Conclusion of a preliminary share purchase agreement concerning the indirect acquisition of a majority stake of shares in Archicom S.A.

The Management Board of ECHO Investment S.A. (“Issuer”) informs that on 17 February 2021 the Issuer concluded, with Mrs. Dorota Jarodzka-Śródka, Mr. Kazimierz Śródka and Mr. Rafał Jarodzki (“Sellers”), a preliminary share purchase agreement (“Agreement”) concerning the indirect acquisition of a majority stake of 16.945.487 shares, representing in aggregate approximately 66,01% of the share capital carrying in aggregate 21.039.375 votes at the general meeting, which represents approximately 65,99% of the total number of votes in Archicom S.A. (“Archicom”) – whose shares are admitted to trading on the main market of the Warsaw Stock Exchange. The acquisition of the above shares in Archicom S.A. by the Issuer will be made indirectly through the acquisition of all of the shares in the share capital of the following shareholders of Archicom S.A. – DKR Investment sp. z o.o. with its registered office in Wrocław (“DKR Investment Shares”) and DKR Invest S.A. with its registered office in Wrocław (“DKR Invest Shares”). At the same time, the parties agreed to exclude from the scope of the transaction the development business carried out by Archicom Polska S.A., a subsidiary of Archicom, outside the territory of the city of Wrocław and adjacent municipalities as well as architectural and design services business carried out by Archicom Studio Projekt spółka z ograniczoną odpowiedzialnością sp.k. (jointly, “Transaction”). The conclusion of a final share purchase agreement and the closing of the Transaction will be subject to the condition precedent that the President of the Office of Competition and Consumer Protection issues clearance for the concentration effected by way of the Transaction.

The total price for DKR Investment Shares and DKR Invest Shares will be PLN 425.093.000 (“DKR Price”). The DKR Price shall be increased by the amount of interest accrued thereon from 15 March 2021 until the date of payment, calculated at an annual interest rate of 6%. Part of the DKR Price will be paid by way of set-off against the Sellers' obligation to pay bearer bonds with an aggregate nominal value of PLN 188.000.000, bearing interest at an annual rate of 5%, with a maturity date falling 3 years and 6 months from the date of the final agreement (“Bonds”), which will be issued by the Issuer in connection with the Transaction and acquired by the Sellers. The Bonds will be admitted to organized trading on the Catalyst market in the Alternative Trading System (ATS) pursuant to the terms of issue corresponding to existing bond issues by the Issuer.

The closing of the Transaction will be preceded by the restructuring of the Archicom group, including in particular:

1. the sale to Mrs. Dorota Jarodzka-Śródka and Mr. Rafał Jarodzki of all shares held by Archicom in the share capital of Archicom Polska S.A., being a company conducting development activities particularly in the cities of Kraków, Łódź, Poznań and Trójmiasto, i.e. outside the Archicom group's core area of operations comprising of the city of Wrocław and adjacent municipalities, in consideration for PLN 131.000.000 (the "Archicom Polska Price"), payable in two instalments, where:
   1. the first installment (in an aggregate amount of PLN 77.500.000) shall be paid on the day of closing of the Transaction, partly by way of transfer for the benefit of Archicom of Bonds (with an aggregate nominal value of PLN 37.000.000), and for the remainder by the transfer of the Issuer's consideration to the Sellers in respect of payment of the DKR Price; and
   2. the second installment, in the amount of PLN 53.500.000, increased by interest accrued thereon over the period from the day of closing of the Transaction, until the date of payment of the second installment, calculated at an annual interest rate of 5%, shall be payable by no later than 15 June 2023;

2. the sale to Ms. Dorota Jarodzka-Śródka and Mr. Kazimierz Śródka of all shares held (indirectly) by Archicom in the share capital of Archicom Studio Projekt sp. z o.o. and withdrawal by Archicom (as a limited partner) from Archicom Studio Projekt spółka z ograniczoną odpowiedzialnością sp.k, a project company providing architectural and design services to Archicom group companies, in respect of which transactions (sale and withdrawal) Archicom will receive (directly and indirectly) the total consideration in the amount of PLN 2.400.000, payable in full on the closing date of the Transaction; and
3. the sale by DKR Investment sp. z o.o. of 2.132.964 shares in the share capital of Archicom, representing in aggregate 8,31% of Archicom's share capital and carrying 4.246.578 votes at Archicom’s general meeting, representing in aggregate 13,32% of the total number of votes in Archicom (“Remaining Sellers’ Shares”) to a special purpose vehicle (“SPV”) established by Mrs. Dorota Jarodzka-Śródka and Mr. Rafał Jarodzki (“SPV Shareholders”).

Further, the transaction documentation provides for the following material provisions, typical for this kind of transaction:

1. the non-competition clause imposed on the Sellers’ restricting conducting competing activities in Wrocław and in its vicinity, binding for a period of 2 years from the closing of the Transaction; subject to certain limitations and exceptions;
2. the representations and warranties of Mrs. Dorota Jarodzka-Śródka, concerning the Archicom group and its business activities; representations and warranties of the Sellers concerning DKR Investment sp. z o.o. and DKR Invest S.A.;
3. the obligations of the parties relating to actions aiming at satisfying the condition precedent for closing of the Transaction;
4. the obligations of the Sellers relating to the period until the closing date of the Transaction, settlements in connection with transactions (leakage) between Archicom group companies and the Sellers (and their related parties) in the period after 30 June 2020, guarantees provided by the Sellers in connection with the Transaction (including in particular those relating to guarantees issued by Archicom to secure Archicom Polska S.A.'s obligations, to the extent that such guarantees will remain in force after the closing of the Transaction); these obligations will be secured on an appropriate part of the Bonds to which the Sellers are entitled (the pledge with a takeover right; Polish: zastaw z prawem przejęcia).

In connection with the Transaction, the Issuer will purchase insurance policies relating in particular to the representations and warranties made by Mrs. Dorota Jarodzka-Śródka and the other Sellers (warranties and indemnities insurance) and title to the material properties and shares in DKR Investment sp. z o.o., DKR Invest S.A., Archicom and its subsidiaries.

At closing of the Transaction, an option agreement will be entered into pursuant to which the Issuer will be entitled to acquire, or designate an entity to acquire, by 15 March 2023 from the SPV Shareholders all of the shares in the share capital of an SPV, which SPV will be entitled to the Remaining Sellers’ Shares, on substantially the same terms as the acquisition of the DKR Investment Shares and the DKR Invest Shares under the Transaction (including, in particular, the consideration for such acquisition will increased by the amount of interest accrued annually at the rate of 6% from 15 March 2021 until the date of the exercise of the call option). In case the Issuer does not exercise its aforementioned right, on the basis of the option agreement, the SPV Shareholders shall be entitled to sell all shares in the share capital of the SPV to the Issuer or to the entity designated by the Issuer.

Legal grounds: Art. 17(1) of Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC – inside information.