Investor relations

Report concerns:
Conclusion of a significant contract

Report’s text:
Acting on the basis of § 5 sec. 1 item 3) of the Ordinance of the Minister of Finance of 19 October 2005, concerning current and periodical information submitted by the issuers of securities (Journal of Laws No 209, item 1744) ("Ordinance") J.W. Construction Holding P.L.C. with its seat in Ząbki ("Company") herewith informs, that on 21 April 2008 it concluded, with Prumstav Develop Poland Sp. z o.o. in organization with its seat in Kłodzko (“Contractor”) a contract (“Contract”) concerning the construction of 14 multi-family residential houses numbered from 18 to 31 within the housing estate “Lewandów II” in the system of general contractorship (“Investment”).

According to the Contract, the deadline for completion of works by the Contractor has been agreed for 26 October 2009. Lump-sum remuneration for the Contractor has been agreed for PLN 62.960.000 net and it may be modified only as a result of tenant-related changes. The remuneration shall be paid on the basis of invoices issued based on the acceptance reports confirming completion of individual types of work. The Contractor shall receive advance payment amounting to 3% of net value of works ordered (in four portions per each stage of works), provided that unconditional bank guarantee on the return of advance payment is submitted to the Company. The bank guarantee shall contain a statement, that if the advance payment is not paid by the Company until the settled date for whatever reason – the guarantee shall remain valid in relation to the part of advance payment already paid-out by the Company, issued in the amount equal to the value of advance payment, i.e. PLN 2.021.016, with expiry date until 30 November 2009. The Contractor has the right to submit 4 bank guarantees for amounts equal to individual portions of advance payment. Moreover, according to the Contract, the Company is entitled to retain security deposit of 5% net of the invoice issued. The deposit may be converted into unconditional, irrevocable bank guarantee payable on first demand.

As a security for proper execution of the Contract, the Contractor within 14 days from passing on the Works shall submit to the Company an unconditional irrevocable bank guarantee payable on first demand, concerning proper execution of the Contract, in the amount of 8% of net contractual remuneration, valid until a date exceeding by 30 days the deadline for final acceptance of the subject of the Contract. Moreover, the Contractor shall grant to the Company a 48-month guarantee for the subject of the Contract, valid from the day of obtaining use permit for the entire subject of the Contract and submission of post-completion documentation. Regardless of entitlements resulting from the guarantee, the Company may also exercise its rights from the warranty for defects occurring in the subject of the Contract in the warranty period of 48 months.

On the basis of an agreement concluded on 21 April 2008 between the Company, the Contractor and Prumstav Develop s.r.o. with its seat in Plzen (Czech Republic) (“Prumstav”), in the event that Contractor fails to complete any of construction stages, its responsibilities resulting from the Contract shall be taken over by Promstav, who shall start to implement the Contract within 7 days from receiving written notification from the Company. In case of taking-over the construction site and commencing to perform the Contractor’s duties as well as completing the duties resulting from the Contract on time, liquidated damages mentioned above, calculated for the Contractor, shall be cancelled. Otherwise both companies shall be jointly and severally liable on account of the Contract.


The Contractor may calculate liquidated damages in the amount of 10% of the value of uncompleted works envisaged in the Contract in case of the Contractor’s withdrawal from the Contract, if: (i) despite correct, additional summoning, the Company refuses to carry out the inspection of works without justification; (ii) Company’s delay in making payments to the Contractor exceeding 45 days in relation to deadlines envisaged in the Contract, after prior written notice setting additional payment date. In case of the Company’s delay in payment of remuneration exceeding 30 days in relation to the dates envisaged in the Contract, the Contractor, after prior written notice setting additional payment date, has the right to charge the Company with penal interests in the amount of 0.05% of invoice value per each day of delay. The Company may calculate liquidated damages: (1) for delay in meeting the deadlines for completion of work elements, caused by the Contractor’s fault, in the amount of 0.05% net value of work stage (to which the delay applies) per each day of delay, (2) for delay in removing defects found during guarantee and warranty period, in the amount of 0.05% of net value of the related work stage, (3) due to the Company’s withdrawal from the Contract caused by the Contractor’s fault, in the amount of 10% of the value of uncompleted works. The Company may claim complementary indemnity increasing the amount of reserved liquidated damages up to the amount of loss actually incurred. Total amount of liquidated damages must not exceed 10% of the Contract value.

Besides the instances indicated in the Civil Code, the Company may withdraw from the Contract also, among others, in the event that the Contractor's winding-up or bankruptcy procedure is commenced, the Contractor does not start the work, interrupts the work and does not continue it within 15 working days (due to the reasons beyond the Company’s control), the Contractors’ delay in execution of work exceeding 30 days in relation to the deadline set in the schedule for a given element, execution of work incompliant with the design, standards and technical conditions for the execution and acceptance of erection and construction works, if despite notice the Contractor does not repair those works within period specified. The Contractor has also obliged itself to purchase watermarks, reinforcing fabric and concrete in quantities indispensable to complete the Contract only from the Company or its subsidiary JWCH Produkcja Budowlana Sp. z o.o. with its seat in Ząbki (“JWCH”). The Contractor may purchase the concrete from other entity if it obtains prices lower by 5% than the price offered by the Company or JWCH. Moreover, the Contractor has obliged itself to insure the subject of the Contract against risks indicated in the Contract, until the day of final work acceptance.

Moreover, on 21 April 2008 the Company concluded an agreement with the Contractor and J.W. Construction S.A. with its seat in Ząbki (“Transferee”), which stipulates that the Company’s entire obligations resulting from the Contract as of 30 April 2008 will be taken over by the Transferee, and this has been accepted by the Contractor. The transfer of obligations under the Contract shall be carried out based on an agreement concerning transfer of organized part of enterprise, concluded in the execution of resolution on increasing the Transferee’s share capital, which besides provisions on taking-over of debts associated with the running of organized part of the Company’s enterprise, including the debt resulting from the Contract, shall contain decisions on the transfer of the rights from the Company to the Transferee, incorporated in the organized part of the enterprise, including the rights from guarantees issued on the Contractor’s request according to the Contract.

Criteria for recognizing the Contract as a significant one are contained in provisions of § 2 sec. 1 item 51) of the Ordinance.