STOCKHOLM, Sweden, July 25, 2005 (PRIMEZONE) -- Shareholders in Pergo AB (publ) are hereby summoned to the Extraordinary General Meeting on Wednesday, August 17, 2005 at 3.00 PM at the Head Office at Strandridaregatan 8 in Trelleborg, Sweden.
A. RIGHT TO PARTICIPATE AND REGISTRATION
Shareholders wishing to participate in the Extraordinary General Meeting must be registered in the share register maintained by VPC AB not later than Sunday, August 7, 2005 (however, due to the intervening weekend, such registration must be made no later than Friday, August 5, 2005), and must also report their intention to participate to the Company not later than Friday, August 12, 2005, at 12:00 by any of the following methods: mail, to Pergo AB (publ), Attn. Helena Bergstrom, P.O. Box 1010, SE-231 25 Trelleborg, Sweden; e-mail: agm@pergo.com; Fax: +46-410-36 33 00; Tel: +46-410-36 33 76. When registering, the shareholder must state his or her name, address, daytime telephone number and personal or organizational identification number, as well as the number of assistants the shareholder plans to bring to the Meeting (maximum of two assistants). Proxies and representatives of legal entities must forward the requisite authorizing documentation prior to the Meeting. In order to be entitled to participate in the Meeting, shareholders who have registered their shares through trustees, must have their shares registered by the trustee in their own name. Such reregistration must be done not later than Friday, August 5, 2005, and the trustee must be apprised of this requirement well in advance of the specified date. To confirm our receipt of your registration, we will send you an entry card that you should bring with you to the Meeting.
B. MATTERS TO BE DEALT WITH BY THE MEETING
Proposal of Agenda
1. Opening of the Meeting.
2. Election of Chairperson.
3. Preparation and approval of the voting list.
4. Approval of the Agenda.
5. Election of two minutes checkers.
6. Determination of whether the Meeting has been properly
convened.
7. Decision regarding a change to the 2005 employee stock option
program.
8. Decision regarding a change to the terms and conditions for
warrants.
9. Adjournment of the Meeting.
Proposal for decision regarding a change to the 2005 employee stock option program. The Board proposes that the General Meeting decide to change the 2005 employee stock option program as follows:
Background and reasons
Since the Annual General Meeting of shareholders in Pergo held on April 18, 2005, voted in favor of the Board's proposal of an employee stock option program, the composition of the Board has changed. There have also been changes in the Company's executive management. In light of this, the new Board composition no longer supports implementing the employee stock option program in accordance with the allocation structure adopted by the Annual General Meeting. The Board has therefore not allocated any stock options. Accordingly, Pergo has no share-based incentive program. In considering the possibility of implementing a long-term compensation system, the Board found reason to include a share-related incentive program in the compensation package to senior executives and key personnel. A share-related incentive program can link employee compensation to the Company's future earnings and value appreciation. This establishes long-term value appreciation as the top priority, since it creates a common goal for shareholders and the employees involved. Share-related incentive programs also create a Group-wide focus for the affected employees in different parts of the Group, establishing long-term action as a priority. It is also believed that incentive programs make it easier for the Company to recruit and retain key personnel. The Board found the most appropriate and efficient program for Pergo to be an allocation of employee stock options that can be exercised, provided established profitability targets are met, and provided the said allocation is taken into consideration in the setting of all other compensation to the employees involved. The new Board believes that it is essential to allocate a larger individual number of employee stock options -- in relation to the employee stock option program adopted by the 2005 Annual General Meeting -- to a small circle of executives who are expected to stand the best chance of influencing the Group's earnings outcome. The Board therefore proposes the following changes to the employee stock option program adopted at the 2005 Annual General Meeting. Given the conditions, size of the allocation, lack of existing incentive programs and other circumstances, the Board finds that proposed stock option program is reasonable and advantageous for the Company and its shareholders.
Allocation
It shall be possible for the Board to allocate stock options with no more than 600,000 stock options to the President and no more than 500,000 stock options to each of about ten other senior executives. A maximum of 2,700,000 employee stock options are to be available for allocation.
Strike price
The Board proposes the Board be authorized to allocate the stock options not later than August 24, 2005 at a strike price of SEK 33.30 (corresponding to the strike price established at the 2005 Annual General Meeting). It shall also be possible to allocate stock options after August 24, 2005, to subsequently hired or promoted senior employees, though not later than December 31, 2005. For such later allocation, the strike price shall correspond to 130% of the volume-weighted average of the share price during a period of five exchange days immediately prior to the time of the allocation, though not less than SEK 25.60.
Early exercise as a result of a public offer for the Company
In accordance with the decision of the 2005 Annual General Meeting, the right to exercise the stock options presupposes that during the fiscal years 2005--2006, the Pergo Group achieves a certain total operating profit before financial items and tax (EBIT) established by the Board at the time of allocation, in accordance with the adopted Annual Reports for each particular year. The Board proposes that if a public offer to acquire all of the shares in the Company is tendered and the Board decides to recommend the shareholders to accept the offer, the Board shall be entitled to decide that the stock options may be fully or partially exercised before the exercise period, regardless of whether the established earnings target has been reached.
Other conditions
The remaining conditions governing the stock options shall be the same as indicated in the decision of the 2005 Annual General Meeting. The stock options shall not be considered as securities and shall not be transferable. Each stock option shall entitle the holder to acquire one share in Pergo AB during the period of May 1, 2007 -- March 1, 2008. The right to exercise the stock options shall presuppose ongoing employment in the Pergo Group -- however, it shall be possible to exercise the stock options during a period of three months after death or departure, with pension, from the Company. The strike price and the number of shares to which every stock option carries the right to purchase shall be translated in the event of a split, merger, issues, etc., in accordance with the customary regulations. In the event of early exercise, the strike price shall be reduced to the discounted present value of the strike price established above.
Proposal for a decision regarding a change to the terms and conditions for warrants. The Company's commitments under the employee stock option program are hedged by warrants to subscribe for 2,700,000 shares as decided at the 2005 Annual General Meeting. Pergo Group subsidiaries shall be able to preside over and without compensation transfer the warrants in order to fulfill their commitments under the employee stock option program. To make early exercise possible in the event of a public offer in accordance with the aforementioned proposal to change the conditions for the employee stock options, the Board proposes that the conditions for the warrants be changed so that exercise may be possible as of September 1, 2005 (in accordance with current conditions, exercise may take place as of May 1, 2007).
Dilution effects and costs
The exercise of the proposed stock options increases the number of shares. The above changes to the employee stock option program do not, however, give cause for any further dilution compared with what was decided at the 2005 Annual General Meeting. If the stock options are fully exercised, the new shares that may arise after the proposed changes to the employee stock option program comprise approximately 4.8% of shares and voting rights, calculated on shares outstanding compared with proposed stock options. The stock options may also give rise to costs in the form of social security charges upon exercise and accounting costs during the period in which the stock options are valid.
Majority requirement
A decision in accordance with the foregoing discussion requires the support of shareholders with not less than nine-tenths of both the votes cast and the shares represented at the Annual General Meeting.
Documentation
The full decision proposal of the Board of Directors as described above will be available from the Company at Strandridaregatan 8 in Trelleborg, Sweden, and on the Company's website, as of August 3, 2005, and will be sent to shareholders who so request and provide their address. Trelleborg, July 2005 Board of Directors
Pergo is a leading flooring company with leading market positions, particularly in Europe and the U.S. Net sales amount to approx. SEK 2,8 billion and the number of employees is around 800. Pergo developed laminate flooring at the end of the 1970s and launched the product in Europe during the 1980s. The company started sales in the U.S. in 1994 and later also in Asia 1995 and Latin America 1997. The company's products have been marketed under the PERGO(r) brand name since 1989. The company is listed on the Stockholm Stock Exchange's O-list. For further information about Pergo, please visit our website www.pergo.com.
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