Current Report: No. 91/2015: Investment agreement with Presco Investments Limited

Date of the report: December 23rd 2015

Subject: Investment agreement with Presco Investments Limited

Legal basis: Art. 56.1.1 of the Act on Public Offering – Inside information

Text of the report: The Management Board of KRUK S.A. (the “Company”) announces that on December 23rd 2015 its subsidiary Secapital S.a r.l. (the “Buyer”) entered into an Investment Agreement (the “Agreement”) with Presco Investments Limited of Malta (the “Seller”) (collectively – the “Parties”).

The Company reported on the signing of the relevant Letter of Intent in Current Report No. 54/2015 of September 18th 2015. The Parties entered into the Agreement in connection with a transaction involving the sale of 100% of shares, free of any encumbrances, unlimited and free of any third-party rights, in Presco Investments S.a r.l (the “Shares”), as well as of the right to the debt portfolios purchased in Poland (the “Transaction”) and held by the Seller and P.R.E.S.C.O. Investment I NS FIZ (the “Fund”), comprising two million cases with a combined nominal value of PLN 2.7bn. Pursuant to the Agreement, the Seller intends to sell, and the Buyer intends to purchase, 390,050 shares in Presco Investments S.a r.l, with a total par value of PLN 39,005,000, for a price of PLN 216.8m (the “Price”).

The Shares confer the right to the debt portfolios purchased in Poland, with a total nominal value of PLN 2.7bn. The Price will ultimately reflect the agreed adjustments, including reduction by any recoveries on the debt portfolios owned by the Seller and the Fund. The title to the Shares will be transferred from the Seller to the Buyer upon signing by the Parties of a representation on fulfilment of conditions and transfer of the Shares (the “Representation”).

Within nine business days of signing the Agreement, the Buyer will pay the Seller PLN 15m as an advance payment of the Price, with the balance to be paid within 15 business days of the Buyer’s receiving an updated debt database after closing of the Transaction, but not earlier than within 58 days of the date of the Agreement. The advance payment will be made on condition that a surety agreement (the “Condition”) is made by P.R.E.S.C.O. GROUP S.A. and the Buyer to secure the performance by the Seller of its obligations under the Agreement, and that a notarial deed is made whereby the Seller submits to enforcement under Art. 777.1.5 of the Polish Code of Civil Procedure. If the Seller fails to fulfil the above Condition, the Buyer will have the right to withdraw from the Agreement.

The Parties have agreed that the payment of a portion of the Price, totalling approximately PLN 42m, will be deferred to secure the performance of the obligations under the Agreement in the transitional period from the date of the Agreement to the Transaction’s closing. The deferred amount, including interest calculated on arm’s length terms, will be settled in accordance with the Agreement. The Agreement sets out the conditions for closing the Transaction, including operational and legal ones, which must be met by May 30th 2016, the Agreement otherwise becoming null and void. Failure to fulfil any of the conditions will be promptly announced by the Issuer in a separate current report. If the above conditions are met or are partially rescinded, the Parties will make the Representation on fulfilment of the conditions, resulting in the transfer of the Shares to the Buyer, in which the final Price of the Shares and the payment terms will be set out.

The Agreement provides for the following contractual penalties for the Seller: PLN 10,000 for each day following the closing of the Transaction in which the Buyer does not receive a hard copy of the debt portfolio’s operational documentation; PLN 50,000 for each breach by the Seller of its disclosure obligations towards the Buyer in the period from the date of the Agreement to the Transaction’s closing; PLN 500,000 for each breach consisting in the Seller’s taking, without consent from the Buyer, of any significant action with respect to Presco Investments S.a r.l, the Fund or the debts held by them, in the period from the date of the Agreement to the Transaction’s closing; PLN 750,000 for each breach of the non-competition agreement.

The Agreement provides for the following contractual penalties for the Buyer: PLN 1m for each breach of the representations made by the Buyer in the agreement; PLN 1m in the event of termination of the Agreement by the Seller due to failure by the Buyer to pay the Price in the additional period set by the Seller to extend the contractual deadline which the Buyer had failed to meet; PLN 500,000 for each day of delay in the Buyer’s submission to enforcement under Art. 777 of the Polish Code of Civil Procedure.

The Agreement also provides for the following contractual penalties for both the Seller and the Buyer: PLN 100,000 for each breach of the confidentiality obligation set out in the Agreement; PLN 50,000 for non-performance by a Party of an action to be performed on the Closing Date.

The Buyer or the Seller may seek from the Seller or the Buyer compensation on general terms, in excess of the contractual penalties.

To secure the payment of the contractual penalties referred to above, the Seller and the Buyer will, within five business days of the date of the Agreement, submit to enforcement under Art. 777.1.5 of the Polish Code of Civil Procedure in respect of their obligation to pay the contractual penalties.

The value of the Agreement exceeds 10% of the Group’s revenue for the previous four financial quarters, which is the criterion for considering an agreement as material.

Detailed legal basis: Par. 5.1.3 of the Regulation of the Minister of Finance of February 19th 2009 on current and periodic information […]