ESPI 43/2023 Signing of an investment agreement with JR Holding ASI S.A. and EKIPA Investments ASI Sp. z o.o. concerning the raising of capital for Closer Music

With reference to the ESPI current report no. 4/2023 of 16 March 2023, the Management Board of IMS S.A. (“Issuer”, “IMS”) announces that on 12 November this year, an Investment Agreement (the “Agreement”) was signed concerning the raising of capital for a subsidiary, Closer Music Sp. z o.o. (“CM”), engaged in the development and commercialisation of proprietary music libraries. The parties to the Agreement are the investors: JR HOLDING ASI S.A. with its registered office in Krakow (“JRH”), controlled by January Ciszewski; EKIPA Investments ASI Sp. zo.o., having its registered office in Krakow (“EKIPA”), controlled by Ekipa Holding S.A., having its registered office in Krakow and Issuer, CM and US-based Closer Music Corporation (“CMC”) (a subsidiary of the Issuer through which the Issuer controls CM).

The investors will invest a total of PLN 3 million at a pre-money valuation of 100% of Closer Music’s shares of PLN 50 million. The investors will take up a total of 627 shares representing 5.57% in the CM capital after the increase. In the case of JRH, the investment will amount to PLN 2 million in exchange for 418 shares in CM (3.71% share in CM’s capital after the increase), in the case of EKIPA PLN 1 million in exchange for 209 shares in CM (1.86% share in CM’s capital after the increase). The parties jointly agreed on a – smaller than originally planned – investment amount of PLN 3 million, due to the currently significantly higher value of CM’s shares, related, among other things, to the several-fold increase in CM’s revenues in relation to 2022, the signing and implementation of the agreement with ZAiKS and the increase in music databases by several thousand high-quality songs.

The CM will use the funds raised for further development, in particular for:
– marketing and promotional activities mainly related to the on-line channel;
– further development of high-quality music databases;
– increasing the sales force and acquiring new customers;
– expanding the on-line sales application.

The Investors have the right to convert the shares held in CM into IMS shares between 24 and 36 months after the signing of the Agreement, which means that the Investors have an unconditional right to demand the conversion of all 627 shares held by the Investors in CM into 854,700 newly created IMS shares. The share price (issue price) is PLN 3.51 per share, which is equivalent to the average of the closing prices of IMS shares on the Warsaw Stock Exchange in September 2023 plus 15%.
 This price has been revised from the original price of PLN 3.21 per share set in the Term Sheet.

Investors have the right to exchange their CM shares for CMC shares according to a fixed parity of 1 CM share = 1,127.36829 CMC shares, i.e. exchange of 627 CM shares for 706,860 CMC shares (exchange parity of 1% for 1% according to the number of CM shares and CMC shares as at the date of signing the Agreement).

The right to convert the CM shares acquired by the Investors into IMS S.A. shares and the right to exchange the CM shares acquired by the Investors into CMC shares are severable rights, i.e. the Investors may exercise only one of the aforementioned rights.

In calculating the number and % of shares for the new investors, in addition to the 10,568 Closer Music shares registered in the KRS, 56 shares that will be created and subscribed for by another investor in performance of the provisions of the investment agreement concluded with this investor on 27 September 2023 are included, as set out in ESPI Current Report No. 37/2023 of 27 September 2023.

The agreement also contains, inter alia, CM’s future corporate governance principles, CM’s board of directors’ remuneration principles, customary transactional rights (including anti-dilution, tag-along, drag-along, priority right, lock-up), representations and warranties and contractual penalties adequate and determined at arm’s length for this type of transaction.

The Agreement shall enter into force upon its conclusion and shall remain in force until the date on which the aggregate shareholding of the Investors falls below 1% of the total number of all shares of  CM.

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