Notice of Annual General Meeting of Mekonomen Aktiebolag
Welcome to the Annual General Meeting of Mekonomen Aktiebolag (publ), corporate identity number 556392-1971, to be held on Thursday, 2 May 2019 at 4 p.m. CET at Vasateatern, Vasagatan 19, Stockholm, Sweden. Registration for the Annual General Meeting will open at 3 p.m.
A shareholder wishing to attend must:
- be recorded as a shareholder in the shareholder register maintained by Euroclear Sweden AB on Thursday, 25 April 2019, and
- give notice of attendance to the Company no later than Thursday, 25 April 2019.
Notice of attendance may be given in writing to Mekonomen Aktiebolag, ”Annual General Meeting”, c/o Euroclear Sweden AB, PO-Box 191, SE-101 23 Stockholm, Sweden, or by telephone +46 (0)8‑402 90 47 on weekdays between 9 a.m. and 4 p.m. CET. Shareholders who are natural persons also have the option to notify their attendance via the Company’s website, www.mekonomen.com. Notification must include the shareholder’s name, personal identity number or corporate identity number, address, telephone number, and the number of assistants accompanying the shareholder, if any.
Shareholders whose shares are registered in the name of a nominee must, in addition to giving notice of attendance, temporarily register their shares in their own names in the shareholder register (so‑called voting right registration) in order to be able to participate in the Annual General Meeting. Such registration must be executed by Thursday, 25 April 2019, and should be requested at the bank or nominee well in advance of this date.
Shareholders who participate via proxy or representative should send authorization documents (power of attorney and/or certificate of registration) to the Company at the address above well in advance of the Annual General Meeting. Proxy forms are available on Mekonomen’s website: www.mekonomen.com.
- Opening of the Annual General Meeting.
- Election of a chair to preside over the Annual General Meeting.
- Preparation and approval of voting register.
- Approval of the agenda.
- Election of one or two persons to approve the minutes of the Annual General Meeting.
- Determination of whether the Annual General Meeting has been duly convened.
- Presentation of the annual report and auditor’s report, the consolidated financial statements and the auditor’s report on the consolidated financial statements, and the auditor’s statement on whether the guidelines for remuneration of senior executives have been adhered to.
- CEO’s address.
- Resolution on adoption of the income statement and balance sheet and of the consolidated income statement and consolidated balance sheet.
- Resolution on discharge of the directors and president from liability.
- Resolution on appropriation of the Company’s result in accordance with the adopted balance sheet.
- Resolution on the number of directors and deputy directors to be elected by the Annual General Meeting.
- Resolution on directors’ fees and auditor’s fees.
- Election of the Board of Directors, Chairman of the Board, and any deputy directors.
- Election of auditor.
- Resolution on guidelines for remuneration of senior executives.
- Resolution on (A) a long-term share-based incentive program and (B) authorization for the Board of Directors to resolve on purchases of own shares and resolution on transfers of treasury shares.
- Resolution on employee’s acquisition of shares in subsidiaries.
- Resolution on authorization of the Board to issue new shares.
- Closing of the Annual General Meeting.
Point 2 – AGM chair
Mekonomen’s Nomination Committee ahead of the 2019 Annual General Meeting consists of John S. Quinn, (committee chair, LKQ Corporation), Kristian Åkesson (Didner & Gerge Småbolagsfond), Arne Lööw (Fjärde AP-fonden) and Caroline Sjösten (Swedbank Robur Fonder). Mekonomen board member Helena Skåntorp is co-opted member of the Nomination Committee.
The Nomination Committee proposes Helena Skåntorp as chairman of the Annual General Meeting.
Point 11 – Dividend
The Board of Directors proposes that no dividend for the financial year 2018 is to be paid.
Point 12 – Number of directors
The Nomination Committee proposes that the Board of Directors shall have seven meeting-elected directors without deputies (unchanged).
Point 13 – Directors’ fee and auditor’s fee
The Nomination Committee proposes that the following fees be paid to the Company’s directors and auditor:
- SEK 620,000 to the Chairman of the Board (590,000), SEK 400,000 to the Vice Chairman (330,000) and SEK 300,000 to each of the other directors appointed by the Annual General Meeting (285,000),
- for committee work, SEK 120,000 to the Chairman of the Audit Committee (70,000) and SEK 50,000 to each of the other members of the Audit Committee (40,000), and SEK 45,000 to the Chairman of the Remuneration Committee (40,000) and SEK 25,000 to each of the other members of the Remuneration Committee (unchanged), and
- auditor’s fees in accordance with approved account.
Furthermore, the Nomination Committee proposes that a one time fee of SEK 600,000 be paid to the Vice Chairman of the Board Helena Skåntorp for the special work effort during 2018 in connection with the Company's acquisition of FTZ and Inter-Team.
Point 14 – Election of the Board of Directors and Chairman of the Board
The Nomination Committee proposes:
- re-election of directors Eivor Andersson, Kenny Bräck, Joseph M. Holsten, Magnus Håkansson, John S. Quinn and Helena Skåntorp,
- election of Arja Taaveniku as new director, and
- re-election of John S. Quinn as Chairman of the Board.
The director Malin Persson has declined re-election.
Information on the persons proposed by the Nomination Committee as directors is available on Mekonomen’s website, www.mekonomen.com.
Point 15 – Election of auditor
The Nomination Committee proposes re-election of the auditing firm PricewaterhouseCoopers AB as the Company’s auditor for the period until the end of the 2020 Annual General Meeting. The auditing firm has informed the Company that Linda Corneliusson will be the auditor in charge, if re-elected. The proposal is in accordance with the Audit Committee’s recommendation.
Point 16 – Guidelines for remuneration of senior executives
The Board of Directors proposes that the 2019 Annual General Meeting decide that the following guidelines for remuneration to senior executives shall apply until the 2020 Annual General Meeting.
The proposal is in accordance in all essential respects with the guidelines that were approved by the 2018 Annual General Meeting.
The guidelines include the CEO and other persons in the Mekonomen group management. The group management currently consists of five persons.
The Board is of the opinion that it is highly important that there is a clear relationship between the remuneration and the values and financial objectives of the Mekonomen Group, both in the short and the long term. The objective of the guidelines is that the Company shall offer competitive compensation, which will enable the Mekonomen Group to recruit and keep executives. The criteria for deciding the compensation shall be based on the importance of individual work duties and the individual employee’s competence, experience and performance. The compensation to senior executives consists of fixed base salary, variable remuneration, long-term share-based incentive programs, pension benefits, other benefits and severance terms.
The remuneration shall be decided by the Remuneration Committee of the Board. The remuneration to the CEO shall however be decided by the Board in its entirety.
Fixed base salary
Mekonomen shall offer a fixed base monthly salary which shall be competitive in comparison with the market conditions. The fixed base salary constitutes compensation for committed work performed at a high professional level, which creates added value for the customers, shareholders and personnel of Mekonomen.
Short-term variable remuneration
In addition to the fixed base salary, Mekonomen shall offer short-term variable cash remuneration which shall be based on the fulfilment of Mekonomen’s objectives for the result of the Mekonomen Group, and individual qualitative parameters. The allocation between base salary and variable compensation shall be proportionate to the responsibility and authority of the individual executive. The short-term variable compensation is capped at a certain percentage of the fixed annual salary. The percentage is linked to the position of the individual and varies between 33 and 60 percentage points for members of the Company management.
Long-term variable remuneration
It shall be possible for an executive to receive long-term variable compensation through participation in long-term share-based incentive programs (LTIPs) resolved by the general meeting. An LTIP shall be structured for the purpose of aligning the shareholders’ and participants’ interests and thereby ensure maximum long-term value creation for Mekonomen. Participation in an LTIP requires a personal shareholding in Mekonomen. A grant of shares to the participant in an LTIP requires that the participant continues to be employed in the Mekonomen Group, that the participant’s shareholding in Mekonomen remains and that certain financial key ratios and performance targets be achieved.
The Board of Directors has proposed that the 2019 Annual General Meeting resolve to establish long-term share-based incentive program (LTIP 2019). More information about the proposed program can be found in the Board’s separate proposal. LTIP 2019 replaces the program that was resolved by the 2018 Annual General Meeting under which no allocation was made.
Pension benefits are paid with an amount based on the Swedish ITP-plan or the corresponding system for employees abroad. The pension qualifying income is the fixed base salary. However, the CEO’s pension benefit amounts instead to a maximum of 30 percent of the fixed base salary.
Other benefits and severance terms
A maximum notice period of twelve months applies. Severance pay upon termination from the Company amounts to a maximum of twelve month’s salary. The notice period for senior executives, upon notice on their own initiative, is between six and twelve months.
Other benefits consist mainly of car benefit.
Derogation from the guidelines
The Board is authorized to depart from these guidelines, if in an individual case there are special reasons for doing so.
The guidelines adopted by the 2018 Annual General Meeting have been followed.
Point 17 – Long-term share-based incentive program (LTIP 2019)
The Board proposes that the Annual General Meeting resolves to establish a long-term share-based incentive program (LTIP 2019) for Mekonomen Aktiebolag (publ) ("Mekonomen") and authorizes the Board to resolve on purchases of own shares, and that the Annual General Meeting resolves on transfers of treasury shares in accordance with items (A) and (B) below. LTIP 2019 replaces the program that was resolved by the Annual General Meeting 2018 (LTIP 2018) under which no allocation was made.
(A) Long-term share-based incentive program
A.1 LTIP 2019 in summary
The fundamental reason for establishing LTIP 2019 is to align the shareholders' interests with the interests of the company management and other key employees to ensure maximum long-term value creation and to encourage a personal shareholding in Mekonomen. In addition, the Board is of the opinion that LTIP 2019 will help Mekonomen to recruit and retain members of the company management and other key employees.
LTIP 2019 comprises a maximum of 19 employees, including the company management in Mekonomen and certain other key employees in the Group. Participation in LTIP 2019 requires a personal shareholding in Mekonomen. After the vesting period, the participants will be allocated shares in Mekonomen free of charge, provided that certain conditions are met. These conditions are linked to continued employment in the Mekonomen Group, a personal shareholding in Mekonomen, and certain financial key ratios and performance targets. The maximum number of shares in Mekonomen that can be allocated under LTIP 2019 shall be limited to 105,000 (including any compensation for dividends), which corresponds to approximately 0.19 per cent of the total number of shares and votes outstanding in the Company.
A.2 Participants in LTIP 2019
LTIP 2019 comprises a maximum of 19 employees, including the company management in Mekonomen and certain other key employees in the Group, divided into three categories. The first category comprises the CEO of Mekonomen ("Category 1"), the second category comprises the CFO of Mekonomen (“Category 2”) and the third category comprises other persons of the company management and certain selected key employees (17 persons) ("Category 3"). Additional persons who have been recruited but not yet started their employment in the Mekonomen Group at the end of the application period for participation in the program may be invited to participate with the condition of starting their employment.
A.3 Personal investment and vesting period
Participation in LTIP 2019 requires that the participant has a personal shareholding in Mekonomen that is allocated to LTIP 2019 ("Investment Shares"). Investment Shares can either be purchased for LTIP 2019 or be held since previously. The participant in Category 1 can invest a maximum of 2,250 shares in Mekonomen, the participant in Category 2 can invest a maximum of 1,600 shares and participants in Category 3 can invest a maximum of 800 shares in Mekonomen. The investment levels correspond to approximately 3-6 per cent of each participant's annual salary before tax. For all categories, each Investment Share entitles to five performance share rights ("Share Rights"). If a participant is in possession of inside information at the time of purchase, purchase of shares to LTIP 2019 shall be made as soon as possible, but not later than 31 December 2019.
A.4 Terms and Conditions for Share Rights
The following terms and conditions shall apply for the Share Rights:
- Share Rights will be granted free of charge a certain time after the Annual General Meeting.
- Share Rights cannot be transferred or pledged.
- Allocation of shares in Mekonomen, if any, shall generally be made within two weeks from the announcement of Mekonomen's interim report for the first quarter of 2022. A precondition for the right to be allocated shares by virtue of the Share Rights is that the participant has not sold any of his or her Investment Shares and, with certain limited exceptions, that the participant remains employed in the Mekonomen Group until the announcement of Mekonomen's interim report for the first quarter of 2022. Further, allocation of shares requires that certain financial key ratios and performance targets be achieved by Mekonomen in the manner described under item A.5 below.
- To align the participants' interests with the shareholders' interests, Mekonomen will compensate the participants for dividends to shareholders by increasing the number of shares that each Share Right entitles to.
A.5 Performance targets
The Share Rights are divided into Series A and Series B. Of the five Share Rights, the participants receive one Share Right of Series A and four Share Rights of Series B. The number of Share Rights that entitles to allocation of shares depends on the achievement of the financial key ratios and performance targets that apply for the respective series as follows:
Series A Allocation requires certain levels of the total shareholder return1 (TSR) on Mekonomen's share during the period 1 April 2019 – 31 March 2022 and of the Group's equity/assets ratio at the end of the financial year 2021.
Series B Allocation requires that the levels in Series A are achieved and, in addition, that certain target levels are achieved relating to growth in earnings per share in Mekonomen during the financial years 2019 – 2021 compared to earnings per share for the financial year 2018. The Board has determined a minimum level and a maximum level for each performance target. If the degree of achievement is between the minimum and the maximum levels, the outcome will be measured on a linear basis. The Board will adjust the outcome for items affecting comparability and for any effects relating to repurchase of shares in the Company. Mekonomen intends to present the target levels and to what extent these have been achieved after the end of the program.
1 Including reversed dividends.
A.6 Structure and handling
The Board shall be responsible for the more detailed structure and handling of LTIP 2019 within the framework of the stipulated conditions and guidelines. In the event significant changes take place in the Mekonomen Group or its business environment that were to result in the decided-upon conditions for allocation and the opportunity to exercise the Share Rights under LTIP 2019 no longer being practicable, the Board shall have the right to make other adjustments. Before the number of shares that are to be allocated according to the Share Rights is finally determined, the Board shall assess if the outcome of LTIP 2019 is reasonable. This assessment shall be made in relation to Mekonomen's financial result and position, the conditions in the stock market, and in general. If the Board as a result of its assessment finds that the outcome is not reasonable, the Board shall reduce the number of shares to be allocated.
The maximum number of shares in Mekonomen that can be allocated under LTIP 2019 shall be limited to 105,000 (including compensation for dividends, if any), which corresponds to approximately 0.19 per cent of the total number of shares and votes in the Company. Based on the more detailed conditions decided by the Board, the number of shares covered by LTIP 2019 shall be subject to adjustment in the event Mekonomen carries out a bonus issue, share split or reverse share split, rights issue or similar measures, while considering customary practice for corresponding incentive programs.
A.8 Hedge measures
To ensure delivery of shares according to LTIP 2019, the company considers a hedge arrangement (equity swap) with a bank, according to which the bank in its own name purchases and transfers shares in Mekonomen to the participants in accordance with LTIP 2019.
As a hedge measure, the company also considers a transfer of treasury shares in Mekonomen to entitled participants in LTIP 2019. The Board has therefore proposed that the Annual General Meeting resolves to authorize the Board to decide on purchases of own shares and transfers of treasury shares according to item (B) below.
Should the Annual General Meeting not approve the Board's proposal according to item (B) below, the Board intends to enter into the above-mentioned hedge arrangement with a bank to ensure the Company's obligation to deliver shares in accordance with the program. Such a hedge arrangement with a bank may also be used if the Board considers it more appropriate than a purchase and transfer of own shares.
A.9 Scope and costs for the program
The Share Rights cannot be pledged or transferred to others. However, an estimated value of each Share Right can be calculated. The Board has estimated the average value of each Share Right to SEK 52.80 The estimate is based on the closing price of the Mekonomen share on 19 March 2019 (SEK 68.90). The annual cost for LTIP 2019 is estimated to approximately MSEK 1.1 (including costs for social security contributions of approximately MSEK 0.5), based on the assumptions of an average achievement of the performance targets of 50 per cent, an annual employee turnover of 10 per cent, an annual increase in the share price by 10 per cent, and average social security contributions of 33 per cent. With an assumption of achievement of the performance targets of 100 per cent, the annual cost is instead expected to approximately MSEK 1.8 (including costs for social security contributions of approximately MSEK 0.7), which, on an annual basis, corresponds to approximately 0.08 per cent of Mekonomen's total personnel costs for the financial year 2018 (adjusted for full year effect from the acquired businesses FTZ and Inter-Team). The costs will be booked as personnel costs in the income statement over the vesting period in accordance with IFRS 2 Share-based Payment. Social security contributions will be expensed in the income statement in accordance with Swedish Financial Accounting Board Pronouncement UFR 7 during the vesting period. The size of these costs will be calculated based on Mekonomen's share price growth during the vesting period and the allocation of Share Rights.
A.10 Effects on important key ratios
On a pro forma basis for 2018, an annual cost of MSEK 1.1 for LTIP 2019 corresponds to a negative effect of approximately 0.02 percentage points on Mekonomen's operating margin and a decrease in earnings per share by approximately SEK 0.02. However, the Board believes that the positive effects on Mekonomen's financial results that are expected to arise through an increase in the participants' shareholdings and the opportunity for additional allocation of shares under the program exceed the costs related to LTIP 2019.
A.11 Drafting of the proposal
LTIP 2019 has been prepared by Mekonomen's Remuneration Committee and was drafted in consultation with external advisors.
A.12 Other incentive programs in Mekonomen
There are no other share-based incentive programs in effect in Mekonomen. For a description of Mekonomen's other remuneration programs, please see the Company's website and annual report for 2018.
A.13 The Board's proposal for decision
In reference to the description above, the Board proposes that the Annual General Meeting votes in favor of LTIP 2019.
A.14 Majority requirement
The Board's proposal for decision to introduce LTIP 2019 requires that the decision is approved by shareholders representing more than half of the votes represented at the Annual General Meeting.
(B) Authorization for the Board of Directors to resolve on purchases of own shares and resolution on transfers of treasury shares
The Board's proposal for a resolution to authorize the Board to resolve on purchases of own shares and proposal for resolution on transfers of treasury shares in accordance with the description below are conditional upon the Annual General Meeting first voting in favor of LTIP 2019 in accordance with item (A) above.
B.1 Purchases of own shares
The Board proposes that the Annual General Meeting resolves to authorize the Board to, on one or more occasions during the period up until the next Annual General Meeting, resolve on purchases of own shares in accordance with the following:
- Purchases may be made of a maximum of 105,000 shares.
- Purchases of shares shall be made on Nasdaq Stockholm and at a price per share that is within the registered price interval at any given time (the spread), i.e., the interval between the highest buying price and the lowest selling price and in observance of the rules that apply at any given time in Nasdaq Stockholm’s Rule Book for Issuers. However, for purchases that are made by a brokerage under assignment by the Company, the price of the shares may correspond to a volume-weighted average price during the period during which the shares were purchased, even if the volume-weighted average price on the day the shares were relinquished to the Company is outside of the price interval.
- Payment for the shares shall be made in cash.
- Purchases may be made for the purpose of securing the Company's obligations arising out of LTIP 2019 and any other share-based incentive programs that may exist pursuant to a resolution by a general meeting of shareholders.
B.2 Transfers of treasury shares to participants in LTIP 2019The Board proposes that the Annual General Meeting resolves to transfer shares in the Company as follows:
The Board proposes that the Annual General Meeting resolves to transfer shares in the Company as follows:
- A maximum of 105,000 shares in Mekonomen may be transferred (or such higher number of shares that may follow from a recalculation resulting from a bonus issue, split, rights issue or similar measure).
- The shares may be transferred to participants in LTIP 2019 who, according to the terms for LTIP 2019, are entitled to receive shares.
- Transfers of shares shall be made at the point in time and in accordance with the other conditions that the participants in LTIP 2019 are entitled to be allocated shares.
The reason for the deviation from the shareholders' preferential rights is that the transfer of shares is part of the execution of LTIP 2019. Therefore, the Board is of the opinion that it is beneficial to the Company to transfer shares in accordance with the proposal.
B.3 Special majority requirement
In order for a resolution by the Annual General Meeting to be valid with respect to item (B), the resolution must be approved by shareholders with a minimum of nine-tenths of the votes and shares represented at the Annual General Meeting.
Point 18 – Employees’ acquisition of shares in subsidiaries
The Board proposes the 2019 Annual General Meeting to adopt the following.
The Mekonomen Group contains wholly and partly owned Swedish and non-Swedish companies which operate Mekonomen stores throughout the Nordic region, so-called store companies. The partners in these store companies are, alongside companies in the Mekonomen Group, the store manager in the store company. The Mekonomen Group also contains wholly and partly owned Swedish and non-Swedish companies which operate Mekonomen workshops, so called workshop companies (in addition to the workshops which are part of the Mekonomen network as independent businesses). The partners in these partly owned workshop companies are, alongside the Mekonomen Group, the manager in the workshop company.
Mekonomen deems it important that the store managers and workshop managers employed by the Mekonomen Group have an interest in the long-term financial development of the said companies.
With the purpose of increasing the long-term commitment among the store managers and workshop managers also in the wholly owned companies and to increase their interest in the proceeds of the stores and workshops, the Board proposes that the Annual General Meeting decides that the employed store and workshop managers in the wholly owned companies shall be entitled to acquire shares in the relevant company through the purchase of existing shares, in order to make such managers partners in the store or workshop companies.
The thus acquired shares may amount to a maximum of nine (9) percent of the total shares in each company. The Mekonomen Group will thus hold shares corresponding to at least 91 percent.
The acquisitions shall be made at market value. Payment for such shares shall be made in cash. The acquisitions shall be completed prior to the 2020 Annual General Meeting in Mekonomen Aktiebolag (publ).
As a result of the resolution adopted by the 2018 Annual General Meeting on the corresponding matter, three store managers have become shareholders in their respective companies. The Board believes that store and workshop managers should be offered to acquire shares in the company in which they are employed during 2019/2020, in accordance with the principles which were adopted by the 2018 Annual General Meeting.
The Mekonomen Group currently contains 37 wholly owned store companies which operate 361 stores and 32 partly owned companies which operate 35 stores. The Mekonomen Group currently contains 33 wholly owned companies which operates 48 workshops and 19 partly owned companies which operate 27 workshops.
Point 19 – Authorization of the Board to issue shares
The Board proposes that the 2019 Annual General Meeting resolve to adopt the following.
The Board is authorized, for the time period until the next Annual General Meeting, at one or several occasions, with preferential rights for the shareholders, or with deviation from shareholder preferential rights, to resolve upon new issues of a maximum of 5,641,662 shares.
Such decision on new issue may include provisions that payment, in addition to cash payment, may be made in kind, through set-off or as else is set forth in chapter 13 paragraph 5 section 1 item 6 of the Swedish Companies Act.
The purpose of the proposal is to enable Mekonomen to issue shares as payment in relation to acquisitions of companies or parts of companies and/or of assets, which the Board deems to add value to the business of the Mekonomen Group, and to be able to raise capital for such acquisitions.
The subscription price for shares in a new issue made under the authorization and which is made without the shareholders’ preferential rights shall be market-based. The Board is authorized to further resolve upon other terms.
The Board, the CEO or any person empowered by the Board, is further authorized to make minor amendments to the resolutions set out above to the extent necessary in connection with the filing of requisite documents with the Swedish Companies Registration Office.
Special majority requirements
A resolution in accordance with points 17 (B) and 18 requires support of shareholders with at least nine-tenths of the number of votes and shares represented at the Annual General Meeting to be valid. A resolution in accordance with point 19 requires support of shareholders with at least
two-thirds of the number of votes and shares represented at the Annual General Meeting to be valid.
Shares and votes
The total number of shares in the Company on the day this notice was issued was 56,416,662, with one vote each, of which the Company owns 63,250 treasury shares that may not be represented at the Annual General Meeting.
Disclosures at the Annual General Meeting
The Board of Directors and President shall, if any shareholder so requests and if the Board is of the opinion that it can be done without causing material harm to the company, provide disclosures about conditions that may influence an assessment of an item of business on the agenda, conditions that may influence an assessment of the company’s or a subsidiary’s financial situation, and/or the Company’s relationship to other Group companies.
Processing of personal data
The Board of Directors’ and Nomination Committee’s proposals and other documents pursuant to the Swedish Companies Act and the Swedish Corporate Governance Code will be available from the Company, at Solnavägen 4, in Stockholm, and on the Company’s website, www.mekonomen.com, not later than three weeks before the Annual General Meeting, and will be sent upon request to shareholders who have provided their postal address. Such request can be made by phone to +46 (0)8 402 90 47.
Stockholm, March 2019
Mekonomen Aktiebolag (publ)
The Board of Directors
This is a translation of the Swedish original wording. In case of discrepancies, the Swedish version shall prevail.