The issue of series A convertible bonds

Under Par. 4.1.1,6,7,8 and 18 in conjunction with Pars. 6, 11, 12, 13 and 23 of the Directive of the Polish Council of Ministers of December 22, 1998 concerning the type, form and extent of current and periodical information to be delivered by issuers of securities admitted to public trade, and the dates of its delivery (Dz.U. No. 163, pos. 1160) the Management Board of PKN ORLEN S.A. announces that:

On August 4, 2000 PKN ORLEN S.A. concluded the issue of 11,344,784 series A convertible bonds with a par value of PLN 1.25 per bond, and a issue price of PLN 20.30 per bond. The combined issue price of all the series A bonds amounted to PLN 230,299,115.20. The series A bonds are non-interest bearing, unsecured bearer bonds.

The series A convertible bonds were issued on the basis of resolution No. 8 of a Company Ordinary General Meeting of Shareholders of May 15, 2000 concerning the issue of series A convertible bonds. One bond entitles the holder to exchange it for one Company series D common bearer share with a par value of PLN 1.25 per share, issued on the basis of resolution No. 9 of a Company Ordinary General Meeting of Shareholders of May 15, 2000 concerning an increase in the Company's share capital (and a withdrawal of pre-emptive rights from existing shareholders) through the issue of series D shares in conjunction with the conversion of series A bonds into shares. The bond issue was made in pursuance of an incentive programme which provides for bonds to be offered to members of the Company's Management Board and to other management personnel who play key roles in the management of the Company and who are seen as being crucial for the Company's future development.

The issue of the bonds was made in the manner provided for in Art. 9. 1.2 of the Act of June 29, 1995 (Dz.U. No. 83, pos. 420), that is by addressing purchase invitations to an individual, designated entity, namely ORLEN Powiernik Sp. z o. o. ORLEN Powiernik Sp. z o. o. is a legal entity exclusively owned by PKN ORLEN S.A., and established solely to fulfill the requirements of the incentive programme. ORLEN Powiernik Sp. z o. o. is a subsidiary of PKN ORLEN S.A., and the members of its Management Board and ballot-counting committee are PKN ORLEN S.A. employees. The Company addressed the bond-purchase invitation to ORLEN Powiernik Sp. z o. o. on August 1, 2000, and on August 4, 2000 ORLEN Powiernik Sp. z o. o. notified the Company that it had received the purchase invitation. The amount due on the total bond-issue price of PLN 230,299,115.20 (at PLN 20.30 per bond) was transferred onto the Company's account on August 4, 2000. The purchase of the bonds by ORLEN Powiernik Sp. z o. o. was financed by a cash contribution of PLN 230,299,115.20 made by the Company, as the sole shareholder, to the equity of ORLEN Powiernik Sp. z o. o. on August 4, 2000. The amount of the cash contribution is to be returned to the Company from the proceeds obtained by ORLEN Powiernik Sp. z o. o. from the sale of the bonds on behalf of persons included in the incentive programme or through the redemption of the bonds. After purchasing the bonds ORLEN Powiernik Sp. z o. o. will offer them to the persons included in the incentive programme in course of the period 2001-2003. The series A convertible bonds were not admitted to public trade, but the series D shares were admitted to public trade on July 14, 2000.

The value of the whole bond issue (given an issue price of PLN 20.30 per bond) will be PLN 230,299,115.20 and will constitute 3.72 % of PKN ORLEN S.A. equity, amounting to PLN 6.191.040 thousand. PKN ORLEN S.A. has issued no convertible bonds other than those in the series A issue. In the event of all of the series A convertible bonds being converted into series D shares, 11,344,784 series D shares will confer the right to 11,344,784 votes at the Company General Meeting of Shareholders, constituting approximately 2.63 % of the total number of votes at the General Meeting. The terms and conditions for the conversion and purchase of series A convertible bonds and the non-monetary benefits associated with the issue are given below. One bond entitles the holder to exchange it for one Company series D common bearer share with a par value of PLN 1.25 per share

The conversion of series A bonds into series D shares will be effected on the basis of written representations made by the bondholders. Such representations regarding the conversion of the bonds into series D shares may be submitted according to the rules for the distribution of shares contained in Section 3.3 of “Rules of Distribution" of the PKN ORLEN S.A. series D share issue prospectus, prepared on May 15, 2000. Representations regarding the conversion may be submitted in person or through the offices of a properly authorised proxy, at the head office of CA IB Securities S.A. (the issue manager responsible for offering the Company's series D shares in public trade), at ul. E. Plater 53 in Warsaw, from the day after the date on which the bonds are purchased by members of the Company's Management Board and other entitled management personnel included in the incentive programme, and during the bond- conversion periods stipulated by the Company's Supervisory Board. In each of the years during which the incentive programme will operate (2001, 2002 and 2003) there will be a single ten-day period set aside for the conversion of bonds following an Ordinary General Meeting of Shareholders. On July 27, 2000 the Company's Supervisory Board adopted a resolution stipulating October 1 to October 10 as the bond-conversion period in 2001, 2002 and 2003, with the following proviso: that if in any of the years, 2001, 2002 or 2003, it should happen that, prior to the conversion-period, the General Meeting of Shareholders is dissolved following the opening of an Ordinary General Meeting of Shareholders in order to adopt a resolution to transform the Company into a limited liability company, liquidate the Company, or merge the Company with another company through the transfer of the Company's assets to another company in consideration of shares in that other company or through the establishment of a new company - the conversion period is to last ten days and to commence ten days prior to, and to conclude on the day of the opening of the Company General Meeting of Shareholders convened to adopt a resolution transforming, liquidating or merging the Company. The bond-redemption date was set as December 31, 2003, and redemption will be made at the issue price of PLN 20.30 per bond.

In the event of PKN ORLEN S.A. being transformed into a limited liability company, or of its liquidation or merger with another company through the transfer of the Company's assets to another company in consideration of shares in that other company or through the establishment of a new company, to which the Company's assets will pass, before the bond- redemption date, all bonds will qualify for premature redemption at the bond-issue price (i.e. at PLN 20.30 per bond). Furthermore the premature redemption date will be set by the Company General Meeting of Shareholders convened to adopt a resolution transforming, re- establishing, liquidating or merging the Company. In such an eventuality the term for the submission of representations concerning the conversion of series D bonds will expire on the day of the opening of Company General Meeting of Shareholders convened to adopt a resolution transforming, re-establishing, liquidating or merging the Company (making due allowance for the provision of the Supervisory Board resolution of July 27, 2000). The principles will be similarly applied in the event of the Company General Meeting of Shareholders adopting a resolution transforming, re-establishing, liquidating or merging the Company before the date when a claim concerning the conversion becomes enforceable. In the event of future changes being made to the par value of PKN ORLEN S.A. shares, the conversion rate of bonds to series D shares will be one z³oty of the bond par value to one zloty of the series D share par value. Given such a situation, the terms and conditions governing the conversion of bonds into shares will be stipulated at the same time as the resolution changing the par value of a Company share. If as a result of conversions a holder should obtain the right to a share-fraction, no such fraction will be allocated, but the holder will have the right to compensation. Such compensation will be determined as a contractual penalty constituting a Company monetary benefit at an amount being the product of the average PKN ORLEN S.A. share price on Gieldzie Papierow Wartosciowych w Warszawie S.A. (WSE) in the fixing system (and should the Company's shares cease to be listed in the fixing system - according to the average price in another applicable system) over the 30 (thirty) trading days immediately prior to the day of the submission of the representation regarding the conversion, and of the share-fraction which cannot be allocated. Compensation will be paid within 45 (forty-five) days of the day on which the capital increase resulting from the conversion was registered. These principles will be similarly applied in the event of the Company General Meeting of Shareholders adopting a resolution adopting a resolution changing the par value of a Company share before the date when a claim concerning the conversion becomes enforceable.

If the registration court fails to register an increase in the Company's capital by the amount reflecting the representation regarding the conversion of bonds into shares within six months of the bondholder submitting such a representation, the bondholder shall have the right to demand that instead of receiving the non-monetary benefits from the bond-conversion, that the bonds be redeemed at the purchase price and that the Company make appropriate compensation. Such compensation will be determined as a contractual penalty constituting a Company monetary benefit at an amount being the product of the average PKN ORLEN S.A. share price on Gieldzie Papierow Wartosciowych w Warszawie S.A. (WSE) in the fixing system (and should the Company's shares cease to be listed in the fixing system - according to the average price in another applicable system) over the 30 (thirty) trading days immediately prior to the day of the submission of the representation regarding the conversion, and of the number of shares which should be allocated as result of the submission of the conversion representation, less the issue price of the bonds presented for conversion. Compensation will be paid within 45 (forty-five) day after the expiry of the abovementioned six-month period. The bonds will be presented to the Company for redemption at the moment when the Company makes the compensation payment. The principles outlined above will similarly apply in cases where as a result of delay on the part of the Company, shares are not allocated to the bondholder within six months of the submission of the representation concerning the conversion of the bonds.

Other information relating to the terms and conditions of the issue of series A convertible bonds is to be found in the series D share issue prospectus.