Extraordinary general meeting

News Release 98 11 03 Extraordinary general meeting confirms the acquisition of UPEC and the agreement with the consortium of institutional investors The extraordinary general meeting decided to complete the acquisition of UPEC by means of a directed new issue of Frontec Series B shares, not exceeding 1,583,003 in number, to UPEC shareholders, resulting in a dilution of 6.3%. The acquisition price represents a p/e ratio of <10 and the group's goodwill increases by SEK 62 million. Frontec's view is that the acquisition will have an immediate positive effect on profit and earnings per share. For 1998, the impact on turnover and profits will be marginal, as consolidation will take place in November. The acquisition is a step towards Frontec's objective of dominating technical consultancy services in Sweden and further strengthening its position in Electronic Commerce. The meeting also decided to ratify the agreement reached with a consortium of institutional investors to subscribe for an issue of convertible preferred shares - a new instrument in the Swedish market - totalling USD 20 million, 50% of which would be provided immediately. The investors will pay SEK 56 per convertible preferred share, representing a 40% premium on the average market price of Frontec B shares which stood at SEK 40 at the time of the agreement. Additional convertible preferred shares of Frontec series D and E with a value of USD 5 million will be issued when the market price reaches SEK 50 followed by a further USD 5 million when the market price reaches SEK 65. Thus the total potential increase in Frontec's share capital amounts to approximately SEK 160 million. "Frontec is now in the process of further strengthening its capital base in preparation for continued acquisitions of operations in the IT sector. Sharp adjustments in the level of valuations of IT companies in recent months have opened the door for continued expansion through acquisitions that supplement organic growth," comments Bengt Wallentin, CEO and President of Frontec. "We are securing a much stronger financial position, enabling us to react quickly to the to the ongoing restructuring of the IT industry. The recently completed acquisitions of UPEC Data and NC Datasupport highlighted the need to act quickly." Equity/assets ratio increases to 57% Based on the balance sheet presented in the six month interim report and an exchange rate of SEK 7.86/ USD 1.00, it is estimated that shareholders' equity will increase from SEK 188 million to SEK 340 million, an increase equivalent to USD 10 million and the addition of 1,583,003 shares depending on the acquisition of UPEC. In turn, the equity/assets ratio will rise pro-forma from 45% as per 30 June 1998 to 57%. Payment for Series C shares, totalling USD 10 million, will be made in November. Several advantages Within five years of issue, these preferred shares can be converted to Series B shares. Conversion will be effected on the basis of one newly issued Series B share for one convertible preferred share. Under certain circumstances, if the market price of Series B shares is lower than the conversion price, the conversion rate may be changed, whereby each preferred share is equivalent to several Series B shares. For example, if the market price of Series B shares is 10% below the conversion rate when conversion is requested, investors will receive a further allocation of Series B shares. This equalises the nominal value of the investment. Preferred shares entitle holders to a dividend of 5% of the amount invested. Frontec may choose to either pay the dividend in cash or change the conversion rate. The extraordinary general meeting also gave authorisation to the Board of Directors to issue additional convertible preferred shares of Series D and E. When the market price of Frontec Series B shares reaches SEK 50 for at least 5 consecutive days and SEK 65 for at least 15 consecutive days, the American group, under the terms of the agreement, will make two further investments, each totalling USD 5 million, at a premium of 40% above the prevailing higher market values. This authorisation will be effective until the next annual general meeting. A conversion to Series B shares can take place after six months at the earliest, provided that a premium is not paid, and at the latest within five years of acquisition, making them medium term investments. Frontec is expected to issue a total 1,403,571 Series C shares at a price of SEK 56 per share and at an estimated exchange rate of SEK 7.86/ USD 1.00. This corresponds to 5.7% of the total number of Frontec shares. The new number of shares will, under these circumstances, be distributed as follows: Share series Number of shares A 3,440,000 B 19,191,445 C 1,403,571 Total 24,035,016 In addition, there are a further 779,376 warrants outstanding Other decisions The meeting also decided to accept the Board's proposal to issue a promissory note coupled with warrants for a new subscription of shares, in accordance with the staff development programme, including employees of the UPEC group.The nominal value of the promissory will not exceed SEK 1000 with, at the most, 60,000 warrants, giving the right to subscribe for one Series B share in Frontec AB for each warrant. In addition, the meeting approved the Board's proposal to issue four promissory notes, each with a nominal value of SEK 1000, accompanied by 50,000 options, which are separable from each note. The Board's proposal concerning changing the articles of association, involving a change in share capital to SEK 28 million at the lowest and SEK 112 million at the highest, coupled with the necessary changes that must be made as the result of certain decisions, was approved by the meeting. For more information: Bengt Wallentin, CEO and President of Frontec tel.: +46 8 470 20 00. Olof Englund, Executive Vice President of Frontec tel.: +46 8 470 22 60, 070 585 22 60. Frontec Frontec's mission statement is to offer professional services and software that help customers shorten lead-times in business processes and projects. The business is divided into two divisions: Frontec Nordic and Frontec Software. Frontec, with over 1000 employees, had net sales of SEK 731 million in 1997.www.frontec.se ------------------------------------------------------------ Please visit <A HREF="http://www.bit.se">http://www.bit.se</A> for further information The following files are available for download: http://www.bit.se/bitonline/1998/11/03/19981103BIT00210/bit0001.doc http://www.bit.se/bitonline/1998/11/03/19981103BIT00210/bit0002.pdf