has an
agreement allowing retirement at the age of 63 and Messrs. Andersson and
Humbla at the age of 62. Pursuant to such agreements, in 1995 Autoliv AB
paid pension insurance premiums to ensure pension benefits would be paid
to Messrs. Kull, Andersson and Humbla for the period from the date of the
executive's retirement until the normal retirement age of 65.
2. APPROVAL OF THE COMPANY'S 1997 STOCK INCENTIVE PLAN
The Board has approved and recommends stockholder approval of the
Autoliv, Inc. 1997 Stock Incentive Plan (the "Plan") in the belief that
grants and awards of cash and stock thereunder (collectively, "awards")
will assist Company Management to attract, retain and provide appropriate
incentives to key personnel. In addition, approval by stockholders will
enable certain awards to qualify as "performance-based compensation" not
subject to the limitations on deductibility of executive compensation in
excess of $ 1 million contained in Section 162 (m) of the Internal
Revenue Code.
The Autoliv, Inc. 1997 Stock Incentive Plan (the "Plan") was approved by
the Board on April 30, 1997 subject to approval by the stockholders of
the Company. The following summary of the Plan is qualified in its
entirety by reference to the complete text of the Plan, a copy of which
can be obtained from the Company by any stockholder upon written request.
The Plan is intended to promote the long term financial interests and
growth of the Company by (a) attracting and retaining executive
personnel, (b) motivating executive personnel by means of growth-related
incentives, (c) providing incentive compensation opportunities that are
competitive with those of other major corporations, and (d) furthering
the identity of interests of participants with those of the stockholders
of the Company.
The Plan is intended to comply with the requirements of Rule 16b-3 ("Rule
16b-3") promulgated under the Securities Exchange Act of 1934, as
amended. In addition, the Plan is intended to provide performance-based
compensation so as to be eligible for compliance with Section 162(m)
("Section 162(m)") of the Code which, generally, limits the deduction by
an employer for compensation of certain covered officers ("Covered
Employees"). Under Section 162(m), certain compensation, including
compensation based on the attainment of performance goals, may be
disregarded for purposes of this deduction limit if certain requirements
are met. Among the requirements for compensation to qualify for this
exception is that the material terms pursuant to which the compensation
is to be paid be disclosed to and approved by the stockholders in a
separate vote prior to the payment. Accordingly, if the Plan is approved
by stockholders and the other conditions of Section 162(m) relating to
performance-based compensation are satisfied, compensation paid to
Covered Employees pursuant to the Plan will not fail to be deductible
under Section 162(m).
General
The Plan will be administered by the Compensation Committee of the Board.
The Plan provides for the granting of awards to such key employees of the
Company and its affiliates as the Compensation Committee may select from
time to time. At present approximately 180 employees are eligible to
participate in the Plan.
An aggregate of 800,000 shares of the Company's common stock ("Company
Stock") is reserved for issuance under the Plan, subject to adjustment as
described below. Such shares may be authorized but unissued Company Stock
or authorized and issued Company Stock held in the Company's treasury or
a combination thereof. Generally, shares subject to an award that remain
unissued upon expiration or cancellation of the award will be available
for other awards under the Plan. The total number of shares of Company
Stock subject to awards (including awards paid in cash but denominated as
shares of Company Stock) granted to any Participant in the Plan during
any calendar year may not exceed 600,000. In the event that the
Compensation Committee determines that any recapitalization,
reorganization, spin off, stock split, combination or other increase or
reduction in the number of issued shares of Company Stock affects such
Company Stock such that an adjustment is appropriate in order to prevent
dilution or enlargement of the rights of participants in the Plan, then
the Compensation Committee may make such equitable changes or adjustments
as it deems necessary to the number and kind of shares of Company Stock
which may thereafter be issued in connection with awards, the limit on
individual awards, the number and kind of shares of Company Stock
subject to each outstanding award, and the exercise price of each award.
Awards under the Plan may be made in the form of (a) Incentive Stock
Options, (b) Non-Qualified Stock Options (Incentive and Non-Qualified
Stock Options are collectively referred to as "options"), (c) stock
appreciation rights, (d) Restricted Stock, and (e) Other Awards.
Administration
The Plan will be administered by the Compensation Committee. The
Compensation Committee will, at all times, consist of two or more
persons, each of whom is an "outside director" within the meaning of
Section 162(m) and a "disinterested person" within the meaning of Rule
16b-3. The Compensation Committee is authorized, among other things, to
interpret and implement the provisions of the Plan, to select the persons
to whom awards will be granted, to determine the terms and conditions of
such awards and to make all other determinations deemed necessary or
advisable for the administration of the Plan.
Awards under the Plan
Stock Options
Options granted pursuant to the Plan will be exercisable at such time or
times as the Compensation Committee determines. The purchase price per
share payable upon the exercise of an option (the "option exercise
price") will be established by the Compensation Committee; provided,
however, that in the case of an Incentive Stock Option, the option
exercise price may be no less than the fair market value of a share of
Company Stock on the date of grant and in the case of a Non-Qualified
Stock Option the option exercise price may be no less than the par value
of a share of Company Stock. The option exercise price is payable by any
one of the following methods or a combination thereof, to the extent
permitted by the Compensation Committee: (a) cash; (b) check, bank draft
or money order; (c) by surrender of shares of Company Stock having a fair
market value on the date of the exercise equal to the option exercise
price; or (e) by any other consideration.
Stock Appreciation Rights
Stock appreciation rights may be granted in connection with all or any
part of, or independently of, any option granted under the Plan. A stock
appreciation right granted independently of any option will be subject to
the same vesting rules as described above for options. A stock
appreciation right granted in tandem with any stock option will be
exercisable only when and to the extent the option to which it relates is
exercisable. The grantee of a stock appreciation right has the right to
surrender the stock appreciation right and receive from the Company, in
cash, an amount equal to the excess of the fair market value of a share
of Company Stock over the exercise price of the stock appreciation right
for each share of Company Stock in respect of which such stock
appreciation right is being exercised.
Restricted Stock
The Compensation Committee may grant restricted shares of Company Stock
to such persons, in such amounts, and subject to such terms and
conditions (including the attainment of performance goals) as the
Compensation Committee may determine in its discretion. Except for
restrictions on transfer and such other restrictions as the Compensation
Committee may impose, participants will have all the rights of a
stockholder with respect to the restricted stock. Unless the Compensation
Committee determines otherwise, termination of employment during the
restricted period will result in the forfeiture by the participant of all
shares still subject to restrictions.
Other Awards
Other cash awards and awards valued in whole or in part by reference to,
or otherwise based on, Company Stock may be granted either alone or in
addition to other awards under the Plan. Subject to the provisions of the
Plan, the Compensation Committee will have the sole and complete
authority to determine the persons to whom and the time or times at which
such Other Awards will be granted, the number of shares of Company Stock
to be granted pursuant to such Other Awards and all other conditions of
such Other Awards. Participants may elect to defer all or a portion of
such Other Awards in accordance with procedures established by the
Compensation Committee. The Compensation Committee may, in its
discretion, make awards with terms and conditions different from those
specified in the Plan to participants who are employed outside of the
United States or who are foreign nationals.
Other Features of the Plan
In the event of a Change in Control (as defined in the Plan), all
outstanding awards will become fully vested and/or immediately
exercisable.
The Board or the Compensation Committee may suspend, revise, terminate or
amend the Plan at any time; provided, however, that no such action may,
without the consent of a participant, reduce the participants' rights
under any outstanding award.
New Plan Benefits
In as much as awards under the Plan will be granted at the sole
discretion of the Compensation Committee, it is not possible to determine
the awards that will be made thereunder for 1998. See "OPTION/SAR GRANTS
IN LAST FISCAL YEAR" for the name, position and grant information for
Plan participants who were granted awards under the Plan for 1997,
subject to shareholder approval of the Plan.
Certain Federal Income Tax Consequences
The following discussion is a brief summary of the principal United
States Federal income tax consequences under current Federal income tax
laws relating to awards under the Plan. This summary is not intended to
be exhaustive and, among other things, does not describe state, local or
foreign income and other tax consequences.
Non-Qualified Stock Options
An optionee will not recognize any taxable income upon the grant of a
Non-Qualified Stock Option. The Company will not be entitled to a tax
deduction with respect to the grant of a Non-Qualified Stock Option. Upon
exercise of a Non-Qualified Stock Option, the excess of the fair market
value of the Company Stock on the exercise date over the option exercise
price will be taxable as compensation income to the optionee and will be
subject to applicable withholding taxes. The Company will generally be
entitled to a tax deduction at such time in the amount of such
compensation income. The optionee's tax basis for the Company Stock
received pursuant to the exercise of a Non-Qualified Stock Option will
equal the sum of the compensation income recognized and the exercise
price.
In the event of a sale of Company Stock received upon the exercise of a
Non-Qualified Stock Option, any appreciation or depreciation after the
exercise date generally will be taxed as capital gain or loss.
Incentive Stock Options
An optionee will not recognize any taxable income at the time of grant or
timely exercise of an Incentive Stock Option and the Company will not be
entitled to a tax deduction with respect to such grant or exercise.
Exercise of an Incentive Stock Option may, however, give rise to taxable
compensation income subject to applicable withholding taxes, and a tax
deduction to the Company, if the Incentive Stock Option is not exercised
on a timely basis (generally, while the optionee is employed by the
Company or within 90 days after termination of employment) or if the
optionee subsequently engages in a "disqualifying disposition," as
described below.
A sale or exchange by an optionee of shares acquired upon the exercise of
an Incentive Stock Option more than one year after the transfer of the
shares to such optionee and more than two years after the date of grant
of the Incentive Stock Option will result in any difference between the
net sale proceeds and the exercise price being treated as long-term
capital gain (or loss) to the optionee. If such sale or exchange takes
place within two years after the date of grant of the Incentive Stock
Option or within one year from the date of transfer of the Incentive
Stock Option shares to the optionee, such sale or exchange will generally
constitute a "disqualifying disposition" of such shares that will have
the following results: any excess of (a) the lesser of (i) the fair
market value of the shares at the time of exercise of the Incentive Stock
Option and (ii) the amount realized on such disqualifying disposition of
the shares over (b) the option exercise price of such shares, will be
ordinary income to the optionee, subject to applicable withholding taxes,
and the Company will be entitled to a tax deduction in the amount of such
income. Any further gain or loss after the date of exercise generally
will qualify as capital gain or loss and will not result in any deduction
by the Company.
Restricted Stock
A grantee will not recognize any income upon the receipt of Restricted
Stock unless the holder elects under Section 83(b) of the Code, within
thirty days of such receipt, to recognize ordinary income in an amount
equal to the fair market value of the Restricted Stock at the time of
receipt, less any amount paid for the shares. If the election is made,
the holder will not be allowed a deduction for amounts subsequently
required to be returned to the Company. If the election is not made, the
holder will generally recognize ordinary income, on the date that the
restrictions to which the Restricted Stock are subject are removed, in an
amount equal to the fair market value of such shares on such date, less
any amount paid for the shares. At the time the holder recognizes
ordinary income, the Company generally will be entitled to a deduction in
the same amount.
Generally, upon a sale or other disposition of Restricted Stock with
respect to which the holder has recognized ordinary income (i.e. a
Section 83(b) election was previously made or the restrictions were
previously removed), the holder will recognize capital gain or loss in an
amount equal to the difference between the amount realized on such sale
or other disposition and the holder's basis in such shares.
Other Types of Awards
The grant of stock appreciation right will not result in income for the
grantee or in a tax deduction for the Company. Upon the settlement of
such a right or award, the grantee will recognize ordinary income equal
to the aggregate value of the payment received, and the Company generally
will be entitled to a tax deduction in the same amount.
THE BOARD RECOMMENDS A VOTE "FOR" THE PROPOSAL TO APPROVE THE PLAN.
3. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Upon recommendation by the Audit Committee, the Board has appointed Ernst
& Young AB as the independent auditing firm for the Company's fiscal year
ending December 31, 1997 and for the fiscal year ending December 31,
1998. The Company has been advised that Ernst & Young AB has no
relationship with the Company or its subsidiaries other than that arising
from the firm's employment as auditors.
In accordance with a resolution of the Board, this selection is being
presented to the stockholders for ratification at the 1998 Annual
Meeting. While ratification by stockholders of this appointment is not
required by law or the Company's certificate of incorporation or by-laws,
management believes that such ratification is desirable. In the event
this appointment is not ratified by a majority vote of stockholders, the
Board will consider that fact when it appoints independent auditors for
the next year.
Ernst & Young AB has been the independent auditing firm for the Company
during 1997 and has been the independent auditors for Autoliv AB since
1984. Audit services provided to the Company by Ernst & Young AB during
1997 consisted of the examination of the financial statements of the
Company and its subsidiaries for that year and the preparation of various
reports based thereon.
Representatives of Ernst & Young AB are expected to be present at the
1998 Annual Meeting with the opportunity to make a statement if they so
desire and to be available to respond to appropriate questions relating
to that firm's examination of the Company's financial statements for
1997.
THE BOARD RECOMMENDS A VOTE "FOR" THE PROPOSAL TO RATIFY THE APPOINTMENT
OF ERNST & YOUNG AB AS THE COMPANY'S INDEPENDENT AUDITORS.
4. DISCRETIONARY VOTING OF PROXIES ON OTHER MATTERS
Management does not now intend to bring before the 1998 Annual Meeting
any matters other than those disclosed in the notice of the meeting.
Should any matter requiring a vote of the stockholders be properly
brought before the meeting by or at the direction of the Board, the
proxies in the enclosed form confer upon the person or persons entitled
to vote the shares represented by such proxies discretionary authority to
vote such shares in respect of any such matter in accordance with their
best judgment.
For business to be properly brought before an annual stockholders meeting
by a stockholder, timely advance written notice thereof must be received
by the Secretary of the Company at its principal executive offices in
accordance with the Company's by-laws (1). No such notices were received
for the 1998 Annual Meeting. For the Company's 1999 Annual Stockholders
Meeting any such notices must be received by the Company not later than
February 20, 1999 and not earlier than January 21, 1999.
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Stockholder proposals intended for inclusion in the proxy statement for
the 1999 Annual Stockholders Meeting must be received by the Secretary of
the Company at its principal executive offices no later than December 12,
1998.
By Order of the Board
(SIGNATURE)
Jorgen I. Svensson
Vice President for Legal Affairs,
General Counsel and Secretary
Stockholm, Sweden
March 10, 1998
(1)A copy of the Company's by-laws may be obtained by written request to
the Company's Secretary.
