March 5, 2004
This way your shares will be voted as you direct even if you cannot attend the meeting.
1. Reelection of three directors for a term of office expiring on the date of the Annual Meeting of Stockholders in 2. Approval of an Amendment to the Company's 1997 Stock Incentive Plan (see page 14) 3. Ratification of the
The close of business on March Attendance at the annual meeting will be limited to stockholders of record, beneficial owners of Company common stock entitled to vote at the meeting having evidence of ownership, a maximum of one authorized representative of an absent stockholder, and invited guests of management. Any person claiming to be an authorized representative of a stockholder must, upon request, produce written evidence of such authorization. The meeting will be conducted pursuant to the Company's by-laws and rules of order By order of the Board of Directors March
Jörgen I. Svensson AUTOLIV, INC. PROXY STATEMENT March SOLICITATION OF PROXIES The shares represented by all properly executed and unrevoked proxies received in proper form in time for the meeting will be voted. Each stockholder is entitled to one vote for each share of common stock held on the Record Date. Shares will be voted in accordance with stockholders' instructions in the accompanying proxy. If no specific instructions are given, the Directors will be elected by a plurality of the votes of the shares present at the meeting in person or by proxy and entitled to vote thereon. Votes withheld as to one or more nominees will not be counted as votes cast for such individuals. Any other proposal brought before the meeting will be decided by a majority of votes represented at the meeting and entitled to vote thereat. Consequently, abstentions and broker non-votes (i.e., votes withheld by brokers in the absence of instructions from beneficial holders) will not be counted for purposes of determining whether a proposal has been approved, but will be counted for purposes of establishing a quorum at the meeting. The Company will bear the cost of the solicitation. In addition to solicitation by mail, the Company will request banks, brokers and other custodian nominees and fiduciaries to supply proxy materials to the beneficial owners of the Company's common stock of whom they have knowledge, and will reimburse them for their expenses in so doing. Certain directors, officers and other employees of the Company, not specially employed for the purpose, may solicit proxies, without additional remuneration In addition, the Company has retained Georgeson Shareholder Communication, Inc. to assist in the solicitation for a fee of 1. ELECTION OF DIRECTORS Listed below as nominees for reelection at the Messrs. Mr. Dionisio Garza Medina, whose present term also expires at the 2004 Annual Meeting, has advised the Company that he will not stand for reelection due to an increase in his other business commitments. The Nominating and Corporate Governance Committee has commenced the process of identifying potential nominees to fill the vacancy created by Mr. Medina's decision not to stand for reelection to the Board. THE BOARD RECOMMENDS A VOTE "FOR" THE NOMINEES FOR DIRECTORS. THE BOARD, MEETING ATTENDANCE AND COMPENSATION OF DIRECTORS Since 1998 the Company has also had a Code of Conduct and Ethics that applies to all employees of the Company and the Company has a Code of Conduct and Ethics for Senior Officers. The Guidelines and the Codes are posted on the Company's web-site www.autoliv.com/governance. The Board has determined that Messrs. Aronson, Carlsson, Kunerth, Lorch, Medina, Ringler, Sekiya, Stewart, Stone and Welin qualify as independent Mr. Stewart has been elected Chairman of the separate sessions of the independent directors. The independent Any interested party who desires to communicate with the
Contact can be made anonymously and communication with the Board or the independent directors is not screened. The Chairman of the Board and the sessions of independent directors receives all such communication after it has been determined that the content represent a message to the Chairman. Directors who are employees of the Company or any subsidiary thereof do not receive any compensation for service on the Board or Board committees. Non-employee directors receive for their services a retainer of In addition, non-employee directors who are chairmen of the Non-employee directors who are elected or continuing as such at annual stockholders meetings also receive annual grants of shares of Company common stock with a market value of $15,000 and the Chairman of the NOMINEES FOR DIRECTORS AT THE APRIL Walter Kunerth, age 63, has been a director of Autoliv since August 1998. Professor Kunerth is a Senior Advisor to the investment banking group Lazard Freres. He is also a member of the Supervisory Board of Gildemeister AG and Chairman of the Supervisory Boards of Basler AG, Götz AG, Paragon AG and Suspa GmbH. For more than 20 years, Professor Kunerth held various senior executive positions at Siemens AG in Germany, including as a member of Siemens' Corporate Executive Board (1993-97), President of Siemens' Automotive Systems Group (1988-93) and head of Siemens' Automotive Electronics Division. He holds a doctorate degree in Engineering from the University of Stuttgart and has been named Honorary Professor by the university. Lars Westerberg, age 55, has been a director and President and Chief Executive Officer of Autoliv, Inc. since February 1999. From 1994 until he assumed his positions with Autoliv, he was President and Chief Executive Officer of Granges AB, a Swedish-based aluminum and plastics company listed on the Stockholm Stock Exchange. From 1991 to 1994 he held the same positions at the publicly-traded welding company Esab AB. He started his employment at Esab in 1984 and held several executive positions, including President of Esab´s North American subsidiary. He is the Chairman of Ahlsell AB, a Swedish heating, water and sanitation company and a director of Plastal AB, a Swedish supplier of automotive plastic components and Haldex AB, a listed Swedish automatic braking and transmission supplier. Mr. Westerberg holds a Master of Science degree in Electrical Engineering from the Royal Institute of Technology (KTH) in Stockholm and an M.B.A. from the University of Stockholm. INCUMBENT DIRECTORS - TERMS EXPIRING AT THE 2005 ANNUAL MEETING S. Jay Stewart, age 65, has been a director of Autoliv since May 1997 and has served as the Chairman of the Board, since April, 2001. He was Chairman and Chief Executive Officer of Morton International, Inc. from April 1994 through October , 1999, and was a director of Morton between 1989 and 1999. Mr. Stewart was President and Chief Operating Officer of Morton International, Inc. from 1989 through March 1994. He is a director of Household International, Inc. and of Box USA Corp. Mr. Stewart holds a Bachelor of Science degree in Chemical Engineering from the University of Cincinnati and an M.B.A. from West Virginia University. Roger W. Stone, age 68, has been a director of Autoliv since May 1997 and is Chairman and Chief Executive Officer of Box USA Corp. He served until 1998 as Chairman of the Board (since 1983), President (since 1975), and Chief Executive Officer (since 1979) of Stone Container Corporation, a multinational producer and marketer of pulp, paper and packaging products. Mr. Stone was President and Chief Executive Officer of Smurfit Stone Container Corporation from 1998 to 1999. He was a director of Morton International Inc. from 1989 through 1999 and is a director of McDonald's Corporation since 1989. He is a graduate of the University of Pennsylvania's Wharton School of Finance. INCUMBENT DIRECTORS - TERMS EXPIRING AT THE 2006 ANNUAL MEETING James M. Ringler, age 57, Tetsuo Sekiya, age 68, has been a director of Autoliv since April 2001. He Per Welin, age 66, has been a director of Autoliv since May 1997 and of Autoliv AB since 1995. Mr. Welin served as Executive Vice President and director of the investment company L-E Lundberg-foretagen AB from 1991
COMMITTEES OF THE BOARD The Audit Committee The Compensation Committee advises the Board of the Company with respect to the compensation to be paid to the directors of the Company and approves and advises the Board with respect to the terms of contracts to be entered into with the senior executives of the Company. The Committee also administers the Company's cash and stock incentive plan. Members of this committee were Messrs. Stone (Chairman), Aronson, Medina, Ringler, Stewart and Welin. The committee met twice in The Nominating and Corporate Governance Committee identifies and recommends individuals qualified to serve as members of the Board and assist the Board in
AUDIT COMMITTEE REPORT The Audit Committee reviews the Company's financial reporting process on behalf of the Board of Directors. In fulfilling its responsibilities, the Audit Committee has reviewed and discussed the audited financial statements contained in the The Audit Committee discussed with the independent accountants matters required to be discussed by Statement on Auditing Standards No. 61, "Communication with Audit Committees," as amended. In addition, the Company's independent accountants provided to the Audit Committee the written disclosures required by the Independence Standards Board Standard No. 1, "Independence Discussions with Audit Committees" and the Audit Committee discussed with the independent accountants their independence. The Audit Committee also concluded that the independent auditors provision of non-audit services to the Company is compatible with the independent auditors independence. In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors (and the Board has approved) that the audited financial statements be included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, The Audit Committee can be contacted regarding accounting issues as follows: Contacts can be made anonymously and communication with the Committee is not screened. The Chairman of the Committee will receive all such communication after it has been determinated that the contents represent a message to the Chairman. Per Welin, Chairman NOMINATING AND CORPORATE GOVERNANCE COMMITTEE REPORT The Nominating and Corporate Governance Committee acts under a written charter first adopted and approved by the Board of Directors in 2002 and subsequently amended in December 2003. A copy of the Charter is available on the Company's web-site at www.autoliv.com/governance. Each of the members of the Committee is independent and qualified to serve on the Committee pursuant to the requirements of the New York Stock Exchange, the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated by the SEC. In 2003 two new directors were appointed to fill vacancies on the Board of Directors pursuant to the By-laws of the Company. Mr. Sune Carlsson was proposed to the Nominating and Corporate Governance Committee by the Chief Executive Officer of the Company, and Mr. George A. Lorch was proposed by the Chairman of the Board. The candidates met with the Chairman of the Board and management of the Company. The Committee evaluated the proposed candidates and determined that they had the necessary skills, experiences and qulifications to fulfil the duties on the Board. The Committee thereafter recommended to the Board to appoint the candidates to be members of the Board of Directors. The Board determined that both candidates qualified as independent under applicable rules of the New York Stock Exchange, the Sarbanes-Oxley Act of 2002 and rules and regulations promulgated by SEC. The directors nominated for reelection, Messrs. Aronson, Westerberg and Kunerth, have been reviewed and recommended for re-election by the Committee. In the case of Mr. Aronson, the Committee and the Board has decided to waive the Company's director retirement policy because Mr. Aronson is in excellent health and his vast experience, knowledge and expertise continue to be valuable to the Board and the Company. The Nominating and Corporate Governance Committee will consider director candidates nominated by stockholders so long as such nominiations are submitted to the Committee by stockholders in accordance with Article II, Section 6 of the By- laws of the Company. In considering candidates submitted by shareholders, the Committee will take into consideration the need of the Board and the qualifications of the candidate. Qualifications of director candidates that are considered by the Committee include an attained position of leadership in the candidates area of expertise, business and financial experience relevant to the Company, possession of demonstrated sound business judgment, expertise relevant to the Company's line of businesses, independence and ability to serve on standing Committees and the ability to serve the interests of all stockholders. The Nominating and Corporate Governance Committee identifies potential nominees by asking current directors and executive officers to notify the Committee if they become aware of persons, meeting the criteria described above, who have had a change in circumstances that might make them available to serve on the Board - for example, retirement as a CEO or CFO of a public company or exiting government or military service. The Nominating and Corporate Governance Committee also, from time to time, engages firms that specialize in identifying director candidates. As described above, the Committee will also consider candidates recommended by shareholders. Once a person has been identified by the Committee as a potential candidate, the Committee may collect and review publicly available information regarding the person to assess whether the person should be considered further. If the Nominating and Corporate Governance Committee determines that the candidate warrants further consideration, the Chairman or another member of the Committee contacts the person. Generally, if the person expresses a willingness to be considered and serve on the Board, the Nominating and Corporate Governance Committee requests information from the candidate, reviews the persons' accomplishments and qualifications, including in light of any other candidates that the Committee might be considering, and conducts one or more interviews with the candidate. In certain instances, Committee members may contact one or more references provided by the candidate or may contact other members of the business community or other persons that may have greater first-hand knowledge of the candidate's accomplishments. The Committee's evaluation process does not vary based on whether or not a candidate is recommended by a shareholder. The Nominating and Corporate Governance Committee can be contacted as follows: Contacts can be made anonymously and communication with the Committee is not screened. The Chairman of the Committee receives all such communication after it has been determined that the content represents a message to the Chairman. S. Jay Stewart, Chairman VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF As of the date of this proxy statement, The following table shows the |
Shares beneficially owned 1) 2) | |
Per-Olof Aronson | |
Sune Carlsson | 0 |
Halvar Jonzon | |
Walter Kunerth | 618 |
George A. Lorch | 0 |
Magnus Lindquist | |
Benoit Marsaud | |
Dionisio Garza Medina | |
James M. Ringler | |
Tetsuo Sekiya | |
S. Jay Stewart | |
Roger W. Stone | |
Jörgen I. Svensson | |
Per Welin | |
Lars Westerberg | |
All directors, nominees and | |
executive officers as a group 3) |
1) All amounts shown represent less than 1% of the outstanding shares of the Company. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION EXECUTIVE COMPENSATION
The Committee has consulted with an independent compensation consulting firm for advice in regard to the total compensation of the Company's senior executive officers. BASE SALARIES ANNUAL BONUS PROGRAMS STOCK INCENTIVE PLAN In December, 2000, the Committee concluded that the stock options under the Stock Incentive Plan had become unattractive, and therefore the programme did not accomplish its intended purpose of attracting and retaining executive personnel, motivating executive personnel and providing incentive compensation that was competitive with those of other major corporations. The Committee further concluded that it was of the utmost importance to expediently ensure that executive personnel was retained and motivated. The Committee received advice from an independent compensation consultant, and thereafter offered optionees the opportunity to cancel the options granted 1997, 1998 and 1999 against (i) a grant by the Company to the optionee of a number of
CHIEF EXECUTIVE OFFICER For LIMITATION ON DEDUCTIBILITY OF CERTAIN COMPENSATION Consequently, the employee incentive compensation programs in which the Company's most highly compensated officers participate have been structured to comply with the Code's definition of performance-based compensation. To qualify as performance-based under the Code, compensation payments must be made pursuant to a plan that is administered by a committee of outside directors and must be based on achieving objective performance goals. In addition, the material terms of the plan must be disclosed to and approved by stockholders, and the Committee must certify that the performance goals were achieved before payments can be awarded. Notwithstanding its general policy, however, the Committee retains the discretion to authorize incentive payments that may not be deductible if it believes that doing so would be in the best interest of the Company and its stockholders. Roger W. Stone, Chairman STOCK PERFORMANCE GRAPH (1) 1) SUMMARY COMPENSATION TABLE (USD) (1) |
Annual Compensation | Long-Term Compensation | All Other Compensation | |||||||
Name and Principal Function | Fiscal year | Salary | Bonus (3) | Other | Securities Underlying Options (2) | Restricted Stock Units (4) | (6) | ||
Lars Westerberg Chief Executive Officer | 2003 2002 2001 | 802,698 564,509 484,496 | 679,200 0 130,233 | 0 0 0 | 37,500 50,000 49,000 | 12,500 0 0 | 1,157,921 370,843 | ||
Benoit Marsaud Vice Manufacturing | 2003 2002 2001 | 343,662 250,447 225,564 | 0 95,694 | 0 0 0 | 7,500 10,000 13,364 | 2,500 0 0 | |||
Magnus Lindquist (5) Chief Financial Officer | 2003 2002 2001 | 277,857 210,408 96,900 | 135,836 25,600 0 | 0 0 0 | 7,500 10,000 10,000 | 2,500 0 0 | 84,807 24,180 | ||
Halvar Jonzon (5) Vice President Purchasing | 2003 2002 2001 | 228,460 177,050 13,929 | 148,185 5,132 0 | 0 0 0 | 7,500 10,000 710 | 2,500 0 0 | 123,939 26,099 | ||
Jörgen I. Svensson Vice President Legal Affairs, General Counsel and Secretary | 2003 2002 2001 | 216,111 144,720 131,298 | 0 35,000 | 0 0 0 | 7,500 10,000 15,558 | 2,500 0 0 | 18,850 |
(1) The amounts contained in the table below were paid either in Swedish Krona or French Francs, or Euro. OPTION GRANTS IN LAST FISCAL YEAR |
Individual Grants | (1) | Expiration | Potential Realizable Value | Individual Grants | (1) | Expiration | Potential Realizable Value | |||||
Number of | % of Total | Exercise | Date | at assumed Annual Rates | Number of | % of Total | Exercise | Date | at assumed Annual Rates | |||
Name and | Securities | Options | or Base | of Stock Price Appreciation | Securities | Options | or Base | of Stock Price Appreciation | ||||
Principal | Underlying | Granted | Price | for Option Term (2) | Underlying | Granted | Price | for Option Term (2) | ||||
Function | Options | to Employees | (per share) | 5% | 10% | Options | to Employees | (per share) | ||||
Granted | in Fiscal year | Granted | in Fiscal year | 5% | 10% | |||||||
Lars Westerberg | 50,000 | 9.2 | $19.96 | 3/1/12 | 629,000 | 1,587,000 | 37,500 | 9.7 | $21.36 | 2/1/13 | 503,744 | 1,276,500 | Chief Executive | Officer |
Benoit Marsaud | 10,000 | 1.8 | $19.96 | 3/1/12 | 125,800 | 317,400 | 7,500 | 1.9 | $21.36 | 2/1/13 | 100,725 | 255,300 | Vice President | Manufacturing |
President | President | |||||||||||
Autoliv France | Autoliv France | |||||||||||
Halvar Jonzon | 10,000 | 1.8 | $19.96 | 3/1/12 | 125,800 | 317,400 | 7,500 | 1.9 | $21.36 | 2/1/13 | 100,725 | 255,300 | Vice President | Purchasing |
Magnus Lindquist | 10,000 | 1.8 | $19.96 | 3/1/12 | 125,800 | 317,400 | 7,500 | 1.9 | $21.36 | 2/1/13 | 100,725 | 255,300 | Chief Financial | Officer |
Jörgen I. Svensson | 10,000 | 1.8 | $19.96 | 3/1/12 | 125,800 | 317,400 | 7,500 | 1.9 | $21.36 | 2/1/13 | 100,725 | 255,300 | Vice President | Legal Affairs | General Counsel and Secretary |
(1) For AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION |
Name | Shares Acquried on Excercise | Value Realized | Number Of Securities Underlying Unexercised Options At Fiscal Year-End Excercisable/Unexercisable | Value Of Unexercised In-The-Money Options At Fiscal Year-End ($) Exercisable/Unexercisable |
Lars Westerberg | 0 | 0 | 99,000 / 37,500 | 1,896,840 / 610,875 |
Chief Executive Officer | ||||
Benoit Marsaud | 0 | 0 | 23,364 / 7,500 | 453,000 / 122,175 |
V.P. Manufacturing | ||||
President ALV France | ||||
Halvar Jonzon | 0 | 0 | 10,710 / 7,500 | 191,568 / 122,175 |
Vice President Purchasing | ||||
Magnus Lindquist | 10,000 | 162,190 | 10,000 / 7,500 | 176,900 / 122,175 |
Chief Financial Officer | ||||
Jörgen I. Svensson | 15,558 | 269,480 | 10,000 / 7,500 | 176,900 / 122,175 |
Vice President Legal Affairs, General Counsel and Secretary |
EQUITY COMPENSATION PLANS (1) |
(a) | (b) | (c) | (a) | (b) | (c) | |
Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (3) | Weighted-average exercise price of outstanding options, warrants and rights (4) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a) | Number of securities to be issued upon exercise of outstanding options, warrants and rights (3) | Weighted-average exercise price of outstanding options, warrants and rights (4) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a) |
Equity compensation plans approved by security holders (2) | 1,411,667 | $19.09 | 1,349,897(5) | 1,304,344 | $20.13 | 862,514(5) |
Equity compensation plans not approved by security holders | - | - | ||||
Total | 1,411,667 | $19.09 | 1,349,897 | 1,304,344 | $20.13 | 1862,514 |
(1) All information as of December 31, TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL SEVERANCE AGREEMENTS Senior Executive Officers of the Company have Change of Control Severance Agreements with the Company ("agreements") which were originally effective until December 31, 1998 for Mr. Svensson until December 31, 2000 for Mr. Westerberg and until December 31, 2002, for Messrs. Lindquist and Jonzon which all are automatically extended annually for additional one-year periods unless notice to the contrary is given. The agreements are otherwise terminable during their periods of effectiveness only by termination of the executive's employment. Such termination in connection with a change in control of the Company (as defined in the agreements) will entitle an executive to benefits under the agreements. In the event that during the two-year period following a change of control, the executive terminates the executive's employment for Good Reason (as defined in the agreements) or, during the 30-day period commencing one year after the change of control, for any reason, or the Company terminates the executive's PENSION PLANS Senior Executive Officers of the Company other than Mr. Westerberg have the right to retire at the age of 60 with pension benefits amounting to 70 percent of the base salary at retirement and with complementary pension benefits after the age of 65. Pursuant to such agreements, the Company pays insurance premiums on a linear basis to ensure the pension benefits for the period from the date of retirement until normal retirement age of 65 and thereafter for complementary pension benefits. COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934 2. APPROVAL OF AN AMENDMENT TO THE COMPANY'S 1997 STOCK INCENTIVE PLAN (the "Amendment") The Board has approved and recommends stockholder approval of such Amendment to the Plan in the belief that grants and awards of cash and stock thereunder (collectively, "awards") will assist Company Management to attract, retain and provide appropriate incentives to key personnel. In addition, approval by stockholders will enable certain awards to qualify as "performance-based compensation" not subject to the limitations on deductibility of executive compensation in excess of $1 million contained in Section 162 (m) of the Internal Revenue Code. The following summary of the Plan, as amended, is qualified in its entirety by reference to the complete text of the Plan and the Amendment, copies of which can be obtained from the Company by any stockholder upon written request. References herein to the "Plan" shall mean the Plan as it is proposed to be amended unless the context requires otherwise. The Plan is intended to promote the long term financial interests and growth of the Company by (a) attracting and retaining executive personnel, (b) motivating executive personnel by means of growth-related incentives, (c) providing incentive compensation opportunities that are competitive with those of other major corporations, and (d) furthering the identity of interests of participants with those of the stockholders of the Company. The Plan is intended to comply with the requirements of Rule 16b-3 ("Rule 16b-3") promulgated under the Securities Exchange Act of 1934, as amended. In addition, the Plan is intended to provide performance-based compensation so as to be eligible for compliance with Section 162(m) ("Section 162(m)") of the Code which, generally, limits the deduction by an employer for compensation of certain covered officers ("Covered Employees"). Under Section 162(m), certain compensation, including compensation based on the attainment of performance goals, may be disregarded for purposes of this deduction limit if certain requirements are met. Among the requirements for compensation to qualify for this exception is that the material terms pursuant to which the compensation is to be paid are disclosed to and approved by the stockholders in separate vote prior to the payment. Accordingly, if the Plan is approved by stockholders and the other conditions of Section 162(m) relating to performance-based compensation are satisfied, compensation paid to Covered Employees pursuant to the Plan will not fail to be deductible under Section 162(m). General Currently, an aggregate of 2,800,000 shares of the Company's common stock ("Company Stock"), plus the number of shares issuable in connection with the exchange of "old" Morton International, Inc. options for options in the stock of the Company, is reserved for issuance under the Plan, subject to adjustment as described below. If stockholder approval is received for the Amendment, the Plan, as amended, will provide for the reservation of 4,800,000 shares of Company Stock, plus the number of shares issuable in connection with the exchange of "old" Morton International, Inc. options for options in the stock of the Company, subject to adjustment as described below. Such shares may be authorized but unissued Company Stock or authorized and issued Company Stock held in the Company's treasury or a combination thereof. Generally, shares subject to an award that remain unissued upon expiration or cancellation of the award will be available for other awards under the Plan. The total number of shares of Company Stock subject to awards (including awards paid in cash but denominated as shares of Company Stock) granted to any Participant in the Plan during any calendar year may not exceed 600,000. (While this upper limit is available to the Compensation Committee for extraordinary situations such as employment of Executive Officers it has never been used.) In the event that the Compensation Committee determines that any recapitalization, reorganization, spin off, stock split, combination or other increase or reduction in the number of issued shares of Company Stock affects such Company Stock such that an adjustment is appropriate in order to prevent dilution or enlargement of the rights of participants in the Plan, then the Compensation Committee may make such equitable changes or adjustments as it deems necessary to the number and kind of shares of Company Stock which may thereafter be issued in connection with awards, the limit on individual awards, the number and kind of shares of Company Stock subject to each outstanding award, and the exercise price of each award. Awards under the Plan may be made in the form of (a) Incentive Stock Options, (b) Non-Qualified Stock Options (Incentive and Non-Qualified Stock Options are collectively referred to as "options"), (c) stock appreciation rights, (d) Restricted Stock, and (e) Other Awards. Administration Awards under the Plan Stock Appreciation Rights Restricted Stock Other Awards Other Features of the Plan The Board or the Compensation Committee may suspend, revise, terminate or amend the Plan at any time; provided, however, that no such action may, without the consent of a participant, reduce the participants' rights under any outstanding award. New Plan Benefits Certain Federal Income Tax Consequences Non-Qualified Stock Options In the event of a sale of Company Stock received upon the exercise of a Non-Qualified Stock Option, any appreciation or depreciation after the exercise date generally will be taxed as capital gain or loss. Incentive Stock Options A sale or exchange by an optionee of shares acquired upon the exercise of an Incentive Stock Option more than one year after the transfer of the shares to such optionee and more than two years after the date of grant of the Incentive Stock Option will result in any difference between the net sale proceeds and the exercise price being treated as long-term capital gain (or loss) to the optionee. If such sale or exchange takes place within two years after the date of grant of the Incentive Stock Option or within one year from the date of transfer of the Incentive Stock Option shares to the optionee, such sale or exchange will generally constitute a "disqualifying disposition" of such shares that will have the following results: any excess of (a) the lesser of (i) the fair market value of the shares at the time of exercise of the Incentive Stock Option and (ii) the amount realized on such disqualifying disposition of the shares over (b) the option exercise price of such shares, will be ordinary income to the optionee, subject to applicable withholding taxes, and the Company will be entitled to a tax deduction in the amount of such income. Any further gain or loss after the date of exercise generally will qualify as capital gain or loss and will not result in any deduction by the Company. Restricted Stock Generally, upon a sale or other disposition of Restricted Stock with respect to which the holder has recognized ordinary income (i.e. a Section 83(b) election was previously made or the restrictions were previously removed), the holder will recognize capital gain or loss in an amount equal to the difference between the amount realized on such sale or other disposition and the holder's basis in such shares. Other Types of Awards THE BOARD RECOMMENDS A VOTE "FOR" THE PROPOSAL TO APPROVE THE AMENDMENT TO THE PLAN. 3. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS The Audit Committee of the Board of Directors has In accordance with directions of the Committee, this Ernst & Young AB has been the independent auditing firm for the Company since May 1997. Ernst & Young AB has been the independent auditors for Autoliv AB since 1984. Audit services provided to the Company by Ernst & Young AB during
TAX FEES FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES All Other Fees The Audit Committee has considered the services discussed in the preceding Representatives of Ernst & Young AB will not be present at the Annual Meeting. THE BOARD RECOMMENDS A VOTE "FOR" THE PROPOSAL TO RATIFY THE APPOINTMENT OF ERNST & YOUNG AB AS THE COMPANY'S INDEPENDENT AUDITORS.
For business to be properly brought before an annual stockholders meeting by a stockholder, timely advance written notice thereof must be received by the Secretary of the Company at its principal executive offices in accordance with the Company's by-laws, a copy of which may be obtained by written request to the Company's Secretary. No such notices were received for the STOCKHOLDER PROPOSALS FOR By Order of the Board
Jorgen I. Svensson Appendix A
I STATEMENT OF POLICY II ORGANIZATION B Members Director's fees (including any additional amounts paid to chairs of committees and to members of committees of the Board) are the only compensation a member of the Committee may receive from the Company; provided, however, that a member of the Committee may also receive pension or other forms of deferred compensation from the Company for prior service so long as such compensation is not contingent in any way on continued service. No director may serve as a member of the Committee if such director serves on the audit committee of more than two other public companies, unless the Board determines that such simultaneous service would not impair the ability of such director to effectively serve on the Committee. Any such determination must be disclosed in the Company's annual proxy statement. The chairperson and a non-voting Secretary of the Committee shall be designated by the Board, provided that if the Board does not so designate a chairperson, the members of the Committee, by a majority vote, may designate a chairperson. Each member of the Committee must be "financially literate", as such qualification is interpreted by the Board in its business Any vacancy on the Committee shall be filled by majority vote of the Board at the next meeting of the Board following the occurrence of the vacancy. No member of the Committee shall be removed except by majority vote of the Board. C Meetings D Agenda, Minutes and Reports E Access to Records, Consultants and Others III DUTIES AND RESPONSIBILITIES OF THE COMMITTEE (a) (b) Review and, in its sole discretion, approve in advance the Company's independent auditors' annual engagement letter, including the proposed fees contained therein, as well as all audit and, all permitted non-audit engagements and relationships between the Company and such auditors (which approval should be made after receiving input from the Company's management). Approval of audit and permitted non-audit services may also be made by the chairperson of the Committee and the person granting such approval shall report such approval to the Committee at the next scheduled meeting; (c) Review the performance of the Company's independent auditors, including the lead partner of the independent auditors, and, in its sole discretion (subject to shareholder ratification), make decisions regarding the replacement or termination of the independent auditors when circumstances warrant; (d) Obtain at least annually from the Company's independent auditors and review a report describing: (i) the independent auditors' internal quality-control procedures; (ii) any material issues raised by the most recent internal quality-control review, or peer review, of the independent auditors, or by any inquiry or investigation by any governmental or professional authority, within the preceding five years, respecting one or more independent audits carried out by the independent auditors, and any steps taken to deal with any such issues; and (iii) all relationships between the independent auditors and the Company (including a description of each category of services provided by the independent auditors to the Company and a list of the fees billed for each such category); The Committee should present its conclusions with respect to the above matters, as well as its review of the lead partner of the independent auditors, and its views on whether there should be a regular rotation of the independent auditors, to the Board. (e) Oversee the independence of the Company's independent auditors by, among other things: (i) actively engaging in a dialogue with the independent auditors with respect to any disclosed relationships or services that may impact the objectivity and independence of the independent auditors, and taking appropriate action to satisfy itself of the auditors' independence; (ii) ensuring that the lead audit partner and reviewing audit partner responsible for the audit of the (iii) ensuring that the chief executive officer, controller, chief financial officer, chief accounting officer or other person serving in an equivalent position of the (iv) considering whether there should be a regular rotation of the (f) Instruct the (g) Review and accept, if appropriate, the annual audit plan of the (h) Review the results of the year-end audit of the (i) Review with management, the
(j) Review with the chief executive officer and chief financial officer and independent auditors, periodically, the following: (i) all significant deficiencies in the design or operation of internal controls which could adversely affect the Company's ability to record, process, summarize, and report financial data, including any material weaknesses in internal controls identified by the Company's independent auditors; (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal controls; and (iii) any significant changes in internal controls or in other factors that could significantly affect internal controls, including any corrective actions with regard to significant deficiencies and material weaknesses. (k) Attempt to resolve all disagreements between the Company's independent auditors and management regarding financial reporting; (i) any accounting adjustments that were noted or proposed by the independent auditors but were rejected by management (as immaterial or otherwise); (ii) any communications between the audit team and the independent auditor's national office respecting auditing or accounting issues presented by the engagement; and (iii) any "management" or "internal control" letter issued, or proposed to be issued, by the independent auditors to the Company; (m) Confirm that the Company's interim financial statements included in Quarterly Reports on Form 10-Q have been reviewed by the Company's independent auditors; (n) Review: (i) the adequacy and effectiveness of the Company's accounting and internal control policies and procedures on a regular basis, including the responsibilities, budget, compensation and staffing of the Company's internal audit function, through inquiry and discussions with the Company's independent auditors and management of the Company; and (ii) the yearly report prepared by management, and attested to by the Company's independent auditors, assessing the effectiveness of the Company's internal control structure and procedures for financial reporting and stating management's responsibility to establish and maintain such structure and procedures, prior to its inclusion in the Company's annual report; (o) Review with management the Company's administrative, operational and accounting internal controls, including any special audit steps adopted in light of the discovery of material control deficiencies, and evaluate whether the Company is operating in accordance with its prescribed policies, procedures and codes of conduct; (p) Receive periodic reports from the Company's independent auditors and management of the Company to assess the impact on the Company of significant accounting or financial reporting developments that may have a bearing on the Company; (q) Establish and maintain free and open means of communication between and among the Board, the Committee, the Company's independent auditors, the Company's internal auditing department and management, including (r) Review the Company's earnings press releases (especially the use of "pro forma" or "adjusted" information not prepared in compliance with generally accepted accounting principles), as well as financial information and earnings guidance provided by the Company to analysts and rating agencies (which review may be done generally (i.e., discussion of the types of information to be disclosed and type of presentations to be made), and the Committee need not discuss in advance each earnings release or each instance in which the Company may provide earnings guidance); (s) Establish clear hiring policies by the Company for employees or former employees of the Company's independent auditors; (t) Discuss guidelines and policies governing the process by which senior management of the Company and the relevant departments of the Company assess and manage the Company's exposure to risk, as well as the Company's major financial risk exposures and the steps management has taken to monitor and control such exposures; u) Meet at least annually with the general counsel, and outside counsel when appropriate, to review legal and regulatory matters, including any matters that may have a material impact on the financial statements of the Company; (v) Prepare the report required by the rules of the SEC to be included in the Company's annual proxy statement; (w) Review the Company's policies relating to the avoidance of conflicts of interest and review past or proposed transactions between the Company and members of management as well as policies and procedures with respect to officers' expense accounts and perquisites, including the use of corporate assets. The Committee shall consider the results of any review of these policies and procedures by the Company's independent auditors; (x) Review the Company's program to monitor compliance with the Company's Code of Conduct, and meet periodically with the Company's Compliance Officer to discuss compliance with the Code of Conduct; (y) Obtain from the Company's independent auditors any information pursuant to Section 10A of the Securities Exchange Act of 1934; (z) Establish procedures for (i) the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, and (ii) the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters; (aa) Secure independent expert advice to the extent the Committee determines it to be appropriate, including retaining, with or without Board approval, independent counsel, accountants, consultants or others, to assist the Committee in fulfilling its duties and responsibilities, the cost of such independent expert advisors to be borne by the Company; (bb) Report regularly to the Board on its activities, as appropriate. In connection therewith, the Committee should review with the Board any issues that arise with respect to the quality or integrity of the Company's financial statements, the Company's compliance with legal or regulatory requirements, the performance and independence of the Company's independent auditors, or the performance of the internal audit function; (cc) Prepare and review with the Board an annual performance evaluation of the Committee, which evaluation must compare the performance of the Committee with the requirements of this charter, and set forth the goals and objectives of the Committee for the upcoming year. The evaluation should include a review and assessment of the adequacy of the Committee's charter. The performance evaluation by the Committee shall be conducted in such manner as the Committee deems appropriate. The report to the Board may take the form of an oral report by the chairperson of the Committee or any other member of the Committee designated by the Committee to make this report; (dd) Perform such additional activities, and consider such other matters, within the scope of its * * * While the Committee has the duties and responsibilities set forth in this charter, the Committee is not responsible for planning or conducting the audit or for determining whether the Company's financial statements are complete and accurate and are in accordance with generally accepted accounting principles. In fulfilling their responsibilities hereunder, it is recognized that members of the Committee are not full-time employees of the Company, it is not the duty or responsibility of the Committee or its members to conduct "field work" or other types of auditing or accounting reviews or procedures or to set auditor independence standards, and each member of the Committee shall be entitled to rely on (i) the integrity of those persons and organizations within and outside the Company from which it receives information, (ii) the accuracy of the financial and other information provided to the Committee absent actual knowledge to the contrary (which shall be promptly reported to the Board) and (iii) statements made by management or third parties as to any information technology, internal audit and other ************* Appendix B AMENDEDMENT NO. 2 TO THE This Amendment is made to the Autoliv, Inc. 1997 Stock Inventive Plan (the "Plan"). Capitalized terms used but not defined herein have the meanings ascribed to them in the Plan. Autoliv, Inc, JÖrgen I. Svensson Autoliv Inc, Box 70381, SE-107 24 Stockholm, Sweden |