Investor relations

Report concerns:
Conclusion of a significant agreement

Report’s text:
Acting pursuant to section 5.1.(3) of the Ordinance of the Minister of Finance on current and periodical reporting by issuers of securities of 19 October 2005 (Journal of Laws of 2005 No. 209, item 1744) (henceforth the “Ordinance”), J.W. Construction Holding S.A., with its seat in Ząbki, Poland (the “Company”) hereby reports that on 23 September 2008 the Company concluded agreements for the total value of PLN 189,467,346.86 net with a subsidiary – J.W. Construction Spółka Akcyjna with its seat in Ząbki (the “Contractor”). The object of the concluded agreements is completion of investments carried out until 30 April 2008 by the Company as a general contractor, and currently executed by the Contractor, in relation to a transfer of an organized part of the enterprise of a Company operating under the name J.W. Construction Holding S.A., “Construction” Branch, with its seat in Ząbki, as a contribution in kind for the benefit of the Contractor. The aforementioned agreements concern the investment executed at ul. Lazurowa and ul. Górczewska in Warsaw, “Rezydencja Quatro”, “Aleja Wiślana”, “Osada Wiślana” as well as “Pyry II”. Details of the agreement of the most significant value (the “Agreement”) are provided below.
The object of the Agreement is the Contractor’s execution, within the system of general contracting, of an investment consisting of comprehensive construction of multi-family residential buildings together with internal infrastructure and roads, on the real property located in Warsaw, at. ul. Lazurowa and ul. Górczewska, in line with the following building permits: no. 634/BEM/06 of 11 September 2006, no. 315/2006 of 19 October 2006, no. 807/Bem/06 of 10 November 2006, no. 798/Bem/06 of 7 November 2006, no. 396/Bem/07 of 1 June 2007 and no. 02/2007 of 5 January 2007 issued by the President of the Capital City of Warsaw (the “Investment”).

According to the Agreement, the works performed by the Contractor are scheduled for completion on 30 January 2009. The contractual fee is PLN 62,973,877.45 net and constitutes the total of all items in the scope of works and expenditures. The Contractor’s fee shall be payable based on invoices received by the Company and issued based on acceptance protocols of complete contractual works of appropriate quality, accepted in line with their progress.
The Contractor granted a 36-month statutory warranty for the facility for the benefit of the Company, valid from the date of the final acceptance of the object of the Agreement. Under each invoice issued by the Contractor, the Company will withhold 2% of the value of the executed and accepted works net as a guarantee deposit. The guarantee deposit will be reimbursed to the Contractor in two equal portions – the first within 21 days from the final acceptance and removal of any potential defects and faults, and the second following the term of the statutory warranty.

The Parties agreed that the Contractor shall be entitled to a contractual penalty in the amount of 10% of the contractual fee in case the Contractor withdraws from the Agreement for reasons on the part of the Company. The Contractor shall have the right to withdraw from the Agreement if: (i) the Company refuses to accept the works or sign the works acceptance protocol for no legitimate reasons; (ii) the Company notifies the Contractor of being incapable of fulfilling its contractual obligations towards the Contractor due to previously unforeseen circumstances; (iii) an application for the Company’s bankruptcy is submitted or the Company is placed into liquidation.
In the case the invoice payments due are delayed, the Company shall pay statutory interest for the benefit of the Contractor.
The Parties agreed that the Company shall be entitled to a contractual penalty in the amount of 10% of the contractual fee in case it withdraws from the Agreement for reasons on the part of the Contractor. The Company shall have the right to withdraw from the Agreement if: (i) the Contractor fails to continue works for a period exceeding 14 days for no legitimate reasons, despite of the Company’s written notice; (ii) the Contractor’s execution of the entirety or part of the Agreement is delayed by more than 30 days compared to the schedule; (iii) an application for the Contractor’s bankruptcy is submitted or the Contractor is placed into liquidation.
The Company is entitled to a contractual penalty from the Contractor for each day of the delay in the performance of works compared to the schedule, in the amount of 0.01% of the fee for the delayed phase per each day of the delay. The Company is entitled to a contractual penalty from the Contractor for each day of the delay in removing defects and faults during the term of the statutory guarantee, in the amount of 0.01% of the value of the deficient item.

The parties reserve the right to additional indemnification, transferring the values of contractual penalties into the amounts of actual losses.

The remaining contractual terms do not differ considerably from the terms generally used in this type of agreements.
The Agreement has been considered significant pursuant to section 2.1.(51a) of the Ordinance, as the value of the concluded Agreement exceeds 10% of the Company's equity.