Arctic Paper S.A.

Capital/Financing Update • Sep 9, 2016

Current report no 20/2016

Dated: 09.09.2016

Subject: Conclusion of material agreements related to the refinancingprocess by Arctic Paper S.A.

Content:

The Management Board of Arctic Paper S.A. (the "Company") informsinvestors that on 9 September 2016:

1. The Company entered into a term and revolving credit facilitiesagreement (the "Facilities Agreement"), which was concluded between theCompany as borrower, the Company's subsidiaries Arctic Paper KostrzynS.A., Arctic Paper Munkedals AB, and Arctic Paper Grycksbo AB, asguarantors (the "Guarantors") and a consortium of banks composed of:Bank BGŻ BNP Paribas S.A. ("BGŻ BNP Paribas"), Bank Zachodni WBK S.A.and the European Bank for Construction and Development ("EBRD") (the"Lenders"), under which the Lenders granted the Company term andrevolving credit facilities in an amount not exceeding PLN 31,500,000(thirty one million five hundred thousand zlotys) and EUR 52,400,000(fifty two million four hundred thousand euro) (the "Facilities").

2. The Company entered into agreements with Haitong Bank, S.A. SpółkaAkcyjna Oddział w Polsce ("Haitong") related to a bond issue programmeof up to PLN 150,000,000 (one hundred and fifty million zlotys) (the"Bonds"), inter alia an agency agreement (the "Agency Agreement") and anunderwriting agreement (the "Underwriting Agreement").

3. The Company, Mr Thomas Onstad, Bank Zachodni WBK S.A., Haitong, BGŻBNP Paribas and other parties entered into an intercreditor agreement(the "Intercreditor Agreement"), under which a parallel debt structurefor an amount equal to, in the relevant currencies, the sum of theliabilities under the Facilities, Bonds, hedging transactions and otherliabilities set out in the Intercreditor Agreement was established forthe benefit of BGŻ BNP Paribas.

4. To secure BGŻ BNP Paribas' claims under the Intercreditor Agreementand other claims set out in the security documents, the Company and theGuarantors will enter into, among other things, agreements forregistered and financial pledges over shares and bank accounts and alsoagreements for the establishment of mortgages on real properties withBGŻ BNP Paribas, make statements on submission to enforcement for thebenefit of BGŻ BNP Paribas and grant BGŻ BNP Paribas powers of attorneyto use their bank accounts (in accordance with the other agreementsmentioned above).

In report no. 9/2016 of 4 May 2016, the management board of Arctic PaperS.A. informed investors that a decision had been made to commence workin connection with the Company's plans to refinance the Company's andits subsidiaries' existing indebtedness under loan and facilityagreements and obtain alternative financing. The aforesaid agreementsrepresent such alternative financing and a change to the structure ofthe financing of the Company's group.

Centralising financing will enable more efficient management offinancial liquidity and flexible adjustment of the level of financing ofindividual companies.

Below the Company provides detailed information regarding the matterspresented above:

Re. 1 - The Facilities Agreement

Pursuant to the Facilities Agreement, the Lenders made the followingloan facilities available to the Company:

(A) a term loan facility, payable in three tranches - tranche 1 of EUR12,000,000 (twelve million euro) to be paid out by EBRD, tranche 2 ofEUR 2,600,000 (two million six hundred thousand euro) to be paid out byBGŻ BNP Paribas, and tranche 3 of PLN 11,500,000 (eleven million fivehundred thousand zlotys) to be paid out by Bank Zachodni WBK S.A. (the"Term Facility") and also investment term loan facilities A and B of EUR8,000,000 (eight million euro) and EUR 10,000,000 (ten million euro)(the "Investment Facility") to be paid out by EBRD; and

(B) a revolving credit facility, to be paid out by BGŻ BNP Paribas andBank Zachodni WBK S.A., payable in two tranches - Tranche 1 of EUR19,800,000 (nineteen million eight hundred thousand zlotys) and Tranche2 of PLN 20,000,000 (twenty million zlotys) (the "Revolving Facility").

The Term Facility was made available, subject to the appropriate termsof the Facilities Agreement, for:

(i) refinancing the intra-group liabilities of the Company to ArcticPaper Kostrzyn S.A. and/or financing intra-group loans granted by theCompany for Arctic Paper Kostrzyn S.A. for the purpose of repaying theexisting indebtedness, whereby the loan may also be replaced by an issueof bonds;

(ii) refinancing the liabilities of Arctic Paper Grycksbo AB by theCompany's granting an intra-group loan for Arctic Paper Grycksbo AB;

(iii) refinancing the liabilities of Arctic Paper Munkedals AB by theCompany's granting an intra-group loan for Arctic Paper Munkedals AB;

(iv) refinancing the capital expenditures of the Company's groupcompanies, including, in particular, the capital expenditures of ArcticPaper Kostrzyn S.A. up to the amount of EUR 4,750,000 - indirectly bythe Company's granting an intra-group loan to the relevant group member,whereby the loan may also be replaced by an issue of bonds; and

(v) financing or refinancing the financing costs referred to in theFacilities Agreement.

The Investment Facility was made available, subject to the appropriateterms of the Facilities Agreement, for financing investments intoresource and operating efficiency improvements, as well as capacityexpansion in Poland. With the planned investments the Company is seekingto significantly increase its competitiveness, expand its capacity andimprove its energy and resource efficiency. The Company's mill atKostrzyn will be upgraded with investments under the EBRD's GreenEconomy Transition (GET) approach to improve energy and waste efficiency.

The Revolving Facility was made available, subject to the appropriateterms of the Facilities Agreement, for refinancing the Company'sintra-group liabilities or financing intra-group loans, whereby a loanmay also be replaced by an issue of bonds, for:

(i) refinancing the overdraft liabilities of Arctic Paper Kostrzyn S.A.arising under the existing bank indebtedness;

(ii) refinancing the outstanding liabilities of Arctic Paper Grycksbo ABarising under existing factoring agreement concluded with SvenskaHandelsbanken AB;

(iii) refinancing the overdraft liabilities of Arctic Paper Grycksbo AB;

(iv) refinancing the outstanding liabilities of Arctic Paper MunkedalsAB, arising under existing factoring agreements concluded with SvenskaHandelsbanken AB; and

(v) after the payment of the bank indebtedness - for implementinggeneral corporate aims or aims related to the working capital of theCompany's group (except for Rottneros AB, Arctic Paper Mochenwangen GmbHand Arctic Paper Investment GmbH and their subsidiaries), includinggranting intra-group loans, whereby a loan may also be replaced by anissue of bonds.

The disbursement of the Facilities (with the exclusion of the InvestmentFacility designated for the investment purposes of the Company's group,except for Rottneros AB, Arctic Paper Mochenwangen GmbH and Arctic PaperInvestment GmbH and their subsidiaries, pursuant to the FacilitiesAgreement), is conditional on the fulfilment of conditions precedent bythe Company and the Guarantors, including, among other things, thedelivery of:

(i) copies of the Company's Statutes and the constitutional documents ofthe Guarantors;

(ii) certified copies of excerpts from the business register (BusinessRegister) of the National Court Register relating to the Company andeach of the Guarantors and, in respect of companies registered inSweden, their certificates of registration, in each case dated noearlier than 7 days prior to the date of a utilisation request withrespect to the relevant tranches of the Facilities;

(iii) to the extent required by applicable law and/or the statures orarticles of association, copies of the resolutions of the shareholders'meeting, supervisory board (if any) and management board of the Companyand Guarantors;

(iv) copies of the management board and the supervisory board of theCompany, regarding the launching of the bonds issuance programme;

(v) copies of the insurance policies of the Company and the Guarantors;

(vi) the Facilities Agreement, the Intercreditor Agreement, the feeletters, the hedging agreement and the other financial documentsmentioned in the Facilities Agreement;

(vii) copies of applications submitted for the registration of thesecurity interests, which to be established must be recorded in therelevant register, and the delivery of excerpts from the land andmortgage registers maintained for the real properties held;

(viii) appropriate legal opinions issued, inter alia, for the Lenders;and

(ix) other documents or the fulfilment of other conditions set out inthe Facilities Agreement.

Pursuant to the provisions of the Facilities Agreement, the Facilitiesbear interest according to a variable interest rate, which comprises theWIBOR reference rate in the case of the financing in PLN and the EURIBORreference rate in the case of the financing in EUR plus the Lenders'variable margin that depends on the amount of the indebtedness ratios.

Under the Facilities Agreement, the relevant Facilities will be repaidby:

(A) in the case of the Term Facility - tranche 1 by 31 August 2022,tranche 2 by 31 August 2021 and tranche 3 by 31 August 2021, and in thecase of the Investment Facility - by 31 August 2021 (in the case of bothinvestment facility A and investment facility B); and

(B) in the case of the Revolving Facility -tranches 1 and 2 are payableby 31 August 2019, with the possibility of deferring that deadline inaccordance with the Facilities Agreement .

The Facilities Agreement was concluded under English law and does notprovide for the payment of contractual penalties. If any of the eventsof default set out in the Facilities Agreement occurs and is continuing,Bank Zachodni WBK S.A. (or other entity acting as agent pursuant to theFacilities Agreement) may, pursuant to the Facilities Agreement, notifythe Company that the Facilities must be prepaid immediately.

Re. 2 - Agreements related to the planned bond issue

On 9 September 2016, in connection with the programme and planned issueof Bonds by the Company, the Company also entered into an AgencyAgreement, an Underwriting Agreement, and other agreements of a solelytechnical nature related to the implementation of the Bonds issueprogramme. Under the Bonds issue programme, the Company plans, under thefirst series, to issue series A Bonds of PLN 100,000,000 (one hundredmillion zlotys).

The subject matter of the Agency Agreement is the organisation byHaitong, which will act as the issue agent, dealer, paying agent,calculation agent, technical agent, administration agent and depositary,of the Bond issue programme.

Under the Underwriting Agreement for the planned issue of Bonds, Haitongagreed to acquire those Bonds that are not placed on the market, for upto a total of PLN 100,000,000 (one hundred million zlotys).

The agreements related to the planned issue of Bonds have been concludedunder Polish law and do not provide for the payment of contractualpenalties. The Company or Haitong may terminate the Agency Agreementand/or the Deposit Transactions Agreement by giving 30 (thirty) days'notice. Both the Company and Haitong may also terminate any of theabove-mentioned agreement for the reasons set out therein.

Re. 3 - The Intercreditor Agreement

The Company also informs investors that on September 9th 2016 one of theconditions precedent stipulated in the Facilities Agreement wasfulfilled, i.e. the Intercreditor Agreement was concluded. It regulatesthe priority of satisfaction of the creditors (the receivables set outin the Intercreditor Agreement will be satisfied pari passu, save forintragroup receivables, which will be subordinated to the Lenders'receivables), rules of pursuing claims, rules of enforcing the securityinterests and release of security interests.

Under the Intercreditor Agreement claims with respect to the paralleldebt, comprising:

(i) the Company's parallel debt;

(ii) the parallel debt of the Company's selected subsidiaries - eachbeing an independent and separate claim of BGŻ BNP Paribas (acting assecurity agent) against the relevant entity,

will be created.

The liabilities of the Company and each of the Guarantors under theparallel debt, covering, among other things, the liabilities under theFacilities Agreement and the Bonds, will be secured by the establishmentof a security package. On the basis of the liabilities under theparallel debt, each of the above entities will be obliged to pay BGŻ BNPParibas an amount that is the sum of all of that entity's liabilitiesunder the basic legal relationships covered by the IntercreditorAgreement. The enforcement of any of the relevant entity's liabilitiesresults in the automatic enforcement of the parallel debt in acorresponding amount. Payment by a relevant entity to BGŻ BNP Paribas ofany amount in respect of the parallel debt results in the automaticreduction of the amount of the basic liabilities of that entity, the sumof which constitutes the parallel debt, by the amount of such payment.The repayment of the basic liabilities by the given entity results inthe automatic reduction of the amount of the parallel debt of thatentity by the amount of such repayment.

The Intercreditor Agreement was concluded under English law and does notprovide for the payment of contractual penalties.

Ad. 4 - Security interests

The Company and the Guarantors will establish the following security forrepayment of the liabilities under the Intercreditor Agreement:

⦁ governed by Polish law (inter alia):

(i) financial and registered pledges over all of the shares, registeredin Poland, held by the Company and the Guarantors, belonging tocompanies from the Company's group (except for Rottneros AB, ArcticPaper Mochenwangen GmbH and Arctic Paper Investment GmbH), save for theCompany's shares;

(ii) mortgages on all of the real properties located in Poland andbelonging to the Company or the Guarantors;

(iii) registered pledges on all Company's and Guarantors' propertyrights and movable assets constituting organised part of the enterpriselocated in Poland (excluding assets mentioned in the FacilitiesAgreement);

(iv) assignment of (existing and future) insurance policies relating toCompany's and Guarantors' assets (excluding insurance policies mentionedin the Facilities Agreement);

(v) a statement by the Company and Guarantors on voluntary submission toenforcement in the form of a notarial deed;

(vi) financial and registered pledges over the banks accounts,registered in Poland, of the Company and the Guarantors;

(vii) powers of attorney for the Polish bank accounts of the Company andGuarantors registered in Poland;

(viii) subordination of claims of the intercompany lenders (contained inthe Intercreditor Agreement).

⦁ governed by Swedish law (inter alia):

(i) pledges over all of the shares, registered in Poland, held by theCompany and the Guarantors, belonging to the group companies, save forthe Company's shares, as well as pledges over Rottneros' shares(excluding Rottneros' shares free stake);

(ii) property mortgages on all real properties, belonging to the Companyand the Guarantors, located in Sweden, on condition that only theexisting mortgage deeds will be the subject of such security;

(iii) corporate mortgages granted by Guarantors incorporated in Sweden,provided that such security shall only be granted over existingcorporate mortgage certificates;

(iv) assignment of (existing and future) insurance policies relating toCompany's and Guarantors' assets (excluding insurance policies mentionedin the Facilities Agreement);

(v) pledges over the Swedish bank accounts of the Company and theGuarantors registered in Sweden, on condition that such security doesnot restrict the right to freely dispose of the funds deposited in saidbank accounts up to the occurrence of an event of default described inthe Facilities Agreement.

The agreements on the basis of which the above-mentioned securityinterests will be established do not provide for the payment ofcontractual penalties.

Legal basis:

Art. 17 sec. 1 of Regulation (EU) No 596/2014 of the European Parliamentand of the Council of 16 April 2014 on market abuse (market abuseregulation) and repealing Directive 2003/6/EC of the European Parliamentand of the Council and Commission Directives 2003/124/EC, 2003/125/ECand 2004/72/EC.