Netia Spółka Akcyjna - Netia SA

PROSPECTUS
Netia Spółka Akcyjna
with its registered office in Warsaw
www.netia.pl
On the basis of this Prospectus, Netia S.A. is introducing into public trading:
18,373,785 series I ordinary bearer shares,
with a nominal value of PLN 1 per share.
In connection with the issue of Series I Shares, up to 18,373,785 Rights to the Offered Shares (PDAs) shall be registered.
Issue Price in PLN Commission for underwriters Real proceeds of the Issuer in PLN
and other costs in PLN (1)
Offered Series Per Unit 1.0826241 0.11 0.97 (2)
Total 19,891,902.45 2,000,000.00 17,891,902.45
(1) The final costs of the issue of the Offered Shares shall be made public by way of a current report in accordance with the rules specified in Art. 81 of the Law on Public Trading in Securities, within 14 days from the day of
closing the subscription.
(2) As the Offered Shares are paid for by way of a contractual set-off of receivables between the Issuer and the Entitled Persons, no physical money transfers shall be effected.
Pursuant to the Resolution of the Management Board No. 1 of December 24, 2004, the public subscription for the Offered Shares shall be commenced on February 14, 2005 and closed
on February 16, 2005.
Those entitled to subscribe for the Offered Shares shall be Merrill Lynch and the Creditors’ Trustee. The Creditors’ Trustee shall enter into agreements with the Entitled Creditors (except
for Merrill Lynch), pursuant to which the Entitled Creditors will assign their receivables under the Arrangement of the Issuer and the Arrangement of Netia Telecom to the Creditors’
Trustee in exchange for the latter assuming the obligation to subscribe for the Offered Shares and, subsequently, to transfer them to the Entitled Creditors, pursuant to the parity agreed.
Merrill Lynch will make a direct subscription for the Offered Shares. The Entitled Creditors are persons whose receivables under the Arrangement of the Issuer and the Arrangement of
Netia Telekom were not satisfied in the course of the Restructuring process in 2002, by way of, inter alia, the offering of Series H Shares. The public subscription for the Offered Shares
shall not be conducted by way of executing a firm commitment underwriting agreement.
In regulated trading, as at the Prospectus update, that is, December 24, 2004, Netia had 364,931,416 shares on the official (main) market of the Warsaw Stock Exchange with a nominal
value of PLN 1 per share, bearing the code PLNETIA00014. The Company plans to introduce the Offered Shares to stock exchange trading on the official (main) market within three
months from the date of closing the public subscription.
Investors are advised to carefully study the information included in this Prospectus. Investing in the securities contemplated hereunder entails a risk characteristic of capital
market equity instruments, as well as a risk connected with investing in the telecommunications sector. The main risk factors include: the risk of changes in the strategy of the
Netia Group; the risk related to performing the Arrangements; the risk resulting from changes in the Telecommunications Law; the Company’s dependence on TP S.A. due to
interconnection agreements; the risk of increased competition.
A detailed description of all the risk factors is included under Point 3 of Chapter I of the Prospectus.
The securities shall be introduced into public trading exclusively on the terms and in accordance with the principles specified in the Prospectus. This Prospectus is the only legally
binding document containing information concerning the Offered Shares, the Offering and the Issuer.
The Issuer has been subject to certain disclosure requirements, as specified in Article 81 of the Law on Public Trading in Securities continuously since April 19, 2000. Current and
periodic reports on the Issuer are published on its web pages: www.inwestor.netia.pl (in Polish) and www.investor.netia.pl (in English).
The securities shall be introduced into public trading in accordance with the procedure set forth in Article 63 of the Law on Public Trading in Securities, on the basis of a notification
submitted to the Securities and Exchange Commission on December 6, 2004. Therefore, the Company did not apply for the Commission’s permission to introduce the securities into
public trading.
THE OFFEROR
Centralny Dom Maklerski Pekao Spółka Akcyjna
with its registered office in Warsaw.
The Prospectus was prepared on December 6, 2004 in Warsaw, and updated as at December 24, unless otherwise specified herein. The validity of the Prospectus shall expire upon the
allocation of the Offered Shares, but not later than on June 30, 2005.
The Prospectus shall be made available to the public in printed form at least seven Business Days prior to the date of commencement of the public subscription, at the registered office of
the Company, at the registered office of the Offeror, the Customer Service Center accepting subscriptions for the Offered Shares, the Information Centre of the Securities and Exchange
Commission at Plac Powstańców Warszawy 1 in Warsaw, the Promotion Centre of the Warsaw Stock Exchange at ul. Książęca 4 in Warsaw; as well as in electronic form on the
Company’s webpage at www.netia.pl. A Short-Form Prospectus shall be published at least seven Business Days prior to the commencement of the public subscription in the daily
newspaper “Puls Biznesu”. Moreover, the following documents shall be made available for review at the Company’s registered office: the Company’s Statute, a copy of the extract from
the National Court Register and the information specified in Article 81 of the Law on Public Trading in Securities which the Company has made public since the date of publication of
the last Prospectus, as well as the documents referred to in Chapter IV of the Prospectus. The documents referred to in Chapter IV of the Prospectus shall be available at the Offeror’s
registered office. The current report and the corrected periodic report referred to in Chapter IV of the Prospectus have been made publicly available by way of an announcement through
the “Emitent” (Issuer) system on December 2, 2004, and are available on the Issuer’s website and at its registered office, and shall be available at the Offeror’s registered office.
The Company does not plan to issue depositary receipts, as these will be issued beyond the territory of Poland on the basis of the offered securities.
Pursuant to Article 81 of the Law on Public Trading in Securities, following the day the Prospectus is made available to the public, any information amending the content of the
Prospectus during its validity shall be submitted simultaneously to the Securities and Exchange Commission and the Warsaw Stock Exchange within 24 hours from the relevant event or
its acknowledgment. Twenty minutes after such submission, this information shall also be provided to the Polish Press Agency. In the event that the information changing the content of
the Prospectus during its validity should considerably affect the price or value of the shares, the information shall be published in the daily newspaper “Puls Biznesu” within 7 days
following its acknowledgement by the Issuer.
The Offeror hereby declares that it does not plan to take any measures related to stabilizing the stock price of the securities contemplated hereunder prior to, during or after the Offering.
This Offering is subject to Polish law and is limited to the territory of the Republic of Poland. The Company has not taken any steps to enable the Offered Shares to be offered, or the
Prospectus or any other materials connected with the Offering to be held or distributed, in any jurisdiction other than that of the Republic of Poland. As regards those recipients of the
Offering that are subject to the laws of a jurisdiction other than the Polish jurisdiction, the Company does not make any representations regarding the compliance of the Offering with the
laws of such recipients’ respective jurisdictions. Persons subject to any jurisdiction other than that of the Republic of Poland who are in possession of this Prospectus and believe they are
eligible to participate in this Offering are advised to determine the scope of their rights under the provisions of law in effect in their respective jurisdictions for the purposes of
participating in the Offering. In view of the fact that the Offering shall be conducted solely in the Republic of Poland and shall be subject to Polish law, investors may participate in the
Offering of the Offered Shares solely within the territory of the Republic of Poland. In the territories of any other countries, the Prospectus may only be used for informational purposes.

PROSPECTUS OF NETIA SPÓŁKA AKCYJNA
CHAPTER I
CHAPTER I
SUMMARY AND RISK FACTORS
1 INTRODUCTION
The Netia Group (the Issuer together with El-Net, Świat Internet, Netia Świat, Netia Globe, Netia Ventures,
Netia Mobile and Uni-Net) offers a wide range of telecommunications services encompassing, in particular,
Voice Services, Internet Access, Data Transmission and Commercial Network Services.
The Netia Group operates on the telecom services market, which is expanding at a relatively fast pace. With
regard to fixed-line telephone services (according to information provided by the Central Statistical Office GUS,
in its Concise Statistical Yearbook for 2003), the number of lines operating on this market had increased to
around 12.3 million by the end of 2003, while in the same period the number of telephone lines per 100 people in
Poland had approached 32. The Netia Group’s activity (excluding the impact of acquiring the company El-Net in
January 2004) on the local voice connections market encompasses an area inhabited by approximately 40% of
the Polish population, and the subscribers of the Netia Group are located within 15 number zones in Poland. The
construction of the nationwide Backbone Network and the extension of the existing Access Network enables the
Netia Group to expand its business, making it independent of the networks of other operators.
Acting through the company Uni-Net, the Netia Group also offers Trunk Services within the entire territory of
Poland and sells radio communication equipment.
100% of the Netia Group’s sales revenues stem from the domestic market.
The Netia Group has focused on the provision of services for the Business Clients market. These customers
constituted 34.1%, 33.6%, 32.9%, 31.0% and 28.5% of the total number of subscribers using the Netia Group’s
Direct Voice Services as of September 30, 2004; June 30, 2004; December 31, 2003; December 31, 2002; and
December 31, 2001, respectively.
In the first half of 2004, the share of revenues from the sale of services other than the traditional Direct Voice
Services in the revenues from the Netia Group’s telecommunications activity increased to 36% and amounted to
PLN 152,658,000, an increase from 26% in the first half of 2003. The revenues from all types of services for
Business Clients constituted 66% of the revenues from telecommunications services in the first half of 2004.
Within the 9-month period ended on September 30, 2004, the share of revenues from the sale of services other
than the traditional Direct Voice Services in the revenues from telecommunications activity amounted to 37%
(PLN 246,205,000). The revenues from Business Clients in that period constituted 72% of the revenues from
telecommunications services.
2 A SUMMARY OF THE MOST SIGNIFICANT INFORMATION ABOUT THE ISSUER AND
THE NETIA GROUP INCLUDED IN THE PROSPECTUS
2.1 The specific nature and characteristics of the activity of the Issuer and the Netia Group
The Netia Group is the largest independent operator providing wireline Telephone Services in Poland. With
regard to the sales volume of Telephone Services, the Netia Group occupies the second position on this market,
following TP S.A. The Issuer is authorized to use a fixed-line telephone network in the entire country and to
provide various telecom services via this network.
The Netia Group may provide lease-line services and any other services, including those not specified in the New
Telecommunications Law but included in the scope of Data Transmission services, such as Frame Relay or IP-
VPN and fixed Internet Access. The Netia Group runs its own internet portal Internetia.pl.
Owing to a long distance operator license obtained on May 17, 2000, the Netia Group began to provide Domestic
Long Distance telephone services in August 2001. These services are offered nationwide both to customers of
the Netia Group and, since August 2001, also to customers of TP S.A who have signed an appropriate agreement
with the Netia Group.
The Netia Group owns both a Backbone Network and an Access Network. As of September 30, 2004, the
Backbone Network, connecting local networks and the largest Polish cities, was 4,939 km long. Data
Transmission nodes were set up in the cities connected by the Backbone Network. The potential of the Access
Network as of September 30, 3004 was 514,000 lines, with around 426,000 Ringing Lines.
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Using the Backbone Network, the Netia Group offers Digital Line lease services, mainly of a bandwidth of 2
Mb/s. In places where the Netia Group does not have its own Backbone Network, it uses lines leased from other
operators. Access to the telecommunications networks of other operators enables Netia Group subscribers to use
services that are not provided by the Netia Group.
Based on the Backbone Network, the Netia Group offers a package of services comprising Data Transmission
Frame Relay and services based on the IP protocol, including Internet Access services. As part of providing the
long distance fibre-optic Backbone Network, the Netia Group also renders the following services: termination of
international inbound traffic to the end subscriber, Internet access, Data Transmission via the Internet and Data
Transmission (also on an international scale) using lines leased to other operators.
The Network constructed by the Company and the Netia Group is based on fibre-optic technology and the SDH
system. As the Network was built for the purposes of wireline Telephone Services, it enables the Netia Group to
render Broadband Services as well.
The Netia Group offers Internet Access services, which cover almost the entire country. The Netia Group offers
fixed and several forms of switched Internet Access. As at the date of preparing the Prospectus, the Netia Group
had opened Internet access nodes in the largest conurbations in Poland.
2.2 Basic goods and services; core areas of activity
All services offered by the Netia Group are related to telecommunications services, with the exception of Trunk
Services. These services include Telephone Services, as well as Data Transmission and Commercial Network
Services.
Within the scope of Telephone Services, the Netia Group offers a range of services which, due to their various
characteristics, are regarded as ancillary to common wireline Telephone Services provided by means of Line
Switching. These include: Centrex, ISDN, the “Komfort” voice mail and the “Komfort Plus” voice and fax mail,
switched Internet Access and additional Telephone Services such as call forwarding, wake-up calls, automatic
switching of local calls (PABX), call barring, hotline, conference calls. Voice Services (except for local calls)
and switched Internet Access are also offered as Indirect Services to customers of other operators. The Netia
Group has been providing international telephone services since January 1, 2003, and since April 2003 – also
intelligent network services (such as “0-700”, “0-800” or “0-801”). Since April 15, 2004, the Netia Group has
offered a new service of broadband Internet Access using ADSL technology, named “Net24”, directed at those
customers of the Netia Group who have both Analogue Lines and ISDN lines.
Other telecommunications services include e.g. Data Transmission, Digital Leased Lines and fixed Internet
access. In September 2001, the Netia Group began to offer new Frame Relay services as part of its Data
Transmission services. Moreover, the Netia Group offers services based on the use of telecom services, e.g.
voice transmission services or basic Host Services (e-mail, webpages) or related to the use of
telecommunications infrastructure owned by the Netia Group, e.g. Equipment Co-location Services.
Commercial Network Services are provided as two groups: (1) leasing services and services related to the
external use of the resources of Netia’s Backbone Network, and (2) services related to the transit and termination
of telecommunications traffic.
Acting through the company Uni-Net, the Netia Group offers also Trunk Services within the entire territory of
Poland and sells radio communication equipment.
2.3 Plans and forecasts related to factors affecting future performance
Achieving the leading position of an independent telephone operator in Poland has been, and remains, the
strategic objective of the Issuer and other companies of the Netia Group. In the first years of its activity, the
Netia Group concentrated on the construction of its network and the development of voice transmission services,
Data Transmission and Commercial Network Services. These efforts allowed the Netia Group to achieve its
strategic objective. In order to maintain this position on the continuously changing market, the Netia Group plans
to expand its activity by taking over other entities and through organic development.
The closing of arrangement proceedings in Poland and the Netherlands in 2003, as well as the proceedings
conducted in the United States concerning the approval of the arrangement plans adopted in Poland and the
Netherlands, have enabled the subsidiaries of the Netia Group to regain solvency. The restructuring did not result
in a complete elimination of the Netia Group’s debts. Apart from the redemption of its bonds, pursuant to the
Arrangements, the Netia Group will have to repay its Arrangement Obligations not exchanged for Series H
Shares by 2012, the nominal value of which is approximately PLN 11,872,000 (out of which PLN 6,033,000 are
accounted for by obligations towards Merrill Lynch). The Issuer’s Management Board has decided on an earlier
repayment of these obligations, either by offering the Offered Shares to the Entitled Persons under this
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Prospectus, or by repayment in cash. Any amounts equal to the amount of the Arrangement Obligations which
cannot be settled through any of the methods described above shall be deposited with the court. Netia’s
indebtedness comprises the part of Netia’s indebtedness which existed before the Issuer merged with its
subsidiaries and arose under the guarantee granted by the Issuer to the holders of the bonds issued in years 1997-
2000 by the Issuer’s Dutch subsidiaries and to the parties to the swap agreement, as well as the indebtedness
assumed from Netia Telekom following the latter’s merger with the Issuer. Netia plans to settle all of its
obligations under both the Arrangement of the Issuer and the Arrangement of Netia Telekom by way of the
issuance of the Offered Shares. In accordance with the conditions thereof, the arrangements encompass all
receivables, including those of whose existence the Issuer was not aware. Therefore, the total Issue Price of the
Offered Shares is higher than the amount of indebtedness stated in the lists of receivables submitted in the course
of the arrangement proceedings.
The outstanding license fee liabilities of El-Net as of the day of preparing the Prospectus, of a nominal value of
EUR 113,662,000 (the equivalent of PLN 479,085,000 according to the average exchange rate of the NBP as at
November 30, 2004), acquired together with the acquisition of El-Net, are subject to a redemption process in
exchange for incurred and future investment outlays. The Management Board believes that these liabilities will
be redeemed in accordance with the valid provisions of law. The said liabilities are disclosed in the financial
statements of the Netia Group at their fair value, reflecting the opinion of the Management Board, allowing,
however, for a certain risk related to future investment outlays and other risk types related to the redemption
process of such liabilities.
The primary goal of the Netia Group in the nearest future is to continue to improve the efficiency of its
telecommunications activity by increasing the share of Business Clients in its total number of customers,
increasing the rate of usage of the Netia Group network and by launching new products.
The Netia Group will aim to maximize the rate of usage of the constructed Backbone Network and Access
Network, at the same time further extending its infrastructure to new areas, which will guarantee a fast return on
the investment made. Additionally, the Netia Group plans a gradual development of its own ATM and IP
network wherever the demand for Fast Data Transmission Services and Internet Access appears.
The Netia Group is working on the further development of its Indirect Services, including switched Internet
Access (hence the introduction of the 020-9267 Access Number), at present only available to its own customers,
with future inclusion of customers of TP S.A. after TP S.A. has fulfilled the provisions of the relevant decision of
the President of the URTiP. Moreover, the Netia Group plans a further development of the Freephone Services
“800”, Split Charge Services “801” and Audio-Textual Services “700”.
In August 2004, Netia extended its ADSL offer, originally introduced in April 2004, ensuring a choice of Data
Transmission speeds (with an unlimited quantity of data transmitted) between the options “Net24 Premium” and
“Net24 Komfort” (the download speed is 640 kb/s and 128 kb/s respectively, and the outbound speed is 160 kb/s
and 64 kb/s). As of November 5, 2004, Netia customers were using 12,264 ADSL ports.
Currently, the Netia Group (excluding El-Net) offers local Telephone Services within an area inhabited by
approximately 40% of the population of Poland, and the subscribers of the Netia Group are located within 15
number zones in Poland. The ownership of the nationwide Backbone Network and the possible extension of the
existing Access Network enable the Netia Group to expand its business and make it independent of the networks
of other operators. The Netia Group does not plan any considerable extensions of the Access or Backbone
Networks, but instead wants to focus on better use of the existing network. Using the present infrastructure, the
Netia Group wants to expand its activity to other conurbations, offering a full range of telecom services
(Telephone Services, Internet Access Services and Data Transmission Services).
The market for Data Transmission and leased lines, which has not been dominated by the national operator TP
S.A. to the same extent as other related markets, discloses the strongest revenues growth potential. The dynamic
expansion of this sector of the telecom services market will be stimulated by increasing demand for fixed
Internet Access and corporate virtual networks.
The increasing liberalization of the telecommunications market in Poland and the change in the legal
environment of this sector lead to the conclusion that competition in this field will increase considerably in the
mid-term perspective. It is very likely that telecom operators will be performing consolidations, seeking the
synergy and convergence of services. Consolidation of telecom service providers will result in the extension of
product ranges of individual operators, including fixed-line voice telephony, Data Transmission, wireless
telephone services, fixed and switched Internet Access, as well as the presentation of media and information
content (cable or satellite television platforms) and internet portals. An additional element affecting the
development of the telecommunications market in Poland is the recognition of TP S.A by the Office of
Telecommunications and Post Regulation as the dominant operator on the domestic market for general telecom
services and domestic leased lines services. The relevant decision of the Office of Telecommunications and Post
Regulation has obliged TP S.A. to interconnect networks upon another operator’s request and to present an offer
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defining the framework terms of agreements regulating the principles of cooperation of operators within the
interconnected networks and the principles of settlements among them, based on cost rates. The New
Telecommunications Law provides a basis for extending TP SA’s obligation to interconnect networks, by a
decision of the President of the URTiP, by providing other forms of access to its network. Moreover, the
recognition of TP S.A as a dominant, and, within the meaning of the New Telecommunications Law, a
significant, entity on the said markets, results in its obligation to prepare and submit to the President of the
URTiP an offer defining the framework terms of agreements on access to a local subscriber loop and an offer
defining the terms of entering into lease-line agreements with other telecommunications providers. A significant
factor shaping the telecommunications market in Poland will be the continuing process of liberalization of the
sector.
2.4 Strategy and development of the Issuer and the Netia Group
As a result of its Restructuring, previous Creditors of the Netia Group have become holders of most of its Shares,
which led to the change of control over the Netia Group at the beginning of 2003.
In May 2003, the Management Board adopted the main objectives of the Netia Group’s five-year strategic plan,
approved by the Supervisory Board, according to which the Netia Group’s primary goal is to achieve the status
of the most popular telecom service provider for Business Clients in Poland.
The Netia Group will concentrate on the provision of comprehensive, high value-added telecom services,
directing its future growth and the extension of its product range towards the needs of Business Clients, while
simultaneously ensuring high standards of services provided for the mass market sector. The Netia Group plans
to achieve a maximum level of customer satisfaction, offering, apart from traditional Voice Services, advanced
telecommunications solutions, including Data Transmission, Internet Access and Broadband Services.
While maintaining its current performance, the Netia Group plans to continue the trend of double-digit revenue
growth and to increase the EBITDA margin by extending its range of services provided to Business Clients. The
above aim is to be achieved in two ways: (i) by taking over other companies/entities, (ii) by an economically
justified extension of the telecommunications network, expanding the access areas through organic development
or the purchase of assets, and (iii) by launching new products or services. Investment on the mass market will be
directed towards decreasing customer resignation and disconnection rate (customer churn rate) and maintaining
the existing customer base. The development of the Netia Group will be financed from the Company’s own
funds and savings from: (i) optimizing its activity on the mass market, (ii) introducing subsequent operational
improvements and (iii) financial synergy effects, resulting from merges with the acquired entities. At the same
time, takeovers of large entities, including mergers, may have to be financed separately.
The basic objectives of the Netia Group’s activity are as follows:
- to launch new products and services for Business Clients, according to their needs and technological
trends;
- to reorganize the procedures of service provision to Business Clients so as to ensure a higher level of
services to key customers, i.e. the customers generating or expected to generate a considerable share of the
total revenues of the Netia Group. In order to achieve this aim, relevant units within the Company will
have to be reorganized and expenditures for operating activity and investment will have to reallocated
accordingly;
- to optimize the level of services and expenditures related to the mass market by using the available
effectiveness of the new customer relationship management (CRM) system;
- to purchase other telecommunications companies, the takeover of which will support the strategic
objectives of the Netia Group concerning the focus on the Business Clients segment; and
- to achieve at least 10% average annual revenue growth and stable profitability ratios, guaranteeing an
improvement of margins year on year, resulting in doubling the revenues and achieving an EBITDA
margin of 35% by 2008.
2.5 The Managers
As of the date of preparing the Prospectus, the following persons were the Managers:
Wojciech Madalski – Chairman of the Board,
Irene Elizabeth Cackett – member of the Board,
Kent Royall Holding – member of the Board,
John Paul Kearney – member of the Board.
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2.6 Shareholders holding at least 5% of the votes in the General Shareholders’ Meeting
According to the information provided to the Issuer by its shareholders until December 24, 2004, as subsequently
published by the Issuer in the form of current reports published on February 17, 2003, August 29, 2003,
September 1, 2003 and February 26, 2004, in consideration of the number of the shares making up the share
capital as at December 24, 2004, the following shareholders held more than 5% of votes at the General
Shareholders’ Meeting:
- subsidiaries of J.P. Morgan Chase & Co., with its registered office in London, Great Britain – 7.92%,
- subsidiaries of Montpelier Asset Management Ltd, with its registered office in London, Great Britain –
5.80%,
- subsidiaries of SISU Capital Limited, with its registered office in George Town, the Cayman Islands –
6.51%,
- subsidiaries of Griffin Capital Management Ltd, with its registered office in Gibraltar – 5.61%.
3 HIGH RISK FACTORS FOR PURCHASERS OF THE SHARES
3.1 Internal factors
3.1.1 Risk of changes to the Netia Group’s strategy
The performed Restructuring has become the basis for developing a strategy which enables the Company to
pursue its mid-term and long-term objectives. On May 6, 2003, the Supervisory Board approved the basic aims
of the Netia Group’s development strategy. The Business Plan was approved by the Supervisory Board on
October 3, 2003 and is being executed in accordance with the objectives. However, it is possible that the detailed
solutions it includes will be modified and it cannot be predicted whether such changes may adversely affect the
operating activity of the Netia Group, its financial standing or its overall performance.
3.1.2 Risk of changes in the shareholder structure, which may influence business activity
As a result of the Restructuring, Netia is not controlled by any strategic investors, and its Shares are held by a
large number of shareholders. Following the issue of Series H Shares on December 23, 2002, the share of the
pre-Restructuring shareholders in the share capital fell below 10%. Moreover, on May 16, 2003, the pre-
Restructuring shareholders obtained Subscription Warrants entitling them to acquire Series J Shares. The Issuer
also granted options for Series K Shares to certain members of the Management Board and officers as part of the
Stock Option Plan. If all subscription warrants and all options for shares are used and the Issue of the Offered
Shares is conducted at its maximum value, the Offered Shares and Series J and Series K Shares will constitute
23% of the Issuer’s share capital. Consequently, the share of the present shareholders in the share capital of the
Company will be reduced. Neither Netia’s corporate documents nor the provisions of Polish law provide for any
serious restrictions to changes in control over the Issuer in the event that third parties should acquire a
considerable number of the Shares. Thus, such changes in control may occur and materially affect the
composition of the Supervisory Board and the Management Board, and, in turn, the strategy and business activity
of the Netia Group. Due to the above, the Issuer cannot guarantee that the newly adopted strategy of the Netia
Group will be pursued in accordance with its initial objectives. Furthermore, it is possible that the new
shareholders might develop a new strategy that may be materially different to the current one.
3.1.3 Risk connected with the impact of potential future takeovers and acquisitions
One of the basic objectives of the strategy adopted by the Netia Group, which may materially affect its revenues
and financial performance, is takeovers or mergers with other entities. Should the Company fail to achieve this
aim, it may not be able to produce the planned operating and financial results in the future. Moreover, upon the
Company’s takeover of another entity, the process of fully integrating this entity may carry high risks, e.g.
employment termination by key employees, the loss of a certain segment of its customers or high costs of the
entire integration process.
The highly fragmented market of alternative operators rendering wireline telephone services may result in their
increasing consolidation within the Polish market. The Issuer shall evaluate potential takeovers and acquisitions
whenever such possibilities should arise. The performance of such transactions requires the special involvement
of the Company’s high-ranking managers and may entail high costs connected with the identification and
evaluation of candidates for the takeover, the negotiating of agreements and integration of the entities acquired.
The Netia Group may request additional funding in order to conduct such transactions.
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The benefits from potential takeovers will depend mostly on the extent to which the Netia Group is able to
integrate the acquired entities into its structures. Future company acquisitions may entail the acceptance of
existing liabilities and the risk of concealed liabilities. The Netia Group cannot guarantee that beneficial takeover
possibilities will arise in the future, nor, if such possibilities arise, that they will result in the successful
integration of the acquired entities with the Netia Group. Failures to integrate the acquired entities into the
structures of the Netia Group may adversely affect its activity and its financial standing.
3.1.4 Technological risk
The telecommunications sector is an area witnessing dynamic technological changes. In designing and expanding
its networks, the Netia Group uses the newest technical solutions. However, what cannot be predicted is how the
Netia Group’s activity may be affected by technological advances in the field of fixed-line telephony, wireless
transmission, and voice transmission protocol via the Internet or cable television telephony. In particular, the
activity of the Netia Group may be affected by the tendency to provide telecom services via wireless or portable
platforms, with wireless broadband access and third generation mobile cellular telephone systems equipped with
the IP. Even if the Netia Group succeeds in adapting its activity to such technological advances, it cannot be
guaranteed that other market participants with whom the Netia Group must cooperate will be able to adapt to
these changes, at least to the same extent.
3.1.5 Risk of employment termination by key executives and difficulties related to the recruitment of
new, competent executives
The activity of the Netia Group is dependent on the quality of work of its staff and employees in executive
positions. The Management Board cannot guarantee that the possible termination of employment by some of its
key executives will not adversely affect the financial standing and performance of the Netia Group, which,
should some of its executives terminate their employment, may then lack executives with sufficient knowledge
and experience in the field of management and operating activity. Changes in composition at the Company’s
executive levels may result in disruptions in the Netia Group’s business activity.
3.1.6 Risk related to the performance of the Arrangements
As a result of the merger of Netia with its subsidiaries (including Netia Telecom and Netia South), Netia has
assumed all of the liabilities related to the performance of Arrangements concluded by it subsidiaries. The
receivables under the Arrangement of Netia South have expired after Netia South merged with the Issuer because
the Issuer was Netia South’s only creditor. Pursuant to Article 20 sections 3 and 4 of the Law on Arrangement
Proceedings, the terms of the valid Arrangements are identical for all creditors of Netia, with the exception of
those creditors having minor receivables, for which more favourable settlement conditions have been drawn up.
Netia must perform the Arrangements by the year 2012. Article 74 section 2 of the Law on Arrangement
Proceedings states that if the debtor fails to fulfil its obligations arising under an arrangement, the court may
revoke the arrangement upon a petition of the creditor or trustee and following a trial. Moreover, pursuant to
Article 77 of the Law on Arrangement Proceedings, should an arrangement be revoked, the amounts paid
thereunder shall not be refunded, but will be credited towards the receivables. Netia plans to settle all of its
obligations under both the Arrangement of the Issuer and the Arrangement of Netia Telekom by way of the
issuance of the Offered Shares. The Issue of the Offered Shares and the manner of payment of the Issue Price by
a set-off thereof with the receivables under the Arrangement of the Issuer and the Arrangement of Netia Telecom
(including those which were assigned to the Creditors’ Trustee) will enable the arrangement proceedings to be
closed. Should the Issue of the Offered Shares not be performed or should the Issuer abandon the Issue, and
consequently the circumstances allowing the arrangement proceedings to be completed do not occur, the risk of
revoking the Arrangements may arise in the future (including the Arrangement of the Issuer and the Arrangement
of Netia Telecom), if the Company fails to perform them.
3.2 External factors
3.2.1 Risk resulting from changes in the Telecommunications Law
The New Telecommunications Law includes provisions compliant with the new package of EU directives in the
field of telecommunications, i.e. “Package 2002”. The New Telecommunications Law entered into force on
September 3, 2004, with the exception of several provisions which shall enter into force on January 1, 2005.
On the basis of the New Telecommunications Law, the President of the URTiP may impose obligations on
operators controlling access to subscribers, so as to ensure that end users are able to communicate with users of
another telecom provider, including the obligation to interconnect networks. The following obligations may be
imposed upon a telecommunications provider which is deemed to have a significant position on one of the
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telecom markets listed in the resolution of the competent Minister of Telecommunications: the obligation to
grant other operators access to the network, especially with regard to its interconnection or mutual use of the
local subscriber loop; the obligation to calculate costs and relate the network access tariffs to these calculations;
the obligation to maintain regulatory accounts separately for each of the telecom services. The New
Telecommunications Law does not define the size of the area in which the market position of a
telecommunications provider is evaluated. As a result, the President of the URTiP may name
telecommunications providers as having a significant position in a small area, in which even a small
telecommunications provider can have a significant market share. This will serve as basis for imposing any other
regulatory obligations upon such company, which will have to be proportional to the superior market position of
the company, i.e. to the extent that it prevents effective competition on the given telecom market.
Pursuant to the New Telecommunications Law, each public telecommunications network operator is obliged to
conduct negotiations concerning interconnection agreements upon another telecom operator’s request. However,
the President of the URTiP shall be obliged to resolve any disputes between the parties to the negotiations by an
administrative decision, which shall replace the relevant agreement only if one of the negotiating parties is a
public telecommunications network operator obliged to provide the interconnection.
The New Telecommunications Law states that the obligation to provide universal services shall rest with the
operator selected pursuant to a decision of the President of the URTiP issued after a tender procedure. Should no
bids for the provision of a universal service or particular sub-services be submitted, the President of the URTiP
shall entrust the provision of the universal service to a provider of generally available fixed-line telecom services
with a significant market position. Telecommunications providers whose revenues from telecom activity exceed
PLN 4,000,000 will have to co-finance the performance of this obligation, by co-financing the funding of
universal services, if the funding has been assigned to the telecommunications provider selected on the basis of
the decision of the President of the URTiP. The share in the funding that a telecommunications provider shall be
obliged to provide shall also be established by a decision of the President of the URTiP; however, it may not
exceed 1% of the telecommunications provider’s revenues in the given calendar year. The amount of the share in
the funding of the universal service shall constitute a deductible cost, as defined by the Act on Corporate Income
Tax.
The present stage of development of the telecommunications market in Poland does not guarantee that the Netia
Group will not be obliged to co-finance the funding of universal services on the terms described above.
However, this obligation shall not arise until the end of 2005.
Should no provider of generally available fixed-line telecom services with a significant market share be selected
on the basis of the provisions of the New Telecommunications Law, the obligation to provide services shall rest
with the provider of the said telecom services having the highest number of subscriber lines within the given
area. However, until telecommunications providers obliged to provide a universal service have been selected, the
obligation to provide a universal service shall rest with the provider deemed as having a significant position on
the market for telephone services in fixed-line telephone networks on the basis of the previous regulations, i.e.
TP S.A. This operator shall not be entitled to receive funding on the grounds of providing universal services.
Until telecommunications providers obliged to provide a universal service on the basis of the New
Telecommunications Law have been selected, the Netia Group shall not be obliged to participate in providing
additional payments.
The New Telecommunications Law shall oblige telecommunications providers to pay annual
telecommunications fees of up to 0.05 % of the provider’s annual revenues from telecommunications activity
generated in the financial year 2 years prior to the year to which the annual fee pertains, if the annual revenues
exceed PLN 4,000,000. The amount, manner of calculation and payment of the fee shall be established by way of
a resolution. The amount of the annual telecommunications fee shall constitute a deductible cost as defined by
the Act on Corporate Income Tax.
Dependence of the Company on TP S.A. due to interconnections
The provision of telecommunications services by the Netia Group is dependent on access to the telephone
network of TP S.A. With several exceptions, telephone calls initiated in the Netia network and terminating
beyond it, including most international and domestic long-distance calls of Netia subscribers, are, due to
technical reasons, performed via the network of TP S.A. Pursuant to the New Telecommunications Law, TP S.A.
is obliged to interconnect telecom providers such as Netia with its network. Operating subsidiaries of the Netia
Group, of whom Netia is a legal successor, concluded interconnection agreements with TP S.A. for each area in
which Netia conducts telecommunications activity on the basis of its telecommunications permit. However, the
delays and difficulties that arose in the past in relation to concluding interconnection agreements with TP S.A.
led to Netia postponing commencement of commercial activity in certain areas. Problems also appeared in
connection with the conclusion of an interconnection agreement with TP S.A. concerning the provision of
domestic long-distance calls by Netia 1. In addition, TP S.A. currently fails to fully execute the decisions of the
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President of the URTiP concerning interconnection tariff settlements in the field of interconnecting Internet
access of the “0-20” type. Further difficulties or delays related to the establishment of interconnections with
TP S.A. may limit Netia’s capacity to provide these telecommunications services and materially and adversely
affect its business activity.
In September 2001, the President of the URTiP issued a decision deeming TP S.A. a dominant operator on the
market for telephone services provided in fixed-line telephone networks. Originally, TP S.A. appealed against
this decision before the Antimonopoly Court. However, it withdrew the appeal in May 2002, following the
cancellation by the President of the URTiP of the fine imposed upon TP S.A. amounting to PLN 30,000,000 for
the non-fulfilment of the decision of the Minister of Telecommunications of December 15, 2002 establishing the
detailed terms of cooperation and settlements between TP S.A. and Niezależny Operator Międzystrefowy
Sp. z o.o., and a fine of PLN 50,000,000 for submitting incorrect information to the President of the URTiP
concerning the revenues of TP S.A. from leased lines, necessary for evaluating the market position of TP S.A.
With reference to the decision of the President of the URTiP which deemed TP S.A. a dominant operator,
TP S.A. was obliged to submit for the approval of the President of the URTiP framework offers defining the
terms on which TP S.A. would conclude interconnection and lease-line agreements with other operators
(Framework Agreements). Since October 1, 2003, TP S.A. has also been obliged to prepare and submit for the
approval of the President of the URTiP an offer defining the framework terms of agreements on access to local
subscriber loops. On June 18, 2003, the President of the URTiP rejected the drafts of four framework offers
concerning the terms of interconnection agreements submitted by TP S.A. On May 20, 2003, another draft
framework offer of TP S.A. defining the terms of network interconnection agreements was rejected for
procedural reasons, because TP S.A. had not withdrawn its complaint filed at the Supreme Administrative Court
concerning the decision of the President of the URTiP on the rejection of the previous draft framework
interconnection offers of TP S.A. The President of the URTiP has declared that the procedure concerning the
approval of the previous draft framework offers is still in progress and that no applications to approve the new
draft framework offers may be made until a decision in this case has been issued by the Supreme Administrative
Court or until TP S.A has withdrawn the complaint. Other draft framework offers have been rejected by the
President of the URTiP because they include numerous references to the draft framework interconnection offer,
so that the remaining three draft framework offers could not function independently. The President of the URTiP
has also deemed the presented draft framework offers as inconsistent with the provisions of the
Telecommunications Law, in particular due to: the lack of justification for using different tariffs for various types
of operators; the incorrect classification of services; restricting the permitted interconnections to types of services
specified in the framework offers; restricting the operators using the framework offers to operators offering local,
domestic long-distance, international long-distance and cellular telephone services; introducing the requirement
for other operators to provide a minimum transit traffic volume and charging additional fees for traffic below this
volume. Upon the approval of the framework offers of TP S.A., the terms of agreements presented by TP S.A. to
other operators should not be less favourable than the terms defined in the framework offers. Moreover, each
agreement should be negotiated separately. Should the parties fail to reach an agreement on the terms of
interconnection, the President of the URTiP may establish the terms of such an agreement by way of an
administrative decision. As a result of changes in the New Telecommunications Law, the notion of an operator
with a dominant position is not used anymore and TP S.A. is now classified as an operator with a significant
market share. Nevertheless, its obligations described above have not changed. Pursuant to the temporary
provisions of the New Telecommunications Law, the aforementioned obligations of TP S.A. will remain in force
until the President of the URTiP issues a decision selecting a telecom operator with a significant market share on
the relevant market, or imposing the regulatory obligations specified in the New Telecommunications Law upon
it.
On January 5, 2004, TP S.A. submitted another draft offer to the President of the URTiP defining framework
terms of interconnection agreements, replaced by the draft of February 3, 2004. The KIGEiT (Polish Chamber of
Commerce for Electronics and Telecommunications), of which Netia is a member, was admitted to the said
proceedings and submitted comments concerning the draft offer. It moved for the rejection of the draft offer as it
was inconsistent with the provisions of law, did not allow for current market and economic conditions and did
not ensure effective competition. Despite the reservations voiced by KIGEiT in the course of the proceedings,
by virtue of the decision of March 5, 2004, the President of the URTiP approved “the Framework Offer of
TP S.A. concerning Interconnections”. On March 23, 2004, KIGEiT filed an accusation against the
aforementioned decision by moving for its reconsideration. KIGEiT claimed that the decision on the approval of
the offer was issued in breach of the provisions of administrative procedure and material law, in particular the
Telecommunications Law.
By virtue of a decision of June 30, 2004 the President of the URTiP upheld the decision on the approval of
TP S.A.’s offer. On August 4, 2004, the KIGEiT challenged the decision of the President of the URTiP with the
Provincial Administrative Court in Warsaw. By way of an order dated November 16, 2004, the Provincial
Administrative Court in Warsaw refused to stay the enforceability of decision of the President of the URTiP. On
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November 29, 2004, the KIGEiT filed an interlocutory appeal against the said order with the Supreme
Administrative Court in Warsaw through the Provincial Administrative Court. By the Prospectus date, the
Supreme Administrative Court has not ruled on staying the enforceability of the decision of the President of the
URTiP on the approval of TP S.A.’s offer, nor has the Provincial Administrative Court in Warsaw issued a
judgement in the case initiated by the KIGEiT’s interlocutory appeal. The Management Board cannot guarantee
that the offer will be amended, despite the legal deficiencies raised in the decision of the President of the URTiP
on the approval of the offer of TP S.A.
As the offer has been admitted to circulation, the terms of interconnection agreements specified in the offer may
constitute a negotiating position of TP S.A. in talks concerning the conclusion of an interconnection agreement.
Pursuant to law, TP S.A. is not obliged to provide operators applying for interconnection with contractual terms
more favourable than those specified in the offer. Agreements concluded on the basis thereof will thus probably
provide for higher fees for the exchange of services in interconnected networks than previously established by
arbitrary decisions of the President of the URTiP. Should the Company enter into a new interconnection
agreement with TP S.A., the higher fees could be compensated for by incorporating the so-called asymmetrical
rates into the agreement, to the benefit of the Company. This is justified with regard to the valid provisions,
because Netia, as opposed to TP S.A., is not obliged to set rates for the traffic in the interconnected networks on
the basis of costs. So far the President of the URTiP, when issuing decisions establishing the terms of
interconnection agreements, has used only symmetrical rates. The Management Bard cannot guarantee that the
President of the URTiP will change its current practice, even considering the fact that one of the independent
operators has been able to enforce asymmetrical rates in its agreements.
Pursuant to the New Telecommunications Law, as well as the provisions of the act amending the
Telecommunications Law, which entered into force in October 2003, the President of the URTiP is guaranteed
the right to influence the content of framework offers, including the right to change interconnection fees,
including the right to adapt the same to legal requirements, i.e. according to the so-called cost principle. In case
the affected operator submits a draft framework offer on telecommunications access that is not compliant with
the provisions of law and the needs of the market indicated by the President of the URTiP, the New
Telecommunications Law obliges the regulator to change such draft framework offer and approve the same and,
in case the affected operator does not submit the framework offer within the prescribed deadline, to determine its
contents. By virtue of those rights, the President of the URTIP is conducting proceedings aimed at determining
the contents of the framework offer of TP S.A. concerning the co-use of certain infrastructure. The KIGEiT, of
which Netia is a member, is participating in the proceedings as a party.
On September 2, 2004, the President of the URTiP initiated proceedings ex officio aimed at determining the
contents of the framework offer of TP S.A. concerning the access to the local subscriber loop. Under the
temporary provisions of the New Telecommunications Law, these proceedings are conducted in accordance with
the rules set forth in the previous version of that law. The KIGEiT, of which Netia is a member, is participating
also in these proceedings as a party.
A significant rise in the fees that the Netia Group will be obliged to pay by virtue of future interconnection
agreements (excluding renewable agreements), or the failure to decrease interconnection fees in the event of a
possible reduction of telephone charges for Individual Customers, may result in its achieving lower margins or
the inability to offer telephone services at competitive prices. Moreover, the interconnection fees that Netia is
obliged to pay for international or domestic long-distance calls via the network of TP S.A. are computed on the
basis of relevant TP S.A. tariffs and not the prices that Netia’s own customers are charged. Therefore, the change
in Netia rates without an analogous change in TP S.A. tariffs may adversely affect Netia’s financial performance.
3.2.2 Risk of increased competition
The Netia Group’s main competitors in the field of telephone services are TP S.A. and cellular network
operators, and in some geographic areas also other operators providing wireline Telephone Services. Within the
unregulated market for Data Transmission services, the main competitors are numerous providers of various
sizes, the most significant of which is TP S.A. Poland has witnessed a considerable increase in competition,
which, as can be expected, will intensify even further, considering that since January 2002, every operator
meeting the minimum requirements set forth in the Telecommunications Law has been able to obtain a
telecommunications permit for the provision of telecom services. Pursuant to the New Telecommunications Law,
every telecommunications provider may pursue telecommunications activity on the basis of its entry into the
Register of Telecommunications Providers kept by the President of the URTiP. Netia is unable to evaluate the
extent to which new market participants will use the availability of such rights, particularly with regard to the
significantly lower costs of entering the market than those incurred by the Netia Group. The Warsaw market will
probably continue to witness intense competition for customers. The Management Board is unable to evaluate
the extent to which the intensification of competition will affect the Netia Group’s activity.
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Competition from TP S.A.
TP S.A. occupies a leading position among wireline Telephone Service operators in Poland. At the same time, it
enjoys a stable position on the market for Data Transmission and indirectly, through its dependent entity where it
holds a majority stake, on the cellular telephone market. Within the scope of wireline Telephone Services, the
Netia Group encounters competition from TP S.A. in all geographic areas it operates in. TP S.A. is a much larger
entity than the Netia Group and possesses much wider Backbone and Access Networks. It enjoys longestablished
relationships with many customers that the Netia Group considers as its target customers, including
many companies operating on the territory of the Netia Group’s operation. The infrastructure used by TP S.A. in
these territories is comparable to the infrastructure of the Netia Group in terms of the technologies employed.
Moreover, until the end of 2002, TP S.A. had the exclusive right to provide International Long-Distance Calls in
Poland and still maintains a leading position among operators of Domestic Long-Distance Calls, which enables it
to offer more flexible tariffs. It is difficult to predict what policies TP S.A. will pursue with regard to tariffs, the
selection of target markets and arrangements concerning access to its infrastructure and Interconnections as a
reaction to the extension of the network by the Netia Group and more intense competition from the Netia Group
in various areas of the country. However, the Management Board expects that TP S.A. will compete with the
Netia Group for prices and the most attractive customers. In the past, the Netia Group was forced to lower its
prices in order to attract new customers and retain the current ones, and such measures may also be necessary in
the future. The Management Board expects that TP S.A. will maintain a strong competitive position against the
Netia Group on the Warsaw market and in most geographic areas where the Netia Group provides Telephone
Services, and will continue to compete with the Netia Group in other fields, including Data Transmission
services and Internet Access. It is possible that aggressive competition from TP S.A. will materially and
adversely affect the revenues of the Netia Group and the results of its operating activity.
TP S.A. owns most Local Loops and offers other operators access to the network of these Local Loops on terms
that, in many cases, render the addition of a customer to the network too expensive. Even though the New
Telecommunications Law provides a basis for the President of the URTiP to oblige operators with a dominant
market share to enable other enterprises to use its network on equal terms, in many cases the Netia Group is
unable to negotiate satisfactory terms with TP S.A. It cannot be guaranteed that the Netia Group will be able to
expand its network to urban areas, where TP SA’s extensive telecommunications infrastructure already exists,
unless the President of the URTiP should issue relevant decisions, and the principles of interconnecting other
operators to the Local Loop are regulated.
Pursuant to the Telecommunications Law, since January 1, 2003, operators other than TP S.A. have also
obtained permits to provide international telecom services, at a cost of EUR 2,500 per permit. The plans of the
Netia Group allow for projected revenues arising from its activity on the International Calls market. The ability
to provide such services is dependent on ensuring the necessary infrastructure and executing the terms of
interconnection agreements with TP S.A.
As TP S.A. occupies a leading position on the telecommunications market in Poland and the Netia Group’s areas
of activity are usually different from those of other independent operators, all indirect subscribers of the Netia
Group that use its domestic long-distance telephone services are subscribers of TP S.A. So far, TP S.A. has
refused to issue invoices to its subscribers using long-term telephone services via Netia, which forces the Netia
Group to conclude separate agreements with such customers and issue separate invoices. This inconvenience
discourages many potential users of the Indirect Services rendered by the Netia Group as part of their domestic
long-distance telephone services, which, consequently, results in a decrease of potential revenues. Moreover, the
necessity to conclude separate agreements and issue separate invoices entails additional costs. This situation may
continue.
Competition from other independent operators
Before the Telecommunications Law entered into force on January 1, 2001, the Minister of Telecommunications
granted licenses for the provision of local telecom services within a given geographic area (usually within a
given number zone) to one private operator (apart from TP S.A.). With regard to the system of
telecommunications permits issued on the basis of the said Law, since January 1, 2002, obtaining licenses has
entailed much higher costs. As a result of the fact that obtaining a permit is significantly cheaper than obtaining a
license, and the fact that the lengthy process of obtaining a license has been eliminated, many new operators have
obtained such permits. Pursuant to the New Telecommunications Law, telecommunications activity may be
pursued on the basis of an entry in the Register of Telecommunications Providers kept by the President of the
URTiP. Therefore, the Netia Group expects the number of operators active in the areas it conducts its activities to
increase. In 2003 there was a swap of license fee liabilities of the then-operating subsidiaries of the Netia Group,
and in the case of the fees El-Net was obliged to pay, necessary measures were introduced to enable their swap
for investment outlays. However, it cannot be guaranteed that the Netia Group will not be forced to pay these
fees in the future, which may give new market participants certain advantage over the Netia Group.
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In some areas where the Netia Group operates, there are large institutions with their own internal
telecommunications networks (where the users of the telecom services of such institutions include, additionally,
the inhabitants of the given area), which reduces the potential revenues that the Netia Group could generate in
these areas, and such operators may be a potential source of competition in the future.
Competition from cellular mobile telephone operators
Cellular telephony services have recently been deemed as competitive to the services of wireless telephone
operators. This can be explained by the increased price competition from cellular network operators, which then
lowered their rates in relation to operators of wireline Telephone Services that continue to balance their tariffs.
Moreover, the offer of cellular telephone operators includes, among others, tariff plans based on a system of
prepayments for calls made, without additional subscription fees. These operators have entered into
interconnection agreements with TP S.A. on terms more favourable than for operators of wireline Telephone
Services. Additionally, in the light of Polish law, mobile cellular telephone services are not universal services.
Therefore, mobile cellular telephone operators are not obliged to provide services to all customers wishing to use
these services.
Other sources of competition
The Netia Group also encounters competition in the field of Voice Services from companies offering alternative
forms of such services, e.g. cable network services. Moreover, in the course of the development of the Data
Transmission and Internet Services, the competition from numerous providers of such services is increasing,
especially with regard to voice transmission technologies via the Internet, including providers that use the
broadband ADSL access. The future impact of the competition from providers of said services on the activity of
the Netia Group cannot be estimated.
Market consolidation
The highly fragmented market of alternative operators rendering wireline telephone services may result in their
increasing consolidation within the Polish market. In its pursuit of one of the objectives of the approved strategy,
that is, the acquisitions of other entities, the Netia Group does not dismiss any methods of consolidation, and it is
possible that it will continue to participate in mergers with competitors. However, the Netia Group’s role in the
consolidation process may be insignificant, in particular if no additional funding can be obtained. The
Management Board is unable to describe the impact of such consolidation on the financial standing of the Netia
Group and its impact on the shareholders of Company.
3.2.3 Risk related to decisions and permits of local authorities and agreements with owners of real
estate concerning access to such real estate
The development of the Netia Group’s telecommunications network will depend, among others, on obtaining
various local decisions and permits and having satisfactory access to real estate for the purpose of extending and
maintaining its telecommunications infrastructure, the so-called “rights of way”. In the past, there have been
several delays in obtaining the necessary decisions and permits and in concluding contracts related to the rights
of way, which have lead to delays in the construction of the network. Similar problems may also arise in the
future, which may contribute to delays in the extension of the network and the financial results of the Netia
Group. Delays may occur, in particular, when the companies of the Netia Group will be extending the network to
city districts which have a large proportion of historical buildings and are subject to protection. Due to the above,
the Netia Group may be forced (which has already happened in some areas) to apply alternative technologies,
such as a wireless local network. Moreover, the construction of the network may be delayed in densely populated
urban areas such as Warsaw due to lack of access to additional frequencies of radio communication.
3.2.4 Risk related to the occurrence of unpredicted events
Unpredicted events such as terrorist attacks, natural disasters and epidemics may disrupt the Issuer’s business
activity and result in considerable losses. These losses may concern the Company’s movable and immovable
property, financial assets and key employees. Unpredicted events may also result in additional operating costs
such as higher insurance premiums. They may also lead to a situation where the Issuer will not be able to receive
insurance cover with regard to all types of risk.
3.2.5 Risk related to the lack of stability of the Polish legal system
Frequent amendments, incoherence and the lack of a uniform method of interpretation of legal provisions, in
particular those relating to tax law, entail a risk related to the legal environment in which the Issuer conducts
business activity. Combined with a relatively long period during which tax liabilities are barred by limitation and
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the immediate enforceability of decisions issued by tax authorities, such circumstances may have a negative
impact on the activity, performance and financial standing of the Issuer.
3.2.6 Political and economic risk
The situation of the telecom sector in Poland and, accordingly, the financial standing of the Issuer, are closely
linked to several factors, affected both by the condition of the Polish economy and the regional economic
situation. The above factors include, among others, the increase or decrease of the Gross Domestic Product,
inflation, unemployment, the size and demographic characteristics of the population, as well as the development
of the industrial and service sector. Any future adverse changes of one or several of those factors, in particular a
deterioration of the Polish economy (and the resulting fall in the demand for the Issuer’s products and services)
may adversely affect the performance and financial standing of the Issuer.
3.2.7 Risk related to judicial proceedings against Netia
The following are pending judicial proceedings against the Company, instituted by:
- Merrill Lynch at the High Court of Justice, in London, Great Britain, concerning the payment of USD
8,676,000, with interest and legal fees. The suit was filed on March 5, 2004. The due amount sought by
Merrill Lynch arises under the swap agreement of March 30, 2001 by and between Netia Telekom and
Merrill Lynch, which was terminated on December 14, 2001. On November 5, 2004, Merrill Lynch and
Netia concluded a conditional settlement. If the Company performs its obligations under the settlement,
then Merrill Lynch will withdraw its suit in the case and waive its claim. The receivable in question is
connected with the issue of the Offered Shares because it is subject to the Arrangement of the Issuer and
the Arrangement of Netia Telekom;
- Newman at the Circuit Court in Warsaw, concerning the payment of PLN 45,554,000 in damages, including
statutory interest and costs of the trial from the day of filing the suit until the day of payment. The suit was
filed on September 30, 2004. Newman is seeking compensation for the damage suffered as a result of the
security established in favour of Netia in the form of an attachment over shares in Millennium, which
attachment remained in force from January 4, 2000 until October 1, 2002. The scheduled date of the
hearing is January 18, 2005. The suit is not in any way connected with the issue of the Offered Shares;
- Millennium and Genesis before the Circuit Court in Warsaw concerning declaring the Resolution of the
Extraordinary Shareholders’ Meeting of October 30, 2003 on the merger of Netia with its subsidiaries, null
and void. The suit was filed on November 23, 2003. The scheduled date of the hearing is January 12, 2005.
The suit is not in any way connected with the issue of the Offered Shares;
- two shareholders before the District Court for the City of Warsaw in Warsaw on declaring the Resolution
of the Extraordinary Shareholders’ Meeting of April 4, 2002 on the manner of allocating subscription
warrants (entitling the placement of subscriptions for Series J Shares), null and void. The suits were filed
on April 29, 2004. In the first of the cases, the judgment is due to be announced on February 15, 2005, and
in the second case, the date of the hearing has not yet been scheduled. The suits are not in any way
connected with the issue of the Offered Shares.
Moreover, Millennium and Newman (the only shareholder of Millennium) have filed petitions with the
Bankruptcy Court requesting the Issuer to be declared bankrupt. The bankruptcy petitions were filed with the
Bankruptcy Court on, respectively, July 16, 2004 and July 21, 2004 (both petitions were combined to be jointly
examined by the court under case reference number sygn. akt XVII GU 703/04). On December 14, 2004, the
Bankruptcy Court dismissed Millennium and Newman’s combined petition. The order is not valid and final.
Adjudications issued in the abovementioned matters to the detriment of the Company may adversely affect the
operations, performance and financial standing of the Issuer.
3.3 Risk factors related to investment in the shares
3.3.1 Risks related to Polish law provisions on company takeovers that may adversely affect the value
of shares
Some of the legal regulations valid in Poland may restrict the possibility of assuming control over the Issuer, and
hence make it impossible for the shareholders to sell their Shares on favourable terms. The existing Shares have
been admitted to public trading by the Commission and are listed on the Stock Exchange, which has rendered the
Issuer a public company as defined by Polish law. Under the Act on the Protection of Competition and
Consumers, the consent of the President of the URTiP is required to effect purchases of shares representing more
than 25% of votes at the company’s General Shareholders’ Meeting. This provision applies to situations where
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PROSPECTUS OF NETIA SPÓŁKA AKCYJNA
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the total turnover of the entities participating in the concentration in the financial year preceding the year in
which the relevant notification is made exceeds the equivalent of EUR 50,000,000. The Law on Public Trading
in Securities requires the permission of the Commission for each purchase of shares in public companies
exceeding the limit of 25%, 33% or 50% of the total number of votes at the General Shareholders’ Meeting and a
notification to the Commission on reaching or exceeding 5% or 10% of the total number of votes at the General
Shareholders’ Meeting. Moreover, the Law on Public Trading in Securities imposes several restrictions and
information obligations in the event of purchasing the controlling stake of a public company. For example, if a
person or an entity purchases shares representing over 50% of votes at the General Shareholders’ Meeting of a
public company, in order to use the right to vote from such shares, this person or entity must announce a public
tender for the sale (at a price not lower than the average market price of the shares in the last 6 months, if the
shares have been in trading on the regulated stock market) of the remaining shares of such company, or sell the
excess of shares held, so as not to exceed the 50% limit.
Moreover, any person or entity intending, within a period shorter than 90 days, to purchase, in public trading,
securities representing over 10% of all votes at the General Shareholders’ Meeting of the given company, must
also make such purchase by announcing a public tender. The obligation to announce the public tender does not
arise in the case of purchasing shares in initial trading or an initial public offering, and is related only to
secondary trading.
3.3.2 Risk related to the refusal to admit the Offered Shares to exchange trading
The Offered Shares are admitted to exchange trading on the official market if they meet the requirements set
forth in the Regulation of the Council of Ministers dated July 17, 2001 on Determining the Conditions to be
Fulfilled by Official Exchange Markets and Issuers of Securities Admitted to Trading on such Markets (J.L. No.
86, item 939) and the Rules of the Warsaw Stock Exchange concerning this market. Pursuant to § 18 of the
Regulations of the Stock Exchange, the shares of the Issuer, whose shares of the same type are quoted on the
Stock Exchange, are admitted to exchange trading if the Issuer’s application for their admission includes a
declaration that: a) they are admitted to public trading, b) their tradability is unlimited, c) they were issued in
compliance with the principles of the public nature of exchange trading. The declaration made by the Issuer
shall have the same consequences as a resolution on the admission to exchange trading adopted by the
Management Board.
There is a risk that in the event that the Issue Price differs considerably from the listed price of the Shares listed
on the Warsaw Stock Exchange, these shares will be deemed as issued contrary to the principles of the public
nature of stock exchange trading (on the basis of the decision of the Supervisory and Management Board of the
WSE of June 4, 2003) and shall not be introduced to exchange trading earlier than 18 months from the day that
the resolution was adopted by the Management Board. The resolution of the Management Board of the Company
was adopted on December 6, 2004.
However, it should be borne in mind that the Offered Shares are issued for the purposes of the prepayment of
Netia’s obligations under the arrangements concluded by and between its creditors and:
a) Netia Holdings S.A. (presently Netia S.A.) on June 28, 2002 (the arrangement was approved on August 9,
2002 by the District Court for the Capital City of Warsaw, XVII Commercial Division (Ref: sygn. akt. XVII
Ukł. 27/02);
b) Netia Telekom S.A on June 24, 2002 (the arrangement was approved on June 25, 2002 by the District Court
for the Capital City of Warsaw, XVII Commercial Division (Ref: sygn. akt. XVII Ukł. 28/02).
The repayment will concern all of the Entitled Creditors’ receivables under the above-mentioned arrangements
which were not settled in the course of the Restructuring process which encompassed both the creditors of Netia
Holdings S.A. as well as those of Netia Telekom S.A.
The Entitled Creditors are those whose receivables under the Arrangement of the Issuer and the Arrangement of
Netia Telekom have not been satisfied in the course of the Restructuring process in 2002, by way of, inter alia,
the offering of Series H Shares.
The above circumstance forces, in accordance with the rule of equal treatment of the creditors included in the
Arrangement, fixing the Issue Price of the Offered Shares at the same level as the price of Series H Shares in
2002, namely PLN 1.0826241 per each share. Fixing the price at another, higher level could lead to the unequally
treated Entitled Creditors bringing an action against the said arrangements, which could result in the revocation
thereof.
The Company consulted with the representatives of the Warsaw Stock Exchange regarding the difference
between the Issue Price and the market price of the Offered Shares. As a result of those consultations, the
Management Board believes that the difference between the Issue Price and the market value will not cause any
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PROSPECTUS OF NETIA SPÓŁKA AKCYJNA
CHAPTER I
delay in the listing of the Offered Shares on the Warsaw Stock Exchange after their registration by the Registry
Court.
The Management Board would like to point out that although the Issue Price remains disproportionate as
compared with the present market price of Netia’s Shares, the whole transaction is still economically justified
and effected on arm’s-length terms, as in accordance with the laws governing the legal relations which are the
basis of certain Arrangement Obligations, some of them could have retained their original value and may be
pursued before the relevant foreign courts.
The voluntary set-off of the Arrangement Obligations with the Issue Price by the Entitled Persons on such terms
as described herein shall result in the expiry of the entire value of the Arrangement Obligations on such terms as
described in the agreements executed directly between the Entitled Creditors and the Creditors’ Trustee.
3.3.3 Risk related to the delisting of the Shares
Pursuant to § 29 of the Rules of the Warsaw Stock Exchange, the Management Board of the WSE may delist
securities: 1) if they cease to meet the requirements for admission to exchange trading specified in the Rules, 2)
if the Issuer is persistently in breach of the Rules of the Warsaw Stock Exchange valid on the Stock Exchange, 3)
upon the request of the Issuer, 4) as a result of the bankruptcy of the Issuer or if a bankruptcy petition is
dismissed by the court because the Issuer’s assets are insufficient to cover the costs of the proceedings, 5) if it
deems it necessary for the protection of the interests and safety of trading participants, 6) following a decision on
the merger of the Issuer with another entity, its split or transformation, 7) if no exchange transactions on the
given security have been made within the last three months, 8) following the commencement of an unlawful
activity by the Issuer, 9) should the Issuer be placed in liquidation; however, the Issuer’s Management Board
shall use its best endeavours to prevent such circumstance from occurring.
3.3.4 Risk related to the suspension of public trading in the Shares
Pursuant to § 28 of the Rules of the Warsaw Stock Exchange, the Management Board of the WSE may suspend
trading in securities for a period of up to 3 months upon the request of the Issuer, should it be deemed necessary
for the protection of the interests and safety of trading participants, or if the Company is in breach of the Rules of
the Warsaw Stock Exchange. However, the Management Board shall use its best endeavours to prevent such
situation. Should such situation arise with regard to the Shares, the liquidity of the Shares shall be restricted on
the secondary market, which may adversely affect their market valuation.
3.3.5 Risk related to exclusion of the Shares from public trading
In the event that a public company should fail to fulfil its obligations required by law, especially the obligation to
provide information arising under the Law on Public Trading in Securities, the Securities and Exchange
Commission may impose a fine upon any such entity or issue a decision to delist its Shares, or use both these
penalties jointly. It cannot be guaranteed that such situation will not arise with regard to the Shares. Such events
may adversely affect the financial results and assessment of the value of the Shares by investors.
3.3.6 Risk related to market liquidity and fluctuation in prices of the Shares
The purchase of the Shares, following their introduction to exchange trading, entails a risk related to share price
fluctuations. Share prices are shaped by the relationship between supply and demand, which itself is determined
by many factors and the unpredictable actions of investors. In the event of great fluctuations in stock prices, the
shareholders may face the risk of not achieving the planned profit. Moreover, it must be remembered that the
prices of Shares may differ considerably from the issue price at which they were acquired. This may result from
e.g. periodical changes in the performance of the Company, the size and liquidity of the equity market, the
overall situation on the Warsaw Stock Exchange and international stock exchanges, as well as changes in
economic and political factors.
3.3.7 Risk of the Issuer’s abandonment of the issue of the Offered Shares
For reasons of material importance, the Issuer may abandon the issue of the Offered Shares even after the
subscription has been commenced. Such reasons may include, among others (a) sudden and unpredicted changes
in domestic or international economic and/or political conditions, which may adversely affect financial markets,
the domestic economy, or the further activity of the Company (e.g. terrorist attacks, wars, natural disasters,
floods) and (b) sudden and unpredicted changes directly affecting the Company’s operating activity.
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CHAPTER I
3.3.8 Risk related to the size of the issue of the Offered Shares.
On the basis of this Prospectus, 18,373,785 Offered Shares are being issued. The list of receivables approved in
the course of the arrangement proceedings of the Issuer and Netia Telecom show that the Entitled Creditors have
receivables due from the Issuer for a total amount of PLN 11,872,036.30 (out of which PLN 6,033,100.60 are
accounted for by obligations towards Merrill Lynch). However, it cannot be guaranteed that all Entitled Creditors
(apart from Merrill Lynch, which will place its subscription directly) will choose to assign their receivables
under the Arrangement of the Issuer and the Arrangement of Netia Telekom to the Creditors’ Trustee, in which
case not all Offered Shares would be subscribed for. This situation might necessitate the repayment of the
Arrangement Obligations in cash and diminish the funds held by the Issuer that could be earmarked for other
purposes.
4 SELECTED FINANCIAL DATA AND CONSOLIDATED FINANCIAL DATA OF THE
COMPANY AND THE NETIA GROUP CONSIDERING THE SPECIFIC NATURE OF THEIR
BUSINESS ACTIVITY FOR THE PERIOD OF THE LAST THREE FISCAL YEARS
The selected financial data and consolidated financial data presented below come from standalone and
consolidated financial statements for the years 2001 – 2003 and for the 6-month period ended on June 30, 2004
and the quarterly information for the 9-month period ended on September 30, 2004, prepared in accordance with
the valid provisions of the Accounting Act and the provisions of the Law on Public Trading in Securities.
The financial data and consolidated data for the period ended on June 30, 2004 result from audited standalone
financial statements and the consolidated financial statements prepared as at December 2, 2004. As it was
explained in Charter 4, these financial statements differ from the financial statements published on August 10,
2004 for the same period, as they include the impact of certain significant events which occurred after June 30,
2004 and the original publication of these statements on August 10, 2004.
4.1 Selected financial data of Netia (in thousands PLN)
2001 2002 2003 June 30,
2004
September 30,
2004
Audited Audited Audited Audited Not audited
Revenues from sales 51 1,118 - 374,496 565,302
Net profit/ loss on economic activity (687,636) 270,969 (23,815) 51,007 72,302
Gross profit/loss (768,703) (2,196,908) (36,868) 56,207 82,785
Net profit/loss (801,282) (2,243,716) 42,519 56,207 82,785
Total assets 3,678,362 2,195,557 2,238,471 2,321,207 2,330,434
Total liabilities and reserves for liabilities 3,551,097 322,126 161,030 145,424 127,532
Long-term liabilities - 206,146 11,010 6,517 6,673
Short-term liabilities 3,403,385 9,732 73,196 89,284 68,817
Equity (net assets) 127,265 1,873,431 2,077,441 2,175,783 2,202,902
Share capital 188,515 188,515 344,487 361,638 362,056
Number of shares as of the balance sheet date
(in units)* 31,419,172 344,045,212 344,486,821 361,638,150 362,056,309
Weighted average number of shares in the
financial year (in units)* 30,817,291 37,730,692 343,849,029 354,447,689 356,967,139
Weighted average diluted number of shares in
the financial year (in units)* 30,817,291 37,730,692 355,674,684 379,510,147 380,502,349
Net profit/loss per share** (26.00) (59.47) 0.12 0.16 0.23
Diluted net profit/loss per share ** (26.00) (59.47) 0.12 0.15 0.22
Dividends paid - - - - -
* data for the year 2002 include Series H Shares entered into the National Court Register on January 30,
2003
** data in PLN.
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CHAPTER I
4.2 Selected financial data of the Netia Group (in thousands PLN)
2001 2002 2003 June 30,
2004
September 30,
2004
Audited Audited Audited Audited Not audited
Revenues from sales 536,531 608,682 700,121 434,245 665,958
Net profit/ loss on operating activity (295,288) (273,022) (815,573) 41,640 66,038
Gross profit/loss (1,141,824) (749,974) (699,031) 65,544 111,677
Net profit/loss (1,141,973) (744,043) (699,031) 64,935 110,707
Total assets 3,974,568 3,541,893 2,265,795 2,518,392 2,528,297
Total liabilities and reserves for liabilities 4,298,275 752,447 172,305 249,023 218,069
Long-term liabilities 164,346 353,859 11,010 20,460 64,505
Short-term liabilities 3,977,752 321,926 76,065 157,402 80,226
Equity (net assets) (349,992) 2,772,304 2,071,117 2,178,188 2,224,501
Share capital 188,515 188,515 344,487 361,638 362,056
Number of shares as of the balance sheet day
(in units)* 31,419,172 344,045,212 344,486,821 361,638,150 362,056,309
Weighted average number of shares in the
financial year (in units)* 30,817,291 37,730,692 343,849,029 349,359,530 356,967,139
Weighted average diluted number of shares in
the financial year (in units)* 30,817,291 37,730,692 343,849,029 379,510,147 380.502.349
Net profit/loss per share** (37.25) (19.72) (2.03) 0.19 0.31
Diluted net profit/loss per share ** (37.25) (19.72) (2.03) 0.17 0.29
Dividends paid - - - - -
* data for the year 2002 include Series H Shares entered into the National Court Register on January 30,
2003
** data in PLN
5 PROFITABILITY RATIOS OF ECONOMIC ACTIVITY AND RATIOS CHARACTERISING
THE CAPACITY FOR SETTLEMENT OF LIABILITIES OF THE COMPANY AND THE
NETIA GROUP WITHIN THE LAST THREE FISCAL YEARS
5.1 Selected profitability ratios of economic activity and the capacity for settlement of Netia’s
liabilities
2001 2002 2003 June 30,
2004
September 30,
2004
Profitability of equity (ROE) (6.30) (1.20) 0.02 0.03 0.04
Profitability of total assets (ROA) (0.22) (1.02) 0.02 0.02 0.04
Profitability of sales (39,703.92%) (1,376.48%) (*) 14.59% 14.41%
Ratio of dividend payment - - - - -
Ratio of equity indebtedness 27.90 0.17 0.08 0.07 0.06
(*) due to the negative value of the equity the ratios cannot be calculated
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CHAPTER I
5.2 Selected profitability ratios of economic activity and the capacity for settlement of the Netia
Group’s liabilities
2001 2002 2003 June 30,
2004
September 30,
2004
Profitability of equity (ROE) (*) (0.27) (0.34) 0.03 0.05
Profitability of total assets (ROA) (0.29) (0.21) (0.31) 0.03 0.04
Profitability of sales (26.17%) (17.28%) (9.52)% 11.57% 12.12%
Ratio of dividend payment - - - - -
Ratio of equity indebtedness (*) 0.27 0.08 0.11 0.10
(*) due to the negative value of the equity, the ratios cannot be calculated
The ratio included in 5.1 and 5.2 hereunder was calculated as follows:
- profitability of equity – the ratio of the net profit/loss to the value of the equity
- profitability of total assets – the ratio of the net profit/loss to the value of the assets
- profitability of sales – the ratio of the net profit/loss on sales to the sales revenues
- ratio of dividend payment – ratio of the value of the dividend to the net profit/loss
- ratio of equity indebtedness – ratio of total liabilities and reserves for liabilities to the value of the equity
6 RATING
On May 19, 2004, the Standard & Poor’s agency awarded the Issuer with a “B+” rating (the scale ranged from
AAA to D), with a stable rating perspective.
The rating scale used by Standard & Poor’s is as follows:
AAA
AA
A
BBB
BB
B
CCC
CC,C
R
SD
extremely strong
very strong
strong
adequate
less vulnerable
more vulnerable
currently vulnerable
currently highly vulnerable
under regulatory supervision
selective default
The above scale may have additional markers “-” and “+” used in between the different categories.
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7 PURPOSES OF THE ISSUE
7.1 Purposes of the public Offering to subscribe for the Offered Shares
The basic purpose of the public Offering is the satisfaction of the Arrangement Obligations. Pursuant to the terms
of the issue, payment for the Offered Shares shall be effected by way of making cash contributions through a
contractual set-off of the Issuer’s receivables under the Issue Price against the receivables of the Entitled
Persons, including the receivables of the Entitled Creditors assigned to the Creditors’ Trustee and arising under
the Arrangement of the Issuer and the Arrangement of Netia Telekom. The Entitled Persons shall have the right
to subscribe for such number of Offered Shares as constitutes the quotient of the Issue Price and the amount of
receivables due to a given Entitled Person from the Issuer, which is subject to the Issuer’s representation
consenting to the contractual set-off.
The Issuer’s debts towards the Entitled Creditors resulting from the Arrangement of the Issuer and the
Arrangement of Netia Telekom amount to PLN 11,872,036.30 (out of which PLN 6,033,100.60 are accounted
for by obligations towards Merrill Lynch). As at the Prospectus date, the Issuer is not able to specify to what
extent the Arrangement Obligations will be satisfied through the issue of the Offered Shares, as it is impossible
to predict how many Offered Shares will actually be subscribed for. The Issuer shall allocate all the proceeds
from the issue to the repayment of the debts arising from the Arrangement Obligations. With the exception of
Merrill Lynch, the Issuer does not know the identity of the Entitled Creditors because they are the creditors under
the guarantee for the repayment of the Eurobonds issued by the Issuer’s Dutch subsidiaries in years 1997-2000,
which were listed on public markets outside the territory of Poland. The Issuer did not have access to any data
regarding the holders of the Eurobonds. The Issuer shall learn the identity of the Entitled Creditors the moment
these entities present themselves. Furthermore, pursuant to Art. 67 § 1 of the Law on Arrangement Proceedings,
the arrangement binds all creditors, including those whose receivables were liable to be included in the list of
receivables but were not. This means that in the course of the offering of the Offered Shares settlement may be
afforded to receivables which are subject to the arrangement but which had not been known to the Issuer and
accordingly were not included in the list of receivables.
All Arrangement Obligations are of a financial nature, they do not bear any interest and their maturity (the
execution of the Arrangement of the Issuer and the Arrangement of Netia Telekom) is due in the years 2007-
2012.
In the Issuer’s opinion, the actions hitherto undertaken to reduce its debts, as well as the real possibility of
complete satisfaction of the Arrangement Obligations, make it possible to draw a conclusion that the decision to
repay the same is justified. The issue of the Offered Shares, under the terms specified in the Management Board
Resolution No. 1 of December 6, 2004, shall permit the final execution of the Arrangement of the Issuer and the
Arrangement of Netia Telekom. The aforesaid circumstance is in line with the shareholders’ interests and shall
have a positive influence on how the Company is perceived by investors.
The issue of the Offered Shares shall not result in the Issuer gaining any financial proceeds (the payment of the
Issue Price shall be effected through a set-off of the Issue Price against the receivables of the Entitled Persons,
including those which the Entitled Creditors assigned to the Creditors’ Trustee, which receivables result from the
Arrangement of the Issuer and the Arrangement of Netia Telekom) or any contributions of a different kind
whatsoever. The payment of the Issue Price by the Entitled Persons will automatically fulfil the objective of
issuing the Offered Shares. In view of the foregoing, the Issuer may not and does not have any plans regarding
the application of the proceeds from the issue in the period before the commencement of the fulfilment of the
objectives of the issue.
The Issuer is prepared to execute the planned purpose of the issue.
The purpose of the public offering for the Offered Shares shall not be liable to change after the Prospectus is
published.
Proceeds received by the Issuer from the issue of securities within the last three years have been used, and are
still being used, in accordance with the planned purposes. The issue of Series H Shares conducted in 2002 did
not yield any financial proceeds as these shares were paid for through a contractual set-off of the Issue Price
against certain receivables of the creditors of the Netia Group reduced through the adoption of the Arrangements.
Proceeds received from the issue of Series J and K Shares, related to the execution of subscription warrants and
the option from the Stock Option Plan, increased the balance of the Issuer’s financial resources and are being
used to settle running costs.
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CHAPTER I
8 CHANGE OF PURPOSE OF THE ISSUE
8.1 Indication as to whether the purposes of the issue may be liable to change
The purposes of the issue specified in Chapter I point 7.1 of this Prospectus cannot be changed.
9 DESCRIPTION OF BASIC FACTORS AFFECTING THE ISSUE PRICE AND THE RULES
FOR FIXING THE ISSUE PRICE
9.1 Basic factors affecting the Issue Price
Pursuant to the Management Board resolution No. 1 of December 6, 2004, the Issue Price shall amount to PLN
1.0826241. The aforesaid Issue Price was primarily influenced by:
- the level of reduction of Netia and Netia Telekom’s debts resulting from the Arrangement of the Issuer
and the Arrangement of Netia Telekom,
- the effects of Netia’s arrangement with its creditors in 2002 concerning the conversion of Netia’s debts
remaining after the reduction of debts into Series H Shares,
- the necessity of equal treatment of the creditors in connection with this Offering in order to correctly
perform the Arrangement of the Issuer and the Arrangement of Netia Telekom,
- the filing of a suit by Merrill Lynch with the High Court of Justice in London, Great Britain, against the
Issuer for the payment of USD 8,676,000, together with accrued interest and legal fess.
9.2 Rules for fixing the Issue Price
The right to subscribe for the Offered Shares shall be vested in the Entitled Persons, including the Creditors’
Trustee, who shall enter into agreements with the Entitled Creditors (except for Merrill Lynch), under which the
Entitled Creditors shall assign their receivables under the Arrangement of the Issuer and the Arrangement of
Netia Telekom to the Creditors’ Trustee, in exchange for the Creditors’ Trustee assuming the obligation to
subscribe for the Offered Shares and to transfer the subscribed Offered Shares to the receivables’ assignors in
accordance with the prearranged parity.
The effect of the above circumstance, in accordance with the rule of equal treatment of the creditors included in
the Arrangements, is that the Issue Price must be fixed at the same level as the Issue Price of Series H Shares in
2002, namely PLN 1.0826241 per share. Fixing the Issue Price at another, higher level could lead the unequally
treated creditors to bring an action against the Arrangement of the Issuer and the Arrangement of Netia Telekom,
which could result in the revocation thereof.
The Management Board would like to point out that although the Issue Price remains disproportionate as
compared with the present market price of Netia’s Shares, the whole transaction is still economically justified
and effected on arm’s-length terms, as in accordance with the laws governing the legal relations which are the
basis of certain Arrangement Obligations, some of them could have retained their original value and may be
pursued before the relevant foreign courts.
The voluntary set-off of the Arrangement Obligations with the Issue Price by the Entitled Persons, on such terms
as described herein, shall result in the expiry of the entire value of the Arrangement Obligations on such terms as
described in the agreements executed directly between the Entitled Creditors and the Creditors’ Trustee.
These circumstances justify the Management Board’s fixing of the Issue Price at the level of PLN 1.0826241.
10 LEVEL OF DECREASING THE NET BOOK VALUE PER SHARE FOR NEW PURCHASERS
According to the Issuer’s published unaudited standalone financial statements for the 9-month period ended on
September 30, 2004, prepared in accordance with the Accounting Act, taking into consideration the provisions of
the Law on Public Trading in Securities, Netia’s share capital as of September 30, 2004 amounted to PLN
2,202,902,000, and the net book value per share amounted to PLN 6.08.
The Company shall issue a maximum of 18,373,785 of the Offered Shares at the nominal price of PLN 1, with a
view to paying the outstanding Arrangement Obligations through offering the Offered Shares to the Entitled
Persons. The payment of the Issue Price shall be effected through a set-off of the Issue Price against certain
receivables of the Entitled Creditors, including those arising under the Arrangement of the Issuer and the
Arrangement of Netia Telekom which were assigned to the Creditors’ Trustee. The Issue Price shall amount to
PLN 1.0826241.
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CHAPTER I
The data presented below has been calculated based on the Company’s book value as at September 30, 2004 and
the Company’s share capital as at September 30, 2004, which comprised 362,056,309 shares.
Issue price of 1 share (in PLN) 1.0826241
Net book value per 1 share prior to the issue (in PLN) 6.08
Decrease in book value per 1 share following the issue (in PLN) (0.24)
Net book value per 1 share following the issue (pro forma) (in PLN) 5.84
Increase in net book value per 1 acquired share (in PLN) 4.76
Acquired shares
Total financial contribution to Average
the Company’s share capital price paid
(in thousands PLN)
per 1 share
number percentage quantity percentage
Existing shareholders 362,056,309 95.2 2,233,611 99.1 6.17
New acquirers 18,373,785 4.8 19,892 0.9 1.08
Total 380,430,094 100.00 2,253,503 100.00 5.93
11 BOOK VALUE OF THE COMPANY AND VALUE OF THE COMPANY’S LIABILITIES
As at October 31, 2004, the Company’s book value, according to standalone financial data, was PLN
2,212,291,000.
As at October 31, 2004, the total value of liabilities and reserves for the Company’s liabilities, according to
standalone financial data, was PLN 135,133,000.
As at October 31, 2004, the net book value of the Netia Group, according to the consolidated financial data, was
PLN 2,235,144,000.
As at October 31, 2004, the total value of liabilities and provisions for liabilities of the Netia Group, according to
the consolidated financial data, was PLN 228,633,000.
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CHAPTER II
CHAPTER II
PERSONS RESPONSIBLE FOR INFORMATION CONTAINED HEREIN
1 COMPANY
1.1 Information about the Company
Name:
Netia Spółka Akcyjna.
Registered office: Warszawa
Address:
ul. Poleczki 13, 02-822 Warszawa
Tel.: (+48 22) 330 20 00
Fax: (+48 22) 330 23 23
E-mail:
info@netia.pl
Web page:
www.netia.pl
1.2 Persons acting on behalf of the Company
Wojciech Madalski – President of the Management Board
Irene Elizabeth Cackett – member of the Management Board
Kent Royall Holding – member of the Management Board
John Paul Kearney – member of the Management Board
Information on addresses of natural persons acting on behalf of the Company has been covered by a motion of
non-disclosure.
The aforementioned members of the Management Board are responsible for any and all information contained in
the Prospectus.
Statement of the persons acting on behalf of the Company
We, the undersigned Members of the Board, state that the information contained in the Prospectus is true,
reliable and does not omit any facts or circumstances that must be disclosed in a Prospectus pursuant to
provisions of law, and that according to our best knowledge, there are no liabilities of the Company or
circumstances, apart from those disclosed in the Prospectus, which could substantially influence the Company’s
legal, financial and real estate status or its financial results.
Wojciech Madalski
President of the Management Board
Irene Elizabeth Cackett
member of the Management Board
Kent Royall Holding
member of the Management Board
John Paul Kearney
member of the Management Board
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PROSPECTUS OF NETIA SPÓŁKA AKCYJNA
CHAPTER II
2 ENTITIES PREPARING THE PROSPECTUS
2.1 Company
2.1.1 Information about the Company
Name:
Netia S.A.
Registered office: Warszawa
Address:
ul. Poleczki 13, 02-822 Warszawa
Tel.: (+48 22) 330 20 00
Fax: (+48 22) 330 23 23
E-mail:
info@netia.pl
Web page:
www.netia.pl
2.1.2 People acting on behalf of the Company
The following persons act on behalf of the Company:
Wojciech Madalski – President of the Management Board
Irene Elizabeth Cackett – member of the Management Board
Kent Royall Holding – member of the Management Board
John Paul Kearney – member of the Management Board
A motion has been filed not to disclose the addresses of the natural persons acting on behalf of the Company.
The Company’s liability arising from preparing the Prospectus is limited to the following parts hereof: Chapter I
Introduction, p 2, 3.1.1-3.1.5, 3.2.1, 3.2.2, 3.2.4, 3.2.6, 3.2.7, 3.3.6, 3.3.7, 4 – 11, Chapter II pt 1, 2.1, Chapter III
pt. 1.2, 2, 8-10, 12, 13 and Chapter IV.
2.1.3 Connections between the Company and natural persons acting on its behalf
As of the date of preparing the Prospectus, persons acting on behalf of the Company have the following
connections with the Company:
- they are members or Presidents of the Board,
- they are employed by the Company, with the exception of the President of the Board and one of the
members of the Board,
- they have concluded non-competition agreements with the Company, except for one of the members of
the Board,
- they participate in the Stock Option Plan.
A motion has been filed not to disclose the identity of the persons who do not have an employment relationship
with the Company, and who have not entered into a non-competition agreement with the Company.
Apart from the above there are no connections between the Company and natural persons acting on its behalf.
Statements of persons acting on behalf of the Company
We, the undersigned Members of the Board, state that the Prospectus has been prepared with due professional
diligence and that the information contained in those parts of the Prospectus the preparation of which the
Company, as the entity preparing the Prospectus, is responsible for, is true, reliable and does not omit any facts
or circumstances that must be disclosed in a Prospectus pursuant to the provisions of law.
Wojciech Madalski
President of the Management Board
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Irene Elizabeth Cackett
member of the Management Board
Kent Royall Holding
member of the Management Board
John Paul Kearney
member of the Management Board
2.2 Centralny Dom Maklerski Pekao S.A.
2.2.1 Information about CDM Pekao S.A.
Name:
Centralny Dom Maklerski Pekao Spółka Akcyjna
Registered office: Warszawa
Address:
ul. Wołoska 18, 02-675 Warszawa
Telephone: (+48 22) 640 28 40
Fax: (+48 22) 640 27 77
Email:
webmaster@cdmpekao.com.pl
Web page:
www.cdmpekao.com.pl
2.2.2 Natural persons acting on behalf of CDM Pekao S.A.
The following persons act on behalf of CDM Pekao S.A.:
Jakub Papierski – President of the Management Board
Paweł Roszczyk – Director of the Capital Markets Department
Information on addresses of natural persons acting on behalf of the Company has been covered by a motion of
non-disclosure.
Liability of CDM Pekao S.A. is limited to the following parts of the Prospectus: Introduction, Chapter I points
3.3.2- 3.3.5, Chapter II points 2.2, 3 and Chapter III points 1, 1.1, 11.
2.2.3 Connections between the Issuer and CDM Pekao S.A. as an entity preparing the Prospectus and
the natural persons acting on behalf of CDM Pekao S.A.
There are no connections between CDM and the Issuer of a formal, informal or personal nature, except for:
- agreement to act as an offeror in the public trading of the securities covered by the present Prospectus, to
prepare a part of the Prospectus and to act as the Creditors’ Trustee,
- agreement to act as an offeror in public trading of Series J Shares and Series K Shares,
- agreement to act as a firm-commitment underwriter for Series E Shares,
- agreement to service the exercise of Netia’s two-year and three-year subscription warrants,
- a firm-commitment agreement concerning Series III Bonds,
- agreement to act as the Sponsor of the issue of Netia’s shares.
There are no connections of a formal, informal or personal nature between persons acting on behalf of CDM
Pekao S.A. and the Issuer.
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Statement of persons acting on behalf of the Offeror
We hereby state that the Prospectus has been prepared with due professional diligence and that the information
contained in those parts of the Prospectus which were the responsibility of CDM Pekao S.A., as an entity
preparing the Prospectus, is true and reliable and does not omit any facts or circumstances that must be
disclosed in a Prospectus pursuant to provisions of law.
Jakub Papierski
President of the Management Board
Paweł Roszczyk
Director of the Capital Markets Department
2.3 Legal Advisor
2.3.1 Information on the Legal Advisor
Name:
Weil, Gotshal & Manges – Paweł Rymarz Spółka Komandytowa
Registered office: Warszawa
Address:
ul. Emilii Plater 53, 00-113 Warszawa
Telephone: (+48 22) 520 40 00
Fax: (+48 22) 520 40 01
E-mail:
wgm.warsaw@weil.com
Web page:
www.weil.com
2.3.2 Natural persons acting on behalf of the Legal Advisor
The following persons act on behalf of the Legal Advisor:
Paweł Rymarz – General Partner,
Anna Frankowska – Commercial Proxy.
Information on addresses of natural persons acting on behalf of the Company has been covered by a motion of
non-disclosure.
Liability of the Legal Advisor is limited to the following parts of the Prospectus: Chapter I points 3.1.6, 3.2.3,
3.2.5, 3.3.1, 3.3.8, Chapter II point 2.3 and Chapter III points 3-7.
2.3.3 Connections between the Company and the Legal Advisor as the entity preparing the
Prospectus and natural persons acting on behalf of the Legal Advisor
The Legal Advisor has been providing legal services to the Company since 1992. As at the Prospectus date, there
were four agreements in force concerning legal services rendered by the Legal Advisor to the Company. Apart
from the abovementioned agreements and the preparation of the part of the Prospectus referred to hereinabove,
there are no connections between the Company and the Legal Advisor and natural persons acting on its behalf.
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Statements of persons acting on behalf of the Legal Advisor
We hereby state on behalf of Weil, Gotshal & Manges – Paweł Rymarz Spółka Komandytowa, that the
Prospectus has been prepared with due professional diligence and that the information contained in those Parts
of the Prospectus which were the responsibility of the Legal Advisor, as an entity preparing the Prospectus, is
true and reliable and does not omit any facts or circumstances that must be disclosed in a Prospectus pursuant
to provisions of law.
Paweł Rymarz
General Partner
Anna Frankowska
Commercial Proxy
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3 THE OFFEROR
3.1 Information on the Offeror
Name:
Centralny Dom Maklerski Pekao Spółka Akcyjna
Registered office: Warszawa
Address:
ul. Wołoska 18, 02-675 Warszawa
Telephone: (+48 22) 640 28 40
Fax: (+48 22) 640 27 77
Email:
webmaster@cdmpekao.com.pl
Web page:
www.cdmpekao.com.pl
3.2 Natural persons acting on behalf of the Offeror
The following persons act on behalf of the Offeror:
Jakub Papierski – President of the Management Board
Paweł Roszczyk – Director of the Capital Markets Department
Information on addresses of natural persons acting on behalf of the Company has been covered by a motion of
non-disclosure.
3.3 Connections between the Company and the Offeror and natural persons acting on the Offeror’s
behalf.
There are no connections between CDM Pekao S.A. and the Issuer of a formal, informal or personal nature,
except for:
- agreement to act as an offeror in the public trading of the securities covered by this Prospectus, to prepare
a part of the Prospectus and to act as the Creditors’ Trustee,
- agreement to act as an offeror in the public trading of Series J Shares and Series K Shares,
- agreement to act as a firm-commitment underwriter for Series E Shares,
- agreement to service the exercise of Netia’s two-year and three-year subscription warrants,
- a firm-commitment agreement concerning Series III Bonds,
- agreement to act as the Sponsor of the Issue of Netia’s shares.
There are no connections of a formal, informal or personal nature between persons acting on behalf of CDM
Pekao S.A. and the Issuer.
Statement of persons acting on behalf of the Offeror
Acting on behalf of CDM Pekao S.A., as an entity offering the Offered Shares for public trading, we hereby state
that the Offeror has exercised due professional diligence in the course of preparing and conducting the
introduction of securities to public trading.
Jakub Papierski
President of the Management Board
Paweł Roszczyk
Director
Capital Markets Department
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CHAPTER III
CHAPTER III
DATA ON THE ISSUE
1 SPECIFICATION OF THE TYPES, NUMBER AND THE TOTAL VALUE OF THE ISSUED
SECURITIES
Pursuant to the present Prospectus, no more than 18,373,785 of the Offered Shares shall be introduced to public
trading. Pursuant to Art. 65a of the Law on Public Trading in Securities, admitting the Offered Shares to public
trading will be equivalent to admitting to public trading 18,373,785 Rights to the Offered Shares (PDAs).
The following table specifies the securities covered by the Prospectus.
Type of Securities Number Nominal value
(PLN)
Issue Price
(PLN)
Surplus of the
Issue Price
over the
nominal value
(PLN)
Estimated
costs and
charges of the
Offering
(PLN)
Issuer’s
Proceeds
(PLN)
Offered Shares per unit 1 1 1.082641 0.082641 0.11 0.97 (1)
Offered Shares - Total 18,373,785 18,373,785 19,891,903 1,518,428 2,000,000 17,891,903 (1)
(1) As the Offered Shares shall be paid for through the contractual compensation of amounts due of the Issuer and the Entitled Persons,
there shall be no physical cash flow.
1.1 Type, number and the total value of the Offered Shares
By virtue of the present Prospectus, the following shares are offered:
- 18,373,785 of series I ordinary bearer shares with a nominal value of PLN 1 each, in accordance with the
Management Board Resolution No. 1 dated December 6, 2004.
The total nominal value of the Offered Shares is PLN 18,373,785.
The Offered Shares do not carry any obligation of additional performances or any preferences. As of the day of
drafting the Prospectus, there exist no contractual limitations as to the transfer of rights pertaining to the Offered
Shares. There is no collateral on the Offered Shares.
1.2 Declaration of the Issuer
The Issuer hereby declares that it consents to the payment of the Issue Price by the Entitled Persons, who shall
pay for the subscription for the Offered Shares by way of a contractual set-off of the Issuer’s Issue Price
receivables with the receivables of the Entitled Persons, including the receivables of the Entitled Creditors
assigned to the Creditors’ Trustee, arising from the Arrangement of the Issuer and the Arrangement of Netia
Telekom. The above declaration constitutes an offer to conclude a set-off agreement within the meaning of Art.
66 of the Civil Code, which shall expire as of the day of closing the subscription period for the Offered Shares.
2 Estimated Costs of the Issue
2.1 Costs of the Issue of the Offered Shares
The Management Board estimates that the total costs of the issue of the Offered Shares shall amount to
approximately PLN 2,000,000. These shall include:
- the costs related to drafting the Prospectus including the costs of advising - PLN 1,150,000;
- the costs related to the public subscription and distribution of the Offered Shares of approximately PLN
350,000;
- the costs related to announcement, printing and distribution of the Prospectus and of the Short-Form
Prospectus – PLN 150,000;
- other costs of preparing and conducting the offering – PLN 450,000.
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The costs of the issue being the costs directly related to raising funds through the share capital increase shall
reduce the spare capital originating from the excess of the value of the issue over the shares’ nominal value. The
Issuer shall cover the costs of the issue from its own funds.
The final costs of the issue of the Offered Shares shall be made publicly available in the form of a current report
after the closing of the public subscription.
3 LEGAL GROUNDS FOR ISSUING AND INTRODUCING SECURITIES INTO PUBLIC
TRADING
3.1 Legal grounds for issuing and introducing the Offered Shares into public trading
The legal grounds for issuing the Offered Shares shall be the provisions of the Commercial Companies Code and
§ 5A of the Statute in the version adopted by Resolution No. 6 of the Extraordinary General Shareholders'
Meeting of March 12, 2002, Resolution No. 7 of the Extraordinary General Shareholders' Meeting of March 12,
2002 as well as the Management Board Resolutions No. 1 and 2 of December 6, 2004, the Supervisory Board
Resolution No. 1 of December 6, 2004, and the Management Board Resolution No. 1 of December 24, 2004,
which stipulate as follows:
Ҥ 5A
1. The Management Board shall have the right to increase the Company’s share capital through the issue of Company
shares of the total nominal value by not exceeding PLN 18,373,785 (eighteen million, three hundred and seventy
three thousand, seven hundred and eighty five Polish zlotys), by issuing, in one or more tranches, series “I” shares
or subsequent series of the Company’s shares (authorized capital). The Management Board’s authority to increase
the Company’s share capital and to issue new Company shares within the limit specified above expires on March
12, 2005.
2. Each increase of the share capital by the Management Board up to the amount determined in § 5A section 1 of the
Company’s Statute requires the Supervisory Board’s approval.
3. Upon the approval of the Supervisory Board, the Company’s Management Board shall determine the detailed
conditions of each issue of shares within the limits set forth in § 5A section 1 of the Company’s Statute, and in
particular:
a) the exact number of shares to be issued in each tranche or series;
b) the issuance price of every subsequent issue;
c) the time of the opening and closing of the subscription periods;
d) the detailed terms and conditions for the distribution of the shares;
e) the date of determining pre-emptive rights, if applicable;
f) to execute agreements with entities authorized to accept subscriptions for shares and to determine the places
and dates of such subscriptions for the shares;
g) to execute agreements, both paid and free of charge, in order to secure the success of the subscription for the
shares and, in particular, any standby or hard commitment underwriting agreement.
4. Upon the approval of the Company’s Supervisory Board, the Management Board is authorized to limit or exclude
the pre-emptive rights of the Company’s Shareholders with respect to the Company’s shares to be issued by the
Management Board within the limits set forth in § 5A section 1 of the Company’s Statute.”
“Resolution No. 7
of the Extraordinary General Shareholders’ Meeting
of Netia Holdings S.A.
dated March 12, 2002
concerning admitting the Company’s shares to be issued within the authorized capital
to public trading
In accordance with Article 84, point 1 of the Law on Public Trading in Securities, it is resolved to introduce to public trading
series “I” shares and subsequent series of the Company’s shares to be issued by the Management Board pursuant to § 5A of
the Company Statute (authorized capital). Upon the issue of new shares pursuant to the authorization granted to the
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Management Board in paragraph 5A of the Company’s Statute, the Management Board shall take all actions necessary to
implement this Resolution, including filing a relevant motion with the Securities and Exchange Commission and subsequently
filing an application for admitting the shares to trading on the main market of the Warsaw Stock Exchange.”
“Resolution No. 1
of the Management Board of Netia SA
of December 6, 2004
regarding the Company’s share capital increase
through the issuance of series “I” bearer shares
1. Pursuant to §5A of the Company statute (the “Statute”), the Company’s share capital is hereby increased by no more
than PLN 18,373,785 (in words: eighteen million, three hundred and seventy three thousand, seven hundred and eighty
five) through the issuance of no more than 18,373,785 (in words: eighteen million, three hundred and seventy three
thousand, seven hundred and eighty five) ordinary bearer series “I” shares (the “Offered Shares”).
2. The Offered Shares shall be issued for the purposes of early repayment of Netia’s obligations under the arrangements
entered into between the creditors (“Entitled Creditors”) and:
a) Netia Holdings S.A. (presently Netia S.A.) on June 28, 2002 (the arrangement was approved on August 9, 2002 by
the District Court for the Capital City of Warsaw, XVII Commercial Division (Ref: sygn. akt. XVII Ukł. 27/02);
b) Netia Telekom S.A on June 24, 2002 (the arrangement was approved on June 25, 2002 by the District Court for the
Capital City of Warsaw, XVII Commercial Division (Ref: sygn. akt. XVII Ukł. 28/02).
3. The issue price for each of the Offered Shares shall amount to PLN 1.0826241 (in words: one and 826241/10,000,000).
4. The persons authorized to subscribe for the Offered Shares shall be Merrill Lynch Capital Services Inc. (“MLCS”) and
the creditors’ trustee (“Creditors’ Trustee”). The Creditors’ Trustee will enter into agreement with the Entitled
Creditors (except for MLCS which will make a direct subscription for the Offered Shares), pursuant to which the
Entitled Creditors will assign thereto their receivables under the above referenced arrangements in exchange for the
Creditors’ Trustee assuming the obligation to subscribe for the Offered Shares and, subsequently, to transfer them to the
Entitled Creditors.
5. The Offered Shares shall entitle to the dividend as of January 1, 2004.
6. The pre-emptive right of Company shareholders with respect to the Offered Shares shall be excluded, which in the
Management Board’s opinion, is economically justified and in the best interests of the Company (see the detailed
explanation in the Management Board’s opinion attached herewith as Schedule No. 1).
7. The Offered Shares shall be offered through public trading. Therefore, the Company’s Management Board shall:
a) act on the basis of Article 63, section 1 and 2 of the Law on Public Trading in Securities of August 21, 1997 (Dz.U.
2002, No. 49, item 447, as amended), for the purposes of admitting the Offered Shares to public trading, notify the
Securities and Exchange Commission in Warsaw, together with the Prospectus of December 6, 2004 (the
“Prospectus”) attached herewith as Schedule No. 2;
b) file an application for the introduction of the Offered Shares to listing on the basic market of the Warsaw Stock
Exchange;
c) file an application for assimilation of the Offered Shares with other shares of the Company at the National
Depository of Securities;
d) take any and all factual and legal actions necessary to introduce the Offered Shares to public trading and to have
the Offered Shares listed on the main market of the Warsaw Stock Exchange in accordance with the preceding
sections of this resolution.
8. The Company’s Management Board agrees that the subscription shall open on January 6, 2005 and close no later than
on January 11, 2005.
9. The detailed terms and conditions of allocation of the Offered Shares as described in Chapter III, section 11 of the
Prospectus are hereby approved.
10. The subscription for the Offered Shares shall fail if at least one Offered Share is not subscribed and paid for in
accordance with the terms and conditions of the Prospectus.
11. This resolution shall come into force after it is approved by the Supervisory Board in accordance with §5A, sections 3
and 4 of the Statute.”
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“Resolution No. 2
of the Management Board of Netia S.A.
of December 6, 2004
regarding amendment of the Company Statute
1. It is resolved that in relation to Netia S.A.’s (the “Company”) share capital increase pursuant to Resolution No. 1 of the
Management Board of December 6, 2004 (“Resolution No. 1”), §5 of the Company statute (the “Statute”) shall be
respectively amended and shall have the following wording:
“The share capital, excluding the conditional capital, shall amount to no more than PLN 362,418,997 (in words: three
hundred and sixty two million, four hundred and eighteen thousand, nine hundred and ninety-seven), and shall be divided
into 362,418,997 (in words:: three hundred and sixty two million, four hundred and eighteen thousand, nine hundred and
ninetyseven) shares of PLN 1.00 (in words: one) each.
The Company’s shares are divided into the following series:
(a) 5,000 ordinary registered series A shares;
(b) 1,000 preferred registered series A1 shares;
(c) 3,727,340 ordinary registered series B shares;
(d) 17,256,855 ordinary bearer series C shares;
(e) 3,977 ordinary bearer series C1 shares;
(f) 5,500,000 ordinary bearer series D shares;
(g) 425,000 ordinary bearer series E shares;
(h) 2,250,000 ordinary bearer series F shares;
(i) 2,250,000 ordinary bearer series G shares;
(j) 312,626,040 ordinary bearer series H shares;
(k) no more than 18,373,785 ordinary bearer series I shares.”
2. The final wording of § 5 of the Statute, within the limits defined by Resolution No. 1, shall be defined by the
Management Board on the basis of Article 310 in relation to Article 431 § 7 of the Commercial Companies Code.”
“Resolution No. 1
of the Supervisory Board of Netia SA
of December 6, 2004
regarding the Company’s share capital increase by the Management Board of Netia S.A. through the issuance of
series “I” shares and regarding the exclusion of preemptive rights with respect to series I shares
1. The Supervisory Board of Netia S.A. (the “Company”) hereby consents for the Management Board to increase the
share capital on the basis of §5A t of the Company statute (the “Statute”) through the issuance of series I shares (the
“Shares”) on the terms and conditions as defined in Resolution No. 1 of the Management Board of December 6, 2004
(the “Management Board Resolution”) and approves the detailed terms and conditions of subscription and allocation
of the Shares, including without limitation:
a) the number of Shares to be issued in accordance with section 1 of the Management Board Resolution;
b) the issue price defined in section 3 of the Management Board Resolution;
c) the dates for the opening and closing of subscription for the Shares as defined in section 8 of the Management
Board Resolution or any other date specified by the Management Board;
d) the detailed terms and conditions of allocation of the Shares as defined in Chapter III, section 11 of the draft
Prospectus.
2. The Company’s Supervisory Board consents for the exclusion of the preemptive right of the Company’s shareholders to
acquire the Shares and accepts the Management Board’s opinion on that subject, attached as Schedule No. 1 to the
Management Board Resolution.”
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“Resolution No. 1
of the Management Board of Netia S.A.
of December 24, 2004
concerning the change of the dates of opening and closing of subscription
for ordinary bearer series I shares
1. Pursuant to §5A of the Company statute, the Management Board of the Company hereby changes the dates of opening
and closing of subscription for the ordinary bearer series I shares (the “Offered Shares”) established in the
Management Board’s Resolution No. 1 of December 6, 2004.
2. The Company’s Management Board resolves that the subscription for the Offered Shares shall commence on February
14, 2005 and shall be closed on February 16, 2005.”
4 PRE-EMPTIVE RIGHT TO SUBSCRIBE FOR THE OFFERED SHARES
The pre-emptive right of shareholders was excluded as concerns the Offered Shares by virtue of the Management
Board Resolution No. 1 of December 6, 2004. Exclusion of the pre-emptive right by the Management Board was
approved by the Supervisory Board by way of Supervisory Board Resolution No. 1 of December 6, 2004. The
pre-emptive right concerning the Offered Shares was excluded in order to enable the Entitled Persons to take up
the Offered Shares.
5 DATE FROM WHICH THE OFFERED SHARES ARE TO PARTICIPATE IN THE
DIVIDEND
By way of the Management Board Resolution No. 1 of December 6, 2004, the Management Board decided that
the Offered Shares would participate in the dividend from January 1, 2004. The condition for participation in the
dividend in the given financial year is the registration of the Offered Shares in the depository account run by the
National Depository for Securities, by the day of determining the right to the dividend at the latest, as determined
by a resolution of the Ordinary General Shareholders' Meeting.
6 RIGHTS PERTAINING TO THE OFFERED SHARES, WAY OF EXECUTING THE RIGHTS
PERTAINING TO THE SHARES, INCLUDING THE PAYMENT OF MONIES BY THE
ISSUER AND THE ENTITIES PARTICIPATING IN THE EXECUTION OF THE RIGHTS
PERTAINING TO THE SECURITIES AS WELL AS THE SCOPE OF THEIR LIABILITY
TOWARDS THE PURCHASERS AND THE ISSUER, OBLIGATIONS OF THE PURCHASER
OF THE OFFERED SHARES WITHIN THE SCOPE OF ADDITIONAL PERFORMANCES
TOWARDS THE ISSUER, AND THE OBLIGATION OF THE PURCHASER AND/OR
SELLER OF THE OFFERED SHARES TO OBTAIN APPROVALS, AND/OR THE
OBLIGATION TO MAKE ANNOUNCEMENTS
6.1 Commercial Companies Code and the Statute
Pursuant to the Act on the Commercial Companies Code and to the Statute, the fundamental rights of the
shareholders shall, in particular, include:
a) the right to transfer shares without any limits pursuant to Art. 337 § 1 of the CCC;
b) the right to participate in the General Shareholders' Meeting and to exercise the voting right in person or
by proxies or through any other representative pursuant to Art. 412 of the CCC. Pursuant to Art. 411 of
the CCC, in relation to Art. 351 § 2 of the CCC each Share shall carry one vote at the General
Shareholders’ Meeting. The condition for participation in the General Shareholders’ Meeting shall be
submitting to the Company a registered depository certificate issued by the entity keeping the securities
account, where the Shares are registered, at least one week prior to the General Shareholders’ Meeting and
blocking the Shares on the securities account for the period covering the General Shareholders’ Meeting.
Under the provisions of the CCC, the Law on Public Trading in Securities and the Statute, the General
Shareholders’ Meeting is valid regardless of the number of shares represented at the General Shareholders'
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Meeting, and the resolutions of the General Shareholders’ Meeting are adopted by an absolute majority of
votes. Pursuant to the provisions of the CCC, adopting a resolution relative to:
- the redemption of shares, the issue of convertible bonds and bonds with priority rights for shares,
changes to the Statute or reducing the share capital, shall require a majority of 3/4 of the votes; if at
least half of the share capital is represented at the General Shareholders’ Meeting, then a simple
majority of votes is enough to adopt a resolution concerning the redemption of shares;
- a change of the Statute authorizing the Management Board to increase the share capital within the
limits of the authorized capital as well as a conditional increase of the share capital, shall require a
majority of 3/4 of the votes in the presence of shareholders representing at least 1/3 of the share
capital; if, however, the General Shareholders’ Meeting convened in order to adopt resolutions
concerning the aforesaid cases was not held due to the lack of the required quorum, a subsequent
General Shareholders’ Meeting may adopt resolutions on the increase of the share capital within the
limits of the authorized capital, as well as on the conditional increase of the share capital regardless
of the number of shareholders present at that General Shareholders’ Meeting;
- an important change of the Company’s scope of activity shall require a majority of 2/3 of the votes;
- the division of the Company as well as administering a break in the General Shareholders’ Meeting
shall require a majority of 2/3 of the votes;
- depriving shareholders of their pre-emptive right, in whole or in part, shall require a majority of 4/5
of the votes.
Pursuant to the provisions of the CCC and the Statute, resolutions concerning the Company’s merger,
liquidation and sale of the Company’s business, or a significant part thereof, are adopted by a majority of
3/4 of the votes cast.
Resolutions on withdrawing the Company’s shares from public trading, delisting the Company’s shares
from the Warsaw Stock Exchange or a merger causing the same consequences shall require a majority of
4/5 of the votes cast in the presence of shareholders representing at least 1/2 of the share capital.
Should the balance sheet prepared by the Management Board evidence a loss exceeding the sum of the
spare and reserve capitals and one third of the share capital, then the Management Board should
immediately convene a General Shareholders’ Meeting in order to adopt a resolution concerning the future
existence of the Company. In such a case, an absolute majority of votes is enough to adopt a resolution on
dissolving the Company. In the event of merging the Company with a non-public company, a resolution
concerning such a merger shall be adopted by a majority of 4/5 of the votes, representing at least 1/2 of the
Company’s share capital. Acquisition and sale of real estate or a share in real estate, regardless of the value
of the acquired or sold right, does not require the consent of the General Shareholders’ Meeting.
Pursuant to Art. 6 of the CCC, a shareholder being in a relation of domination towards the Company (a
dominant company defined in Art. 4 § 1 point 4 of the CCC) shall notify the Company that the relation of
domination has arisen within two weeks of the date on which such relation arose. Otherwise, the exercise
of the right to vote with the shares of the dominant company representing more than 33% of the share
capital of the dependent Company shall be suspended.
c) the right to request, in the case of a shareholder or shareholders representing at least 1/10 of the share
capital, that the Extraordinary General Shareholders’ Meeting be convened and that certain matters be
placed on the agenda of the next General Shareholders’ Meeting. Such request should be submitted to the
Management Board in writing not later than one month prior to the proposed date of the General
Shareholders’ Meeting;
d) the right to take up the shares from the new issue in proportion to the number of shares they hold (the preemptive
right). Pursuant to Art. 433 of the CCC, the shareholders shall have the right of priority in taking
up the new shares in proportion to the number of shares they hold, and they shall also have the preemptive
right in the case of the issue of securities convertible into shares or incorporating the right to
subscription for the shares. Where the interests of the Company so require, the General Shareholders’
Meeting may deprive the shareholders of their pre-emptive right, in whole or in part. The resolution of the
General Shareholders’ Meeting shall require a majority of 4/5 of the votes. The shareholders may be
deprived of the pre-emptive right with respect to the new shares, provided that this has been indicated in
the agenda of the General Shareholders’ Meeting. In such a case, the Management Board shall present to
the General Shareholders’ Meeting an opinion justifying the reasons for the depriving or limiting the preemptive
right and the proposed issue price of the shares or the method of its calculation;
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e) the right to dismiss or suspend a Management Board member from his activities. Pursuant to Art. 368 of
the CCC, the Management Board members shall be appointed and dismissed by the Supervisory Board,
with the reserve that a Management Board member may also be dismissed or suspended from his activities
by the General Shareholders’ Meeting;
f) the right to request the election of the Supervisory Board by way of a vote in separate groups. Pursuant to
Art. 385 §3 of the CCC, upon an application of the shareholders representing at least 1/5 of the share
capital, the election of the Supervisory Board should be made by the next General Shareholders’ Meeting
by way of a vote in separate groups, even if the Statute provides for a different procedure for appointing
the Supervisory Board;
g) the right to request information concerning the Company. Pursuant to Art. 428 of the CCC, during the
General Shareholders’ Meeting, the Management Board shall provide a shareholder, at his request, with
information concerning the Company, whenever this is required, so that a matter included in the agenda of
the General Shareholders’ Meeting can be considered. The Management Board should, however, refuse to
provide information where this could result in damage to the Company or an affiliated company or a
dependent company or co-operative, or expose a Management Board member to criminal, civil or
administrative liability. In justified cases, the Management Board may provide the shareholder with
information also in writing not later than within two weeks of the end of the General Shareholders’
Meeting. The Management Board may also provide the shareholder with information concerning the
Company outside of the General Shareholders’ Meeting; such information, however, should be
subsequently disclosed by the Management Board in writing, in the materials submitted to the next
General Shareholders’ Meeting. A shareholder who has been refused the requested information during the
sitting of the General Shareholders’ Meeting and who raised an objection, recorded in the minutes, may,
within one week of the end of the General Shareholders’ Meeting, file an application with the Registry
Court requesting that the Management Board be obligated to provide the information. A shareholder may
also file an application with the Registry Court requesting that the Company be obligated to announce the
information provided to another shareholder outside of the General Shareholders’ Meeting;
h) the right to bring an action to revoke a resolution of the General Shareholders’ Meeting or declare the
same null and void. Pursuant to Art. 422 of the CCC, a resolution of the General Shareholders’ Meeting
which contravenes the Statute or good practice and harms the interests of the Company or is aimed at
harming a shareholder, may be challenged in an action to revoke the resolution brought against the
Company. An action to revoke a resolution of the General Shareholders’ Meeting should be brought
within one month from receipt of notice of the resolution, not later, however, than three months of the
adoption of the resolution. Pursuant to Art. 425 of the CCC, a resolution of the General Shareholders’
Meeting which contravenes the law may be also challenged in an action to declare such resolution null
and void brought against the Company. Such action to declare a resolution of the General Shareholders’
Meeting null and void should be brought within thirty days of the resolution being announced, not later,
however, than within one year of the adoption of the resolution. The lapse of these time periods shall not
preclude the raising of the objection that the resolution contrary to the law is null and void. The following
parties shall have the right to bring an action to revoke a resolution of the General Shareholders’ Meeting
or declare the same null and void: (i) a shareholder, who voted against the resolution and, following its
adoption, requested that his objection be recorded in the minutes, (ii) a shareholder, who, without valid
reason, was not allowed to participate in the General Shareholders’ Meeting, and (iii) a shareholder, who
was not present at the General Shareholders’ Meeting, however, only where the General Shareholders’
Meeting was incorrectly convened, or where the adopted resolution concerned a matter not included on
the agenda. The Commercial Companies Code provides for certain modifications of the general provisions
within the scope of challenging the resolutions concerning mergers, divisions and reorganization of
companies, which are provided respectively in Art. 509, Art. 544 and Art. 567 of the CCC;
i) the right to participate in the profits shown in the financial statements, audited by an auditor, which have
been designated by the General Shareholders’ Meeting for distribution to the shareholders. Pursuant to
Art. 347 §2 of the CCC, the profits shall be divided in proportion to the number of shares the shareholders
hold, and if the shares are not paid for in full, the profits shall be divided in proportion to the effected
payments for the shares;
j) the right to participate in the assets in case of liquidation of the Company. Pursuant to Art. 474 of the
CCC, the assets remaining after the creditors of the Company are satisfied or secured shall be divided
among the shareholders in proportion to the payments towards the share capital made by each of them.
On the basis of the Statute, the purchasers of the Offered Shares shall be not obligated to any additional
performances towards the Company.
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6.2 The Law on Public Trading in Securities
The Law on Public Trading in Securities introduces regulations different from the regulations contained in the
Commercial Companies Code and the Civil Code, concerning securities, including shares and the rules of their
transferring, and it imposes on the shareholders of public companies a number of obligations concerning
obtaining appropriate licences or giving notifications.
6.2.1 Dematerialization of the securities approved for public trading
Pursuant to Art. 7 of the Law on Public Trading in Securities, the securities approved for public trading are not in
a material form. The rights attached to the securities approved for public trading originate at the moment when
the securities are registered on the securities account for the first time and vested in the person holding the said
account. A contract obliging its party to transfer securities approved for public trading causes such securities to
be transferred at the time when the relevant entry is made on the securities account.
Pursuant to Art. 11 of the Law on Public Trading in Securities, a depository certificate confirms the title to
exercise all rights resulting from securities indicated therein, which are not or may not be exercised solely on the
grounds of the entries in the securities account, and, in particular, the rights to participate in the General
Shareholders’ Meeting. A depository certificate may be issued by a brokerage house, bank or any other entity
running the securities account, at the request of the person holding such an account. In the event that the rights
referred to in section 1 above are to be exercised using the said certificate, the number of securities indicated on
the said certificate may not be traded from issue until expiration or until the certificate is returned to the issuer.
For the duration of this period, the entity operating the said account shall block the indicated number of securities
on the said account.
6.2.2 Obligations related to purchasing and selling major blocks of stock
Pursuant to Art. 147 section 1 of the Law on Public Trading in Securities, any entity which, by acquiring shares
in a public company, obtains or exceeds 5% or 10% of the total number of votes at the General Shareholders’
Meeting and any entity which, prior to the sale of shares held in a public company ensuring at least 5% or at least
10% of the total number of votes at the General Shareholders’ Meeting, and after the sale holds shares ensuring
no more than 5% or no more than 10% of the total number of votes respectively, shall be obliged to notify the
Securities and Exchange Commission and the company about the acquisition or sale of shares within four days
after the day, when the number of the votes held changed, or after the day, when the obliged entity learned about
such a change or could have learned respecting the rules of due care and diligence. Pursuant to Art. 147 section 2
of the Law on Public Trading in Securities, the obligation to notify the Securities and Exchange Commission and
the company applies also to cases of acquisition and sale of shares resulting in a change in the number of the
votes held by shareholders who originally held more than 10% of the votes, by at least 2% of the total number of
votes in the General Shareholders’ Meeting. The said obligation shall arise upon the conclusion of both single
and multiple combined transactions. Pursuant to Art. 147 section 4 of the Law on Public Trading in Securities,
the obligation to notify the Securities and Exchange Commission and the company applies also to the persons
who, as a result of acquiring the shares of a public company, reached or exceeded respectively 25%, 50% or 75%
of the total number of votes at the General Shareholders’ Meeting, or as a result of a sale, became owners of
shares providing them with no more than respectively 25%, 50% or 75% of the total number of votes at the
General Shareholders’ Meeting.
The notification should contain information about the number of shares currently held, their percentage share in
the share capital and the voting rights derived from such shares, and their percentage share in the total number of
votes at the General Shareholders’ Meeting. Moreover, the notification regarding the reaching or exceeding 10%
of the total number of votes at the General Shareholders’ Meeting should additionally contain information on any
intent to continue to increase the share held in a public company in the period of 12 months following the date of
its submission and the purpose for which such an increase will be sought. Each time such intent or the purpose
thereof changes, within 12 months of the submission of the notice or later, the shareholder shall be obliged to
immediately notify the Securities and Exchange Commission and the concerned company.
Pursuant to Art. 149 of the Law on Public Trading in Securities, the acquisition of shares in a public company or
of depository receipts issued in connection with such shares in a number causing the purchaser to reach or
exceed, in total, respectively 25%, 33% or 50% of the total number of votes at the General Shareholders’
Meeting, shall be subject to the Securities and Exchange Commission’s approval to be issued at the request of
the purchaser. Within 14 days of submitting the request, the Securities and Exchange Commission may refuse to
grant an approval to acquire shares, in cases where such an acquisition might result in a violation of the law or
would be contrary to important interests of the state or the national economy. Moreover, the Securities and
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Exchange Commission may refuse to grant an approval in the case, where within 24 months prior to submitting
the request, the requesting party failed to perform or inadequately performed obligations set forth in Art. 147 and
150 of the Law on Public Trading in Securities. If the approval is granted, the Securities and Exchange
Commission shall transfer the information on the granted approval to acquire shares to the information agency.
Pursuant to Art. 150 of the Law on Public Trading in Securities, the obligation specified in Art. 147 of the Law
on Public Trading in Securities shall be applied respectively to acquisition or sale of bonds convertible into
shares, depository receipts as well as other securities, which bear the right or obligation to buy shares in a public
company.
Pursuant to Art. 158a section 1 of the Law on Public Trading in Securities: (i) the acquisition, sale or holding, by
a direct or indirect subsidiary, of shares in a public company or depository receipts issued in connection with
such shares, will be construed as the acquisition, sale or holding of such shares or depository receipts by the
parent company, and (ii) depository receipts issued in connection with shares of a public company will be
construed to be securities carrying voting rights on such a number of the company's shares as the holders of the
depository receipts may obtain by trading their depository receipts for such shares.
Pursuant to Art. 151 section 1 of the Law on Public Trading in Securities, the acquisition of shares approved for
public trading or depository receipts issued in connection with such shares constituting at least 10% of the total
number of votes within a period of less than 90 days, under secondary distribution, may be effected only as a
result of announcing a public summons to subscribe for the sale or conversion of shares. The manner of
announcing the summons and the terms relative to the acquisition of shares at the Stock Exchange is set forth in
the Decree of the Council of Ministers of July 17, 2001, on forms of summons inviting to the sale or exchange of
shares in a public company, the detailed procedure of their announcement and conditions of the acquisition of
shares following these summons (J.L. No. 86, section 941, as amended). The announcement of the summons
takes place after establishing a security with a value of 100% of the value of the shares to be purchased.
Pursuant to Art. 154 of the Law on Public Trading in Securities, any person who has come into the ownership of
shares in a public company or of depository receipts issued in connection with such shares, in a number
providing such a person with over 50% of the total number of votes at the General Shareholders’ Meeting, shall
be obliged to announce and conduct the summons to subscribe for the sale of the remaining shares of the
company, or to sell such a number of shares, prior to exercising the voting rights on these shares, yielding a
holding of no more than 50% of the total vote in the General Shareholders’ Meeting.
Pursuant to Art. 158a section 3 of the Law on Public Trading in Securities, the obligations specified in the
provisions on major blocks of stock shall be binding upon the entities which conclude a written or oral
understanding regarding the joint acquisition of the shares of the public company or the depository receipts
issued in connection with such shares, or the concerted voting of the company's shareholders an the General
Shareholders’ Meeting on matters of significance for the company, the pursuit of an long-term joint policy
regarding the company's management, if they possess shares in a public company in a number assuring jointly
the achievement or excess of a given threshold of the total number of votes. Moreover, the obligations
concerning major blocks of stock shall be binding jointly upon all parties to the already concluded agreement
referred to above, if one of these parties undertook or was intending to undertake actions from which follow the
obligations concerning major blocks of stock. The obligations concerning major blocks of stock shall be binding
on the investment fund also in the case when the achievement or excess of a given threshold of the number of
votes specified in these provisions takes place in connection with shares or depository receipts purchased, sold or
held jointly by other investment funds managed by the same investment funds society or other investment funds
created outside the territory of the Republic of Poland, managed by the same entity. The obligations concerning
major blocks of stock shall be binding also upon the entity, in the case of which the achievement or excess of a
given threshold of the number of votes specified in the provisions concerning major blocks of stock takes place
in connection with shares or depository receipts purchased, sold or held jointly: (i) by a third party personally but
on the order or for the benefit of this entity, excluding the shares purchased within the scope of performing the
actions referred to in Art. 30 section 2 point 2 of the Law on Public Trading in Securities, (ii) within the scope of
performing actions, referred to in Art. 30 section 2 point 4 of the Law on Public Trading in Securities – as
regards the shares composing managed securities portfolios whereof the entity as the manager may exercise the
voting right at the General Shareholders’ Meeting on behalf of contractors, (iii) by a third party, with which this
entity concluded an agreement whose object is the transfer of title to exercise the voting right.
Obligations concerning major blocks of stock also arise in the event when the voting rights are related to: (i)
securities constituting an object of guarantee, unless the entity for the benefit of which the guarantee was
established is entitled to exercise the voting right and declares its intention to exercise this right , (ii) shares, the
rights resulting from which are vested in a given entity are personal and held for life, (iii) securities deposited or
registered within an entity which is able to manage them upon its own on decision.
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The exercise of the voting right arising from the shares acquired in violation of the obligations specified in Art.
147, 149 and 151 of the Law on Public Trading in Securities shall be ineffective, and a failure to perform the
obligation referred to in Art. 154 of the Law on Public Trading in Securities shall result in an ineffective exercise
of the voting right resulting from all held shares of the company. Moreover, a shareholder who fails to give
notifications referred to in Art. 147 sections 1 and 2 of the Law on Public Trading in Securities, as well as a
shareholder who fails to perform the obligations specified in Art. 149 and 154 of the Law on Public Trading in
Securities shall be liable to a fine amounting to PLN 1 million. To the same fine shall be liable each person, who
announces and conducts the summons, referred to in Art. 151 of the Law on Public Trading in Securities or
renounces them failing to comply with the terms and conditions set forth in the Law on Public Trading in
Securities.
6.2.3 Right to request a verification to be conducted by a special auditor
Pursuant to Art. 158b of the Law on Public Trading in Securities, on the motion of a shareholder or shareholders
holding no less than 5% of the total number of votes at the General Shareholders’ Meeting, the General
Shareholders’ Meeting of a public company may resolve to have a special auditor examine a specific issue
related to the company's formation or the management of its business. Should the General Shareholders’ Meeting
dismiss the motion of the shareholder, the latter may apply to a Registry Court to appoint a special auditor.
6.2.4 The right to transfer securities admitted to public trading outside the regulated market
Pursuant to Art. 93, when justified, the Commission may grant a permit to transfer securities admitted to public
trading outside the regulated market. The entity which is to be a party to the transaction shall apply for a permit
through the entity maintaining the securities account for one of the transacting parties. Such entity is obliged to
publicly disclose, in the manner determined in the permit from the Commission, the conditions of the transaction.
In especially justified cases the Commission may grant an exemption from such disclosure obligation.
6.3 Act on the Protection of Competition and Consumers
Pursuant to Art. 12 of the Act on the Protection of Competition and Consumers, the intention of concentration of
entrepreneurs is subject to the notification to the President of the UOKiK in the case where the combined
turnover of the entrepreneurs participating in the concentration in the financial year preceding the year of the
notification exceeds the equivalent of EUR 50 million. The entrepreneurs within the meaning of the Act on the
Protection of Competition and Consumers shall be the persons being entrepreneurs within the meaning of the Act
on the Freedom of Business Activity dated July 2, 2004 (J.L. No. 173, item 1807), and also, among others,
natural persons holding stock or shares ensuring no less than 25% of votes in the entrepreneur’s bodies or having
decisive influence on such entrepreneur, should they undertake further actions subject to control of
concentration. The obligation to notify the President of the UOKiK about the intention of concentration
concerns, among other things, the intention to subscribe for or purchase shares of another entrepreneur resulting
in obtaining no less than 25% of votes at the General Shareholders’ Meeting as well as the intention to take direct
or indirect control over the entrepreneur by one or several entrepreneurs by way of subscribing for or purchasing
shares. Within the meaning of the Act on the Protection of Competition and Consumers, a takeover shall be
understood to mean any form of direct or indirect acquisition of rights, which separately or jointly, taking into
consideration all legal or factual circumstances, permit to exert a decisive influence on a given entrepreneur.
Pursuant to Art. 13 of the Act on the Protection of Competition and Consumers, the obligation to notify the
intention of concentration shall not apply, inter alia if:
- it consists of a financial institution acquiring or subscribing for the shares on a temporary basis with
a view to resell them, if the object of activity of this institution is investing in shares of other
entrepreneurs, for its own account or for the account of others provided that such resale takes place
within one year of the date of acquisition, and that this institution does not exercise the rights arising
from these shares, except from the right to dividend or exercises these rights solely in order to
prepare the resale of the entirety or a part of the enterprise, its property, or these shares;
- it consists in an entrepreneur temporary acquiring the shares with a view to secure debts, provided
that such entrepreneur does not exercise the rights arising from these shares, except from the right to
sell.
The concentration proceedings, pursuant to Art. 97 section 1 of the Act on the Protection of Competition and
Consumers should be ended not later than within two months from the day of their initiation. Pursuant to Art. 98
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section 1 of the Act on the Protection of Competition and Consumers, the entrepreneur, whose intention of
concentration is liable to announcement, shall be obliged to refrain from concentrating until the President of the
UOKiK issues his decision or until the deadline for issuing such a decision elapses. Pursuant to Art. 98 section 3
of the Act on the Protection of Competition and Consumers, the execution of a public offering to acquire or
convert shares notified to the President of the UOKiK pursuant to Art. 12 of the Act on the Protection of
Competition and Consumers, in the event where the purchaser does not avail himself of the voting right resulting
from the purchased shares or does it only in order to preserve the full value of his capital investment or in order
to prevent any serious damage that could arise and be suffered by entrepreneurs participating in the
concentration, does not constitute a violation of this provision.
Pursuant to Art. 101 section 1 of the Act on the Protection of Competition and Consumers, the President of the
UOKiK shall impose upon the entrepreneur, by way of a decision, a fine in the amount not exceeding 10% of the
income attained in the financial year preceding the year of imposing the fine, should this entrepreneur execute a
concentration without obtaining prior consent of the President of the UOKiK.
6.4 Consent of the licensing bodies concerning the application for an approval to introduce the
Offered Shares into public trading
The Company’s application for an approval to introduce the Offered Shares into public shall not require any
consent of the licensing bodies.
7 INFORMATION ON THE TAXATION RULES APPLICABLE TO INCOME RELATED TO
HOLDING AND TRADING IN SHARES, INCLUDING THE INDICATION OF THE TAX
REMITTER
The information included in the present Chapter are of a general nature, thus all investors are advised to consult
tax, financial and legal advisers.
7.1 Rules concerning income taxation
7.1.1 Income derived from the sale of the shares by natural persons residing within the territory of the
Republic of Poland (subject in Poland to an unlimited tax obligation)
Pursuant to Art. 30b section 1 of the Act on Personal Income Tax, tax on the income derived from the sale of
shares within the territory of the Republic of Poland amounts to 19%. Income from the sale of shares shall be
understood to mean a surplus of the profit derived from the sale (the value of a share expressed as the price in the
sale agreement) over the costs of acquiring the profit (the costs borne in relation to their acquisition or purchase),
achieved in the fiscal year, and in the case where the price of a share expressed in the agreement, without any
justified reasons, considerably differs from the market value, the profits from the sale are determined by a tax
authority in the amount equivalent to the market value of the securities. After the end of the given fiscal year, the
tax payers deriving incomes from the sale of securities are obligated to disclose them in the annual tax return,
calculate the due income tax and pay it into the account of a competent tax authority. The indicated income shall
not be added to other incomes.
The tax payers should prepare the aforesaid tax return on the basis of personal information on the amount of
derived income forwarded to them, by the end of February of the year immediately following the fiscal year, by
natural persons conducting business activity, legal persons and their organizational units as well as
unincorporated organizational units.
The aforesaid provisions shall not be applied if the sale of securities takes place within the scope of conducting
business activity, as in such a case the profits from their sale should be qualified as coming from the performance
of such activity and settled pursuant to the general principles.
7.1.2 Incomes derived from the sale of the shares by the payers of the corporate income tax having
their registered office or headquarters within the territory of the Republic of Poland
Incomes derived from the sale of the shares by the payers of the corporate income tax having their registered
office or headquarters within the territory of the Republic of Poland are subject to income tax in the Republic of
Poland pursuant to the general principles. Income from the sale of shares shall be understood to mean the
difference between the profit (the value of a share expressed as the price in the sale agreement) and the costs of
acquiring the profits (the costs borne in relation to the acquisition or purchase of the indicated securities), and in
the case where the price of a share, without any justified reasons, considerably differs from the market value, the
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profits from the sale are determined by a tax authority in the amount equivalent to their market value. The
income from the sale of shares increases the tax payer’s basis for taxation. Pursuant to Art. 19 section 1 of the
Act on Corporate Income Tax, the tax on the incomes derived by the payers of the corporate income tax amounts
to 19% of the basis for taxation.
7.1.3 Taxation of the income from the dividend derived by the natural persons residing within the
territory of the Republic of Poland and the payers of the corporate income tax having their
registered office or headquarters within the territory of the Republic of Poland
Pursuant to Art. 30a section 1 point 4 of the Act on Personal Income Tax and Art. 22 section 1 of the Act on
Corporate Income Tax, the income derived both by natural persons residing within the territory of the Republic
of Poland and the payers of the corporate income tax having their registered office or headquarters within the
territory of the Republic of Poland, from the dividends and other revenues resulting from the participation in the
profits of legal persons having their registered office within the territory of the Republic of Poland, is subject to
a lump-sum income tax amounting to 19% of the revenue.
Pursuant to Art. 23 of the Act on Corporate Income Tax, the paid amount of the tax from the received dividend
and from other revenues resulting from the participation in the profits of legal persons having their registered
office within the territory of the Republic of Poland is deducted from the amount of the tax, calculated pursuant
to the principles set forth in Art. 19 of the Act on Corporate Income Tax. In case it is impossible to make such
deductions in the given fiscal year, the amount of the income tax on the indicated income may be deducted by
the tax payer in the following fiscal years.
Pursuant to Art. 41 section 4 of the Act on Personal Income Tax, lump-sum tax payments on disbursements or
monies or funds made available to a tax payer (e.g. as a result of dividend payments) are the responsibility of the
entities making such payments. Tax payments are to be made by the 20 th day of the month following the month,
in which the tax was collected, into the account of the tax office, headed by the head of the tax office relevant for
the tax payer’s domicile or registered office, simultaneously with filing a return according to a standard form.
Pursuant to Art. 26 sections 1 and 3 of the Act on Corporate Income Tax, the entities listed therein that disburse
dividend payouts, shall be obligated, as tax-remitters, to collect the due lump-sum income tax on the day of such
disbursement. The amounts of the tax shall be transferred before the 7 th day of the month following the month, in
which the tax was collected, into the account of a tax office, headed by the head of the tax office relevant for the
tax payer’s domicile or registered office, and – for entities which do not have their headquarters or a registered
office in Poland – to the account of a tax office headed by the head of the tax office relevant for taxing foreign
nationals. Within the deadline for the transfer of the collected tax, the tax-remitters shall be obligated to send the
tax returns to the tax office, and the information on the collected tax, prepared according to a standard form - to
the tax payer.
7.1.4 Taxation of income from the sale of shares or dividend income derived by the natural persons not
residing within the territory of the Republic of Poland and the payers of the corporate income tax
not having their registered office or headquarters within the territory of the Republic of Poland
The principles referred to above concerning the taxation of income from the sale of shares and from dividends
are also applicable to the taxation of the income of foreign investors in virtue of those, unless an agreement on
double taxation treaty provide otherwise. Pursuant to Art. 30a section 2 or Art. 30b section 3 of the Act on
Personal Income Tax and Art. 26 section 1 of the Act on Corporate Income Tax, using, for the purposes of the
abovementioned cases, tax rates resultant from treaties on avoiding double taxation or not collecting the tax
pursuant to such treaties is possible, provided that the domicile or registered office of the tax payer abroad is
documented with a certificate issued for them by a relevant tax authority (a residence certificate). Effective from
May 1, 2004, pursuant to Art. 22 section 4 of the Act on Corporate Income Tax, the income-tax exemption
applies to dividend income and other income (revenues) resulting from the participation in the profits of legal
persons, distributed by companies with their registered office within the territory of the Republic of Poland and
earned by entities meeting all of the following requirements: (i) not having their registered office or headquarters
within the territory of the Republic of Poland, (ii) being subject to income tax in one of the EU member states as
concerns their entire income regardless of the place where they earn the same, and (iii) provided that the income
is derived from the participation in the profit of a legal person, in whose share capital the entity receiving this
income holds directly at least 25% of the shares constantly for a period of not less than two years. The
exemption is not applied in the case, when such income is a result of redemption of shares, sale of shares at the
price of their redemption or liquidation of the legal person.
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7.2 Tax on Civil Law Transactions
The sale of securities to brokerage houses and banks conducting brokerage activity, and the sale of securities
effected through these entities, pursuant to Art. 9 point 9 of the Act on the Tax on Civil Law Transactions is
exempted from this tax. Art. 89 of the Law on Public Trading in Securities allows, however, for the possibility of
concluding agreements under which the ownership of shares is transferred without intervention of the entity
conducting brokerage business. This possibility applies to, among other things, trading conducted between
natural persons, a dominant entity and its subsidiary (in accordance with the rules specified in the Law on
Bankruptcy) and in the course of enforcement proceedings. Such agreements, pursuant to the provisions of the
Act on the Tax on Civil Law Transactions, are subject to regulated tax amounting to 1% of the market value of
the sold property rights. The tax payers are obligated, without any summons of the Tax Authority, to submit
returns concerning the Act on the Tax on Civil Law Transactions, calculate and pay the tax within 14 days of the
day when the tax obligation arose, excluding the cases where the tax is collected by a remitter. A tax remitter is a
notary public, if the action is performed in the form of a notarial deed.
8 PARTIES TO THE FIRM-COMMITMENT OR STANDBY UNDERWRITING AGREEMENT
As at the Prospectus date, the Company has not signed and does not intend to sign the firm-commitment or
standby underwriting agreement concerning the Offered Shares.
9 AGREEMENTS ON THE BASIS OF WHICH OUTSIDE THE TERRITORY OF POLAND
WERE ISSUED DEPOSITORY RECEIPTS IN CONNECTION WITH SHARES ISSUED BY
THE COMPANY
As at the Prospectus date, the Company is not a party to any agreement, by virtue of which, outside the territory
of Poland, depository receipts were issued in connection with the shares issued by the Company.
10 INDICATION WHETHER THE ISSUER INTENDS TO CONCLUDE AN AGREEMENT ON
THE BASIS OF WHICH SECURITIES SHALL BE ISSUED IN CONNECTION WITH
SHARES OUTSIDE THE TERRITORY OF POLAND
As at the Prospectus date, the Company does not intend to conclude an agreement, by virtue of which depository
receipts could be issued outside the territory of Poland in connection with the shares issued by the Company or
the Offered Shares. The Company is watching the market situation and the Company’s plans concerning the
issuance of such securities in the future may change in order to grant investors the broadest possible access to the
Company.
11 RULES OF DISTRIBUTION OF THE OFFERED SHARES
The entity offering the Offered Shares in public trading is:
Centralny Dom Maklerski Pekao Spółka Akcyjna
ul. Wołoska 18
02-675 Warszawa
tel.: (+48 22) 640-28-40
fax: (+48 22) 640-28-00
11.1 Detailed rules of distribution of the Offered Shares
On the basis of this Prospectus, 18,373,785 Series I ordinary bearer shares shall be offered for the purpose of the
public subscription.
The Offered Shares are issued solely in order to prepay Netia’s obligations that result from agreements
concluded between the creditors and:
a) Netia Holdings S.A. (presently Netia S.A.) on June 28, 2002 (the arrangement was approved on August 9,
2002 by the District Court for the Capital City of Warsaw, XVII Commercial Division (Ref: sygn. akt. XVII
Ukł. 27/02);
b) Netia Telekom S.A on June 24, 2002 (the arrangement was approved on June 25, 2002 by the District Court
for the Capital City of Warsaw, XVII Commercial Division (Ref: sygn. akt. XVII Ukł. 28/02).
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PROSPECTUS OF NETIA SPÓŁKA AKCYJNA
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Pursuant to Resolution No. 1 of the Management Board of December 6, 2004 which was approved by the
Supervisory Board by way of Resolution No. 1 of December 6, 2004 the Issue Price of the Offered Shares
amounts to PLN 1.0826241.
11.1.1 Persons Entitled to purchase the Offered Shares
The persons entitled to subscribe for the Offered Shares are Merrill Lynch and the Creditors’ Trustee. The
Creditors’ Trustee shall conclude agreements with the Entitled Creditors (except for Merrill Lynch), under which
the Entitled Creditors shall transfer to the Creditors’ Trustee their receivables resulting from the Arrangement of
the Issuer and the Arrangement of Netia Telekom in return for the Creditors’ Trustee’s commitment to subscribe
for the Offered Shares and to transfer the purchased Offered Shares onto the assigners of receivables according
to the agreed parity. Merrill Lynch shall place direct subscriptions for the Offered Shares.
The Entitled Creditors are persons whose receivables have not been satisfied in the course of the Restructuring
process in 2002, by way of, inter alia, the offering of series H bearer shares issued by the Issuer in the course of
a public offering. In view of the joint and several nature of the obligations subject to the Arrangement of the
Issuer and the Arrangement of Netia Telekom, the subscription for Series H Shares resulted in a partial
satisfaction of the receivables subject to the Arrangement of Netia Telekom. A further portion of Netia’s
obligations towards Netia Telekom subject to the Arrangement of the Issuer expired following the merger of
Netia and Netia Telekom. The Offering may satisfy the remainder of the receivables subject to the Arrangement
of Netia Telekom for which the Issuer is currently liable.
The agreements under which the Entitled Creditors, except for Merrill Lynch, shall assign to the Creditors’
Trustee their receivables under the Arrangement of the Issuer and the Arrangement of Netia Telekom shall be
concluded by the parties thereto until the date immediately preceding the Offered Shares subscription opening
date, inclusive.
CDM Pekao S.A., with its registered office in Warsaw, shall act as the Creditors’ Trustee.
11.1.2 Dates of subscription and receiving subscriptions for Offered Shares
Pursuant to Resolution No. 1 of the Management Board of December 24, 2004, the commencement of the public
subscription for the Offered Shares shall take place on February 14, 2005 and its closing on February 16, 2005.
Subscription orders for the Offered Shares will be accepted from February 14, 2005 to 6 pm on February 16,
2005.
Upon the announcement of the abovementioned dates, the Company may, in consultation with the Offeror,
decide upon a change of the commencement or the closing date of the public subscription and upon the
commencement or the closing date of accepting subscriptions. In case of a change of the date of commencement
of the public subscription or the commencement of accepting subscriptions, information thereof shall be made
public by way of a current report prior to the day of the commencement of the public subscription or the
commencement of accepting subscriptions. Accordingly, in case of a change of the closing date of the public
subscription or the end of accepting subscriptions, information thereof shall be made public by way of a current
report not later than before the closing day of the public subscription, or by the end of accepting subscriptions for
the Offered Shares.
11.1.3 Rules of submitting subscriptions for the Offered Shares
A subscription for the Offered Shares shall be made for the number of Offered Shares equal to the quotient of the
amount of receivables owed the Entitled Person by the Issuer, covered by the Issuer’s statement of agreement on
a contractual set-off, and the Issue Price. When an Entitled Person subscribes for more Offered Shares than the
number resulting from the quotient of the receivables and the Issue Price, the subscription for a number
exceeding the number of Offered Shares resulting from the quotient of the receivables and the Issue Price, shall
be ineffective.
The subscription for Offered Shares contains, inter alia:
- the company of the Entitled Person;
- the registered office of the Entitled Person;
- in case of a resident: the REGON number, in case of a non-resident: number in the register or an
equivalent thereof appropriate for the country of origin with regard to legal persons or unincorporated
organisational units;
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- data of the natural person/natural persons authorized to make a subscription on behalf of the Entitled
Person, including the PESEL number and the ID or passport number;
- number and type of the Offered Shares for which the subscription is made;
- the Issue Price;
- name of the entity holding the securities account, and the securities account number of the Entitled
Person in case of an order to deposit the Offered Shares.
Moreover, the Entitled Person shall state that:
- s/he expresses the will and agreement to deduct the sum of receivables owed to him/her by the
Company from the sum of the Company’s receivables on account of the placed order for shares and of
the duty to pay the Issue Price,
- s/he is familiar with the contents of the Prospectus and the conditions of the public subscription,
- if instructions are given to deposit the Offered Shares, s/he confirms the correctness of the data stated
therein, undertakes to notify the Customer Service Center where s/he made the subscription about all
changes concerning the securities account and confirm the irrevocability of the instruction.
Person/persons making a subscription on behalf of an Entitled Person are obliged to present in the place of
accepting subscriptions documents confirming their authority to make a subscription on behalf of an Entitled
Person and to present an ID card or a passport. The original or the copy of the excerpt from an appropriate
register or other official document, containing basic information about the Entitled Person, stating his/her legal
status and mode of representation, as well as the names and surnames of persons authorized to perform such
representation, remains in the place where subscriptions are accepted.
The subscription for the Offered Shares is unconditional; it cannot contain any stipulations and is irrevocable in
the period of subscription being binding.
Any consequences resulting from an incorrect or incomplete completion of the subscription form shall be borne
by the Entitled Person.
The validity of subscription for the Offered Shares requires submitting the completed subscription form by the
Entitled Person or his/her agent in the period of accepting subscriptions.
11.1.3.1 The time in which the order placed is binding on the ordering party
An Entitled Person shall be bound by the subscription for the Offered Shares until the decision of the Registry
Court on the increase of the equity capital of the Company by way of issuing the Offered Shares becomes legally
binding, or until the decision to reject the registration of the increase of the equity capital by way of issuing the
Offered Shares becomes legally binding, unless the failure of the issue of the Offered Shares to come into effect
is announced prior to that by the Management Board.
11.1.3.2 Acting through an agent
An Entitled Person authorized to subscribe for the Offered Shares is entitled to act through a duly authorized
agent.
A power of attorney should be issued in writing. The persons acting as an agent should present such power of
attorney when placing a subscription order for the Offered Shares at the Customer Service Center accepting such
order.
Apart from authorizing an agent to place a subscription order for the Offered Shares, the Entitled Person may
authorize its agent to also perform other actions connected with the Offered Shares, such as the authorization to
give instructions to deposit the Offered Shares or to collect a confirmation of the acquisition of the Offered
Shares. If the Entitled Person authorizes its agent to perform both the above-mentioned actions, the agent shall
have to decide whether to give instructions to deposit the Offered Shares, or whether to collect the confirmation
of the acquisition at the Customer Service Center where such agent placed a subscription order.
Investors are requested to pay particular attention to situations when the power of attorney is granted outside the
territory of the Republic of Poland, in which case the power of attorney shall have to be certified by a Polish
diplomatic mission or a consular office, unless the provisions of law or of an international agreement to which
the Republic of Poland is a party stipulate otherwise. A power of attorney issued in a language other than Polish
shall have to be translated into Polish by a certified translator.
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The power of attorney should contain the following data on the agent and the Entitled Person:
- For natural persons (Resident or Non-Resident): full name, address, ID card number and personal
identification number (PESEL) or passport number, and, in the case of Non-Residents, their nationality;
- Residents not being natural persons: company name, registered office and address, the name of their
registry court and the National Court Register (KRS) number, industry identification number (REGON);
- Non-Residents not being natural persons: company name, address, number or name of the relevant
register or another official document.
Furthermore, the power of attorney should define the scope of authorization and contain an indication as to
whether the agent is entitled to grant further powers of attorney.
Apart from the power of attorney, a person acting as an agent shall present the following documents:
- their ID card or passport (natural person);
- an excerpt from the register relevant to the agent (Residents not being natural persons);
- an excerpt from the register relevant to the agent’s registered office or another official document
containing basic information on the agent, indicating his or her legal status, manner of representation,
and names of authorized representatives (Non-Residents not being natural persons). Unless the
provisions of law or of an international agreement to which the Republic of Poland is a party stipulate
otherwise, the abovementioned excerpt should be certified by a Polish diplomatic mission or a consular
office and then translated into Polish by a certified translator;
- an excerpt from the register relevant to the Entitled Person (Residents not being natural persons);
- an excerpt from the register relevant to the Entitled Person’s registered office or another official
document containing basic information on the Entitled Person, indicating its legal status, manner of
representation, and names of authorized representatives (Non-Residents not being natural persons).
Unless the provisions of law or of an international agreement to which the Republic of Poland is a party
stipulate otherwise, the abovementioned excerpt should be certified by a Polish diplomatic mission or a
consular office and then translated into Polish by a certified translator.
One person may hold more than one power of attorney.
The excerpt from the relevant register or another official document containing basic information on the agent and
the Entitled Person, indicating their legal status, manner of representation, as well as names of authorized
representatives, and the power of attorney, or copies thereof, shall be kept by the Customer Service Center
accepting the order.
The Entitled Persons are requested to note that the power of attorney must be properly drawn up, with stamp duty
of PLN 15 paid (The Stamp Duty Act of September 9, 2000, Dz.U. No. 86, item 960, as amended).
The agent shall confirm the collection of the relevant documents, i.e. the subscription form and the confirmation
of payment on behalf of the Entitled Person.
11.1.4 Place of acceptance of orders for the Offered Shares
Subscriptions for the Offered Shares shall be accepted in CDM Customer Service Centre at ul. Wołoska 18 in
Warsaw.
11.1.5 The terms of payments for the Offered Shares
11.1.5.1 Legal regulations relating to payments
Pursuant to the Act of November 16, 2000 on the prevention of introduction to financial dealing of monies
originating from illicit or undisclosed sources and preventing the financing of terrorism (J.L. No. 153/2003, item
1505, as amended), the institution accepting the instruction (order) from the client to carry out a transaction the
equivalent of which exceeds EUR 15,000, whether it is a single transaction carried out within a single operation
or within a series of operations, if the circumstances suggest that they are related transactions, is obliged to
register such transactions. Also, such transactions are to be registered whose circumstances imply that the money
involved may come from illicit or undisclosed sources, irrespective of the value of such transactions and their
nature. In order for the brokerage house to fulfil the registration obligation, the brokerage house shall identify its
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PROSPECTUS OF NETIA SPÓŁKA AKCYJNA
CHAPTER III
clients each time they give an instruction or order to carry out a transaction on the basis of the documents
presented upon submitting the instruction or order to carry out a transaction, or upon concluding an agreement
with the client. The identification process shall include:
−
In the case of natural persons and their agents – confirmation and registration of the features of the
document confirming the identity on the basis of separate regulations or of a passport, as well as the
name, surname, citizenship and address of the person carrying out the transaction, the PESEL number in
case of presenting an ID card or the country code when presenting a passport, and for a person on whose
behalf or for whom the transaction is carried out – confirmation and registration of his/her name,
surname and address;
−
−
In the case of legal persons – recording the current data from the excerpt from the court register or an
equivalent thereof, stating the name (company), organisational form of the legal person, the registered
office and address, as well as a current document confirming the authority of the person carrying out the
transaction to represent the legal person and the abovementioned data regarding the representative;
In the case of unincorporated organisational units – recording the data from the document stating such
unit’s organisational form and address, and from the document confirming the authority of the persons
carrying out the transaction to represent such unit, as well as the abovementioned data regarding the
representative.
CDM shall submit to the General Inspector for Financial Information the information regarding the transactions
registered in accordance with the abovementioned principles.
In case of a transaction where there is a reasonable suspicion that it is connected with a committed offence as
defined in Article 299 of the Penal Code, CDM shall notify thereof the General Inspector for Financial
Information.
The term “transaction” should be understood as cash and non-cash payments and withdrawals, including
transfers between different accounts held by the same holder, except transfer onto time deposit accounts and
transfers from abroad, currency exchange, transfer of property or ownership of material values, including
consigning such values for sale on the commission basis or putting them on pledge and transferring the material
values between different accounts held by the same holder, exchange of receivables for securities or shares,
regardless of whether such transactions are carried out on one’s own or somebody else’s behalf, for one’s own or
somebody else’s account.
11.1.5.2 Specific rules, place and dates of payment for the Offered Shares
The payment for the Offered Shares shall be effected by way of a contribution of funds by means of a contractual
set-off of the Issuer’s receivables from the Issue Price with the receivables of the Entitled Persons, including the
receivables of the Entitled Creditors transferred to the Creditors’ Trustee, resulting from the agreements
concluded between the creditors and:
a) Netia Holdings S.A. (presently Netia S.A.) on June 28, 2002 (the arrangement was approved on August 9,
2002 by the District Court for the Capital City of Warsaw, XVII Commercial Division (Ref: sygn. akt. XVII
Ukł. 27/02);
b) Netia Telekom S.A on June 24, 2002 (the arrangement was approved on June 25, 2002 by the District Court
for the Capital City of Warsaw, XVII Commercial Division (Ref: sygn. akt. XVII Ukł. 28/02).
As a result of the fact that the Offered Shares will be paid for by way of a contractual set-off of the mutual
receivables of the Issuer and the Entitled Persons, no physical flow of funds will take place.
The condition of a successful placement of the order for the Offered Shares is the agreement of the Entitled
Person to the contractual set-off of the receivables upon placing the order.
11.1.6 Legal effects of the failure to pay for the Offered Shares within the specified time or the making of
an incomplete payment
Due to the fact that no physical flow of funds shall take place, failure to pay for the Offered Shares within the
specified time, or the making of an incomplete payment, cannot occur.
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11.1.7 Allocation of the Offered Shares
The Offered Shares shall be allocated by the Issuer on the basis of the accepted and verified orders within three
days from the closing of the public offering.
11.1.8 Reimbursement of overpaid amounts
Due to the form of payment for the Offered Shares, the failure to set-off receivables shall be considered as the
reimbursement of overpaid amounts (cf. 11.1.11.1 of this Chapter).
11.1.9 Issuing the certificates of purchase of the Offered Shares
Immediately after the allocation of the Offered Shares and the submission of the representation referred to in Art.
310 of the CCC in conjunction with Art. 431 § 7 of the CCC on the value of the share capital subscribed for, the
Management Board shall apply to the Registry Court for the registration of the increase in the equity capital. The
announcement of the registration of the increase in the Company’s share capital shall be published in the “Court
and Business Gazette” (Monitor Sądowy i Gospodarczy) and the daily newspaper “Puls Biznesu”.
Immediately after the registration of the Offered Shares in the National Depository for Securities, the Entitled
Persons, if having made an instruction to deposit the Offered Shares, shall be notified of crediting the shares to
his/her securities account by the entity maintaining his/her securities account in the time and manner stated in the
regulations of this entity, whereas in case of a failure to have made such an instruction the Entitled Persons shall
receive in the Customer Service Centre in which s/he has placed the order for the Offered Shares, a certificate of
purchase of the Offered Shares containing, in particular, the code of these securities.
11.1.10 Secondary trading in the Rights to Offered Shares
Immediately after the allocation of the Offered Shares and the submission of the representation referred to in Art.
310 of the CCC in conjunction with Art. 431 § 7 of the CCC on the value of the share capital subscribed for, the
Management Board shall submit a motion to the National Depository for Securities to register the Rights to the
Offered Shares. After being registered by the National Depository for Securities, the Rights to the Offered Shares
shall be credited to the securities accounts of the Entitled Persons who have given instructions to deposit the
Offered Shares, whereas other persons’ Rights to the Offered Shares shall be credited to the account of the
Sponsor of the Issue. The Company shall not take steps to have the Rights to the Offered Shares admitted to
stock exchange trading.
Immediately after being granted a code by the National Depository for Securities, the Rights to the Offered
Shares granted to the Creditors’ Trustee shall be registered on its securities account, and, in case no deposit
instructions with respect to the Offered Shares have been given, they shall be registered in the name of the
Sponsor of the Issue. At the same time, a transaction shall be concluded on the basis of the permission of the
Commission issued according to the Article 93 of the Law on Public Trading in Securities, as a result of which
the Creditors’ Trustee shall transfer the Rights to the Offered Shares to the Entitled Creditors who have
transferred to it their receivables resulting from the Arrangement of the Issuer and the Arrangement of Netia
Telekom. An application for a permit under Art. 93 of the Law on Public Trading in Securities to transfer the
Rights to the Offered Shares outside the regulated market was filed with the Commission on December 17, 2004.
Rights to the Offered Shares are securities within the meaning of Article 3 section 1 of the Law on Public
Trading in Securities.
Immediately upon the allocation of the Offered Shares, the Company’s Management Board shall submit a
representation referred to in Art. 310 of the CCC in conjunction with Art. 431 § 7 of the CCC on the value of the
share capital subscribed for and notify the Registry Court of such increase of the share capital in order to register
the same, and afterwards shall apply to the National Depository for Securities to conclude an agreement
regarding their registration in the deposit for securities and their assimilation with the Shares which already are
in stock exchange trading.
On the day on which the Offered Shares are granted a code by the National Depository for Securities, the owners
of the Rights to the Offered Shares shall be granted the Offered Shares in such a way that for each Right to the
Offered Shares, one Offered Share shall be registered.
11.1.11 Failure of the issue of the Offered Share
The Management Board shall allocate to the Entitled Persons all the Offered Shares that have been properly
subscribed for and paid for and it undertakes to submit a motion to the Registry Court to register the increase of
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PROSPECTUS OF NETIA SPÓŁKA AKCYJNA
CHAPTER III
the share capital in the sum equal to the orders and payments made for the Offered Shares. The Management
Board shall not change the conditions of the issue of the Offered Shares to be effected after the public offering
has begun. In extraordinary circumstances, the Management Board may abandon the issue according to section
11.1.11.2 of this Chapter.
The issue of the Offered Shares shall not come into effect if:
- not even one Offered Share has been subscribed and paid for pursuant to the conditions of the Prospectus,
- The Management Board has failed to submit the representation referred to in Art. 310 of the CCC in
conjunction with Art. 431 § 7 of the CCC on the value of the share capital increase,
- The Management Board has not submitted to the Registry Court the resolution on the increase of the
equity capital by way of the issue of the Offered Shares within six months from the date on which the
Securities and Exchange Commission granted the permission to admit the Offered Shares to public
trading,
- the decision of the Registry Court refusing to register the increase of the equity capital by way of the issue
of the Offered Shares has become legally binding.
Moreover, the issue shall not come into effect in the case of the Issuer’s abandonment of the public subscription.
The change of the time frames of the public offering shall not be understood as an abandonment of the public
subscription.
11.1.11.1 Announcement of the effectiveness or failure of the issue of the Offered Shares
The Management Board will give notice on the effectiveness or failure of the issue of the Offered Shares within
14 days from the closure of the public subscription if the issue does not come into effect due to a failure to place
a subscription or inadequate payment for at least one Offered Share, or immediately if the issue of the Offered
Shares does not come into effect due to other reasons enumerated in point 11.1.11 of this Chapter. The
information of the effectiveness or failure of the issue shall be made public by way of a current report, and the
announcement of the failure of the issue shall be published in daily newspaper “Puls Biznesu”.
11.1.11.2 Conditions of the cancellation, time change or abandonment of the issue of the Offered
Shares
The Issuer may cancel the public subscription for the Offered Shares at any time prior to the commencement of
the public subscription without giving reason. The Issuer may change the time frames of the issue of the Offered
Shares at any time prior to the commencement of the public subscription without giving reason. Changing the
time frames of the public subscription for the Offered Shares may be performed without the immediate
announcement of the new time frames of the public subscription. These time frames may be set by the Issuer at a
later date.
The Issuer may abandon the issue of the Offered Shares after the commencement of the subscription only due to
important reasons. These important reasons include, among other things, (a) sudden and previously unpredictable
changes in the economic or political situation of the country or in the world that may have a vital negative impact
on the financial markets, the economy of the country or on the further activity of the Company (e.g. terrorist
attacks, wars, environmental catastrophes, floods), and (b) sudden and unpredictable changes that have a direct
influence on the operational activity of the Company.
The change of the time frames of the public subscription is not understood as an abandonment of the public
subscription.
11.1.11.3 Announcement of the abandonment of the issue of the Offered Shares
The Management Board shall give notice of the abandonment of conducting the issue of the Offered Shares
immediately after such a decision has been taken.
The information about abandoning the conducting of the issue of the Offered Shares shall be made public by way
of a current report.
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11.1.11.4 Return of payments connected with the issue of the Offered Shares
Due to the form of payments for the Offered Shares, no return of payments shall be made. In the case of a failure
of the issue of the Offered Shares, upon that moment all effects of the contractual set-off of the receivables shall
be made invalid and the effects of the payment of the Issue Price shall be considered non-existent.
12 THE REGULATED MARKET TO WHICH THE ISSUER PLANS TO INTRODUCE THE
OFFERED SHARES
It is the intention of the Issuer to have the Offered Shares listed on the Warsaw Stock Exchange within three
months from the closing of the public subscription.
Immediately upon the allocation of the Offered Shares, the Company’s Management Board shall submit a
representation referred to in Art. 310 of the CCC, in conjunction with Art. 431 § 7 of the CCC, on the value of
the share capital subscribed for and notify the Registry Court about the increase of the equity capital in order to
register it, and afterwards it shall apply to the National Depository for Securities to conclude the agreement for
the registration of the Offered Shares in the securities deposit and for their assimilation with the shares being the
object of the stock exchange trading. At the same time, the Issuer shall apply to the Warsaw Stock Exchange to
admit the Offered Shares to the Warsaw Stock Exchange listings.
Pursuant to section 18 of the Rules of the Warsaw Stock Exchange, the admission to the stock exchange trading
of the new issue shares of a company whose shares of the same type are admitted to stock exchange trading does
not require a resolution of the Supervisory Board if in the application concerning their admission to the stock
exchange trading, submitted to the Management Board of the WSE, the Issuer makes the appropriate statement
that they are admitted to public trading, their transferability is unlimited and they have been issued in compliance
with the rules of the public nature of the public trading.
The abovementioned statement shall have the same legal consequences as a resolution of the Council of the
Exchange on admitting the new issue share to the stock exchange trading.
13 INFORMATION WHETHER THE ISSUER SHALL GRANT LOANS, HEDGING, ADVANCE
PAYMENTS, AND IN OTHER FORMS, DIRECTLY OR INDIRECTLY, FINANCE THE
PURCHASE OR ASSUMING OF THE ISSUED OFFERED SHARES
The Issuer shall not grant loans, security, advance payments or otherwise finance the purchase or subscription for
the issued Offered Shares, whether directly or indirectly.
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CHAPTER IV
CHAPTER IV
FINANCIAL STATEMENTS
On August 10, 2004, the Company published its extended consolidated semi-annual statements for the first half of 2004,
including complete consolidated financial statements and summary standalone financial statements. The said statements, dated
August 10, 2004, were examined by the Certified Auditor, who issued a report from the audit dated August 10, 2004, including a
note on the ongoing process of the allocation of the acquisition price of El-Net to the fair value of El-Net’s assets and liabilities
acquired on January 29, 2004.
The financial statements prepared for the purposes of the Prospectus should be examined by the Certified Auditor. Therefore, the
Management Board prepared new financial statements and the consolidated financial statements for the six months ending on
June 30, 2004, and submitted it for the Certified Auditor’s review. The consolidated financial statements dated December 2, 2004,
take account of events which occurred after the balance sheet date (June 30, 2004) and which affected these statements. These
events included, among other things, the closing of the process of the allocation of the acquisition price of El-Net to the fair value
of El-Net’s acquired net assets. The consolidated financial statements for the six months ending on June 30, 2004, prepared as at
December 2, 2004, replace the consolidated financial statements dated August 10, 2004.
The financial statements and the consolidated financial statements dated December 2, 2004, together with the opinions and reports
of the Certified Auditor have been made available to the public in the form of a current report and a corrected periodic report
dated August 10, 2004, by supplementing the same with new information on December 2, 2004.
The data below illustrates the impact of the events which occurred after the balance sheet date and the equating of the balance
sheet and the profit and loss account items in the financial statements and consolidated financial statements dated December 2,
2004, with those in the financial statements and consolidated financial statements dated August 10, 2004.
CONSOLIDATED BALANCE SHEET
Data published in
the semi-annual
report
(in thousands PLN)
Change
(in thousands
PLN)
Examined data
(in thousands PLN)
ASSETS
Fixed assets 2,449,267 (308,486) 2,140,781
Intangible assets 275,200 - 275,200
Goodwill of the subsidiaries 308,486 (308,486) -
Fixed tangible assets 1,865,530 - 1,865,530
Long-term investment 51 - 51
Circulating assets 377,611 - 377,611
Stock 4,571 - 4,571
Short-term receivables 122,190 - 122,190
Short-term investments 217,619 - 217,619
Short-term accruals 33,231 - 33,231
TOTAL ASSETS 2,826,878 (308,486) 2,518,392
LIABILITIES
Equity 2,181,284 (3,096) 2,178,188
Share capital 361,638 - 361,638
Spare capital 1,757,913 - 1,757,913
Revaluation capital 25 - 25
Loss from previous years (6,323) - (6,323)
Net profit 68,031 (3,096) 64,935
Minority interests 4,694 - 4,694
Negative goodwill of the subsidiaries 11,852 74,635 86,487
Liabilities and reserves for liabilities 629,048 (380,025) 249,023
Long-term liabilities 77,757 (57,297) 20,460
Short-term liabilities 480,130 (322,728) 157,402
Accruals 71,161 - 71,161
TOTAL LIABILITIES 2,826,878 (308,486) 2,518,392
Book value 2,181,284 (3,096) 2,178,188
Book value per share (in PLN) 6.03 6.02
Diluted book value per share (in PLN) 5.33 5.32
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CHAPTER IV
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Data published in
the semi-annual
report
(in thousands PLN)
Change
(in thousands
PLN)
Examined data
(in thousands PLN)
Net revenues 434.245 - 434.245
Costs of goods sold, sale and overall management (383.987) - (383.987)
Profit on sales 50.258 - 50.258
Other operating revenues 3.557 (934) 2.623
Other operating costs (12.175) 1.305 (10,870)
Profit on operating activity 41.640 -371 42,011
Financial income 30.582 (16.830) 13.752
Financial expense (4.215) 1,916 (2,299)
Profit on the sale of all or some interests in subsidiaries - 5 5
Profit on economic activity 68.007 (14,583) 53,469
Deduction of goodwill of subsidiaries (8.814) 8.814 -
Deduction of negative goodwill of subsidiaries 9.447 2.628 12.075
Gross profit 68.640 (3.096) 65.544
Income tax – current portion (243) - (243)
Profits of minorities (366) - (366)
Net profit 68.031 (3.096) 64.935
Net profit 68,031 64,935
Loss per one ordinary share (in PLN) 0.19 0.19
The above changes relate mainly to the impact of the review of El-Net’s license fee liabilities with regard to their fair value as at
the acquisition day of El-Net by the Netia Group. The fair value was established on the basis of the estimates of the Management
Board as to the probability of future payments in view of the fact that at the acquisition day the redemption process of license fee
liabilities had been opened. The probability of redemption estimated by the Management Bard was 100% in relation to the
investment expenses already incurred, and 80% in relation to future expenses, which led to a significant decrease in their value as
of June 30, 2004 compared to the value disclosed previously in the consolidated financial statements for the same period. The
valuation materially affected the establishment of the net fair value of the assets acquired, which resulted in a negative value of
the consolidation as of the acquisition day, amounting to PLN 77,263,000 in comparison to the consolidated value of the company
of PLN 317,300,000, estimated previously prior to the valuation of license fee liabilities to be equal to the fair value.
The current report and the corrected periodic report referred to above have been made publicly available by way of an
announcement through the “Emitent” (Issuer) system on December 2, 2004, and are available on the Issuer’s website and at its
registered office, and shall be available at the Offeror’s registered office.
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SCHEDULES
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SCHEDULE 1
EXTRACT FROM THE REGISTER OF ENTREPRENEURS
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1 § 5A of the Statute
SCHEDULE 2
§ 5A OF THE STATUTE, THE RESOLUTIONS OF THE GENERAL SHAREHOLDERS MEETING,
THE MANAGEMENT BOARD AND THE SUPERVISORY BOARD
Ҥ 5A
1. The Management Board shall have the right to increase the Company’s share capital through the issue of Company shares with a
total nominal value not exceeding PLN 18,373,785 (in words: eighteen million, three hundred and seventy three thousand, seven
hundred and eighty five Polish zlotys), by issuing, in one or more tranches, series “I” shares or subsequent series of the Company’s
shares (authorized capital). The Management Board’s authority to increase the Company’s share capital and to issue new Company
shares within the limit specified above expires on March 12, 2005.
2. Each increase of the share capital by the Management Board up to the amount determined in § 5A section 1 of the Company’s Statute
requires the Supervisory Board’s approval.
3. Upon the approval of the Supervisory Board, the Company’s Management Board shall determine the detailed conditions of each issue
of shares within the limits set forth in § 5A section 1 of the Company’s Statute, and in particular:
a) the exact number of shares to be issued in each tranche or series;
b) the issuance price of every subsequent issue;
c) the time of the opening and closing of the subscription periods;
d) the detailed terms and conditions for the distribution of the shares;
e) the date of determining pre-emptive rights, if applicable;
f) to execute agreements with entities authorized to accept subscriptions for shares and to determine the places and dates of such
subscriptions for the shares;
g) to execute agreements, both paid and free of charge, in order to secure the success of the subscription for the shares and, in
particular, any standby firm-commitment underwriting agreement.
4. Upon the approval of the Company’s Supervisory Board, the Management Board is authorized to limit or exclude the pre-emptive
rights of the Company’s Shareholders with respect to the Company’s shares to be issued by the Management Board within the limits
set forth in § 5A section 1 of the Company’s Statute.”
2 The resolutions of the General Shareholders’ Meeting, the Management Board and the Supervisory Board
“Resolution No. 6
of the Extraordinary General Shareholders’ Meeting
of Netia Holdings S.A.
dated March 12, 2002
concerning amending the Company’s Statute and authorizing the Management Board to increase the Company’s share capital within the
authorized capital
1. § 5A shall be added to the Company’s Statute after § 5:
Ҥ 5A
1. The Management Board shall have the right to increase the Company’s share capital and to issue new Company shares with
a total nominal value not exceeding PLN 18,373,785 (in words: eighteen million, three hundred and seventy three thousand,
seven hundred and eighty five Polish zlotys), by issuing, in one or more tranches, ordinary bearer shares of series “I” shares
or subsequent series of the Company’s shares (authorized capital). The Management Board’s authority to increase the
Company’s share capital and to issue new Company shares within the limit specified above expires on March 12, 2005.
2. Each increase of the share capital by the Management Board up to the amount determined in § 5A section 1 of the
Company’s Statute requires the Supervisory Board’s approval.
3. Upon the approval of the Supervisory Board, the Company’s Management Board shall determine the detailed conditions of
each issue of shares within the limits set forth in § 5A section 1 of the Company’s Statute, and in particular:
a) the exact number of shares to be issued in each tranche or series;
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b) the issuance price of every subsequent issue;
c) the time of the opening and closing of the subscription periods;
d) the detailed terms and conditions for the distribution of the shares;
e) the date of determining pre-emptive rights, if applicable;
f) to execute agreements with entities authorized to accept subscriptions for shares and to determine the places and dates
of such subscriptions for the shares;
g) to execute agreements, both paid and free of charge, in order to secure the success of the subscription for the shares
and, in particular, any standby or firm-commitment underwriting agreement or agreements.
4. Upon the approval of the Company’s Supervisory Board, the Management Board is authorized to limit or exclude the preemptive
rights of the Company’s Shareholders with respect to the Company’s shares to be issued within the limits set forth in
§ 5A section 1 of the Company’s Statute.”
2. Granting the Supervisory Board the authority to consent to a limitation or exclusion of the pre-emptive rights for shares to be issued by the
Management Board is, in the view of the Shareholders, commercially justified and in the best interests of the Company, as well as its
Shareholders, as explained in detail in the Management Board’s opinion attached thereto as Annex 1. The pre-emptive rights of the
Shareholders are adequately protected by the requirement that the Supervisory Board has to approve any limitation or exclusion of the
pre-emptive rights. If it were not possible to exclude the Shareholders’ pre-emptive rights, the flexibility of the Management Board to use
the authorized capital would be severely limited. This would be unjustified taking into account the Company’s current financial situation
and its capital needs. The power granted to the Company’s Management Board to increase the Company’s share capital shall allow the
Management Board to issue new Company shares immediately, without additional expense to the Company and the time constraints
related to the Company’s convening of a General Shareholders’ Meeting.
3. Series “I” shares or subsequent series of the Company’s shares to be issued within the authorized capital may only be used in connection
with the Restructuring Agreement, dated March 5, 2002, entered into among the Company, Netia South Sp. z o.o., Netia Telekom S.A.,
Netia Holdings B.V., Netia Holdings II B.V., Netia Holdings III B.V., the Noteholders who signed the Restructuring Agreement, JPMorgan
Chase Bank, Telia AB (publ.), Warburg, Pincus Equity Partners, L.P., Warburg, Pincus Ventures International, L.P., Warburg, Pincus
Netherlands Equity Partners I, C.V., Warburg, Pincus Netherlands Equity Partners II, C.V., Warburg, Pincus Netherlands Equity Partners
III, C.V., and Warburg Netia Holding Limited.
4. Taking into consideration the above facts and the Company’s current financial situation, adopting § 5A of the Company’s Statute
concerning the authorized capital is in the best interests of the Company and its Shareholders.”
“Resolution No. 7
of the Extraordinary General Shareholders’ Meeting
of Netia Holdings S.A.
dated March 12, 2002
concerning admitting the Company’s shares to be issued within the authorized capital
to public trading
In accordance with Article 84, point 1 of the Law on Public Trading in Securities, it is resolved to introduce to public trading series “I” shares
and subsequent series of the Company’s shares to be issued by the Management Board pursuant to § 5A of the Company Statute (authorized
capital). Upon the issue of new shares pursuant to the authorization granted to the Management Board in paragraph 5A of the Company’s
Statute, the Management Board shall take all actions necessary to implement this Resolution, including filing a relevant motion with the
Securities and Exchange Commission and subsequently filing an application for admitting the shares to trading on the main market of the
Warsaw Stock Exchange.”
“Resolution No. 1
of the Management Board of Netia SA
of December 6, 2004
regarding the Company’s share capital increase
through the issuance of series “I” bearer shares
1. Pursuant to §5A of the Company statute (the “Statute”), the Company’s share capital is hereby increased by no more than PLN 18,373,785
(in words: eighteen million, three hundred and seventy three thousand, seven hundred and eighty five) through the issuance of no more
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than 18,373,785 (in words: eighteen million, three hundred and seventy three thousand, seven hundred and eighty five) ordinary bearer
series “I” shares (the “Offered Shares”).
2. The Offered Shares shall be issued for the purposes of early repayment of Netia’s obligations under the arrangements entered into between
the creditors (“Entitled Creditors”) and:
a) Netia Holdings S.A. (presently Netia S.A.) on June 28, 2002 (the arrangement was approved on August 9, 2002 by the District Court
for the Capital City of Warsaw, XVII Commercial Division (Ref: sygn. akt. XVII Ukł. 27/02));
b) Netia Telekom S.A on June 24, 2002 (the arrangement was approved on June 25, 2002 by the District Court for the Capital City of
Warsaw, XVII Commercial Division (Ref: sygn. akt. XVII Ukł. 28/02)).
3. The issue price for each of the Offered Shares shall amount to PLN 1.0826241 (in words: one and 826241/10,000,000).
4. The persons authorized to subscribe for the Offered Shares shall be Merrill Lynch Capital Services Inc. (“MLCS”) and the creditors’
trustee (“Creditors’ Trustee”). The Creditors’ Trustee will enter into agreement with the Entitled Creditors (except for MLCS which will
make a direct subscription for the Offered Shares), pursuant to which the Entitled Creditors will assign thereto their receivables under the
above referenced arrangements in exchange for the Creditors’ Trustee assuming the obligation to subscribe for the Offered Shares and,
subsequently, to transfer them to the Entitled Creditors.
5. The Offered Shares shall entitle to the dividend as of January 1, 2004.
6. The pre-emptive right of Company shareholders with respect to the Offered Shares shall be excluded, which in the Management Board’s
opinion, is economically justified and in the best interests of the Company (see the detailed explanation in the Management Board’s
opinion attached herewith as Schedule No. 1).
7. The Offered Shares shall be offered through public trading. Therefore, the Company’s Management Board shall:
a) act on the basis of Article 63, section 1 and 2 of the Law on Public Trading in Securities of August 21, 1997 (Dz.U. 2002, No. 49, item
447, as amended), for the purposes of admitting the Offered Shares to public trading, notify the Securities and Exchange Commission
in Warsaw, together with the Prospectus of December 6, 2004 (the “Prospectus”) attached herewith as Schedule No. 2;
b) file an application for the introduction of the Offered Shares to listing on the basic market of the Warsaw Stock Exchange;
c) file an application for assimilation of the Offered Shares with other shares of the Company at the National Depository for Securities;
d) take any and all factual and legal actions necessary to introduce the Offered Shares to public trading and to have the Offered Shares
listed on the main market of the Warsaw Stock Exchange in accordance with the preceding sections of this resolution.
8. The Company’s Management Board agrees that the subscription shall open on January 6, 2005 and close no later than on January 11,
2005.
9. The detailed terms and conditions of allocation of the Offered Shares as described in Chapter III, section 11 of the Prospectus are hereby
approved.
10. The subscription for the Offered Shares shall fail if at least one Offered Share is not subscribed and paid for in accordance with the terms
and conditions of the Prospectus.
11. This resolution shall come into force after it is approved by the Supervisory Board in accordance with §5A, sections 3 and 4 of the
Statute.”
“Resolution No. 2
of the Management Board of Netia S.A.
of December 6, 2004
regarding amendment of the Company Statute
1. It is resolved that in relation to Netia S.A.’s (the “Company”) share capital increase pursuant to Resolution No. 1 of the Management
Board of December 6, 2004 (“Resolution No. 1”), §5 of the Company statute (the “Statute”) shall be respectively amended and shall have
the following wording:
“The share capital, excluding the conditional capital, shall amount to no more than PLN 362,418,997 (say: three hundred and sixty-two million,
four hundred and eighteen thousand, nine hundred and ninety-seven), and shall be divided into 362,418,997 (in words: three hundred and sixty
two million, four hundred and eighteen thousand, nine hundred and ninety seven) shares of PLN 1.00 (in words: one) each.
The Company’s shares are divided into the following series:
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(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)
5,000 ordinary registered series A shares;
1,000 preferred registered series A1 shares;
3,727,340 ordinary registered series B shares;
17,256,855 ordinary bearer series C shares;
3,977 ordinary bearer series C1 shares;
5,500,000 ordinary bearer series D shares;
425,000 ordinary bearer series E shares;
2,250,000 ordinary bearer series F shares;
2,250,000 ordinary bearer series G shares;
312,626,040 ordinary bearer series H shares;
no more than 18,373,785 ordinary bearer series I shares.”
2. The final wording of § 5 of the Statute, within the limits defined by Resolution No. 1, shall be defined by the Management Board on the
basis of Article 310 in relation to Article 431 § 7 of the Commercial Companies Code.”
“Resolution No. 1
of the Supervisory Board of Netia S.A.
of December 6, 2004
regarding the Company’s share capital increase by the Management Board of Netia S.A. through the issuance of series “I” shares and
regarding the exclusion of preemptive rights with respect to series I shares
1. The Supervisory Board of Netia S.A. (the “Company”) hereby consents for the Management Board to increase the share capital on the
basis of §5A of the statute through the issuance of series I shares (the “Shares”) on the terms and conditions as defined in Resolution No.
1 of the Management Board of December 6, 2004 (the “Management Board Resolution”) and approves the detailed terms and conditions
of subscription and allocation of the Shares, including without limitation:
a) the number of Shares to be issued in accordance with section 1 of the Management Board Resolution;
b) the issue price defined in section 3 of the Management Board Resolution;
c) the dates for the opening and closing of subscription for the Shares as defined in section 8 of the Management Board Resolution or
any other date specified by the Management Board;
d) the detailed terms and conditions of allocation of the Shares as defined in Chapter III, section 11 of the draft Prospectus.
2. The Company’s Supervisory Board consents for the exclusion of the preemptive right of the Company’s shareholders to acquire the Shares
and accepts the Management Board’s opinion on that subject, attached as Schedule No. 1 to the Management Board Resolution.”
“Resolution No. 1
of the Management Board of Netia S.A.
of December 24, 2004
concerning the change of the dates of opening and closing of subscription
for ordinary bearer series I shares
1. Pursuant to §5A of the Company statute, the Management Board of the Company hereby changes the dates of opening and closing of
subscription for the ordinary bearer series I shares (the “Offered Shares”) established in the Management Board’s Resolution No. 1 of
December 6, 2004.
2. The Company’s Management Board resolves that the subscription for the Offered Shares shall commence on February 14, 2005 and shall
be closed on February 16, 2005.”
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SCHEDULE 3
THE STATUTE OF THE COMPANY
STATUTE OF NETIA S.A., A JOINT-STOCK COMPANY
I. GENERAL PROVISIONS
§ 1
The name of the Company shall be “Netia Spółka Akcyjna”. The Company may use an abbreviation of its name: “NETIA” S.A.
The registered office of the Company shall be the Capital City of Warsaw.
§ 2
The Company may establish divisions, branches, plants and representative offices and other entities, and may also participate in
other companies in Poland and abroad.
The scope of activity of the Company shall be:
§ 3
a) design, manufacture and use of internal (company internal and other) telecommunication systems;
b) design and introduction of new telecommunication designs and techniques;
c) provision of telecommunication services within the scope of internal (company internal and other)
telecommunication systems;
d) manufacturing and leasing of telecommunication equipment;
e) conducting domestic trade;
f) conducting imports in connection with services offered by the Company, the shareholders and partners;
g) conducting exports of services provided by the Company;
h) export and import of telecommunication equipment;
i) rendering telecommunication services;
j) export and import shall not include goods, the trade of which requires a license;
k) organizing and implementing commercial undertakings individually or together with other entities, including
undertakings within the scope of construction for housing purposes, including the sale, rental and management
of buildings and parts thereof;
l) undertaking land managing commercial ventures by means of holdings and equity stakes held by the Company,
including granting loans and guarantees as part of the holding structure;
m) granting loans and credits to the entities whose shares the Company holds directly or indirectly.
The founders of the Company are:
§ 4
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1) INTERNATIONAL COMMUNICATION TECHNOLOGIES Inc., with its registered office in Los Angeles, USA;
2) GRUPA INWESTYCYJNA NYWIG Sp. z o.o., with its registered office in Warsaw;
3) PROMACO Sp. z o.o., with its registered office in Warsaw;
4) UNITRONEX CORP., with its registered office in Wooddale, Ilinois, USA;
5) TOWARZYSTWO ROZWOJU TELEKOMUNIKACJI, with its registered office in Warsaw;
6) METRONEX S.A., with its registered office in Warsaw;
7) Andrzej Radzimiński;
8) Aleksander Szwarc;
9) Donald Mucha;
10) Krzysztof Korba;
11) Jacek Słowakiewicz;
12) Marian Benda;
13) Janina Kopacka;
14) Leopold Benda;
15) Edward Jędrzejowicz;
16) Andrzej Wawrzeńczak;
17) Ryszard Lewandowski;
18) Grzegorz Górski;
19) Zbigniew Przybyszewski;
20) Bogusław Chmielewski;
21) Jan Drobiecki;
22) Władysław Baliński;
23) Janusz Błaszczak;
24) Jerzy Dygdoń;
25) Grzegorz Figlarz;
26) Tadeusz Gruszka;
27) Zbigniew Hayder;
28) Roman Jarocki;
29) Jerzy Kantorski;
30) Anna Kasowicz;
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31) Marian Kołosiński;
32) Janusz Krzysztofiński;
33) Zofia Ledwoś;
34) Andrzej Piątkowski;
35) Stanisława Sobierańska;
36) Elżbieta Zandecka;
37) Andrzej Wadecki;
38) Frederic Henri Chapus.
II.
SHARE CAPITAL AND SHARES
§ 5
The Company’s share capital is PLN 344,045,212 (in words: three hundred and forty four million, forty five thousand, two
hundred and twelve) and is divided into 344,045,212 (in words: three hundred and forty four million, forty five thousand, two
hundred and twelve) shares with a value of PLN 1 (in words: one) each.
The Company’s shares are divided into the following series:
a) 5,000 ordinary registered series A shares;
b) 1,000 preferred registered series A1 shares;
c) 3,727,340 ordinary registered series B shares;
d) 17,256,855 ordinary bearer series C shares;
e) 3,977 ordinary bearer series C1 shares;
f) 5,500,000 ordinary bearer series D shares;
g) 425,000 ordinary bearer series E shares;
h) 2,250,000 ordinary bearer series F shares;
i) 2,250,000 ordinary bearer series G shares;
j) 312,626,040 ordinary bearer series H shares.
§ 5A
1. The Management Board shall have the right to increase the Company’s share capital through the issue of Company
shares of the total nominal value by not exceeding PLN 18,373,785 (in words: eighteen million, three hundred and
seventy three thousand, seven hundred and eighty five), by issuing, in one or more tranches, series “I” shares or
subsequent series of the Company’s shares (authorized capital). The Management Board’s authority to increase the
Company’s share capital and to issue new Company shares within the limit specified above expires on March 12, 2005.
2. Each increase of the Company’s share capital by the Management Board up to the amount determined in § 5A section 1
of the Company’s Statute requires the Supervisory Board’s approval.
3. Upon the approval of the Supervisory Board, the Company’s Management Board shall determine the detailed conditions
of each issue of shares within the limits set forth in § 5A section 1 of the Company’s Statute, and in particular:
a) the exact number of shares to be issued in each tranche or series;
b) the issuance price of every subsequent issue;
c) the time of the opening and closing of the subscription periods;
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d) the detailed terms and conditions for the distribution of the shares;
e) the date of determining pre-emptive rights, if applicable;
f) to execute agreements with entities authorized to accept subscriptions for shares and to determine the places and
dates of such subscriptions for the shares;
g) to execute agreements, both paid and free of charge, in order to secure the success of the subscription for the shares
and, in particular, any standby or hard commitment underwriting agreement.
4. Upon the approval of the Company’s Supervisory Board, the Management Board is authorized to limit or exclude the
pre-emptive rights of the Company’s Shareholders with respect to the Company’s shares to be issued by the
Management Board within the limits set forth in § 5A section 1 of the Company’s Statute.
1. The conditional share capital of the Company is PLN 83,222,437 (in words: eighty three million, two hundred and
twenty two thousand, four hundred and thirty seven) and includes up to 64,848,652 (in words: sixty four million, eight
hundred and forty eight thousand, six hundred and fifty two) ordinary bearer series "J" shares and up to 18,373,785 (in
words: eighteen million, three hundred seventy three thousand, seven hundred and eighty five) ordinary bearer series "K"
shares.
2. The owners of series "J" and "K" shares shall participate in dividends payable by the Company, provided that
respectively series "J" shares and series "K" shares are issued to the Shareholders of the Company on or before the
record day for the dividend payments set forth in a resolution of the Ordinary General Shareholders’ Meeting.
3. The pre-emptive rights of the Company's current Shareholders with respect to series "J" shares and series "K" shares
shall be excluded.
4. The right to acquire:
§ 5B
a) up to 64,848,652 (in words: sixty four million, eight hundred and forty eight thousand, six hundred and fifty two)
ordinary bearer series "J" shares shall be granted to: (i) holders of bonds with the priority right to acquire shares
issued by the Company based on Resolution No. 2 of the General Shareholders’ Meeting of April 4, 2002 (the
“Bonds”), (ii) the holders of the right to acquire shares (warrant) upon their separation from the Bonds and
introduction to trading; and
b) up to 18,373,785 (in words: eighteen million, three hundred and seventy three thousand, seven hundred and
eighty five) ordinary bearer series "K" shares shall be granted to the employees, consultants, and board members
of the Company and its subsidiaries pursuant to a performance stock option plan to be adopted by the Company’s
Supervisory Board for the Netia Group; this right may be implemented by executing the priority right to
subscribe for the shares (warrant) attached to the Bonds.
5. The priority right to acquire series "J" shares (warrant) shall have a duration of:
a) two years from the date of the Bonds’ issue with respect to 32,424,326 (in words: thirty two million, four
hundred and twenty four thousand, three hundred and twenty six) ordinary bearer series "J" shares; and
b) three years from the date of the Bonds’ issue with respect to 32,424,326 (in words: thirty two million, four
hundred and twenty four thousand, three hundred and twenty six) ordinary bearer series "J" shares.
6. The priority right to acquire series "K" shares (warrant) may be executed not later than on December 31, 2007, unless,
subject to the Supervisory Board’s approval, the Management Board will shorten the period for the execution of the
priority right to acquire series "K" shares (warrant) pursuant to a performance stock option plan to be adopted by the
Company’s Supervisory Board for the Netia Group.
7. Subject to: (i) the provisions of the performance stock option plan to be adopted by the Company’s Supervisory Board
for the Netia Group, (ii) the provisions of Resolution No. 2 of the General Shareholders’ Meeting of April 4, 2002,
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concerning the Bonds’ issue with the priority right to acquire shares, as well as the detailed terms and conditions of the
Bonds’ issue set forth on the basis of that Resolution, and (iii) the approval of the Company’s Supervisory Board, the
Company’s Management Board, is authorized to:
a) determine the detailed terms and conditions for subscribing for series "J" and "K" shares and the division of
series "J" and "K" shares into tranches;
b) determine the issue prices of series "J" and "K" shares separately for each tranche;
c) execute agreements with entities authorized to accept subscriptions for shares and to determine the places and
dates of the subscription for series "J" and "K" shares;
d) sign agreements, both paid and free of charge, in order to secure the success of the subscription for series "K"
shares for the benefit of the entities referred to in § 5B section 4.b) of the Company’s Statute and, in particular,
trust deed and/or any standby or firm-commitment underwriting agreement or agreements.
8. The purpose of establishing the conditional share capital is to:
a) grant the right to acquire the new issue of the Company’s shares to those Company Shareholders who will
acquire the Bonds with the priority right to acquire series "J" shares issued pursuant to Resolution No. 2 of the
General Shareholders’ Meeting of April 4, 2002, or for whose benefit such Bonds will be acquired; and
b) grant the right to acquire series "K" shares to the employees, consultants and board members of the Company and
its subsidiaries who will be entitled to acquire such shares pursuant to the performance stock option plan to be
adopted by the Company’s Supervisory Board for the Netia Group.
1. Shares of the Company may be registered shares and bearer shares.
2. Bearer shares may not be transformed into registered shares.
§ 6
3. The preferred registered series A1 shares shall give their holders rights as defined in § 15.2 of the Statute. The transfer of
any preferred registered series A1 shares shall result in the loss of privileges referred to in § 15.2 of this Statute.
Conversion of registered series A1 shares to bearer shares is forbidden.
§ 7
The share capital may be increased by way of an issue of registered or bearer shares against cash and in-kind contributions or by
increasing the nominal value of existing shares.
III.
OTHER CAPITAL AND FUNDS
§ 8
1. Besides the share capital, the Company establishes the following capital and funds:
1) the reserve capital;
2) the spare capital;
3) the employee social benefits fund.
2. Other funds may be established by resolutions of the General Shareholders’ Meeting.
3. The Company may issue bonds, including convertible bonds and securities within the scope allowed by law.
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IV.
COMPANY AUTHORITIES
§ 9
The bodies of the Company shall be:
1. the General Shareholders’ Meeting;
2. the Supervisory Board;
3. the Management Board.
§ 10
The Management Board shall convene the ordinary General Shareholders’ Meeting not later than 6 (six) months following the
end of the financial year.
§ 11
The General Shareholders’ Meeting shall be convened by way of an announcement to the shareholders published in Monitor
Sądowy i Gospodarczy.
§ 12
1. Unless the provisions of the Commercial Companies Code or this Statute provide otherwise, resolutions of the General
Shareholders’ Meeting shall be adopted by an absolute majority of votes cast (abstentions shall be counted as votes cast).
2. Resolutions on a Company merger, Company dissolution or transfer of the enterprise of the Company or transfer of a
material part thereof shall be adopted by a majority of 3/4 of the votes cast.
3. Resolutions on the withdrawal of the Company’s shares from public trading or on de-listing of the Company’s shares
from the Warsaw Stock Exchange or on a merger having the same consequences, shall be adopted by a majority of 4/5 of
the votes cast. Those voting must represent at least 1/2 of the Company’s share capital.
§ 13
1. Resolutions of the General Shareholders’ Meeting shall be required in matters provided for in the Commercial
Companies Code, and, in particular, regarding decisions on the division and distribution of profit. No approval of the
General Shareholders’ Meeting is required for the purchase or sale of real estate or share in real estate, without
limitations upon the value of such transaction.
2. The Management Board shall submit the proposed resolutions of the General Shareholders’ Meeting for a prior opinion
of the Supervisory Board of the Company. Drafts of proposed resolutions shall be delivered to the members of the
Supervisory Board not later than 10 (ten) days prior to the date of the General Shareholders’ Meeting. If the Supervisory
Board fails to give its opinion on any proposed resolution 1 (one) day before the day of the General Shareholders’
Meeting, it shall be deemed that no opinion has been given by the Supervisory Board. A negative opinion or the lack of
an opinion of the Supervisory Board shall not be an obstacle to adoption of such resolution by the General Shareholders’
Meeting.
§ 14
1. The Shareholders may participate in the General Shareholders’ Meeting and exercise their right to vote in person or by
proxies. Members of the Management Board of the Company and the Company employees may not act as proxies at the
General Shareholders’ Meeting.
2. The rules governing the operation of the General Shareholders' Meeting shall be specified in the By-laws of the General
Shareholders' Meeting, which shall be approved by the General Shareholders’ Meeting.
§ 15
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1. The Supervisory Board shall consist of up to 7 (seven) members. Except as otherwise provided in this Section, members
of the Supervisory Board shall be elected and dismissed by the General Shareholders’ Meeting for a term of office of 5
(five) years.
2. 1 (one) member of the Supervisory Board shall be appointed and dismissed by holders of series A1 shares; provided that,
such privilege has not terminated pursuant to § 6.3 above and, upon termination, such member shall be elected by the
General Shareholders’ Meeting and shall be an Independent Member.
3. At all times, at least 2 (two) of the Supervisory Board members shall be “independent” (the “Independent Member”).
An “Independent Member” is a person who: (i) is not an executive officer of the Company or any of its subsidiaries or of
any Affiliate of the Company, or is not a member of the immediate family (or has a similar relationship) with any such
person, (ii) does not have a business or professional relationship with the Company or any of its subsidiaries that is
material to the Company or such person, (iii) does not have an ongoing business or professional relationship with the
Company or any of its subsidiaries, whether or not material in an economic sense, which involves continued dealings
with management of the Company such as the relationship between the Company and its investment bankers or legal
counsel, (iv) is not an employee of the Company or any of its subsidiaries or of any Affiliate of the Company, or is not a
member of the immediate family (or has a similar relationship) with any such person, (v) is not an employee of any
shareholder or any Affiliate of any shareholder holding more than 5 (five) % of issued share capital of the Company or
any of its subsidiaries or of any Affiliate of the Company, or is not a member of the immediate family (or has a similar
relationship) with any such person, or (vi) does not have a business or professional relationship with any shareholder or
any Affiliate of any shareholder holding more than 5 (five) % of issued share capital of the Company or any of its
subsidiaries that could have significant impact on the ability of such person to make impartial decisions.
In this Statute: “Affiliate” shall mean any firm, company or corporation which, directly or indirectly, controls, is
controlled by or is under common control of the Company; “Subsidiary” shall mean an entity in which the Company
holds more than 50 (fifty) % of the voting stock or has the right to appoint at least 50 (fifty) % of the members of the
management board or supervisory board (or similar governing or supervisory authority) of such entity; “Executive
Officer” shall mean members of the Management Board of the Company, liquidators, chief accountant of the Company,
in-house legal counsel and all persons responsible for managing the Company and reporting directly to the Management
Board.
4. The Chairman of the Supervisory Board shall be elected by the Supervisory Board from amongst the members of the
Supervisory Board in a simple majority vote. The Chairman shall have the power to cast the deciding vote in the event
of a deadlock among the members of the Supervisory Board. In addition, the Chairman shall have the right to call and
preside over meetings of the Supervisory Board and other procedural rights normally associated with such office.
5. Meetings of the Supervisory Board shall be convened at least monthly for the six month period following the registration
of the series H share increase and once every quarter thereafter. The Chairman shall also convene meetings of the
Supervisory Board at the written request of the Management Board of the Company or any member of the Supervisory
Board.
6. The members of the Supervisory Board may be remunerated for fulfilling their functions of Supervisory Board members.
The General Shareholders’ Meeting should adopt the Rules of Remunerating the Supervisory Board’s Members”.
§ 16
1. The competency of the Supervisory Board shall include general supervision of the activities of the Company.
Resolutions of the Supervisory Board shall be required in matters provided for in the Commercial Companies Code and
Paragraph 3 of this Section.
2. Save as prescribed otherwise in this Statute, all resolutions of the Supervisory Board shall be undertaken by an absolute
majority of votes cast in favour of such resolution (abstentions shall be counted as votes cast).
3. Subject to the provisions of § 16.4 below, resolutions of the Supervisory Board regarding the following matters shall
require that at least 4 (four) members of the Supervisory Board vote in favour:
a) presentation to the Company’s General Shareholders’ Meeting of a written report on the results of the
Supervisory Board’s examination of the Company’s balance sheet and the profit and loss statement;
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CHAPTER V
b) presentation to the Company’s General Shareholders’ Meeting of a written report on the results of the
Supervisory Board’s examination of the report of the Management Board and the recommendations of the
Management Board with respect to the distribution of profits or coverage of losses;
c) the appointment and removal of the members of the Management Board, and the issuance of by-laws for the
Management Board;
d) setting or changing the compensation for the members of the Management Board and defining other terms and
conditions of their employment, and the setting and changing of any stock option plan for the Management
Board and other key employees;
e) approval of business plans and budgets for the Company;
f) unless provided in the most recent business plan or budget of the Company approved by the Supervisory Board,
consent to incurring or making loans or other indebtedness in excess of US$ 100,000 on a single or a series of
related transactions or the equivalent amount in Polish zlotys or any other currencies;
g) unless provided in the most recent business plan or budget of the Company approved by the Supervisory Board,
the authorization of capital expenditures, assumption of obligations or commitments in excess of US$ 100,000
in a single or a series of related transactions or the equivalent amount in Polish zlotys or any other currencies;
h) unless provided in the most recent business plan or budget of the Company approved by the Supervisory Board,
the giving of any guarantee or indemnity with respect to the obligations of liability of any other entity, which
guarantee or indemnity shall be in excess of US$ 100,000 in a single or a series of related transactions or the
equivalent amount in Polish zlotys or any other currencies;
i) unless provided in the most recent business plan or budget of the Company approved by the Supervisory Board,
the sale or acquisition of real estate for a purchase price exceeding US$ 100,000 in a single or series of related
transactions or the equivalent amount in Polish zlotys or any other currencies;
j) unless provided in the most recent business plan or budget of the Company approved by the Supervisory Board,
consent to the sale, lease, pledge, hypothecation encumbering or transferring of any the Company’s assets
having a value in excess of US$ 100,000 in a single or series of related transactions or the equivalent amount in
Polish zlotys or any other currencies, provided, however, that sales of products and obsolete equipment in the
ordinary course of business will be subject to no restrictions;
k) unless provided in the most recent business plan or budget of the Company approved by the Supervisory Board,
the making of any investment or funding of any amounts in or with respect to any non-telecommunications
related business or operations of the Company (including, for this purpose, Uni-Net Sp. z o.o. with its registered
office in Warsaw), whether under contractual arrangements existing at the time of such investment or funding
or otherwise;
l) consent to the commencement, settlement, assignment, compromise or release of any claim of or against the
Company in excess of US $100,000 in a single or series of related transactions or the equivalent amount in
Polish zlotys or other currencies;
m) bidding for any license or concession or agreeing to the material modification of any existing license of the
Company or any subsidiary;
n) consent to acquiring shares of or investing in other entities other than in existing subsidiaries of the Company;
o) consent to the adoption of a performance stock option plan in accordance with § 5B of this Statute;
p) appointment of the certified auditor to audit the Company’s financial statements;
r) the conclusion by the Company of any contracts with an Affiliate (defined below). For the purposes of this
point, “Affiliate” shall mean (i) a member of the Management Board or Supervisory Board or the cousin or
relative of up to the second degree of such member, (ii) a shareholder holding shares entitling it to at least 5% of
votes at the General Shareholders’ Meeting or (iii) an entity controlled by, controlling or under common control
with the aforementioned persons and “control” shall mean the possibility of even indirect influence over the
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PROSPECTUS OF NETIA SPÓŁKA AKCYJNA
CHAPTER V
management or business policy of the controlled entity through holding shares with the right to vote in such
entity, a shareholders’ agreement, an agreement for official receivership of votes (umowa syndykowania
głosów) or in any other similar manner, even if not connected with a written agreement.
4. Resolutions of the Supervisory Board regarding the consent for the Company to enter into the first credit facility
following January 15, 2003 in the amount equal to, or exceeding EUR 50 million (fifty million) in a single or a series of
related transactions or the equivalent amount in Polish zlotys or any other currencies shall require that at least 5 (five)
members of the Supervisory Board vote in favour. Resolutions of the Supervisory Board regarding the consent for the
Company to enter into all subsequent credit facilities shall require that at least 4 (four) members of the Supervisory
Board vote in favour.
5. Supervisory Board resolutions on the matters described in section 16.3.r. above (the conclusion by the Company of a
contract with an Affiliate) shall require the approval of at least one of the Independent Members.
§ 17
1. Meetings of the Supervisory Board shall be convened by written notices sent to each member of the Supervisory Board
informing them of the date, the time, the venue and the agenda, at least 7 (seven) days prior to the planned meeting.
Meetings of the Supervisory Board may be held without formal convening if all the members of the Supervisory Board
agree to such a meeting and the proposed agenda.
2. Resolutions of the Supervisory Board may be undertaken in writing or by means of direct communication media (such as
telephone, video conferencing) in a manner allowing mutual communication between all the members of the Supervisory
Board present. Resolutions adopted during such conference shall be effective if the minutes including such resolutions
were signed by each member of the Supervisory Board participating in such meeting. Members of the Supervisory
Board may also vote on Supervisory Board resolutions in writing via another member of the Supervisory Board.
3. Resolutions of the Supervisory Board shall only be valid if a quorum is present at such meeting. The quorum shall
consist of a majority of the total number of members of the Supervisory Board.
4. The rules governing the operation of the Supervisory Board shall be specified in the By-laws of the Supervisory Board,
which shall be adopted by the Supervisory Board.
5. Reasonable out-of pocket expenses incurred by members of the Supervisory Board in connection with attending
meetings and fulfilling other obligation as board members, shall be reimbursed by the Company.
§ 18
1. The Management Board of the Company shall consist of up to 10 (ten) members. The Supervisory Board shall decide on
the number of Management Board members.
2. The Management Board members shall be appointed and dismissed by the Supervisory Board for a term of office of 5
(five) years.
3. The Management Board shall manage the activities of the Company, shall adopt resolutions necessary for the
performance of tasks and shall represent the Company before courts, authorities, offices and third parties.
4. The Management Board shall handle the matters, which are not within the exclusive competence of the General
Shareholders’ Meeting or the Supervisory Board.
5. Resolutions of the Management Board shall be adopted by a simple majority of votes.
6. Two members of the Management Board acting together, or one member of the Management Board acting together with
a commercial proxy (prokurent), shall be authorized to make declarations and to sign on behalf of the Company.
7. Reasonable out-of-pocket expenses incurred by members of the Management Board in connection with attending
meetings and fulfilling other obligations as board members, shall be reimbursed by the Company.
8. The rules governing the operation of the Management Board shall be specified in the By-laws of the Management Board,
which shall be approved by the Supervisory Board.
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CHAPTER V
V. FINAL PROVISIONS
§ 19
1. Liquidation and dissolution of the Company shall be undertaken in cases provided for by law or pursuant to a resolution
of the General Shareholders’ Meeting.
2. Liquidators shall be members of the Management Board unless the General Shareholders’ Meeting appoints other
liquidators.
§ 20
In any and all matters not provided for in this Statute, the provisions of the Commercial Companies Code and other provisions of
Polish law shall apply.
§ 21
The Company was established by transformation into a joint stock company of “R.P. TELEKOM” Spółka z ograniczoną
odpowiedzialnością, the Shareholders of which were the founders listed in Section 4.
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CHAPTER V
SCHEDULE 4
OPINION OF THE ISSUER’S MANAGEMENT BOARD JUSTIFYING THE EXCLUSION OF PRE-EMPTIVE
RIGHTS
“Opinion of the Management Board of Netia Spółka Akcyjna
for the Supervisory Board
dated December 6, 2004 on
excluding the Company’s existing shareholders’ pre-emptive rights
to Series I ordinary bearer shares
and the establishment of the issue price
In accordance with the requirements of Article 433 §2 of the Commercial Companies Code and §5 A, section 4 of the Statute, the
Management Board hereby presents the Supervisory Board with its opinion and recommendations with regards to the proposed
Company’s share capital increase with the exclusion of the pre-emptive rights of the Company’s existing shareholders with
respect to ordinary bearer series I shares (the “Offered Shares”) and the establishment of the issue price for the Offered Shares.
The Offered Shares are issued for the purposes of the early repayment of Netia’s indebtedness (the “Arrangement Obligations”)
under the arrangements entered between the creditors and:
a) Netia Holdings S.A. (presently Netia S.A.) on June 28, 2002 (the arrangement was approved on August 9, 2002 by the
District Court for the Capital City of Warsaw, XVII Commercial Division (Ref: sygn. akt. XVII Ukł. 27/02);
b) Netia Telekom S.A on June 24, 2002 (the arrangement was approved on June 25, 2002 by the District Court for the Capital
City of Warsaw, XVII Commercial Division (Ref: sygn. akt. XVII Ukł. 28/02).
The entitled creditors are persons whose receivables were not satisfied in the course of Netia’s financial restructuring in 2002
through, inter alia, the ordinary bearer series H offering (the “Entitled Creditors”).
Those entitled to subscribe for the Offered Shares are Merrill Lynch Capital Services Inc. (“MLCS”) and the creditors’ trustee (the
“Creditors’ Trustee”). The Creditors’ Trustee shall enter into agreements with the Entitled Creditors (except for MLCS which
will make a direct subscription for the Offered Shares), pursuant to which the Entitled Creditors will assign to the Creditors’
Trustee their receivables under the above referenced arrangements in exchange for the latter assuming the obligation to subscribe
for the Offered Shares and, subsequently, to transfer them to the Entitled Creditors. The Offered Shares can also be listed on the
Warsaw Stock Exchange.
The right to subscribe for the Offered Shares, within the scope of Netia’s authorized share capital, through the issuance of the
Offered Shares at a nominal price not greater than a total of PLN 18,373,785, shall be exercisable by those Entitled Creditors
whose Arrangement Obligations were not satisfied in the course of Netia’s financial restructuring in 2002 through, inter alia, the
ordinary bearer series H offering (“Series H Shares”). Netia’s share capital increase is also required for the purposes of
performing the obligation assumed by Netia in relation to the execution of a settlement agreement (the “Settlement Agreement”)
with MLCS on November 5, 2004 with regard to the early repayment of the arrangement receivable due to MLCS.
The above circumstance necessitates, in accordance with the terms of equitable treatment of the creditors subject to the
arrangement, the establishment of the Issue Price for the Offered Shares on the same level as the price established in 2002 for
Series H Shares, i.e. PLN 1.0826241 per share. Fixing the price at any other, higher level, could result in the arrangement being
challenged by the Entitled Creditors on the grounds of unequal treatment and, consequently, lead to the revocation thereof. The
Management Board further points out that although the Issue Price of the Offered Shares is disproportionate to the existing price
of Netia’s shares, the entire transaction is economically justified and effected on arm’s-length terms, because the value of the
unreduced Arrangement Obligations, in accordance with the laws governing the legal relations which are the basis of such
Arrangement Obligations, is greater than the total value of the Offered Shares. That applies, in particular, to MLCS’ receivables
due from Netia in connection with the Arrangement Obligations. The suit filed by MLCS at the High Court of Justice in London,
U.K. is for USD 8.56 million, while the number of Offered Shares offered to MLCS, in accordance with section 1 of the
Settlement Agreement, amounts to a mere 5,572,663.
Taking into account the past actions taken by the Management Board to reduce Netia’s indebtedness and the actual ability to fully
satisfy the Arrangement Obligations, the Management Board believes that the exclusion of the pre-emptive right of Netia’s
existing shareholders with respect to the Offered Shares is economically justified, while the adoption of a resolution in this
respect is in Netia’s best interest. The issuance of the Offered Shares on the terms provided in Resolution No. 1 of the
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PROSPECTUS OF NETIA SPÓŁKA AKCYJNA
CHAPTER V
Management Board of December 6, 2004, will permit Netia’s arrangements with the Entitled Creditors to be finally performed.
This circumstance, in the Management Board’s opinion, complies with the shareholders’ interests and will have a positive
influence on investors’ perception of Netia.
In view of the above, the Management Board recommends that the Supervisory Board members vote in favour of the proposed
resolution and approve the issuance of the Offered Shares with the exclusion of the pre-emptive rights of Netia’s existing
shareholders.”
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CHAPTER V
SCHEDULE 5
DEFINITIONS AND ABBREVIATIONS
Short-Form Prospectus
Accounting Act
Act on Corporate Income
Tax
Act on Personal Income
Tax
Act on Stamp Duty
Act on the Protection of
Competition and
Consumers
Act on the Tax on Civil
Law Transactions
Antimonopoly Court
Arrangement Obligations
Arrangement of Netia
Telekom
Arrangement of the Issuer
Arrangements
Bankruptcy Court
Bondholders
Business Day
CDM, CDM Pekao, CDM
Pekao S.A.
Certified Auditor
Civil Code
Commercial Companies
Code, CCC
Council of the Exchange
Short-form prospectus, referred to in art. 68 section 2 clause 1 of the Law on
Public Trading in Securities, with contents specified in the Decree on the
Prospectus
Act of September 29, 1994 on Accounting (amended and restated: Journal of
Laws of 2002, No. 76, item 694, as amended)
Act of February 15, 1992 on Corporate Income Tax (amended and restated:
Journal of Laws of 2000 No. 54, item 654, as amended)
Act of July 26, 1991 on Personal Income Tax (amended and restated: Journal of
Laws of 2000, No. 14, item 176, as amended)
Act of September 9, 2000 on Stamp Duty (Journal of Laws No. 86, item 960, as
amended)
Act of December 15, 2000 on the Protection of Competition and Consumers
(amended and restated: Journal of Laws of 2003, No. 86, item 804, as amended)
Act of September 9, 2000 on the Tax on Civil Law Actions (Journal of Laws No.
86, item 959, as amended)
Circuit Court in Warsaw – Court for the protection of competition and consumers
Obligations of the Company resulting from the Arrangement of the Issuer and the
Arrangement of Netia Telekom
Arrangement signed between the creditors and Netia Telekom on June 24, 2002
and approved on June 25, 2002 by the Bankruptcy Court (Ref: sygn. akt. XVII
Ukł. 28/02)
Arrangement signed between the creditors and Netia Holdings S.A. (now: Netia)
on June 28, 2002 and approved on August 9, 2002 by the Bankruptcy Court (Ref:
sygn. akt. XVII Ukł. 27/02)
The Arrangement of the Issuer, the Arrangement of Netia Telekom and the
arrangement signed between the creditors and Netia South on August 29, 2002
and approved by the Bankruptcy Court on December 4, 2002 (sygn. akt XVII
Ukł. 52/02)
District Court for the City of Warsaw, XVII Commercial Division for
Bankruptcy and Arrangement Matters in Warsaw
Previous holders of the Bonds
Each day of the week other than Saturday, Sunday and other public holidays
Centralny Dom Maklerski Pekao S.A. (Central Brokerage House) with its
registered office in Warsaw
PricewaterhouseCoopers Sp. z o.o., with its registered office in Warsaw, an entity
authorized to examine the Company’s financial statements and issue opinions on
these statements; the company is listed as an entity authorized to examine
financial statements by Krajowa Rada Biegłych Rewidentów (National Council
of Auditors), No. 144
Act of April 23, 1964, the Civil Code (Journal of Laws No. 16, item 93, as
amended)
Act of September 15, 2000, the Commercial Companies Code (Journal of Laws
No. 94, item 1037, as amended)
Council of the Warsaw Stock Exchange
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PROSPECTUS OF NETIA SPÓŁKA AKCYJNA
CHAPTER V
Creditors’ Trustee
Decree on the Prospectus
El-Net
Entitled Creditors
Entitled Persons
EU
Euro, EUR
Executive Officers
Extraordinary
Shareholders’ Meeting
General Inspector for
Financial Information
(Generalny Inspektor
Informacji Finansowej)
General Shareholders’
Meeting
Genesis
Issue Price
Issuer, Netia, Company
J.L., Dz.U., Journal of
Laws
JPMorgan
KIGEiT
Law on Arrangement
Proceedings
Law on Public Trading in
Securities
Legal Advisor
Merrill Lynch, MLSC
Millennium
National Court Register
National Depository for
CDM Pekao
Decree of the Council of Ministers of August 11, 2004 regarding special
conditions to be met by a prospectus and the short-form prospectus (Journal of
Laws No. 186, item 1921)
Regionalne Sieci Telekomunikacyjne El-Net S.A., with its registered office in
Warsaw
The Company’s creditors under arrangements who have receivables due to them
pursuant to the Arrangement of the Issuer and the Arrangement of Netia Telekom
and who were not satisfied during the Restructuring in 2002, i.a. by the
subscription of series H ordinary bearer shares issued by the Issuer in the course
of a public offering
Merrill Lynch and the Creditors’ Trustee
European Union
Currency being the legal tender of twelve member states of the European Union,
that is, Austria, Belgium, Finland, France, Greece, Spain, the Netherlands,
Ireland, Luxembourg, Germany, Portugal and Italy
Management Board members and other persons who have a material impact on
the management of the Company
Extraordinary general shareholders’ meeting of the Company
A government administration body, relevant in matters connected with
preventing money laundering and the financing of terrorism, with reference to the
Act of November 16, 2000 on the prevention of the introduction to financial
dealing of monies originating from illicit or undisclosed sources and preventing
the financing of terrorism (Journal of Laws of 2003, No. 153, item 1505, as
amended)
General Meeting of the Company’s Shareholders
Genesis Sp. z o.o., with its registered office in Warsaw
Issue price of Series I Shares
Netia S.A., with its registered office in Warsaw
Journal of Laws of the Republic of Poland
JP Morgan Chase Bank, with its registered office in London, Great Britain
Krajowa Izba Gospodarcza Elektroniki i Telekomunikacji (Polish Chamber of
Commerce for Electronics and Telecommunications)
Decree of the President of Poland of October 24, 1934, Law on Arrangement
Proceedings (Journal of Laws No. 93, item 836, as amended)
Act of August 21, 1997, the Law on Public Trading in Securities (amended and
restated: Journal of Laws of 2002, No. 49, item 447, as amended)
Weil, Gotshal & Manges – Paweł Rymarz Spółka Komandytowa (Limited
Liability Partnership), with its registered office in Warsaw
Merrill Lynch Capital Services, Inc., with its registered office in New York, USA
Millennium Communications S.A., with its registered office in Warsaw
National Court Register within the meaning of the Act on the National Court
Register of August 20, 1997 (Journal of Laws of 2001, No. 17, item 209, as
amended)
Krajowy Depozyt Papierów Wartościowych S.A., with its registered office in
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PROSPECTUS OF NETIA SPÓŁKA AKCYJNA
CHAPTER V
Securities
NBP, National Bank of
Poland
Warsaw
The National Bank of Poland
Netia 1 Netia 1 Sp. z o.o., merged with the Issuer on December 31, 2003
Netia Globe
Netia Holdings I B.V.
Netia Holdings II B.V.
Netia Holdings III B.V.
Netia Mobile
Netia Globe S.A. with its registered office in Warsaw
Netia Holdings B.V., a company duly organised under Dutch law, with its
registered office in Amsterdam, the Netherlands
Netia Holdings II B.V. a company duly organised under Dutch law, with its
registered office in Amsterdam, the Netherlands
Netia Holdings III B.V. a company duly organised under Dutch law, with its
registered office in Amsterdam, the Netherlands
Netia Mobile Sp. z o.o., with its registered office in Warsaw
Netia South Netia South Sp. z o.o., merged with the Issuer on December 31, 2003
Netia Świat
Netia Świat S.A., with its registered office in Warsaw
Netia Telekom Netia Telekom S.A., merged with the Issuer on December 31, 2003
Netia Ventures
New Telecommunications
Law
Newman
NSA, Supreme
Administrative Court
Offered Shares
Offering
Offeror
Penal Code
POK, Customer Service
Center
Polish Press Agency
President of the UOKiK
President of the URTiP
Prospectus
Registry Court
Restructuring
Netia Ventures Sp. z o.o., with its registered office in Warsaw
Act of July 16, 2004 on the Telecommunications Law (Journal of Laws No. 171,
item 1800)
Newman Finance Corp., with its registered office in the British Virgin Islands
The Polish Supreme Administrative Court
Series I Shares
Offer to subscribe for the Offered Shares
Centralny Dom Maklerski Pekao S.A. (Central Brokerage House) with its
registered office in Warsaw
Act of June 6, 1997, the Penal Code (Journal of Laws No. 88, item 553, as
amended)
Customer Service Center of CDM Pekao
Polska Agencja Prasowa S.A. (the Polish Press Agency) with its registered office
in Warsaw
Central governmental administrative body relevant in issues of the protection of
competition and consumers, which performs its tasks with the assistance of the
UOKiK (UOKiK - Office for Competition and Consumer Protection)
Central governmental administrative body relevant in issues concerning the
regulation of the telecommunications and postal market, which performs its tasks
with the assistance of the URTiP (Office of Telecommunications and Post
Regulation)
This prospectus, which is the only legally binding document containing
information on Series I Shares, their offering and the Issuer, prepared pursuant to
the Decree on the Prospectus
District Court for the City of Warsaw, Commercial Court, XX Commercial
Division of the National Court Register
Financial restructuring of the Issuer carried out in accordance with the
stipulations of the Restructuring Agreement executed on March 5, 2002 by and
between the Company, Netia South, Netia Telekom, Netia Holdings I B.V., Netia
Holdings II B.V., Netia Holdings III B.V., former bondholders of the bonds
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Rights to the Offered
Shares, PDAs
Rules of the Warsaw Stock
Exchange
Securities and Exchange
Commission, the
Commission
Series H Shares
Series I Shares
Series III Bonds
Series J Shares
Series K Shares
Shares
Sponsor of the Issue
Statute
Stock Option Plan
Supervisory Board
Świat Internet
issued by the Issuer in 1997, 1999 and 2000 (who acceded thereto), JPMorgan,
Telia, Warburg Pincus and Warburg
A security that incorporates the right to the Offered Shares
Rules of the Warsaw Stock Exchange valid in the official regulated market,
introduced by resolution No. 6/1024/2004 of the Council of the Exchange of
February 24, 2004, as amended.
The Polish Securities and Exchange Commission (Komisja Papierów
Wartościowych i Giełd)
312,626,040 ordinary bearer series H shares of the Company (or part thereof)
18,373,785 ordinary bearer series I shares of the Company (or part thereof)
offered on the basis of the Prospectus
18,373,785 ordinary bearer series III bonds entitling their holders to subscribe for
Series K Shares (or a part thereof) with priority over the Company’s shareholders
64,848,652 ordinary bearer series J shares of the Company (or part thereof); as at
the Prospectus date; only a part of the shares within this series have been issued
18,373,785 ordinary bearer series K shares of the Company (or part thereof); as
at the Prospectus date, only a part of the shares within this series have been
issued
Netia shares of the following series: A, A1, B, C, D, E, F, G, H, J, K
CDM, which keeps a register of the Company’s shareholders who have not
submitted instructions to credit the Shares or the Offered Shares to securities
accounts
Statute of the Company – approved by the resolution of the General
Shareholders’ Meeting on December 18, 1998, included in the notary deed of
December 18, 1998 prepared by notary public, Ms. Izabela Miklas, Notary Public
Office in Warsaw, Rep. A No. 6852/99, including amendments made before
June 12, 2003, enclosed in Schedule 3 to the Prospectus
A stock option plan stipulated by the Restructuring Agreement which allows
persons who are of special value to the Netia Group to acquire Series K Shares
free of charge on conditions stipulated therein. The Stock Option Plan was
approved under the Supervisory Board’s resolution of April 10, 2003.
Supervisory board of the Company
Świat Internet S.A. with its registered office in Warsaw
Telecommunications Law
Telia
The Board, The
Management Board
The Management Board of
the WSE
The Netia Group
TP S.A.
Uni-Net
Act of July 21, 2000, Telecommunications Law (Journal of Laws No 73, item
852, as amended)
Telia AB (publ.), with its registered office in Farsta, Sweden, a Company’s
shareholder
The management board of the Company
The management board of the Warsaw Stock Exchange
The Issuer together with El-Net, Świat Internet, Netia Świat, Netia Globe, Netia
Ventures, Netia Mobile and Uni-Net
Telekomunikacja Polska S.A., with its registered office in Warsaw
Uni-Net Sp. z o.o., with its registered office in Warsaw
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UOKiK
The Office for Competition and Consumer Protection, operating pursuant to the
Competition and Consumer Protection Act
URTiP Office of Telecommunications Regulation which ceased to exist on March 31,
2002 pursuant to the Act of March 1, 2002 on changes in the organization and
operations of central government administration institutions and dependent units
and on the modifications of some acts (Journal of Laws. No 25 item 253) and
now: the Office of Telecommunications and Postal Regulation, operating
pursuant to the New Telecommunications Law
USA
USD
Warburg
Warburg Pincus
Warsaw Stock Exchange,
Stock Exchange, WSE
zł, złoty, PLN
United States of America
US Dollar, legal tender on the territory of the United States of America
Warburg Netia Holding Limited, with its registered office in Nicosia, Cyprus, a
shareholder of the Company, a subsidiary of Warburg Pincus
Warburg Pincus Equity Partners, L.P., Warburg Pincus Ventures International,
L.P., Warburg Pincus Netherlands Equity Partners I, C.V., Warburg Pincus
Netherlands Equity Partners II, C.V., Warburg Pincus Netherlands Equity
Partners III C.V.
Giełda Papierów Wartościowych w Warszawie S.A., (Warsaw Stock Exchange),
with its registered office in Warsaw
Legal tender in the Republic of Poland valid from January 1, 1995 pursuant to
the Act of July 7, 1994 on the Denomination of Zloty (Journal of Laws No. 84,
item 386, as amended)
When analysing the financial data included in the Prospectus, the following should be taken into consideration:
● number “0” in the tables refers to a fraction rounded to 0, whereas “-”means that a given value equals zero or is absent,
● ratios in the tables are calculated on the basis of data before rounding - they may differ slightly from the ratios calculated
on the basis of rounded data,
● percentages may not sum up to 100% due to being rounded to one decimal point.
The definitions of telecommunications terms, presented below, are not strictly technical definitions and their objective is to
acquaint the reader with certain telecoms terms used in the Prospectus.
Access Number
number in the telephone network which provides access to the infrastructure of the service provider, e.g. Internet service provider
ADSL
Asymmetrical Digital Subscriber Line - technology that enables fixed Internet access on the existing copper telephone line
Analogue Line
basic telephone service that enables analogue voice transmission through commuted telephone lines
ATM
Asynchronous Transfer Mode - technology of digital information transmission that enables obtaining high speed transmission by
using the technology of information transfer in fixed size cells; ATM enables the transfer of text data, voice and video images
Audiotext “700” Services
services of commuted access to information or entertainment, for which special, higher tariffs apply; in Poland the prefix “070x”
defines the group of audiotext services
Backbone
telecommunications network used to transfer telecommunications traffic between the main nodes of the network
Base Station
group of transmission and reception equipment in the subscription radio communication systems
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Bit
binary digit - unit of information quantity
Broadband Services
telecommunication services that use broadband of over 2 Mb/s
Business Client
a client other than an Individual Customer, who is a legal person, natural person or an organizational unit with whom one of the
Netia Group companies have signed a telecommunications services agreement
Centrex
Provides exchange services to Netia customers on the basis of Netia’s urban exchange infrastructure. Netia Centrex includes the
following services: local free of charge connections, abbreviated private numbers, operators’ workstations, free of charge transfer
of connections
Commercial Network Services
telecommunications services and services based on providing access to telecommunications infrastructure rendered to other
telecommunication operators and providers of services rendered within telecommunications networks, implemented mostly
through Backbone Network resources
Commutation of Lines
telecommunications technology that makes it possible to establish, at the time of duration of a given service (e.g. a telephone
conversation) a physical connection that enables the transfer of information in real time
Connected line
existing telephone line, tested along with the commutation equipment and the public network connection, ready to be activated for
the subscriber after the agreement for telecommunications services has been signed
Data Transmission
transmission of information coded in an electronic format
Digital Line
enables voice transmission or transmission of other information in digital format (i.e. a sequence of bits)
Direct Services
services provided by the Netia Group for Individual and Business Clients of the Netia Group, connected directly to Netia’s
network and executed by means of Netia’s Access Network, or leased from another operator
Direct Voice Services
voice telephone services available to Netia subscribers; these include: local connections, inter-zone connections, international
connections, mobile telephone networks’ connections and other services (dial-up Internet access, emergency connections,
comertel, intelligent network services (0-80x, 0-70x))
Equipment Collocation Services
a group of services involving making some space available in a collocation facility in order to store the client’s equipment, and
involving power supply, selected supervision and maintenance services applicable to such equipment, as well as providing access
to the network services of the operator or the group of operators present in the collocation facility
Frame Relay
fast Data Transmission protocol with a mechanism that guarantees the quality of information transfer
Free of charge “800” services
services of telephone connections which are free of charge for the subscriber who has initiated the connection and paid for the
service
Host Services
services of generally available systems to Internet users, such as mail systems used to send and receive electronic mail, or systems
used to store and make any content available to other Internet users through the WWW
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Indirect Services
Services rendered through the Netia prefix (1055) to customers who are subscribers of other operators; indirect services include
the following types of traffic: inter-zone connections, international connections and connections to mobile telephone networks.
Individual Customer
a physical person who does not conduct business activities, with whom one of the Netia Group companies have signed a
telecommunications services agreement
Installed Capacity of Access Network
number of existing and tested telephone lines available in distribution points and ready to for the subscriber to be connected (the
total of the Connected Lines)
International Connection
connections between subscribers located in different countries
Internet
a collection of interconnected worldwide computer networks that use IP (Internet Protocol)
Internet Access
a service that enables access to Internet resources through a telephone or radio line or with the use of other technologies
Inter-Operators Connection
telecommunication connection between the network of one operator and the network of another operator with the use of a
network crossing point
IP
Internet Protocol – network protocol for the Internet and Internet users
IP-VPN
virtual internal network for selected users based on the Internet Protocol.
ISDN
Integrated Service Digital Network – a digital network with integrated services, a digital telecommunications network that enables
a vast scope of telecommunication services to be rendered, which users can access through NT (network termination)
Local Access Network
telecommunications network used to connect the subscriber with the telecommunication node
Local Loop
last part of the circuit between the exchange providing telecommunication services and the customer’s equipment (often referred
to as „the last kilometre”)
Long distance call (connection)
national connection between subscribers of fixed lines located in different number zones
Mobile Telephone Network
mobile network, access to which is provided from a terminal (telephone, computer, etc.) also in cases when the terminal is in
motion
National Numbering Plan
for the PSTN public use telephone network, the numbering system for public telephone networks defined in the currently binding
regulations in the Republic of Poland
Number zone
area of the country that is part of the national public telephone network with an assigned area code in accordance with the
National Numbering Plan
PABX
private automated branch exchange
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Ringing Line
activated Subscriber Line for which at least one telephone invoice has been issued
SDH
Synchronous Digital Hierarchy: a digital tele-transmission system with a synchronous digital hierarchy
Split-charge – “801” services
services of telephone connections in which part of the connection fee is paid by the subscriber who has initiated the connection
and the other part is paid by the subscriber of the service
Telephone Services/Voice Services
direct transmission telecommunications services with the use of a public network(s) using a commutation technique(s), speech
signals in real time in such a way so that each user can use the end apparatus connected to a specific network termination in order
to communicate with another user of another end apparatus, connected to another network termination; the notion of a publicly
available telephone service has been defined in art. 2 point 30 of the New Telecommunications Law
Trunk Services
telecommunications services where the available communication channels are used by a large number of radio-telephone users
who communicate among themselves via a computer-controlled base station which automatically allocates radio channels and
configures connections.
94

TABLE OF CONTENTS
CHAPTER I SUMMARY AND RISK FACTORS ............................................................................................................................................ 1
1 INTRODUCTION...................................................................................................................................................................................... 1
2 A SUMMARY OF THE MOST SIGNIFICANT INFORMATION ABOUT THE ISSUER AND THE NETIA GROUP INCLUDED
IN THE PROSPECTUS........................................................................................................................................................................................... 1
3 HIGH RISK FACTORS FOR PURCHASERS OF THE SHARES ......................................................................................................... 5
4 SELECTED FINANCIAL DATA AND CONSOLIDATED FINANCIAL DATA OF THE COMPANY AND THE NETIA GROUP
CONSIDERING THE SPECIFIC NATURE OF THEIR BUSINESS ACTIVITY FOR THE PERIOD OF THE LAST THREE FISCAL
YEARS ................................................................................................................................................................................................................. 15
5 PROFITABILITY RATIOS OF ECONOMIC ACTIVITY AND RATIOS CHARACTERISING THE CAPACITY FOR
SETTLEMENT OF LIABILITIES OF THE COMPANY AND THE NETIA GROUP WITHIN THE LAST THREE FISCAL YEARS...... 16
6 RATING................................................................................................................................................................................................... 17
7 PURPOSES OF THE ISSUE................................................................................................................................................................... 18
8 CHANGE OF PURPOSE OF THE ISSUE ............................................................................................................................................. 19
9 DESCRIPTION OF BASIC FACTORS AFFECTING THE ISSUE PRICE AND THE RULES FOR FIXING THE ISSUE PRICE 19
10 LEVEL OF DECREASING THE NET BOOK VALUE PER SHARE FOR NEW PURCHASERS................................................... 19
11 BOOK VALUE OF THE COMPANY AND VALUE OF THE COMPANY’S LIABILITIES ........................................................... 20
CHAPTER II PERSONS RESPONSIBLE FOR INFORMATION CONTAINED HEREIN.................................................................... 21
1 COMPANY .............................................................................................................................................................................................. 21
2 ENTITIES PREPARING THE PROSPECTUS ...................................................................................................................................... 22
3 THE OFFEROR ....................................................................................................................................................................................... 26
CHAPTER III DATA ON THE ISSUE............................................................................................................................................................. 27
1 SPECIFICATION OF THE TYPES, NUMBER AND THE TOTAL VALUE OF THE ISSUED SECURITIES ............................... 27
2 Estimated Costs of the Issue .................................................................................................................................................................... 27
3 LEGAL GROUNDS FOR ISSUING AND INTRODUCING SECURITIES INTO PUBLIC TRADING........................................... 28
4 PRE-EMPTIVE RIGHT TO SUBSCRIBE FOR THE OFFERED SHARES ........................................................................................ 31
5 DATE FROM WHICH THE OFFERED SHARES ARE TO PARTICIPATE IN THE DIVIDEND................................................... 31
6 RIGHTS PERTAINING TO THE OFFERED SHARES, WAY OF EXECUTING THE RIGHTS PERTAINING TO THE SHARES,
INCLUDING THE PAYMENT OF MONIES BY THE ISSUER AND THE ENTITIES PARTICIPATING IN THE EXECUTION OF THE
RIGHTS PERTAINING TO THE SECURITIES AS WELL AS THE SCOPE OF THEIR LIABILITY TOWARDS THE PURCHASERS
AND THE ISSUER, OBLIGATIONS OF THE PURCHASER OF THE OFFERED SHARES WITHIN THE SCOPE OF ADDITIONAL
PERFORMANCES TOWARDS THE ISSUER, AND THE OBLIGATION OF THE PURCHASER AND/OR SELLER OF THE OFFERED
SHARES TO OBTAIN APPROVALS, AND/OR THE OBLIGATION TO MAKE ANNOUNCEMENTS .................................................... 31
7 INFORMATION ON THE TAXATION RULES APPLICABLE TO INCOME RELATED TO HOLDING AND TRADING IN
SHARES, INCLUDING THE INDICATION OF THE TAX REMITTER......................................................................................................... 37
8 PARTIES TO THE FIRM-COMMITMENT OR STANDBY UNDERWRITING AGREEMENT ..................................................... 39
9 AGREEMENTS ON THE BASIS OF WHICH OUTSIDE THE TERRITORY OF POLAND WERE ISSUED DEPOSITORY
RECEIPTS IN CONNECTION WITH SHARES ISSUED BY THE COMPANY............................................................................................. 39
10 INDICATION WHETHER THE ISSUER INTENDS TO CONCLUDE AN AGREEMENT ON THE BASIS OF WHICH
SECURITIES SHALL BE ISSUED IN CONNECTION WITH SHARES OUTSIDE THE TERRITORY OF POLAND............................... 39
11 RULES OF DISTRIBUTION OF THE OFFERED SHARES................................................................................................................ 39
12 THE REGULATED MARKET TO WHICH THE ISSUER PLANS TO INTRODUCE THE OFFERED SHARES ......................... 46
13 INFORMATION WHETHER THE ISSUER SHALL GRANT LOANS, HEDGING, ADVANCE PAYMENTS, AND IN OTHER
FORMS, DIRECTLY OR INDIRECTLY, FINANCE THE PURCHASE OR ASSUMING OF THE ISSUED OFFERED SHARES ........... 46
CHAPTER IV FINANCIAL STATEMENTS .................................................................................................................................................. 47
CHAPTER V SCHEDULES............................................................................................................................................................................... 49
SCHEDULE 1 EXTRACT FROM THE REGISTER OF ENTREPRENEURS.......................................................................................... 50
SCHEDULE 2 § 5A OF THE STATUTE, THE RESOLUTIONS OF THE GENERAL SHAREHOLDERS MEETING, THE
MANAGEMENT BOARD AND THE SUPERVISORY BOARD................................................................................................................. 71
1 § 5A of the Statute.................................................................................................................................................................................... 71
2 The resolutions of the General Shareholders’ Meeting, the Management Board and the Supervisory Board ....................................... 71
SCHEDULE 3 THE STATUTE OF THE COMPANY................................................................................................................................... 75
SCHEDULE 4 OPINION OF THE ISSUER’S MANAGEMENT BOARD JUSTIFYING THE EXCLUSION OF PRE-EMPTIVE
RIGHTS ................................................................................................................................................................................................................ 85
SCHEDULE 5 DEFINITIONS AND ABBREVIATIONS .............................................................................................................................. 87