The Board of Directors of MOL plc. has convened an extraordinary general meeting of the Company for the 19th of July, 1999 for 12.00 CET with the following agenda:
- Approval of the resignation of members of the Board of Directors, withdrawal and election of members of the Board of Directors
- Election of the Chief Executive Officer
- Election of Supervisory Board members
- Amendment of the Articles of Association in compliance with the Regulations for Listing, Continued Trading and Disclosure of the Budapest Stock Exchange
- Authorisation to purchase treasury shares
- Approval of a long-term performance plan for the members of the Board of Directors
The general meeting has been initiated by the Board of Directors itself, with the aim of discussing matters resulting from the changes in the management structure of the company as announced on the 12th of May, 1999 and to discuss other current issues of importance. The general meeting has been convened in the manner required by valid regulation and by-laws, the invitation having been announced in the places and within the timeframe defined in the Articles of Association of the Company. The Board of Directors puts forward the following resolutions to the general meeting in connection with the respective agenda items:
1. APPROVAL OF THE RESIGNATION OF MEMBERS OF THE BOARD OF DIRECTORS, WITHDRAWAL AND ELECTION OF MEMBERS OF THE BOARD OF DIRECTORS
Mr. János Szitó and Gábor Baranyai have indicated in writing to the Company their intention to resign from their membership in the Board of Directors. Following the due acknowledgement of the respective resignations by shareholders, the Board of Directors proposes to the general meeting to elect Mr. György Mosonyi, acting chief executive officer as a new member of the Board of Directors for a period ending with the 24th of February, 2004 (in line with new members elected at the EGM held on the 24th of February, 1999).
Mr. Mosonyi (50) Trained as a chemical engineer at the University of Veszprém, he is a seasoned international petroleum executive and a recognised business leader. His 25-year career at Shell including positions in London, in Hungary as Country General Manager and during 1997 as Chairman of Shells Central and Eastern European Oil Products Cluster. Since early 1998, he has also been responsible for business development in the region. In addition, Mr. Mosonyi has served as Vice-Chairman of the Hungarian Petroleum Association since 1992, he is the Vice-Chairman of the Joint Venture Association and a Director of the Hungarian Association of Multinational companies as well as the Hungarian Business Leaders Forum. Since 1998, he has been Co-chairman of the Foreign Investors Council, the local affiliate of the European Roundtable of Industrialist.
The Board of Directors, at the same time, informs all shareholders, that the selection of the third member to the three-strong, newly created Executive Committee, the chief financial officer (CFO), is still in progress. After the selection procedure, the Board of Directors has the intention to propose to the shareholders that the member selected to fill the position be also elected to the Board of Directors. In the event that such person can be identified before the date of the extraordinary general meeting, the Board of Directors will announce this proposal to shareholders as soon as possible, but as latest at the general meeting itself. In case this proves not to be possible due to a longer selection process needed to identify the right individual, this proposal will be submitted at a later general meeting. We would like to call the attention of shareholders to the fact, that all represented shareholders are entitled to submit proposals for this agenda item. A simple majority of votes of the represented shares is required to elect members of the Board of Directors.
2. ELECTION OF THE CHIEF EXECUTIVE OFFICER
The Board of Directors of MOL Plc. proposes the election of Mr. György Mosonyi as Chief Executive Officer of MOL. A simple majority of affirmative votes of the represented shares is required to elect the Chief Executive Officer.
3. ELECTION OF SUPERVISORY BOARD MEMBERS
The ÁPV Rt. (the Hungarian State Privatisation and Holding Co.) as the company exercising the ownership rights of the state shareholder, forwarded a proposal to the Company regarding the election of Mr. Zsolt Incze as member of the Supervisory Board, for a period ending with the 24th of February 2004 (in line with new Supervisory Board members elected at the extraordinary general meeting held on the 24th of February, 1999). We would like to call the attention of shareholders to the fact that all shareholders are entitled to submit proposals for this agenda item. A simple majority of the votes of the represented shares is required for the election of the members of the Supervisory Board.
Mr Zsolt Incze (36) graduated from the Budapest University of Economics specialising in Finance. Between 1987 and 1989 he worked for the Central Statistics Office then for a commercial bank where he mainly dealt with macroe analysis. From 1989 he worked for different small companies as financial manager, from 1990 he worked for Tax-bit Ltd. dealing with asset valuation and liquidation. He has been a tax expert since 1991 and a chartered auditor since 1995. He has been the managing director of HBF Auditing and Consulting Ltd. since 1991 and the member of the Supervisory Board of the Paks Nuclear Power Co. since 1998.
4. AMENDMENT OF THE ARTICLES OF ASSOCIATION
The Budapest Stock Exchange amended its Regulation for Listing, Continued trading and Disclosure on the 27th of July, 1998. The amendment included certain provisions requiring compulsory changes to all listed issuers´ Articles of Association. The amendments became effective on the 30th of July, 1998. The stock exchange enforce the implementation of such provisions not only in for issuers listings their shares after this effective date, but called all listed companies to amend their Articles accordingly. In consideration of the above, the Board of Directors proposes that the Articles of MOL Plc. be amended as follows:
A new sub-section 12 is to be added to section 12 of the Articles:
"12.12 The general meeting shall only decide in accordance with section 12.2.j of the Articles, if a group of shareholders undertakes, in advance, the obligation to submit a public offer to purchase the shares of those shareholders, who had not voted in favour of a resolution concerning the de-listing of the shares."
Sub-section 24.1 of the Articles is added a new sentence:
24.1. ...... "The starting date for the payment of dividends shall be defined by the Board of Directors in such way as to ensure a period of at least 20 business days elapsing between the date of such resolution and the starting day of dividend payment."
The amendment of the Articles of Association requires the affirmative vote of more than 75% of the represented shares.
5. AUTHORISATION TO PURCHASE TREASURY SHARES
The annual general meeting of MOL Plc. held on the 29th of April, 1998 has authorised the Board of Directors of the Company to purchase from the market, during a period of three years, a maximum of 900.000 treasury shares per annum at the prevailing stock market prices to cover share incentive schemes implemented by the company. The Board of Directors proposes to increase the allowed quantity of treasury share purchases to the maximum level permitted by regulation (currently 10% of the share capital). This is explained by the following reasons:
- a planned increase of the share and weight of share-based incentive schemes in order to harmonise more fully the interests of shareholders and management;
- adding a new potential measure to optimise the capital structure through the re-purchase of outstanding share capital (eventually, if justified by later cancellation of shares re-purchased);
- the facilitation of the implementation of potentially attractive equity-related and hybrid financing instruments.
The Board of Directors, on this basis, proposes to the general meeting to amend the authorisation granted to it earlier to purchase the Company´s own shares as follows:
- the authorisation shall be valid for 5 years;
- the total nominal value of all treasury shares in the property of the Company may not at any given time exceed 10% of the share capital;
- the shares shall be purchased by the Company at prices reflecting prevailing prices on the stock market on the day of the transactions;
- the Board of Directors shall report any transactions as well as the use of the purchased own shares at the first subsequent general meeting. The Board of Directors shall also take into consideration the conditions contained in the present resolution, the provisions of the Company Act and of the Securities Act, as well as the compliance with the reporting obligations contained in relevant stock exchange regulations.
The authorisation requires the affirmative vote of the simple majority of the represented shares.
6. APPROVAL OF A LONG TERM PERFORMANCE PLAN FOR THE NON-EXECUTIVE MEMBERS OF THE BOARD OF DIRECTORS
Members of the Board of Directors currently receive their compensation monthly, on a cash basis, irrespective of the performance of the Company. The objective of the Plan is to ensure that the interests of the Non-Executive directors (directors who are not full time employees of MOL) (the "Directors") are aligned with the interests of MOL`s shareholders by encouraging the improvement of long term corporate performance and the value of shareholdings. The Board of Directors and MOL`s Supervisory Board proposes a stock-based compensation scheme that furthers these goals. Under the proposal, if the Company performs poorly, the Directors compensation is at risk. If the company performs well the Directors are rewarded for their efforts.
Directors will be compensated for services rendered to MOL in their capacity as Directors, in common shares of MOL. There will be no annual cash fees. Directors, who are Hungarian citizens will not receive any other form of remuneration, except that a Director who is an employee of the ÁPV Rt., its legal successors or any other entity holding the series B (golden) share, receives as full compensation for services rendered a remuneration of HUF 300,000 per month from 1 July 1999. Directors who are not Hungarian citizens will receive meeting fees of USD 1,000 per meeting if attending. This will be increased to USD 1,500 if the Director is requested to travel to Hungary from abroad to attend the meeting.
Directors` compensation will be based on the relative share price performance of MOL`s stock compared to that of other companies in the Budapest Stock Exchange´s official index (the "BUX index") and a comparator group comprising not less than ten European energy companies ("EEC Group Index") over a 12-month performance period. The composition of EEC Group Index will be detailed at the July 19th 1999 extraordinary general meeting. The Supervisory Board of MOL is authorised to modify the EEC Group Index company list with valid reason. Half of the potential award will be determined by reference to the companies of the BUX Index (on a HUF basis) and the other half by reference to the EEC Group Index companies (on a USD basis).
The maximum value of the shares that may be awarded to a Director is the HUF equivalent of USD 25,000 from the comparison with companies in the BUX Index and the HUF equivalent of USD 25,000 from the comparison with EEC Group Index. (The Non-Executive Chairman has a maximum award available of the HUF equivalent of USD 41,500 from each index.) The USD/HUF exchange rate will be set according to the official middle rate published by the National Bank of Hungary as of the last day of the performance period.
For each index, no stock compensation will be granted if MOL`s share price growth is below the 25th percentile of companies in the index at the end of the respective period. One hundred percent of the proposed maximum award will be granted if the performance of MOL`s stock is at or above the 75th percentile of the companies in the index. If MOL`s performance is between the 25th and 75th percentile of the companies in the index, awards will be calculated on a straight line basis between zero and the maximum award. For the purposes of calculation each index is to be reviewed separately.
The starting share price will be taken as the average share price over the three months prior to the start of the annual performance period, which shall be the 1st day of April of each year, and the closing share price will be taken as the average share price over the three months before the end of the performance period. The number of shares to be issued to Directors will be calculated based on the average share price over the three months before the end of the performance period.
The Plan will commence in 1999, with the first performance period commencing on 1 April, 1999. The first grant of shares may be on 1 April, 2000 upon which the Board of Directors and the Supervisory Board will report to shareholders at the Annual General Meeting and in the Annual Report.
Obligatory holding period
Shares awarded to Directors continuing in office may not be sold, transferred, disposed or pledged for a period of one year from the date of the grant. This restriction is not applicable from the retirement date of the Directors.
Newly elected Directors participate in the first performance period commencing upon their election. Retiring Directors receive a pro-rata award for the relevant period of service within the performance period. Awards will vest at the maximum award level on a change of control of MOL Rt., subject to the Board and the Supervisory Board determining that performance to the date of change of control justifies an award.
Any compensation received by Directors through June 30, 1999 will be retained by the Directors as additional compensation for such period.
Executive directors will receive no compensation for their acting in their capacity as members of the Board of Directors from June 30, 1999.
SOURCE OF SHARES
The source of this Plan will be treasury shares purchased by MOL in the open market as it is specified under agenda item no. 5.
The Plan was developed in conjunction with international, independent compensation consulting firm Towers, Perrin, Forster & Crosby, Inc. who advised the Board of Directors of MOL Rt. that the Plan is fair and equitable to the shareholders. Weil, Gotshal & Manges LLP acted as special corporate and corporate governance counsel to the Directors.