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 14 October 2008 the Company concluded two agreements for the total value of PLN 262,960,818.10 net with a subsidiary – J.W. Construction Spółka Akcyjna with its seat in Ząbki (henceforth the Contractor). The first agreement concerns completion of the “Górczewska Park” investment project in Warsaw in the area of ul. Olbrachta and ul. Górczewska, executed by the Company as the general contractor until 30 April 2008 and currently realized by the Contractor, in relation to a transfer of an organized part of the enterprise of the Company operating under the name J.W. Construction Holding S.A., Oddział “Budownictwo” (“Construction” Branch) with its seat in Ząbki, as a contribution in kind for the benefit of the Contractor. The other agreement concerns the execution of an investment project known as “Lewandów II” housing estate located in Warsaw at ul. Lewandów, representing the most significant value (henceforth the Agreement) and described below in detail.
The object of the Agreement is the Contractor’s execution in the system of general contracting of an investment project consisting of comprehensive construction of multi-family residential houses together with the entire external infrastructure and roads as well as service lines, on real property located in Warsaw, at. ul. Lewandów – “Lewandów II” housing estate, in line with building permit No. 989/Bia/07 of 26 November 2007, issued by the President of the Capital City of Warsaw (henceforth the Investment Project).

According to the Agreement, the works performed by the Contractor are scheduled for completion on 28 January 2010. The contractual fee is PLN 170,971,863.04 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 to 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.