in connection with the proposed merger of
Komplett ASA
and
Torp Computing Group ASA
Exchange ratio:
1 share in Torp Computing Group ASA will give 0.336134 shares in Komplett ASA
Advisor to Komplett ASA
Advisor to Torp Computing Group ASA
This Information Memorandum has been prepared in connection with the proposed merger between Komplett ASA (“Komplett”) and Torp Computing Group ASA (“TCG”) (the “Merger”), as further described herein.
This Information Memorandum does not constitute an offer to sell, or a solicitation of an offer to buy, any of the shares issued by the companies or any other securities.
All inquiries relating to this Information Memorandum should be directed to the companies or SEB Enskilda ASA (the “Manager”). No other person has been authorized to give any information about, or make any representation on behalf of, the companies in connection with the Merger and, if given or made, such other information or representation must not be relied upon as having been authorized by the companies or the Manager.
The information contained herein is as of the date hereof and subject to change, completion or amendment without notice. There may have been changes affecting the companies subsequent to the date of this Information Memorandum. Neither the delivery of this Information Memorandum nor the completion of the Merger at any time after the date hereof will, under any circumstances, create any implication that there has been no change in the affairs of the companies since the date hereof or that the information set forth in this Information Memorandum is correct as of any time since its date.
The distribution of this Information Memorandum may in certain jurisdictions be restricted by law. Persons in possession of this Information Memorandum are required to inform themselves about, and to observe, any such restrictions. This Information Memorandum has not been approved or recommended by any regulatory authorities in any jurisdictions, including any United States federal or state securities commission or regulatory authority, nor have such entities confirmed its adequacy or accuracy.
The contents of this Information Memorandum are not to be construed as legal, business or tax advice. Each reader of this Information Memorandum should consult with its own legal, business or tax advisor as to legal, business or tax advice. If you are in any doubt about the contents of this Information Memorandum you should consult your stockbroker, bank manager, lawyer, accountant or other professional adviser.
This Information Memorandum includes “forward-looking” statements, including, without limitation, projections and expectations regarding the companies’ future financial position, business strategy, plans and objectives. When used in this document, the words “anticipate”, “believe”, “estimate”, “expect” and similar expressions, as they relate to the companies, their subsidiaries or their management, are intended to identify forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the companies and their subsidiaries, or, as the case may be, the industry, to materially differ from any future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the companies’ present and future business strategies and the environment in which the companies and their subsidiaries will operate. Factors that could cause the companies’ actual results, performance or achievements to materially differ from those in the forward-looking statements include but are not limited to, the competitive nature of the markets in which the companies operate, technological developments, government regulations, changes in economical conditions or political events. These forward-looking statements reflect only the companies’ views and assessment as of the date of this Information Memorandum. The companies expressly disclaim any obligation or undertaking to release any updates or revisions of the forward-looking statements contained herein to reflect any change in the companies’ expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.
Investing in the shares of Komplett, TCG and/or the Merged Company involves certain risks. See section 2 “Risk Factors” of this Information Memorandum.
TABLE OF CONTENTS
1
SUMMARY ... 4
2
RISK FACTORS ... 9
3
RESPONSIBILITY FOR THE INFORMATION MEMORANDUM ... 15
4
THE MERGER OF KOMPLETT AND TCG... 16
5
KOMPLETT FOLLOWING COMPLETION OF THE MERGER... 20
6
INFORMATION ABOUT KOMPLETT... 37
7
INFORMATION ABOUT TCG ... 63
8
MARKET OVERVIEW ... 66
9
MAJOR SHAREHOLDERS... 70
10
DOCUMENTS ON DISPLAY... 72
11
KEY INFORMATION ... 73
12
TAXATION IN NORWAY ... 74
13
DEFINITIONS AND GLOSSARY OF TERMS ... 78
Appendices:
Appendix 1: Merger Plan with appendices, including consolidated financial statements for Komplett ASA and Torp Computing Group ASA for 2004, 2005 and 2006
Appendix 2: Reports on the merger from the Board of Directors of Komplett ASA and Torp Computing Group ASA
Appendix 3: Expert Statements on the Merger Plan
Appendix 4: Report from KPMG on pro forma financials
Appendix 5: Financial statements for Komplett ASA for the three and six months ended 30 June 2007
1 SUMMARY
This summary includes a brief description of Komplett, TCG and the Merged Company. Investors are advised that (a) it should be read as an introduction to the Information Memorandum; (b) any decision to invest in the shares issued by Komplett, TCG or the Merged Company or on how to assess the proposed Merger should be based on consideration of the Information Memorandum as a whole by the investor; (c) where a claim in relation to the information contained in the Information Memorandum is brought before a court, the plaintiff investor might have to bear the costs of translating the Information Memorandum before the legal proceedings are initiated; and (d) civil liability attaches to those persons who have tabled the summary including any translation thereof, and applied for its notification, but only if the summary is misleading, inaccurate or inconsistent when read together with the other parts of the Information Memorandum.
1.1 The Proposed Merger of Komplett and TCG
The Boards of Directors of Komplett ASA (Komplett) and Torp Computing Group ASA (TCG) have entered into a Merger Plan dated 6 September 2007, which will be presented to the shareholders of both companies for their approval in an Extraordinary General Meetings to be held on 11 October 2007. Komplett will be the surviving entity in the Merger.
The Merger will be completed pursuant to the provisions on statutory mergers set out in the Public Limited Companies Act, Chapter 13. Upon completion of the Merger TCG will be liquidated and transfer its assets, rights and obligations in its entirety to Komplett, with the TCG shareholders receiving the merger consideration as described in section 4.5.1 below.
The Merger Plan must be approved by the general meetings of Komplett and TCG. Such approval requires a qualified majority of two-thirds of the votes cast and share capital represented at the respective general meetings.
The Merger is pursuant to the Merger Plan subject to certain conditions including, without limitation, approval from the Norwegian Competition Authority and any other applicable competition authorities as well as the lapse of a two months creditor notice period, cf section 4.5.2 for a more detailed description of these and other conditions for implementation of the Merger. It is expected that the Merger be completed by the end of 2007.
1.2 Background for the Merger
Komplett and TCG have both successfully developed expertise and technological solutions in the face of a demanding international competitive situation. E-commerce is in continuous development. The Merged Company will be a very strong player that can pursue international opportunities with even greater leverage.
The ambition for the Merged Company is to offer European end-users the best selections of products, prices and customer service available especially within computer equipment, consumer electronics and appliances. Improved economies of scale and business and technical development are among the areas in which synergies are expected. The brand names Komplett, MPX, Itegra and Norek will be continued.
The recommended merger is motivated by ambitions of growth. Consequently, downsizing due to overlapping functions is expected to be limited, and will be handled through internal realignment and natural attrition.
1.3 The Merger and Merger Consideration
100% of the consideration to the shareholders in TCG shall be settled with new shares in Komplett. The merger consideration shall thus be settled by the issuance of 0.336134 new shares in Komplett for each share in TCG.
1.4 Selected Financial Information
The selected consolidated financial data set forth in this Information Memorandum should be read in conjunction with the relevant consolidated financial statements and the notes to those statements which are attached to the Merger Plan and which may also be inspected at i) Komplett’s website www.komplett.com or be obtained, free of charge at the offices of Komplett at Østre Kullerød 4, Sandefjord, Norway; or ii) TCG’ website www.tcg.no, or be obtained, free of charge, at the offices of TCG, at Østre Kullerød 5, Sandefjord, Norway. The selected consolidated financial data presented in this section was derived from the audited consolidated financial statements as of and for the three years ended December 31, 2006, 2005 and 2004. And interims financial data presented for 1H and Q2 2006 and 2007 are not audited.
1.4.1 Komplett
Below is an extract of the consolidated financial statements of Komplett. For more detailed financial information, please see section 6.19.
Figures in NOK 1,000 2004 IFRS (audited) 2005 IFRS (audited) 2006 IFRS (audited) 1H 2006 IFRS (unaudited) 1H 2007 IFRS (unaudited) Q2 2006 IFRS (unaudited) Q2 2007 IFRS (unaudited) Total operating revenues 1,794.0 1,973.9 2,249.4 997.1 1,296.8 437.3 633.5 Operating profit 45.7 63.4 85.9 37.3 33.0 15.9 13.0 Ordinary pre-tax profit 51.8 70.7 94.5 40.2 36.2 17.5 14.4 Net profit 31.2 49.3 66.1 27.5 24.3 11.7 8.7 Earnings per share 2.6 4.1 5.5 2.3 2.0 1.0 0.7 Total fixed assets 38.8 40.1 43.5 39.4 187.9 39.4 187.9 Total current assets 511.3 476.7 574.0 425.7 531.0 425.7 531.0 TOTAL ASSETS 550.1 516.8 617.5 465.2 718.9 465.2 718.9 Total equity 325.0 288.3 339.3 299.0 467.0 299.0 467.0 Total liabilities 225.1 228.5 278.2 166.1 251.9 166.1 251.9 TOTAL LIABILITIES AND EQUITY 550.1 516.8 617.5 465.2 718.9 465.2 718.9
1.4.2 TCG
Below is an extract of the consolidated financial statements of TCG.
Figures in NOK million NGAAP 2004 (audited) 2005 IFRS (audited) 2006 IFRS (audited) 1H 2006 IFRS (unaudited) 1H 2007 IFRS (unaudited) Q2 2006 IFRS (unaudited) Q2 2007 IFRS (unaudited) Total operating revenues 891.0 1098.3 1312.3 555.2 733.8 250.3 358.3 Operating profit 10.3 21.6 33.0 8.7 17.0 3.1 9.6 Ordinary pre-tax profit 8.4 21.4 31.1 8.2 15.0 3.2 8.7 Net profit 4.4 14.6 21.6 5.3 10.3 2.1 6.1 Earnings per share 0.49 1.41 2.08 0.51 0.99 0.20 0.58 Total fixed assets 11.6 18.1 20.7 19.7 19.5 19.7 19.5 Total current assets 169.4 245.5 359.9 197.6 279.5 197.6 279.5 TOTAL ASSETS 181.0 263.7 380.6 217.3 299.0 217.3 299.0 Total equity 33.6 64.0 81.4 65.4 83.8 65.4 83.8 Total liabilities 147.3 199.6 299.2 151.9 215.2 151.9 215.2 TOTAL LIABILITIES AND EQUITY 181.0 263.7 380.6 217.3 299.0 217.3 299.0
1.5 Selected Preliminary Pro Forma Financial Information
The table below shows the unaudited preliminary condensed pro forma income statement for the combined Komplett and TCG as of and for the year ended 31 December 2006 and the six months ended 30 June 2007 and the unaudited preliminary condensed pro forma balance sheet as of 30 June 2007. Please refer to section 5.8 for a description of the pro forma adjustments.
Figures in NOK
million 2006 PF IFRS (audited) 1H 2007 PF IFRS (unaudited)
Komplett TCG Adj. Merged
company Komplett TCG Adj. Merged company
Total operating revenues 2249.4 1312.3 -13.2 3548.5 1296.8 733.8 -7.5 2023.1 Operating profit 85.9 33.0 -7.7 111.2 33.0 17.0 -3.9 46.1 Ordinary pre-tax profit 94.5 31.1 -7.7 117.9 36.1 15.0 -3.9 47.2 Net profit 66.1 21.6 -5.5 82.2 24.3 10.3 -2.8 31.8 Earnings per share (NOK) 5.5 2.08 -0.33 4.9 2.0 0.99 -0.17 1.9 Total fixed assets 187.9 19.5 460.2 667.5 Total current assets 531.0 279.5 -0.9 809.7 TOTAL ASSETS 718.9 299.0 459.3 1477.2 Total equity 467.0 83.8 456.5 971.0 Total liabilities 251.9 215.2 39.1 506.2 TOTAL LIABILITIES
1.6 Share capital
Komplett’s registered share capital before the Merger is NOK 13,258,400.00 divided into 13,258,400 shares each with a nominal value of NOK 1.00, fully paid.
100% of the consideration to the shareholders in TCG shall be settled with new shares in Komplett (0.336134 new shares in Komplett for each share in TCG). If the Merger is completed, the share capital of Komplett will hence be increased with NOK 3,501,118 through the issuance of 3,501,118 new shares, each with a nominal value of NOK 1.00, resulting in a share capital in the Merged Company of NOK 16,759,518, consisting of 16,759,518 shares, each with a nominal value of NOK 1.00.
The new shares will be issued upon completion of the Merger, which is expected to take place ultimo December 2007.
1.7 Summary of Risk Factors
Please revert to section 2 "Risk Factors" below for relevant risk factors, summarised in the following:
Risks related to the Merged Company and the industry in which it operates:
• Market development
• Competitive industry
• Risk of price erosion
• Managing and funding growth
• Entry into new markets
• Technological risk
• Risks regarding start up of new systems/ technology in operation
• Limitation of deliveries and vendors production capacity
• Technical problems or other defects relating to the products being sold and claims arising thereby
• Dependence on executive management and certain key personnel
• Dependence on and loss of employees
• Dependence on third parties
• Dependence on intellectual property and proprietary rights (IPR)
• Risks associated with international operations
• Foreign exchange risk Risks related to the Merger
• The integration process
• Reduced influence of shareholders
• The completion of the Merger
Risks related to the Merged Company’s shares
• Future dilution of shareholders
• Pre-emptive rights may not be available to U.S. holders of the Shares
1.8 Documents on display
Copies of the following documents will, during the life of this Information Memorandum, be available for inspection at any time during normal business hours on any business day, free of charge, at the registered office of the respective companies up until the completion of the Merger and at the registered office of the Merged Company as from the completion of the Merger (see section 5.5, 6.2 and 7.6):
• The Merger Plan dated 6 September 2007, including appendices
• The annual consolidated financial statements of Komplett for the years 2004-2006
• Komplett’s Articles of Association and the Merged Company’s proposed Articles of Association
• All other reports, letters and other documents, historical financial information, valuations and statements prepared by any expert at Komplett’s or TCG’s request, any part of which is included or referred to in this Information Memorandum.
• Komplett’s Policies are available on the company’s web-page www.komplett.com.
2 RISK FACTORS 2.1.1 General
Investing in Komplett, TCG and the Merged Company involves inherent risks. Prospective investors should consider, among other things, the risk factors set out herein in the Information Memorandum before making an investment decision. The risks described below are not an exhaustive list of risks facing Komplett, TCG and/or the Merged Company. Additional risks may also have a material adverse effect on Komplett’s, TCG’s and/or the Merged Company’s business, financial position and/or operating results.
A prospective investor and shareholder in either of the companies should carefully consider the factors set forth below, and elsewhere in this Information Memorandum, and should consult his or her own expert advisors as to the suitability of an investment in the shares of Komplett, TCG and/or the Merged Company and/or its assessment of the proposed Merger.
In the risk factors described below reference is generally made to the Merged Company. However, the risk factors will apply to Komplett and TCG respectively as long as the two companies remain independent companies, i.e. up until the Merger is completed or if the Merger for any reason is not completed.
Risks may in many cases effect revenue, efficiency, cost level of purchasing or operation, profit of the company and/or the share price.
All forward-looking statements included in this document are based on information available to, and considered relevant by, Komplett and TCG on the date hereof, and Komplett and TCG assume no obligation to update any such forward-looking statements unless required by applicable law or regulation. Investors are cautioned that any forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties. Actual results may thus differ materially from those included in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those described below and elsewhere in this Information Memorandum.
2.2 Certain risks related to the Merged Company and the industry in which it operates
2.2.1 General
The Merged Company may in the future not be able to attract a sufficient number of paying customers to generate adequate revenues to cover its operating expenses and/or service its debts. Inability to attract a sufficient number of customers may have a material adverse effect on the Merged Company’s business, operating results and financial condition.
The Merged Company may also be affected by the general state of the economy and business conditions, including, but not limited to, the occurrence of recession and inflation, unstable or adverse credit markets, fluctuations in operating expenses, technical problems, work stoppages or other labour difficulties, property or casualty losses which are not adequately covered by insurance, and changes in governmental regulations, such as increased taxation or introduction of regulations decreasing the number of customers or increasing operating costs and capital expenditure.
2.2.2 Market development
The future success of the Merged Company’s business will depend on the continued growth in the market in which the Merged Company will operate. There can be no assurance that the current
2.2.3 Competitive industry
The market in which the Merged Company will operate is highly competitive, and the Merged Company may in the future also be exposed to increased competition from current market players or new entrants to the market. Certain existing and potential new customers may also view the merger of Komplett and TCG negatively and therefore reduce or stop buying from Komplett, TCG or the Merged Company.
The failure of the Merged Company to maintain its competitiveness, and respond to increased competition, may have a material adverse effect on the Merged Company’s business, operating results and financial condition.
2.2.4 Risk of price erosion
The majority of the Merged Company’s revenues will be derived from sales of computers, computer components, consumer electronics and other products. Most of these products tend to be exposed to price erosion and hence the Merged Company may experience declining profits and revenue despite significant growth in units sold. Neither Komplett, TCG nor the Merged Company can guarantee that it will be able to grow the number of units sold sufficient to secure growth in revenues and profit.
2.2.5 Managing and funding growth
The Merged Company’s future growth and performance will partly depend on its ability to manage growth effectively. This include among others number of employees, technical solutions including computer systems and software, warehouse organisation and systems, handling by the company or partners, how the company is organised, locations etc. Such risks include the risk and inefficiency during changing/reorganising the daily operations like moving to new locations, reorganising the warehouse, updating software or systems capable to handling larger number of customers, orders, products, hiring and training new employees, etc. In addition certain acquisitions of other companies may result in accelerated growth and demanding integration processes.
For the time being a new location for the TCG warehouse is being built and Komplett is installing a new automated inventory handling system. Komplett acquired the Swedish company inWarehouse in May 2007, and are now in the integration process.
Growth may create a need for additional financial funding. The general financial market conditions, stock exchange climate, interest level etc., the investors interest in Komplett, TCG or the Merged Company, the existing share price of the company and other reasons may create a risk for not being capable to raise necessary funding for future growth and/or investments to increase efficiency.
The Merged Company’s failure to successfully grow its operations, and/or to handle such growth, could have a material adverse affect on the Company’s business, operating results and financial condition.
2.2.6 Entry into new markets
The Merged Company may in the future enter into new markets, both geographically and in terms of new products and new customer groups. New market entries are associated with similar risks as those related to managing growth, and will require investments and significant resources, including management time. In the short term, new market entries may generate negative results.
2.2.7 Technological risk
A significant part of the Merged Company’s operations is generated from orders made through web sites and automatically processed by computer systems. Technical problems with computer systems, automated storage systems and procurement systems may have a material adverse effect on the Merged Company’s business, operating results and financial condition.
2.2.8 Risks regarding start up of new systems/ technology in operation
Komplett, TCG or the Merged Company may from time to time invest in new systems and technology or upgrade existing systems to increase handling capacity, efficiency or for other reasons. Based on experience from the years of operation such upgrades or changes may effect the efficiency, cost level, revenue and profit of the operation for a certain period both prior and during installation of such systems, and for a period after such installation. Employees must also be trained to handle the new systems. New systems must be carefully exposed to full load and during such increase of the capacity certain problems may be detected. This includes uncertainty of how long such a period of installation may be before the new or upgraded systems run smoothly. This may involve employees to handle both existing and new systems in parallel for a certain period.
2.2.9 Limitation of deliveries and vendors production capacity
The products sold and delivered are manufactured by other companies in different countries around the world. In periods the manufacturing capacity may not be in balance with the market demand for certain products or the vendor may have manufacturing problems. This may result in increased prices or lack of deliveries. Some brands have a strong market position and especially reduced or failed deliveries of such popular products will affect the revenue and profit.
2.2.10 Technical problems or other defects relating to the products being sold and claims arising thereby.
Komplett, TCG and the Merged Company are selling a large variety of product mostly operated by electricity. The products are manufactured by hundreds of different vendors in different countries. Komplett, TCG and the Merged Company have through the purchasing agreements with the vendors in different ways and level tried to arrange replacement or repair of defect products. The sales regulations published to the customers on the web-pages, inform the customers of their rights and procedure regarding technical problems with the products sold and related claims.
There may be situations where the customers and Komplett, TCG or the Merged Company and the vendors, may not agree upon the reasons for the defect or claim, and that the situation may result in a costly and time consuming process or in other ways may affect the business. For several products Komplett, TCG and the Merged Company are obliged by law or regulations to give their customers better warranties and/or for a longer period than the vendors are willing to give Komplett, TCG or the Merged Company.
2.2.11 Dependence on executive management and certain key personnel
The Merged Company’s future success will be dependent upon the continued services of the executive management and other key personnel. Loss of one or more of the members of the executive management and/or capability to attract and recruit new managers or key employees could have a material adverse effect on the Company’s business, operating results and financial condition.
experience and expertise, other than the executive management and key employees mentioned above. There can be no assurance that the Merged Company will have access to sufficient skilled personnel, especially considering the current labour market with high demand for skilled personnel.
2.2.13 Dependence on third parties
The Merged Company will depend on third parties such as suppliers, partners etc. There can be no assurance that the Merged Company’s suppliers and other partners will not experience problems in the future (within or outside their control) which may adversely affect the Merged Company’s business, operating results and financial condition.
2.2.14 Dependence on intellectual property and proprietary rights(IPR)
Komplett, TCG and the Merged Company’s sales and operations are based on several systems including software developed and sold to Komplett, TCG or the Merged Company by other companies. Such companies’ lack of IPR for the products they have sold or will sell in the future to Komplett, TCG or the Merged Company may result in legal conflicts. This may also be the case if vendors of certain products sold by Komplett, TCG or the Merged Company are in IPR conflicts with other vendors.
2.2.15 Risks associated with international operations
The Merged Company’s operations in international markets will be subject to risks inherent in international business operations, including, but not limited to, general economic conditions in each foreign country in which the Merged Company will operate, overlapping differing tax structures, problems related to management of an organisation spread over various countries, unexpected changes in regulatory requirements, compliance with a variety of foreign laws and regulations, and longer accounts receivable payment cycles in certain countries. Materialisation of such risks may have a material adverse effect on the Merged Company’s business, operating results and financial condition.
2.2.16 Foreign exchange risk
The Merged Company’s results of operations will be subject to currency translation risk. The results of operations are reported in the relevant functional currency and then translated into NOK for inclusion in the Merged Company’s financial statements. Exchanges rates between the relevant foreign currencies and the NOK have in the recent years fluctuated significantly and may do so also in the future. Sweden will be an important market for the Merged Company and, accordingly significant fluctuations in the exchange rates between the SEK and the NOK could significantly affect the Merged Company’s reported results. The Merged Company is also expected to generate significant revenues in EUR and GBP and is also significantly exposed to USD and EUR through its cost of goods sold. Significant fluctuations in exchange rates between these currencies and the NOK may thus significantly affect the reported results.
2.3 Risks related to the Merger 2.3.1 The integration process
The Merger will involve the integration of two businesses which currently operate independently. Such an integration process is challenging and involves risks. There can be no assurance that the integration will be successful. Any delays and unexpected costs incurred in the integration process or failure to achieve the advantages contemplated by the combination of the two companies may have a material adverse effect on the Merged Company’s financial condition and operating result.
2.3.2 Reduced influence of shareholders
A successful merger will result in an increased number of shares and by such reduced percentage ownership and influence of the existing shareholders in both TCG and Komplett.
2.3.3 The completion of the Merger
The completion of the Merger is subject to certain conditions, including, but not limited to, approval of the Merger by the Extraordinary General Meetings of Komplett and TCG and necessary approval and/or clearances by the Norwegian Competition Authority, cf. section 4.5.2. There can be no assurance that such conditions will be satisfied and, if they are not, the Merger may not be completed.
If the Merger is not completed and both companies will continue to operate separately, the failed Merger process will have resulted in costs, time consumption and decisions that may not have occurred if the process never was started. In such a situation the continued operation of Komplett and TCG as separate entities in several ways will recognize a set back compared to if the Merger process never was started.
The share price may also be affected if the Merger fail compared to a continued separate operation of the two companies. Also the announcement of the intention to merge and the following process and flow of information, may have affected the share price.
2.4 Risks related to the Merged Company’s shares 2.4.1 Future dilution of shareholders
The Merged Company may require additional capital in the future to finance its business activities and growth plans. The issuance of shares in order to raise such additional capital, or as means of honouring options or warrants, may have a dilutive effect on the ownership interests of the shareholders of the Merged Company at that time.
2.4.2 Pre-emptive rights may not be available to U.S. holders of the Shares
Under Norwegian law, prior to the issuance of any new shares for consideration in cash, the Merged Company must offer holders of the then-outstanding shares pre-emptive rights to subscribe and pay for a sufficient number of shares to maintain their existing ownership percentages, unless these rights are waived at a general meeting of the shareholders. These pre-emptive rights are generally transferable during the subscription period for the related offering and may be quoted on Oslo Børs.
U.S. holders of the Merged Company’s shares may not be able to receive, trade or exercise pre-emptive rights for new shares unless a registration statement under the U.S. Securities Act is effective with respect to such rights or an exemption from the registration requirements of the U.S. Securities Act is available. If U.S. holders of the shares are not able to receive, trade or exercise pre-emptive rights granted in respect of their shares in any rights offering by the Merged Company, they may not receive the economic benefit of such rights. In addition, their proportional ownership interests in the Merged Company will be diluted.
2.4.3 It may be difficult for investors based in the United States to enforce civil liabilities predicated on U.S. securities laws against the Merged Company or the Merged Company’s directors and executive officers
directors and executive officers judgments obtained in U.S. courts predicated on the civil liability provisions of U.S. federal securities laws.
2.4.4 Holders of the Merged Company’s shares that are registered in a nominee account may not be able to exercise voting rights as readily as other shareholders
Beneficial owners of the Merged Company’s shares that are registered in a nominee account (e.g. through brokers, dealers or other third parties) may not be able to vote such shares unless their ownership is re-registered in their names with the Norwegian Centralized Securities Register (VPS) prior to the Merged Company’s general meetings. There can be no assurance that beneficial owners of the Merged Company’s shares will receive the notice of a general meeting in time to instruct their nominees to either effect a re-registration of their shares or otherwise vote their shares in the manner desired by such beneficial owners.
3 RESPONSIBILITY FOR THE INFORMATION MEMORANDUM
The Board of Directors of Komplett ASA confirms that, having taken all reasonable care to ensure that such is the case, the information contained in this Information Memorandum is, to the best of our knowledge, in accordance with the facts and contains no omissions likely to affect its import.
6 September 2007
The Board of Directors of Komplett ASA
Bengt Thuresson (Chairman) Ingvild Huseby
Anne Lise Meyer Peter A. Ruzicka
Odd Johnny Winge Elin Ertsås (Employee representative)
Arnt Ree (Employee representative)
The Board of Directors of Torp Computing Group ASA confirms that, having taken all reasonable care to ensure that such is the case, the information contained in this Information Memorandum is, to the best of our knowledge, in accordance with the facts and contains no omissions likely to affect its import.
6 September 2007
The Board of Directors of Torp Computing Group ASA
Gunnar Bjønness, Chairman Vivi-Ann Hilde Svein Vier Simensen Severin Skaugen
4 THE MERGER OF KOMPLETT AND TCG 4.1 The Proposed Merger of Komplett and TCG
The Boards of Directors of Komplett and TCG have entered into a Merger Plan dated 6 September 2007, which will be presented to the shareholders of both companies for their approval in Extraordinary General Meetings to be held on 11 October 2007. Komplett will be the surviving entity in the Merger.
The Merger will be completed pursuant to the provisions on statutory mergers set out in the Public Limited Companies Act, Chapter 13. Upon completion of the Merger TCG will be liquidated and transfer its assets, rights and obligations in its entirety to Komplett, with the TCG shareholders receiving the merger consideration as described in section 4.5.1 below.
The Merger Plan must be approved by the general meetings of Komplett and TCG. Such approval requires a qualified majority of two-thirds of the votes cast and share capital represented at the respective general meetings.
The Merger is pursuant to the Merger Plan subject to certain conditions including, without limitation, approval from the Norwegian Competition Authority and any other applicable competition authorities as well as the lapse of a two months creditor notice period, cf section 4.5.2 for a more detailed description of these and other conditions for implementation of the Merger. It is expected that the Merger be completed by the end of 2007.
The Merger Plan with appendices is attached as Appendix 1 hereto. The reports on the Merger from the Boards of Directors of Komplett and TCG are attached as Appendix 2 hereto and the expert statements on the Merger Plan are attached as Appendix 3 hereto.
4.2 Background for the Merger
Komplett and TCG have both successfully developed expertise and technological solutions in the face of a demanding international competitive situation. E-commerce is in continuous development. The merged company will be a very strong player that can pursue international opportunities with even greater leverage.
The company's ambition is to offer European end-users the best selections of products, prices and customer service available with a view to computer equipment, consumer electronics and
appliances. Improved economies of scale and mutual development are among the areas in which synergies are expected. The brand names Komplett, MPX, Itegra and Norek will be continued. The recommended merger is motivated by ambitions of growth. Consequently, downsizing due to overlapping functions is expected to be limited, and will be handled through internal realignment and natural attrition.
4.3 About Komplett
Komplett is one of the leading European companies in Internet shopping, and the operations include the Internet shops Komplett.no, Komplett.se, Komplett.co.uk, Komplett.ie, Komplett.nl, Komplett.be, Komplett.de, Komplett.at, Komplett.dk, Komplett.fr, Norek.no, Af.komplett.se and inWarehouse.se.
Komplett offers computer components, PCs, home electronics, white goods and related equipment to end-users and dealers. The revenue in 2006 was NOK 2 249 million. Komplett has more than 1 600 000 registered customers in total in Norway, Sweden, UK, Ireland, the Netherlands, Belgium, Germany, Austria, Denmark and France.
4.4 About TCG
TCG is an investment company with focus on companies related to distribution and sale of products and services over the internet. The group consists of the fully owned companies Itegra AS, MPX.no AS, XD.no AS, Torp Distribusjon AS and TCG Kapital AS.
Itegra AS is a distributor within data and consumer electronics. The company sells primarily to dealers. MPX.no AS and XD.no AS are both internet shops. Both companies offer products within data, consumer electronics and home/leisure to consumers, businesses and public services. XD.no has an aggressive price profile. Torp Distribusjon AS is a distribution company and carries out all physical handling (distribution) of goods. TCG Kapital AS is a debt collection company. The company handles the TCG group’s debt collection and also servicing third party customers.
In addition, TCG owns 100 percent of Micro Parts Express Sweden AB. This company has no employees and only limited operations. TCG and its subsidiaries have their head office in Sandefjord, Norway. In addition, Itegra and MPX.no have sales offices at Billingstad, close to Oslo. For a more detailed description of TCG, please see section 7.
4.5 The Merger
4.5.1 Merger Consideration
100% of the consideration to the shareholders in TCG shall be settled with new shares in Komplett. The merger consideration shall thus be settled by the issuance of 0.336134 new shares in Komplett for each share in TCG and it is proposed in the Merger Plan that the Extraordinary General Meeting of Komplett to be held on 11 October 2007 passes the following resolution to increase the share capital:
a) Komplett’s share capital is increased by NOK 3 501 118, from NOK 13 258 400 to NOK 16 759 518, through the issue of 3 501 118 shares, each with a nominal value of NOK 1. b) As consideration for the shares Komplett shall take over TCG’s assets, valued at NOK
416 633 600 as per 17 June 2007, rights and obligations pursuant to the provisions in the Merger Plan.
c) The new shares shall be allotted in full to the shareholders of TCG. The shareholders of Komplett shall therefore not have any preferential rights to subscribe for the new shares. The shares are deemed to have been subscribed for by the shareholders of TCG when the company’s General Meeting has approved the Merger Plan.
d) The new shares shall give rights to dividends approved after the capital increase has been registered in the Register of Business Enterprises and in Komplett’s shareholder register in the VPS.
The proposed exchange ratio was determined after negotiations between the two companies, which were focused on inter alia the estimated relative values of the two companies. The exchange ratio was in connection with the integration agreement entered into between the two parties on 17 June 2007 established based upon a total evaluation of the companies' current trading valuation on Oslo Børs (Komplett) and the OTC list (TCG) in a period prior to 17 June 2007, historical earnings and book value of equity, projected earnings and future earnings potential and the values of expected revenue and cost synergies which the Merger is expected to provide the basis for.
be issued. Such fractions will be aggregated and sold, and the net proceeds of a sale of the fractional shares will be distributed to the relevant holders in proportion to their fractional rights. Consideration shares will not be issued for Komplett’s or its subsidiaries’ shares in TCG (if any) nor for TCG’s own shares (if any). As at the date of this Information Memorandum, neither Komplett and its subsidiaries nor TCG own any shares in TCG and TCG owns no shares in Komplett.
The new shares will be deemed to be subscribed for when the general meeting of TCG approves the Merger Plan, cf. Section 13-3, third paragraph, of the Public Limited Liability Companies Act and will be issued as of the completion of the Merger. Consideration for the new shares issued by Komplett will take the form of the completion of the Merger, cf. Section 13-17 of the Public Limited Liability Companies Act. At the time shares in TCG are exchanged for shares in Komplett, the shareholders will be registered in the share register of Komplett and the shareholders in TCG will accordingly acquire full shareholder rights in Komplett from said point in time. Registration as a shareholder in the Komplett share register is conditional on the TCG shareholder being registered in the TCG share register on the day that the Merger is completed (or that notification of the TCG shareholder’s acquisition of shares in TCG has been given to TCG or Komplett prior to or on the day that the Merger is completed).
The new shares shall be allotted in full to shareholders in TCG. Shareholders in Komplett will therefore not have any preferential rights to subscribe for the shares. The new shares give the rights to any dividends resolved after the registration of the new shares in the shareholder register of Komplett in VPS.
See section 5.7 for a description of the rights which will be attached to the shares in the Merged Company.
Komplett is listed on Oslo Børs and TCG is registered on the Norwegian OTC-list. The last 30 days average TCG share price prior to the announcement of the proposed Merger was NOK 39.8 per share. The last 30 days average Komplett share price prior to the announcement of the proposed Merger was NOK 117.2 per share. After the announcement the Komplett share price has increased, and based on the last 30 days average Komplett share price of NOK 149.2, the exchange ratio implies a value of the TCG share of NOK 50.2 per share.
4.5.2 Conditions for completion of the Merger
Implementation of the Merger is subject to the satisfaction of the following conditions:
a) Oslo Børs having confirmed that the listing of the shares in Komplett on Oslo Børs will be continued after the completion of the Merger.
b) The Extraordinary General Meetings in Komplett and TCG having approved the Merger Plan and passed the resolutions required in this respect with the necessary majority. c) All necessary approvals and/or clearances from the Norwegian Competition Authority and
any other relevant competition authorities having been obtained without any conditions or on conditions which will not have a material adverse effect for the Merged Company.
d) The parties have not undertaken, nor resolved to undertake, larger investments, changes in their business, changes in their equity, capital increases, issuances of rights to shares, distributions of dividends or other similar changes in the period from the Board of Directors’ approval of the Merger Plan until the new shareholder elected board members
accordance with the Merger Plan or with the other party’s prior written consent. The parties recognize that two large activities are ongoing in Komplett: The integration process of the Swedish company inWarehouse acquired in May 2007 and the installation of an automated warehouse system.
The parties also recognize the ongoing construction work for a new warehouse for TCG.
e) No circumstances or incidents that materially alter the basis for the Merger having occurred prior to the time when the new shareholder elected board members as mentioned in Section 9 of the Merger Plan have taken up their duties.
f) The deadline for objections from creditors pursuant to the Public Limited Companies Act Section 13-15 having expired for both Parties and the relation to creditors who have raised objections if any having been settled, or the District Court having decided that the Merger may nevertheless be completed and registered with the Register of Business Enterprises.
Neither of the Parties may claim any compensation or other sort of indemnification in the event that the Merger is not completed, unless this is caused by the other Party’s violation of its obligations according to the Merger Plan.
In the event that the Merger is not completed because an offer to acquire one of the parties or a significant part of its business is put forward, said party shall irrespective of the other provisions of the Merger Plan pay the other Party an amount of NOK 20 million as full and final compensation for the failure to complete the Merger.
Except for the above mentioned provisions, neither of the Parties may claim any sort of compensation from the other party if the Merger is not carried through.
The Board of Directors of Komplett and TCG will on behalf of the companies decide if the above conditions are satisfied at the relevant point in time. If the conditions have not been satisfied by 31 March 2008, each of the parties may, unless the situation has been caused by breach by or circumstances related to the terminating party, terminate the Merger with the result that the Merger will not be completed.
4.5.3 Special rights or benefits
No agreements to the benefit of the members of the Board of Directors or management of the Merged Company, Komplett or TCG have been entered into, and no special rights or benefits shall accrue to the members of the Boards of Directors or management of the Merged Company,
Komplett or TCG, in connection with the Merger, cf. section 13-6, first paragraph no. 6 of the Public Limited Companies Act.
5 KOMPLETT FOLLOWING COMPLETION OF THE MERGER
This section provides information of the Merged Company and does not discuss the detailed business operations. Such information is set out in the presentation of Komplett in section 6 and TCG in section 7.
5.1 Vision and Strategy
• Komplett’s vision is to be a leading European Internet company
• TCGs vision is to be first choice for Internet shopping in Norway
The strategy of the Merged Company will be based on the current strategies of Komplett and TCG. The business plans of Komplett and TCG will be reviewed in the period up to the completion of the Merger.
The current Boards of Directors of Komplett and TCG are of the opinion that the current dividend policies of Komplett should be continued in the Merged Company. Other financial targets will be set by the Board of Directors of the Merged Company after the completion of the Merger.
The current Boards of Directors of the two companies are also of the opinion that the current shareholder and corporate governance policies of Komplett should be continued in the Merged Company.
The Merger is not expected to change the listing of the Komplett share on Oslo Børs. It is a condition for the completion of the Merger that Oslo Børs confirms that the listing of the Komplett share will be continued after the completion of the Merger.
5.2 Business overview
The planned functional organisation of the Merged Company is presented in the chart below:
Organization Chart Title
IR
TCG Norway Komplett Norway Communications Logistics IT/Development Financial Sweden/Denmark Western Europe CEO 5.3 Legal structure Komplett ASA Komplett BV The Netherl. Komplett AS Norway IWH AB Sweden KDF Sweden Apparat Inv. AB Sweden Malex Data AB Sweden Itegra AS Norway XD.no AS Norway MPX.no AS Norway Torp Distr. AS Norway Micro Parts Expr Sweden AB Sweden TCG Kapital AS Norway
5.4 Organisation 5.4.1 Board of Directors
It is proposed that the new Board of Directors of the Merged Company shall consist of:
• Bengt Thuresson (Chairman of the board)
• Gunnar Bjønness
• Anne Lise Meyer
• Peter Ruzicka
• Agnes Beate Steen Fosse
• Elin Ertsås (Employee representative)
• Arnt Ree (Employee representative)
In addition, one representative will also be elected by and from the employees of TCG and attend board meetings as an observer in the merged company. This observer will be elected for a period until the next ordinary election of employee representatives.
Description of new board members Gunnar Bjønness, director,
Mr. Bjønness holds a MBA degree from University of California, Berkley and a BS in Mechanical Engineering and Metalurgical Engineering from University of Michigan, Ann Arbor. He was a co-founder of Itegra AS in 1999 and is currently chairman in TCG. In addition, he is a board member of CableCom AS, Multicase Norge AS and Sandefjord Fotball AS. His business address is Tangenodden 7, 3234 Sandefjord, Norway.
Agnes Beate Steen Fosse, director,
Ms. Steen Fosse holds an MSc degree in marketing from Norges Markedshøyskole and is currently employed as Managing Director by Pronorm AS which is the sales company for the standardisation in Norway. Prior to this she founded her own company Norsk Kompetansesenter AS (NOKS AS) and she was Manager Director in eforum.no and in Nsafe.no. Her business address is Strandveien 18, Lysaker, Norway.
For a short presentation of the other members of the Board of Directors, please refer to section 6.11 description of the Board of Directors in Komplett.
5.4.2 Board practices and independence of the Board of Directors
The Merged Company will comply with the Norwegian Code of Practice for Corporate Governance issued by the Norwegian Corporate Governance Board on 28 November 2006.
All of the members of the board of directors of the Merged Company will be independent from the Merged Company’s executive management and important business relations. The board will also satisfy the requirement of the Norwegian Code of Practice for Corporate Governance that at least two directors shall be independent from major shareholders as only Peter Ruzicka will be representing a shareholder (Canica) holding more than 10% of the Merged Company. The four other Board Members are independent in this respect as their share holdings will be less than 10%. The presentation of each Board Member includes the shareholding.
5.4.3 Nomination Committee
It is proposed that the current Nomination Committee of Komplett will continue as the Nomination Committee for the Merged Company. The Komplett Nomination Committee consists of:
• Bjørn Myhre; Partner in Personal Utvelgelse AS, a recruiting firm
• Nils Selte; CFO, Canica AS
• Bengt Thuresson; Chairman, Komplett 5.4.4 Management
It is proposed that the Merged Company shall have a management team consisting of:
• Ole Vinje, CEO
• Gyrid Skalleberg Ingerø, CFO/IR
• Pål Vindegg, COO
• Trond Christensen, director of finance
• Frank Wirum, director of IT and development
• Ingebjørg Tollnes, director of marketing
• Lars Seeberg, manager TCG
• Anton Hagberg, manager Komplett Norway
• Ole Sauar, country manager Komplett Sweden/Denmark
• Vincent Hoogduijn, country manager Komplett Western Europe
Description of new members of the management team in Komplett after the Merger Ole Vinje, CEO
Ole Vinje (48) has since 2000 been CEO of Torp Computing Group. Vinje has a degree from Handelsakademiet in Oslo. He has 24 years of experience from the IT-industry and has had a number of leading positions. His previous work experience is from IBM, Lantec, Ark/Getronics and Itegra.
Frank Wirum, Director of IT and development
Mr. Wirum (44) holds an engineer degree from Göteborgs Tekniska Institut. He was a co-founder of Itegra AS in 1999 and has held several executive positions in Itegra/TCG since 1999. Prior to this he worked for Cisco Systems.
Ingebjørg Tollnes, Director of marketing
Ms. Tollnes (42) holds a degree of travel administration from Norsk Hotellhøyskole and has been director of marketing in TCG/Itegra since 2002. Prior to this she was director of marketing in Color Line (Scandi Line AS) for ten years.
Lars Seeberg, Manager TCG
Mr. Seeberg (41) holds a degree from Norges Høyskole for Informasjonsteknologi. He was a co-founder of Itegra AS in 1999 and has been head of sales/ manager in Itegra AS since 1999. Prior to this he held was head of sales in Ingram Micro and Micro Software for five years.
Anton Hagberg, Manager Komplett Norway
Mr. Hagberg (40) holds a Bachelor degree in Logistic from Norwegian School of Management. He has had various positions in TCG/Itegra since 2000 and is currently head of logistics in TCG. He has previously worked for CHS AS, Helly Hansen AS and Micro Software AS.
All the employees described above currently have their business address at TCG’s office in Østre Kullerød 5, 3241 Sandefjord, Norway.
For a short presentation of the other members of the management team, please refer to the description of the management in Komplett in section 6.12.
5.5 Address and auditor
The Merged Company will have its registered address at Østre Kullerød 4, P.O.Box 2094, NO-3202 Sandefjord, Norway.
KPMG shall be the Merged Company’s auditor. See section 6.19.6 below for KPMG’s address and information on membership in professional body.
5.6 The integration process
The planning of the integration process will by managed by the management teams of the two companies. An integration committee has been established for this purpose with participation from the chairmen of the Board of Directors in the two companies. The committee shall be a forum for discussions on issues concerning the planning of the integration, make an efficient link to the Boards of Directors and ensure the involvement of the employees. The committee has had several meetings since the merger proposal was published.
5.7 Share capital and shareholder matters 5.7.1 Shares and share capital
Komplett’s registered share capital before the Merger is NOK 13,258,400.00 divided into 13,258,400 shares each with a nominal value of NOK 1.00, fully paid.
As mentioned in section 4.5.1 above, 100% of the consideration to the shareholders in TCG shall be settled with new shares in Komplett (0.336134 new shares in Komplett for each share in TCG). If the Merger is completed, the share capital of Komplett will hence be increased with NOK 3,501,118 through the issuance of 3,501,118 new shares, each with a nominal value of NOK 1.00, resulting in a share capital in the Merged Company of NOK 16,759,518, consisting of 16,759,518 shares, each with a nominal value of NOK 1.00.
The new shares will be issued upon completion of the Merger, which is expected to take place ultimo December 2007.
All the new shares will rank equally in all regards with the existing shares of Komplett from the time they are validly issued and registered in Komplett’s shareholder register in the VPS. The new shares will give the holders right to dividends declared after the shares have been registered in
refer to sections 5.7.4 et seq. below, where the rights attached to the shares in the Merged Company are described.
It is a condition for the completion of the Merger that Oslo Børs have confirmed that the listing of the shares in Komplett on Oslo Børs will be continued after the completion of the Merger, cf. section 4.5.2 above. The new shares will hence be listed on Oslo Børs upon their issuance in connection with the completion of the Merger. The existing shares in Komplett are, and the new shares will be, issued in accordance with the Public Limited Companies Act. All shares are/will be registered in electronic form in the VPS on ISIN NO 001 0032097.
There are no outstanding options, other rights to acquire shares or other share structured incentive agreements for management or employees in Komplett and TCG.
5.7.2 Authorisation to the Board of Directors to issue shares and acquire own shares
At the Annual General Meeting on 27 March 2007 (the “AGM”), the Board of Directors of Komplett was granted two authorisations to issue new shares, one against consideration in cash and one to be used in connection with acquisition of stakes in other enterprises, business combinations etc. against consideration in shares.
The first authorisation was fully utilised in connection with the private placement conducted in May 2007, shortly after the acquisition of inWarehouse AB (publ.).
According to the second authorisation which is still in force, the Board of Directors of Komplett ASA was by the Annual General Meeting 27 March 2007, authorised to increase the company's share capital by up to NOK 1 200 000 by issuing up to 1 200 000 shares with a nominal value NOK 1 each, with the right to waive the preferential rights of shareholders to subscribe for new shares pursuant to §10-4 of the Norwegian Public Limited Companies Act and to comprise considerations other than cash. The authorisation shall also cover business combinations. The authorisation can be used in connection with the acquisition of stakes in other enterprises, i.e. business combinations, the acquisition of shares and in other ways where settlement takes place in the form of shares in Komplett ASA. To the extent that the authorisation is used, the Board is authorised to amend §4 of the Articles of Association correspondingly. The authorisation shall apply until 30 June 2008, but a motion to renew the Board authorisation will be discussed at next year's AGM.
The AGM also granted the following authorisation to the Board to acquire own shares:
1. The authorisation shall apply to the purchase of up to 1 200 000 of the company's shares, each with a nominal value of NOK 1.00, for a total nominal value of up to NOK 1 200 000. 2. The Board of Directors shall stipulate the mode of acquisition, and the acquisition of shares
can only take place between a minimum price of NOK 1.00 and a maximum price of NOK 200 per share.
3. The Board of Directors can dispose of acquired shares at a price close to market price. 4. The authorisation shall apply from 27 March 2007 to 30 June 2008, but a motion to renew
the Board authorisation will become discussed by next year's ordinary AGM.
The two above mentioned authorisations to the Board still in force will continue to apply following the Merger.
5.7.3 Convertible securities/warrants/options, etc.
5.7.4 Share rights
The Merged Company will have one class of shares, and all shares will give equal rights in every respect, including dividend rights. Each share will be entitled to one vote at a general meeting of the shareholders of the Merged Company, and no shareholders will enjoy different voting rights. The shares will be freely transferable.
5.7.5 General meetings
Under Norwegian law, the shareholders of a company exercise supreme authority in the company through the general meeting. A shareholder may attend the general meeting either in person or by proxy.
In accordance with Norwegian law, the Annual General Meeting of the Merged Company’s shareholders will be required to be held each year on or prior to June 30. The following business must be transacted and decided at the Annual General Meeting:
• approval of the annual accounts and annual report, including the distribution of any dividend; and
• any other business to be transacted at the general meeting by law or in accordance with the company’s Articles of Association.
The Public Limited Companies Act requires that written notice of general meetings be sent to all shareholders whose addresses are known at least two weeks prior to the date of the meeting, unless a company’s articles of association stipulate a longer period. The proposed Articles of Association of the Merged Company do not include any provision deviating from the Public Limited Companies Act in this respect.
The Board of Directors of the Merged Company shall convene an Extraordinary General Meeting to consider a specific matter if the auditors or shareholders representing a total of at least 5% of the share capital so demand.
5.7.6 Dividends
a) Procedure for declaration of dividends
Dividends in respect of a fiscal year, if any, will normally be declared at the Merged Company’s Annual General Meeting the following year. Under Norwegian law, dividends may only be paid in respect of a fiscal year for which audited financial statements have been approved by the Annual General Meeting of shareholders, and any proposal to pay a dividend must be recommended by the company’s Board of Directors and approved by its shareholders at a general meeting. The shareholders may vote to reduce, but may not adopt a resolution to increase, the dividend proposed by the company’s Board of Directors. Dividends declared and approved in this manner accrue to those shareholders who are shareholders at the time the resolution is adopted, unless otherwise stated in the resolution.
b) Legal constraints on the distribution of dividends
Dividends may be paid in cash or in some instances in kind. The Public Limited Companies Act provides several constraints on the distribution of dividends:
shareholders) and the retained profit from previous years (adjusted for any reclassification of equity), less (i) uncovered losses, (ii) the book value of research and development, goodwill and net deferred tax assets (as recorded in the balance sheet, as of the most recent fiscal year end, approved by the Annual General Meeting of shareholders), (iii) the total nominal value of treasury shares which the company has acquired for ownership or as security in previous fiscal years, as well as credit and security which, pursuant to Sections 8-7 to 8-9 of the Public Limited Companies Act, fall within the limits of distributable equity, and (iv) that part of the profit for the prior fiscal year which, by law or pursuant to the company’s Articles of Association, must be allocated to the undistributable reserve or cannot be distributed as a dividend.
• Dividends cannot be distributed if the company’s equity at the end of the last financial year amounts to less than 10% of the total assets, unless a two-month creditor notice period provided for under the Public Limited Companies Act Sections 12-4 and 12-6 is invoked.
• Dividends can only be distributed to the extent compatible with good and careful business practice, with due regard to any losses which the Company may have incurred since the balance sheet date (i.e. the prior fiscal year end) or which the Company may expect to incur.
• The amount of dividends the Company can distribute is calculated on the basis of the parent Company’s annual financial statements.
According to the Public Limited Companies Act, there is no time limit after which entitlement to dividends lapses. Further, there are no dividend restrictions or specific procedures for non-Norwegian resident shareholders in the Act. For a description of withholding tax on dividends that is applicable to non-Norwegian residents, see section 12.
5.7.7 Amendments to the company’s Articles of Association, including variation of rights
The affirmative vote of thirds of the votes cast at a general meeting as well as at least two-thirds of the share capital represented at the meeting will be required to amend the Merged Company’s Articles of Association. Decisions that (i) would reduce any shareholder's right in respect of dividend payments or other rights to the assets of the company, or (ii) restrict the transferability of the shares, require a majority vote of at least 90% of the share capital represented at the general meeting in question as well as the majority required for amendments to the company’s Articles of Association. Certain types of changes in the rights of shareholders require the consent of all shareholders affected thereby as well as the majority required for amendments to the Company's Articles of Association.
5.7.8 Additional issuances and preferential rights
If the Merged Company issues any new shares, including bonus share issues (i.e. the issuance of new shares by a transfer from the company’s share premium reserve or distributable equity to the share capital), the company’s Articles of Association must be amended and a two-thirds majority of the votes cast at a general meeting of shareholders is hence required. In connection with an increase in the Merged Company’s share capital by a subscription for shares against cash contributions, Norwegian law provides the company’s shareholders with a preferential right to subscribe for the new shares on a pro rata basis in accordance with their then current shareholdings in the company.
The preferential rights to subscribe to an issue may be waived by a resolution in a general meeting passed by a two-thirds’ majority of the votes cast and share capital represented at a general
meeting of shareholders (i.e. the same majority as required to approve amendments to the company’s Articles of Association).
The general meeting may, with a vote as described above, authorise the Board of Directors to issue new shares. Such authorisation may be effective for a maximum of two years, and the par value of the shares to be issued may not exceed 50% of the nominal share capital as at the time the authorisation was granted. The preferential right to subscribe for shares against consideration in cash may be set aside by the Board of Directors only if the authorisation includes such possibility for the Board of Directors.
As mentioned in Section 5.7.2 above, Komplett’s Annual General Meeting held on 27 March 2007 provided the Board of Directors with two authorisations to issue new shares. The first authorisation has already been used. Pursuant to the second authorisation, the Board of Directors has the right to waive the preferential rights of the shareholders to subscribe for new shares. Further, as described in Section 4.5.1 above, it is proposed that the preferential rights of the shareholders of Komplett are waived when the consideration shares in relation to the Merger are issued. If shares are issued to citizens or residents of the United States upon exercise of preferential rights, the Merged Company may be required to file a registration statement in the United States under U.S. securities laws. If the company decides not to file a registration statement, these holders may not be able to exercise their preferential rights.
Under Norwegian law, bonus shares may be issued, subject to shareholder approval and provided, among other requirements, that the company does not have an uncovered loss from a previous financial year, by transfer from the company’s distributable equity or from the company’s share premium reserve. Any bonus issues may be effected either by issuing shares or by increasing the par value of the outstanding shares. If new shares are being issued, these shares must be allotted to the shareholders of the company in proportion to their current shareholdings in the company. 5.7.9 Related party transactions
Under Norwegian law, an agreement between a public limited liability company and a shareholder, a shareholder’s parent company, a board member or a managing director, or a person or company that is closely related to a shareholder or a shareholder’s parent company, which involves consideration from the company in excess of 5 per cent of the company’s share capital at the time, is not binding on the company unless the agreement has been approved by the shareholders at a general meeting. There are certain exemptions from this rule. For example, business agreements in the normal course of the company’s business containing pricing and other terms and conditions which are normal for such agreements, as well as the purchase of securities at a price which is in accordance with the official quotation, do not require such approval. Any performance of an agreement which is not binding on the company must be reversed.
5.7.10 Minority rights
Norwegian law contains a number of protections for minority shareholders against oppression by the majority, including but not limited to those described in this and preceding paragraphs. Any shareholder may petition the courts to have a decision of the company’s Board of Directors or general meeting declared invalid on the grounds that it unreasonably favours certain shareholders or third parties to the detriment of other shareholders or the company itself. In certain grave circumstances, shareholders may require the courts to dissolve the company as a result of such decisions. Shareholders holding in the aggregate 5% or more of the company’s share capital have a right to demand that the company convenes an extraordinary general meeting to discuss or resolve specific matters, and to request that the district court set a higher dividend than decided by