ASSA ABLOY seeks to attain an as wide spread participation as possible among its employees and management. The two earlier incentive programs have in a striking way created a basis for a unanimous view on the importance of the continuous development of profitability and common goals of ASSA ABLOY. As mentioned in the Annual Report 2000, a new incentive program has been under preparation to ensure participation for the many new employees in the Group since 1997. The new incentive program will be open to approximately 22,000 employees in approximately 15 countries.

 

Pursuant to the program, Group employees will be offered the opportunity to acquire shares at market price in a company especially established for the intended purpose, which company shall subscribe for convertible bonds issued by ASSA ABLOY. It is proposed that the convertible bonds will be issued at a  nominal value of up to EUR 100 million, which is assessed to correspond to their market value, with a maturity of five years. At maturity, it is intended that the company will be dissolved and any net proceeds, depending on the value increase, will be distributed to the employees participating in the incentive program.

 

The dilution will depend on the ASSA ABLOY share price and the applicable exchange rate but is expected, as of the date of the extraordinary general meeting, to amount to one to two per cent of the share capital and total number of votes. The special purpose company will finance its subscription for the convertible bonds by debt financing corresponding to 90 per cent of the nominal value of the convertible bonds and the remainder with capital contributions from the employees' subscription for shares. In some countries, the participation in the incentive program will take place indirectly by way of stock appreciation rights or similar means.

 

The full notice to the shareholders' meeting is attached.

                                                                          

 

For further information, please contact

Carl-Henric Svanberg, President & CEO, tel: +46-8-506 485 52 or +46-70-510 0551,

or Göran Jansson, CFO, tel. +46-8-506 485 72 or +46-70-698 85 72

 

ASSA ABLOY AB (publ)

P.O. Box 70340, SE-107 23 Stockholm

Tel:  +46-8-506 485 00, Fax:  +46-8-506 485 85

Visiting address: Klarabergsviadukten 90

 

 

 

 

The shareholders in ASSA ABLOY AB are hereby invited to attend the Extraordinary General Meeting to be held at 2 p.m. on Tuesday 9 October 2001, at Salénhuset, Norrlandsgatan 15, Stockholm.

 

 

 

Shareholders who wish to attend the General Meeting must:

 

(i) be recorded in the printout of the share register maintained by the Swedish Securities Register Centre ("VPC"), made as of Saturday 29 September 2001. Due to the intervening week-end, the record must be made by Friday 28 September 2001.

 

and

 

(ii) notify ASSA ABLOY AB of their intent to participate in the Meeting at address: ASSA ABLOY AB,
"General Meeting", P.O. Box 70340, SE-107 23 Stockholm, Sweden, by telephone +46-8 506 485 00 or by telefax +46-8 506 485 85, by Wednesday 3 October 2001.

 

On giving notice of attendance, the shareholder shall state name, personal registration  number or equivalent, (corporate identity number), address, telephone number and the number and series of shares held. Proxy and representative of a juridical person shall hand in papers of authorisation prior to the Meeting.

 

In order to participate in the proceedings of the General Meeting, owners with nominee-registered shares should request their bank or broker to have their shares temporarily owner-registered with VPC. Such registration must, due to the intervening week-end, be made by Friday 28 September 2001 and the bank or broker should therefore be notified in due time before said date.

 

 

 

 

1.    Opening of the Meeting.

2.    Election of Chairman of the Meeting.

3.    Drawing up and approval of the voting list.

4.    Approval of the agenda. 

5.    Election of one or two persons to check the minutes.

6.    Determination of compliance with the rules of convocation.

7.    Resolution regarding a directed issue of convertible debt instruments and approval of an employee incentive program. 

8.     Closing of the Meeting.

 

 

 

The Board of Directors has unanimously decided to propose to the General Meeting to resolve to issue convertible bonds as set forth in Section 1 below and to approve of the measures for the realization of a global incentive program for employees of the ASSA ABLOY Group as set forth in Section 2.

 

 

 

The Board of Directors of ASSA ABLOY AB proposes the General Meeting to resolve

 

that                  the company shall issue four (4) convertible bonds, each with a maximum nominal value of EUR twenty-five million (25,000,000), in series 2001/2006:1, 2001/2006:2, 2001/2006:3 and 2001/2006:4;

 

that                  the convertible bonds shall be issued at a rate corresponding to their nominal value;

 

that                  with disregard to the present shareholders' priority rights, ASSA ABLOY Incentive 2001 Holding S.A ("InvestCo") shall be granted the right to subscribe for all four (4) convertible bonds;

 

that                  subscription can be made for all convertible bonds only, or for equal parts thereof, as one unit;

 

that                  subscription and payment of the convertible bonds shall be made on 31 January 2002 at the latest;

 

that                  no over-subscription can be made;

 

that                  the convertible bonds shall run with an annual interest corresponding to 90% of "3 months' EURIBOR plus 0,54%";

 

that                  the interest shall become due for payment as specified in "ASSA ABLOY AB  Terms and Conditions for Convertible Debentures Series 2001/2006:1-4";

 

that                  the convertible bonds shall become due for payment on the date occurring five years after the date of subscription and payment of the bonds to the extent that conversion has not been made before then;

 

that                  the convertible bonds shall be convertible into shares of series B in ASSA ABLOY AB 45 days prior to the date when the bonds are due for payment at the earliest and 14 days before the date when the bonds are due for payment at the latest;

 

that                  the rate at which conversion can be made shall correspond to an amount totalling the following percent of the average of the latest quoted transaction price on the Stockholm Stock Exchange for shares of series B in ASSA ABLOY during five banking days before the date when the convertible bonds are subscribed to and paid for (the "Measure Period"):

 

-          100 percent for convertible bonds of series 2001/2006:1;

-          120 percent for convertible bonds of series 2001/2006:2;

-          140 percent for convertible bonds of series 2001/2006:3;

-          160 percent for convertible bonds of series 2001/2006:4;

 

                         in the absence of a price quotation for any of the days in question, the purchase price quoted as the final rate shall be applied. A day when there is neither a buying rate nor a purchase rate shall not be included in the calculation. The calculated conversion rate shall be rounded to the nearest whole number of Swedish Kronor, whereby fifty öre (SEK 0.50) shall be rounded downwards and thereafter be recalculated into Euro applying the exchange fixing rate SEK/EUR quoted by the Swedish commercial banks on the date of subscription to and payment for the convertible bonds, without the conversion rate being less than the par value of a share in the company;

 

that                  shares obtained due to conversion shall be entitled to profit distribution the first time on the record day for distribution falling next to the execution of the conversion; and

 

that                  in all other respects, the terms and conditions set out in "ASSA ABLOY AB terms and Conditions for Convertible Debentures Series 2001/2006:1-4", shall apply to the convertible bonds.             

 

The Board of Directors, or a person authorised by the Board of Directors, shall be entitled to make such minor adjustments of the resolution passed by the General Meeting regarding the issue of convertible bonds that may be necessary in connection with the registration of the bonds with the Swedish Patent and Registration Office and
VPC AB.

 

The reason for the disregarding the shareholders' right of priority is that ASSA ABLOY AB wishes to introduce a global incentive program for employees in the group, whereby they can be offered to take part of an increase in value of the ASSA ABLOY share. This is expected to increase the interest of the employees in the profitability and share price of the ASSA ABLOY share, the share price development and to stimulate a continued company loyalty over the forthcoming years.

 

ASSA ABLOY AB has previously issued a convertible debenture loan (1997/2002) amounting to SEK 250 million at the time of the issue, to employees in the group.

 

The increase of the share capital of ASSA ABLOY AB will at a full subscription and conversion of the convertible bonds, respectively, based on a share rate of the company of SEK 125, a SEK-EUR-rate of 9.50 and a conversion rate determined in accordance with what has been stated above, be approximately MSEK 6.0, which at a full conversion of the company's present outstanding convertible bond 1997/2002, correspond to a dilution of approximately 1.7 per cent of the share capital and approximately 1.1 per cent of the total number of votes. Together with the convertible debenture loan (1997/2002) the total dilution will be approximately 2.9 percent of the share capital and approximately 1.9 percent of the total number of votes.

 

 

 

The incentive program shall be carried through mainly in accordance with what is stated below.

 

Employees within the Group shall be offered the possibility to acquire shares ("Shares") in InvestCo, a Special Purpose Vehicle established for the intended purpose. InvestCo is a company (Societé Anonyme) having its registered seat in Luxembourg. For practical and legal reasons, the acquisition of Shares in some countries will be made indirectly by subsidiaries or legal entities established for this particular purpose. The offer shall be directed to approximately 22,000 of the Group's employees in approximately 15 countries.

 

The allotment of the number of Shares in InvestCo shall be determined by the Board of Directors of ASSA ABLOY AB in accordance with the following guidelines:

 

a)              Right to acquire shares shall, subject to what is stated below and to adjustments on a country by country basis in accordance with local laws, be granted all present permanent employees in the ASSA ABLOY Group of Companies at the end of the subscription period (for the Shares in InvestCo),  provided that notice of termination has not been given at such date, or to such persons who at this time have signed employment contracts for permanent positions with companies in the ASSA ABLOY Group of Companies. The above right is subject to the reservation that for employees in countries other than Sweden, it is presumed that the transfer can take place legally and that it, in the opinion of the Board of Directors, can be made within reasonable administrative and financial efforts. This could mean that employees in certain countries will not be entitled to participate in the incentive program.

 

b )       The employees shall be entitled to acquire 1, 8 or 40 Shares or multiples of 40 Shares. The price of each Share will be EUR 250. Except for a minimum allotment of 1 Share, there will be no guaranteed allotment of Shares and all employees shall have the same right to purchase Shares, however, subject to local limitations, no employee shall have the right to acquire Shares to an amount exceeding an estimated 50% of its annual salary, except for senior management within the group (app. 400), who shall have the right to acquire Shares up to an amount corresponding to 100% of their annual salary. If the number of Shares that the employees wish to acquire should exceed the actual number of Shares in InvestCo, allotment shall take place by a proportional reduction in relation to the number of Shares each employee wishes to acquire, less the guaranteed number of Shares.

 

c)         Board members of ASSA ABLOY AB, who are not employed within the ASSA ABLOY Group, shall not be entitled to acquire Shares in InvestCo or otherwise participate in the incentive program.

 

The allotment of Shares is expected to take place in October - November 2001 and in no case after the end of January 2002.

 

The purchase price for the acquired Shares shall correspond to the market value of the Shares during the Measure Period, which is expected to correspond to the material value of the Shares. The valuation of the Shares shall be performed by one  independent valuation institute.

 

InvestCo will have different series of shares; ASSA ABLOY AB will, due to English legislation, acquire shares in InvestCo of a series which, in principle, will not entitle ASSA ABLOY AB to any voting right nor any right to any value increase in InvestCo, while the Shares acquired by the employees and in accordance with the hedge arrangement described below, will be of series that will entitle to voting right as well as proceeds. ASSA ABLOY AB's share holding will be less than 20% of the share capital of InvestCo. The employees' acquisition of Shares is expected to correspond to approx. 50% of the economic interest in InvestCo while the hedge arrangement is expected to correspond to approx. 50 %.

 

The Shares will be transferable only to the extent necessary to obtain capital gains treatment in connection with the sale of the Shares or if otherwise required by local laws. Early redemption of the Shares by a company in the ASSA ABLOY Group shall take place only if and to the extent that this is required by local regulations.

 

InvestCo intends to finance its subscription for the convertible bonds, to 90 percent by raising a loan of maximum EUR 90 million (the "Loan") and to 10 percent by the capitalization taking place by way of the employees' acquisition of Shares and the hedge arrangement described below. InvestCo will then have an equity of up to approximately EUR 10 million. Each employee Share will have a market value and a price of EUR 250. InvestCo intends to divest its assets (convertible bonds and/or shares) during 2006 and repay all its debts, whereafter InvestCo's remaining proceeds, after repayment of the nominal value of the shares of ASSA ABLOY AB, shall be distributed to the employees who directly or indirectly are participating in the incentive program.

 

The accrued interest from the convertible bonds will cover the interest paid under the Loan as well as certain administrative costs.

 

Decisions regarding issues related to conversion, sale or other management issues concerning the convertible bond and/or shares in ASSA ABLOY AB held by InvestCo shall be taken by the Board of Directors of InvestCo, which shall consist of 7 board members, whereof 2 ASSA ABLOY AB representatives, 2 employee representatives and 3 independent board members.

 

ASSA ABLOY AB will, neither through its shareholdings nor through its board representation have control over InvestCo.

 

To employees in some countries such as the United States, Australia and China, ASSA ABLOY AB will, via local subsidiaries and in principle on the same terms as for the sale of Shares, issue different types of Stock Appreciation Rights (or similar type instrument depending on local law requirements) having economic rights and obligations basically corresponding to those of Shares in InvestCo. In order to hedge any value increase of the Stock Appreciation Rights, ASSA ABLOY AB intends to enter into a hedging arrangement with a foreign bank that will in turn acquire Shares in InvestCo, thereby maintaining the link between InvestCo and those employees that participate in the program indirectly.  The total hedging costs after tax are expected to amount to an insignificant amount from an ASSA ABLOY Group perspective.

 

 

The Board of Directors proposes that the resolution on the issue of convertible bonds and the approval of the measures described for the realization of the incentive program shall be valid only if they are supported by shareholders holding at least nine tenths of the given number of votes as well as the shares represented at the shareholders' meeting, since the issue and the transfers form parts of one integrated incentive program.

 

On the whole, the Board of Directors finds that the incentive program, considering the persons entitled to subscribe, the conditions, the size of the allotment, the existence of other share related incentive programs and other factors, appears reasonable.

 

 

 

Documents according to Chapter 4 § 4 of the Swedish Companies Act together with the complete proposal by the Board of Directors for the resolution regarding the issue of convertible bonds will be available at the company as from 2 October 2001 at latest.

 

Copies of the documentation will be sent to the shareholders, who so request and state their address and will also be available at the General Meeting.

 

Stockholm, September 2001
Board of Directors

ASSA ABLOY AB (publ)