35/2010 - Information on the conclusion of a significant contract
1. The Management Board of Trakcja Polska S.A. (the “Company”) would like to inform you that it has carried out negotiations with Lithuanian companies Tiltra Group AB and AB Kauno tiltai (further collectively called the “Tiltra Group”) and their shareholders, AB Invalda, UAB NDX Energija (as a legal successor of UAB Peronas) and individuals who are minority shareholders (further collectively called the “Tiltra Group Shareholders”), concerning merger of activities carried out by the Company’s group and activities carried out by the Tiltra Group AB and AB Kauno tiltai group. Disclosure of information on the negotiations was earlier delayed in accordance with article 57 of the Offering Act.
2. As a result of the negotiations referred to above, on 18 November 2010, the Company, Tiltra Group AB, AB Kauno tiltai, the Tiltra Group Shareholders and Comsa S.A. signed a conditional agreement setting out the principles of creating a joint capital group (the “Agreement”). The Agreement provides for:
a) the acquisition by the Company of up to 100% of shares in Tiltra Group AB, up to 96.84% of shares in AB Kauno tiltai and 22% of shares in Silentio Sp. z o.o. (collectively the ”Tiltra Shares”), however, not less than 75% of shares in Tiltra Group AB and not less than 75% of shares in AB Kauno tiltai, for a total price of up to PLN 777,536,000 (the “Price of the Tiltra Shares”) to be proportionally reduced, depending on the number of the Tiltra Shares to be acquired by the Company.
The part of the Price of the Tiltra Shares may be reduced by an envisaged amount of the proceeds from the sale of non-core assets of AB Kauno tiltai if such sale is not effected by the Transaction Completion (as defined below).
The price for the Tiltra shares will be paid by set-off of the Company’s receivable due from the Tiltra Group Shareholders against (i) the issue price of the Company’s shares referred to in item b) below, (ii) the issue price of the subscription warrants issued by the Company, referred to in point c) below, and (iii) the issue price of the bonds referred to in item d) below. A surplus of up to PLN 152,000,000 will be paid by the Company in cash.
b) issue by the Company of 72,000,000 subscription warrants and 72,000,000 new shares to be taken up by the Tiltra Group Shareholders on the Transaction Completion date in performance of the above subscription warrants for the issue price of PLN 4.56 per share. The Tiltra Group Shareholders agreed that, within 12 months of the above shares being acquired, they would not transfer or otherwise dispose of the acquired shares in the Company in a total number of 48,000,000, save for the exceptions provided for in the Agreement (lock-up).
c) issue by the Company of 47,160,000 subscription warrants at the issue price of PLN 0.10 carrying the right to take up 47,160,000 new issue shares in the Company for an issue price of PLN 6.00 per share. The subscription warrants may be performed from 2 January 2013 to 29 October 2013. The subscription warrants will be taken up by the Tiltra Group Shareholders.
d) issue by the Company of bonds for the total of PLN 292,500,000, with maturity date falling on 12 December 2013, bearing fixed interest of 7% p.a. All bonds will be taken up by the Tiltra Group Shareholders.
3. The activities referred to in items a) – d) above will be performed upon fulfillment of the conditions precedent set out in the Agreement (the “Transaction Completion”). The Agreement provides for the following conditions precedent:
a) the Company obtains OPCC clearance for the acquisition of the Tiltra Group AB, AB Kauno Tiltai and Silentio Sp. z o.o. shares;
b) the Company’s general meeting adopts the following resolutions: (i) a resolution to conditionally increase the Company’s share capital by PLN 11,916,000 through the issue of 119,160,000 series G shares, with the preemptive right of the existing shareholders of the Company being excluded; (ii) a resolution to issue 72,000,000 series A subscription warrants and 47,160,000 series B subscription warrants, with the preemptive right of the existing shareholders of the Company being excluded; and (iii) a resolution to consent to the Company to accept a pledge on the shares in the Company’s shares capital held by the Tiltra Group Shareholders; if any of the above resolutions is challenged, this condition will be deemed fulfilled only if such a resolution is not invalidated in a final court decision.
c) the conditional share capital increase effected under resolutions referred to in point b) are finally registered in the commercial register of the Polish Court Register;
d) the National Depository of Securities adopts a resolution to conditionally register series G shares issued by the Company as part of the conditional share capital increase (under the same ISIN code as the other shares of the Company admitted to trading on the WSE are registered) and the Warsaw Stock Exchange adopts a resolution to conditionally introduce series G shares to trading, conditional only on a final registration of such shares by the National Depositary of Securities;
e) the National Depository of Securities adopts a resolution to register and dematerialize bonds referred to in point 2d) above;
f) there is no adverse change with respect to the Tiltra group or to the Company’s group;
g) there are no changes in the applicable legal regulations which could impose, as a result of the Transaction Completion, on any of the parties to the agreement, without an intention of such a party, an obligation to announce a tender offer for the remaining shares of the Company;
h) the financial institutions financing the Tiltra Group companies consent to the transaction provided for in the agreement; and
i) the Company obtains a declaration of a financial institution (supported by the credit committee decision), securing, in addition to the existing financing lines of the Company and its subsidiaries, a cash financing of at least PLN 60,000,000 for a period no shorter than one year; this condition shall be deemed fulfilled unless not later than 31 December 2010 the Company delivers to the remaining parties a written statement that this condition has not been fulfilled.
4. As a general rule, the liability of the Tiltra Group Shareholders towards the Company and the Company’s liability towards the Tiltra Group Shareholders under the Agreement were limited to PLN 90,000,000 or to the Price, depending on the type of breach.
The Company’s claims against the Tiltra Group Shareholders in connection with representations and warranties given are to be secured by pledge on the shares in the Company’s shares capital held by the Tiltra Group Shareholders.
If the conditions precedent are fulfilled and the Transaction Completion provided for in the agreement does not take place due to either party’s failure to perform its contractual obligations, the other party may rescind the agreement and demand liquidated damages of PLN 10,000,000; however, if the Transaction Completion does not take place due to willful misconduct of the party failing to perform its obligations and failure to cure such situation within 7 days after the writing notice of the suffering party, the liquidated damages will be PLN 50,000,000.
If the Transaction Completion does not occur due to any of the Tiltra Group Shareholders failing to perform its obligations, and subsequently, within 12 months of the planned Transaction Completion date, the Tiltra Group Shareholders sell the Tiltra Shares, the Tiltra Group Shareholders will be obliged to pay liquidated damages of PLN 50,000,000.
5. The Agreement specifies the circumstances in which the parties will be entitled to rescind the Agreement. In particular, a party may rescind the Agreement if it does not accept the disclosure letter (i.e. compilation of information disclosed by the other party generally excluding the liability of the party providing the disclosure letter under the warranties) delivered to it by no later than 30 November 2010.
6.The Agreement shall expire in the event no Transaction Completion has occurred on or prior to 31 March 2011, unless before that time the parties reach agreement on the postponement of this date. The Agreement shall expire also if the Company delivers to the remaining parties, not later than 31 December 2010, the declaration that the condition precedent specified in point 3(i) above has not been fulfilled.
There are no relations between the Company and persons managing or supervising the Company, on the one part, and the Tiltra Group Shareholders, one the other.
The agreement will be deemed material as 10% of the Company’s equity is exceeded.
Legal basis for submitting the report:
Paragraph 5 point 3) of the Minister of Finance Regulation of 19 February 2009 concerning current and periodical information submitted by issuers of securities and terms and conditions of classifying as equivalent information required by regulations of a non-member state.
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