Government Published Secret Contract with MOL

The Croatian government published on its website on Tuesday evening the “Contract on Mutual Relations of INA Shareholders” which was signed at the end of January this year by, on behalf of the Croatian government, then Deputy Prime Minister and Minister of Economy Damir Polančec, and on behalf of the Hungarian MOL, CEO Zsolt Hernádi and Executive Board member Zoltán Áldott.

The announcement of this contract was made by Prime Minister Jadranka Kosor, who also confirmed a few days ago that she received the requested contract for the sale of INA to the Hungarian MOL and that she would publish it. The contract was signed on January 30, and the document itself is titled "First Amendment and Supplement to the Contract on Mutual Relations of Shareholders Relating to INA – Oil Industry". Namely, the Government and MOL signed the first contract in July 2003 when MOL, by purchasing 25 percent plus one share of INA, became a strategic partner of INA. Amendments to this contract were made after MOL acquired 47.15538 percent of INA shares in a public takeover bid in September 2008, and along with this contract, the Government also published three annexes – the Statute of INA, or its consolidated text, the Rules of Procedure of the Supervisory Board of INA, and the Rules of Procedure of the Management Board of INA.

The introduction of the contract states, among other things, that the "goal of the Government is to revise the Contract in order to maintain and strengthen the protection of national energy stability". The contract regulates issues related to the management of the company and governs the composition of the Supervisory Board (9 members, of which 3 are proposed by the Government which also nominates the chairman of the board, MOL 5, one employee representative), the Management (6 members, of which the Government nominates three, three are nominated by MOL including the chairman of the Management Board, and in the case of a tie, the chairman’s vote prevails), and the executive directors. It also defines so-called "reserved matters", i.e., solutions and decisions for which the Management needs prior consent from the Supervisory Board.

The contract also defines a so-called lock-up period, establishing that the strategic investor, i.e., MOL, cannot directly or indirectly transfer any shares it holds without the written consent of the Government for a period of five years from the date of entry into force, and that the Government or a person it appoints can repurchase all shares held by the strategic investor at fair value (determined by an independent reputable international auditor selected by the Government, with costs borne by the Government) in the event of a change of control in MOL. This right, it is stated, applies only to the total package of shares held by MOL, and not to a part of such a package of shares. The Government and MOL have defined the right of first refusal and the possibility that if MOL wishes to transfer its shares to a third party in a transaction outside the stock exchange, the Government can purchase those shares at the price and under the conditions agreed upon by the strategic investor with the potential buyer. In the miscellaneous section of the contract, it is stated which provisions of the contract will in any case be considered a material breach of the contract itself, and it also mentions the Main Gas Business Agreement and articles of that agreement which will also be considered a material breach. The document has 18 pages and is marked confidential on the cover page.(H)