SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): April 24, 1997
MORTON INTERNATIONAL, INC.(1)
(Exact Name of Registrant as Specified in Charter)
Indiana 1-12825 36-4140798
(State or Other (Commission (IRS employer
Jurisdiction of File Number) Identification No.)
Incorporation)
100 North Riverside Plaza, Chicago, Illinois 60606
(Address of Principal Executive Offices) (Zip Code)
(312) 807-2000
(Registrant's telephone number, including area code)
1 Formerly named New Morton International, Inc.<PAGE>
ITEM 1. CHANGES IN CONTROL OF REGISTRANT
On April 30, 1997 (the "Spinoff Date"), Morton
International, Inc. ("Old Morton"), the then sole shareholder
of the Registrant, distributed on a one-for-one basis (the
"Spinoff") all of the outstanding shares of the Common Stock,
par value $1.00 per share, of the Registrant (the "Common
Stock"), together with one related preferred share purchase
right distributed by the Registrant for each share of Common
Stock distributed, to the shareholders of record of the common
stock of Old Morton as of such date, pursuant to the
Distribution Agreement, dated as of April 30, 1997, by and
between the Registrant and Old Morton (the "Distribution
Agreement"). No consideration was paid by the shareholders of
Old Morton for the receipt of the shares of common stock of the
Registrant in the Spinoff. All of the voting securities of the
Registrant were, as of such date, held by the shareholders of
Old Morton.
The above matters are more fully described in an
Information Statement (the "Information Statement") made part
of the Registration Statement on Form 10 (No. 001-12825) under
the Securities Exchange Act of 1934, as amended, as previously
filed by the Registrant with the Commission on March 24, 1997
(the "Registration Statement").
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
As contemplated by the Information Statement and
pursuant to the terms of the Distribution Agreement, on or
prior to the Spinoff Date, Old Morton transferred to the
Registrant all of the assets and businesses of Old Morton other
than the assets and businesses exclusively related to Old
Morton's automotive safety products business plus a certain
amount in cash comprising the Capital Contribution and Safety
Supplemental Distribution (as defined in the Distribution
Agreement), and the Registrant assumed certain liabilities.
Additional information concerning the assets and
liabilities transferred to the Registrant and the continuing
relationship between the Registrant and Old Morton is contained
in the Information Statement under the heading "Business and
Properties" and in the Proxy Statement/Prospectus/Exchange
Offer made a part of the Registration Statement on Form S-4
(No. 333-23813) under the Securities Act of 1933, as amended,
as previously filed by Autoliv, Inc. ("Autoliv") with the
Commission and declared effective by the Commission on March
24, 1997 (the "Autoliv Registration Statement"), under the
heading "Pre-Merger Transactions," which portions of the
Information Statement and Autoliv Registration Statement are
incorporated herein by reference. In connection with the
Spinoff, the Registrant and Old Morton entered into certain
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agreements, copies of which are attached hereto as exhibits and
are incorporated herein by reference.
ITEM 5. OTHER EVENTS
On May 1, 1997, the name of the Registrant was
changed to "Morton International, Inc."
On March 19, 1997, the Board of Directors of the
Registrant declared a dividend of one preferred share purchase
right (a "Right"), to be paid as of the time of the Spinoff,
for each share of Common Stock issued and outstanding at the
close of business at such time (the "Time of Distribution"),
each Right representing the right to purchase one one-hundredth
of a share of preferred stock, par value $1.00 per share, of
the Registrant upon the terms and subject to the conditions set
forth in the Rights Agreement, dated as of April 24, 1997, by
and between the Registrant and First Chicago Trust Company of
New York, as Rights Agent (the "Rights Agreement"). The Rights
are more fully described in the Information Statement under the
heading "Description of New Morton Capital Stock -- New Morton
Rights" and in the Rights Agreement, which description and
Rights Agreement are filed as exhibits hereto and incorporated
herein by reference.
On April 24, 1997, Old Morton issued a press release
relating to, among other things, the authorization by the Board
of Directors of the Registrant of an initial share repurchase
program, allowing management to repurchase up to 10 million
shares of Common Stock, which press release is filed as Exhibit
99.03 hereto and incorporated herein by reference.
On April 28, 1997, the Registrant entered into a
Supplemental Indenture between Old Morton, the Registrant and
First Trust National Association, as Trustee (the "Supplemental
Indenture"), in connection with the assumption, as of the
effective time of the Spinoff, by the Registrant of the
obligations of Old Morton under the Indenture, dated as of June
1, 1990, between Old Morton and First Trust National
Association, successor to Continental Bank, National
Association, as Trustee, relating to the 9 1/4% Credit
Sensitive Debentures due 2020 of Old Morton, which Supplemental
Indenture is attached as Exhibit 4.01 hereto and incorporated
herein by reference.
On May 1, 1997, Old Morton and the Registrant issued
a press release relating to the Spinoff and to the combination
of Old Morton with Autoliv AB to form Autoliv, which press
release is filed as Exhibit 99.04 hereto and incorporated
herein by reference.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS.
(a) Financial Statements
The financial statements relating to Old Morton are
contained in, and are incorporated herein by reference to,
pages F1-F23 of the Information Statement.
(b) Pro Forma Financial Information
The pro forma financial information relating to the
Registrant is contained in, and is incorporated herein by
reference to, pages 6-10 of the Information Statement.
(c) Exhibits
Exhibit
No. Description
2.01 Distribution Agreement by and between the
Registrant and Autoliv ASP, Inc. (formerly named
Morton International, Inc.) ("Old Morton"),
dated as of April 30, 1997.
2.02 Tax Sharing Agreement by and between the
Registrant and Old Morton, dated as of April 30,
1997.
2.03 Employee Benefits Allocation Agreement by and
between the Registrant and Old Morton, dated as
of April 30, 1997.
4.01 Supplemental Indenture, dated as of April 28,
1997, among Old Morton, the Registrant and First
Trust National Association, as Trustee, to the
Indenture, dated as of June 1, 1990, between Old
Morton and Continental Bank, National
Association, as Trustee.
10.01 Rights Agreement by and between the Registrant
and First Chicago Trust Company of New York, as
Rights Agent, dated as of April 24, 1997.
99.01 Description of the preferred share purchase
rights of the Registrant under the heading
"Description of New Morton Capital Stock -- New
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Morton Rights" and "Business and Properties" and
the financial information of the Registrant at
pages 6-10 and F1-F23 in the Information
Statement contained in the Registration
Statement on Form 10 of the Registrant as
previously filed with the Securities and
Exchange Commission on March 24, 1997.
99.02 Information under the heading "Pre-Merger
Transactions" in the Proxy Statement/Prospectus/
Exchange Offer made a part of the Registration
Statement on Form S-4 previously filed by
Autoliv, Inc. with the Securities and Exchange
Commission on March 24, 1997.
99.03 Press release issued by Old Morton, dated April
24, 1997.
99.04 Press release issued by Old Morton and the
Registrant, dated May 1, 1997.
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SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned hereunto
duly authorized.
MORTON INTERNATIONAL, INC.
Date: May 1, 1997 By: /s/ P. Michael Phelps
P. Michael Phelps
Vice President and Secretary
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EXHIBIT INDEX
Exhibit No. Description of Document Method of Filing
2.01 Distribution Agreement by and Filed electronically
between the Registrant and herewith
Autoliv ASP, Inc.
(formerly named Morton
International, Inc.) ("Old
Morton"), dated as of April
30, 1997.
2.02 Tax Sharing Agreement by and Filed electronically
between the Registrant and Old herewith
Morton, dated as of April 30,
1997.
2.03 Employee Benefits Allocation Filed electronically
Agreement by and between herewith
the Registrant and Old Morton,
dated as of April 30, 1997.
4.01 Supplemental Indenture, dated Filed electronically
as of April 28, 1997, among herewith
Old Morton, the Registrant and
First Trust National Association,
as Trustee, to the Indenture,
dated as of June 1, 1990,
between Old Morton and Continental
Bank, National Association,
as Trustee.
10.01 Rights Agreement by and between Filed electronically
the Registrant and First herewith
Chicago Trust Company of New
York, as Rights Agent, dated
as of April 24, 1997.
99.01 Description of the preferred Incorporated by
share purchase rights of the reference to the
Registrant under the heading Registration
"Description of New Morton Statement on Form 10
Capital Stock -- New Morton (No. 001-12825) of
Rights" and "Business and the Registrant
"Properties" and the financial
information of the Registrant
at pages 6-10 and F1-F23 in
the Information Statement
contained in the Registration
Statement on Form 10 of the
Registrant as previously filed
with the Securities and
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Exchange Commission on March
24, 1997.
99.02 Information under the heading Incorporated by
"Pre-Merger Transactions" in reference to the
the Proxy Statement/Prospectus/ Registration Statement
Exchange Offer made a part of on Form S-4 (No. 333-
the Registration Statement 23813) of Autoliv,
on Form S-4 previously filed Inc.
by Autoliv, Inc. with the
Securities and Exchange
Commission on March 24, 1997.
99.03 Press release issued by Old Filed electronically
Morton, dated April 24, 1997. herewith
99.04 Press release issued by Old Filed electronically
Morton and the Registrant, herewith
dated May 1, 1997.
-8-
Exhibit 2.01
DISTRIBUTION AGREEMENT
DATED AS OF APRIL 30, 1997
BY AND BETWEEN
MORTON INTERNATIONAL, INC.,
AN INDIANA CORPORATION
(TO BE RENAMED "AUTOLIV ASP, INC.")
AND
NEW MORTON INTERNATIONAL, INC.,
AN INDIANA CORPORATION
(TO BE RENAMED "MORTON INTERNATIONAL, INC.")
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
Section 1.01 General.................................. 2
Section 1.02 Exhibits, Etc............................ 12
ARTICLE II
CERTAIN TRANSACTIONS PRIOR TO THE DISTRIBUTION DATE
Section 2.01 Financing................................ 12
Section 2.02 Transfer of New Morton Assets............ 16
Section 2.03 Transfers Not Effected Prior to
the Distribution; Transfers Deemed
Effective as of the Distribution Date.. 16
Section 2.04 No Representations or Warranties;
Consents............................... 17
Section 2.05 Assumption and Satisfaction of New
Morton Liabilities; Retention of
Safety Liabilities..................... 17
Section 2.06 Financial Representations and Warranties. 17
Section 2.07 Conveyancing and Assumption Instruments.. 18
Section 2.08 Certificate of Incorporation; By-laws;
Share Purchase Rights Plan............. 18
Section 2.09 New Morton Capitalization................ 18
Section 2.10 Certain Pre-Distribution Transactions.... 19
ARTICLE III
THE DISTRIBUTION
Section 3.01 Cooperation Prior to the Distribution.... 19
Section 3.02 Company Board Action; Distribution
Procedures............................. 20
Section 3.03 Conditions Precedent to the
Distribution........................... 20
Section 3.04 The Distribution......................... 22
ARTICLE IV
SERVICES
Section 4.01 Provision of Management Services......... 22
Section 4.02 Fee for Services; Expenses............... 23
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Page
Section 4.03 Independent Contractor Status............ 23
Section 4.04 Disclaimer; Limited Liability............ 23
ARTICLE V
INDEMNIFICATION
Section 5.01 Indemnification by Safety................ 24
Section 5.02 Indemnification by New Morton............ 25
Section 5.03 Limitations on Indemnification
Obligations............................ 25
Section 5.04 Procedure for Indemnification............ 26
Section 5.05 Remedies Cumulative...................... 29
Section 5.06 Survival of Indemnities.................. 29
Section 5.07 Right of Inquiry......................... 30
ARTICLE VI
CERTAIN ADDITIONAL MATTERS AND COVENANTS
Section 6.01 The New Morton Board..................... 31
Section 6.02 Resignations; Safety Board............... 31
Section 6.03 Certain Post-Distribution Transactions... 32
Section 6.04 Use of Names............................. 33
Section 6.05 Restrictions on Hiring of Other Party's
Employees.............................. 34
Section 6.06 Further Assurances; Cooperation.......... 34
Section 6.07 Guarantees............................... 34
Section 6.08 Shared Facilities........................ 35
Section 6.09 Thiokol-Morton Spinoff................... 36
Section 6.10 Non-Competition.......................... 36
ARTICLE VII
ACCESS TO INFORMATION AND SERVICES
Section 7.01 Provision of Corporate Records........... 37
Section 7.02 Access to Information.................... 38
Section 7.03 Production of Witnesses.................. 40
Section 7.04 Reimbursement............................ 41
Section 7.05 Retention of Records..................... 41
Section 7.06 Confidentiality.......................... 41
ARTICLE VIII
INSURANCE
Section 8.01 Policies and Rights...................... 42
Section 8.02 Post-Distribution Date Claims............ 42
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Page
Section 8.03 Administration and Reserves.............. 43
Section 8.04 Agreement for Waiver of Conflict and
Shared Defense......................... 44
Section 8.05 Cooperation with Respect
to Insurance........................... 44
ARTICLE IX
MISCELLANEOUS
Section 9.01 Complete Agreement; Construction......... 45
Section 9.02 Survival of Agreements................... 45
Section 9.03 Expenses................................. 45
Section 9.04 Governing Law............................ 45
Section 9.05 Notices.................................. 46
Section 9.06 Amendments............................... 46
Section 9.07 Successors and Assigns................... 47
Section 9.08 Counterparts............................. 47
Section 9.09 Subsidiaries............................. 47
Section 9.10 Third Party Beneficiaries................ 47
Section 9.11 Titles and Headings...................... 47
Section 9.12 Exhibits and Schedules................... 47
Section 9.13 Legal Enforceability..................... 47
Section 9.14 Consent to Jurisdiction.................. 48
Schedules and Exhibits
Schedule 1.01(a) Safety Business, Retained Subsidiary
and Other Safety Interests and In-
vestments
Schedule 1.01(b) Safety Liabilities
Schedule 1.01(c)(1) Company Policies
Schedule 1.01(c)(2) New Morton Policies
Schedule 1.01(c)(3) Safety Policies
Schedule 1.01(d)(1) New Morton Real Property
Schedule 1.01(d)(2) Safety Real Property
Schedule 1.01(e) New Morton Businesses, New Morton
Subsidiaries and Other New Morton
Interests and Investments
Schedule 1.01(f) New Morton Liabilities
Schedule 1.01(g)(1) New Morton Intellectual Property
Schedule 1.01(g)(2) Safety Intellectual Property
Schedule 4.02 Rates for Services - Formula Format
Schedule 6.08 Terms of Rochester Hills Shared Usage
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Exhibit A Form of Employee Benefits Allocation
Agreement
Exhibit B New Morton By-Laws
Exhibit C New Morton Articles of Incorporation
Exhibit D Form of Tax Sharing Agreement
Exhibit E Form of New Morton Share Purchase
Rights Plan
Exhibit F Records Retention Policy
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DISTRIBUTION AGREEMENT
DISTRIBUTION AGREEMENT (this "Agreement"), dated as
of April 30, 1997, by and between MORTON INTERNATIONAL, INC.,
an Indiana corporation (the "Company") and NEW MORTON INTERNA-
TIONAL, INC., an Indiana corporation and a wholly owned subsid-
iary of the Company ("New Morton").
WHEREAS, the Board of Directors of the Company has
determined it is appropriate and desirable to separate the Com-
pany 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 as-
sociated 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 "Com-
bination 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 Ex-
change 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 stock-
holders and the other conditions set forth in Section 3.03 of
this Agreement, expects to cause (i) the Company to contribute<PAGE>
the New Morton Assets (as defined below) to New Morton or an-
other wholly-owned subsidiary of the Company as a capital con-
tribution 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 Supplemen-
tal 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 transac-
tions 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 subsidiar-
ies, 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 agree-
ments, 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 (such
meanings to be equally applicable to both the singular and plu-
ral forms of the terms defined):
Action: any action, suit, arbitration, inquiry, pro-
ceeding or investigation by or before any court, any governmen-
tal or other regulatory or administrative agency or commission
or any arbitration tribunal.
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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 Com-
pany 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 Agree-
ment, 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, furni-
ture 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 perfor-
mance and surety bonds;
(e) certificates of deposit, banker's acceptances,
shares of stock, bonds, debentures, evidences of indebted-
ness, 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;
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(f) financial, accounting and operating data and
records including, without limitation, books, records,
notes, sales and sales promotional data, advertising mate-
rials, 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, trade-
mark applications and registrations, trade names, service
marks, service names, copyrights and copyright applica-
tions and registrations, commercial and technical informa-
tion including engineering, production and other designs,
drawings, specifications, formulae, technology, computer
and electronic data processing programs and software, in-
ventions, processes, trade secrets, know-how, confidential
information and other proprietary property, rights and
interests;
(h) agreements, leases, contracts, sale orders, pur-
chase orders, open bids and other commitments and all
rights therein;
(i) prepaid expenses, deposits and retentions held
by third parties;
(j) claims, causes of action, choses in action,
rights under insurance policies, rights under express or
implied warranties, rights of recovery, rights of set-off,
rights of subrogation and all other rights of any kind;
(k) licenses, franchises, permits, authorizations
and approvals; and
(l) goodwill and going concern value.
Benefits Agreement: the Employee Benefits Allocation
Agreement, dated as of the date of this Agreement, between the
Company and New Morton, the form of which is attached hereto as
Exhibit A.
Claims Administration: the processing of claims made
under the Policies, including the reporting of claims to the
insurance carrier, management and defense of claims and provid-
ing for appropriate releases upon settlement of claims.
Code: the Internal Revenue Code of 1986, as amended,
or any successor legislation.
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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 Busi-
ness and the New Morton Businesses, including without limita-
tion the Policies identified on Schedule 1.01(c)(1).
Conveyancing and Assumption Instruments: col-
lectively, the various agreements, instruments and other docu-
ments 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 op-
erations do not primarily relate to or primarily arise from the
Safety Business.
Distribution Date: the date determined by the Com-
pany Board as of which the Distribution shall be effected,
which is presently contemplated to be April 30, 1997.
Distribution Record Date: the date to be determined
by the Company Board as the record date for the Distribution.
Exchange Act: the Securities Exchange Act of 1934,
as amended.
Foreign Exchange Rate: with respect to any currency
other than United States dollars as of any date of determina-
tion, 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 cur-
rency 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 regis-
tration of the New Morton Common Stock and the New Morton
Rights pursuant to the Securities Act, provided that in the
event such form is not required to be filed, "Form S-4" shall
refer to the registration statement on Form 10 filed by New
Morton with respect to such securities.
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Insurance Administration: with respect to each
Policy, the accounting for premiums, retrospectively-rated pre-
miums, defense costs, indemnity payments, deductibles and re-
tentions 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 distri-
bution of Insurance Proceeds as contemplated by this Agreement.
Insurance Proceeds: those monies (a) received by an
insured from an insurance carrier or (b) paid by an insurance
carrier on behalf of the insured, in either case net of any
applicable premium adjustment, co-insurance, retrospectively-
rated premium, deductible, retention, cost or reserve paid or
held by or for the benefit of such insured.
Insured Claims: those Liabilities that, individually
or in the aggregate, are covered within the terms and condi-
tions of any of the Policies, whether or not subject to deduct-
ibles, co-insurance, uncollectability or retrospectively-rated
premium adjustments, but only to the extent that such Liabili-
ties are within applicable Policy limits, including aggregates.
IRS: the Internal Revenue Service.
Liabilities: any and all debts, liabilities, commit-
ments and obligations, absolute or contingent, matured or unma-
tured, 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 Dis-
tribution Date (other than, in each case, assets sold or other-
wise 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 Liabili-
ties; (d) subject to Section 6.04 hereof, the patents, trade-
marks, trade names, copyrights (including applications for any
of the foregoing), and invention records of the Company other
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than the Safety Assets, including without limitation the pat-
ents, 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 for-
eign 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 Supple-
mental 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 ac-
counts 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 Agree-
ments.
New Morton Board: the Board of Directors of New Mor-
ton.
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 busi-
nesses, which have been sold or otherwise disposed of or dis-
continued prior to the Distribution Date but which shall not
include the Safety Business.
New Morton By-Laws: the By-Laws of New Morton, sub-
stantially in the form of Exhibit B, to be in effect on the
Distribution Date.
-7-<PAGE>
New Morton Capital Contribution: the capital contri-
bution or repayment in cash of intercompany indebtedness (in-
cluding 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 Distribu-
tion 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 Agree-
ments, (ii) the Liabilities arising out of or relating to any
of the New Morton Businesses or the New Morton Assets; (iii)
the Liabilities referred to in the proviso contained in clause
(v) of the definition of Safety Liabilities contained herein,
and (iv) the Liabilities specified on Schedule 1.01(f).
New Morton Policies: all Policies, current or past,
which are owned or maintained by or on behalf of the Company or
any of its predecessors which relate to the New Morton Busi-
nesses 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
-8-<PAGE>
self-insurance and captive insurance company arrangements, to-
gether with the rights, benefits and privileges thereunder.
Proxy Statement: the proxy statement/prospectus/
offer to purchase sent to the holders of shares of Company Com-
mon 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 Com-
pany listed on Schedule 1.01(a).
Rights Agreement: the Rights Agreement, dated as of
April 24, 1997, by and between New Morton and First Chicago
Trust Company of New York, as Rights Agent, substantially in
the form of Exhibit E hereto.
Ruling Request: the private letter ruling request to
be filed by the Company with the IRS, as supplemented and
amended from time to time, with respect to certain tax aspects
of the Distribution and the Merger.
Safety: Autoliv ASP, Inc., the surviving corporation
of the Merger (as defined in the Combination Agreement), which
shall occur pursuant to the Combination Agreement immediately
subsequent to the Distribution.
Safety Assets: collectively, the following rights
and Assets of the Company and its subsidiaries: (a) the assets
included on the consolidated balance sheet of the Safety Busi-
ness as of June 30, 1996 and any assets acquired by the Company
exclusively relating to the Safety Business from July 1, 1996
to the Distribution Date (other than, in each case, assets sold
or otherwise disposed of on or prior to the Distribution Date);
(b) the real property owned or leased listed on Schedule
1.01(d)(2); (c) any recoveries under the litigation listed on
Schedule 1.01(b); (d) other than with respect to the "Morton"
and "Morton International" names and related trademarks and
trade names (but subject to Section 6.04 hereof), the patents,
trademarks, trade names, copyrights (including applications for
any of the foregoing), and invention records of the Company
relating primarily to the Safety Business, including without
limitation the patents, trademarks and copyrights listed on
Schedule 1.01(g)(2); (e) the Company's books and records to the
extent set forth in Section 7.01(b); (f) all of the outstanding
capital stock or other interests of the Company in the Retained
Subsidiaries and in the partnerships, joint ventures and in-
vestments listed on Schedule 1.01(a); (g) petty checking and
-9-<PAGE>
cash accounts with respect to the Safety Business not main-
tained, in the ordinary course of business, on the central com-
pany cash management system; (h) cash generated from the opera-
tions of the Safety Business from July 1, 1996 through the Dis-
tribution 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 connec-
tion 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 in-
clude (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 con-
ducted, 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 Dis-
tribution 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 Contri-
bution and, if necessary, to repay certain intercompany indebt-
edness 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 subsid-
iary 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 other-
wise expressly provided herein or therein; (ii) all of the Li-
abilities (or portion thereof) relating exclusively to or aris-
ing exclusively from the Safety Business or the Safety Assets;
-10-<PAGE>
(iii) the Liabilities listed on Schedule 1.01(b); (iv) Liabili-
ties on the balance sheet of the Safety Business as of June 30,
1996 (or reflected in the notes thereto), and Liabilities in-
curred by the Safety Business on or after July 1, 1996, exclud-
ing, in each case, Liabilities paid or otherwise satisfied on
or prior to the Distribution Date; and (v) the liabilities of
the Company under the Safety Credit Agreement, provided that
Liabilities under the Safety Credit Agreement relating to the
representations and warranties of the Company, to the extent
such Liabilities relate to a representation or warranty with
respect to the New Morton Businesses or the New Morton Assets
on or prior to the Distribution Date, shall not be a Safety
Liability and shall be a New Morton Liability.
Safety Policies: all Policies, current or past,
which are owned or maintained by or on behalf of the Company or
any of its predecessors which relate to the Safety Business but
do not relate to the New Morton Businesses, including without
limitation the Policies identified on Schedule 1.01(c)(3).
Safety Supplemental Distribution: an amount in cash
equal to $50,000,000 (subject to adjustment pursuant to Sec-
tions 2.01(a) and 2.10(a)) plus, if the Distribution Date oc-
curs 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 Mor-
ton 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 Com-
pany, the form of which is attached hereto as Exhibit D.
-11-<PAGE>
Section 1.01 Exhibits, Etc. References to an "Ex-
hibit" 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 Con-
tribution; Safety Supplemental Distribution. On or shortly
prior to the Distribution Date, the Company shall enter into
the Safety Credit Agreement, on terms reasonably acceptable to
Autoliv and the Company, and shall contribute the New Morton
Capital Contribution to New Morton. New Morton shall have no
obligations or Liabilities with respect to the Safety Credit
Agreement. On or prior to the Distribution Date, the Company
shall contribute the Safety Supplemental Distribution to New
Morton to the extent not previously paid under Section 2.01(c)
of this Agreement; provided that if the estimated retained
earnings (exclusive of any costs and expenses to be paid by
Safety pursuant to Section 9.03 of this Agreement relating to
the transactions contemplated by this Agreement and the Combi-
nation 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 ap-
plied, as set forth in a certificate of the Chief Financial Of-
ficer of the Company dated the Distribution Date (the "CFO Cer-
tificate"), are less than the amount of the Safety Supplemental
Distribution as otherwise determined, the amount of the Safety
Supplemental Distribution shall be adjusted (without interest)
to equal such lesser amount as set forth in such certificate.
The CFO Certificate shall be prepared in good faith, shall be
final and binding upon the parties, and each party hereby
waives and releases any claim or remedy it might otherwise have
with respect thereto.
(b) Credit Sensitive Debentures. Prior to the
Distribution Date, New Morton shall enter into a supplemental
indenture or other instrument to the extent required by the
indenture pursuant to which the Company's Credit Sensitive De-
bentures due June 1, 2020 have been issued, which supplemental
-12-<PAGE>
indenture or instrument will provide that, as of the Distribu-
tion Date and pursuant to Sections 801 and 802 of such inden-
ture, the obligations of the Company thereunder shall become
obligations of New Morton, and the Company shall have no re-
maining 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 op-
erations 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 ex-
penses incurred by the Company in connection with the transac-
tions 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 borrow-
ings 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 pay-
able 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 limita-
tion, 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 insuf-
ficient funds and other similar transactions occurring on or
after July 1, 1996 as shall be reasonable under the circum-
stances consistent with the purpose and intent of this Agree-
ment; 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 practi-
cable following each month end. For purposes of this Section
-13-<PAGE>
2.01(c), the parties contemplate that the Safety Business, in-
cluding but not limited to the administration of accounts pay-
able 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 subsid-
iaries is a party or by which it or any of its respective sub-
sidiaries 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 Distribu-
tion 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 satis-
factory to Safety. From the date hereof until there no longer
remain any such material consents, waivers or amendments to be
obtained in connection with the Distribution pursuant to the
terms of this Agreement and the Ancillary Agreements, New Mor-
ton 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, con-
tracts, 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 Arrange-
ments"), 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 un-
billed as of the Distribution Date shall be billed and payable
on and after the Distribution Date in accordance with the terms
-14-<PAGE>
thereof. Subject to Sections 2.01(c) and 2.10 of this Agree-
ment, on or before the Distribution Date, the Company shall
cause all intercompany indebtedness (which shall include pay-
ables 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 estab-
lish and maintain a separate cash management system and ac-
counting records with respect to the New Morton Businesses ef-
fective as of immediately prior to the Distribution Date;
thereafter, (i) any payments by the Company or a Remaining Sub-
sidiary to or on behalf of New Morton or a New Morton Subsid-
iary 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 Com-
pany from New Morton; any payments by New Morton or a New Mor-
ton 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 main-
tained, in the ordinary course of business, on the central Com-
pany cash management system, and the accounts listed on Sched-
ule 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 inter-
national 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 limi-
tation, 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
-15-<PAGE>
Safety, as appropriate, as promptly as practicable. For pur-
poses 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 ac-
counts receivable, will be conducted in the normal course. All
transactions contemplated in this Section 2.01(f) shall be sub-
ject to review by the parties, and any dispute thereunder shall
be resolved by Ernst & Young LLP (or another "Big Six" account-
ing 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 op-
tion, to a New Morton Subsidiary effective as of the Distribu-
tion Date all of the Company's right, title and interest in the
New Morton Assets.
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 practi-
cable. 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 as-
sumed; 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 as-
sumed 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 reason-
ably possible, in the same position as would have existed had
such Asset or Liability been transferred as contemplated here-
by. As and when any such Asset or Liability becomes trans-
ferable, such transfer shall be effected forthwith. The par-
ties 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
-16-<PAGE>
of the Liabilities, and all duties, obligations and responsi-
bilities incident thereto, which such party is entitled to ac-
quire or required to assume pursuant to the terms of this
Agreement.
Section 2.04 No Representations or Warranties; Con-
sents. 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 docu-
ment 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 limi-
tation, 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 insuf-
ficient 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 ef-
forts 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 Mor-
ton Liabilities; Retention of Safety Liabilities. Except as
set forth in the Benefits Agreement or the Tax Sharing Agree-
ment, 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 Li-
abilities 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 Warran-
ties. New Morton hereby represents and warrants to the Company
that:
(a) Safety Assets. The Safety Assets as of the Dis-
tribution Date shall include all Assets then owned or held by
-17-<PAGE>
the Company and its subsidiaries which are exclusively used in
the operation of the Safety Business as such business is con-
ducted as of such date, including cash and cash equivalents as
provided in clauses (g) and (h) of the definition of Safety
Assets.
(b) Financial Liabilities. The interest-bearing
indebtedness (excluding hedging or similar contracts and let-
ters 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 fi-
nancing, not to exceed $1,100,000.
The representations contained in this Section 2.06 shall sur-
vive the Distribution Date until March 31, 1998.
Section 2.07 Conveyancing and Assumption Instru-
ments. 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 As-
sumption Instruments in such forms as the parties shall reason-
ably agree, including the transfer of real property with spe-
cial warranty or equivalent deeds. The transfer of capital
stock shall be effected by means of delivery of stock certifi-
cates and executed stock powers and notation in the stock
record books of the corporation or other legal entities in-
volved and, to the extent required by applicable law, by nota-
tion 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.
-18-<PAGE>
Section 2.10 Certain Pre-Distribution Transactions.
(a) Prior to the Distribution, the Company shall use its rea-
sonable best efforts to form a registered German limited li-
ability corporation (GmbH) ("Safety GmbH"). Prior to the Dis-
tribution, Safety GmbH shall purchase or assume, and the Com-
pany 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 Manufac-
turing B.V., a limited liability corporation under the laws of
the Netherlands ("Safety B.V."), shall repay in cash intercom-
pany indebtedness owed by Safety B.V. to each of Morton Inter-
national B.V. and Morton Service B.V. ("Morton B.V."), each a
limited liability corporation under the laws of the Nether-
lands, 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 Dis-
tribution, Morton B.V. shall transfer to the Company all of the
outstanding capital stock of Safety B.V. as a distribution in
respect of the shares of Morton B.V. held by the Company. Any
such cash payments by Safety B.V. to repay such intercompany
indebtedness, up to $51,648,000 (representing the amount of
such intercompany indebtedness as of June 30, 1996), shall be
credited against the New Morton Capital Contribution.
ARTICLE III
THE DISTRIBUTION
Section 3.01 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 disclo-
sure concerning Newco, Autoliv, the Company, New Morton,
Safety, the Merger, the Distribution, the Transactions and
other matters. The Company and New Morton shall also pre-
pare, and New Morton shall file with the Commission, the
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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 Securi-
ties Act;
(b) the Company and New Morton shall cooperate in
preparing, filing with the Commission and causing to be-
come 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 secu-
rities or blue sky laws of states or other political sub-
divisions of the United States in connection with the
transactions contemplated by this Agreement and the Ancil-
lary 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 Pro-
cedures. 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 discre-
tion, establish the Distribution Record Date and the Distribu-
tion 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 Distribu-
tion. 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:
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(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 condi-
tion 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 out-
standing 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 consum-
mated in all material respects, to the extent required to
be consummated prior to the Distribution;
(iv) the New Morton Common Stock shall have been au-
thorized for listing on the NYSE, subject to official no-
tice of issuance;
(v) the New Morton Board, composed as contemplated
by Section 6.01, shall have been elected by the Company,
as sole stockholder of New Morton;
(vi) the Form S-4 (to the extent required) shall have
been declared effective under the Securities Act (or the
Form 10 shall have been declared effective under the Ex-
change Act) by the Commission and no stop order suspending
the effectiveness of the Form S-4 (or the Form 10) shall
have been issued by the Commission and, to the knowledge
of the Company and New Morton, no proceeding for that pur-
pose 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 Combina-
tion 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
-21-<PAGE>
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 prac-
ticable 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 an-
niversary thereof (the "Services Period"), New Morton shall
make available to Safety the following services (collectively,
the "Services"):
(a) Legal, tax, accounting, patent and other intel-
lectual property, payroll and payroll tax, real estate,
human resources (including pension administration), envi-
ronmental, 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 ser-
vices the parties agree would be necessary and desirable
to permit Safety and its subsidiaries to operate its busi-
ness in the ordinary course and to facilitate the orderly
-22-<PAGE>
transition of Safety and Newco to an independent and self-
sufficient company in a reasonable and timely manner.
It is understood that Services provided to Safety and
its subsidiaries hereunder will be performed by those employees
of New Morton who perform equivalent services for New Morton in
the normal course of their employment. Accordingly, New Morton
shall not be obligated to make available any services to the
extent that doing so would unreasonably interfere with the per-
formance 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, fil-
ing 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 un-
der Section 4.01 of this Agreement (including tax, audit, em-
ployee benefits and other Services contemplated to be provided
by the Tax Sharing Agreement or the Benefits Agreement) pursu-
ant 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 represen-
tations, 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 reason-
able efforts to provide the Services in a manner at least com-
parable 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
-23-<PAGE>
this Article IV; provided, however, that this Section 4.04(b)
shall not apply to any expense, claim (for malpractice or oth-
erwise), loss or damage resulting from the failure of New Mor-
ton 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 ob-
ligations 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 Affili-
ate of New Morton and each of the heirs, executors, successors
and assigns of any of the foregoing (the "New Morton Indemni-
tees") 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 Ac-
tions, demands, assessments, judgments, settlements and compro-
mises relating thereto and attorneys' fees and any and all ex-
penses whatsoever reasonably incurred in investigating, prepar-
ing or defending against any such Actions or threatened Ac-
tions) (collectively, "Indemnifiable Losses" and, individually,
an "Indemnifiable Loss") of the New Morton Indemnitees arising
out of or due to the failure or alleged failure of Safety or
any of its Affiliates to pay, perform or otherwise discharge in
due course any of the Safety Liabilities.
(b) Safety shall indemnify, defend and hold harmless
each of the New Morton Indemnitees from and against any and all
Indemnifiable Losses of the New Morton Indemnitees arising out
of or based upon any untrue statement or alleged untrue state-
ment 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 infor-
mation relating to, Autoliv or its subsidiaries, or the omis-
sion or alleged omission to state in any such portion a mate-
rial fact required to be stated therein or necessary to make
-24-<PAGE>
the statements made therein, in light of the circumstances un-
der 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, execu-
tors, successors and assigns of any of the foregoing (the
"Safety Indemnitees") from and against the New Morton Li-
abilities 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 Li-
abilities.
(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 con-
taining information relating to, any of New Morton, the New
Morton Subsidiaries or Safety, or the omission or alleged omis-
sion 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 Obliga-
tions.
(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 Sec-
tion 5.02 shall be reduced (including, without limitation, ret-
roactively) 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 Indem-
nifying 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 Indem-
nitee shall pay to such Indemnifying Party a sum equal to the
-25-<PAGE>
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 cur-
rency other than United States dollars, the amount of such pay-
ment shall be translated into United States dollars using the
Foreign Exchange Rate for such currency determined in ac-
cordance 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 con-
tract 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 insur-
ance company providing such insurance in settling such
Indemnifiable Loss with the Indemnifying Party; and
(iii) with respect to an Indemnifiable Loss not cov-
ered by clause (i) or (ii) above, the indemnification pay-
ment shall be paid in the applicable local currency with-
out any translation into United States dollars.
Section 5.04 Procedure for Indemnification.
(a) If an Indemnitee shall receive notice or other-
wise 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 Agree-
ment, such Indemnitee shall give such Indemnifying Party writ-
ten 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 obliga-
tions under this Article V, except to the extent that such In-
demnifying 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 practi-
cable) of the Indemnifiable Loss that has been or may be sus-
tained by such Indemnitee.
-26-<PAGE>
(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 "Acknowl-
edgment") of its indemnification obligation under this Agree-
ment with respect to the Third Party Claim. The Acknowledgment
may specify reservations and exceptions to the extent reason-
ably acceptable to the Indemnitee or consistent with the terms
of this Agreement and the Ancillary Agreements, and such Indem-
nitee shall cooperate in the defense or settlement or compro-
mise 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 In-
demnitee of its election to assume the defense of a Third Party
Claim, such Indemnifying Party shall not be liable to such In-
demnitee 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 In-
demnitees and in such Indemnitees' reasonable judgment a con-
flict of interest between such Indemnitees and such Indemnify-
ing Party exists in respect of such claim or if the Indemnify-
ing 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 Agree-
ment and the Ancillary Agreements, such Indemnitees shall have
the right to employ separate counsel to represent such Indemni-
tees and in that event the reasonable fees and expenses of such
separate counsel (but not more than one separate counsel rea-
sonably satisfactory to the Indemnifying Party) shall be paid
by such Indemnifying Party.
If an Indemnifying Party elects not to assume respon-
sibility 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
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case may be) such Indemnitee may defend or (subject to the fol-
lowing sentence) seek to compromise or settle such Third Party
Claim. Notwithstanding the foregoing, an Indemnitee may not
settle or compromise any claim without prior written notice to
the Indemnifying Party, which shall have the option within ten
days following the receipt of such notice (i) to disapprove the
settlement and assume all past and future responsibility for
the claim, including reimbursing the Indemnitee for prior ex-
penditures 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 reason-
ableness 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 Indemn-
itee'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 Indem-
nifying 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 Indemni-
tee shall make available to such Indemnifying Party any person-
nel 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 com-
promise contemplates as an unconditional term thereof the giv-
ing 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 Indem-
nitee shall notify the Indemnifying Party in writing that such
Indemnitee declines to accept any such settlement or compro-
mise, 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 ex-
penses of such Indemnitee prior to the date such Indemnifying
Party notifies such Indemnitee of the offer to settle or com-
promise (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.
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(e) Any claim on account of an Indemnifiable Loss
which does not result from a Third Party Claim shall be as-
serted by written notice given by the Indemnitee to the related
Indemnifying Party. Such Indemnifying Party shall have a pe-
riod of 30 days after the receipt of such notice within which
to respond thereto. If such Indemnifying Party does not re-
spond within such 30-day period, such Indemnifying Party shall
be deemed to have refused to accept responsibility to make pay-
ment. 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 Agree-
ment, be reduced by recovery, settlement or otherwise, the
amount of such reduction, less any expenses incurred in connec-
tion 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 circum-
stances in respect of which such Indemnitee may have any right
or claim relating to such Third Party Claim against any claim-
ant or plaintiff asserting such Third Party Claim. Such Indem-
nitee shall cooperate with such Indemnifying Party in a reason-
able 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 rea-
sonable judgment that it is likely that it will be named as a
potentially responsible party in any Superfund or other envi-
ronmental litigation or investigation with respect to a New
Morton Liability, if requested to do so by Safety, New Morton
shall notify the potential claimant(s) in such potential liti-
gation of its indemnification obligation in favor of Safety
under this Agreement.
Section 5.05 Remedies Cumulative. The remedies pro-
vided in this Article V shall be cumulative and shall not pre-
clude 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 obliga-
tions of New Morton and the Company under this Article V, shall
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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 transac-
tions) 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 re-
spective 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 assump-
tion 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 ob-
ligations 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 investiga-
tions or proceedings for which Safety or New Morton, as the
case may be, could be contingently liable. Such right of in-
quiry shall terminate at such time as there is no longer a sub-
stantial 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 In-
demnifiable 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
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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 ma-
terial pending and threatened litigation and material govern-
mental 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 bur-
densome meetings or discussions. In addition, each of Safety
and New Morton shall have the further right to request one ad-
ditional meeting per year in connection with the public disclo-
sure by the other party during such year of a material adverse
development in any pending or threatened litigation or govern-
mental investigation or proceeding for which the requesting
party may be contingently liable, such meeting otherwise to be
on the same terms as set forth in this Section 5.07(b). Each
of Safety and New Morton shall bear its own cost of attendance
at such meetings, which shall be held at the corporate offices
of the non-requesting party.
ARTICLE VI
CERTAIN ADDITIONAL MATTERS AND COVENANTS
Section 6.01 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 Mor-
ton.
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 Distribu-
tion 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 Re-
tained 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.
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(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 represen-
tation and statement made, or to be made, to any taxing author-
ity 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 satis-
factory to Safety is obtained from nationally recognized tax
counsel to New Morton and/or (Y) a supplemental ruling is ob-
tained 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 Dis-
tribution 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 Distribu-
tion; (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 Mor-
ton 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 Sec-
tion 9.1(g)(ii) of the Combination Agreement relating to the
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opinions of counsel to be rendered in connection with the Dis-
tribution and the Merger, shall not be subject to the provi-
sions of this Section 6.03(a)(ii).
(b) The Company. The Company shall, and shall cause
each Remaining Subsidiary to, comply with each representation
and statement made, or to be made, to any taxing authority in
connection with any ruling obtained, or to be obtained, by the
Company and New Morton acting together, from any such taxing
authority with respect to any transaction contemplated by this
Agreement.
Section 6.04 Use of Names.
(a) Any existing printed material showing any af-
filiation or connection of Safety or the Retained Subsidiaries
with New Morton, including any names using "Morton" or a de-
rivative thereof, may be used by Safety or the Retained Subsid-
iaries only for a period ending eight months after the Distri-
bution 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 con-
fusingly similar therewith except as permitted by this Agree-
ment. Prior to or promptly after the Effective Time, the Com-
pany 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 Inter-
national" 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 promo-
tional material, and products in inventory as of the Distribu-
tion 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
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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 fu-
ture.
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 em-
ploy 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 rea-
sonably 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 Com-
pany of the Safety Business, including, without limitation, (i)
allocating rights and obligations under contracts, agreements
and other arrangements, if any, of the Company that relate to
both the Safety Business and the New Morton Businesses, (ii)
determining whether to enter into any service or other sharing
agreements on a mutually acceptable arm's-length basis that may
be necessary to assure a smooth and orderly transition, and
(iii) obtaining any reasonably necessary or appropriate third-
party consents, licenses and permits in connection with the
Distribution. In case at any time after the Distribution Date
any further action is necessary or desirable to carry out the
purposes of this Agreement, the proper officers and directors
of each party to this Agreement shall take all such necessary
or desirable action.
Section 6.07 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
-34-<PAGE>
loan, financing, lease, contract, or other obligation in exist-
ence as of the Distribution Date pertaining to the Safety Busi-
ness for which New Morton or an Affiliate of New Morton may be
liable, as guarantor, original tenant, primary obligor or oth-
erwise. 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 Of-
ficer 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 substi-
tuted 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 exist-
ence 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 Dis-
tribution Date, (i) New Morton shall indemnify and hold harm-
less 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 obliga-
tions 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 facili-
ties specified in Schedule 6.08 on the terms set forth thereon.
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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 distri-
bution 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 further-
ance of its obligations under this Section 6.09 if Safety de-
termines, 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 re-
straint business (as such business is conducted by Newco and
its subsidiaries immediately following the Effective Time (as
defined in the Contribution Agreement)); provided, however,
that this Section 6.10 shall not prevent New Morton from:
(i) acquiring no more than 10% of the outstanding
stock, partnership or other equity interests in
any corporation, partnership, limited liability
company or other person or entity ("Person");
(ii) acquiring more than 10% of the outstanding capi-
tal stock, partnership or other equity interests
in any Person for which the annual revenues de-
rived from the business of such Person that com-
petes with the automotive safety restraint busi-
ness (as such business is conducted by Newco and
its subsidiaries immediately following the Ef-
fective Time) are not more than 10% of such
Person's total annual revenues;
(iii) acquiring more than 50% of the outstanding capi-
tal stock, partnership or other equity interests
in any Person (or any lesser percentage if, pur-
suant to contractual or other arrangements, New
Morton has the right to cause such Person to
take the actions specified in the following pro-
viso) for which the annual revenues derived from
the business of such Person that competes with
the automotive safety restraint business (as
-36-<PAGE>
such business is conducted by Newco and its sub-
sidiaries 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 with-
out materially affecting the remaining busi-
nesses 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 subsid-
iaries 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 re-
spect 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 Sec-
tion 6.10(a), for a period of ten years from and after the Dis-
tribution 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 cor-
porate 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 prima-
rily relating to the New Morton Businesses, except to the ex-
tent such items are already in the possession of New Morton or
-37-<PAGE>
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 Mor-
ton, but shall be available to Safety for review and duplica-
tion and shall otherwise be subject to Section 7.05 of this
Agreement.
(b) Safety Assets shall include the original corpo-
rate minute books, stock ledgers and certificates and corporate
seals of the Company and the Retained Subsidiaries and all li-
censes, leases, agreements, litigation files and filings exclu-
sively relating to the Safety Business. New Morton shall ar-
range 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 oth-
erwise agreed by the parties) in its possession or located at
the Company's principal executive offices exclusively relating
to Safety and the Retained Subsidiaries, except to the extent
such items are already in the possession of Safety. Such
records shall be the property of Safety, but shall be available
to New Morton for review and duplication and shall otherwise be
subject to Section 7.05 of this Agreement.
Section 7.02 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, instru-
ments, computer data and other data and information (col-
lectively, "Information") within Safety's possession insofar as
such access is reasonably required by New Morton, subject to
appropriate restrictions for classified information. Simi-
larly, New Morton shall afford to Safety and its authorized
accountants, counsel and other designated representatives rea-
sonable access (including using reasonable efforts to give ac-
cess to persons or firms possessing information) and duplicat-
ing 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 ful-
filling disclosure and reporting obligations and for performing
this Agreement and the transactions contemplated hereby.
-38-<PAGE>
(b) For a period of five years following the Distri-
bution 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 Commis-
sion promulgated thereunder.
(c) In furtherance of the rights and obligations of
the parties set forth in subsections (a) and (b) of this Sec-
tion 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 Subsid-
iaries (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 Li-
abilities (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 ap-
plicable privileges ("Privileged Information"); (B) there
are a number of actual, threatened or future litigations,
investigations, proceedings (including arbitration pro-
ceedings), 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 re-
lationship 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 contem-
plated by this Agreement and the Ancillary Agreements and
any transfer of Privileged Information in connection here-
with 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 Informa-
tion relating to the New Morton Businesses or the Safety
Business as they or it existed prior to the Distribution
-39-<PAGE>
Date, respectively, or relating to or arising in connec-
tion 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; pro-
vided, however, that Safety and New Morton may make such
disclosure or waiver with respect to Privileged Informa-
tion if such Privileged Information relates, in the case
of Safety, solely to the Safety Business as it existed
prior to the Distribution Date or, in the case of New Mor-
ton, solely to the New Morton Businesses as they existed
prior to the Distribution Date. In the event of a dis-
agreement between any member of the Safety Group and any
member of the New Morton Group concerning the reasonable-
ness 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 mem-
ber 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, respec-
tively, as they or it existed prior to the Distribution
Date or relating to or arising in connection with the re-
lationship 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 Mor-
ton, 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 un-
til the disagreement is resolved as provided in paragraph
(ii) above, Safety and New Morton shall cooperate to as-
sert 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 docu-
ments 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,
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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 re-
questing 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, dis-
bursements and other out-of-pocket expenses and direct and in-
direct costs of employees who are witnesses, as may be reason-
ably incurred in providing such Information or witness ser-
vices.
Section 7.05 Retention of Records. Except as other-
wise 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 Ex-
hibit 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 Infor-
mation 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 deliv-
ered to such requesting party, the party proposing the destruc-
tion 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 posses-
sion or furnished by the other or the other's representatives
pursuant to this Agreement (except to the extent that such In-
formation 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, attor-
neys, financial advisors, bankers and other consultants and
advisors, unless compelled to disclose by judicial or adminis-
trative process or, as advised by its counsel, by other re-
quirements of law.
-41-<PAGE>
ARTICLE VIII
INSURANCE
Section 8.01 Policies and Rights.
(a) New Morton Assets. Without limiting the gener-
ality of the definition of New Morton Assets set forth in Sec-
tion 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 subsidiar-
ies, the Safety Business and which injuries, losses, Liabili-
ties, damages and expenses may arise out of insured or insur-
able 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, li-
ability, 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 subsidiar-
ies, the Safety Business, or any of them, and which injury,
loss, liability, damage or expense may arise out of insured or
-42-<PAGE>
insurable occurrences or events under one or more of the Com-
pany Policies, the Company shall at the time such claim is as-
serted be deemed to assign, without need of further documenta-
tion, to New Morton any and all rights of an insured party un-
der 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 con-
stitute (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) In-
surance Administration of the Company Policies and the New
Morton Policies, and (B) Claims Administration with re-
spect to the New Morton Liabilities; provided, that the
retention of the Company Policies and the New Morton Poli-
cies by New Morton is in no way intended to limit, in-
hibit, or preclude any right to insurance coverage for any
Insured Claim of a named insured under the Company Poli-
cies and the New Morton Policies, including but not lim-
ited 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 Ad-
ministration with respect to the Safety Liabilities; pro-
vided that the retention of the Safety Policies by Safety
is in no way intended to limit, inhibit, or preclude any
right to insurance coverage for any Insured Claim of a
named insured under the Safety Policies;
(iii) New Morton shall be entitled to reserves estab-
lished 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
-43-<PAGE>
that Safety does not pay premiums with respect to Safety Li-
abilities (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 par-
ties hereto, Safety shall purchase (subject to a 50% reimburse-
ment 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 in-
demnity 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 con-
flict of interest necessary to the conduct of that joint de-
fense. 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, pro-
vided, that New Morton shall not be obligated to pay any premi-
ums or other costs in connection therewith.
-44-<PAGE>
ARTICLE IX
MISCELLANEOUS
Section 9.01 Complete Agreement; Construction. This
Agreement, including the Schedules and Exhibits and the Ancil-
lary 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 re-
spect to such subject matter. Notwithstanding any other provi-
sions in this Agreement to the contrary, in the event and to
the extent that there shall be a conflict between the provi-
sions of this Agreement (or any Conveyancing and Assumption
Instrument or other instrument of assumption) and the provi-
sions 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 oth-
erwise contemplated by this Agreement, all covenants and agree-
ments of the parties contained in this Agreement shall survive
the Distribution Date.
Section 9.03 Expenses. Safety Liabilities shall
include $15 million of expenses incurred by the Company in con-
nection 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 fi-
nancing 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 ex-
penses 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 Dis-
tribution 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 con-
flicts of laws thereof.
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Section 9.05 Notices. All notices and other com-
munications hereunder shall be in writing and shall be deliv-
ered by hand or mailed by registered or certified mail (return
receipt requested) to the parties at the following addresses
(or at such other addresses for a party as shall be specified
by like notice) and shall be deemed given on the date on which
such notice is received:
To the Company or Safety:
Autoliv ASP, Inc.
3350 Airport Road
Ogden, Utah 84409
Attention: Corporate Secretary
with a copy to:
Autoliv, Inc.
c/o Autoliv AB
Box 703 81
S-107 24 Stockholm
Sweden
Attention: Corporate Secretary
and
Skadden, Arps, Slate, Meagher & Flom
One Canada Square
Canary Wharf
London E14 8DS, England
Attention: Scott V. Simpson, Sr., Esq.
To New Morton:
Morton International, Inc.
100 North Riverside Plaza
Chicago, Illinois 60606
Attention: Corporate Secretary
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Eric S. Robinson, Esq.
Section 9.06 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.
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Section 9.07 Successors and Assigns. This Agreement
and all of the provisions hereof shall be binding upon and in-
ure to the benefit of the parties and their respective succes-
sors and permitted assigns.
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 ref-
erence to this Agreement.
Section 9.11 Titles and Headings. Titles and head-
ings to sections herein are inserted for the convenience of
reference only and are not intended to be a part of or to af-
fect 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 ju-
risdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition or unenforceability without in-
validating the remaining provisions hereof. Any such prohibi-
tion or unenforceability in any jurisdiction shall not invali-
date or render unenforceable such provision in any other juris-
diction. 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
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the provisions of this Agreement and agrees that the obliga-
tions of the parties hereunder shall be specifically enforce-
able.
Section 9.14 Consent to Jurisdiction. Each of the
parties hereto irrevocably submits to the exclusive jurisdic-
tion 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 re-
lating 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 pro-
ceeding in Delaware with respect to any matters to which it has
submitted to jurisdiction as set forth in the immediately pre-
ceding 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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IN WITNESS WHEREOF, the parties have caused this
Agreement to be duly executed as of the day and year first
above written.
MORTON INTERNATIONAL, INC.
By: /s/ Thomas F. McDevitt
Thomas F. McDevitt
Vice President Finance and Chief
Financial Officer
NEW MORTON INTERNATIONAL, INC.
By: /s/ Raymond P. Buschmann
Raymond P. Buschmann
Vice President for Legal
Affairs and General Counsel
Exhibit 2.02
TAX SHARING AGREEMENT
dated as of April 30, 1997
by and between
Morton International, Inc.,
an Indiana corporation
and
New Morton International, Inc.,
an Indiana corporation
<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
-i-<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
-ii-<PAGE>
TAX SHARING AGREEMENT
Tax Sharing Agreement (the "Agreement"), dated as of
April 30, 1997, by and between Morton International, Inc., an
Indiana corporation (the "Company"), and New Morton Interna-
tional, Inc., an Indiana corporation and a wholly owned subsid-
iary of the Company ("New Morton").
WHEREAS, the Board of Directors of the Company has
determined it is appropriate and desirable to enter into the
Distribution Agreement (the "Distribution Agreement") dated as
of April 30, 1997, by and between the Company and New Morton,
pursuant to which, among other things, the Company will dis-
tribute to holders of its common stock all the issued and out-
standing shares of common stock of New Morton (the "Distribu-
tion");
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 "Com-
bination 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 Par-
ent"), 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<PAGE>
to acquire all of the outstanding capital stock of Autoliv pur-
suant 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 re-
sponsibilities, liabilities and benefits relating to or affect-
ing 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 agree-
ments, 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 Dis-
tribution Agreement. As used in this Agreement, the following
terms shall have the following meanings (such meanings to be
-2-<PAGE>
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 sub-
sequently enacted federal tax laws.
"Distribution Date" means the date determined by the
Company's Board of Directors as of which the Distribution shall
be effected, which is presently contemplated to be the close of
business on April 30, 1997.
"due date" means, with respect to any Tax Return or
payment, the date on which such Tax Return is due to be filed
with or such payment is due to be made to the appropriate gov-
ernmental 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
-3-<PAGE>
assert a further deficiency shall not constitute a Final Deter-
mination; (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 of-
fer 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 peri-
ods 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 pay-
able.
-4-<PAGE>
"Tax Detriment" means any item of income, gain, re-
capture of credit or any other Tax Item which increases Taxes
paid or payable.
"Tax Item" means any item of income, gain, loss, de-
duction, credit, recapture of credit or any other item which
increases or decreases Taxes paid or payable, including an ad-
justment under Code Section 481 resulting from a change in ac-
counting 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 for-
eign) 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, penal-
ties and additions to any such tax, or additional amounts im-
posed by any taxing authority (domestic or foreign) upon the
-5-<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 begin-
ning prior to the close of business on the Distribution Date
shall be prepared on a basis which is consistent with the rul-
ings obtained in connection with the Distribution (in the ab-
sence of a controlling change in law or circumstances) and oth-
erwise 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 elec-
tions, accounting methods, conventions, and principles of taxa-
tion 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.
-6-<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 in-
come Tax Return for the Company's taxable year ending on the
Distribution Date; provided, that the Company shall not be re-
quired to make any such election if the Company determines in
good faith that such election would cause a material Tax Detri-
ment or other material adverse effect to any member of the Com-
pany Group.
All state and local income and/or franchise Tax Re-
turns 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
-7-<PAGE>
twenty days prior to the due date for such Tax Return. Not-
withstanding 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 peri-
ods 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 Re-
turn 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 "Dis-
puted Item") in such Tax Return at least ten days prior to the
-8-<PAGE>
due date for such Tax Return. If, after receiving such notice
and prior to such due date for such Tax Return, New Morton de-
livers 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 Sec-
tion 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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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 Peri-
ods Ended on the Distribution Date. Except as otherwise pro-
vided 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 Liabil-
ity"). 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.
-10-<PAGE>
New Morton's share of the Pre-Distribution Consoli-
dated 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 "Com-
pany Pre-Distribution Consolidated Federal Return"), as would
be allocated to New Morton under the Company's existing federal
income tax allocation election (it being agreed and understood
that with respect to New Morton and the New Morton Businesses
amounts will be allocated to the Pre-Distribution Federal Pe-
riod which ends on the Distribution Date and the post-
Distribution period which ends June 30, 1998 using the ratable
allocation election provided for in Treasury Regulation Section
1.1502-76) if: (p) the Company and New Morton were separately
incorporated members of the same consolidated group for such
Pre-Distribution Federal Period and all previous taxable peri-
ods; (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
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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 esti-
mated federal income tax payments remitted by the Company to
the IRS on or prior to the Distribution Date with respect to
such Pre-Distribution Federal Period shall with respect to any
such payment made on or after July 1, 1996, be equal to the
amount of such payments less the amounts taken into account in
determining "cash used in the Safety Business" for purposes of
Section 2.01(c) of the Distribution Agreement.
If the calculations made pursuant to paragraphs (i)
and (ii) of this Section 3.01(a) indicate that New Morton has
either overpaid or underpaid its share of any such Pre-
Distribution Consolidated Federal Tax Liability, then at the
time that the relevant Company Pre-Distribution Consolidated
Federal Return is filed, the Company shall pay New Morton the
amount of any such overpayment or New Morton shall pay the Com-
pany 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 para-
graphs (i) and (ii) of this Section 3.01(a).
All calculations and determinations required to be
made pursuant to this Section 3.01(a) shall be made in good
-12-<PAGE>
faith by New Morton and shall be subject to the Company's ap-
proval, which approval shall not be withheld unless the Company
in good faith reasonably disputes any such calculation or de-
termination, in which case any payments shall nevertheless be
made in accordance with New Morton's calculations and determi-
nations, 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 peri-
ods 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 pur-
suant to Section 2.02 of this Agreement (each such Tax being
individually referred to as a "Pre-Distribution State or Local
Income Tax"). New Morton hereby assumes and agrees to pay on
or prior to the due date thereof its share of each Pre-
Distribution State or Local Income Tax, which payment may be
made either directly to the appropriate taxing authority by New
Morton (provided that New Morton shall provide the Company with
written notice of such payment at least ten business days prior
to the due date of the corresponding Tax Return and provide
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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 ag-
gregate 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 Dis-
tribution 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 sepa-
rate return basis as if the corporate separation contemplated
by the Distribution Agreement had been the first day of each
relevant taxable period);
(ii) reduced by the sum of (x) all amounts paid by
New Morton after the Distribution Date with respect to such
Pre-Distribution State or Local Income Tax and (y) an amount
equal to New Morton's share of all estimated tax payments re-
mitted by the Company to the relevant taxing authority on or
-14-<PAGE>
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 Com-
pany shall pay New Morton the amount of any such overpayment or
New Morton shall pay the Company the amount of any such under-
payment, the amount of such overpayment or underpayment, as the
case may be, to be equal to the difference between the amounts
calculated pursuant to paragraphs (i) and (ii) of this Section
3.01(b).
All calculations and determinations required to be
made pursuant to this Section 3.01(b) shall be made in good
-15-<PAGE>
faith by New Morton and shall be subject to the Company's ap-
proval, which approval shall not be withheld unless the Company
in good faith reasonably disputes any such calculation or de-
termination, in which case any payments shall nevertheless be
made in accordance with New Morton's calculations and determi-
nations, 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 Agree-
ment (each such Tax being individually referred to as an "1997
Other Tax"). New Morton hereby assumes and agrees to pay prior
to the due date thereof its share of each 1997 Other Tax, which
payment may be made either directly to the appropriate taxing
authority by New Morton (provided that New Morton shall provide
the Company with written notice of such payment at least ten
business days prior to the due date of the corresponding Tax
Return and provide proof of such payment within five business
days of making such payment) or to the Company which shall then
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forward such New Morton payment to the appropriate taxing au-
thority 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 contem-
plated by the Distribution Agreement had been effected July 1,
1996), bears to the sum of the applicable 1997 Other Tax lia-
bility of the New Morton Group and the Company Group (each de-
termined on a separate return basis as if the corporate sepa-
ration contemplated by the Distribution Agreement had been ef-
fected 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 Distribu-
tion Date with respect to each such 1997 Other Tax. New
Morton's share of each such estimated or other similar payment
remitted by the Company on or before the Distribution Date
shall be an amount equal to the product of (r) such payments
and (s) the applicable New Morton 1997 Other Tax Ratio.
-17-<PAGE>
With respect to each 1997 Other Tax, if the calcula-
tions made pursuant to paragraphs (i) and (ii) of this Section
3.01(c) indicate that New Morton has either overpaid or under-
paid 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 Com-
pany 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 para-
graphs (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 ap-
proval, which approval shall not be withheld unless the Company
in good faith reasonably disputes any such calculation or de-
termination, in which case any payments shall nevertheless be
made in accordance with New Morton's calculations and determi-
nations, 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 Mor-
ton Group, as the case may be, shall pay, on a timely basis,
all federal, state and local Taxes with respect to all Tax Re-
turns due after the Distribution Date with respect to periods
ending on or before the Distribution Date for which New Morton
-18-<PAGE>
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 Com-
pany 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 busi-
ness 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 to-
gether 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 corpo-
rate separation contemplated by the Distribution Agreement had
been effected July 1, 1996), bears to the sum of the applicable
New Morton 2.02 Tax liability of the Company Group and the New
Morton Group (each determined on a separate return basis as if
the corporate separation contemplated by the Distribution
Agreement had been effected July 1, 1996);
-19-<PAGE>
(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 cal-
culations made pursuant to paragraphs (i) and (ii) of this Sec-
tion 3.01(d) indicate that the Company has either overpaid or
underpaid its share of such liability, then not later than 30
days after the actual filing date, New Morton shall pay the
Company the amount of any such overpayment or the Company shall
pay New Morton the amount of such underpayment, the amount of
such overpayment or underpayment, as the case may be, to be
equal to the difference between the amounts calculated pursuant
to paragraphs (i) and (ii) of this Section 3.01(d).
All calculations and determinations required to be
made pursuant to this Section 3.01(d) shall be made in good
faith by New Morton and shall be subject to the Company's ap-
proval, which approval shall not be withheld unless the Company
-20-<PAGE>
in good faith reasonably disputes any such calculation or de-
termination, in which case any payments shall nevertheless be
made in accordance with New Morton's calculations and determi-
nations, 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 Distri-
bution Date and for the payment of all Taxes due or payable in
connection therewith.
Section 3.02. (a) Change in the Company Filed Re-
turns. If as a result of any audit, amendment or other change
in a Tax Return as filed by the Company or any of the Automo-
tive 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 Detri-
ments") exceeds the amount of Tax Benefits generated by or at-
tributable to New Morton Businesses with respect to such tax-
able period ("New Morton Business Tax Benefits"), New Morton
hereby assumes and agrees to pay to the appropriate taxing au-
thority (provided that New Morton shall provide the Company
-21-<PAGE>
with written notice of such payment at least ten business days
prior to the due date of the corresponding Tax Return and pro-
vide 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 pre-
viously made the payment to such taxing authority, or no pay-
ment is due to the taxing authority, an amount equal to the
product of (x) the amount by which New Morton Business Tax Det-
riments exceed New Morton Business Tax Benefits and (y) the
actual marginal tax rate applicable with respect to the rel-
evant Tax Return, with appropriate adjustment to account for
Tax credits generated by or attributable to New Morton Busi-
nesses 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 in-
terest at the rate the taxing jurisdiction imposes upon tax
deficiencies (the "Deficiency Rate") for the relevant periods
with respect to that portion of such tax payment attributable
to the lesser of (a) the amount by which New Morton Business
Tax Detriments exceed New Morton Business Tax Benefits, and (b)
the amount by which New Morton Business Tax Detriments (net of
New Morton Business Tax Benefits) exceeds Automotive Safety
Business Tax Benefits net of Automotive Safety Business Tax
Detriments, each as defined below. New Morton shall pay inter-
est 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
-22-<PAGE>
the taxing jurisdiction would have paid with respect to the
Balance had the Balance been a refund from the taxing jurisdic-
tion, and (y) the interest that New Morton would have paid to
the taxing authority with respect to the tax deficiency repre-
sented 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 Busi-
ness 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 Busi-
nesses included in such calculation plus a payment equal to any
interest received by the Company, acting as agent for New Mor-
ton with respect to such amount. If, however, the refund of
tax, exclusive of interest, received by the Company as New
Morton's agent is less than the amount due New Morton pursuant
to this Section 3.02(a)(ii), the Company shall also pay to New
Morton interest on the additional tax amount (the "Excess") in
an amount equal to one-half of the sum of (x) the interest the
taxing jurisdiction would have paid to the Company with respect
to the Excess had the Excess been refunded by the taxing juris-
diction, and (y) the interest the Company would have paid to
-23-<PAGE>
the taxing jurisdiction with respect to the Excess had the Ex-
cess been a deficiency due from the Company to such jurisdic-
tion, in each case, for the relevant periods.
(b) Changes in New Morton Group Member Filed Re-
turns. 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 Ben-
efit 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 Bene-
fits"), 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 pay-
ment within five business days of making such payment) an
amount equal to the product of (x) the amount by which Automo-
tive Safety Business Tax Detriments exceed Automotive Safety
-24-<PAGE>
Business Tax Benefits and (y) the actual marginal Tax rate ap-
plicable with respect to the relevant Tax Return, with appro-
priate adjustment to account for Tax credits generated by or
attributable to the Safety Business included in such calcula-
tion 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 rel-
evant periods with respect to that portion of such tax payment
attributable to the lesser of (a) the amount by which the Auto-
motive 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 Automo-
tive 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 author-
ity with respect to the tax deficiency represented by the Com-
pany Balance, in each case, for the relevant periods (the "Com-
pany Blended Rate").
-25-<PAGE>
(ii) If in connection with any such Change, the Auto-
motive Safety Business Tax Benefits exceed the Automotive
Safety Business Tax Detriments, the appropriate New Morton Bus-
iness 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 attrib-
utable 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 re-
ceived by New Morton, acting as agent for the Company with re-
spect to such amount. If, however, the refund of tax, exclu-
sive of interest, received by New Morton as the Company's agent
is less than the amount due the Company pursuant to this Sec-
tion 3.02(a)(ii), New Morton shall also pay to the Company in-
terest 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.
-26-<PAGE>
(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 deter-
mine and direct.
Section 3.03. Restructuring Taxes. (b) (i) Notwith-
standing 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 Mor-
ton (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 con-
trary notwithstanding, Section 3.03(a) hereof shall not apply
-27-<PAGE>
to any Restructuring Taxes to the extent that all or any por-
tion 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 connec-
tion 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 recog-
nize gain pursuant to Code Section 311 with respect to the Dis-
tribution, then, to the extent permitted by law or regulation,
the Company, if so requested by New Morton, shall elect pursu-
ant to Code Section 336(e) to treat the Distribution as a dis-
position 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 re-
spect to periods beginning after the Distribution Date which
are attributable to Automotive Safety Businesses. Unless oth-
erwise provided in this Agreement, the New Morton Group shall
-28-<PAGE>
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 Busi-
nesses.
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. Section 1.1502-21T(b)
shall be applied to determine the portion of the Company Tax
Reduction attributable to the New Morton Carryback and the
Company Carryback, respectively. The preceding two sentences
shall apply, mutatis mutandis, to state and local Taxes. The
Company shall, and shall cause each member of the Company Group
to, take all steps reasonably necessary to receive a reduction
in Taxes attributable to a New Morton Carryback.
Notwithstanding anything in this Section 3.05 to the contrary,
the Company shall not be required to take any action to carry
back a New Morton Carryback if the Company determines in good
faith that
-29-<PAGE>
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 pur-
suant 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 Reduc-
tion") by reason of a deduction, loss or credit with respect to
an item for which a member of the Company Group bore the eco-
nomic 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
-30-<PAGE>
New Morton Tax Benefit had been utilized to the extent other-
wise 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) Hypo-
thetical 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 ex-
ceed 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 re-
duction 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 "Sec-
tion 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 for-
eign 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 deduc-
tion, loss or credit, would have resulted in a reduction in
Taxes by the Company or any member of the Company Group (the
-31-<PAGE>
"Section 3.06(b) Hypothetical Tax Reduction") in the same tax-
able period with respect to which the Section 3.06(b) Tax Re-
duction 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 Reduc-
tion 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 ag-
gregate 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 Sec-
tion 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 Sec-
tion 3.06(b) Hypothetical Tax Reduction and the Company Tax
Benefits, as the case may be. Any payment not so made within
-32-<PAGE>
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 Mor-
ton Group or the Company Group pursuant to Article III of this
Agreement or Article V of the Distribution Agreement is charac-
terized by any taxing authority as a Tax Detriment to a member
of the other Group, then the payor shall pay the other Group an
additional amount so the total payments made by the payor equal
the sum of (i) the portion, if any , of such payments that was
not characterized by such taxing authority as a Tax Detriment,
plus (ii) x/(l-y) where x is the amount payable under said Ar-
ticle 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
-33-<PAGE>
Company Group from and against any payment required to be made
as a result of the breach by a member of the Company Group or
the New Morton Group, as the case may be, of any obligation
under this Agreement.
ARTICLE IV
INDEMNITY; COOPERATION AND EXCHANGE OF INFORMATION
Section 4.01. Indemnity. (a) Notwithstanding any-
thing to the contrary in this Agreement, the Company shall in-
demnify 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 Agree-
ment, 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 af-
filiated, combined, consolidated, unitary or similar group of
corporations.
-34-<PAGE>
Section 4.02. Tax Controversies. (a) Whenever a
party hereto (hereinafter an "Indemnitee") is notified in writ-
ing 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 Indemni-
tor's expense, shall be entitled to participate (i) in all con-
ferences, 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 mat-
ter of which is or includes an Indemnity Issue. The Respon-
sible 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 coop-
erate 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 coopera-
tion 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
-35-<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 settle-
ment 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 Respon-
sible 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 discre-
tion:
-36-<PAGE>
(A) enter into a closing agreement or other
final resolution with respect to such matter with the rel-
evant 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 mat-
ter with the relevant taxing authority and/or pay any ad-
ditional 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 li-
ability 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 as-
sume 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 harm-
less 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
-37-<PAGE>
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 Re-
sponsible 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, pro-
vided, 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 re-
sponsibility 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 Com-
pany and New Morton shall agree as to any settlement or compro-
mise 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 Sec-
tion 5.04 with respect to such Indemnity Issue.
-38-<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 documenta-
tion, protests, memoranda of fact and law and briefs, the con-
duct of oral arguments or presentations, the selection of wit-
nesses and the negotiation of stipulations of fact.
Section 4.03. Cooperation and Exchange of Informa-
tion. (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
-39-<PAGE>
cooperation and information as the other shall reasonably re-
quest 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 infor-
mation 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, to-
gether with accompanying schedules and related workpapers,
documents relating to rulings or other determinations by taxing
authorities, including without limitation, foreign taxing au-
thorities, 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 con-
venient basis to provide explanation of any documents or infor-
mation 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 end-
ing on or before the Distribution Date, until the expiration of
-40-<PAGE>
the statute of limitations (including extensions) of the tax-
able 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 Re-
turns 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 informa-
tion 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) here-
of, 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
-41-<PAGE>
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.
-42-<PAGE>
Section 5.03. Notices. All notices and other com-
munications hereunder shall be in writing and shall be deliv-
ered by hand or mailed by registered or certified mail (return
receipt requested) to the parties at the following addresses
(or at such other addresses for a party as shall be specified
by like notice) and shall be deemed given on the date on which
such notice is received:
To the Company or any member of the Company Group:
Autoliv ASP, Inc.
3350 Airport Road
Ogden, Utah 84409
Attention: Corporate Secretary
with a copy to:
Autoliv, Inc.
c/o Autoliv AB
Box 70381
S-107 24 Stockholm
Sweden
Attention: Corporate Secretary
and
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, NY 10022
Attention: Stuart M. Finkelstein, Esq.
To New Morton or any member of the New Morton Group:
Morton International, Inc.
100 North Riverside Drive
Chicago, Illinois 60606
Attention: Corporate Secretary
-43-<PAGE>
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Jodi J. Schwartz, Esq.
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 re-
solved by a "Big Six" public accounting firm or a law firm sat-
isfactory 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 Sub-
sidiaries. 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 Agree-
ment shall constitute a direct obligation of each such member
and shall be deemed to have been readopted and affirmed on be-
half 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, agree-
ments and obligations provided for under this Agreement of each
member of the Company Group and the New Morton Group, respec-
tively. The Company and New Morton shall, upon the written
-44-<PAGE>
request of the other, cause any of their respective group mem-
bers formally to execute this Agreement. This Agreement shall
be binding upon, and shall inure to the benefit of, the succes-
sors, assigns and persons controlling any of the corporations
bound hereby for so long as such successors, assigns or con-
trolling 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 head-
ings 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 in-
validating the remaining provisions hereof. Any such prohibi-
tion or unenforceability in any jurisdiction shall not invali-
date or render unenforceable such provision in any other juris-
diction. 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
-45-<PAGE>
the provisions of this Agreement and agrees that the obliga-
tions of the parties hereunder shall be specifically enforce-
able.
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.
-46-<PAGE>
IN WITNESS WHEREOF, the parties have executed this
agreement as of the 30th day of April, 1997.
MORTON INTERNATIONAL, INC. NEW MORTON INTERNATIONAL, INC.
By /s/ Thomas F. McDevitt By /s/ Raymond P. Buschmann
Thomas F. McDevitt Raymond P. Buschmann
Vice President Finance and Vice President for Legal
Chief Financial Officer Affairs and General
Counsel
Exhibit 2.03
EMPLOYEE BENEFITS ALLOCATION AGREEMENT
DATED AS OF APRIL 30, 1997
BY AND BETWEEN
MORTON INTERNATIONAL, INC.,
AN INDIANA CORPORATION
AND
NEW MORTON INTERNATIONAL, INC.,
AN INDIANA CORPORATION
-1-<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
-i-<PAGE>
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
-ii-<PAGE>
EMPLOYEE BENEFITS ALLOCATION AGREEMENT
Employee Benefits Allocation Agreement (the "Agree-
ment"), dated as of April 30, 1997, by and between Morton
International, Inc., an Indiana corporation (the "Company"),
and New Morton International, Inc., an Indiana corporation and
a wholly owned subsidiary of the Company ("New Morton").
WHEREAS, the Board of Directors of the Company has
determined it is appropriate and desirable to enter into the
Distribution Agreement (the "Distribution Agreement") dated as
of April 30, 1997, by and between the Company and New Morton,
pursuant to which, among other things, the Company will dis-
tribute to holders of its common stock all the issued and out-
standing shares of common stock of New Morton (the "Distribu-
tion");
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 Auto-
liv pursuant to the Exchange Offer (as defined in the Combina-
tion Agreement, and, together with the other transactions con-
templated thereby, the "Transactions");
WHEREAS, it is intended that in connection with such
separation and distribution New Morton will adopt employee ben-
efit plans and programs which are substantially identical to
those sponsored by the Company; and
WHEREAS, in connection with such separation and dis-
tribution, 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 agree-
ments, 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.
-2-<PAGE>
Bonus Plan: the Morton International, Inc. executive
bonus program which is comprised of the Morton International,
Inc. Key Executive Annual Bonus Program, the Morton Interna-
tional, Inc. Staff Executive Annual Bonus Program and the Mor-
ton 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 bar-
gaining 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 Distri-
bution 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 con-
ducted 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.
-3-<PAGE>
Company Incentive Plan: the Bonus Plan, the Company
Option Plan or the LTIP.
Company Individual: any individual who (i) is a Com-
pany Employee as of the Cut-off Date or, following the Distri-
bution, 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 Com-
pany 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 Com-
pany 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").
-4-<PAGE>
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 pur-
suant 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 subsidiar-
ies exclusively for the benefit of Company Individuals.
Company Subsidiary: as of and following the Dis-
tribution Date, any direct or indirect subsidiary of the Com-
pany other than New Morton or any New Morton Subsidiary.
Company VEBA: the Morton International, Inc. Employ-
ees' 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).
-5-<PAGE>
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 Distrib-
ution Date.
Distribution: the distribution to holders of Company
Common Stock of the shares of New Morton Common Stock and re-
lated rights owned by the Company on the Distribution Date on
the basis of one share of New Morton Common Stock for each out-
standing share of Company Common Stock.
Distribution Date: the date determined by the Compa-
ny's Board as of which the Distribution shall be effected,
which is presently contemplated to be April 30, 1997.
Enrolled Actuary: Hewitt Associates, or any other
enrolled actuary making actuarial or similar determinations
with respect to assets or liabilities relating to a particular
employee benefit plan selected by New Morton.
ERISA: the Employee Retirement Income Security Act
of 1974, as amended, or any successor legislation.
Ex-Distribution Date: the first trading day prior to
the Distribution Date on which the Company Common Stock is
-6-<PAGE>
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 Com-
pany or any of its current or former subsidiaries or conducted
currently or heretofore by any of the Company's former subsid-
iaries all of which are listed on Schedule B and all businesses
or operations predominantly managed or operated by, or other-
wise 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 in-
clude 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 busi-
ness and operation not currently conducted by the Company or
any of its current subsidiaries or any predecessors of the Com-
pany including Morton Thiokol, Inc., Thiokol Chemical Corpo-
ration, Thiokol Corporation or Morton Norwich Products Inc. and
-7-<PAGE>
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 Dis-
tribution Agreement, to be conducted, following the Distribu-
tion, 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 Distribu-
tion, otherwise conducted by New Morton or any New Morton Sub-
sidiary.
New Morton Common Stock: the Common Stock, par value
$1.00 per share, of New Morton.
New Morton Employee: any individual who is, follow-
ing 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.
-8-<PAGE>
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 Interna-
tional, 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 Em-
ployee, or (iii) is a beneficiary of any individual specified
in clause (i) or (ii).
New Morton Subsidiary: any direct or indirect sub-
sidiary of the Company that, effective as of the Distribution
Date or otherwise in connection with the Distribution, will be,
-9-<PAGE>
or is contemplated by the Distribution Agreement to be, a di-
rect or indirect subsidiary of New Morton, and any other sub-
sidiary 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 Mor-
ton 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 Subsid-
iary which will provide benefits for New Morton Individuals
who, immediately prior to the Cut-off Date, are active or inac-
tive participants in or otherwise entitled to benefits under
any Company-New Morton Joint Qualified Plan and which is ex-
pected to provide substantially identical benefits to the Com-
pany-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 em-
ployees or former employees or individual employee or former
employee, or the beneficiary or beneficiaries of any such em-
ployee or former employee, whether formal or informal or writ-
ten or unwritten and whether or not legally binding, and in-
cluding, without limitation, any means, whether or not legally
-10-<PAGE>
required, pursuant to which any benefit is provided by an em-
ployer 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 limita-
tion, 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 "Sche-
dule" 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
-11-<PAGE>
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 contribu-
tions 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 liabi-
lities 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
-12-<PAGE>
cause to be taken, all such actions as may be necessary or ap-
propriate 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, li-
abilities 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 af-
ter 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 Quali-
fied Plan are invested, to transfer to the new trustee or other
funding agent appointed by New Morton for such plan the amount
-13-<PAGE>
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 Com-
pany 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 Individu-
als 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 re-
quested by New Morton and necessary in order for New Morton or
any New Morton Subsidiary effectively to maintain and adminis-
ter the New Morton Free-Standing Qualified Plan.
Section 2.02 Company Retained Qualified Plans. Ef-
fective as of the Cut-off Date, the Company shall or shall
-14-<PAGE>
cause one or more Company Subsidiaries, as appropriate, to re-
tain and be solely responsible for, all liabilities and obliga-
tions 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 ad-
justment 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 Quali-
fied 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 li-
ability 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 es-
tablish 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
-15-<PAGE>
applicable, entitled, for all purposes under any applicable new
New Morton Qualified Plan, to be credited with the term of ser-
vice 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 coop-
eration 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 Individ-
ual's term of service for eligibility and vesting purposes un-
der such Plan and a listing of each such New Morton Individu-
al's accrued benefit or account balance thereunder. The Com-
pany 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 al-
ready in the possession of New Morton or a New Morton Subsid-
iary) as may be reasonably requested by New Morton and neces-
sary in order for New Morton or the New Morton Subsidiary to
-16-<PAGE>
establish and administer effectively any new New Morton Quali-
fied Plan.
(b) The Company agrees, as soon as practicable fol-
lowing 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 fur-
ther reduced to reflect contributions due but not paid in re-
spect 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 In-
dividuals 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 Valua-
tion 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
-17-<PAGE>
the Valuation Date to the Joint Defined Benefit Plan through
the date of complete transfer; where (Y) equals aggregate pay-
ments 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 to-
tal 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 de-
scribed in the preceding sentence an additional amount of as-
sets shall be transferred equal to the percentage of such Ex-
cess that the liabilities of such plan (determined using the
same actuarial assumptions) attributable to New Morton Individ-
uals 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 prac-
ticable following the later of the Distribution Date and the
establishment of the qualified trust for the New Morton Quali-
fied Plan which is a Joint Defined Benefit Plan, an initial
-18-<PAGE>
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 as-
sets which is consistent with this section.
(c) The Company agrees, as soon as practicable fol-
lowing 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 unallo-
cated 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
-19-<PAGE>
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 re-
ceipt 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 informa-
tion in the possession of the Company or any Company Subsidiary
as may be reasonably requested by New Morton's counsel in con-
nection 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 re-
tired participants who are New Morton Individuals to be made,
on behalf of New Morton, from the relevant Company-New Morton
-20-<PAGE>
Joint Qualified Plan in accordance with applicable law and pur-
suant 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 Com-
pany Subsidiaries shall cease to have any liability or obliga-
tion 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 ac-
crued pension liabilities with respect to the Company-New Mor-
ton Joint Qualified Plans to the extent attributable to the New
Morton Individuals are reflected on New Morton's consolidated
-21-<PAGE>
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 ap-
propriate 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 infor-
mation (in the possession of the Company or a Company Sub-
sidiary 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
-22-<PAGE>
the extent not previously made. The Company and New Mor-
ton 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 Mor-
ton 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 es-
tablish Company or one or more Company Subsidiaries, as ap-
propriate, 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
-23-<PAGE>
consolidated balance sheet rather than New Morton's consoli-
dated 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 re-
spect 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 re-
tain, as the case may be, and shall be solely responsible for,
or cause its insurance carriers to be responsible for, all li-
abilities 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
-24-<PAGE>
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 appli-
cable, 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 ap-
plicable 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 repre-
sentative with such information (in the possession of the Com-
pany or any Company Subsidiary and not already in the posses-
sion of New Morton or a New Morton Subsidiary) as may be rea-
sonably 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 ar-
rangement 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
-25-<PAGE>
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 reason-
ably 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 Wel-
fare 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 (in-
cluding 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 Distribu-
tion Date, each Company Option which is outstanding and not ex-
ercised 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
-26-<PAGE>
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 Ex-
change; 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 near-
est $.01; the number of shares subject to any such option shall
be rounded to the nearest share. Any related limited stock ap-
preciation 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
-27-<PAGE>
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 de-
ferred 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 (includ-
ing for deferred compensation) with respect to New Morton Indi-
viduals. 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 con-
tained in each Company Incentive Plan to reflect the Distribu-
tion.
(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
-28-<PAGE>
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 re-
spect to individuals who, in connection with the Distribution,
cease to be employees of the Company and become New Morton Em-
ployees, such cessation shall not be deemed a severance of em-
ployment from the Company and its subsidiaries for purposes of
any Plan of the Company or any of its subsidiaries that pro-
vides for the payment of severance, salary continuation or sim-
ilar benefits and shall, in connection with the Distribution,
if and to the extent appropriate obtain waivers from individu-
als 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 Sub-
sidiaries shall assume and be solely responsible for all li-
abilities 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 re-
lating 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.
-29-<PAGE>
Section 2.08 Company Restricted Trust.
(a) Effective as of the Distribution Date, New Mor-
ton 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 fund-
ed 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 Com-
pany 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 Restrict-
ed 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 Indi-
viduals. Such transfer shall be made in cash, securities,
other property or a combination thereof, as determined by the
Company and New Morton.
-30-<PAGE>
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 Subsidiar-
ies 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 In-
dividual 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 as-
sume and discharge all of the liabilities and obligations of
the Company and its subsidiaries relating to New Morton Indi-
viduals which have not been satisfied as of and through the
-31-<PAGE>
Cut-off Date with respect to any Collective Bargaining Agree-
ment, and to be bound by any and all provisions of such Collec-
tive Bargaining Agreements with respect to such New Morton In-
dividuals 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 Com-
pany 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 Ter-
minate 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
-32-<PAGE>
on the right of the Company or New Morton or any Company Sub-
sidiary or New Morton Subsidiary to amend such Plan or termi-
nate its participation therein which the Company or New Morton
or any Company Subsidiary or New Morton Subsidiary would other-
wise 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 re-
duced by the amount of any tax reduction or recovery of tax
benefit realized by the Company or New Morton, as the case may
-33-<PAGE>
be, in respect of the corresponding payment made by it; pro-
vided, 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 al-
location of assets set forth in Section 2.03 shall not be sub-
ject 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 Mor-
ton Subsidiary pursuant to this Agreement, in each case, shall
be deemed to be New Morton Liabilities, as defined in the Dis-
tribution 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 Ar-
ticle 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 Com-
pany 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
-34-<PAGE>
Morton so agree with respect to any such individuals, the as-
sets and liabilities with respect to such employees which are
associated with the plans and programs described in this Agree-
ment 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 negotia-
tions, 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 provi-
sions 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 con-
trol over any contrary provision hereof.
Section 3.02 Guarantee of Subsidiaries' Obligations.
The Company shall cause to be performed, and hereby guarantees
-35-<PAGE>
the performance and payment of, all actions, agreements, obli-
gations 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 Actu-
ary 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 an-
other enrolled actuary (or "Big Six" accounting firm) selected
by agreement between or among the Enrolled Actuary (or the Ac-
countants) 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
-36-<PAGE>
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 com-
munications hereunder shall be in writing and shall be deliv-
ered by hand or mailed by registered or certified mail (return
receipt requested) to the parties at the following addresses
(or at such other addresses for a party as shall be specified
by like notice) and shall be deemed given on the date on which
such notice is received:
To the Company:
Autoliv ASP, Inc.
3350 Airport Road
Ogden, Utah 84409
Attention: Corporate Secretary
with a copy to:
Autoliv, Inc.
c/o Autoliv AB
Box 70381
S10724 Stockholm
Sweden
Attention: Corporate Secretary
and
Skadden, Arps, Slate, Meagher & Flom
25 Bucklersbury
London EC4N 8DA, England
Attention: Scott V. Simpson, Sr., Esq.
To New Morton:
New Morton International, Inc.
100 North Riverside Drive
Chicago, Illinois 60606-1560
Attention: Corporate Secretary
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Jodi J. Schwartz
-37-<PAGE>
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 in-
ure to the benefit of the parties and their respective succes-
sors and permitted assigns.
Section 3.08 Termination. This Agreement may be
terminated in the event that the Distribution Agreement is ter-
minated and the Distribution abandoned prior to the Distribu-
tion 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 con-
fer upon third parties any remedy, claim, liability, reimburse-
ment, claim of action or other right in excess of those exist-
ing without reference to this Agreement.
Section 3.10 Titles and Headings. Titles and head-
ings to sections herein are inserted for the convenience of
reference only and are not intended to be a part of or to af-
fect the meaning of or interpretation of this Agreement.
-38-<PAGE>
Section 3.11 Schedules. The Schedules shall be con-
strued 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 ju-
risdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition or unenforceability without in-
validating the remaining provisions hereof. Any such prohibi-
tion or unenforceability in any jurisdiction shall not invali-
date or render unenforceable such provision in any other juris-
diction.
-39-<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 /s/ P. Michael Phelps
P. Michael Phelps
Vice President and Secretary
NEW MORTON INTERNATIONAL, INC.
By /s/ Christopher K. Julsrud
Christopher K. Julsrud
Vice President Human Resources
Exhibit 4.01
FIRST SUPPLEMENTAL INDENTURE (the "Supplemental"), dated
as of April 28, 1997, among Morton International, Inc., an Indiana
corporation (the "Company"), New Morton International, Inc., an
Indiana corporation to be renamed Morton International, Inc.
("New Morton"), and First Trust National Association, as trustee
(the "Trustee").
W I T N E S S E T H:
WHEREAS, in accordance with Section 901 of the Indenture
relating to the 91/4% Credit Sensitive Debentures due June 1, 2020 of
the Company, dated as of June 1, 1990, between the Company and the
Trustee (the "Indenture"), the Trustee and the Company desire to add
a definition to the Indenture of the phrase "assets and properties as,
or substantially as, an entirety"; and
WHEREAS, pursuant to the Distribution Agreement, dated as
of April 30, 1997, by and between the Company and New Morton, the Company
is transferring its assets and properties to New Morton substantially as
an entirety (the "Transfer");
WHEREAS, in accordance with Article Eight of the Indenture,
New Morton desires to assume the obligations of the Company under the
Indenture upon the Transfer and to succeed to, and be substituted for,
and exercise every right and power of, the Company under the Indenture;
and
WHEREAS, all things necessary to make this Supplemental
Indenture a valid supplement to the terms of the Indenture have been done;
NOW, THEREFORE, the parties hereto agree as set forth below.
Section 1. Amendment to Article Eight. Section 801 of the
Indenture is hereby amended by adding the following sentence at the end
of such Section:
"A conveyance, transfer or lease to any Person by the
Company of its properties and assets constituting not
less than 75% of the book value of the Company's assets
(as reflected on the most recent regularly prepared
consolidated balance sheet of the Company and its
Subsidiaries prior to the date of such conveyance,
transfer or lease) and representing not less than 51%
of the Company's revenues and income from operations
(for the most recently completed fiscal year for which
audited financial statements of the Company and its
Subsidiaries have been prepared prior to the date of
such conveyance, transfer or lease) shall be deemed for
purposes of this Indenture to be a conveyance, transfer
or lease of the Company's properties and assets
substantially as an entirety."
Section 2. Assumption by New Morton. New Morton hereby
expressly assumes the due and punctual payment of the principal of and
interest on all of the Securities (as defined in the Indenture) and the
performance of every covenant of the
<PAGE>
Indenture on the part of the Company to be performed or observed. New
Morton hereby succeeds to, is substituted for, and may exercise every
right and power of, the Company under the Indenture with the same effect
as if New Morton had been named as the Company therein. In accordance
with Section 802 of the Indenture, the Company shall be relieved of all
obligations and covenants under the Indenture and the Securities.
Section 3. Effectiveness. This Supplemental Indenture shall
become effective on the date the Transfer becomes effective and duly
executed counterparts hereof shall have been signed by the Trustee, the
Company and New Morton.
Section 4. Governing Law. This Supplemental Indenture shall
be governed by and construed in accordance with the laws of the State of
Illinois without regard to the conflicts of laws rules thereof.
Section 5. Counterparts. This Supplemental Indenture may be
signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon
the same instrument.
Section 6. Defined Terms. All capitalized terms used but not
defined in this Supplemental Indenture shall have the meanings ascribed
in the Indenture.
IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture to be duly executed and their respective corporate
seals to be hereunto affixed and attested, all as of the date first above
written.
Attest: MORTON INTERNATIONAL, INC.
/s/ P. Michael Phelps By: /s/ Thomas F. McDevitt
P. Michael Phelps Thomas F. McDevitt
Secretary Vice President Finance and Chief
Financial Officer
Attest: NEW MORTON INTERNATIONAL, INC.
/s/ P. Michael Phelps By: /s/ Thomas F. McDevitt
P. Michael Phelps Thomas F. McDevitt
Secretary Vice President Finance and Chief
Financial Officer
Attest: FIRST TRUST NATIONAL ASSOCIATION,
AS TRUSTEE
/s/ Patricia Trlak By: /s/ F. Sgaraglino
Patricia Trlak F. Sgaraglino
Vice President and Assistant Vice President
Secretary
Exhibit 10.01
NEW MORTON INTERNATIONAL, INC.
and
FIRST CHICAGO TRUST COMPANY OF NEW YORK,
as Rights Agent
Rights Agreement
Dated as of April 24, 1997
____________________________________________________________<PAGE>
TABLE OF CONTENTS
Page
Section 1. Definitions.............................. 2
Section 2. Appointment of Rights Agent.............. 8
Section 3. Issue of Right Certificates.............. 9
Section 4. Form of Right Certificates............... 11
Section 5. Countersignature and Registration........ 12
Section 6. Transfer, Split Up, Combination and
Exchange of Right Certificates;
Mutilated, Destroyed, Lost or
Stolen Right Certificates.............. 13
Section 7. Exercise of Rights; Purchase Price;
Expiration Date of Rights.............. 15
Section 8. Cancellation and Destruction of
Right Certificates..................... 17
Section 9. Availability of Preferred Shares......... 18
Section 10. Preferred Shares Record Date............. 19
Section 11. Adjustment of Purchase Price, Number of
Shares or Number of Rights............. 20
Section 12. Certificate of Adjusted Purchase Price
or Number of Shares.................... 35
Section 13. Consolidation, Merger or Sale or Transfer
of Assets or Earning Power............. 35
Section 14. Fractional Rights and Fractional Shares.. 37
Section 15. Rights of Action......................... 40
Section 16. Agreement of Right Holders............... 41
Section 17. Right Certificate Holder Not Deemed a
Stockholder............................ 42
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Page
Section 18. Concerning the Rights Agent.............. 42
Section 19. Merger or Consolidation or Change of
Name of Rights Agent................... 44
Section 20. Duties of Rights Agent................... 45
Section 21. Change of Rights Agent................... 49
Section 22. Issuance of New Right Certificates....... 51
Section 23. Redemption............................... 51
Section 24. Exchange................................. 53
Section 25. Notice of Certain Events................. 56
Section 26. Notices.................................. 57
Section 27. Supplements and Amendments............... 58
Section 28. Successors............................... 59
Section 29. Benefits of this Rights Agreement........ 60
Section 30. Severability............................. 60
Section 31. Governing Law............................ 60
Section 32. Counterparts............................. 61
Section 33. Descriptive Headings..................... 61
Signatures............................................ 62
Exhibit A - Form of Right Certificate
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Rights Agreement, dated as of April 24, 1997,
between New Morton International, Inc., an Indiana corpora-
tion which, following the Spin-Off (as defined herein), will
be renamed Morton International, Inc. (the "Company"), and
First Chicago Trust Company of New York, a New York corpora-
tion (the "Rights Agent").
The Board of Directors of the Company has autho-
rized and declared a dividend of one preferred share purchase
right (a "Right") for each Common Share (as hereinafter de-
fined) of the Company to be issued in the distribution of
Common Shares of the Company (the "Spin-Off") by Morton
International, Inc., an Indiana corporation ("MII"), to its
shareholders, each Right representing the right to purchase
one one-hundredth of a Preferred Share (as hereinafter de-
fined), upon the terms and subject to the conditions herein
set forth, and has further authorized and directed the issu-
ance of one Right with respect to each Common Share of the
Company that shall become outstanding between the effective
date of the Spin-Off (the "Record Date") and the earliest of
the Distribution Date, the Redemption Date and the Final
Expiration Date (as such terms are hereinafter defined).
Accordingly, in consideration of the premises and
the mutual agreements herein set forth, the parties hereby
agree as follows:<PAGE>
Section 1. Definitions. For purposes of this
Rights Agreement, the following terms have the meanings indi-
cated:
(a) "Acquiring Person" shall mean any Person who
or which, together with all Affiliates and Associates of such
Person, shall be the Beneficial Owner of 20% or more of the
Common Shares of the Company then outstanding, but shall not
include the Company, any Subsidiary of the Company, any em-
ployee benefit plan of the Company or any Subsidiary of the
Company, any entity holding Common Shares for or pursuant to
the terms of any such plan or, prior to the spin-off, MII.
Notwithstanding the foregoing, no Person shall become an
"Acquiring Person" as the result of an acquisition of Common
Shares by the Company which, by reducing the number of shares
outstanding, increases the proportionate number of shares
beneficially owned by such Person to 20% or more of the
Common Shares of the Company then outstanding; provided,
however, that if a Person shall become the Beneficial Owner
of 20% or more of the Common Shares of the Company then out-
standing by reason of share purchases by the Company and
shall, after such share purchases by the Company, become the
Beneficial Owner of any additional Common Shares of the Com-
pany, then such Person shall be deemed to be an "Acquiring
Person." Notwithstanding the foregoing, if the Board of Di-
rectors of the Company determines in good faith that a Person
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who would otherwise be an "Acquiring Person," as defined pur-
suant to the foregoing provisions of this paragraph (a), has
become such inadvertently, and such Person divests as
promptly as practicable a sufficient number of Common Shares
so that such Person would no longer be an "Acquiring Person,"
as defined pursuant to the foregoing provisions of this para-
graph (a), then such Person shall not be deemed to be an "Ac-
quiring Person" for any purposes of this Rights Agreement.
(b) "Affiliate" shall have the meaning ascribed to
such term in Rule 12b-2 of the General Rules and Regulations
under the Exchange Act as in effect on the date of this
Rights Agreement.
(c) "Associate" shall have the meaning ascribed to
such term in Rule 12b-2 of the General Rules and Regulations
under the Exchange Act as in effect on the date of this
Rights Agreement.
(d) A Person shall be deemed the "Beneficial
Owner" of and shall be deemed to "beneficially own" any secu-
rities:
(i) which such Person or any of such Person's Af-
filiates or Associates beneficially owns, directly or
indirectly;
(ii) which such Person or any of such Person's Af-
filiates or Associates has (A) the right to acquire
-3-<PAGE>
(whether such right is exercisable immediately or only
after the passage of time) pursuant to any agreement,
arrangement or understanding (other than customary
agreements with and between underwriters and selling
group members with respect to a bona fide public offer-
ing of securities), or upon the exercise of conversion
rights, exchange rights, rights (other than these
Rights), warrants or options, or otherwise; provided,
however, that a Person shall not be deemed the Benefi-
cial Owner of, or to beneficially own, securities ten-
dered pursuant to a tender or exchange offer made by or
on behalf of such Person or any of such Person's Af-
filiates or Associates until such tendered securities
are accepted for purchase or exchange; or (B) the right
to vote pursuant to any agreement, arrangement or under-
standing; provided, however, that a Person shall not be
deemed the Beneficial Owner of, or to beneficially own,
any security if the agreement, arrangement or under-
standing to vote such security (1) arises solely from a
revocable proxy or consent given to such Person in re-
sponse to a public proxy or consent solicitation made
pursuant to, and in accordance with, the applicable
rules and regulations promulgated under the Exchange Act
and (2) is not also then reportable on Schedule 13D un-
der the Exchange Act (or any comparable or successor
report); or
-4-<PAGE>
(iii) which are beneficially owned, directly or in-
directly, by any other Person with which such Person or
any of such Person's Affiliates or Associates has any
agreement, arrangement or understanding (other than cus-
tomary agreements with and between underwriters and
selling group members with respect to a bona fide public
offering of securities) for the purpose of acquiring,
holding, voting (except to the extent contemplated by
the proviso to Section 1(c)(ii)(B)) or disposing of any
securities of the Company.
Notwithstanding anything in this definition of Ben-
eficial Ownership to the contrary, the phrase "then outstand-
ing", when used with reference to a Person's Beneficial Own-
ership of securities of the Company, shall mean the number of
such securities then issued and outstanding together with the
number of such securities not then actually issued and out-
standing which such Person would be deemed to own benefi-
cially hereunder.
(e) "Business Day" shall mean any day other than a
Saturday, a Sunday, or a day on which banking institutions in
New York are authorized or obligated by law or executive or-
der to close.
-5-<PAGE>
(f) "Close of Business" on any given date shall
mean 5:00 P.M., New York time, on such date; provided, how-
ever, that, if such date is not a Business Day, it shall mean
5:00 P.M., New York time, on the next succeeding Business
Day.
(g) "Common Shares" when used with reference to
the Company shall mean the shares of common stock, par value
$1.00 per share, of the Company. "Common Shares" when used
with reference to any Person other than the Company shall
mean the capital stock (or equity interest) with the greatest
voting power of such other Person or, if such other Person is
a Subsidiary of another Person, the Person or Persons which
ultimately control such first-mentioned Person.
(h) "Company" shall have the meaning set forth in
the preamble hereof.
(i) "current per share market price" shall have
the meaning set forth in Section 11(d) hereof.
(j) "Distribution Date" shall have the meaning set
forth in Section 3 hereof.
(k) "equivalent preferred shares" shall have the
meaning set forth in Section 11(b) hereof.
(l) "Exchange Act" shall mean the Securities Ex-
change Act of 1934, as amended.
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(m) "Exchange Ratio" shall have the meaning set
forth in Section 24(a) hereof.
(n) "Final Expiration Date" shall have the meaning
set forth in Section 7(a) hereof.
(o) "NASDAQ" shall mean the National Association
of Securities Dealers, Inc. Automated Quotation System.
(p) "Person" shall mean any individual, firm, cor-
poration or other entity, and shall include any successor (by
merger or otherwise) of such entity.
(q) "Preferred Shares" shall mean shares of Series
A Junior Participating Preferred Stock, par value $1.00 per
share, of the Company having the rights and preferences set
forth in the Articles of Incorporation of the Company.
(r) "Purchase Price" shall have the meaning set
forth in Section 4 hereof.
(s) "Record Date" shall have the meaning set forth
in the second paragraph hereof.
(t) "Redemption Date" shall have the meaning set
forth in Section 7(a) hereof.
(u) "Redemption Price" shall have the meaning set
forth in Section 23(a) hereof.
-7-<PAGE>
(v) "Right" shall have the meaning set forth in
the second paragraph hereof.
(w) "Right Certificate" shall have the meaning set
forth in Section 3(a) hereof.
(x) "Rights Agent" shall have the meaning set
forth in the preamble hereof.
(y) "Security" shall have the meaning set forth in
Section 11(d) hereof.
(z) "Shares Acquisition Date" shall mean the first
date of public announcement by the Company or an Acquiring
Person that an Acquiring Person has become such.
(aa) "Subsidiary" of any Person shall mean any
corporation or other entity of which a majority of the voting
power of the voting equity securities or equity interest is
owned, directly or indirectly, by such Person.
(ab) "Trading Day" shall have the meaning set
forth in Section 11(d) hereof.
Section 2. Appointment of Rights Agent. The Com-
pany hereby appoints the Rights Agent to act as agent for the
Company and the holders of the Rights (who, in accordance
with Section 3 hereof, shall, prior to the Distribution Date,
also be the holders of the Common Shares) in accordance with
the terms and conditions hereof, and the Rights Agent hereby
-8-<PAGE>
accepts such appointment. The Company may from time to time
appoint such co-Rights Agents as it may deem necessary or
desirable.
Section 3. Issue of Right Certificates. (a) Un-
til the earlier of (i) the tenth day after the Shares Acqui-
sition Date or (ii) the tenth Business Day (or such later
date as may be determined by action of the Board of Directors
of the Company prior to such time as any Person becomes an
Acquiring Person) after the date of the commencement by any
Person (other than the Company, any Subsidiary of the Com-
pany, any employee benefit plan of the Company or of any Sub-
sidiary of the Company or any entity holding Common Shares
for or pursuant to the terms of any such plan) of, or of the
first public announcement of the intention of any Person
(other than the Company, any Subsidiary of the Company, any
employee benefit plan of the Company or of any Subsidiary of
the Company or any entity holding Common Shares for or pursu-
ant to the terms of any such plan) to commence, a tender or
exchange offer the consummation of which would result in any
Person becoming the Beneficial Owner of Common Shares ag-
gregating 20% or more of the then outstanding Common Shares
(including any such date which is after the date of this
Rights Agreement and prior to the issuance of the Rights; the
earlier of such dates being herein referred to as the "Dis-
tribution Date"), (x) the Rights will be evidenced (subject
to the provisions of Section 3(b) hereof) by the certificates
-9-<PAGE>
for Common Shares registered in the names of the holders
thereof (which certificates shall also be deemed to be Right
Certificates) and not by separate Right Certificates, and (y)
the right to receive Right Certificates will be transferable
only in connection with the transfer of Common Shares. As
soon as practicable after the Distribution Date, the Company
will prepare and execute, the Rights Agent will countersign,
and the Company will send or cause to be sent (and the Rights
Agent will, if requested, send) by first-class, insured,
postage-prepaid mail, to each record holder of Common Shares
as of the Close of Business on the Distribution Date, at the
address of such holder shown on the records of the Company, a
Right Certificate, in substantially the form of Exhibit A
hereto (a "Right Certificate"), evidencing one Right for each
Common Share so held. As of the Distribution Date, the
Rights will be evidenced solely by such Right Certificates.
(b) Until the earliest of the Distribution Date,
the Redemption Date or the Final Expiration Date, Certifi-
cates for Common Shares shall have impressed on, printed on,
written on or otherwise affixed to them the following legend:
This certificate also evidences and entitles the holder
hereof to certain rights as set forth in a Rights Agree-
ment between Morton International, Inc. (formerly New
Morton International, Inc.) and First Chicago Trust Com-
pany of New York, dated as of April 24, 1997 (the
"Rights Agreement"), the terms of which are hereby in-
corporated herein by reference and a copy of which is on
file at the principal executive offices of Morton Inter-
national, Inc. Under certain circumstances, as set
-10-<PAGE>
forth in the Rights Agreement, such Rights will be evi-
denced by separate certificates and will no longer be
evidenced by this certificate. Morton International,
Inc. will mail to the holder of this certificate a copy
of the Rights Agreement without charge after receipt of
a written request therefor. Under certain circum-
stances, as set forth in the Rights Agreement, Rights
issued to any Person who becomes an Acquiring Person (as
defined in the Rights Agreement) may become null and
void.
With respect to such certificates containing the foregoing
legend, until the Distribution Date, the Rights associated
with the Common Shares represented by such certificates shall
be evidenced by such certificates alone, and the surrender
for transfer of any such certificate shall also constitute
the transfer of the Rights associated with the Common Shares
represented thereby. In the event that the Company purchases
or acquires any Common Shares after the Record Date but prior
to the Distribution Date, any Rights associated with such
Common Shares shall be deemed cancelled and retired so that
the Company shall not be entitled to exercise any Rights as-
sociated with the Common Shares which are no longer outstand-
ing.
Section 4. Form of Right Certificates. The Right
Certificates (and the forms of election to purchase Preferred
Shares and of assignment to be printed on the reverse
thereof) shall be substantially the same as Exhibit A hereto
and may have such marks of identification or designation and
such legends, summaries or endorsements printed thereon as
the Company may deem appropriate and as are not inconsistent
-11-<PAGE>
with the provisions of this Rights Agreement, or as may be
required to comply with any applicable law or with any rule
or regulation made pursuant thereto or with any rule or regu-
lation of any stock exchange or automated quotation system on
which the Rights may from time to time be listed, or to con-
form to usage. Subject to the provisions of Section 22
hereof, the Right Certificates shall entitle the holders
thereof to purchase such number of one one-hundredths of a
Preferred Share as shall be set forth therein at the price
per one one-hundredth of a Preferred Share set forth therein
(the "Purchase Price"), but the number of such one one--
hundredths of a Preferred Share and the Purchase Price shall
be subject to adjustment as provided herein.
Section 5. Countersignature and Registration. The
Right Certificates shall be executed on behalf of the Company
by its Chairman of the Board, its Chief Executive Officer,
its President, any of its Vice Presidents, or its Treasurer,
either manually or by facsimile signature, shall have affixed
thereto the Company's seal or a facsimile thereof, and shall
be attested by the Secretary or an Assistant Secretary of the
Company, either manually or by facsimile signature. The
Right Certificates shall be manually countersigned by the
Rights Agent and shall not be valid for any purpose unless
countersigned. In case any officer of the Company who shall
have signed any of the Right Certificates shall cease to be
such officer of the Company before countersignature by the
-12-<PAGE>
Rights Agent and issuance and delivery by the Company, such
Right Certificates, nevertheless, may be countersigned by the
Rights Agent and issued and delivered by the Company with the
same force and effect as though the person who signed such
Right Certificates had not ceased to be such officer of the
Company; and any Right Certificate may be signed on behalf of
the Company by any person who, at the actual date of the ex-
ecution of such Right Certificate, shall be a proper officer
of the Company to sign such Right Certificate, although at
the date of the execution of this Rights Agreement any such
person was not such an officer.
Following the Distribution Date, the Rights Agent
will keep or cause to be kept, at its principal office, books
for registration and transfer of the Right Certificates is-
sued hereunder. Such books shall show the names and ad-
dresses of the respective holders of the Right Certificates,
the number of Rights evidenced on its face by each of the
Right Certificates and the date of each of the Right Certifi-
cates.
Section 6. Transfer, Split Up, Combination and
Exchange of Right Certificates; Mutilated, Destroyed, Lost or
Stolen Right Certificates. Subject to the provisions of Sec-
tion 14 hereof, at any time after the Close of Business on
-13-<PAGE>
the Distribution Date, and at or prior to the Close of Busi-
ness on the earlier of the Redemption Date or the Final Expi-
ration Date, any Right Certificate or Right Certificates
(other than Right Certificates representing Rights that have
become void pursuant to Section 11(a)(ii) hereof or that have
been exchanged pursuant to Section 24 hereof) may be trans-
ferred, split up, combined or exchanged for another Right
Certificate or Right Certificates entitling the registered
holder to purchase a like number of one one-hundredths of a
Preferred Share as the Right Certificate or Right Certifi-
cates surrendered then entitled such holder to purchase. Any
registered holder desiring to transfer, split up, combine or
exchange any Right Certificate or Right Certificates shall
make such request in writing delivered to the Rights Agent,
and shall surrender the Right Certificate or Right Certifi-
cates to be transferred, split up, combined or exchanged at
the principal office of the Rights Agent. Thereupon the
Rights Agent shall countersign and deliver to the person en-
titled thereto a Right Certificate or Right Certificates, as
the case may be, as so requested. The Company may require
payment of a sum sufficient to cover any tax or governmental
charge that may be imposed in connection with any transfer,
split up, combination or exchange of Right Certificates.
Upon receipt by the Company and the Rights Agent of
evidence reasonably satisfactory to them of the loss, theft,
destruction or mutilation of a Right Certificate, and, in
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case of loss, theft or destruction, of indemnity or security
reasonably satisfactory to them, and, at the Company's re-
quest, reimbursement to the Company and the Rights Agent of
all reasonable expenses incidental thereto, and upon sur-
render to the Rights Agent and cancellation of the Right Cer-
tificate if mutilated, the Company will make and deliver a
new Right Certificate of like tenor to the Rights Agent for
delivery to the registered holder in lieu of the Right Cer-
tificate so lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price;
Expiration Date of Rights. (a) The registered holder of any
Right Certificate may exercise the Rights evidenced thereby
(except as otherwise provided herein), in whole or in part,
at any time after the Distribution Date, upon surrender of
the Right Certificate, with the form of election to purchase
on the reverse side thereof duly executed, to the Rights
Agent at the principal office of the Rights Agent, together
with payment of the Purchase Price for each one one-hundredth
of a Preferred Share as to which the Rights are exercised, at
or prior to the earliest of (i) the Close of Business on the
tenth anniversary of the Record Date (the "Final Expiration
Date"), (ii) the time at which the Rights are redeemed as
provided in Section 23 hereof (the "Redemption Date"), or
(iii) the time at which such Rights are exchanged as provided
in Section 24 hereof.
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(b) The Purchase Price for each one one-hundredth
of a Preferred Share purchasable pursuant to the exercise of
a Right shall initially be $105.00, and shall be subject to
adjustment from time to time as provided in Section 11 or 13
hereof and shall be payable in lawful money of the United
States of America in accordance with paragraph (c) below.
(c) Upon receipt of a Right Certificate represent-
ing exercisable Rights, with the form of election to purchase
duly executed, accompanied by payment of the Purchase Price
for the shares to be purchased and an amount equal to any
applicable transfer tax required to be paid by the holder of
such Right Certificate in accordance with Section 9 hereof by
certified check, cashier's check or money order payable to
the order of the Company, the Rights Agent shall thereupon
promptly (i) (A) requisition from any transfer agent of the
Preferred Shares certificates for the number of Preferred
Shares to be purchased and the Company hereby irrevocably
authorizes any such transfer agent to comply with all such
requests, or (B) requisition from the depositary agent de-
positary receipts representing such number of one one-
hundredths of a Preferred Share as are to be purchased (in
which case certificates for the Preferred Shares represented
by such receipts shall be deposited by the transfer agent of
the Preferred Shares with such depositary agent) and the Com-
pany hereby directs such depositary agent to comply with such
request, (ii) when appropriate, requisition from the Company
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the amount of cash to be paid in lieu of issuance of frac-
tional shares in accordance with Section 14 hereof, (iii)
promptly after receipt of such certificates or depositary
receipts, cause the same to be delivered to or upon the order
of the registered holder of such Right Certificate, regis-
tered in such name or names as may be designated by such
holder and (iv) when appropriate, after receipt, deliver such
cash to or upon the order of the registered holder of such
Right Certificate.
(d) In case the registered holder of any Right
Certificate shall exercise less than all the Rights evidenced
thereby, a new Right Certificate evidencing Rights equivalent
to the Rights remaining unexercised shall be issued by the
Rights Agent to the registered holder of such Right Certifi-
cate or to his duly authorized assigns, subject to the provi-
sions of Section 14 hereof.
Section 8. Cancellation and Destruction of Right
Certificates. All Right Certificates surrendered for the
purpose of exercise, transfer, split up, combination or ex-
change shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or
in cancelled form, or, if surrendered to the Rights Agent,
shall be cancelled by it, and no Right Certificates shall be
issued in lieu thereof except as expressly permitted by any
of the provisions of this Rights Agreement. The Company
-17-<PAGE>
shall deliver to the Rights Agent for cancellation and re-
tirement, and the Rights Agent shall so cancel and retire,
any other Right Certificate purchased or acquired by the Com-
pany otherwise than upon the exercise thereof. The Rights
Agent shall deliver all cancelled Right Certificates to the
Company, or shall, at the written request of the Company,
destroy such cancelled Right Certificates, and, in such case,
shall deliver a certificate of destruction thereof to the
Company.
Section 9. Availability of Preferred Shares. The
Company covenants and agrees that it will cause to be re-
served and kept available out of its authorized and unissued
Preferred Shares or any Preferred Shares held in its trea-
sury, the number of Preferred Shares that will be sufficient
to permit the exercise in full of all outstanding Rights in
accordance with Section 7. The Company covenants and agrees
that it will take all such action as may be necessary to en-
sure that all Preferred Shares delivered upon exercise of
Rights shall, at the time of delivery of the certificates for
such Preferred Shares (subject to payment of the Purchase
Price), be duly and validly authorized and issued and fully
paid and nonassessable shares.
The Company further covenants and agrees that it
will pay when due and payable any and all federal and state
transfer taxes and charges which may be payable in respect of
-18-<PAGE>
the issuance or delivery of the Right Certificates or of any
Preferred Shares upon the exercise of Rights. The Company
shall not, however, be required to pay any transfer tax which
may be payable in respect of any transfer or delivery of
Right Certificates to a person other than, or the issuance or
delivery of certificates or depositary receipts for the Pre-
ferred Shares in a name other than that of, the registered
holder of the Right Certificate evidencing Rights surrendered
for exercise or to issue or to deliver any certificates or
depositary receipts for Preferred Shares upon the exercise of
any Rights until any such tax shall have been paid (any such
tax being payable by the holder of such Right Certificate at
the time of surrender) or until it has been established to
the Company's reasonable satisfaction that no such tax is
due.
Section 10. Preferred Shares Record Date. Each
person in whose name any certificate for Preferred Shares is
issued upon the exercise of Rights shall for all purposes be
deemed to have become the holder of record of the Preferred
Shares represented thereby on, and such certificate shall be
dated, the date upon which the Right Certificate evidencing
such Rights was duly surrendered and payment of the Purchase
Price (and any applicable transfer taxes) was made; provided,
however, that if the date of such surrender and payment is a
date upon which the Preferred Shares transfer books of the
-19-<PAGE>
Company are closed, such person shall be deemed to have be-
come the record holder of such shares on, and such certifi-
cate shall be dated, the next succeeding Business Day on
which the Preferred Shares transfer books of the Company are
open. Prior to the exercise of the Rights evidenced thereby,
the holder of a Right Certificate shall not be entitled to
any rights of a holder of Preferred Shares for which the
Rights shall be exercisable, including, without limitation,
the right to vote, to receive dividends or other distribu-
tions or to exercise any preemptive rights, and shall not be
entitled to receive any notice of any proceedings of the Com-
pany, except as provided herein.
Section 11. Adjustment of Purchase Price, Number
of Shares or Number of Rights. The Purchase Price, the num-
ber of Preferred Shares covered by each Right and the number
of Rights outstanding are subject to adjustment from time to
time as provided in this Section 11.
(a) (i) In the event the Company shall at any
time after the Record Date (A) declare a dividend on the Pre-
ferred Shares payable in Preferred Shares, (B) subdivide the
outstanding Preferred Shares, (C) combine the outstanding
Preferred Shares into a smaller number of Preferred Shares or
(D) issue any shares of its capital stock in a reclassifica-
tion of the Preferred Shares (including any such reclas-
sification in connection with a consolidation or merger in
-20-<PAGE>
which the Company is the continuing or surviving corpora-
tion), except as otherwise provided in this Section 11(a),
the Purchase Price in effect at the time of the record date
for such dividend or of the effective date of such subdivi-
sion, combination or reclassification, and the number and
kind of shares of capital stock issuable on such date, shall
be proportionately adjusted so that the holder of any Right
exercised after such time shall be entitled to receive the
aggregate number and kind of shares of capital stock which,
if such Right had been exercised immediately prior to such
date and at a time when the Preferred Shares transfer books
of the Company were open, he would have owned upon such exer-
cise and been entitled to receive by virtue of such dividend,
subdivision, combination or reclassification; provided, how-
ever, that in no event shall the consideration to be paid
upon the exercise of one Right be less than the aggregate par
value of the shares of capital stock of the Company issuable
upon exercise of one Right.
(ii) Subject to Section 24 of this Rights Agree-
ment, in the event any Person becomes an Acquiring Person
after the Record Date, each holder of a Right shall thereaf-
ter have a right to receive, upon exercise thereof at a price
equal to the then current Purchase Price multiplied by the
number of one one-hundredths of a Preferred Share for which a
Right is then exercisable, in accordance with the terms of
this Rights Agreement and in lieu of Preferred Shares, such
-21-<PAGE>
number of Common Shares of the Company as shall equal the
result obtained by (A) multiplying the then current Purchase
Price by the number of one one-hundredths of a Preferred
Share for which a Right is then exercisable and dividing that
product by (B) 50% of the then current per share market price
of the Company's Common Shares (determined pursuant to Sec-
tion 11(d) hereof) on the date of the occurrence of such
event. In the event that any Person shall become an Acquir-
ing Person and the Rights shall then be outstanding, the Com-
pany shall not take any action which would eliminate or di-
minish the benefits intended to be afforded by the Rights.
From and after the occurrence of such event, any
Rights that are or were acquired or beneficially owned by any
Acquiring Person (or any Associate or Affiliate of such Ac-
quiring Person) shall be void and any holder of such Rights
shall thereafter have no right to exercise such Rights under
any provision of this Rights Agreement. No Right Certificate
shall be issued pursuant to Section 3 that represents Rights
beneficially owned by an Acquiring Person whose Rights would
be void pursuant to the preceding sentence or any Associate
or Affiliate thereof; no Right Certificate shall be issued at
any time upon the transfer of any Rights to an Acquiring Per-
son whose Rights would be void pursuant to the preceding sen-
tence or any Associate or Affiliate thereof or to any nominee
of such Acquiring Person, Associate or Affiliate; and any
Right Certificate delivered to the Rights Agent for transfer
-22-<PAGE>
to an Acquiring Person whose Rights would be void pursuant to
the preceding sentence shall be cancelled.
(iii) In the event that there shall not be suf-
ficient Common Shares issued but not outstanding or autho-
rized but unissued to permit the exercise in full of the
Rights in accordance with the foregoing subparagraph (ii),
the Company shall take all such action as may be necessary to
authorize additional Common Shares for issuance upon exercise
of the Rights. In the event the Company shall, after good
faith effort, be unable to take all such action as may be
necessary to authorize such additional Common Shares, the
Company shall substitute, for each Common Share that would
otherwise be issuable upon exercise of a Right, a number of
Preferred Shares or fraction thereof such that the current
per share market price of one Preferred Share multiplied by
such number or fraction is equal to the current per share
market price of one Common Share as of the date of issuance
of such Preferred Shares or fraction thereof.
(b) In case the Company shall fix a record date
for the issuance of rights, options or warrants to all hold-
ers of Preferred Shares entitling them (for a period expiring
within 45 calendar days after such record date) to subscribe
for or purchase Preferred Shares (or shares having the same
rights, privileges and preferences as the Preferred Shares
("equivalent preferred shares")) or securities convertible
-23-<PAGE>
into Preferred Shares or equivalent preferred shares at a
price per Preferred Share or equivalent preferred share (or
having a conversion price per share, if a security convert-
ible into Preferred Shares or equivalent preferred shares)
less than the then current per share market price of the Pre-
ferred Shares on such record date, the Purchase Price to be
in effect after such record date shall be determined by mul-
tiplying the Purchase Price in effect immediately prior to
such record date by a fraction, the numerator of which shall
be the number of Preferred Shares outstanding on such record
date plus the number of Preferred Shares which the aggregate
offering price of the total number of Preferred Shares and/or
equivalent preferred shares so to be offered (and/or the ag-
gregate initial conversion price of the convertible securi-
ties so to be offered) would purchase at such current market
price and the denominator of which shall be the number of
Preferred Shares outstanding on such record date plus the
number of additional Preferred Shares and/or equivalent pre-
ferred shares to be offered for subscription or purchase (or
into which the convertible securities so to be offered are
initially convertible); provided, however, that in no event
shall the consideration to be paid upon the exercise of one
Right be less than the aggregate par value of the shares of
capital stock of the Company issuable upon exercise of one
Right. In case such subscription price may be paid in a con-
sideration part or all of which shall be in a form other than
-24-<PAGE>
cash, the value of such consideration shall be as determined
in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with
the Rights Agent and shall be binding on the Rights Agent and
holders of the Rights. Preferred Shares owned by or held for
the account of the Company shall not be deemed outstanding
for the purpose of any such computation. Such adjustment
shall be made successively whenever such a record date is
fixed; and in the event that such rights, options or warrants
are not so issued, the Purchase Price shall be adjusted to be
the Purchase Price which would then be in effect if such
record date had not been fixed.
(c) In case the Company shall fix a record date
for the making of a distribution to all holders of the Pre-
ferred Shares (including any such distribution made in con-
nection with a consolidation or merger in which the Company
is the continuing or surviving corporation) of evidences of
indebtedness or assets (other than a regular quarterly cash
dividend or a dividend payable in Preferred Shares) or sub-
scription rights or warrants (excluding those referred to in
Section 11(b) hereof), the Purchase Price to be in effect
after such record date shall be determined by multiplying the
Purchase Price in effect immediately prior to such record
date by a fraction, the numerator of which shall be the then
current per share market price of the Preferred Shares on
such record date, less the fair market value (as determined
-25-<PAGE>
in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with
the Rights Agent and shall be binding on the Rights Agent and
holders of the Rights) of the portion of the assets or evi-
dences of indebtedness so to be distributed or of such sub-
scription rights or warrants applicable to one Preferred
Share and the denominator of which shall be such current per
share market price of the Preferred Shares; provided, how-
ever, that in no event shall the consideration to be paid
upon the exercise of one Right be less than the aggregate par
value of the shares of capital stock of the Company to be
issued upon exercise of one Right. Such adjustments shall be
made successively whenever such a record date is fixed; and
in the event that such distribution is not so made, the Pur-
chase Price shall again be adjusted to be the Purchase Price
which would then be in effect if such record date had not
been fixed.
(d) (i) For the purpose of any computation here-
under, the "current per share market price" of any security
(a "Security" for the purpose of this Section 11(d)(i)) on
any date shall be deemed to be the average of the daily clos-
ing prices per share of such Security for the 30 consecutive
Trading Days immediately prior to such date; provided, how-
ever, that in the event that the current per share market
price of the Security is determined during a period following
the announcement by the issuer of such Security of (A) a
-26-<PAGE>
dividend or distribution on such Security payable in shares
of such Security or securities convertible into such shares,
or (B) any subdivision, combination or reclassification of
such Security and prior to the expiration of 30 Trading Days
after the ex-dividend date for such dividend or distribution,
or the record date for such subdivision, combination or re-
classification, then, and in each such case, the current per
share market price shall be appropriately adjusted to reflect
the current market price per share equivalent of such Secu-
rity. The closing price for each day shall be the last sale
price, regular way, or, in case no such sale takes place on
such day, the average of the closing bid and asked prices,
regular way, in either case, as reported in the principal
consolidated transaction reporting system with respect to
securities listed or admitted to trading on the New York
Stock Exchange or, if the Security is not listed or admitted
to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with re-
spect to securities listed on the principal national securi-
ties exchange on which the Security is listed or admitted to
trading or, if the Security is not listed or admitted to
trading on any national securities exchange, the last quoted
price or, if not so quoted, the average of the high bid and
low asked prices in the over-the-counter market, as reported
by NASDAQ or such other system then in use, or, if on any
-27-<PAGE>
such date the Security is not quoted by any such organiza-
tion, the average of the closing bid and asked prices as fur-
nished by a professional market maker making a market in the
Security selected by the Board of Directors of the Company.
The term "Trading Day" shall mean a day on which the princi-
pal national securities exchange on which the Security is
listed or admitted to trading is open for the transaction of
business or, if the Security is not listed or admitted to
trading on any national securities exchange, a Business Day.
(ii) For the purpose of any computation hereunder,
the "current per share market price" of the Preferred Shares
shall be determined in accordance with the method set forth
in Section 11(d)(i). If the Preferred Shares are not pub-
licly traded, the "current per share market price" of the
Preferred Shares shall be conclusively deemed to be the cur-
rent per share market price of the Common Shares as deter-
mined pursuant to Section 11(d)(i) (appropriately adjusted to
reflect any stock split, stock dividend or similar transac-
tion occurring after the date hereof), multiplied by one hun-
dred. If neither the Common Shares nor the Preferred Shares
are publicly held or so listed or traded, "current per share
market price" shall mean the fair value per share as deter-
mined in good faith by the Board of Directors of the Company,
whose determination shall be described in a statement filed
with the Rights Agent.
-28-<PAGE>
(e) No adjustment in the Purchase Price shall be
required unless such adjustment would require an increase or
decrease of at least 1% in the Purchase Price; provided, how-
ever, that any adjustments which by reason of this Section
11(e) are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All
calculations under this Section 11 shall be made to the near-
est cent or to the nearest one one-millionth of a Preferred
Share or one ten-thousandth of any other share or security as
the case may be. Notwithstanding the first sentence of this
Section 11(e), any adjustment required by this Section 11
shall be made no later than the earlier of (i) three years
from the date of the transaction which requires such adjust-
ment or (ii) the date of the expiration of the right to exer-
cise any Rights.
(f) If, as a result of an adjustment made pursuant
to Section 11(a) hereof, the holder of any Right thereafter
exercised shall become entitled to receive any shares of
capital stock of the Company other than Preferred Shares,
thereafter the number of such other shares so receivable upon
exercise of any Right shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Preferred
Shares contained in Section 11(a) through (c), inclusive, and
the provisions of Sections 7, 9, 10 and 13 with respect to
-29-<PAGE>
the Preferred Shares shall apply on like terms to any such
other shares.
(g) All Rights originally issued by the Company
subsequent to any adjustment made to the Purchase Price here-
under shall evidence the right to purchase, at the adjusted
Purchase Price, the number of one one-hundredths of a Pre-
ferred Share purchasable from time to time hereunder upon
exercise of the Rights, all subject to further adjustment as
provided herein.
(h) Unless the Company shall have exercised its
election as provided in Section 11(i), upon each adjustment
of the Purchase Price as a result of the calculations made in
Sections 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evi-
dence the right to purchase, at the adjusted Purchase Price,
that number of one one-hundredths of a Preferred Share (cal-
culated to the nearest one one-millionth of a Preferred
Share) obtained by (A) multiplying (x) the number of one
one-hundredths of a share covered by a Right immediately
prior to this adjustment by (y) the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price
and (B) dividing the product so obtained by the Purchase
Price in effect immediately after such adjustment of the Pur-
chase Price.
-30-<PAGE>
(i) The Company may elect on or after the date of
any adjustment of the Purchase Price to adjust the number of
Rights in substitution for any adjustment in the number of
one one-hundredths of a Preferred Share purchasable upon the
exercise of a Right. Each of the Rights outstanding after
such adjustment of the number of Rights shall be exercisable
for the number of one one-hundredths of a Preferred Share for
which a Right was exercisable immediately prior to such ad-
justment. Each Right held of record prior to such adjustment
of the number of Rights shall become that number of Rights
(calculated to the nearest one ten-thousandth) obtained by
dividing the Purchase Price in effect immediately prior to
adjustment of the Purchase Price by the Purchase Price in
effect immediately after adjustment of the Purchase Price.
The Company shall make a public announcement of its election
to adjust the number of Rights, indicating the record date
for the adjustment, and, if known at the time, the amount of
the adjustment to be made. This record date may be the date
on which the Purchase Price is adjusted or any day thereaf-
ter, but, if the Right Certificates have been issued, shall
be at least 10 days later than the date of the public an-
nouncement. If Right Certificates have been issued, upon
each adjustment of the number of Rights pursuant to this Sec-
tion 11(i), the Company shall, as promptly as practicable,
cause to be distributed to holders of record of Right Cer-
tificates on such record date Right Certificates evidencing,
-31-<PAGE>
subject to Section 14 hereof, the additional Rights to which
such holders shall be entitled as a result of such adjust-
ment, or, at the option of the Company, shall cause to be
distributed to such holders of record in substitution and
replacement for the Right Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof,
if required by the Company, new Right Certificates evidencing
all the Rights to which such holders shall be entitled after
such adjustment. Right Certificates so to be distributed
shall be issued, executed and countersigned in the manner
provided for herein and shall be registered in the names of
the holders of record of Right Certificates on the record
date specified in the public announcement.
(j) Irrespective of any adjustment or change in
the Purchase Price or the number of one one-hundredths of a
Preferred Share issuable upon the exercise of the Rights, the
Right Certificates theretofore and thereafter issued may con-
tinue to express the Purchase Price and the number of one
one-hundredths of a Preferred Share which were expressed in
the initial Right Certificates issued hereunder.
(k) Before taking any action that would cause an
adjustment reducing the Purchase Price below one one-
hundredth of the then par value, if any, of the Preferred
Shares issuable upon exercise of the Rights, the Company
shall take any corporate action which may, in the opinion of
-32-<PAGE>
its counsel, be necessary in order that the Company may val-
idly and legally issue fully paid and nonassessable Preferred
Shares at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall
require that an adjustment in the Purchase Price be made ef-
fective as of a record date for a specified event, the Com-
pany may elect to defer until the occurrence of such event
the issuing to the holder of any Right exercised after such
record date of the Preferred Shares and other capital stock
or securities of the Company, if any, issuable upon such ex-
ercise over and above the Preferred Shares and other capital
stock or securities of the Company, if any, issuable upon
such exercise on the basis of the Purchase Price in effect
prior to such adjustment; provided, however, that the Company
shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder's right to receive such
additional shares upon the occurrence of the event requiring
such adjustment.
(m) Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such
reductions in the Purchase Price, in addition to those ad-
justments expressly required by this Section 11, as and to
the extent that it in its sole discretion shall determine to
be advisable in order that any consolidation or subdivision
-33-<PAGE>
of the Preferred Shares, issuance wholly for cash of any Pre-
ferred Shares at less than the current market price, issuance
wholly for cash of Preferred Shares or securities which by
their terms are convertible into or exchangeable for Pre-
ferred Shares, dividends on Preferred Shares payable in Pre-
ferred Shares or issuance of rights, options or warrants re-
ferred to hereinabove in Section 11(b), hereafter made by the
Company to holders of its Preferred Shares shall not be tax-
able to such stockholders.
(n) In the event that at any time after the Record
Date and prior to the Distribution Date, the Company shall
(i) declare or pay any dividend on the Common Shares payable
in Common Shares, or (ii) effect a subdivision, combination
or consolidation of the Common Shares (by reclassification or
otherwise than by payment of dividends in Common Shares) into
a greater or lesser number of Common Shares, then in any such
case (A) the number of one one-hundredths of a Preferred
Share purchasable after such event upon proper exercise of
each Right shall be determined by multiplying the number of
one one-hundredths of a Preferred Share so purchasable im-
mediately prior to such event by a fraction, the numerator of
which is the number of Common Shares outstanding immediately
before such event and the denominator of which is the number
of Common Shares outstanding immediately after such event,
and (B) each Common Share outstanding immediately after such
event shall have issued with respect to it that number of
-34-<PAGE>
Rights which each Common Share outstanding immediately prior
to such event had issued with respect to it. The adjustments
provided for in this Section 11(n) shall be made successively
whenever such a dividend is declared or paid or such a subdi-
vision, combination or consolidation is effected.
Section 12. Certificate of Adjusted Purchase Price
or Number of Shares. Whenever an adjustment is made as pro-
vided in Section 11 or 13 hereof, the Company shall promptly
(a) prepare a certificate setting forth such adjustment, and
a brief statement of the facts accounting for such adjust-
ment, (b) file with the Rights Agent and with each transfer
agent for the Common Shares or the Preferred Shares a copy of
such certificate and (c) mail a brief summary thereof to each
holder of a Right Certificate in accordance with Section 25
hereof.
Section 13. Consolidation, Merger or Sale or
Transfer of Assets or Earning Power. In the event, directly
or indirectly, at any time after a Person has become an Ac-
quiring Person, (a) the Company shall consolidate with, or
merge with and into, any other Person, (b) any Person shall
consolidate with the Company, or merge with and into the Com-
pany and the Company shall be the continuing or surviving
corporation of such merger and, in connection with such
merger, all or part of the Common Shares shall be changed
into or exchanged for stock or other securities of any other
-35-<PAGE>
Person (or the Company) or cash or any other property, or (c)
the Company shall sell or otherwise transfer (or one or more
of its Subsidiaries shall sell or otherwise transfer), in one
or more transactions, assets or earning power aggregating 50%
or more of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person other
than the Company or one or more of its wholly-owned Subsid-
iaries, then, and in each such case, proper provision shall
be made so that (i) each holder of a Right (except as other-
wise provided herein) shall thereafter have the right to re-
ceive, upon the exercise thereof at a price equal to the then
current Purchase Price multiplied by the number of one one-
hundredths of a Preferred Share for which a Right is then
exercisable, in accordance with the terms of this Rights
Agreement and in lieu of Preferred Shares, such number of
Common Shares of such other Person (including the Company as
successor thereto or as the surviving corporation) as shall
equal the result obtained by (A) multiplying the then current
Purchase Price by the number of one one-hundredths of a Pre-
ferred Share for which a Right is then exercisable and divid-
ing that product by (B) 50% of the then current per share
market price of the Common Shares of such other Person (de-
termined pursuant to Section 11(d) hereof) on the date of
consummation of such consolidation, merger, sale or transfer;
(ii) the issuer of such Common Shares shall thereafter be
-36-<PAGE>
liable for, and shall assume, by virtue of such consolida-
tion, merger, sale or transfer, all the obligations and du-
ties of the Company pursuant to this Rights Agreement; (iii)
the term "Company" shall thereafter be deemed to refer to
such issuer; and (iv) such issuer shall take such steps (in-
cluding, but not limited to, the reservation of a sufficient
number of its Common Shares in accordance with Section 9
hereof) in connection with such consummation as may be neces-
sary to assure that the provisions hereof shall thereafter be
applicable, as nearly as reasonably may be, in relation to
the Common Shares thereafter deliverable upon the exercise of
the Rights. The Company shall not consummate any such con-
solidation, merger, sale or transfer unless prior thereto the
Company and such issuer shall have executed and delivered to
the Rights Agent a supplemental agreement so providing. The
Company shall not enter into any transaction of the kind re-
ferred to in this Section 13 if at the time of such transac-
tion there are any rights, warrants, instruments or securi-
ties outstanding or any agreements or arrangements which, as
a result of the consummation of such transaction, would
eliminate or substantially diminish the benefits intended to
be afforded by the Rights. The provisions of this Section 13
shall similarly apply to successive mergers or consolidations
or sales or other transfers.
Section 14. Fractional Rights and Fractional
Shares. (a) The Company shall not be required to issue
-37-<PAGE>
fractions of Rights or to distribute Right Certificates which
evidence fractional Rights. In lieu of such fractional
Rights, there shall be paid to the registered holders of the
Right Certificates with regard to which such fractional
Rights would otherwise be issuable, an amount in cash equal
to the same fraction of the current market value of a whole
Right. For the purposes of this Section 14(a), the current
market value of a whole Right shall be the closing price of
the Rights for the Trading Day immediately prior to the date
on which such fractional Rights would have been otherwise
issuable. The closing price for any day shall be the last
sale price, regular way, or, in case no such sale takes place
on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal con-
solidated transaction reporting system with respect to secu-
rities listed or admitted to trading on the New York Stock
Exchange or, if the Rights are not listed or admitted to
trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with re-
spect to securities listed on the principal national securi-
ties exchange on which the Rights are listed or admitted to
trading or, if the Rights are not listed or admitted to trad-
ing on any national securities exchange, the last quoted
price or, if not so quoted, the average of the high bid and
low asked prices in the over-the-counter market, as reported
by NASDAQ or such other system then in use or, if on any such
-38-<PAGE>
date the Rights are not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights se-
lected by the Board of Directors of the Company. If on any
such date no such market maker is making a market in the
Rights, the fair value of the Rights on such date as deter-
mined in good faith by the Board of Directors of the Company
shall be used.
(b) The Company shall not be required to issue
fractions of Preferred Shares (other than fractions which are
integral multiples of one one-hundredth of a Preferred Share)
upon exercise of the Rights or to distribute certificates
which evidence fractional Preferred Shares (other than frac-
tions which are integral multiples of one one-hundredth of a
Preferred Share). Fractions of Preferred Shares in integral
multiples of one one-hundredth of a Preferred Share may, at
the election of the Company, be evidenced by depositary re-
ceipts, pursuant to an appropriate agreement between the Com-
pany and a depositary selected by it; provided that such
agreement shall provide that the holders of such depositary
receipts shall have all the rights, privileges and prefer-
ences to which they are entitled as beneficial owners of the
Preferred Shares represented by such depositary receipts. In
lieu of fractional Preferred Shares that are not integral
-39-<PAGE>
multiples of one one-hundredth of a Preferred Share, the Com-
pany shall pay to the registered holders of Right Certifi-
cates at the time such Rights are exercised as herein pro-
vided an amount in cash equal to the same fraction of the
current market value of one Preferred Share. For the pur-
poses of this Section 14(b), the current market value of a
Preferred Share shall be the closing price of a Preferred
Share (as determined pursuant to the second sentence of Sec-
tion 11(d)(i) hereof) for the Trading Day immediately prior
to the date of such exercise.
(c) The holder of a Right by the acceptance of the
Right expressly waives his right to receive any fractional
Rights or any fractional shares upon exercise of a Right (ex-
cept as provided above).
Section 15. Rights of Action. All rights of ac-
tion in respect of this Rights Agreement, excepting the
rights of action given to the Rights Agent under Section 18
hereof, are vested in the respective registered holders of
the Right Certificates (and, prior to the Distribution Date,
the registered holders of the Common Shares); and any regis-
tered holder of any Right Certificate (or, prior to the Dis-
tribution Date, of the Common Shares), without the consent of
the Rights Agent or of the holder of any other Right Certifi-
cate (or, prior to the Distribution Date, of the Common
-40-<PAGE>
Shares), may, in his own behalf and for his own benefit, en-
force, and may institute and maintain any suit, action or
proceeding against the Company to enforce, or otherwise act
in respect of, his right to exercise the Rights evidenced by
such Right Certificate in the manner provided in such Right
Certificate and in this Rights Agreement. Without limiting
the foregoing or any remedies available to the holders of
Rights, it is specifically acknowledged that the holders of
Rights would not have an adequate remedy at law for any
breach of this Rights Agreement and will be entitled to spe-
cific performance of the obligations under, and injunctive
relief against actual or threatened violations of the obliga-
tions of any Person subject to, this Rights Agreement.
Section 16. Agreement of Right Holders. Every
holder of a Right, by accepting the same, consents and agrees
with the Company and the Rights Agent and with every other
holder of a Right that:
(a) prior to the Distribution Date, the Rights
will be transferable only in connection with the transfer of
the Common Shares;
(b) after the Distribution Date, the Right Cer-
tificates are transferable only on the registry books of the
Rights Agent if surrendered at the principal office of the
Rights Agent, duly endorsed or accompanied by a proper in-
strument of transfer; and
-41-<PAGE>
(c) the Company and the Rights Agent may deem and
treat the person in whose name the Right Certificate (or,
prior to the Distribution Date, the associated Common Shares
certificate) is registered as the absolute owner thereof and
of the Rights evidenced thereby (notwithstanding any nota-
tions of ownership or writing on the Right Certificate or the
associated Common Shares certificate made by anyone other
than the Company or the Rights Agent) for all purposes what-
soever, and neither the Company nor the Rights Agent shall be
affected by any notice to the contrary.
Section 17. Right Certificate Holder Not Deemed a
Stockholder. No holder, as such, of any Right Certificate
shall be entitled to vote, receive dividends or be deemed for
any purpose the holder of the Preferred Shares or any other
securities of the Company which may at any time be issuable
on the exercise of the Rights represented thereby, nor shall
anything contained herein or in any Right Certificate be con-
strued to confer upon the holder of any Right Certificate, as
such, any of the rights of a stockholder of the Company or
any right to vote for the election of directors or upon any
matter submitted to stockholders at any meeting thereof, or
to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stock-
holders (except as provided in Section 25 hereof), or to re-
ceive dividends or subscription rights, or otherwise, until
-42-<PAGE>
the Right or Rights evidenced by such Right Certificate shall
have been exercised in accordance with the provisions hereof.
Section 18. Concerning the Rights Agent. The Com-
pany agrees to pay to the Rights Agent reasonable compensa-
tion for all services rendered by it hereunder and, from time
to time, on demand of the Rights Agent, its reasonable ex-
penses and counsel fees and other disbursements incurred in
the administration and execution of this Rights Agreement and
the exercise and performance of its duties hereunder. The
Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability, or expense
incurred without negligence, bad faith or willful misconduct
on the part of the Rights Agent, for anything done or omitted
by the Rights Agent in connection with the acceptance and
administration of this Rights Agreement, including the costs
and expenses of defending against any claim of liability in
the premises.
The Rights Agent shall be protected and shall incur
no liability for, or in respect of any action taken, suffered
or omitted by it in connection with, its administration of
this Agreement in reliance upon any Right Certificate or cer-
tificate for the Preferred Shares or Common Shares or for
other securities of the Company, instrument of assignment or
transfer, power of attorney, endorsement, affidavit, letter,
notice, direction, consent, certificate, statement, or other
-43-<PAGE>
paper or document believed by it to be genuine and to be
signed, executed and, where necessary, verified or acknowl-
edged, by the proper person or persons, or otherwise upon the
advice of counsel as set forth in Section 20 hereof.
Section 19. Merger or Consolidation or Change of
Name of Rights Agent. Any corporation into which the Rights
Agent or any successor Rights Agent may be merged or with
which it may be consolidated, or any corporation resulting
from any merger or consolidation to which the Rights Agent or
any successor Rights Agent shall be a party, or any corpora-
tion succeeding to the stock transfer or corporate trust pow-
ers of the Rights Agent or any successor Rights Agent, shall
be the successor to the Rights Agent under this Rights Agree-
ment without the execution or filing of any paper or any fur-
ther act on the part of any of the parties hereto; provided
that such corporation would be eligible for appointment as a
successor Rights Agent under the provisions of Section 21
hereof. In case at the time such successor Rights Agent
shall succeed to the agency created by this Rights Agreement,
any of the Right Certificates shall have been countersigned
but not delivered, any such successor Rights Agent may adopt
the countersignature of the predecessor Rights Agent and de-
liver such Right Certificates so countersigned; and, in case
at that time any of the Right Certificates shall not have
-44-<PAGE>
been countersigned, any successor Rights Agent may counter-
sign such Right Certificates either in the name of the prede-
cessor Rights Agent or in the name of the successor Rights
Agent; and in all such cases such Right Certificates shall
have the full force provided in the Right Certificates and in
this Rights Agreement.
In case at any time the name of the Rights Agent
shall be changed and at such time any of the Right Certifi-
cates shall have been countersigned but not delivered, the
Rights Agent may adopt the countersignature under its prior
name and deliver Right Certificates so countersigned; and in
case at that time any of the Right Certificates shall not
have been countersigned, the Rights Agent may countersign
such Right Certificates either in its prior name or in its
changed name; and in all such cases such Right Certificates
shall have the full force provided in the Right Certificates
and in this Rights Agreement.
Section 20. Duties of Rights Agent. The Rights
Agent undertakes the duties and obligations imposed by this
Agreement upon the following terms and conditions, by all of
which the Company and the holders of Right Certificates, by
their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal coun-
sel (who may be legal counsel for the Company), and the opin-
ion of such counsel shall be full and complete authorization
-45-<PAGE>
and protection to the Rights Agent as to any action taken or
omitted by it in good faith and in accordance with such opin-
ion.
(b) Whenever in the performance of its duties un-
der this Rights Agreement the Rights Agent shall deem it nec-
essary or desirable that any fact or matter be proved or es-
tablished by the Company prior to taking or suffering any
action hereunder, such fact or matter (unless other evidence
in respect thereof be herein specifically prescribed) may be
deemed to be conclusively proved and established by a cer-
tificate signed by any one of the Chairman of the Board, the
Chief Executive Officer, the President, any Vice President,
the Treasurer or the Secretary of the Company and delivered
to the Rights Agent; and such certificate shall be full au-
thorization to the Rights Agent for any action taken or suf-
fered in good faith by it under the provisions of this Rights
Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to
the Company and any other Person only for its own negligence,
bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by
reason of any of the statements of fact or recitals contained
in this Rights Agreement or in the Right Certificates (except
its countersignature thereof) or be required to verify the
-46-<PAGE>
same, but all such statements and recitals are and shall be
deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any re-
sponsibility in respect of the validity of this Agreement or
the execution and delivery hereof (except the due execution
hereof by the Rights Agent) or in respect of the validity or
execution of any Right Certificate (except its countersigna-
ture thereof); nor shall it be responsible for any breach by
the Company of any covenant or condition contained in this
Rights Agreement or in any Right Certificate; nor shall it be
responsible for any change in the exercisability of the
Rights (including the Rights becoming void pursuant to Sec-
tion 11(a)(ii) hereof) or any adjustment in the terms of the
Rights (including the manner, method or amount thereof) pro-
vided for in Section 3, 11, 13, 23 or 24, or the ascertaining
of the existence of facts that would require any such change
or adjustment (except with respect to the exercise of Rights
evidenced by Right Certificates after actual notice that such
change or adjustment is required); nor shall it by any act
hereunder be deemed to make any representation or warranty as
to the authorization or reservation of any Preferred Shares
to be issued pursuant to this Rights Agreement or any Right
Certificate or as to whether any Preferred Shares will, when
issued, be validly authorized and issued, fully paid and non-
assessable.
-47-<PAGE>
(f) The Company agrees that it will perform, ex-
ecute, acknowledge and deliver or cause to be performed, ex-
ecuted, acknowledged and delivered all such further and other
acts, instruments and assurances as may reasonably be re-
quired by the Rights Agent for the carrying out or performing
by the Rights Agent of the provisions of this Rights Agree-
ment.
(g) The Rights Agent is hereby authorized and di-
rected to accept instructions with respect to the performance
of its duties hereunder from any one of the Chairman of the
Board, the Chief Executive Officer, the President, any Vice
President, the Secretary or the Treasurer of the Company, and
to apply to such officers for advice or instructions in con-
nection with its duties, and it shall not be liable for any
action taken or suffered by it in good faith in accordance
with instructions of any such officer or for any delay in
acting while waiting for those instructions.
(h) The Rights Agent and any stockholder, direc-
tor, officer or employee of the Rights Agent may buy, sell or
deal in any of the Rights or other securities of the Company
or become pecuniarily interested in any transaction in which
the Company may be interested, or contract with or lend money
to the Company or otherwise act as fully and freely as though
-48-<PAGE>
it were not Rights Agent under this Rights Agreement. Noth-
ing herein shall preclude the Rights Agent from acting in any
other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any
of the rights or powers hereby vested in it or perform any
duty hereunder either itself or by or through its attorneys
or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of
any such attorneys or agents or for any loss to the Company
resulting from any such act, default, neglect or misconduct,
provided reasonable care was exercised in the selection and
continued employment thereof.
Section 21. Change of Rights Agent. The Rights
Agent or any successor Rights Agent may resign and be dis-
charged from its duties under this Rights Agreement upon 30
days' notice in writing mailed to the Company and to each
transfer agent of the Common Shares or Preferred Shares by
registered or certified mail, and to the holders of the Right
Certificates by first-class mail. The Company may remove the
Rights Agent or any successor Rights Agent upon 30 days' no-
tice in writing, mailed to the Rights Agent or successor
Rights Agent, as the case may be, and to each transfer agent
of the Common Shares or Preferred Shares by registered or
certified mail, and to the holders of the Right Certificates
by first-class mail. If the Rights Agent shall resign or be
-49-<PAGE>
removed or shall otherwise become incapable of acting, the
Company shall appoint a successor to the Rights Agent. If
the Company shall fail to make such appointment within a pe-
riod of 30 days after giving notice of such removal or after
it has been notified in writing of such resignation or inca-
pacity by the resigning or incapacitated Rights Agent or by
the holder of a Right Certificate (who shall, with such no-
tice, submit his Right Certificate for inspection by the Com-
pany), then the registered holder of any Right Certificate
may apply to any court of competent jurisdiction for the ap-
pointment of a new Rights Agent. Any successor Rights Agent,
whether appointed by the Company or by such a court, shall be
a corporation organized and doing business under the laws of
the United States or of the State of New York (or of any
other state of the United States so long as such corporation
is authorized to do business as a banking institution in the
State of New York), in good standing, having an office in the
State of New York, which is authorized under such laws to
exercise corporate trust or stock transfer powers and is sub-
ject to supervision or examination by federal or state au-
thority and which has at the time of its appointment as
Rights Agent a combined capital and surplus of at least $50
million. After appointment, the successor Rights Agent shall
be vested with the same powers, rights, duties and responsi-
bilities as if it had been originally named as Rights Agent
without further act or deed; but the predecessor Rights Agent
-50-<PAGE>
shall deliver and transfer to the successor Rights Agent any
property at the time held by it hereunder, and execute and
deliver any further assurance, conveyance, act or deed neces-
sary for the purpose. Not later than the effective date of
any such appointment the Company shall file notice thereof in
writing with the predecessor Rights Agent and each transfer
agent of the Common Shares or Preferred Shares, and mail a
notice thereof in writing to the registered holders of the
Right Certificates. Failure to give any notice provided for
in this Section 21, however, or any defect therein, shall not
affect the legality or validity of the resignation or removal
of the Rights Agent or the appointment of the successor
Rights Agent, as the case may be.
Section 22. Issuance of New Right Certificates.
Notwithstanding any of the provisions of this Rights Agree-
ment or of the Rights to the contrary, the Company may, at
its option, issue new Right Certificates evidencing Rights in
such form as may be approved by the Board of Directors of the
Company to reflect any adjustment or change in the Purchase
Price and the number or kind or class of shares or other se-
curities or property purchasable under the Right Certificates
made in accordance with the provisions of this Rights Agree-
ment.
Section 23. Redemption. (a) The Board of Direc-
tors of the Company may, at its option, at any time prior to
-51-<PAGE>
such time as any Person becomes an Acquiring Person, redeem
all but not less than all the then outstanding Rights at a
redemption price of $.01 per Right, appropriately adjusted to
reflect any stock split, stock dividend or similar transac-
tion occurring after the Record Date (such redemption price
being hereinafter referred to as the "Redemption Price").
The redemption of the Rights by the Board of Directors of the
Company may be made effective at such time, on such basis and
with such conditions as the Board of Directors of the Company
in its sole discretion may establish.
(b) Immediately upon the action of the Board of
Directors of the Company ordering the redemption of the
Rights pursuant to paragraph (a) of this Section 23, and
without any further action and without any notice, the right
to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the
Redemption Price. The Company shall promptly give public
notice of any such redemption; provided, however, that the
failure to give, or any defect in, any such notice shall not
affect the validity of such redemption. Within 10 days after
such action of the Board of Directors ordering the redemption
of the Rights, the Company shall mail a notice of redemption
to all the holders of the then outstanding Rights at their
last addresses as they appear upon the registry books of the
Rights Agent or, prior to the Distribution Date, on the reg-
istry books of the transfer agent for the Common Shares. Any
-52-<PAGE>
notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice.
Each such notice of redemption will state the method by which
the payment of the Redemption Price will be made. Neither
the Company nor any of its Affiliates or Associates may re-
deem, acquire or purchase for value any Rights at any time in
any manner other than that specifically set forth in this
Section 23 or in Section 24 hereof, and other than in connec-
tion with the purchase of Common Shares prior to the Distri-
bution Date.
Section 24. Exchange. (a) The Board of Directors
of the Company may, at its option, at any time after any Per-
son becomes an Acquiring Person, exchange all or part of the
then outstanding and exercisable Rights (which shall not in-
clude Rights that have become void pursuant to the provisions
of Section 11(a)(ii) hereof) for Common Shares at an exchange
ratio of one Common Share per Right, appropriately adjusted
to reflect any stock split, stock dividend or similar trans-
action occurring after the Record Date (such exchange ratio
being hereinafter referred to as the "Exchange Ratio"). Not-
withstanding the foregoing, the Board of Directors of the
Company shall not be empowered to effect such exchange at any
time after any Person (other than the Company, any Subsidiary
of the Company, any employee benefit plan of the Company or
any such Subsidiary, or any entity holding Common Shares for
or pursuant to the terms of any such plan), together with all
-53-<PAGE>
Affiliates and Associates of such Person, after the Record
Date becomes the Beneficial Owner of 50% or more of the Com-
mon Shares then outstanding.
(b) Immediately upon the action of the Board of
Directors of the Company ordering the exchange of any Rights
pursuant to paragraph (a) of this Section 24 and without any
further action and without any notice, the right to exercise
such Rights shall terminate and the only right thereafter of
a holder of such Rights shall be to receive that number of
Common Shares equal to the number of such Rights held by such
holder multiplied by the Exchange Ratio. The Company shall
promptly give public notice of any such exchange; provided,
however, that the failure to give, or any defect in, such
notice shall not affect the validity of such exchange. The
Company promptly shall mail a notice of any such exchange to
all of the holders of such Rights at their last addresses as
they appear upon the registry books of the Rights Agent. Any
notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice.
Each such notice of exchange will state the method by which
the exchange of the Common Shares for Rights will be effected
and, in the event of any partial exchange, the number of
Rights which will be exchanged. Any partial exchange shall
be effected pro rata based on the number of Rights (other
than Rights which have become void pursuant to the provisions
of Section 11(a)(ii) hereof) held by each holder of Rights.
-54-<PAGE>
(c) In the event that there shall not be suf-
ficient Common Shares issued but not outstanding or autho-
rized but unissued to permit any exchange of Rights as con-
templated in accordance with this Section 24, the Company
shall take all such action as may be necessary to authorize
additional Common Shares for issuance upon exchange of the
Rights. In the event the Company shall, after good faith
effort, be unable to take all such action as may be necessary
to authorize such additional Common Shares, the Company shall
substitute, for each Common Share that would otherwise be
issuable upon exchange of a Right, a number of Preferred
Shares or fraction thereof such that the current per share
market price of one Preferred Share multiplied by such number
or fraction is equal to the current per share market price of
one Common Share as of the date of issuance of such Preferred
Shares or fraction thereof.
(d) The Company shall not be required to issue
fractions of Common Shares or to distribute certificates
which evidence fractional Common Shares. In lieu of such
fractional Common Shares, the Company shall pay to the regis-
tered holders of the Right Certificates with regard to which
such fractional Common Shares would otherwise be issuable an
amount in cash equal to the same fraction of the current mar-
ket value of a whole Common Share. For the purposes of this
paragraph (d), the current market value of a whole Common
-55-<PAGE>
Share shall be the closing price of a Common Share (as deter-
mined pursuant to the second sentence of Section 11(d)(i)
hereof) for the Trading Day immediately prior to the date of
exchange pursuant to this Section 24.
Section 25. Notice of Certain Events. (a) In
case at any time after the Record Date the Company shall
propose (i) to pay any dividend payable in stock of any class
to the holders of its Preferred Shares or to make any other
distribution to the holders of its Preferred Shares (other
than a regular quarterly cash dividend), (ii) to offer to the
holders of its Preferred Shares rights or warrants to
subscribe for or to purchase any additional Preferred Shares
or shares of stock of any class or any other securities,
rights or options, (iii) to effect any reclassification of
its Preferred Shares (other than a reclassification involving
only the subdivision of outstanding Preferred Shares), (iv)
to effect any consolidation or merger into or with, or to
effect any sale or other transfer (or to permit one or more
of its Subsidiaries to effect any sale or other transfer), in
one or more transactions, of 50% or more of the assets or
earning power of the Company and its Subsidiaries (taken as a
whole) to, any other Person, (v) to effect the liquidation,
dissolution or winding up of the Company, or (vi) to declare
or pay any dividend on the Common Shares payable in Common
Shares or to effect a subdivision, combination or
consolidation of the
-56-<PAGE>
Common Shares (by reclassification or otherwise than by pay-
ment of dividends in Common Shares), then, in each such case,
the Company shall give to each holder of a Right Certificate,
in accordance with Section 26 hereof, a notice of such pro-
posed action, which shall specify the record date for the
purposes of such stock dividend, or distribution of rights or
warrants, or the date on which such reclassification, con-
solidation, merger, sale, transfer, liquidation, dissolution
or winding up is to take place and the date of participation
therein by the holders of the Common Shares and/or Preferred
Shares, if any such date is to be fixed, and such notice
shall be so given in the case of any action covered by clause
(i) or (ii) above at least 10 days prior to the record date
for determining holders of the Preferred Shares for purposes
of such action, and in the case of any such other action, at
least 10 days prior to the date of the taking of such pro-
posed action or the date of participation therein by the
holders of the Common Shares and/or Preferred Shares, which-
ever shall be the earlier.
(b) In case the event set forth in Section
11(a)(ii) hereof shall occur, then the Company shall as soon
as practicable thereafter give to each holder of a Right Cer-
tificate, in accordance with Section 26 hereof, a notice of
the occurrence of such event, which notice shall describe
such event and the consequences of such event to holders of
Rights under Section 11(a)(ii) hereof.
-57-<PAGE>
Section 26. Notices. Notices or demands autho-
rized by this Rights Agreement to be given or made by the
Rights Agent or by the holder of any Right Certificate to or
on the Company shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another
address is filed in writing with the Rights Agent) as fol-
lows:
Morton International, Inc.
100 North Riverside Plaza
Chicago, Illinois 60606
Attention: Corporate Secretary
Subject to the provisions of Section 21 hereof, any notice or
demand authorized by this Rights Agreement to be given or
made by the Company or by the holder of any Right Certificate
to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (un-
til another address is filed in writing with the Company) as
follows:
First Chicago Trust Company of New York
525 Washington Boulevard
Suite 4660
Jersey City, New Jersey 07310
Attention: Tenders & Exchanges Administration
Notices or demands authorized by this Rights Agreement to be
given or made by the Company or the Rights Agent to the
holder of any Right Certificate shall be sufficiently given
-58-<PAGE>
or made if sent by first-class mail, postage prepaid, ad-
dressed to such holder at the address of such holder as shown
on the registry books of the Company.
Section 27. Supplements and Amendments. The Com-
pany may from time to time supplement or amend this Agreement
without the approval of any holders of Right Certificates in
order to cure any ambiguity, to correct or supplement any
provision contained herein which may be defective or incon-
sistent with any other provisions herein, or to make any
other provisions with respect to the Rights which the Company
may deem necessary or desirable, any such supplement or
amendment to be evidenced by a writing signed by the Company
and the Rights Agent; provided, however, that from and after
such time as any Person becomes an Acquiring Person, this
Rights Agreement shall not be amended in any manner which
would adversely affect the interests of the holders of
Rights. Without limiting the foregoing, the Company may at
any time prior to such time as any Person becomes an Acquir-
ing Person amend this Rights Agreement to lower the thresh-
olds set forth in Sections 1(a) and 3(a) to not less than the
greater of (i) the sum of .001% and the largest percentage of
the outstanding Common Shares then known by the Company to be
beneficially owned by any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the
-59-<PAGE>
Company or any Subsidiary of the Company, or any entity hold-
ing Common Shares for or pursuant to the terms of any such
plan) and (ii) 10%.
Section 28. Successors. All the covenants and pro-
visions of this Rights Agreement by or for the benefit of the
Company or the Rights Agent shall bind and inure to the ben-
efit of their respective successors and assigns hereunder.
Section 29. Benefits of this Rights Agreement.
Nothing in this Rights Agreement shall be construed to give
to any Person other than the Company, the Rights Agent and
the registered holders of the Right Certificates (and, prior
to the Distribution Date, the Common Shares) any legal or
equitable right, remedy or claim under this Rights Agreement;
but this Rights Agreement shall be for the sole and exclusive
benefit of the Company, the Rights Agent and the registered
holders of the Right Certificates (and, prior to the Distri-
bution Date, the Common Shares).
Section 30. Severability. If any term, provision,
covenant or restriction of this Rights Agreement is held by a
court of competent jurisdiction or other authority to be in-
valid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Rights Agree-
ment shall remain in full force and effect and shall in no
way be affected, impaired or invalidated.
-60-<PAGE>
Section 31. Governing Law. This Rights Agreement
and each Right Certificate issued hereunder shall be deemed
to be a contract made under the laws of the State of Indiana
and for all purposes shall be governed by and construed in
accordance with the laws of such State applicable to con-
tracts to be made and performed entirely within such State.
Section 32. Counterparts. This Rights Agreement
may be executed in any number of counterparts and each of
such counterparts shall for all purposes be deemed to be an
original, and all such counterparts shall together constitute
but one and the same instrument.
Section 33. Descriptive Headings. Descriptive
headings of the several Sections of this Rights Agreement are
inserted for convenience only and shall not control or affect
the meaning or construction of any of the provisions hereof.
-61-<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused
this Rights Agreement to be duly executed and attested, all
as of the day and year first above written.
Attest: NEW MORTON INTERNATIONAL, INC.
By /s/ P. Michael Phelps By /s/ Raymond P. Buschmann
Name: P. Michael Phelps Name: Raymond P. Buschmann
Title: Vice President Title: Vice President and General
and Secretary Counsel
Attest: FIRST CHICAGO TRUST COMPANY OF
NEW YORK
By /s/ Michael J. Kane By /s/ James Kuzmich
Name: Michael J. Kane Name: James Kuzmich
Title: Assistant Vice Title: Assistant Vice President
President
-62-<PAGE>
Exhibit A
Form of Right Certificate
Certificate No. R- Rights
NOT EXERCISABLE AFTER , 2007 OR EARLIER IF
REDEMPTION OR EXCHANGE OCCURS. THE RIGHTS ARE SUB-
JECT TO REDEMPTION AT $.01 PER RIGHT AND TO EXCHANGE
ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
Right Certificate
MORTON INTERNATIONAL, INC.
This certifies that , or regis-
tered assigns, is the registered owner of the number of
Rights set forth above, each of which entitles the owner
thereof, subject to the terms, provisions and conditions of
the Rights Agreement, dated as of , 1997 (the
"Rights Agreement"), between Morton International, Inc., an
Indiana corporation (formerly New Morton International, Inc.)
(the "Company"), and First Chicago Trust Company of New York,
a New York corporation (the "Rights Agent"), to purchase from
the Company at any time after the Distribution Date (as such
term is defined in the Rights Agreement) and prior to
5:00 P.M., New York time, on , 2007 at the princi-
pal office of the Rights Agent, or at the office of its suc-
cessor as Rights Agent, one one-hundredth of a fully paid
non-assessable share of Series A Junior Participating Pre-
ferred Stock, par value $1.00 per share, of the Company (the
"Preferred Shares"), at a purchase price of $___ per one
one-hundredth of a Preferred Share (the "Purchase Price"),
upon presentation and surrender of this Right Certificate
with the Form of Election to Purchase duly executed. The
number of Rights evidenced by this Right Certificate (and the
number of one one-hundredths of a Preferred Share which may
be purchased upon exercise hereof) set forth above, and the
Purchase Price set forth above, are the number and Purchase
Price as of , 1997, based on the Preferred Shares
as constituted at such date. As provided in the Rights
Agreement, the Purchase Price and the number of one one--
hundredths of a Preferred Share which may be purchased upon
the exercise of the Rights evidenced by this Right Certifi-
cate are subject to modification and adjustment upon the hap-
pening of certain events.
This Right Certificate is subject to all of the
terms, provisions and conditions of the Rights Agreement,
which terms, provisions and conditions are hereby incorpo-
rated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full descrip-
<PAGE>
tion of the rights, limitations of rights, obligations, du-
ties and immunities hereunder of the Rights Agent, the Com-
pany and the holders of the Right Certificates. Copies of
the Rights Agreement are on file at the principal executive
offices of the Company and the offices of the Rights Agent.
This Right Certificate, with or without other Right
Certificates, upon surrender at the principal office of the
Rights Agent, may be exchanged for another Right Certificate
or Right Certificates of like tenor and date evidencing
Rights entitling the holder to purchase a like aggregate num-
ber of Preferred Shares as the Rights evidenced by the Right
Certificate or Right Certificates surrendered shall have en-
titled such holder to purchase. If this Right Certificate
shall be exercised in part, the holder shall be entitled to
receive upon surrender hereof another Right Certificate or
Right Certificates for the number of whole Rights not exer-
cised.
Subject to the provisions of the Rights Agreement,
the Rights evidenced by this Right Certificate (i) may be
redeemed by the Company at a redemption price of $.01 per
Right or (ii) may be exchanged in whole or in part for Pre-
ferred Shares or shares of the Company's Common Stock, par
value $1.00 per share.
No fractional Preferred Shares will be issued upon
the exercise of any Right or Rights evidenced hereby (other
than fractions which are integral multiples of one one- hun-
dredth of a Preferred Share, which may, at the election of
the Company, be evidenced by depositary receipts), but in
lieu thereof a cash payment will be made, as provided in the
Rights Agreement.
No holder of this Right Certificate shall be en-
titled to vote or receive dividends or be deemed for any pur-
pose the holder of the Preferred Shares or of any other secu-
rities of the Company which may at any time be issuable on
the exercise hereof, nor shall anything contained in the
Rights Agreement or herein be construed to confer upon the
holder hereof, as such, any of the rights of a stockholder of
the Company or any right to vote for the election of direc-
tors or upon any matter submitted to stockholders at any
A-1<PAGE>
meeting thereof, or to give or withhold consent to any corpo-
rate action, or to receive notice of meetings or other ac-
tions affecting stockholders (except as provided in the
Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by
this Right Certificate shall have been exercised as provided
in the Rights Agreement.
This Right Certificate shall not be valid or obliga-
tory for any purpose until it shall have been countersigned
by the Rights Agent.
WITNESS the facsimile signature of the proper offic-
ers of the Company and its corporate seal. Dated as of
, .
ATTEST: MORTON INTERNATIONAL, INC.
By
Name: Name:
Title: Title:
Countersigned:
FIRST CHICAGO TRUST COMPANY
OF NEW YORK
By
Name:
Title:
A-2<PAGE>
Form of Reverse Side of Right Certificate
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Right Certificate.)
FOR VALUE RECEIVED
hereby sells, assigns and transfers unto
(Please print name and address of transferee)
this Right Certificate, together with all right, title and
interest therein, and does hereby irrevocably constitute and
appoint Attorney, to transfer the within
Right Certificate on the books of the within-named Company,
with full power of substitution.
Dated: ,
Signature
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a
registered national securities exchange, a member of the Na-
tional Association of Securities Dealers, Inc., or a com-
mercial bank or trust company having an office or correspon-
dent in the United States.
------------------------------------------------------------
A-3<PAGE>
The undersigned hereby certifies that the Rights
evidenced by this Right Certificate are not beneficially
owned by an Acquiring Person or an Affiliate or Associate
thereof (as defined in the Rights Agreement).
Signature
-------------------------------------------------------------
A-4<PAGE>
Form of Reverse Side of Right Certificate -- continued
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise
Rights represented by the Right Certificate.)
To: MORTON INTERNATIONAL, INC.
The undersigned hereby irrevocably elects to exer-
cise Rights represented by this
Right Certificate to purchase the Preferred Shares issuable
upon the exercise of such Rights and requests that certif-
icates for such Preferred Shares be issued in the name of:
Please insert social security
or other identifying number
(Please print name and address)
If such number of Rights shall not be all the Rights evi-
denced by this Right Certificate, a new Right Certificate for
the balance remaining of such Rights shall be registered in
the name of and delivered to:
Please insert social security
or other identifying number
(Please print name and address)
Dated: ,
Signature
A-5<PAGE>
Signature Guaranteed:
Signatures must be guaranteed by a member firm of a
registered national securities exchange, a member of the Na-
tional Association of Securities Dealers, Inc., or a com-
mercial bank or trust company having an office or correspon-
dent in the United States.
A-6<PAGE>
Form of Reverse Side of Right Certificate -- continued
-------------------------------------------------------------
The undersigned hereby certifies that the Rights
evidenced by this Right Certificate are not beneficially
owned by an Acquiring Person or an Affiliate or Associate
thereof (as defined in the Rights Agreement).
Signature
-------------------------------------------------------------
NOTICE
The signature in the Form of Assignment or Form of
Election to Purchase, as the case may be, must conform to the
name as written upon the face of this Right Certificate in
every particular, without alteration or enlargement or any
change whatsoever.
In the event the certification set forth above in
the Form of Assignment or the Form of Election to Purchase,
as the case may be, is not completed, the Company and the
Rights Agent will deem the beneficial owner of the Rights
evidenced by this Right Certificate to be an Acquiring Person
or an Affiliate or Associate thereof (as defined in the
Rights Agreement) and such Assignment or Election to Purchase
will not be honored.
A-7
Exhibit 99.03
[MORTON LETTERHEAD]
Contact: Nancy A. Hobor 312/807-2424
Janis K. Tratnik 312/807-2435
MORTON INTERNATIONAL ANNOUNCES MEETING RESULTS AND
SHARE REPURCHASE PROGRAM
Chicago (April 24, 1997) -- Shareholders of Morton In-
ternational, Inc. at the company's special meeting today approved
the spinoff of Morton's specialty chemicals and salt businesses
and the combination of Morton's airbag business with Autoliv AB
creating Autoliv, Inc. Out of the 140.6 million shares entitled
to vote, the vote for the spinoff was 98.1 million in favor, .4
million opposed, and .8 million abstaining. The vote for the com-
bination was 98.0 million in favor, .4 million opposed, and .9
million abstaining. Approximately 71 percent of the company's
shareholders were represented either in person or by proxy at the
meeting.
The Board of Directors today conditionally declared the
close of business on April 30, 1997, would be the record date and
the distribution date for the dividend to be paid to Morton share-
holders. The dividend consists of one share of the common stock
as well as a related preferred share purchase right of "new" Mor-
ton International for each share of Morton common stock held of
record as of the record date for the dividend. The spinoff record
and distribution dates are subject to satisfaction of the condi-
tion that the exchange offer by Autoliv, Inc. to the holders of
the common stock of Autoliv AB is accepted by the holders of more
than 90% of the Autoliv AB common stock. That offer is due to
expire today.
Completion of the exchange offer is the remaining mate-
rial condition to the consummation of the Morton Automotive Safety
Products-Autoliv combination. The spinoff will be consummated on
the day prior to the consummation of the Morton Automotive Safety
Products-Autoliv combination, expected to be May 1.
"New" Morton International will be renamed Morton Inter-
national, Inc. and will be listed on the New York and Chicago
Stock Exchanges, trading under the symbol "MII". Autoliv, Inc.
will be listed on the New York Stock Exchange and will trade under
the symbol "ALV".
Morton also announced that at a meeting today the new
Morton Board of Directors, which consists of the current directors
of Morton, declared a quarterly dividend of 12 cents per share of
common stock, payable on June 9, 1997, to shareholders of record
on May 27, 1997. As described in the proxy, this amount, combined
with the expected dividend to be declared by Autoliv, Inc., will
result in a total dividend paid to shareholders at or above what
the shareholders had been receiving.
<PAGE>
Following completion of the spinoff, the new Morton
Board also authorized an initial share repurchase program, allow-
ing the management to repurchase up to 10 million shares of common
stock of the company. Morton's management will consider whether
to buy some or all of those shares under a Dutch tender offer or
to buy the shares expeditiously on the open market. Further in-
formation regarding any repurchase will be announced at a later
date.
Morton International is a Chicago-based manufacturer and
marketer of specialty chemicals, automotive inflatable restraint
systems and salt.
# # #
<PAGE>
Exhibit 99.04
[MORTON LETTERHEAD]
Contact: Nancy A. Hobor 312/807-2424
Janis K. Tratnik 312/807-2435
MORTON COMPLETES SPINOFF OF SPECIALTY CHEMICALS AND SALT
BUSINESSES AND COMBINES AIRBAG BUSINESS WITH AUTOLIV
CHICAGO (MAY 1, 1997) -- Morton International today announced the
completion of the spinoff to its shareholders of its specialty
chemicals and salt businesses. The spinoff coincides with the
combination of Morton's automotive safety products business with
Autoliv AB to create a new company, Autoliv, Inc.
In the spinoff, approved by shareholders of Morton International,
Inc. on April 24, 1997, Morton will receive $750 million dollars
cash funded by debt retained by the former Morton automotive safe-
ty products business.
"We are pleased to have successfully completed the spinoff and
merger," said S. Jay Stewart, Chief Executive Officer and Chairman
of the Board of Morton International. "Both companies are well-
positioned to pursue worldwide growth. For Morton, the change
allows us the opportunity to build on our strength and success in
the specialty chemicals and salt businesses." <PAGE>
Morton shareholders of record, as of the close of business on
April 30, 1997, will become shareholders of both the new Morton
International and the new Autoliv, Inc. They will receive, for
each share of Morton common stock, one share of common stock and
related preferred share purchase right of new Morton International
and will also receive .341 of a share of Autoliv, Inc. common
stock, and cash in lieu of fractional shares.
Morton shareholders will shortly receive confirmation of their
shares of new Morton International in book entry account state-
ments, and will also receive instructions regarding the exchange
of the Morton share certificates for Autoliv, Inc. shares. Morton
shareholders with questions regarding the new Morton spinoff or
the Autoliv combination may call 1-800-511-2024 for further infor-
mation.
Shares of new Morton will begin trading "regular way" today on the
New York Stock Exchange and the Chicago Stock Exchange under the
symbol "MII." Shares of Autoliv, Inc. will begin trading "regular
way" today under the symbol "ALV" on the New York Stock Exchange.
Autoliv, Inc. is a leading global supplier of occupant restraint
systems and components including front-impact driver and passenger
airbags, side-impact airbags, seatbelts, sensors and related
products.
Morton International, Inc., based in Chicago, Illinois, is a
worldwide leading marketer and manufacturer of specialty chemicals
and salt.
###
