9 Cash dividend and record day
The Board of Directors proposes a dividend to the shareholders of SEK 1.25 per share and Monday, 3 September 2007 as record day for receiving dividend. Subject to approval by the Annual General Meeting in accordance with the proposal, the dividend is expected to be remitted by VPC Thursday, 6 September 2007 to shareholders of record on the record day.
The proposal means that retained earnings available for disposition, SEK 331,854 thousand, be allocated as follows:
Dividend to the shareholders SEK 1.25 x 23,677,809 shares SEK 29,597 thousand
To be carried forward SEK 302,257 thousand
15 Principles for compensation and other terms of employment for management
The proposal of the Board of Directors for principles means that compensation to the President and other persons in management may consist of basic salary, variable compensation, pension, other benefits and financial instruments.
The aggregate compensation should be in line with market conditions and competitive, and should also be related to responsibility and authority. The variable portion of the compensation should be maximised and never exceed the fixed salary. The variable portion of the salary shall be based on overall outcome in relation to set goals and on individual performance.
The retirement age shall be 60-65 years and only defined contribution plans will normally occur additional to ITP plans. In addition to salary during the period of notice, there may be a severance payment up to a maximum of one annual salary. There will be no share-based or share-price-based programs beyond the current incentive programme and the programme proposed to the Annual General Meeting.
In individual cases and where special reasons prevail, the Board of Directors may depart form the guidelines proposed above.
16 Proposal for resolution with respect to issuance of call options and conveyance of repurchased shares to members of senior management
The 2006 Annual General Meeting resolved to approve the 2006 Incentive programme of the Lagercrantz Group AB (publ.) in accordance with the guidelines set forth in the documents provided to the 2006 Annual General Meeting and which are described on Lagercrantz Group’s website, www.lagercrantz.com, and elsewhere. The purpose of the programme is to constitute a basis for an annual award of call options during the period 2006-2008. Each year’s award shall be submitted to the Annual General Meeting for approval.
The Board of Directors and management have evaluated last year’s programme to arrive at the following conclusions with respect to the proposal to be presented to the 2007 Annual General Meeting: The Group works with a clearly decentralised philosophy where skilled and motivated managers are a prerequisite for success. During 2006/07 further steps were taken in the right direction and earnings improved sharply. Participation in last year’s program was good and the offer was fully subscribed. The programme has had a positive effect on participation and interest in the Group’s performance and development on the part of senior management. The subsidy is regarded as an important component since it reduces the risk for the individual at the same time as the fact that it is paid out two years after subscription means that the individual takes a risk (tax is paid on the subsidy as tax on income from employment, which means that the net subsidy is only about half of what the individual actually pays). In addition hereto continued employment is encouraged since this is a condition for receiving the subsidy. Economically for the Company, the financial effect is marginal. The programme for 2006 had a net effect on equity of 0 and a cost affecting earnings of approximately MSEK 0.2. It should also be noted that the Company’s obligation to issues shares to its employees is covered by repurchased shares at an average cost of SEK 23 per share.
In accordance with the general guidelines drawn up for the programme, and based on the evaluation made, the Board of Directors proposes to the 2007 Annual General Meeting (award for 2007) that a resolution be passed to issue call options on repurchased shares in accordance with the following principal terms and conditions:
(i) Number of call options − to be issued − shall be no more than 260,000.
(ii) The right to acquire call options will inure to managers and members of senior management in the Lagercrantz Group. Subscription of options shall take place from 17 September 2007 until 21 September 2007, inclusive.
(iii) The premium for the options shall be equal to the market value of the call options in accordance with external valuation with application of generally accepted valuation method (the Black & Scholes model). The measurement period for the option premium with the application of the Black & Scholes model shall be during the measuring period from 3 September 2007 until 14 September 2007, inclusive.
(iv) Acquisition of shares utilizing call options shall take place from 21 September 2010 until 21 December 2010, inclusive.
(v) Each call option will entitle its holder to acquire one (1) repurchased class B share in the Company at a redemption price of 125 percent of the volume-weighted average of the paid prices quoted on the price list for shares in Lagercrantz Group AB (publ.) on the OMX Nordic Exchange from 3 September 2007 until 14 September 2007, inclusive, (but not lower than the quotient value of the share). Days without a quoted paid price shall not be included in the calculation.
(vi) Upon full subscription of the call options up to 260,000 shares may be issued (subject to any recalculation), equivalent to approximately 1.1 percent of the total number of shares outstanding (of class A as well as class B) and approximately 0.8 percent of the total number of votes. This calculation is based on the maximum number of shares and votes issued divided by the total number o shares and votes after such issuance. Shares held in treasury by the Company shall be included in the calculation of the total number of shares outstanding. Already outstanding are 255,000 call options on repurchased class B shares in the Company (2006 award). Upon full award under the proposed programme, the total number of shares outstanding at the time of the 2007 Annual General Meeting (2006 and 2007 awards) would be equivalent to approximately 2.1 percent of the total number of shares outstanding and approximately 1.5 of the votes.
(vii) The programme shall encompass a maximum of 35 persons. The proportion between the number of call options offered to the employee shall vary depending on the responsibility and position of the employee. The President and CEO shall be offered a maximum of 35,000 call options and other members of management shall be divided into categories where each individual person is awarded a maximum of 22,000 call options and a minimum of 4,000 call options.
(viii) The Board of Directors will decide which persons shall be included in each respective category and which persons will receive call options.
(ix) In the event that a person entitled to an award of call options wholly or partially refrains from acquiring such options, his or her not acquired call options shall be distributed pro rata among persons entitled to be awarded call options who in writing have proclaimed an interest in acquiring additional call options (“secondary subscription right”). For call options acquired as described in this section ix no subsidy on the premium will be paid. Persons entitled to award of call options may in this way acquire more than 130 percent of the originally offered number of options.
(x) The members of the Board of Directors do not have the right to acquire call options, with the exception of the Company’s President.
(xi) Issuance of call options to employees outside Sweden will depend on prevailing tax effects, that no legal obstacles exist and that the Board of Directors is of the opinion that such awards can be made by expending reasonable administrative and economic resources.
(xii) A condition for being awarded call options is that the employee has signed a special pre-emption agreement with the Company. Shares to be offered under the pre-emption agreement shall be offered at market value in cases such as termination of employment. In other instances the call options are freely transferable.
(xiii) For the purpose of encouraging participation in the programme a subsidy will be paid equivalent to the premium paid. Payment of the subsidy will take place two (2) years after the decision to issue on the condition that the option holder is still an employee of the Company at that time and owns call options.
(xiv) The costs for the programme (2007 award) is estimated to be approximately MSEK 1.1. The costs mainly consist of the subsidy of the premium as described above and of the social benefits payable on such subsidy. The programme (2007 award) is expected to have a marginal effect on the Company’s earnings per share.
(xv) The proposal by the Board of Directors includes that the Annual General Meeting also approves that the Company, with departure form the preferential rights of shareholders, convey up to 260,000 of the Company’s shares held in treasury at the redemption price decided in connection with any utilisation of the call options (subject to any recalculation).
The reason for the departure from the preferential rights of shareholders is to raise motivation and to create participation for managers and members of senior management with respect to risks and opportunities in the Company’s development. The purpose is also to motivate managers and members of senior management to continued employment in the Group and in special cases to be used for recruitment purposes.
The proposal for the call option programme was prepared by the Company’s Compensation Committee in consultation with the Company’s Board of Directors. The decision to propose issuance of call options on repurchased shares was made by the Board of Directors.
The decision to issue call options in accordance with this item of the agenda requires that the resolution by the Annual General Meeting is seconded by not less than nine tenths of the votes cast and represented at the Annual General Meeting.
17 Authorisation for the Board of Directors to decide on acquisition of and conveyance of own shares
The Board of Directors proposes that the Annual General Meeting resolves to authorise the Board of Directors to acquire shares before the next following Annual General Meeting in accordance with the following terns and conditions:
1 Purchases may be made over the OMX Nordic Exchange Stockholm and shall be executed in accordance with the provisions of the current listing agreement with respect to purchase and sale of own shares.
2 Purchases may be made on one or more occasions before the next Annual General Meeting.
3 A maximum number of class B shares may be acquired so that the Company’s holding from time to time does not exceed 10 percent of the total number of shares outstanding.
4 The prevailing market price at the time of purchase of shares shall be paid.
5 Payment for shares shall be made in cash.
The Board of Directors further proposes that the Annual General Meeting authorises the Board of Directors (i) to decide on conveyance of the Company’s class B shares held in treasury, with departure of shareholders preferential rights, in payment for acquisition of companies or businesses, and (ii) to decide on sale of the Company’s shares held in treasury, with departure of shareholders preferential rights, in ways other than over the OMX Nordic Exchange Stockholm to finance the acquisition of companies or businesses as well as to cover the Company’s obligation in accordance with the proposed incentive programme. Compensation for shares sold shall be equivalent to an estimated market value and may be paid for in means other than money. In other respects the following terms and conditions shall apply.
1 The authorisation may be exercised on one or more occasions before the next following Annual General Meeting.
2 The authorisation applies to all shares held in treasury at the time of the decision of the Board of Directors.
The resolution of the Annual General Meeting under the items above shall be valid only if seconded by at least two thirds of the votes cast and represented at the Annual General Meeting.
The purpose of acquiring own shares is to allow the Board of Directors to adapt the Group’s capital structure as well as to enable the Company to acquire companies and businesses with payment in own shares and to cover the Company’s obligations in accordance with the proposed incentive programme.
Statement of the Board of Directors pursuant to Chapter 18, Section 4 and Chapter 19, Section 22 of the Swedish Companies Act:
The Board of Directors proposes a dividend of SEK 1.25 (1.00) per share. The dividend is equivalent to a total of MSEK 30 (24) and constitutes 45 percent of the year’s profit. The Board of Directors is of the opinion that the proposed dividend leaves room for the Group to fulfil its obligations and to make the necessary capital expenditures.
The Board of Directors is further of the opinion that the proposal for repurchasing shares can be defended in view of the requirements posed by the nature, scope, goals for and risks of the operations with respect to the Company’s and the Group’s equity, need for consolidation, liquidity and financial position in other regards.
Stockholm, 15 August 2007
Lagercrantz Group AB (publ)
Board of Directors