Execution of transaction documents concerning the terms and conditions of Grupa LOTOS S.A.'s involvement in the financing of the Polimery Police project
Report no. 12/20202020-05-31

Further to Current Report No. 41/2019 of December 13th 2019, which referred to the execution of the term-sheet concerning involvement in the financing of the Polimery Police project, Grupa LOTOS S.A. (the “Company”) announces that on May 31st 2020 agreements were signed to define the terms and conditions of the equity investment and subordinated debt financing (the “Transaction Documents”) in connection with the Grupa Azoty Polyolefins S.A.'s Polimery Police project (the “Project”). The agreements were signed between the following parties:

- the Initial Sponsors, i.e. Grupa Azoty S.A., Grupa Azoty Zakłady Chemiczne Police S.A. and their subsidiary Grupa Azoty Polyolefins S.A. (“Polyolefins”),

- the Co-Sponsors, i.e. Hyundai Engineering Co., Ltd (“Hyundai”), Korea Overseas Infrastructure & Urban Development Corporation (“KIND”) and Grupa LOTOS S.A.

The following agreements were signed by the Company as part of the Transaction Documents:

(i)              an investment agreement between the Initial Sponsors, Polyolefins and the Company;

(ii)             a loan agreement between Polyolefins and the Company;

(iii)            shareholders' agreement between all the Parties.

Simultaneously, corresponding investment agreements and subordinated loan agreements were signed between the Initial Sponsors, the remaining Co-Sponsors and Polyolefins, covering the entire necessary amount of equity and subordinated financing for the Project.

Under the Transaction Documents, Grupa LOTOS agreed to invest PLN 500,000,000 in the Project (the “LOTOS Investment") by:

(a) making a cash contribution of PLN 300,000,000 to cover increased share capital of Polyolefins and to subscribe for new Polyolefins shares, and

(b) advancing a subordinated loan of PLN 200,000,000 to Polyolefins.

The performance of the Company's obligations under the LOTOS Investment is subject to satisfaction of the conditions precedent agreed in the Transaction Documents, including obtaining relevant approvals from the Supervisory Board and the General Meeting of Grupa LOTOS.

Pursuant to the Transaction Documents, the target shareholding structure of Polyolefins will be as follows: 64.93% of the shares will be held by the Initial Sponsors, 17.3% by Grupa LOTOS; 16.63% by Hyundai; and 1.14% by KIND. Those percentages will correspond to the parties’ interests in the share capital and total voting rights at the General Meeting of Polyolefins.

The Transaction Documents provide for a lock-up period, during which Grupa LOTOS may not dispose of Polyolefins shares (with certain exceptions) until full repayment of debt under the Debt Financing Agreement, but for no longer than until December 15th 2035.

The Transaction Documents provide for contractual penalties for breach of key contractual provisions typical for similar transactions.

Under the Transaction Documents, until the subscription for the shares or disbursement of the loan, Grupa LOTOS has the right to terminate the Transaction if any events or circumstances occur that have or may have a material adverse effect on the Project or the financial condition of Polyefins and that prevent implementation of the Project on the agreed terms.

Legal basis: Article 17(1) of MAR – Inside information