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 (henceforth the Company) hereby reports that on 3 October 2008 the Company concluded an agreement with its subsidiary – J.W. Construction S.A. with its seat in Ząbki (henceforth the Contractor). The aforementioned agreement (henceforth the Agreement) concerns the Contractor’s execution of an investment project consisting of comprehensive construction of 11 multi-family residential buildings as part of the “Kręczki - Kaputy” I A and I B housing estate as well as comprehensive execution of external works involving the entire external infrastructure together with roads and utility lines for the Kręczki Kaputy 1 project, on real property located in the municipality of Ożarów, in line with decisions regarding building permits No. 918/08 of 23 April 2008 and No. 962/08 of 28 April 2008 issued by the Head [Starosta] of the Poviat of Warszawa Zachód (henceforth the Investment Project).

According to the Agreement, the works performed by the Contractor are scheduled for completion on 23 November 2009. The contractual fee is PLN 91,573,630 net and constitutes the total of all the 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 net works as a guarantee deposit. The guarantee deposit will be reimbursed to the Contractor in two equal portions – the first one within 21 days from the final acceptance and removal of any potential defects and faults, whereas the second one 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 the 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 payments due to invoices are delayed, the Company shall pay statutory interest to 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 the 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 compared to the schedule by more than 30 days; (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 delay in the performance of works compared to the schedule, in the amount of 0.01% of the fee for the delayed phase, for each day of delay. The Company is entitled to a contractual penalty from the Contractor for each day of 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 reserved 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.