The conclusion of an annex to the transmission solutions delivery frame agreement and the agreement for the sale of transmission equipment (material agreements) (37/2009)
The management board of Netia SA (“Netia”, the “Company”) informs that on July 24, 2009 Netia and P4 sp. z o.o. (“P4”) concluded an agreement for the sale of the transmission equipment (the “Sale Agreement”) used by Netia to provide transmission services to P4 under the UMTS transmission solutions delivery frame agreement dated 3 July 2006 (the “UMTS Agreement”) (see current report No. 58/2006 dated 3 July 2006) and an annex to the UMTS Agreement (the “Annex”).
The Company announced in current report No. 17/2009 dated 4 March 2009 that on 3 March 2009 it had signed with P4 a non-binding letter of intent (term sheet) regarding the sale of the transmission equipment to P4 and the annex to the UMTS Agreement. Following negotiations, the Company and P4 have signed a binding Sale Agreement and the Annex.
The Sale Agreement was entered into on the following terms and conditions:
1. The transmission equipment will be purchased by P4 in three batches.
2. The total price for the transmission equipment is PLN 65,417,550, of which:
a) PLN 22,831,875 is payable by P4 on the date of purchase of the first batch of the transmission equipment, i.e. 1 August 2009;
b) PLN 21,140,625 is payable by P4 on the date of purchase of the second batch of the transmission equipment, i.e. 1 January 2010; and
c) PLN 21,445,050 is payable by P4 on the date of purchase of the third batch of the transmission equipment, i.e. 1 July 2010.
3. The legal title to the given batches of the transmission equipment will be transferred to P4 after P4 pays the price for a given batch, however not earlier that on the dates indicated above.
4. P4 may assign all rights and obligations under the Sale Agreement to its subsidiary, 3 GNS spółka z ograniczoną odpowiedzialnością sp.k.
5. P4 may unilaterally withdraw from the Sale Agreement up to 31 July 2009.
6. In the event that the payment for the first batch is late by more than 45 days Netia shall have the option to rescind the Purchase Agreement. In the event that the payment for the subsequent batches is late by more than 30 days Netia shall have the option to withdraw from the sale of all the remaining batches.
The Annex provided for the following amendments to the UMTS Agreement:
1. The UMTS Agreement was concluded for an unspecified term and will expire upon the lapse of the termination period of the last of the circuits through which Netia provides transmission services under the UMTS Agreement.
2. The termination period relating to the transmission services provided through the circuits to be sold to P4 and through the hub circuits was extended from 12 to 24 months, except for 15% of such circuits intended for reconfiguration, for which the termination period is 12 months.
3. Up to the date of sale of particular batches of the transmission equipment, P4 cannot terminate the transmission services provided through the circuits covered by a particular batch, except for 15% of the circuits as referred to in point 2 above.
4. New unit prices for the core network transmission have been introduced.
5. P4 has the right to assign all rights and obligations under the UMTS Agreement to its subsidiary, 3 GNS Spółka z ograniczoną odpowiedzialnością sp. k.
6. In the event that Netia does not deliver to P4 a letter from Rabobank Polska SA confirming that transaction under the Sale Agreement is in accordance with the annex to Netia credit facility (see Current Report No 36/2009 dated 30 June 2009) P4 may rescind the Annex, however under the condition that it simultaneously rescinds the Sale Agreement.
On the date hereof P4 assigned all rights and obligations under the Sale Agreement and the UMTS Agreement to 3 GNS Spółka z ograniczoną odpowiedzialnością sp. k.
These changes are in line with Netia’s strategy of focusing its investment on residential and business customers rather than on large wholesale projects. Should P4 utilise its right to buy the transmission equipment, the revenues and EBITDA from the reduced scope of services provided by the Company under the UMTS Agreement are expected to be approximately 30 % of current levels whilst Netia expects to fully recover its original investment in the P4 transmission project.
The Sale Agreement and the annex to the UMTS Agreement were qualified as material agreements due to the fact that in the management board’s opinion the price for the transmission equipment, together with the projected profits under the UMTS Agreement taking into account the new extended termination periods of particular circuits, will exceed 10% of the Company’s equity.
§5 section 1.3 of the Regulation of the Council of Ministers dated 19 February 2009 on current and periodical information disclosed by issuers of securities and conditions for recognizing as equivalent information required by the laws of a non-member state (Journal of Laws of 2009, No. 33 item 259).