Cyfrowy Polsat S.A. — M&A Activity 2021

Dec 20, 2021

Subject:Cyfrowy Polsat S.A. signspreliminary share purchase agreements concerning PAK-Polska CzystaEnergia sp. z o.o., Port Praski sp. z o.o. and Pantanomo Limited.TheManagement Board of Cyfrowy Polsat S.A. ("Company", "Purchaser"), inconnection to current report no. 36/2021 of 20 December 2021 concerningthe adoption by the Company's Management Board of a new strategy ofPolsat Plus Group and a new dividend policy of the Company, and tocurrent report no. 37/2021 of 20 December 2021 concerning the delayeddisclosure of inside information on the commencement of negotiationsbetween the Company and (i) ZE PAK S.A. - with respect to the Company'scontemplated capital investment in certain ZE PAK S.A. assets generatingelectricity from low-emission and zero-emission sources, and (ii)Elektrim S.A., Embud 2 sp. z o.o. S.K.A. and potentially other investorsparticipating in specific projects - with respect to the Company'scontemplated acquisition of selected real properties from thoseentities, hereby announces that as a result of these negotiations, on 20December 2021 the Company entered into the following agreements("Agreements"):-apreliminary agreement concerning the Company's purchase of shares inPAK-Polska Czysta Energia sp. z o.o. with its registered office in Konin("PAK-PCE"), representing 67% of PAK-PCE's share capital ("PAK-PCEShares"), executed between the Company and ZE PAK S.A. with itsregistered office in Konin ("ZE PAK");-apreliminary agreement concerning the Company's purchase of 1,070,000(one million seventy thousand) shares in Port Praski sp. z o.o. with itsregistered office in Warsaw ("Port Praski"), representing approximately66.94% of Port Praski's share capital ("PP Shares"), executed betweenthe Company and Embud 2 sp. z o.o. S.K.A. with its registered office inWarsaw ("Embud") and a preliminary agreement concerning the Company'spurchase of 4,705 (four thousand seven hundred and five) shares inPantanomo Limited, a Cypriot company with its registered office inLimassol ("Pantanomo"), representing approximately 32% of Pantanomo'sshare capital ("Pantanomo Shares"), executed between the Company andTobe Investments Group Limited, a Cypriot company with its registeredoffice in Limassol ("Tobe").Theexecution of these agreements is related to the new strategy of PolsatPlus Group announced by the Company on 20 December 2021 in currentreport no. 36/2021 of the same date.Thebase purchase price for the PAK-PCE Shares is set at PLN 193,104,000.00,for PP Shares at 572,211,844.00 and for Pantanomo Shares at PLN307,160,830.00._#8195;These base purchase prices have beenestablished, among others, on the basis of valuations prepared byDeloitte Advisory sp. z o.o. and may be subject to adjustments routinelyapplied in acquisitions using the locked box approach. Additionally, forthe purpose of the transaction and establishing the price for thepurchased shares the Company has obtained a fairness opinion fromDeloitte Advisory sp. z o.o., confirming the pricing fairness.Theagreement concerning the PAK-PCE Shares also provides for an additionalZE PAK obligation, to be performed after the date of sale of the PAK-PCEShares being the subject of the agreement. The whole biomass-basedelectricity generation business conducted in Elektrownia Konin (Koninpower station) will be spun-off from the ZE PAK enterprise as anorganized part of the enterprise ("Elektrownia Konin OPE"). ZE PAKagreed to contribute the Elektrownia Konin OPE to PAK-PCE (after theCompany acquires the PAK-PCE Shares) as in-kind contribution valued, asat 30 September 2021, at PLN 906,500,000.00. In consideration for thisin-kind contribution, PAK-PCE will issue shares to ZE PAK and ZE PAKagrees to afterwards sell to the Company 67% of those shares for a totalprice of PLN 607,355,000.00. Part of the price for the new PAK-PCEshares in the amount of PLN 90,000,000.00 will be required to be paid asa downpayment ("Downpayment") by the Company upon acquisition of thePAK-PCE Shares.The totalprice for the PAK-PCE Shares and the new shares of PAK-PCE to be issuedin relation to the in-kind contribution in the form of Elektrownia KoninOPE will amount to PLN 800,459,000.00. If ZE PAK does not contribute theElektrownia Konin OPE as an in-kind contribution to PAK-PCE, ZE PAK willbe obliged to return the Downpayment and pay a contractual penalty tothe Company in the amount of PLN 100,000,000.00.PAK-PCEis a holding company serving as the core for a whole structure ofsubsidiaries engaging in the development of renewable energy projectsand the generation and utilization of hydrogen in the capital group towhich ZE PAK is a member.PortPraski is a company engaging in real property development businessthrough its subsidiaries, mainly in the Praga-Północ district of Warsaw.Pantanomoengages in the business of managing its properties as well as holding,financial and investment activities.Theclosing of the transactions contemplated in the Agreements is contingenton the satisfaction of the following conditions precedent: (i) thePurchaser being satisfied with the results of a documentation review,including specifically the legal and tax documents of the companieswhose shares are being acquired and their subsidiaries, (ii) the Companyobtaining the Supervisory Board's approval for completing thetransactions contemplated in the Agreements. Furthermore, the closing ofthe transactions contemplated in the Agreements is contingent on thesatisfaction of certain additional conditions precedent set forth in theAgreements ("Additional Conditions") including, without limitation, theimplementation of agreed changes to the targets' capital structure._#8195;Pursuant to the Agreements, all the conditions precedent have beenreserved for the benefit of the Company, therefore the Company maydecide to proceed with the closing, despite a condition precedent nothaving been fulfilled in whole or in part and, should the transactionsto which the Additional Conditions refer not be completed, mayaccordingly reduce the base prices.Pursuantto the Agreements, the Company may terminate each of them with immediateeffect, if: (i) any of the conditions precedent is not satisfied by 31March 2022 (the deadline may be extended by the parties by no more than90 days), regardless of the reason; (ii) a seller fails to provide theCompany with documents that are key for the given legal due diligencereview, or (iii) irregularities identified in the course of a legal duediligence review may result in losses in a significant amount (whichvaries depending on the Agreement), and remedying the identifiedirregularities is not objectively feasible.TheAgreements contain standard representations and warranties of theparties regarding the shares and businesses of individual companies. Inthe event of a breach of any of the representations and warranties, orbreach of the obligations, the parties are liable on the terms andwithin the time limits stipulated by the Agreements.