Court Opinion

ID: 4066921
Source: CourtListenerOpinion
Date Created: 2016-09-29 22:56:39.229265+00
Date Added: 2024-06-11T14:27:31.296198
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ACCEPTED
                                                                                    13-15-00174-CV
                                                                    THIRTEENTH COURT OF APPEALS
                                                                           CORPUS CHRISTI, TEXAS
                                                                               7/22/2015 8:09:32 PM
                                                                             CECILE FOY GSANGER
                                                                                             CLERK

                           No. 13-15-00174-CV
                                   In The            FILED IN
                    Thirteenth Court of Appeals
                                             13th COURT OF APPEALS
                                          CORPUS CHRISTI/EDINBURG, TEXAS
                      Corpus Christi, Texas   7/22/2015 8:09:32 PM
                                               CECILE FOY GSANGER
HALE-MILLS     CONSTRUCTION, LTD., HALE-MILLS CONSTRUCTION,
                                                      Clerk
      INC., and HMC CONTRACTING SOUTH TEXAS, LLC
                        Appellants,
                            v.
                           WILLACY COUNTY,
                               Appellee.

On Interlocutory Appeal from the 197th District Court of Willacy County Texas
                       (Cause No. 2014-CV-0103-A)

                           APPELLEE’S BRIEF

      Mazin Sbaiti                       Ramon Garcia
      State Bar No. 24058096             State Bar No. 07641800
      Bruce Steckler                     Emerson E. Arellano
      State Bar No. 00785039             State Bar No. 24067490
      Steckler, LLP                      Law Office of Ramon Garcia, P.C.
      12720 Hillcrest Road, Ste. 1045    222 West University Drive
      Dallas, TX 75230                   Edinburg, Texas 78539
      Telephone: (972) 387-4040          Telephone: (956) 383-7441
      Fax: (972) 387-4041                Facsimile: (956) 381-0825
      mazin@stecklerlaw.com              rgarcia@ramongarcia-law.com
      bruce@stecklerlaw.com              earellano@ramongarcia-law.com
      Manuel Solis                       Daniel G. Rios
      State Bar No. 18826790             State Bar No. 00784844
      Law Office of Manuel Solis         Law Office of Daniel G. Rios, PC
      6657 Navigation Boulevard          323 W. Nolana Avenue
      Houston, TX 77011                  McAllen, TX 78504
      Telephone: (713) 844-2700          Telephone: (956) 630-9401
      Fax: (281) 754-4681                Facsimile: (956) 682-0566
      msolis1882@yahoo.com               dan@danrioslaw.com
                        Counsel for Appellee
                   ORAL ARGUMENT REQUESTED
                IDENTITIES OF PARTIES AND COUNSEL
      The following is a complete list of all parties to the trial court’s order and the

names and addresses of all trial and appellate counsel.

APPELLANTS HALE-MILLS CONSTRUCTION, LTD., HALE-MILLS
CONSTRUCTION, INC., and HMC CONTRACTING SOUTH TEXAS, LLC

Represented in the trial court and in this appeal by:

William B. Westcott
Robert A. Plessala
Andrews Myers, P.C.
3900 Essex Lane, Suite 800
Houston, TX 77027-5109

APPELLEE WILLACY COUNTY
Represented in the trial court and in this appeal by:

Mazin Sbaiti                                   Ramon Garcia
State Bar No. 24058096                         State Bar No. 07641800
Bruce Steckler                                 Emerson E. Arellano
State Bar No. 00785039                         State Bar No. 24067490
Steckler, LLP                                  Law Office of Ramon Garcia, P.C.
12720 Hillcrest Road, Ste. 1045                222 West University Drive
Dallas, TX 75230                               Edinburg, Texas 78539
Telephone: (972) 387-4040                      Telephone: (956) 383-7441
Fax: (972) 387-4041                            Facsimile: (956) 381-0825
mazin@stecklerlaw.com                          rgarcia@ramongarcia-law.com
bruce@stecklerlaw.com                          earellano@ramongarcia-law.com
Manuel Solis                                   Daniel G. Rios
State Bar No. 18826790                         State Bar No. 00784844
Law Office of Manuel Solis                     Law Office of Daniel G. Rios, PC
6657 Navigation Boulevard                      323 W. Nolana Avenue
Houston, TX 77011                              McAllen, TX 78504
Telephone: (713) 844-2700                      Telephone: (956) 630-9401
Fax: (281) 754-4681                            Facsimile: (956) 682-0566
msolis1882@yahoo.com                           dan@danrioslaw.com

                                           i
                                   TABLE OF CONTENTS

REQUEST FOR ORAL ARGUMENT ...................................................... …..cover

IDENTITIES OF PARTIES AND COUNSEL…………………………………............i

TABLE OF CONTENTS……………………………………………………………….ii

TABLE OF AUTHORITIES…………………………………………………...............v

STATEMENT REGARDING ORAL ARGUMENT .............................................. ix

RESPONSE ISSUES PRESENTED ........................................................................ x

SUMMARY OF THE ARGUMENT………………………………………………xi

STATEMENT OF FACTS ......................................................................................1

I.      Defendants/Appellants Propose to Build Three Facilities Using Taxpayer
        Dollars…………………………………………………………………….......1

II.     The Scandal……………………………………………………………………2

III.    The State of the Facilities……………………………………………………..4

STANDARD OF REVIEW .....................................................................................6

ARGUMENTS AND AUTHORITIES…………………………………………..……6

I.      The District Court did not Abuse Its Discretion in Denying Arbitration as to Any
        of the Three Facilities at Issue…………………………………………………6

        A.Appellant has Waived any Argument Challenging the District Court’s Finding
        that the Contracts were Unconscionable when Made…………………………...8

        B.Appellant has Waived any Argument Challenging the District Court’s Finding
        that Compelling Arbitration Would be Substantively Unconscionable………..10

                                                    ii
       C.Appellants have Waived any Challenge to the District Court’s Finding of
       Insufficient of Evidence to Support the Existence of a Valid Agreement……..14
II.    The District Court did not Abuse Its Discretion in Denying Arbitration on the
       Basis of Sovereign Immunity………………………………………………….15

       A.The District Court Properly Found that there had been no Waiver of Sovereign
       Immunity…………………………………………………………...15

       B.Willacy County Has Not Waived Its Sovereign Immunity Because It Has Not
       Signed the Agreements………………………………………………………...16

       C.    Texas Local Government Code Does Not Waive Sovereign Immunity...18

             1.    Local Government Code Section 271 Does Not Waive the
                   County’s Sovereign Immunity………………………………….18

             2.    Appellant’s Contentions Regarding the Local Government
                   Corporations’ Agency are Inapt and Irrelevant………………..19

             3.    Local Government Code Section 262.007 Also Establishes Why
                   the County has Not Waived Sovereign Immunity………………21

III.   Willacy County has Not Filed Suit to Enforce the Agreements, Nor Does It Seek
       a “Direct Benefit” From Them, Therefore It Is Not Bound By the Arbitration
       Clause……………………………………………………………………….22

       A.     Texas Supreme Court Precedent and Persuasive Authority Support the
       District Court’s Discretionary Finding……………………………………….24

       B.    Under KBR, The Court at most Would Reverse as to the Warranty
             Claims………………………………………………………………….29

IV.    This Court Should Affirm on Contractual Grounds…………………………..30

       A.    The Sherriff’s Office Agreement Does not Provide for Mandatory
             Arbitration by the County Because it Was Not a Party and the Provision is
             Patently Ambiguous…………………………………………………31

       B.    The County is Expressly Excluded from Mandatory Arbitration Regarding
                                          iii
        the Marshall’s Office………………………………………34

   C.   The Agreements’ Clauses are Limited to Disputes that Arise During
        Construction and Pendency of the Contracts- Not After………………35

   D.   Appellant Has Not Proven that All Pre-Requisites to Compelling
        Arbitration on the Detention Facility Have Been Met…………………38

CONCLUSION AND PRAYER……………………………………………..………39

CERTIFICATE OF SERVICE………………………………………………………41

CERTIFICATE OF COMPLIANCE………………………………………………...41

                                 iv
                           TABLE OF AUTHORITIES

Aldridge v. Thrift Fin. Mktg., LLC,
      376 S.W.3d 877 (Tex. App.–Fort Worth 2012, no pet.)………………..….30, 36

Amir v. Int’l Bank of Commerce,
      419 S.W.3d 687 (Tex. App.–Houston [1st Dist.] 2013, no pet.)………..……..38

Bankhead v. Maddox,
     135 S.W.3d 162 (Tex. App –Tyler- 2004, no pet.) …………………………8, 15

Bridas S.A.P.I.C. v. Turkmenistan,
      345 F.3d 347 (5th Cir. 2003)…………………………………………………...23

Britton v. Texas Dep't of Criminal Justice,
       95 S.W.3d 676 (Tex. App. - Houston [1st Dist.] 2002, no pet.)………….7, 8, 13

Carr v. Main Carr Dev., LLC,
      337 S.W.3d 489 (Tex. App. Dallas 2011)………………………………….25, 27

Cruikshank v. Consumer Direct Mortgage, Inc.,
      138 S.W.3d 497 (Tex. App. - Houston [14th Dist.] 2004, pet. den). 9, 10, 13, 15

First Option of Chicago, Inc. v. Kaplan,
       514 U.S. 938 (1995)……………………………………………………..…30, 36

Fluor Daniel, Inc. v. Travis County,
      2003 U.S. App. LEXIS 8138, *4 (5th Cir. Tex., Apr. 30, 2003)………...…….17

Freis v. Canales,
      877 S.W.2d 283 (Tex. 1994) (orig. proceeding)…………………………….14

Gonzalez v. Mission Am. Ins. Co.,
     795 S.W.2d 734 (Tex. 1990)…………………………………………31, 33, 37

Green Tree Find. Corp. v. Randolph,
     531 U.S. 79 (2000)……………………………………………………………..12

Hill v. G.E. Power Sys, Inc.,

                                         v
      282 F.3d 343 (5th Cir. 2002)…………………………………………………..25

In re Choice Homes, Inc.,
       174 S.W.3d 408 (Tex. App.–Houston [14th Dist.] 2005, no pet.)…………35, 37

In re First Merit Bank N.A.,
       52 S.W.3d 749 (Tex. 2001)…………………………………………………11

In re Halliburton Co.,
       80 S.W.3d 566 (Tex. 2002)……………………………………….………11, 13

In re Kellogg Brown & Root, Inc.,
       166 S.W.3d 732 (Tex. 2005) (orig. proceeding)…14, 24, 25, 26, 27, 28, 29, 30

In re Luna,
       175 S.W.3d 315 (Tex. App. Houston 1st Dist. 2004)………………………….12

In re Pisces Foods, L.L.C.,
       228 S.W.3d 349 (Tex. App–Austin 2007, orig. proceeding)………………….38

In re Poly-America, L.P.,
       262 S.W.3d 337 (Tex. 2008)……………………………………9, 10, 11, 12, 13

In re Serv. Corp. Intern.,
       355 S.W.3d 655 (Tex. 2011)……………………………………………….31, 37

In re Weekley Homes, L.P.,
      180 S.W.3d 127 (Tex. 2005)……………………………………………..23, 24

Intergen N.V. v. Grina,
      344 F.3d 134 (1st Cir. 2003)………………………………………20, 26, 27, 32

Int’l Paper Co. v. Schwabedissen Maschinen Anlagen GMBH
       206 F.3d 411 (11th Cir. 2000)………………………………………………….23

Jack B. Anglin Co., Inc. v. Tipps,
      842 S.W.2d 266 (Tex. 1992) (orig. proceeding)……………………………….6

J.M. Davidson Inc. et al. v. Webster, 128 S.W.3d 228 (Tex. 2003)

                                        vi
      128 S.W.3d at 227……………………………………………………………...14

Landmark Org., L.P. v. Tremco Inc.,
     2010 Tex. App. LEXIS 5052, *29 (Tex. App. Austin 2010)………………….29

Morrison v. Circuit City Stores, Inc.,
     317 F.3d 646 (6th Cir. 2003)…………………………………………………...12

Okorafor v. Uncle Sam & Assocs., Inc.,
     295 S.W.3d 27 (Tex. App.–Houston [1st Dist.] 2009, pet. denied)…………..6

Olshan Found. Repair Co. v. Ayala,
     180 S.W.3d 212 (Tex. App.-San Antonio 2005, pet. denied)………………….10

R.J. Griffin & Co. v. Beach Club II Homeowners Ass’n,
      384 F.3d 157 (4th Cir. 2004)…………………………………………………25

Schlumberger Technology Corp. v. Baker Hughes Inc.,
     355 S.W.3d 791 (Tex. App.–Houston [1st Dist.] 2011)…………….............6

Schwartz v. Forest Pharmaceuticals, Inc.,
     127 S.W.3d 118 (Tex. App. - Houston [1st Dist.] 2003, pet. den)……9, 10, 13

Seagull Energy E & P, Inc. v. Eland Energy, Inc.,
     207 S.W.3d 342 (Tex.2006)……………………………………………….31, 37

Town of Highland Park v. Iron Crow Construction Incorporated,
     168 S.W.3d 313 (Tex. App. Dallas 2005)…………………………16, 17, 18, 22

Texas Natural Resource Conservation Commission v. IT-Davy,
      74 S.W.3d 849 (Tex. 2002)……………………………….………………17, 18

Venture Cotton Coop. v. Freeman
      395 S.W.3d 272 (Tex. App. Eastland 2013)…………………………………...13

Webb County v. Khaledi Props.,
     2013 Tex. App. LEXIS 9063, *3 (Tex. App. San Antonio, July 24, 2013)……18

Wortham v. Otis Elevator Co.,

                                      vii
     2000 Tex. App. LEXIS 3443, *8 (Tex. App. Dallas May 25, 2000)…………..14

Secondary Authorities

Tex. Civ. Prac. Rem. Code § 171.001………………………………………………14

Tex. Loc. Gov. Code § 262.001…………………………………………………….20

Tex. Loc. Gov. Code § 262.007…………………………………………………21, 22

Tex. Loc. Gov. Code § 262.011……………………………………………………..21

Tex. Loc. Gov. Code § 271.151…………………………………………………18, 19

Tex. Loc. Gov. Code § 271.152……………………………………………………..18

Tex. Loc. Gov. Code § 271.154……………………………………………………..19

Tex. Loc. Gov. Code § 271.160……………………………………………………..20

W. Wendall Hall et al., Hall’s Standards of Review in Texas,
    42 St. Mary’s L.J. 1, 78 (2010)…………………………………………………6

                                   viii
               STATEMENT REGARDING ORAL ARGUMENT

      Appellee respectfully requests that this Court grant oral argument. Due to the

novelty of the arguments raised by Appellants, Appellee believes oral argument will be

of assistance in this matter.

                                          ix
                          RESPONSE ISSUES PRESENTED

1.      Texas law states that a party who does not raise evidentiary objections before
     the district court waives them on appeal. Here, Appellants failed to raise any
     evidentiary objections before the district court seeking to strike Willacy County’s
     evidence supporting the district court’s finding of unconscionability. Did Appellants
     waive these objections on appeal?

2.      Texas law states that an appellant’s failure to raise points of error in an opening
     brief waives them for the appeal. Texas law also requires proof of a valid agreement
     before ordering arbitration. Here, Appellants’ opening brief fails to challenge the
     district court’s adopted finding that Appellants’ motion was unsupported by
     competent evidence of a valid agreement. Have the Appellants waived any right to
     argue against this finding?

3.      Texas law states that a County has sovereign immunity from enforcing an
     arbitration clause, and that only the legislature may waive sovereign immunity.
     Texas statutes have only waived sovereign immunity for a county with regards to
     specific contracts to which the County is a party, and even then immunity is waived
     only to the extent suit is brought in a district court in that county. Here it is
     undisputed that Willacy County is not a signatory to any of the Agreements. Was
     the district court correct in finding that sovereign immunity applied and had not
     been statutorily waived for Willacy County?

4.       Texas law states that the doctrine of “direct benefits estoppel” may apply to a
     third party to a contract where that party’s claims seek a direct benefit from
     enforcement of the contract. Texas courts review such determination for abuse of
     discretion. Here, the district court found that the County’s claims for fraud, unjust
     enrichment, warranty and negligence did not seek derive a direct benefit from the
     Agreements. Did the district court abuse its discretion in finding that direct
     benefits estoppel did not apply to one or more of the County’s claims?

5.       This court may affirm on any basis in the record. Texas law requires that
     arbitration agreements be construed by their terms. Here, two of the Agreements are
     limited by their terms to the signatories to the contracts, and the others are limited to
     claims arising during the time period during which the work was in progress. Do
     these support the district court’s denial of the motion to compel arbitration on a
     harmless error standard?

                                               x
                        SUMMARY OF THE ARGUMENT

       This appeal arises from the improvident motion by Appellants to compel Willacy

County to arbitration. The record is clear that Willacy County is not a signatory to any

of the Agreements. The Agreements are project specific, and therefore, must be

evaluated on their own terms.

       However, Appellants’ motion to compel arbitration, and this Appeal, suffer from

four common flaws:

       First, the district court’s adopted finding on unsconscioability was predicated on

evidence that Appellants never challenged below—therefore, Appellants have waived

their appeal on this issue which is sufficient to affirm in full.

       Second, the district court’s conclusion is supported by its adopted finding that

Appellants’ motion was not supported by competent evidence of a valid agreement to

arbitrate—Appellants fail to address this issue in their opening brief and therefore, have

waived their appeal on this issue which is sufficient to affirm in full.

       Third, it is well established that only the Texas legislature can waive immunity.

Here, the district court’s conclusion is supported by the fact that the County is immune

from suit to compel arbitration, and its immunity has not been waived by the Texas

legislature for suits brought on contracts to which the county is not a signatory. The

only statute that remotely speaks to the issue only applies to signatories, and even then

                                            xi
only waives immunity from suits brought in district court.

      Fourth, the Texas Supreme Court in KBR said that “direct benefits estoppel”

only applies to a non-signatory who “seeks, through the claim, to derive a direct benefit

from the contract.” The Court very clearly excluded any non-contractual claims from

arbitration. Courts have consistently held that extra-contractual warranty claims are not

the types of claims that invoke the estoppel doctrine. Here, Appellants have failed to

demonstrate how the district court abused its discretion in concluding that the county’s

claims for fraud, unjust enrichment, negligence and implied warranty did not seek to

derive a direct benefit from the Agreements. Under KBR, even if this Court thinks that

the warranty claim triggers estoppel, it should only reverse as to the warranty claim and

affirm on the other claims.

       The foregoing demonstrate four independent and sufficient reasons to affirm.

      But before this Court must also consider the individual Agreements’ terms. There

are three facilities and each is governed by its own arbitration provision. However, (i)

Two of the arbitration clauses by their terms are limited to the parties to the respective

agreements unless otherwise stated in writing. Binding authority holds that arbitration

cannot be compelled under those circumstances. (ii) The other arbitration clause is by

its terms, limited to the pre-dispute resolution provisions, which itself only applies to

disputes that arise during the pendency of the construction project. It lacks any

language taking it beyond to any and claims arising under the agreement before or after
                                           xii
the contract terminates.

                           xiii
                                       STATEMENT OF FACTS

I.      DEFENDANTS/APPELLANTS PROPOSE TO BUILD THREE FACILITIES USING
        TAXPAYER DOLLARS

        Defendants Hale Mills Construction, Ltd., Hale-Mills Construction, Inc., and

HMC Contracting South Texas, LLC (“Appellants”) approached members of

Willacy County’s board of commissioners proposing to build a detention center for

the U.S. Marshall’s Office, a detention center for pre-deportation inmates of the

Immigration and Customs Enforcement agency (aka “ICE”), and a new jail for the

Willacy County Sherriff’s office in Raymondville (altogether, the “Facilities”).

        To that end, over the course of years, four principal agreements were entered

into between one or more of the Defendants/Appellants and one of the County’s

local government entities (altogether, the “Agreements”)1.

               For the Marshall’s Office, Willacy County Public Facility Corporation

contracted with Hale Mills Construction, Ltd., and Hale-Mills Construction, Inc.

(CR 106 - 130). Attached hereto as Exhibit A (the “Marshall’s Office Agreement”).

               For the Willacy County Sherriff’s office, Hale-Mills Construction Ltd.

contracted with the County Jail Public Facility Corporation of Willacy County,

    1 Below, Appellee moved to strike any such evidence as not properly for the district court. See
Exhibit F; CR 90-91). The district court adopted this finding in its Order. Appellee’s citation to the
agreements in the record is without waiving their contention that such evidence was not properly before
the district court or the contention that Appellants have waived the challenge on appeal since they did not
raise it in their opening brief. See Section I(c) supra.

                                                     1
Texas, on June 29, 2004 (CR 132 - 158). Attached hereto as Exhibit B (the “Jail

Agreement”).

               For the Detention Center for ICE, the ICE Facility was constructed

under an agreement between the Willacy County Local Government Corporation

and HMC Contracting South Texas, LLC, and was executed on July 19, 2006 (CR

160-196). Attached hereto as Exhibit C. An addition was constructed pursuant to an

agreement executed on August 2, 2007 between The Willacy County Local

Government Corporation and HMC Contracting South Texas, LLC. (CR 198-239).

Attached hereto as Exhibit D (Exhibits C and D together, the “ICE Facility

Agreements”).

        There is no dispute that the Facilities were substantially completed by January

2008, (CR 130, 158, 196, 239) 2 and that the completion of the facilities terminated

the contractual relationships cited above.

II.     THE SCANDAL

        The Agreements were neither negotiated, nor made without substantial

controversy. (CR 92). They were procured through a system of bribery that

ultimately saw two Willacy County officials get indicted and plead guilty with a

third official to criminal charges. (CR 92).3 Jose Jimenez and Israel Tamez were

    2 Appellants admit as much in the brief. See Appellant’s Opening Br. at 1).
    3 Citing http://www.myplainview.com/article_439ed742-bbc0-51de-8368-26bf030b4c35.htm (“Two
former Willacy County commissioners pleaded guilty Tuesday to accepting bribes for their votes on federal

                                                   2
sentenced to six months in prison each for their roles in voting in favor of the

Facilities projects. (Id.)

        Yet, these men’s names are all over the Local Government Entities’

paperwork that Appellants attach to their opening briefs. For example, in Appellants’

Opening Brief, Appendix 2, the Articles of Incorporation of Willacy County Public

Facility Corporation, Israel Tamez is named on the Board of Directors (pg 2) and

Jose Jimenez is additional board member (pg 2(A)). In Appellants’ Opening Brief,

Appendix 3, the Articles of Incorporation of County Jail Public Facility

Corporation, Israel Tamez is the “Incorporator” (Art. IX) and is named to the Board

of Directors (Art. VIII).

        What makes the scandal so insidious is that the Facilities were financed

through public bond issuances that the Taxpayers undertook to bear and repay in

reliance on the representations that the Facilities would not only perform a function,

but also on the basis that the Marshall’s Office and the ICE Facility would generate

revenue and jobs to the County. (CR 92; see also Willacy County Commissioner Bd.

prison contracts. Jose Jimenez, 67, of Sebastian, and Israel Tamez, 58, of Raymondville, waived indictment
and admitted accepting more than $10,000 each from companies competing for work on the Willacy County
Adult Correctional Center. The $14.5 million prison was being built to house federal inmates.”); and see
http://www.myplainview.com/article_92fb86e1-aa11-504a-94cf-49820f746300.html (“The last of three
county commissioners to plead guilty in a bribery scandal involving a Rio Grande Valley federal detention
facility has been sentenced…Webb County Commissioner David Cortez, 72, of Laredo was given three
months in prison Tuesday in federal court for his role in funneling $39,000 in bribes to former Willacy
County Commissioners Jose Jimenez and Israel Tamez in 2002. The money was given in exchange for
favorable votes on contracts to design, build or manage a 500-bed facility in Raymondville that opened in
2003.”).

                                                    3
Resolutions attached to Appellant’s Brief).4 This is reflected in the various board

resolutions attached to Appellants’ Opening Brief. See also Appellants’ Br. app’x 3,

Art. XIII.

III.    THE STATE OF THE FACILITIES

        While what was promised by Appellants was state-of-the-art facilities, what

was delivered was substandard. After only a few years of use, the facilities are in

complete disrepair, revealing the fraud and slipshod workmanship done by the

Defendants. (CR 06 et. seq.)

        The Facilities are in no shape to last their useful lives. As revealed in the

Original Petition (CR 06 et. seq.), poor materials were used in place of proper

construction materials, thus requiring constant repairs (Id. at ¶ 17). The site

preparation was irremediably flawed, with building sitting below grade, subjecting

them to shifting, flooding and improper drainage (Id. at ¶ 18). Whereas the typical

home houses 3 to 4 people, and has 8 to 12 inches of foundation, the buildings are

based on less than that (Id. at ¶ 19). Moreover, the quality of the concrete is

substandard. The concrete throughout reveals flaking, chipping, and spalding—all

of which should not happen had minimally appropriate concrete and cement been

used. (Id. at ¶ 21) There are structural defects in load-bearing walls—these are

    4 Appellants have attached several appendices to the Opening Brief that are not part of the record.
These should be stricken to the extent Appellants have not made them a part of the record, but also serve
as admissions.

                                                    4
cracking and showing signs of failure. Walls without sufficient internal structure are

bearing heavy steel beams that cause a danger of failure. (Id. at ¶ 22). There are

cracks and chipping in all walls and ceilings that continually have to be repaired.

This is cumulatively worse in quarantine and isolation rooms, since cracks in interior

walls allow contamination to pass through the walls that are supposed to prevent that

from happening. (Id. at ¶ 23). There are have been hundreds of roof leaks due to poor

roofing installation techniques. (Id. at ¶ 24). There is evidence of serious water

penetration and leakage into the Centers. These are dangerous and cause electrical

wiring failures, and have caused shorting wiring and otherwise damage conduits and

electrical appliances and equipment (HVACs, grid ceiling, etc.). (Id. at ¶ 26) The

sewage and drainage system is demonstrably deficient and exhibits signs of

improper construction and building techniques. The sewage line is (singular) far too

small for the Centers and the number of people in them—causing constant grotesque

backup of sewage and human waste into the dormitories and cafeterias. (Id. at ¶ 27)

      The list is endless.

      The County in filing the instant suit, presciently observed in its Original

Petition:

            Make no mistake: What is at stake here is the potential loss of
            the contracts and eventually closure of the Centers (all of them)
            because they fail to meet even the most basic requirements of
            suitable construction. Such a cataclysmic event would cost jobs

                                           5
           in addition to County revenue. (CR 07)

       Thus, it surprised absolutely no one at the County when a riot broke out at the

ICE Facility in February 2015 precipitating its closure and the dismissal of all but a

skeleton crew of employees.5 Appellants’ misconduct has contributed to the loss of

the government contract with the Bureau of Prisons for the ICE Facility, costing over

400 Willacy County residents their livelihood, and costing the County fiscally as

well. (Id.) That is just one building; the rest are soon to fall.

                                STANDARD OF REVIEW
       This Court reviews the trial court’s denial of a motion to compel arbitration

for abuse of discretion. See Schlumberger Technology Corp. v. Baker Hughes Inc.,

355 S.W.3d 791, 800 (Tex. App.–Houston [1st Dist.] 2011); Okorafor v. Uncle

Sam & Assocs., Inc., 295 S.W.3d 27, 38 (Tex. App.–Houston [1st Dist.] 2009, pet.

denied); see also W. Wendall Hall et al., Hall’s Standards of Review in Texas, 42

St. Mary’s L.J. 1, 78 (2010) (citing Jack B. Anglin Co., Inc. v. Tipps, 842 S.W.2d
266, 271–72 (Tex. 1992) (orig. proceeding).

                         ARGUMENTS AND AUTHORITIES

I.     THE DISTRICT COURT DID NOT ABUSE ITS DISCRETION IN DENYING
       ARBITRATION AS TO ANY OF THE THREE FACILITIES AT ISSUE
       The District Court denied arbitration on several independent grounds. (CR

    5 See http://www.valleymorningstar.com/news/local_news/article_bf112990-cc4a-11e4-ba2f-
e3c024760e63.html.

                                                6
418) (the “Order”). The Order is attached hereto as Exhibit E. The district court ruled

that the County had sovereign immunity because it was not a signatory to the

agreements and was not seeking to enforce the Agreements; that Defendants’ had

failed to properly authenticate their evidence to establish their contractual right to

arbitrate; and that the arbitration clauses were unconscionable.6

        Appellants expends the entirety of their Appellate briefing on the first of these

arguments. But they never address the other independent grounds for the denial of

their motion to compel arbitration. For that reason, Appellants have waived them

and this Court need not wade into the mire of sovereign immunity.

        An appellant “must attack all independent bases or grounds that fully support

a complained-of ruling or judgment.” Britton v. Texas Dep't of Criminal Justice, 95
S.W.3d 676, 681 (Tex. App. - Houston [1st Dist.] 2002, no pet.). If the appellant

fails to do so, the court of appeals “must affirm the ruling or judgment.” Id. The

reason is that:

            If an independent ground fully supports the complained-of ruling
            or judgment, but the appellant assigns no error to that
            independent ground, then (1) [the appellate court] must accept
            the validity of that unchallenged independent ground, … and thus
            (2) any error in the grounds challenged on appeal is harmless

    6 The District Court’s Order cited sovereign immunity, and incorporated as independent grounds the
balance of the issues raised in Willacy County’s Response below (Willacy County’s Plea to the Jurisdiction
and Response to Plea in Abatement and Opposition to Arbitration Before AAA (CR 84 et seq.) is attached
hereto as Exhibit F). This Court thus must treat the Willacy County Response below as incorporated by
reference into the Court’s Order.

                                                    7
          because the unchallenged independent ground fully supports the
          complained-of ruling or judgment.

Id. at 681-682. It is not enough for the Appellants to try and cure this waiver in their

reply brief. That would sandbag the Appellee and be patently unfair. The failure to

address these issues in the opening brief constitutes an irrevocable waiver. See

Bankhead v. Maddox, 135 S.W.3d 162, 164-65 (Tex. App –Tyler- 2004, no pet.)

(holding issues not raised in appellant's initial brief are deemed waived on appeal).

      Accordingly, the waiver of the issues provides ample ground for affirmance.

A. Appellant Has Waived any Argument Challenging the District Court’s
   Finding that the Contracts Were Unconscionable When Made

      The District Court adopted the argument set forth in Willacy County’s

opposition to arbitration. (CR 418, 84; see Exhibits E and F). Below, the County

contended that the Contracts were contracts of adhesion, procured in the midst of a

criminal bribery scandal during which two of Appellant’s affiliates (former county

commissioners) were tried, convicted, and sent to prison. (CR 92) The District Court

adopted this argument in its Order, thus holding that the Agreements were

unconscionable when made. (CR 418).

      These facts were never controverted nor even addressed by Appellant before

the district court. They never objected to the evidence, and never obtained a ruling

on their objections. Appellants have thus failed to preserve the alleged evidentiary

error for this Appeal.

                                           8
       In Cruikshank v. Consumer Direct Mortgage, Inc., 138 S.W.3d 497 (Tex.

App. - Houston [14th Dist.] 2004, pet. denied), appellant argued that the trial court

had erroneously sustained objections to the appellant's summary judgment affidavit.

The court of appeals held that the appellant had not preserved error because he had

not filed a response to the objecting party's motion to strike, he did not object to the

trial court's ruling, and he did not request the court to reconsider its ruling. Id. at 499.

       Also, the fact that Appellants did not specifically object to the evidence

anywhere, and failed to obtain a ruling means they have irrevocably preserved the

error. Accord Schwartz v. Forest Pharmaceuticals, Inc., 127 S.W.3d 118, 120 (Tex.

App.- Houston [1st Dist.] 2003, pet. den) (holding that failure to specifically raise

relevance or sufficiency objection before trial court and obtain a ruling failed to

preserve the objection for appeal even though same evidence had been objected to

on other grounds).

       The failure to preserve error on appeal deprives the appellate court of any

jurisdiction to reverse on that basis. Id. That is true even if the Appellate court

believes it might have otherwise ruled in the appellant’s favor.

       Furthermore, Texas law applies to determine the validity or revocability of the

arbitration clause. See In re Poly-America, L.P., 262 S.W.3d 337, 348 (Tex. 2008).

There is no presumption favoring arbitration when it comes to determining whether

there is a valid and enforceable agreement to arbitrate. Id. “Unconscionable

                                             9
contracts, however – whether relating to arbitration or not – are unenforceable under

Texas law.” Id. at 348.

      Here, Appellant neither raised Willacy County’s support of unconscionability

as a matter of factual or legal error before the district court. Therefore, Appellant

cannot argue that the District Court abused its discretion or applied the wrong law,

and has thus waived any contention to that effect in this appeal. Schwartz, 127

S.W.3d at 120; Cruikshank, 138 S.W.3d at 499. Moreover, this Court would be duty-

bound to defer to the district court’s findings even without a finding waiver. See

Olshan Found. Repair Co. v. Ayala, 180 S.W.3d 212, 214 (Tex. App.-San Antonio

2005, pet. denied) (when reviewing “the trial court's decision concerning the

unconscionability of an arbitration agreement . . . we defer to the trial court's factual

determinations”). Appellants’ waiver of their challenges thus conclusively requires

affirmance.

      Therefore, it is undeniable that Appellant has waived any point of error on the

District Court’s finding that the agreements are unconscionable. See id. Its waiver

provides prima facie, independent and uncontroverted grounds for affirming the

District Court’s Order.

B. Appellant Has Waived any Argument Challenging the District Court’s
   Finding that Compelling Arbitration Would be Substantively
   Unconscionable

      Below, the County contended that the arbitration clauses were unconscionable

                                           10
because they imposed on Willacy County and the county taxpayers an insupportable

burden and expense in filing and litigating before the Arbitral panel. (CR 92). The

District Court adopted this position in its Order, thus holding that the Agreements

were unconscionable when made. (CR at 418).

      Contrary to Appellants’ position that, under In re In re First Merit Bank N.A.,

52 S.W.3d 749 (Tex. 2001), substantive unconscionability lies within the exclusive

realm of the arbitrator, the Texas Supreme Court overruled that opinion and held

that a court may find that procedural or substantive unconscionability is sufficient

to invalidate an arbitration clause. See In re Halliburton Co., 80 S.W.3d 566, 572

(Tex. 2002) (“We therefore clarify that courts may consider both procedural and

substantive unconscionability of an arbitration clause in evaluating the validity of an

arbitration provision.”).

      The case law is littered with courts invalidating arbitration clauses for being

substantively unconscionable. The Texas Supreme Court specifically held that an

arbitration provision is unconscionable if it imposes on the party raising the claim

the obligation to pay the costs of arbitration which render access to the forum

unaffordable. See In re Poly-America, L.P., 262 S.W.3d at 355. There, the Supreme

Court agreed that:

          [I]n some cases, the potential of incurring large arbitration costs
          and fees will deter potential litigants from seeking to vindicate
          their rights in the arbitral forum . . . . [I]f the fees and costs of the

                                             11
          arbitral forum deter potential litigants, then that forum is clearly
          not an effective, or even adequate, substitute for the judicial
          forum . . . [T]he burden of demonstrating that incurring such
          costs is likely under a given set of circumstances rests, at least
          initially, with the party opposing arbitration.

Id. (quoting Morrison v. Circuit City Stores, Inc., 317 F.3d 646, 659-60 (6th Cir.

2003) (invalidating arbitration provision that imposed excessive fees on litigant)).

While the Supreme Court held that there was no “per se” rule, it ruled that such a

determination would be a question of fact. Id. The lower court had found that there

was sufficient evidence of the litigants inability to afford access to the arbitral forum.

In re Luna, 175 S.W.3d 315, 322 (Tex. App. Houston 1st Dist. 2004). The Supreme

Court disagreed, noting that the fee provisions were not unconscionable because the

arbitrator was permitted to adjust any unconscionable terms including the fee split

between the parties, and therefore, he had a remedy. In re Poly-America, L.P., 262

S.W.3d at 355. Here, the District Court implicitly found that the County is required

to foot the entire cost of filing arbitration which is substantial, and the Agreements

afford no discretion to the arbitrator to reduce the amount(s).

      Similarly, under Green Tree Find. Corp. v. Randolph, 531 U.S. 79, 90 (2000),

the U.S. Supreme Court held that prohibitively high arbitration costs that would

“preclude a litigant...from effectively vindicating [her] rights in the arbitral forum”

are unsconsionable, and held that it raised a question of evidentiary fact, not law.

Following these precedent, Texas courts have invalidated arbitration clauses that

                                           12
substantively deny a litigant the right of redress. See, e.g., Venture Cotton Coop. v.

Freeman, 395 S.W.3d 272, 276 (Tex. App. Eastland 2013),

      Applying these precedents, it is clear that Appellant has waived any challenge

to the district court’s factual finding of unconscionability due to the expense and cost

to be imposed on the County.

      While Appellants contend that there was insufficient evidence to support this

finding, Appellants never specifically raised that objection before the district court.

Appellants thus fail to preserve the factual and legal error for appeal. See

Cruikshank, 138 S.W.3d at 499 (failure to raise matters before trial court does not

preserve error on appeal and waives such issues); Schwartz, 127 S.W.3d at 120

(holding that objection to ruling on one issue—in that case, Rule 401 prejudice, does

not preserve objections on relevance of evidence).

      Accordingly, Appellants have waived any challenge to the District Court’s

finding of substantive unconscionability. The finding of unconscionability is

sufficient in and of itself to vitiate the arbitration clause and its enforcement. See In

re Poly-America, L.P., 262 S.W.3d 337, 348; In re Halliburton Co., 80 S.W.3d at

572. This Court need not address the other issues as they are rendered moot. See

Freeman, 395 S.W.3d at 277 (“Because we have held that the arbitration agreement

is substantively unconscionable…we need not consider appellants’ remaining

arguments attacking appellees’ other substantive unconscionability and procedural

                                           13
unconscionability defenses.”); Britton, 95 S.W.3d at 681 (failure to attack all

independent grounds requires affirmance).

      Therefore, the district court’s order may be summarily affirmed.

C. Appellants Have Waived Any Challenge to the District Court’s Finding of
   Insufficient of Evidence to Support the Existence of a Valid Agreement

      To compel arbitration, a party must show that there is a valid arbitration

agreement and that the claims raised fall within the agreement's scope. In re Kellogg

Brown & Root, Inc., 166 S.W.3d 732, 737 (Tex. 2005) (orig. proceeding); see also

Tex. Civ. Prac. Rem. Code § 171.001(a). Without an agreement to arbitrate,

arbitration cannot be compelled. J.M. Davidson, 128 S.W.3d at 227 (citing Freis v.

Canales, 877 S.W.2d 283, 284 (Tex. 1994) (orig. proceeding)).

      Below, Willacy County attacked the insufficiency of Defendants’ evidence in

their motion to compel arbitration, and moved to strike the supporting evidence as

being unsubstantiated, inauthentic, and incomplete. (CR 91-92). This objection was

sustained by the district court (see Order, CR 418), despite Appellants’ last-ditch

effort to supplement their motion papers with the agreements. (CR 103 et seq.).

Appellants never obtained a ruling overruling the objection, meanwhile, the Order

plainly adopts it as independent grounds to deny arbitration and is correct. See

Wortham v. Otis Elevator Co., 2000 Tex. App. LEXIS 3443, *8 (Tex. App. Dallas

May 25, 2000) (sustaining trial court striking of evidence where “documents

                                         14
constituted hearsay and were not properly authenticated”).

      However, Appellants also fail to raise the issue in the opening brief before this

Court. This waives the issue on appeal. In Cruikshank, the court held that raising a

general point of error only preserves such errors if the errors are expressly and

specifically addressed in the briefing. 138 S.W.3d at 502. The court of appeals

concluded that, because the appellant only generally addressed the issue in its brief,

those issues and the error had been waived. Id. at 503. Furthermore, such waiver

cannot be cured in an Appellant’s reply brief. See Bankhead, 135 S.W.3d at 164-65

(holding issues not raised in appellant's initial brief are deemed waived).

      Accordingly, Appellants have likewise waived yet another independent

grounds for affirming the district court’s Order denying arbitration against Willacy

County.

II.   THE DISTRICT COURT DID NOT ABUSE ITS DISCRETION IN DENYING
      ARBITRATION ON THE BASIS OF SOVEREIGN IMMUNITY

A. The District Court Properly Found That There Had Been No Waiver of
   Sovereign Immunity

      The district court, after considering the parties’ motion papers and hosting a

lengthy hearing, found that the County was protected by sovereign immunity from

a suit to compel arbitration because it was not a signatory to the Agreements, found

that the County’s factual allegations at best merely touched upon the Agreements,

but that the County was not seeking to enforce the Agreements. See Order.

                                          15
      The fault in this appeal lies in the fact that Appellant side-steps the salient

argument. Rather than address the district court’s finding head-on, Appellant hangs

its hat on the premise that the County as a third-party beneficiary of the Agreements

is attempting to enforce the Agreements, and therefore, is bound by the Arbitration

clauses. These premises rest on a faulty and simplistic construction of the allegations

and the law. We address the issues one by one.

B. Willacy County Has Not Waived Its Sovereign Immunity Because It Has
     Not Signed the Agreements

      Appellant does not dispute that Willacy County is a sovereign cloaked in

sovereign immunity from suits to compel arbitration. This was clarified by the

Supreme Court initially in Town of Highland Park v. Iron Crow Construction

Incorporated, 168 S.W.3d 313, 319 (Tex. App. Dallas 2005) (“Because its contract

with Highland Park provided for binding arbitration in the event of a dispute between

the parties, Iron Crow was seeking to enforce Highland Park's performance under

that contract. Therefore, sovereign immunity was indeed implicated here.”).

      In Town of Highland Park, the town was a signatory to the contract and the

Supreme Court refused to allow it to be compelled to arbitration because merely

signing the agreement did not waive sovereign immunity. 168 S.W.3d at 319. The

Court held that a motion or action to enforce an Arbitration clause is essentially a

suit to enforce the terms of a contract, a suit against which the County has sovereign

                                          16
immunity. Id. The Court noted that only the legislature can waive immunity which

it did not do in this case. Id. The court of appeals also held that the Federal

Arbitration Act did not apply because both the plaintiff and the defendant were Texas

residents (as is the case here: Willacy and Hale-Mills are Texas residents); and even

if the FAA did apply, it could not preempt the sovereign rights of the County. Id. at

317-318. Town of Highland Park thus stands for the proposition that a sovereign is

generally immune from suit to compel arbitration, even if it is a counterclaim to a

suit brought by the sovereign.

      In another case analogous to this one, in Texas Natural Resource

Conservation Commission v. IT-Davy, 74 S.W.3d 849 (Tex. 2002), the Texas

Supreme Court rejected the argument that a contractual provision providing that

disputes could be decided by arbitration could be enforced against a County. Id. at

857-58. The court held that since only the Legislature could waive sovereign

immunity, “administrative agents,” even those with authority to enter into contracts

such as the County Judge, had no authority to bind the County. Id.

      Likewise, in Fluor Daniel, Inc. v. Travis County, 2003 U.S. App. LEXIS
8138, *4 (5th Cir., Apr. 30, 2003), the Fifth Circuit held that Travis County had not

waived its rights as a sovereign in a contract with Fluor, despite the fact that the

County Judge had signed the contract. The Court held that only “the legislative body

of the county—the commissioner’s court—can waive sovereign immunity.” Id. at

                                         17
*5. And moreover, even then it must be “clear and unambiguous.” Id. In that case,

the Court held that Travis County—even though it arguably invoked the jurisdiction

of the court by filing counterclaims—had not waived any of its sovereign rights not

to be brought into court without its express consent. It is also well-established that

these rights cannot be waived through the conduct of the county. See Webb County

v. Khaledi Props., 2013 Tex. App. LEXIS 9063, *3 (Tex. App. San Antonio, July

24, 2013).

      The Texas legislature amended the statutes after Town of Highland Park and

It-Davy to provide that sovereign immunity could be waived in the limited

circumstances. See Tex. Loc. Gov. Code § 271.151 et seq. However, outside of these

amendments, Town of Highland Park is still good law.

      Appellant apparently does not disagree that Willacy County is not a signatory

to the Agreements. And it cannot show how Section 271 of the Texas Local

Government Code applies to Willacy County as a non-signatory to the agreements.

C. Texas Local Government Code Does Not Waive Sovereign Immunity

      1. Local Government Code Section 271 Does Not Waive the County’s
         Sovereign Immunity

      Appellant attempts to expand the reach of the waiver of sovereign immunity

by invoking Local Government Code section 271.

      However, Local Government Code section 271.152 states that “A local

governmental entity that is authorized by statute or the constitution to enter into a
                                         18
contract and that enters into a contract subject to this subchapter waives sovereign

immunity to suit for the purpose of adjudicating a claim for breach of the contract,

subject to the terms and conditions of this subchapter.”

      And Texas Local Government Code 271.154 states that “Adjudication

procedures, including requirements for …engaging in alternative dispute resolution

proceedings before bringing a suit or an arbitration proceeding, that are stated in the

contract subject to this subchapter or that are established by the local governmental

entity and expressly incorporated into the contract or incorporated by reference are

enforceable except to the extent those procedures conflict with the terms of this

subchapter.”

      The definition of a “contract” includes the fact that the contract “is properly

executed on behalf of the local governmental entity.” See Tex. Loc. Gov. Code §

271.151(2)(A). And the definition of “Local Government Entity” excludes a County.

See id. at § 271.151(3).

      Therefore, even if the local government entities’ execution of the Agreements

waives sovereign immunity, it does not extend to the County as a non-signatory.

Nothing in Section 271 extends the waiver of sovereign immunity for signing the

Agreements to the County.

      2. Appellant’s Contentions Regarding the Local                     Government
         Corporations’ Agency Are Inapt and Irrelevant
      Appellants take the position that the founding and structure of the various

                                          19
local government corporations and their signatory authority creates an agency

relationship with the County. Appellants ask this Court to conclude that the agency

relationship binds the County to the Arbitration clause.

      This argument is inapt and irrelevant.

      First, if there is there is no agency, then there can be no binding authority.

Intergen N.V. v. Grina, 344 F.3d 134, 148 (1st Cir. 2003). Here, the local government

entities were not serving as agents of the County. If they were, they would have been

signing the Agreements on behalf of the County as a party. The Agreements

expressly disclaim such a relationship, relegating the County to anything from

complete stranger (Exhibit A, at CR 106-130) to assignee (Exhibit B, at CR 132-

158) to third party beneficiary (Exhibits C, at CR 160-196 and D at CR 198-239).

      Second, Texas Local Government Code section 271.160 expressly precludes

Appellants’ argument. That provision states that “A contract entered into by a local

government entity is not a joint enterprise [with the county] for liability purposes.”

In other words, where a local government entity signs an agreement, under Chapter

271 it would waive immunity. This provision states that it only waives immunity as

to itself—not as to the local governing body (e.g., here, the County).

      This stands in distinction to Appellants’ invocation of Local Government

Code section 262.001(b). That states that “A contract or other act of an agent

appointed under this section that is properly executed on behalf of the county and

                                         20
is within the agent's authority binds the county to the contract for all purposes.”

However, Willacy County did not appoint any of the local government entities as its

agents—the documents attached to Appellants’ brief clearly show the decision to

create the local government entities to do the work themselves. Moreover, nothing

says that creating local government entities is the same as “appointing” an agent

under section 262 as agents of the County. See Tex. Loc. Gov. Code § 262.011 or

0115 (purchasing agents). Appellants also never demonstrate how the local

government entities were appointed as agents under the section.

      Therefore, Willacy County is not liable for any contractual liabilities—

including liability for the contract’s arbitration provision—entered into by one or

more of the local government entities.

      3. Local Government Code Section 262.007 Also Establishes Why the
         County Has Not Waived Sovereign Immunity

      Section 262.007 only applies to contracts and waives sovereign immunity for

a County that is a signatory to the contract. See Tex. Loc. Gov. Code § 262.007(a)

(“A county that is a party to a written contract for engineering, architectural, or

construction services or for goods related to engineering, architectural, or

construction services may sue or be sued, plead or be impleaded, or defend or be

defended on a claim arising under the contract.”) (emphasis added). Therefore, this

section only applies to contracts where the County is a signatory.

      Consequently, the section specifically requires all suits to be brought in court.
                                          21
It provides that even where the county is a signatory to the contract, “a suit on the

contract brought against a county shall identify the county by name and must be

brought in a state court in that county.” Id. (emphasis added). No exception is made

for a contract that contains an arbitration clause.

       It is now well established that only the Texas legislature can waive sovereign

immunity, or delegate the specific power to do so to subordinate entities, such as the

County or municipal entity. See Town of Highland Park v. Iron Crow Constr., Inc.,

168 S.W.3d 313, 319 (Tex. App. Dallas 2005).

       The Texas legislature has spoken and stated that where the County is a

signatory to a contract for specified goods, it may only be sued in the state court of

that county. See Tex. Loc. Gov. Code § 262.007(a). Nowhere has the Texas

legislature stated that a County may be compelled to arbitration on a contract, much

less on a contract to which it is not a signatory. The inclusion of only a means to sue

a county in state court (e.g., irrespective of an arbitration agreement), necessarily

implies the exclusion of the right to impose arbitration on a signatory, much less to

do so on a county that is not even a signatory to an arbitration agreement.

III.   WILLACY COUNTY HAS NOT FILED SUIT TO ENFORCE THE AGREEMENTS,
       NOR DOES IT SEEK A “DIRECT BENEFIT” FROM THEM, THEREFORE IT IS
       NOT BOUND BY THE ARBITRATION CLAUSE

       Finding no statutory grounds for the premise that the Texas legislature has

                                           22
waived sovereign immunity to compel the County into arbitration, Appellants’

primary argument is the equitable contention that the County cannot bring suit to

enforce the Agreements, but evade the Agreements’ arbitration provisions. They cite

the “direct benefits estoppel” argument for this position.

      The district court has substantial discretion in deciding whether the equitable

doctrine applies. See In re Weekley Homes, L.P., 180 S.W.3d 127, 135 (Tex. 2005)

(“the equitable nature of the [direct benefits estoppel] doctrine may render firm

standards inappropriate, requiring trial courts to exercise some discretion based on

the facts of each case.”) (citing Bridas S.A.P.I.C. v. Turkmenistan, 345 F.3d 347,

360 (5th Cir. 2003) (“The use of equitable estoppel is within a district court's

discretion.”)).

      Appellants rely exclusively the contention that the district court committed

legal error. Appellants conveniently gloss over the fact that in its cited cases, the

sovereign at issue had brought to suit to enforce a contract’s specific provisions, or

the record had evidence that the plaintiff had specifically adopted the contract as its

own prior to instituting suit. See Weekley, 180 S.W.3d at 131 (also discussing lnt'l

Paper Co. v. Schwabedissen Maschinen Anlagen GMBH, 206 F.3d 411 (11th Cir.

2000) (estopping non-signatory from denying agreement to arbitrate "when he has

consistently maintained that other provisions of the same contract should be

enforced to benefit him.”)).

                                          23
A. Texas Supreme Court Precedent and Persuasive Authority Support the
   District Court’s Discretionary Finding

      In Weekely, the Supreme Court reiterated that “a nonparty may be compelled

to arbitrate ‘if it seeks, through the claim, to derive a direct benefit from the contract

containing the arbitration provisions.’ On the other hand, claims can be brought in

tort (and in court) if liability arises from general obligations imposed by law.” Id.

(citing In re Kellogg Brown & Root, Inc., 166 S.W.3d 732, 741 (Tex. 2005)). The

Supreme Court created a two part test: “Claims must be brought on the contract (and

arbitrated) if liability arises solely from the contract” and if the claims “must be

determined by reference to [the contract].” Weekley, 180 S.W.3d at 132.

      The narrowness of Weekely’s adoption of the direct benefits estoppel doctrine

was clarified by the Texas Supreme Court in In re Kellogg Brown & Root, Inc., 166
S.W.3d 732, 741 (Tex. 2005) (“KBR”). There, the Supreme Court addressed

whether by alleging damages due to non-payment under color of a claim for unjust

enrichment or declaratory relief of valid liens, KBR has in effect sought to enforce

a contract and could be subject to arbitration as a non-litigant. The Supreme Court

said no. The Supreme Court agreed that KBR was seeking to enforce a right that was

“based on the fabrication subcontract in the sense that KBRs labor and services were

linked inextricably to that subcontract.” Id. at 739-740. But it held that it was not

enough. “[U]nder ‘direct benefits estoppel,’ a non-signatory plaintiff cannot be

compelled to arbitrate on the sole ground that, but for the contract containing the
                                           24
arbitration provision, it would have no basis to sue.” Id. at 740.

      The KBR court further elucidated: “We conclude that, under ‘direct benefits

estoppel,’ although a non-signatory's claim may relate to a contract containing an

arbitration provision, that relationship does not, in itself, bind the non-signatory to

the arbitration provision. Instead, a non-signatory should be compelled to arbitrate a

claim only if it seeks, through the claim, to derive a direct benefit from the contract

containing the arbitration provision.” Id. (emphasis added). The Supreme Court held

that “we conclude that the court of appeals abused its discretion to the extent it

compelled KBR to arbitrate its quantum meruit claim[.]” Id. at 741.

      As a Texas Court of Appeals likewise explained, “a non-signatory cannot be

compelled to arbitrate when claims merely ‘touch matters’ covered by a contract or

‘are dependent upon’ a contract; instead, the claims must rely on the terms of the

contract.” Carr v. Main Carr Dev., LLC, 337 S.W.3d 489, 498 (Tex. App. Dallas

2011) (citing Hill v. G.E. Power Sys, Inc., 282 F.3d 343, 348-49 (5th Cir. 2002).

“Where the obligations arise under general law”—e.g., here, the law of negligence,

anti-fraud and implied warranty—then a non-signatory to the agreement cannot be

compelled to arbitrate. Id.

      Furthermore, it is well-established that a warranty and defect claims can be

brought by third parties to the contract without enforcing any specific terms of the

contract. Highly instructive is R.J. Griffin & Co. v. Beach Club II Homeowners

                                          25
Ass'n, 384 F.3d 157 (4th Cir. 2004), on which the Texas Supreme Court heavily

relied on in KBR, 166 S.W.3d at 740. There, the Fourth Circuit denied application

of “direct benefits estoppel” to compel homeowners association who were non-

signatories to a development contract, even though they sued on the basis of breach

of contract/breach of warranty. Id. at 164. The circuit court recognized that the claim

did arise from the construction agreement—but they were not seeking to enforce

particular terms of the agreement; e.g., they were suing “to enforce extra-contractual

common law rights created by South Carolina to protect homeowners from shoddy

construction practices.” Id. Moreover, the circuit court noted that the doctrine did

not apply because “equitable estoppel operates to prevent one party from holding

another to the terms of an agreement while simultaneously avoiding the same

agreement's arbitration clause. Here, the Association is not attempting to hold

[defendant] to any term of” the agreement in question.” Id. at 165.

      Similarly, in Intergen N.V. v. Grina, 344 F.3d 134, 145 (1st Mass. 2003), the

court of appeals refused to apply the direct benefits estoppel to force a plaintiff to

arbitration even though the plaintiff alleged breach of contract to which it was not a

signatory. The plaintiff had alleged that it was the “the successor to all rights of

predecessor entities related to the actions and omissions alleged.” Id. The court of

appeals noted that the plaintiff was not seeking to enforce the contract in its breach

of warranty claims because, inter alia, the “claimed damages are not contract

                                          26
damages per se.” Id. The court further noted that the damages were instead a series

of “extra contractual” acts and representations. Id. at 145-146. Moreover, the court

held that where a non-signatory has been forced to arbitrate, it is only where the non-

signatory “during the life of the contract, have embraced the contract despite their

non-signatory status but then, during litigation, attempt to repudiate the arbitration

clause in the contract.” Id. at 146. The court saw no evidence before it of the plaintiff

attempting, during the life of the contract, to enforce the terms of the agreement to

its benefit. Id.

       Here, the district court’s Order is fully consistent with binding precedent.

Appellants identify no grounds for finding that the district court abused its discretion

in holding that the claims in the case did not seek to enforce the terms of the

Agreements. Indeed, Appellants have identified no terms or provisions of the

Agreements that are being enforced. The Agreements contain no warranty language

being enforced, nor fraud nor unjust enrichment language. This is all a red herring.

       Willacy County’s claims for breach of implied warranty, negligence, unjust

enrichment and fraud may “relate” to the Agreements to the extent they relate to the

Facilities, but they do not actually depend upon them or enforce them. See KBR, 166

S.W.3d at 740 (“under ‘direct benefits estoppel,’ a non-signatory plaintiff cannot be

compelled to arbitrate on the sole ground that, but for the contract containing the

arbitration provision, it would have no basis to sue”); Carr, 337 S.W.3d 489, 498

                                           27
(contracts that merely “relate” or “touch upon” an agreement insufficient to impose

arbitration obligation). Nor do Appellants identify how the County seeks to obtain

“through the claim, to derive a direct benefit from the [Agreement],” KBR, 166

S.W.3d a 741.

      There is no evidence in the record of any direct benefit obtained by the County

from the Agreements. The specific evidence in the Appendices shows that the

County got no direct benefit because the local government entities were handling the

work load and raised the funds to build the Facilities. Moreover, those Agreements

terminated a long, long time ago (CR 130, 158, 196, 239). Therefore, any alleged

benefit to the County from this lawsuit is incidental.

      For these reasons, Appellants’ continual recitation of the fact that the County

is a named third-party beneficiary in two of the three Agreements is a non-starter.

Being named a third party beneficiary does not change the fact that Willacy is a

stranger to the Agreements. No case has held that a sovereign entity can be bound to

the breadth of fundamental waivers of sovereign immunity even when it has not

signed the Agreement. Not a single case has held that.

      To the extent that Appellants admit that in one of the Agreements—the

Sherriff’s Office Agreement—the County is NOT a third party beneficiary—that

justifies affirming prima facie. Thus, if as Appellants’ own contorted logic demands,

being a named third-party beneficiary is outcome determinative, this Court cannot

                                          28
reverse the district court as to the Sherriff’s Office Agreement.

B. Under KBR, The Court At Most Would Reverse as to the Warranty Claims

       Under KBR, the Texas Supreme Court has recognized that a non-signatory

cannot be compelled to arbitrate claims lying outside of the contract, even if it can

be compelled to arbitrate claims within the contract.

       The KBR Court recognized the general rule that arbitration clauses can be read

expansively for signatory parties to include all claims arising between them; the

same is not true for non-signatories. The Court expalained:

          A party to a contract may, however, seek alternative relief under
          both contract and quasi-contract theories. Pleading in the
          alternative does not defeat the effect of an arbitration clause that
          broadly covers all disputes between signatories that arise out of
          the underlying agreement. But in this case, KBR is not a
          signatory to the fabrication subcontract between MacGregor and
          Unidynamics; therefore, the scope of that subcontract's
          arbitration clause does not answer whether KBR must arbitrate.

KBR, 166 S.W.3d at 740. Thus, the KBR ultimately reversed as to the quantum

meruit claim because it was definitely not under the contract, and remanded for

further determination by the district court of whether the other claims could be

arbitrated. Id. at 742.

       Therefore, at best, Appellants’ estoppel theory would place the warranty

claims in arbitration. Seeking restitution for negligence or unjust enrichment and

fraud in the inducement does not invoke any terms of the agreement. Landmark Org.,

                                          29
L.P. v. Tremco Inc., 2010 Tex. App. LEXIS 5052, *29. These arise independent of

any contract. KBR, 166 S.W.3d at 740. Therefore, the claims for negligence, fraud

and unjust enrichment must be allowed to remain in district court.

IV.      THIS COURT SHOULD AFFIRM ON CONTRACTUAL GROUNDS

         An appellate court may affirm a trial court’s determination on any sufficient

ground in the record. Here, in the event this Court overrules the district court’s

sustaining of Willacy County’s objection to the lack of evidence and admits the

Agreements as evidence, the Agreements themselves provide textual grounds to

affirm.7

         It is important to note that the three facilities were subject to independent

contracts, none of which had the same arbitration clause or arbitration language. A

close reading of these Agreement shows that they do not compel arbitration under

these circumstances and that the trial court did not abuse her discretion – or said

differently, any error was ultimately harmless.

         Arbitration agreements are creatures of contract and are construed under the

same rules of construction as applied to other contracts. See Aldridge v. Thrift Fin.

Mktg., LLC, 376 S.W.3d 877, 882 (Tex. App.–Fort Worth 2012, no pet.); First

Option of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995). When interpreting a

    7 Because they were never provided in full, Appellee did not have the opportunity to raise the textual arguments
herein except where noted. Thus, to the extent this court overrules the district court’s implicit evidentiary ruling, it
should permit these arguments to be raised and find sufficient grounds to affirm the district court’s order.

                                                          30
contract, the primary concern is “to ascertain and give effect to the intent of the

parties as expressed in the contract.” In re Serv. Corp. Intern., 355 S.W.3d 655, 661

(Tex. 2011). “To discern this intent, we ‘examine and consider the entire writing in

an effort to harmonize and give effect to all the provisions of the contract so that

none will be rendered meaningless. No single provision taken alone will be given

controlling effect; rather, all the provisions must be considered with reference to the

whole instrument.’” Seagull Energy E & P, Inc. v. Eland Energy, Inc., 207 S.W.3d
342, 345 (Tex.2006) (citations omitted).

      Furthermore, all of these agreements were presented and drafted by the

Defendants. And “[i]t is well-established law that where an ambiguity exists in a

contract, the contract language will be construed strictly against the party who

drafted it since the drafter is responsible for the language used.” Gonzalez v. Mission

Am. Ins. Co., 795 S.W.2d 734, 737 (Tex. 1990).

A. The Sherriff’s Office Agreement Does not Provide for Mandatory
   Arbitration by the County Because it Was Not a Party and the Provision is
   Patently Ambiguous

      In addition to not naming the County as a third party beneficiary, the Sherriff’s

Office Agreement does not provide for mandatory arbitration involving the County.

That agreement only provides for arbitration or mediation of “Claims, disputes, or

other matters in question between the parties to this Agreement arising out of or

relating to this Agreement or breach thereof[.]” (see Exhibit B, at CR 132-158)

                                           31
(emphasis added).

      As revealed in the Record before this Court, the County is not a Party and is

not a named third party beneficiary to the Sherriff’s Office Agreement. (see Exhibit

B, at CR 132-158). In fact, that agreement specifically provides that “Nothing

contained in this Agreement shall create a contractual relationship between the

Owner [County Jail Public Facility Corporation] and any person or entity other than

the Design/Builder [Hale-Mills].” (see Exhibit B at § 1.2.3, at CR 132-158).

      Thus, the express inclusion of the limitation of “parties” as persons bound by

the arbitration provision to the Agreement cannot be overridden by an equitable

catch-all. None of the cases cited by the Appellants addressed an arbitration

provision that was, by its terms, limited to the “parties” of that contract. To the

contrary, at least one appellate court has held that even a third party beneficiary to a

contract who brings suit cannot be compelled to arbitrate when the contract

specifically delineates who must arbitrate, and does not specifically identify the third

party. See Intergen, 344 F.3d at 146 (“Each purchase order's arbitration clause

applies to "any and all controversies, disputes or claims between Buyer and Seller."

The words "Buyer" and "Seller" are explicitly defined.”).

      Additionally, the contract provision is ambiguous. It does not provide that

arbitration is the exclusive or mandatory means to settling disputes. Indeed, Section

10.1 specifically states that “Claims, disputes or other matters in question between

                                          32
the parties to this Agreement arising out of or relating to this Agreement or breach

thereof shall be subject to and decided by mediation or arbitration.” (see Exhibit B,

at CR 132-158).

        Section 10.2 then clarifies that if a party selects arbitration under Section 10.1,

it must be preceded by a demand for mediation. (See id.). But the opposite is plainly

not true. A party who elects mediation—as the County did—which then turns out to

be unsuccessful is nowhere required to then also seek arbitration. The “or” in

“mediation or arbitration” is disjunctive. Either the mediation, or the arbitration is

mandatory. Both are not.

        Because neither Section 10.1 nor Section 10.2 states that once a demand for

mediation is made then a party must then also file for arbitration, arbitration is not

mandatory under the Sherriff’s Office Agreement. Indeed, Section 10.2, by its own

terms, only applies to mandatory mediation preceding arbitration.

        This language can be juxtaposed to the ICE Agreements (see Exhibits C, at

CR 160-196 and D, at CR 198-239) which specifically states that if mediation is

unsuccessful, then the complaining party must move for arbitration. (See § 10.2 and

10.3).8 Thus, to the extent that the provision allows the party to select between

mandatory mediation or arbitration, it is patently ambiguous and must be construed

8 The Arbitration provision in the Ice Agreements do not compel arbitration for other reasons, however, as we spell
out below.

                                                        33
against the Appellant. Gonzalez, 795 S.W.2d at 737.

         Because the County is not a named third party beneficiary, is not a party to

the agreement required to bring an arbitration, and arbitration is not clearly

mandatory under the provision, this Court must affirm the district court’s denial of

arbitration as to the Sherriff’s Office Agreement.

B. The County is Expressly Excluded from Mandatory Arbitration Regarding
   the Marshall’s Office9

         Appellants’ own arbitration clause in the Marshall’s Office Agreement

expressly excludes arbitration with non-signatories to the Agreement. (See Exhibit

A, at CR 106-130). Specifically, the agreement provides, for example, that:

             No other arbitration arising out of or relating to this Part 2
             Agreement shall include by consolidation, joinder, or in any
             other manner, an additional person or entity not a party to this
             Part 2 Agreement or not a party to an Agreement with [Hale-
             Mills], except by written consent[.]

See Exhibit B, at CR 132-158.

         Thus, by the plain language in the Marshall’s Office Contract, Willacy County

cannot be compelled to arbitration over the marshal’s office facility because Willacy

County is not a signatory to any of the arbitration agreements with Hale-Mills, and

Willacy County has not otherwise agreed in writing to be bound.

         Thus, the County is expressly excluded from being required to bring

9 This argument was raised and upheld by the district court.

                                                         34
arbitration under Marshall’s Office Agreement, and could not otherwise join the

non-signatory defendants.

C. The Agreements’ Clauses are Limited to Disputes that Arise During
   Construction and Pendency of the Contracts—Not After

      In In re Choice Homes, Inc., 174 S.W.3d 408 (Tex. App.–Houston [14th Dist.]

2005, no pet.), the appeals court acknowledged that generally, events that occur after

a contract lapses or has terminated, they are not governed by the contract or its

arbitration provision unless expressly provided for. That is true even between the

same parties to the contract. Id. But, because the arbitration provision in that case

“encompassed claims that arose ‘during or after’” the contract period (there, the

period of employment), they were “thus subject to arbitration regardless of whether

the [events occurred] before or after [the contract] was terminated.” Id. at 413-14.

Under this language, the In re Choice Homes court held that the plaintiff’s

defamation claim was within the scope of the arbitration provision. Id.

      While the court’s opinion in In re Choice Homes, Inc., turned on the “during

or after” language contained in the arbitration provision, no such language appears

in any of the Agreements at issue in this case. Appellants do not deny that the period

governed by the Agreements ended years ago, but that the latent infirmities and

cover-ups have only metastasized in recent years. Nonetheless, the disputes at issue

did not arise during the pendency of the Agreements—those contracts have long

lapsed, and therefore arguably, so have the Arbitration clauses. There is no dispute

                                         35
that the Facilities were substantially completed by January 2008, (CR 130, 158, 196,

239)10 and that the completion of the facilities terminated the contractual

relationships.

       This reading is consistent with the language in the Agreements. For example,

the ICE Agreements’ dispute resolution provisions address the parties relationship

“throughout the project.” See, e.g., Exhibit D, at CR 198-239 § 10.2 (§ 10.2.1). That

same provision then provides that “if disputes or disagreements do arise,” e.g.,

“throughout the project,” then the parties “commit to resolving such disputes or

disagreements in an amicable, professional, and expeditious manner so as to avoid

unnecessary losses, delays and disruptions to the Work.” Id. The balance of Section

10.2 describes the procedures for resolution thereof. Id. § 10.3.2-4.

       Section 10.3 governs “Arbitration,” but by its own terms specifically and only

applies to disputes that arise and cannot be resolved under Section 10.2. See Exhibit

D, CR at 198-239 at § 10.3 (§§ 10.3.1). In other words, if the dispute arose under

Section 10.2 and was not resolved, only then would it be subject to Section 10.3.

Nothing in Section 10.2 suggests that it would apply to disputes that arose after the

completion of the “Project,”

       It is black letter law that the provisions of contracts, especially those

containing an arbitration clause must be read to give each term its meaning, and to

   10 Appellants admit as much in the brief. See Appellant’s Opening Br. at 1.

                                                  36
harmonize the terms thereof. See Aldridge, 376 S.W.3d at 882; Kaplan, 514 U.S. at

944. When interpreting a contract, the primary concern is “to ascertain and give

effect to the intent of the parties as expressed in the contract.” In re Serv. Corp.

Intern., 355 S.W.3d at 661. “To discern this intent, we ‘examine and consider the

entire writing in an effort to harmonize and give effect to all the provisions of the

contract so that none will be rendered meaningless. No single provision taken alone

will be given controlling effect; rather, all the provisions must be considered with

reference to the whole instrument.’” Seagull Energy, 207 S.W.3d at 345.

       Here, the plain reading of Section 10.3 of the ICE Agreement renders it

limited in scope to the “disputes or disagreements” that arise under Section 10.2,

which is limited to disputes and disagreements that arise “throughout the project”—

e.g., while the construction project is still underway. Any other reading would

expand the scope of Section 10.3 beyond its textual moorings, and would render the

reference to Section 10.2 meaningless. Id.

      Had the drafters intended for Arbitration to be mandatory regardless of when

the dispute arose—e.g., before or after, it would have expressly stated as much, and

it would not have referred to the limited scope of Section 10.2. Accord In re Choice

Homes, Inc., 174 S.W.3d at 413-14. Moreover, to the extent these provisions are

ambiguous, the ambiguity should be construed against Appellee as the drafter.

Gonzalez, 795 S.W.2d 734, 737.

                                         37
       Because there is no dispute in the record that the construct project is no longer

“underway,” and there is no risk of “unnecessary losses delays or disruptions to the

work” that could be avoided by mediation under Section 10.2, the plain language of

Section 10.3 renders the mandatory arbitration provision therein inapplicable to the

current litigation.

D. Appellant Has Not Proven that All Pre-Requisites to Compelling Arbitration
   on the Detention Facility Have Been Met

       The Appellant has not proven that the pre-requisites to invoking arbitration

have been met. Where there are contractual prerequisites to invoking an arbitration

agreement, the party seeking an order compelling arbitration is not entitled to relief

if it cannot demonstrate that those pre-requisites were met. See In re Pisces Foods,

L.L.C., 228 S.W.3d 349, 353 (Tex. App–Austin 2007, orig. proceeding) (holding

trial court did not abuse its discretion by refusing to compel arbitration, and noting

that many courts have held “arbitration could not be compelled when parties who

were contractually required to mediate or follow other grievance procedures as a

precondition to arbitration had failed to do so.”); Amir v. Int’l Bank of Commerce,

419 S.W.3d 687, 692 (Tex. App.–Houston [1st Dist.] 2013, no pet.). (holding that

where it is clearly established that a strictly procedural requirement has not been met

and that procedural requirement precludes arbitration, a court can deny a motion to

compel arbitration).

                                           38
      Here, the ICE Agreement Section 10.1 requires that the Parties mediate in

good faith to resolve any dispute that arises during the project. Therefore, if the scope

of that clause is broadened, then Appellant as the movant bears the burden of proving

that all pre-requisites were met. The record is barren of any evidence that such a

prerequisite has been met.

                          CONCLUSION AND PRAYER

      Therefore, for the foregoing reasons, any one of which is sufficient, Appellee,

Willacy County respectfully requests this Court affirm the Order of the Trial Court

denying Appellant’s motions to compel arbitration.

                                           39
  Respectfully submitted,

By_____/s/Mazin Sbaiti
  Bruce W. Steckler
  State Bar No. 00785039
  Mazin Sbaiti
  State Bar No. 24058096
  STECKLER, LLP
  12720 Hillcrest Road, Ste. 1045
  Dallas, TX 75230
  Telephone: (972) 387-4040
  Fax: (972) 387-4041
  bruce@stecklerlaw.com
  mazin@stecklerlaw.com

  Ramon Garcia
  State Bar No. 07641800
  Emerson E. Arellano
  State Bar No. 00785039
  LAW OFFICE OF RAMON GARCIA, P.C.
  222 West University Drive
  Edinburg, TX 78539
  T: 956-383-7441
  F: 956-381-0825

  Manuel Solis
  State Bar No. 18826790
  LAW OFFICE OF MANUEL SOLIS
  6657 Navigation Boulevard
  Houston, TX 77011
  T: 713-844-2700
  F: 281-754-4681
  msolis1882@yahoo.com

  Daniel G. Rios
  State Bar No. 00784844
  LAW OFFICE OF DANIEL G. RIOS, PC
  323 W. Nolana Avenue
  McAllen, TX 78504
  T: 956-630-9401
    40
                                        F: 956-682-0566
                                        dan@danrioslaw.com

                                        ATTORNEYS FOR APPELLEE

                          CERTIFICATE OF SERVICE

      This is to certify that on July 22, 2015, a true and correct copy of the foregoing
Appellee’s Brief was served via U.S. Mail, Fax and/or Electronic Service, upon the
following counsel of record in accordance with the Texas Rules of Appellate
Procedure:

      William B. Westcott
      Robert A. Plessala
      Andrews Myers, P.C.
      3900 Essex Lane, Suite 800
      Houston, TX 77027-5109
      (713) 850-4211 (facsimile)

                                        /s/Mazin Sbaiti
                                        Mazin Sbaiti

                       CERTIFICATE OF COMPLIANCE

      Based on a word count run in Microsoft Word 2010, this Appellant’s Brief
contains 9,415 words, excluding the portions of the document exempt from the word
count under Texas Rule of Appellate Procedure 9.4(i)(1).

                                        /s/ Mazin A. Sbaiti
                                        Mazin Sbaiti

                                          41
EXHIBIT A
                            JENKENS &GILCHRIST                              • Fax=214-855-4107                                             Aug        ~    2003           9:01                P.02

                                                                                      MA Document A191

                   Standard Form of Agreement Between
                        Owner and Design/Builder
                            THIS DOQ..;)/£NT HAS IMPORTANT LEGAL CONSEQUENCES: CONSULTKl'ION WffH AN
                            AITORNEl•JS ENCOURAGED VlffH RESPECI10 ITS USE. CQ"'1PIE1'JON ORlrlODJF/CATION.

                            7bis d«umeru a>mprises tUJD Slljlarate~ Jbrt 1 ~ement and lbrl 2 ~- 10 tbe
                             e:rumr n/enmced in tbae   ~- subordinate pruolblf qrumena to A191 consisl of ALA
                            Document ~l. Standard Farm of A8"emtetlts 811tKYnm Deslp,&dldtzr and Conrractor, and A/A
                            Do<:umenl B!JOI, Standard Form of~ .8etr.wm Du/gn/Builder and ;.rcbitea..
                                                .                 .
                                                                                  PART 2 AGREEMENT
                                                                                             1996EDmON

  AGR~ENT

  made as oft~                        Tenth                                                      day.of            June                                      in che year of two thousand
                                                                                                                                                                                      two

 BETWEEN rhe Owner.
 ~_,,atlJnsJ

                                             Armando Ruba1caba-President
                                             Willacy c~unty Public Faciiity Corporation
                                             546 W. Hidalgo Street
                                             Raymondville, Texas 78580

                                            Hale-Mills Construction, Ltd.
                                            Bale-Mills Construction, Inc.
                                            413Q Bellaire Blvd, Ste 210
                                            Houston, Texas 77025

                                                                                                                   EXHIBIT

                                                                                                      I I\ .
C:•1flo/111(h1 i'lll~. O'Jl'l'lll 1"ho; Am'-"fll."ilA llll'lilulc 11( Ard11ln1,S, 1-~~ ~~w lork ,w..-11uc. ),"It; lr•ohln11tun. DC .!llUOl>o';l\I.!. llc1tr11(l\A~l\lll Ill 1hc "'"''-"""' h1t11ru"'I
                    I•"""""'".,
•1uut.:.U\\Jt\ 1•l 1b                                                                                                     rhL"
                                     u.11hoU1 ttu.... ""'''-··.., JA'l"ln•Ultlft u( the AJJ\ \"Md.Ill") d11; ''"P'TI~hl b•·a 1.t 1·n11t,:d ~l.:ito ilnd w1U .. uh1~'' lh.,; ,.,,,~11or ,.. "-~I pt\NoL"l•utmn.

  -                                                                                                                                                                                                         106
                         JENKENS &GILCl-RIST                          Fax:214-855-4107                 ~ug   ~   2003    9:01           P.03

  For the foUo"ing Projet.'t:
  ''""'""" l'roj«;t ....,.•. loctil1on and,..,,,._,,. "-t;rlptlan.1

                                    See ParagraPi 1 of Apperdix "A".

 T'" 'UChlt.caural services desc:ribcd in Article 3 will be pcovided by the fbllowing peaon or entity who is lawfully licensed
      .Cli-
 pi:ovide sttviccs oo rhc Project thac implementation of           riKd t0 ace on the owner·• behalf Wich respect ro du!:
any instruction received from the Ownet would cause a              Profeet. The OWner or such authoclzcd repreR:ruadve
violation of any ~Ucable la-. the Design/Builder shall             shall cxo.mine documencs submitted by the Desianl
 notify dte Owner m writing. Netdler the OesigntBuildec            8U1Jderand shall tender decisions in a timdy manner and
 nor the Archltca shall be obl(ga(ed co perform anv ace            In accordance wfth the schedule accepted by the Owner.
which either believes wtU Violate any appllablc law..·             l"he Owner may obtain Independent review of me
                                                                   Contraet Documents by a sepaate ;architcet, eQRineer,
'1 .2..3 Nothtog c:ontained in this Patt l Agreement shall         con~r.          or cost     ~tor             under contn.et to           OC
CR::3IC II conmu:wal relationship between       me.Owner and       em~ by- the Ownci: Such inde~nt ~shall
any person or enrity orher than the Daisn/BUUder.                  be underckcn at che 0wncc·s cicpcn11e in a amely m211·
                                                                   ner :and 11hall ncl delay the orderly [>f'UKri:ss of ~he Wbc\.
1.3     OWNERSHIP AND USE OF DOCUMENTS
1.3.1 Drawings, spcdficatians. and other documents and             2.2 The Owner may appoint an on-site project rcpre.o;en-
electronic data fumished by ~ .Dc$ign18uUdec :u:e                  iatiYC co ob;erve the Worlc 41nd co ha~ .such ocher
tnsttUntems of    secvtce. The OesiJ,wBuildcr's A.n:hltect         responsibilities :JS the OwneC" :ind Dc.'fi~uildc:r agree
lllld other providcn or profe$stonal ~ shaft ~rain                 in writing.
all common law, $1attllory nnd other resenicd righu,
;.,dut.l1ng c=opyri8ht In those in.'itrumentli of service fur-     2.3 The O\\ncr sh:all ll>t>pc:race With the 0cs1Rnl13ulkkr in
    '1cd' by them. Dnlwini;tS, spccifac-Jtions. aru.l other doc-   :;ecurinJt buildina and ocher pennies. 111.-.::nses md ilU~­
     ienr.s and ela-cronic cJ:im are fumi:;hed lbr use sol<.."ly   tioni;. ·nle O\\"n\."f sh~• not be requil\!d «> pay the li.-e.~ nn:
wich l'C.!'ipect to this f3.n l J\qreemenc. The O\\ncr i;haU       such permit.". li1."Cn.'K.-s :ind !mp."t.·dons unk::l.1 the t-'t>.>;l ot
l.>~ p~rmitted ru re~ain cupl~. indodin~ reproducible:             sud1 ft."c::I is 1:-'Q:ludec.I rrum the: Dcs~liuik.lc:r·, Propc:i.o;:JJ.
t:,-Opic:;. of the drawings. ~1>ccif'i<.~dun.'i. and other
cJocumc:nts and      d~ctmnit.·    dat:i.   rurrti~hed   hy chc    2..4 1"hc   C)\m1.T   shall fuml.~h   l>&.:rvicc..'I   of bnd ~urvt.·yor.;.
                                                                                           ~~~------~~~T1Q8
                     JENKENS & GILCHRIST                Fax:214-S55-4107                      Aug     ~   2003      9:02         P.05

   ge:otec:hnical engineei:s. and other consultants for subsoil         the persons or entities identified In this hn 2 ~ent,
   air and \\-ater conditions. in addition ro chose prQ\;ded            and any subsequent mod!ftcations. shall be in wridng.
   under the Pan l -"'8ret:ment. \\'hen such 5c:rvices are              These a.gceemencs, including financial arrangements ~ith
   deemed nccessat)· ~- the Design Buildcc co properlr carry            respect to tbis Protea. shall be prompt!~· and fully
   ou( the design senices required by d\is hct 2 .<\g(ecmcnt.           disclosed to the Owner upon request

   2.5 The 01\"tler shall disclose, co the extent kno\\-n to the        3.1.3 The DeslgnlBuilder shall be responsible w lhe
   OwnC(. the results and rcpons of prior cests. inspections            Owner for aos and ombs.ions sf the Design/Builder's
   or invesligations conducted for the Project itl\'oidng:              employees, subcontraetors and ·their agents and em-
   suuaui:al or mechanical .svsteans: dlemical. air and \\1lter         ployees. and other persons. lnduding the Archirect and
   pollution; hazardous mar.Crials: or Other environmental              other design prok:ssionals, pedocmlng any portion of the
   and subsurface conditions. The Owner shall disclose all              Design/Builder·s obligations under rhis .Patt Z .~nc.
   information known to rhc Owner regarding the presence
   of pollutants at the Ptojea's site.                                  3.2     BASIC SERVICES
                                                                        3.2.1 The Design/Bulldec's Basic Services ~ described
  2.S The Owner shall fumi.sh all Jeg:d, accounling and                 below and in An:ide 14.
  insurance counsding senices as .inay be ncccssacy at any
  tlme for the Project. indudins such.aqdl.tjng senices as              3.2.2 The DesigolBuUde.r shall destgoace a re~ta­
  me Owner may require tO \'lerify tbc Deslgn/BuUdcr's                  civi(auclioriled· to ace an rhe DesJgntBulldr:r's bChalf with
  Applic:adons for ~mc.ru.                                              respect to the Pmjca.
                                                                        3..2.3 The D~ullder shall submit Consuuc:don
                                                                        Document! for revtew and approval by the: Owner.
                                                                        Construaion Documcncs may IDdude tirn-'ingS. sped&·
                                                                        adons, and other docwnenrs and electronk; data setting
                                                                        forth In derail the requlrementS for c:onsauclion of the
                                                                       WOlk, and shall;
                                                                              .1 be consiste.nt with the intent of die Desiga/Build-
                                                                                 er's Proposal:
  '-' If the Owner requires the Designl8u1kler to maintain                    .2 provide infonnation for the use of those in the
  any speci31 insurance ~. po1q amendment. or
  cider, the Owner shall pay the addidonal c:oSt thereof,                        building trades; and
  except as otherwise StlpWated ln this hn 2 Aareemcnt.                       .3 Include documents c:uscomarity required for
                                                                                 tcguWory asenc:y appcova.1$.
  2.1 If che Owner observes or ot.hctwJsc becomes aware
  of a fault ot defect in the Work or nonconformity \\'lth             3.2.4 The Ocsijp11Buj1der, with the assistance of the
  the Design/Builder's Proposal or che Construcdon                     Owner, shall rue documents required to obtdn nr.ces-
  Documeius. the Owner shall give prompt written nolice                sary approvals of govcramennd authorities having
  thaeofm rhe D~ildet:                                                 jurisdiCtion over the Projec:t.
                                                                       3.2.5 Unless orherwiSe proVided . in the COouact
 2.10 The Owner shall, at the request of the Design/·                  Docurnents. dlc: De1ign1Buildec .shall pro\lide or cause to
 Bulk.lei-, pnor to QC!CUdon of this .P.ut 2 Aareement aod             be pC'Ol'ided and shall paJ"tor desJ.gn services. labor,
 prompdy upon request thereafter, furnish to the                       materials. equipment, tooJs, constrUCdon equipment
 Design/Builder reasonable evidence that financial                     md machine~ water, heat. utillde., Uln&pon.adon and
 ~rs h«Ve been made to fulfill i:hc O\\ner·s
                                                                       other &dlides and scrvio:s n~ for proper CCCCU·
 obllgaiions under rhe Conrna.                                         don and compledOn of the Work. whethcC temporary or
                                                                       pennancru and whether or nor incorporaed or to be
 2.11   nu:C>wner shall com"1unlcate with persons or                   incorporated In rhe Work.
 entities empfoyed or reWllcd by             me
                                        DcsfgntBullder
 through rhc Oeslgn/Bullder, unless othenvise directed                3.2.6 The OesignJBuilder ithall be responsible             Cot   all
 by the Design/Bulfder.                                               C003trucdon DlCIOa, mcd\oc;ls, -=iudqWK.. ~
                                                                      and procedures, and i>r coordinating all poniOnS of me
                                                                      ~.de under thi$ P..an: 1 Agreement.
                           AATICLE3                                   3.2.7 The De20ign1Builder shall keep the Own« infuc-
                      DESIGN/BUILDER                                  med of the progress and qu~ty of the Work.
                                                                      3.2.B The Df:sitn/Builucr shall be: responsible for
3.1     SERVICES AND ftESPONSIB1unES                                  L-orrc:cting Work which <.lo.:J> nm conform ro the Contract
                                                                      Documen1:1.
  ' l'>c:!IJCO scn-lc:coc require:d by thL1 fart .2 :\J!reement
    he 1~cfonncd tw qualified irchlreas and ndu:r                     3.2.1 Tilc! Design/Builder "~"rrants m the Owner that
uc.~ pmlcs... iun:il'L The cunrcaawll abl~ttun.; 01' sui::h           1nareriaJs ;md equi1>rmmt fuml."il11..-d under the Conu-a£;t
profr:s.'iiona.I per:-ion., or meides are undlm:ila:n :inti per·      will be: uf l(iJ.{Nl3uikl1.:r :ind   c.:nnstruc..·tiun \\itl c:onform \\ith Che: tcqUin:numtS of the
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  Contract Documencs. Construction not conforming ro                     not included in Basic Senices unless so identified In
  these rcquiremencs, Including substitutions ncx properly               .\cticlc 14. and they shall be paid for~ the Ql\·ner as pro-
  approved by the Owner. shaJJ be corrected in accoroancc                \.ided in this Pan 2 Agreement. in addition to the com·
  \\ith Article 9.                                                       pensatlOn for Basic Services. The services described in
                                                                         thi' Paragraph 3.3 shall be provided onJy if aucoorized or
  3.2.1 o The Design.IBuilder shall pay all saJc:s. consumer.            confitmcd in writing b~· the Owner.
  use and similar mes which had been lcgallv enacted at
  chc rime the Or.:s.ign.IBuildcr's Proposal was n.x;i; submitted        3.3.2 Making revisions in dtawlngs, spccillcati00$. and
  co the ~er. :and shall secure and pay for buildlng and                 other documcntS or elecuonic data "·hen such revisions
  ~ pcnruts and govemmcnw kc:s, licenses and in.spcc-                    ace required by the enactment or te\islan of codes, l:a\\'5
  t1ons necessary for the proper execution and completk>n                or regulations subsequent to the: prepacatlon of such
  of the Work l\illch are dt:her customarih• secured after               documentS or electr0nic data.
  c:edldously as Is conslatent with rCasonable s~ and
  Owner concurs, the OealgnJBullder shaH Issue a                        catt: and   che ocdcdy progress of        me Projca.
  Cenificate of Sub5lllntial Completion which shall estab-
  lish the Date of Substmdal Completion. shall swie the                 4.2 Time limits seated in chc: Conmct Documents arc of
  responsibility m eadl pany ror securitv. mainceoance.                 the essence. TilC Work to be perfonned uC1der           Pare mas
  heat. udlldes, damage to the \Vock and "tnsuranct!. sh:ill            .? Agn:emenc sh:ill commence upon iec:dpt of a nonce to
  incluclc a list of lccins to be compleced or c:orrec:ted and          proc:_eed unless otherwlile agreed aod, subject to autho-
  stwl fix the time within which the DesigntBuildcr shall               rized Modlllcadons. Substantial compledon shall be
                                                                        achlcVcd on or bc:forc chc: date c;:smb11ahed tn Att1cle 14.
  complete items lism:l lheretn. -9isptrllCS between ~-
-'>wRef ~Q11111p1Buil•f-f88&RillRtt ahe CIK-Cifiwe et:                  4.3 Subsw.nd:il Completion L.; che stage in the progre:s.~
4ubaaRlkal~~ RSQlt...c}Jn ac:GOR.laAQt
~AJ01ido10
                                                                        of the Work when       me
                                                                                              wt>rk or d~ted portion there-
                                                                        of is :sufficiently complete in acconlance with the
 3.2.15 11-.e Design/Builder shall maintain ac       me :ilte for       Conmct Documents so the Owner can occupy or utUize
 the Owner one tce0cd copy of the         drawio~.      itpt:etfk2-     the Wbrk for it."i intended use.
 ric>no;, produce data, samples. shop dr:i\\inRS. Ch.:i~e
 Ordeni :and ocher modificarioos. in gou1.."SigrvBullcJc:r·11 Pmpo...:.il, :i cull!itnl\!·
                                                                        tiOR !;cheduic 1th::tll be r>roviuctl l.'UOllistCnt with P:lra-
 ~larly updarttl 10_ record the t.-Omplered construction.
      'it: sNll be dcltven:d to the Own~ upon complt:tinn
                                                                        graph 4.2 ~bcn-c.
       .n:strUc."tion :md prior ro Ii~ p:iyn1ait.                       4.5 If the 11c.si1lr\/Builth:r is c.lela~'t:O at any [lntc in the:
 3.3     ADDmONAL SERVICES                                              p~s of ch~ \'1;11rk br 41n nt.'l or n1..1flc.:t..1 of rhc O\mcr.
                                                                        0Wncr·i; ltlll[)(C~"C~l'i. \ll" !iC!:r.lf;UC t;Ontr.u:mrs t.'mplu~·t.'tl
 3-3.1 The services described in thi'I      1';1r.i~C"J.ph   .3.3 are   by the O\\'flcr. 111· I~· c:h~~'-"l:i urderttl ln chc '\M1rk. or hy

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   labor di:iputcs. fire, unusual delar In deliveries. aU\'ersc            sti2ll become due until the Design/Builder submlts to
   weather conditions not fe2sonably anticip:uable.                        the Owner OJ an affldavit that payrolls. bills for materials
   unavoidable casualties or other causc:s be\•ond the                     and equipment. and ocher indebtedness connected with
   DesignlBuilder's conucl. or by delay authorized by the                  the Work for "·hich the Owner or Owner's property
   Owner pending arbitRtlon. or~· Ot'her causes "'hich the                 might be responsible or encumbered (less amounts
   Ownc:c and Design/Builder agree m:iy justi~· dela~·. then               tVichhcJd    b\• the Owner) have been pald or otherwise
   the Con~ Time shall be reasonablv extended bv                           saclstled:   tk.                               .3 t~ of spedaJ wamanties required by the eon-
 5.1.6 Neithct progress payment nor partial or entire use                         u:ux Document$.
 oc occupancy of r:he Project by rhc Owner shaO ccnsd-                    5.2.4 ~lance of final payment shall constiture a
 rure an ac:ceplanCl! of 'Mlrk noc in accordance ~id\ me
 Contra.ct Documenrs.
                                                                          waM:r o( all daims by      me
                                                                                                ~uilder ~ those
                                                                          prcVlous1v made in writing and idcntitlcd by the
                                                                          Design/Builder as unsettled at the time or ftml
 5.1.7 The De.sfgo/.Buildc:r wamw.1 rhat Ude IO all con-                  Application for P:t.ym~nt.
 ~truetioncowm:d by an ~ for Paymcnc will pass
 ro ~ OWncr no Jacec- tbail the dme uf payment. the                       5.3       INTEREST PAYMENTS
 ~iJesignlBuildcr 01" any other pc:n;on          ur in the ®sente of a spcclftcd rate. at the legal rate
or r:ntity pcrlbrming c:unstruCtion m the site: or furnishln,g            prevaillng u-lu:re the Project L'! IOOlced.
marerial.'I or equipment relacing to the <.."OnStJU(..-tiun.
5.1.8 AL the time of Substanclal Curnplc.-titJD, the Owner
s!la.11 par tile Ol.-sign/Builder the r<..'13in:ip;c, if :in~~ less the
.....~on:ablc cu.,c w wrrecc or cumpk.-u: inc:um:a Clr incom·
                                                                                                   ARTICLE&
                                                                                                     ,,    ~

                                                                             PROTECTtON OF PERSONS AND PROPERTY
                                                                                                               ~   -
      u: ~irk. Final payment uf !iud1 \\.'ithbdd :turn :ihall be
  .1dc upon co1n..~'don or compleciuo of i;udl 'M>rk.
                                                                          6.1 The Ocsi!tn1 BuiklL'1' :1h:sll be n:sponsible fur i1lil,i:U-
5.2      FINAL PAYMENT                                                    ing, m.11nrainini.t and pnwltling !lupervL'liun cif all :s;itcty
                                                                          prec..":lutio11:1 :mu pn>Nr.am:i i11 c:nnn~ctlun     wich the
5.2.1 ~r:ilhc.:r tinal p.:t}'l11enc nor arnoums rr.:raiireU.   if •lnY.   pecfurmanec uf thL'I hrt l    ~rt.-emem.

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6.2 The besign!Builder shall take reasonable prccau·                           of ownershlp, maintenance or use of a motor
tion.s for the safety of. and shall pCOYide reasonable                         vehicle; and
protection co pre:vcnr damage:, injucy or loss co: (1)                      .7 claims involvlng comrac;tual liabilir:r insurance
empl~es on the Work and other pe(So~ who ma~· be                               applicable to the DesigntBuilder·s obligations
affected thereby; (2) rhe Work and materials and equip-.                       under Paragraph 11.5.
mcru to be incorporated therein. whether In scora~e on
oc off the sice, under care. custodl( or control or the              7.1.2 The insucancc required bv Subparagraph 7.1.l
Design/Builder or the Dcsignlt!uilder's contractors: and             shall be \\'rittcn foe not less titan limitS of liabiJlty
(3) Other property at or adjacent thereto, 5uch as u-ees,            spec:ifkd in this Part l Agreemcii.t or requ1n:d by law,
shrubs, lawns. walks, pavements, roadways, structures                whichever coverage i$ greater. Coverages, whether
and utilities not dcslgf1ated for removal, relocation.. or           "-'fitten on an occur.rence or claims-made basis, shall be
replacemeoc in rhe course of constnJCtion.                           malnrained "1ilhout interruption frolll dale of com-
                                                                     mencemenc or the Wbrk until date of final paymtnc and
6.3 11\e Design/Builder shall give notices and comply                termination of any covenge required to be mainwned
with ~ laws, ·on:iinances, rule.&, regu)ations and                   after final payment.
lawful Oaleas or public aut:hondes bearing on rhe safety
of pe.rsons oc pcopercy or their prorecdon from damage.              7.1.3 Ccrdftcaces of lnsuta11cc acceptable to the Owner
injucy CC" loss.     .                                               shllll be dellvete:d to che Owner immediately after execu-
                                                                     tion of dns Pan 2 Agrmnenc. These_Cerdfic:.:ard an~~. _ .....
6.4 The Design/Builder shall promply remedy damage                   inSurance poUck:s required ~· this Pmgraph 7.1 SlllW
and loss (odlcr than c:Wnage or Joss insured under                   cootaJn a provision that ooveJ38CS afl"orded under rhe
property insua.na: provided or i:equired by the Conaaa               palidcs wifl not be canceled or allowed to expJre until at
Documerus) to property at the site caused In whole or                least 30 davs' pd_51r written notice has beet\ given to the
in pare by the Dcstgn/Builder. a conam:tor of che                    Owner. Jf    my   ol the Co~ lnsurance coverages arc
                                                                     ~ed ro remain in lDrcc after final payment, an Mkli·
Oesi,gn/Builder ot anyone directly ar indirectly empl~
::i:~ of them. oc by myonc for whose aas they may be                 tiOOal cenificacc evidencing contlnll2lion of such cow:r-
                                                                     agc shall be submitted with the appllcauon for ftnal pay-
                                                                     ment. lntormadon concerning ccdualon of' CO¥er2F
                                                                     .shall be Cumlshai by rhe Desigi1/Builder with reasonable
                                                                     prompcncss ln acCocdanc:e wkh the DesJanlBuiJdet's
                            ARTICLE7                                 information and belie[
                 INSURANCE AND BONDS
                                                                     7.2.     OWNER'S UABIUTY INSURANCE
T.1      DESIGN/BUILDER'S UABIUTY INSURANCE
                                                                    :::~,::e~~~~::t=:~
7.1.1 The Design/Builder shall purchase from and                    ~Owawmaypu,.;._.ud                           Rlinl1liA od'•
mainl2in. in a company or~ lawfully aulhor.izcd                     ~ (ef lelltw~~~~ .......... -.y
to do buslnea in die furisdicdOn In whk:b die Profect is
located, sud\ lmuraDce as will protea the DcslglvBullder
from dalins set Cvnh below which may anse out or or
                                                                    ~~..::~:c=r::
                                                                    llHI R'lliMdAWtg • ., epfie8lll OPIAet's liMilier IAsUllMEe -
1C$Ult from opetation5 under this Pan 2 Agreement by                '1calc5S sptdlicall.¥ f8'1111RMI i..•• C9"m Oocz·•enti--
the DcsignlBuilder or by a c:oruraaor of the Design(
BWldet, or by anyone dtrecdy or llldkecdy emplm'l:d bv               7.3      PROPeft'n" INSURANCa
any of mcm, 0( by anyone for whose aas any of             them      ~At l::Jntess e~1-t:toder ehie-                       PHI 3
may be liable:
                                                                     •8""'ffl!"'1', the GWftef shall purchase and maintain, In
     .1 daiiN undet workecs' CIDl1lpeosation, disabillly             a company or co~panic:S authorized to do busineSs in
          benefit and orher simiJar employee bcne6t laws           · the jurisdiction In which the principal improvell'lCDt5
          that :are applicable to dte 1ft:Jrk to be performed;       are to be located, prl!lpe;ner insUl'lll'\U ttpeft lhe Wem •
     ...Z c:bims for dilv lniurv.
         dcach of a pc:r.mn or property c.i:lma~e :ari:;in~ ouc

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                                                                      professionals. contractors. subconmaaors. agents :and
                                                                     employee$. each of the Other. for damages caused by fire
                                                                     or other perils to the extent covered by prope«!f insur-
                                                                     ance obtained pursuant to this Paragraph : .3 or other
                                                                      propcn:y Insurance applicable to the '«'Ork, except such
                                                                     rtghts as th~· may haw: ro proceeds of such Insurance
                                                                     held by the Owner as trUStee. The 0\\-ner or Design/
                                                                     Bullder. as appropriate, shall require Crom conuacrors
                                                                     and subcontraaors by approptiatc agreements, written
                                                                     v.ncrc legall~· required for validlry. similar waivm's each in
                                                                     favor of other pantes enumerated in this Paagraph 7.3.
                                                                     The policies shall provide such waivers of subrogation by
                                                                     endorsement or otherwtsc. A waiver of subropclon shall
                                                                     be efleaJve as to a person or entity ever> rhough that ~·
                                                                     son ()(' entity would othcrwi.se have a duty lndemnffi...  or
                                                                     cation, conuaaual or otherwise, did not pay dle Jnsur-
                                                                     ance premium directly or lndireal~ and whedlcr or not
                                                                     the peaon or endcy had an insurable interest in the
                                                                     prope(t! damaged.

                                                                     7.3.9 11 requfrcd in writing by a pany In inrcrest. the
                                                                    Owner as tn.IStee shall, upon oa:urrc:oce of an Insured
  7.3.4 Unless ~e prot'idcd. me Owner shall pW'-                    loss, give bond tor      fropcr
                                                                                                  performance of the Owner's
                                                                    duties. The eost o required bood5 shall be ~
  chase and maintain such bollef and machinety Insurance
 requhcd by this Pan 2 ~enc or by law, which shall                  ~ proceeds recd\fed as ~ The Owner shall
 spedfu:aDy CCM:r such insured objeas dutiog insrallark>n           deposit in a separate account p~ so received. which
 and until final m:qmancc by the Owner. This iDsuGlnCC              rhe Owner shall dlsrn'bute In a:f."I<::>
a~ainst   t::ich ocher :ind the Architect lnd other dc.-slgn       uue tU tit"U Uf other hazards. however <:aWICU.

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                                   AATICLI; B                                             design services            and revisions           to    che Contract
                           ----
                      CHANGES IN THE WORK
                                                                                          Documenrs. In case of an increase in chc COncract Sum.
                                                                                          the cosc shall indude a ctlSonable allowance for
                                                                                          overhead  and pro.fiL In such case, rhe DcsigniBuilder
  8.1       CHANGES                                                                       shall keep and present an itemized accounting cogether
                                                                                          with appropriate .supporting data for inclusion h1 a
  8.1.1   Chang~        in the     ~Ork ma~·      be accomplished after                   Change Order. Unless otherwise provided ln the
  O(CCUtlon      of this Pact Z -~t, whhout imralidal:lng                                 Contraa Documc:na.              co;,c:i   tor ihcic pwposcs :shsl1 be
  rhis Pact 2 Agreement.            bY Change Order,
                                           Constn.tc::don                                 li.mltcd to the following<                    .
  Cb,anse Dlcective, or order for a minor change in the                                        •1 costs or 1mor, including sodal security. old age
  Work. subject co rhe limiwkms stau:d in the Conuacr                                             and unemployment \Nul;ill1Ce, fringe benefiu
  Documcncs.                                                                                      requ~ by agreement or cusmm, Nld workets'
  8.1.2 A Change Ocdc:r sh'a.11 be based upon a~c:mcnt                                            compenso.don lnsur:ancc;
  bl!t'\leen du~ Ownec- and rhe DesignlBui,Jdcr; i:a Cori.struc-                               .2 ~~ of rnau:.rials, $upplies $Ind equipment, in-
 tiOn Change Direaive may be issued by rhe Owner with-                                            cluding cost of rransponacion, whether mcorpo-
 out rhc agra:m~t of the DcsigrvBuildcf; an order for a                                             med of consumed:
 minor change ID rhe ~ may be issued b\• rhe                                                   .a  cental coacs of m;ac:hinery and equipment exclu-
  Design/Builder alone.                                                  ·
                                                                                                .. slve. of h2od to0ls, whelh.ec l'CJlted .from the
 8.1.3 Changes in lhe              ~       shall be performed under                                Design/Builder or othttS;
 app~e ~c~ of the Conuaa Documents. and                                                        _4 c0$U of premiums foe all boods and lnSUr;3nCC
 the ~slmll ~ ~pdy. unlcs.1 othero.                                                                permit fees. and &ales. use: or similar c:axcs;
 wise provided In the Change Order, Consuuctlon                                                .& Wdldonml cosrs of r;;up~ llJld field office
 Change DlcecUVe. or oRier for a mlJlOr change tn the
 Work.                                                                                             pemmnd directly att.dbutable m r.be diaoge; :znd
                                                                                                   fees paid to the Archlt:ect. engineers aod other
 8.1.4 If.unit pdca are swed In me Conttact Documents                                               professionals_
 or subsequently agreed upon. and Jf quantities originally                               8.U Pcm:llng lioa.l dctcrmloadon ol cost to the Owner,
 contemplared aR: so c:binged In a pcopo5ed Cfumge
 Orde.f o.r consuuc:uon awnge Ditealve mac applicatlOn                                   amounm not in dispute maybe Included In~
 - r 5uc:b unit priom         '°
                          quamldes of Work propo,ed wW                                   b- PlilYmeOt. The sunount Of cn!!dlt w be allowed by the
                                                                                         DcsWnlBulldcr t0 the Owner for ddedon or change
      1e aubs12.0dlal Inequity m che Owner or the Des.lgoJ
     .kier, rhe appJiablc unir prices shall be ~tablv                                    whidi results tn a ner decrease In Ibo Coaaact sum Wtll
 ~usted.                                        ~~-      .                               be aaull net cost. When both addidOllS and aa:iltS cov·
                                                                                         l!dog related "Wbrk or substitutions are tnvol-.ed in a
 &.Z       CtlANGI!! DRDl!RS                                                             chsnge, rhe allowance foe ovel'hmd and pro&t shall be
                                                                                         ~ on the b2Sis o( the net inae:ISe. if IPY. with
 8.2..1 A rt of proposed l'CYlslons tO the COncract                                      lntonn the Owner, in wrldn& of minor changes in                     me
Documenr.s.                                                                              COllSU\lctlon Oocumenu mcl consuuaion.

8.3       CONSTRU~N CHANGE DIRECTIVES                                                    I.I        CONCUL.m CONDITIONS

B.a.1 A Consttuetion Change Directive 15 a wtirtcn order                                 8.5.1 If conditions are encourucred at the sire which ace
prepared and signed by lhe Owner. directing a change in                                  (1) subsurface or othenWic cona:aled physbl condi-
che Wlbri£ prior (0 agreement on adjustment, if :mv, in che                              uons Which differ nuu:Cl'lally ttom those fudiaa:d in chc
ConU2Ct Sum or Conmaa nmc. or both.               ·                                      Concraa: Documcnc:t or (2) unknown physical condi..
                                                                                         dON of Ill\ unusual nature, which di8'er inslterially from
8.3.2 Except as uthcnYisc agreed by me Owner and the                                     those on::linacumems. then nodcc by
 .    · aruJ savin~s of those performing the 'Mtrk ~tribut-                              che observing p:iny shllll be gi¥en co the other pacey
        m lhe change, lnduditlft Che c:xpcndtcures fur                                   proniptly betOrc conditionS ;ire disturbed and in no

AIA OOCUllllENT A191, Pllt I o(J"VNEll~ICH.U&:llJ)tll At:llf'.£\IE...:T• "F.C0!'1D mmoN. AL\~. '"9'Jfi                                             A191-1HI
n1£ A.'\11".llit:AS L'l;smt.7E 01' NlOurectS. 17;\~ l'il!W' ")RK A\11.~Cr., :,"'I( "\FISMINCilCN, nc JO(llto-~J9J.
WAl'VH!fG: UfMI.,.,,.... ~,... vfDIMH U.S. vapyrtgnc- HD •• llUCll- kl ..... pr-an.                                                           Part 2-P99e 9
                                                                                                                                                              114
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  event later than 21 davs after first observance of the              ouc the \~'ork io accordance t-.·irh che Coouact
  conditions. The Concract Sum shall be equitably adjust-             Documents and (ails within SCVCl (i) days after receipt
  ed for such concealed or unknown conditions by                      of written notice from the Owner to ccmmence and con-
  Change Oeder upon daim by either patty made within 21               tinue correction of such default or neglect wich diligence:
  da~ after the daimanc becomes aware of the conditions.              and promptness. the Owner m~ give a second written
                                                                      notice to the Design/Builder and. SC\-'Cn r.) da~'S fo~ow:·
  8.6     REGULATORY CHANGES                                          ing receipt bv the Design/Builder of chat second wnuen
                                                                      notice and ~ithout prejudice to orhcr remedies che
  8.6.1 The Design/Builder shall be compensated for                   Owner mav ha"C, correct such ddldencies. tn such asl!!
  changes in the construction ncCCiSltarcd by the enact·              an appropriate Change Order shall be issued deductJng
  mcnr or revisions of codes, laws or reguladons subse-               from paymencs then or thereafter due the Design/
  qucru t0 chc submission of the Oesign/Builder..s Prop052.I.         Builder cosu of correcting such delidencics. U che pay-
                                                                      mcnrs then or thereafter due rhe DesJgntBullder are nor
                                                                      suffidenr re cover the amount ol the deduction, the
                           ARTICLES                                   Design/Builder .shall pay the difference to the Owntt.
                                                                      Such actlon by the Owner shall be subject to d15pote
                  CORRECTION OF WORK                                  resolution procedul'C$ as pt'OYided In .Artide 10.

  9.1 1be Desigll/BuUdec shall prtJlJlptly coaea \Vork
  rtjc:ctc:I by rbc Owner or lmown by the DcsignJBuildcc to                                   ARTICLE 10
  be defcctivc oc f.Wlng co confi>cm to the requirements of
  the Contraet Documents, wh.erher obaerved before or·                                DISPUTE RESOLUTION-
  atitt Sllbswu:bl Cornplerion and whether or not f.abricat-                      MED~TION        AND ARBITRATION
  ed, lnsralled occompleced. 1be ~shall bear'
  costS of correcdng such rejected Work, including                    10.1 Claims. '"5putcS ·or other mauers in question
  adc:Utkxaal tesdng :and insptttiOns.                                between the patties to thlS Pan 2 Agreement a.riSin& our
                                                                      of tX relating to this Part 2 Agrttmcnc or bn:ach thereof
 1.2 I( widUn one (l) year after &:he dale of Subscanlial             sh;dl be subject to and decided by mediation ot abim-
 C'     ·letion oI the \lClbrk oc, aftu the date for oommence-        tlon. Such mediatioo or ubiuation s.ball be conducted in
 n.     of W'llmUldc:s established ln a written agR:emc:nt            accordance 'Mch the Consuuc:tion lndusuy Media~ or
 bct\Vttll rhe OWnet and      me    Dcsign/BUildcr, or by tcrmS       Atbitration Rules of the AuieriC2'1 Arbkr.ation Association
 oI an applk:able special warranty required by the                    cummtly in eftCa.
 Conuaa Dacu.ments. any or me Wbrk is fi::Jund EC be not
 In acCoabnce 'l'llch the requimnc:nu of che ConU3ct                 10,2 ln additton to and prior w adJJtration, the parties
 Oocumems, the Daign/Builder shall con:ect .it pxomptly              shall endeavoc m settle disputcS by medladon. Demand
 afu:r receipt o! a wrtm:n ncxice from che owner ra do so            fur mediation shall be lilc:d in writing with the orher
 unless lhe Own« has pccviously ~ the Desigpl                        pany to this fut 2 Agl'eemcnt and with the Amaic:an
 BUfldcr a written aa::epCllDCe of 5uch condldon..                   Arbiindon Association. Adeuaand tor medlation shall be
                                                                     made within a reasonable time al\er the claim, dispute.
 9.3 Nodling contained in rhis Anide 9 a;hall be coo-                01: ocher matter In questlon has arisen.· Jn no ~t shall
suued ro esl2b!lsh a period of IJmiwioo With rcspca i:o              the demand for mediation be made aftc:t the dare when
otbec obli,pdons which the DesiplBuilder mighc haw!                  lnftltudon of legal or equh:lble proceedinas bslsed on
under the Conrna Documents. Esrabllshmerit ofthe                     such clahn, dispure oc other mauer In quesdon would be
dme period of one (1) year• desalJed in Subparagraph                 barred by the appllcable stature of repose or limbadons.
9.2 relates only to the specific obligadon of d\e
Desf8n/BUlldCl' ro correct the '\lb'k, and has no relatiOn·           10.8 Demand For arbitl2don shall l:!F filed In writing with
ship to d\e Wile Within whk:h the obligadon to comply               · the other party to this Part 2 Agreement and Wir.h me
with th.e c.onuaa Docwnems may be sought 1:c be                       Amcdcan Nblttation AssodarJon. A demand for acbitra--
enforced, nor ro rhe dmc within~ch e_cocee~ may                       tion shall be made wlthiil a reasonable dme afra' the
be commenced to escabJJsh me ~uildcr's ffabuky                        claim, dJspure or Other matter in ~uesrion has amen. In
W1ch ropc:a to the Dcir1.g111BufJd~t"':i oblfptlons Other            no cvenc snau enc ctc:mand a wlt;ral:icn be mtadc after
than spedflally to c:x>rrect the '1.brlt.                            the date when lnstkudon of lc;pl or equir.abJe proceed-
                                                                     ings based on     $Uch   claim, c.Jisputc or oc:her mattct' In
9.• If the Oesign/Bulldcr faiJ.'i ro correct nonconforming           quesdon would be barred by the applicable srarures of
W'ortl:: a.s n:quired or f.l1ls ro catty ouc \M:>(ic in a«ocdance    repose or limitations.
wirh !:fie Conuacr Docwnents, the Owner, t.,• wrtcceo
order signed personally or by an agou spo:UkaJI~· so                 10.4 An arbimuJ.oo pursunnc to thili Para~ph may be:
t!nlpowcred by the Owner in writing, ma.y order rhe                  joined with :m arbitration involving common ls.slid or
Desigri/Buildcr to stop the W'ork. or any portion thereof.           law or fac.'t bctMCrt the ~ign/Builtlt!r :i.ntl any person
untU che Cl.use for such onler has been ctiminaced: how·             or entity \\.ith whom me Dcst.gnJBuUcler N.-c a concra<.."tu-
r:v1      '1c Owner's right to srop rhc Work shall noc give          al obligation tu .arbitr:ate disputes. No othtt a.rbiu;itiun
ris        a duty on the part of the Owner tQ exercise the           arising uuc o( or n:latinR lO this Part l ~nt sh2JI
ripu tor benefit or the Oec;1RnJBulldl!r or ocher persons            include. by c;unsolid:uion. julndcr or in any other man-
or entitie$.                                                         ner, :in addidon:d per.1on or endry noc a p:i.rty co thljtratc with an addltlonal person ur eodcy duly con·                                           11.6.1 To the fullC$t extent pc.nnitccd by law, the
   :sentcd to by the putia to thb Part 2 Agreement sf\all be .                                         De5JgrvBuilder &hall indemnify and hoJd harmless the
   'peci&co.fl~ enforceable in accordance -.ith applii;ablc                                            Owner. OWnet''s consulcuus, :and ~cs snd employees
   law itl any coun havlns ;urisdiction cheteot                                                        of anv of thcim from and ~insc claims. damascs. Jo5SCS
                                                                                                       and expenses, inducting bur not limited to atmmeys'
   1 o.sThe award rendered bv the arbitrator or arbitratots                                            fets. arising out of or resulting from performance of the
   slWl be final, and iudgmeni may be entered upon it in                                               Wt>rlc. provldcd thac such daJm, a.image, Joss or
   accordance wtdi applicable l2w In tny courc haVing                                                  expense is amibutable co bodily inlu.cy, sickness, dJse:asc
   jutisdiaioo thcn:of.                                                                                or- dn.ch. or co injucy ~ or: daottuction of caagiblc: prop-
                                                                                                       etty (od>er cMn the We.it: lcs:e1f) indudtns           roo
                                                                                                                                                            of use
                                                                                                       resul~a thci;efrom. bur onty to che ~c caused in
                                                                                                       whole or in pan by negligcot aas or omwlons of the
                                      ARTICLE 11                                                       Oesign/BuUder. anvone dJi:ectly or indlrecdy employed
                   MISCELLANEOUS PROVISIONS                                                            by the Design/Builder oc anyone for whose aas the
                                                                                                       Ocsign/Bulldc:r may be liable. n:prdla5 of wllcctlu or
                                                                                                       not :iuch claim, damage, loss OC' apense is caused in
  11.1 Unles$ odtccwisc provided. this Part z Agtttmeoc                                                p2Ct by- a p:any indemnified hel'eundec Such obligation
  shall be g~cd by the law of che place where the                                                      shall not h! consrnied to ~ abfidae. or reduce
  Projea is located. ·          ·                                                                      other righu or obliptions of indemnity wh1ch Wl)Uld
                                                                                                       omerwise cxisc as to a pany or person described lo this
  11.Z        SU8CONTRACTS                                                                             Pacagraph 11.5.
  11.2.1 The Dc:sig.yBullder. as soon as praccicab~ a!ra                                               11.5.2 In claims apfnst :any peison °"entity indemnified
     ~ution or miS Pan 2 Agreement, shall furnish co the                                               under this Pa.rasraPh 11.5 by an emp&oyee of the
      nee in wrtdng die names of rhe persons or entitia                                                DcsilWIBuU".'a·-~ direcr:ly or indkecdy employed
  •••e DeeignlBuilder 1'11ijJ cngasc a:s COntraaor.5 for- the                                          by dle DCSlgnll:SUlldCr or anyone tor whoise acrs die
  Profea.                                                                                              Oes.ign/Builder may be liable, die Ulde.mnificaEion oblig·
                                                                                                       adon under r1d3 Patagraph 11., ahall not be: JUPkc:d by a
  11.J       WORK BY OWNER OR                                                                          llmlcadon an amount or type of daanagl:s, eompensation
             OWNER'S CONTRACTORS
                                                                                                       or benefits ~ by               °'
                                                                                                                                  foe the Desien/Builder uru:le:
                                                                                                       wodccrs' compensadon acts, diubilir:y bene&t acts or
  11.3.1 The Owner rescrw:s the right m pedorm c:on-
  struetlon ot opcr:adons related to lbe Project \\1th the                                             other employee benefit aas.
  Owner's own fon:a, and IO a'l\'acd separate conuaas Jn
  conm:alon With other porttons of the Protect or other                                                11.8       SUC&:eSSORS AND ASSIGNs
  consuuaion or opc:radons on the~ under condidons                                                     11.e.1 The OtMer and ~c:r, ac:s~ bind
 of imur.ancc and waiver of subcopdon idenc.tcal to the                                                rhemsel'l<-es, their parmers., successocs, 8SSignS aod legal
 pl'DYisJoos of this Part 2 A.lircemenL lf the OeslenrBuikkr                                          repl'Clic:matlVes 10 the ocher pany to dlf.5 Part 2
 Claims dw delay or addldonal cosc is In~ 6ecause of                                                  Agreement and to the panncis.. :n.accic::soon and~ of
 :such aaion by the Ownes:, the OesignlBudder shall a$Sert                                            such othel' P='"Y With respea co 1111 c:ovenams ol dds Part
 lJUdl daims·as pawfded in SUbparagraph 11.4.
                                                                                                       2 Aarecmc:m.. Neither the Owne.r noc the De.siaol.Builder
11.3.2 The Des.ign/BuUdcc shall afford the O~"ner'.s                                                  shall :WiS!\ this Part 2 Agreement wilhout the written
5c:par,.te mntt:aet0a reasonable oppomanh:y foe inuo-                                                 consent Of the orher. The a.met may .assJgn this Part 2
duafon :and $10(3Be of didr m:uerillls and equipm•t                                                   .~em co :my insritudonal lender~ eon·
~d pcrfOnnancc ofthck aa1vn1es and shall connect :md                                                  :strucdoa financing. and rhc .DcslgnlB •           l18la:3 to
cooo:lin2ce the Dc:signlBuilder·s L'Onstruccion and opera-                                            eecutc all cunsents ceasonablY required ao f:acilicace
tions with theit5 35 required ~· the Coner-act Docvmems.                                              5uch an :assignment. II either patty mab:s such an assign-
                                                                                                      ment, th2t P.3ftY s112ll nevertheless remain leg:ally respon-
11,3.3 CusL'i t:1u.o;ed by rne bv the                                          unless oc.herw;se agreed by- the other p:arty.
parry n."5ponslblc rhcr:cfor.                          ·
                                                                                                      11.7        TEFIMINATION 01"
11.4        CLAIMS FOR DAMAGES                                                                                    PROFESSIONAL DESIGN SliRVICE8
11.4.1 If either party to rhls P.Jtt 1. ·"-t:erecmen( sutlers                                         i1.1.1     PB         t89tc~Mm/~mt .services or the
injur~· or tbm::t~ co per.ion or pmpcny bet."au.'ic: of :in act                                       Archircc';;~ any nther dc.':iign pmfessiunal desianatc:d in
Of ontl"siun nftho other p:irt~ (Jf :1.ny lic: :&cti; o;uch                                  m me O\,.m,.r in wrltinK lllloth l'C'.JSUnahlc ohjCL11Un, who WIO f)fU\•ide the ~C!C\'in:.'i

AJA DOCUMINT A 111. P•" 2 • 1111'!111'.ll·l>lil'k:i< bl :11.J)Kll .ACl<~IV.'T • i:tiCOND F'.Dl1'10l'r • All\ .e. • ., I 'I'"•
111£ AMl!lll~~'> l:o\:l'l1Tl:TF. Of •.\llCHITF.~. 1-i; !(f,... YOHK A\'FSl:F.. ;>."\II( •"'-~1 ll:St.TOlol. l'IC·!lllllte,.o\~\ll •                       A191-1996
WARNING: Unrlcemrord pit_ _,....,....,., u.s. copyrlgllt i.... ena 19 eaei-& It> legal ,'°'9cvllon.                                                  Part 2-Page 11
                                                                                                                                                                          116
                    JENKENS & GILC~IST            Fax=214-855-4107                   Aug 8 2003          9:06        P.13

  originally to have been provided by the: Arehirea or            notice that the owner intends to lerminatc this Part Z
  other design professional whose services are being              .o\gfccment. lf the Design/BuJlder £ails to cocrcct the
  cccmlnated.                                                     defaults. failure or neslect within seven (/J days after
                                                                  being given notice. the Oomer may then give a second
  11.8      EXTENT OF AGREEMENT                                   \\'Otten notice and, after an additional seven (';) days. the
                                                                  Qwner may without prejudice to any O(bei: remedy tCC'·
  11.s.1 This P:u:t 2 Agreement represents che entire             minate the employment of the Design/Builder and caltk c:ompleu:d and Cot proven toss sustained upon             the Dcsign/Bullder fails.to receive payment within seven
  materials, equipment. wols, and co.nsuuctioo equipment          (7) days after cecdpt of such noclce by the Owner, the
  and~            ioduding reasoo.ible pWN!a-Pl!SIGM~l AGUEM8'IT ~ 199& IElmON • /dAe • Ol996 ~
                           ITSCl'S, 1735 tf8'I' YORK AYllflJB. h.W, Y~GTON, D.C. 10006·~ •                   A191-1fJ!I
 JENKENS &GILC~IST         Fax:214-855-4107                Aug 8 2003       9:07       P.17

                                    APPENDIX "A"

 1.   A minimum and medi\lJJl security coaecti.onal facility to house 500 inmates, to be
      located on the real property described in Exhibit "A" attached hereto, located in
      the Town of Raymondville, Willacy County, Texas, design to be. approved by the
      Texas Commission on Jail Standards.

2.    Design/Build.er acknowledges the funds for the construction of the Project are to
      be provided through the issuance of Lease Certificates of Participation by Willacy
      County (the "County,,), the disbursement of which will be governed by a certain
      Trust Indenture between Municipal Capital Mafkets Coxporation (''Owner'') and
      U.S. Bank National Association C'Trustee''). Design/Builder had reviewed the
      Trust Indenture and hereby agrees to be bound by the terms thereof. Further,
      Design/Builder acknowledges and.understands the Owner, immediately upon
      cxerution hereof, will assign to the County this agreement and Design/Builder
      agrees that Owner should have no penonal liability whatsoever for any payments
      due to Design/Builder heremider and that Design/Builder shall look solely to the
      Construction Fund established pursuant to the Trust Indenture by the Tru.stcc for
      any and all payments due to Design/Builder hereunder. Notwithstanding the
      foregoing, Owner shall be liable to Design/Builder for any act or omissions of
      Owner which are negligent, grossly negligent or willful and which are directly
      related to the obligations of Owner hereunder.

3.    This agreement is make and intended for the benefit of Owner and Design/Builder
      only, and is not made or intended for the benefit of any third party, except the
      County and the Trustee. Design/Builder makes no representations 11!1 to the
      com.merciality or profitability of the Project, and does not guarantee or. wanant
      any representations or statemeiits made by any other party in connection with the
      Project.

4.    If the Desiga/Builder is delayed in the progress ofthe Project by acts of neglect of
      Ownec, Owner's employees, sepataie con.1ractorS employed by the Own.er,
      changes ordered in the Work except as provided in Paragraph 7 below, labor
      disputes, fire not caused by Design/Builder, wiusual delay in transportation,
      unavoidablo oMUnltic~, or another cause which the Owner and Design/Builder
      agree is justifiable, the contract time shall be reasonably extended by Change
      Order.

5.    Should Design/Builder fail to substantially complete the Project within 1hirteen
      (13) months from the date of :funding, subject to any extensions pursuant to this
      Agreement ("Time of Completion of Work"). the Design/Builder agrees to pay
      the OWner as liquidated damages for each and evezy day of delay beyon~ the
      Time of Completion of Work the sum of $6,475 per day, which sum is hereby, in
      view of the difficulty of estimating such dam.ages, agrc:ed upon, :fixed, and

                                                                          Page 1 of3
                                                                                              121
JENKENS &GILCHRIST        Fax:214-855-4107                Aug 8 2003       9:08       P.18

      per day, which sum is hereby, in view of the difficulty of estimating such
      damages. agreed upon, fixed, and detennined by the parties hereto, as the
      liquidated damages that the Owner will suffer by such default and not by way of .
      penalty, and shall be deducted as such from the "Balance Due Design/Builder."
      The facility will be considered substantially complete upon inspection and
      approval by tbB Texas Jail Standards Commission.                 :

6.    Design/Builder's liability for damage or loss shall be limited to the amount of
      insurance coverage and payment and pmonnance bonds required by the teims of
      this Agreement. In no event shall Design/Builder by liable for any damages or
      losses, no matter how described, for amounts in excess of that cove.red by the
      insl11'81ice required hcrebv.
7.     DesigliJBuilder shall receive a total of thirteen million eight hundred tbcusand and
      .n0/100 dollars ($ 14,279,000) as coinpensation for services provided under this
      Agreement, subject to the time and provisions he.reof. The parties hereto agree
      tb;lt the Project, as coDStructed in accordance with th.is Contlact, will not be .
      subject to state 8Jld local sales taxes. Owner will provide Des.igo/Builder an
       exemption certificate fur exemption from payment of state and local sales and use
      taxes in order to oomply with applicable sales tax lBWS of the State of Texas, this
      Agtcemcnt shall be separated contract, with the amount fOr, materials and
       services specified separat.ely:

      Ma1a:iaJ.s - S 7,.350,000 Services - S 6,979,000

      Application for payment will be for 100% of work completed, less I 0% retainage,
      which retainage shall be paid upon completion of the Project. The rctainage is not
      applicable to development insurance and bond costs. The price is subject to
      change only pursuant to the provisions contained in this Agreement .

8.    Design/Builder and Owner agree that Design/Build.a need not present a complete
      set of docum.ent.s for Owner to approve prior to the begjnniDg of construction.
      Design/Builder will present for approval such documents as are reasonably
      avail.able at the time Design/Builder is xeady to commmwe construction of the
      Project and Dcisignmuildct shall be entitled. to commence construction based on
      partial documents. Notwithstanding the foregoin& Design/Builder repxesents and
      waxrants that the Project will be designed and conatrlletecl to house 500 im;wrtca,
      to be located on the real property described in Exhibit '"A" attached hereto, and to
      be approved by the Texas Commission 011 Jail Stand~,

                                                                                              122
      JENKENS &GILCHRIST           Fax=214-855-4107                    Aug   8 2003       9:08        P.19

 9.   W eathettrime Extensions

The time quoted in this contract includes -0- days for weather related 4elays on the project and the
contractor has made no allowance for time or cost above this number for delays caused by weather. Any
delay or work stoppage due to a.o.y weather above the stated allowance will necessitate a change order to
address this change to the contract The time quoted in the contract is in calendar days and the schedule
of the project recognizes a S day work week, therefore, the loss of part or all of a day will need to be
converted to calendar days.

 10. Warranty

 Hale-Mills Construction, Inc. wmants our finished product to be the project as defined on the plans aod
 specifications. Conttactor warrants all work. for one year after substantial completion. Contractor ~es
 to provide the OWncr with all wananties as required by the specifications. Some systems and/or
 products have been selected by the Design Professionals on this project for tbW value to the project and
 an extended warranty by the vendor is required by the couttaot documents. For any extended warranties
.required in any conttact doCUIJBUts, the Contractor will provide and the Owner will rely Solely on the
 Product or ManuDcttirer or Subconfractor providing the syst.em, for 1be extended warranty.

11. Design Liability

 Hale-Mills Construction, Inc. bas no licend professional design or engineering personnel nor do we
 engage in professional design work. Hale-Mills Construction. Inc. docs not represent that we have tht
 capability or expertise to evaluate such services or product The Architect is the design profcssiouaJ on
 this proj~ and is qualified to mab these ~uations and judgments. bl the event design or engineering
 work is required llllder the conftact, Hale-Milla Construction, blc. will provide and pay for the
'professiooal &sign work required but, Hale-Mills Construction, Inc. and the Qlmer are relying on the
Architect and his project design professionals in evaluati:og and approving this design work. Hale-Mills
 C~struction, Inc. will assist the Owner 111d Architect in any 'Way, necessary and will, if request.eel, assign
 any rights Hale-Milla Construction, Inc. might have, to the Owner :regarding this professional design and
engineering work and the entity or pe:rson providing the professional design or engineering services
wider this contract.

12. Change Order Cost

Any increased cost to the project will increase the cost of the insurance and if applicable the cost of any
bonds. The cost on 8ny chan&e order will cmy a added burden of 1.97% for insurance cost a.o.d 1.15%
for bonds wh«e applicable.

                                                                                                 Page3 of3

                                                                                                                  123
     JENKENS &GILCHRIST                              Fax:214-855-4107                                      i:\J.g   8 2003           9:08           P.20

..

         Willacy 500 Bed Detention Center
            08/05/2002

         Cash Flow anal}'Sis of a 500 bed Detention center
         Based on a total                            east of:                                                          $14,279,000

         Many things effect the timing of draws and detemine
         progresss on a particular project. Sorre of these are:
         rain, approvals/inspection&, changes, deli\ery, schedules,
         etc. This is only a projection of work on the project
         and does not con\ey or guarantee the resorces needed
         for any particular month. ·

        :·,,~:-, ,;-~ 1 : ~ •=~ r~~ --:;. ~~-'   '   :   ~; ~· :' ~ 5_;~ '. r ~~~~w~~fi-~':t,:~. :l .~•~\}(~':I~:·:~:~~-~·~,_;·~·~ 7}-_-,~~:~·.~~
                        3,656,352                              26%                                1                 At Closing
                        1,285,110                               9%                                2                 September
                        1.142,320                               8%                                3                    October
                          999,530                                7%                              4                  November
                          999,530                                7%                               5                 December
                        1,142,320                                8%                               6                   January
                          999,530                                7%                               7                   February
                          713.950                                5%                               8                     March
                          713,950                                5%                               9                       April
                          579,460                                4%                              10                       May
                            571,160                              4%                              11                       June
                        428,370                               3%                                 12                     July
                      1,047,418                               7%                                 13                    August
                     14,279,000                             100%

                                                                                                                                                           124
          _..APPLICATION AND CERTIFICATE FOR PAYMENT
                                                                                                                                                                                                                                                                    It)
           ro (OWl!Cr): WiUac.y Couty Public racillty Corp. l'!lOJ'BCTl                                                                                                 Al'PUCA.TlON NO:                               1                DiSlcflulim (A);
                                                                                                                                                                                                                                                                    N

                                                                                                                                                                                                                                      ~--
                              5'16 West Hidalgo Sll'eel                                      Willaey Coua(1                                                                                                                                                         'I""

                              Raymondville, Tcx111 785 80                                    Deteatloa Ceater                                                           PBRJODTO:                                Start                        ARCHlTBC'r
                                                                                                                                                                                                                                              CX»mlACTOR
.......    FROM {G'C):        HaleeMllls Comlnldiou, Inc.                                    VIA AB.CHmlC'l'~                                                                                                                                 INSPliCTOR
N
0..:                          4130 Bellaire Blvd. #210                                       Apll"re, lnc. • .•.
                              HoUll:On, Texas        no25                                    r.2100 Park ~ill>rive #~_.sos                                              PIOJECrMO:                             09-016
           Atteatioa:                                                                        Dallas, Texas ·1~251
                              l1m11 P•rkey
           CONTRACTOR'S APPLICATION FOR PAYMENT                                                                                                                   The umfenripd. C'bmnr.tor =tifn duic                     ID   the best of .bis knowledge.
           Apphclltlon 13 maac tor l'Byment, as st\etow, 1n connecti.on w1Ul. tnc t;onua.c-.t.                                                             ~oa            I.ad belld the WorJt CDftteci by thG APJ:'L.ltATLUN .t11tna: Docune.or.a, hued on on-sim obse.rfttiou
           8. CURRENT PAYMENT DUE •••••••••••••• '-''s_ _ _3_,_,6_56.....~_5_l._Oo_,I                                                                             wi the d.ata coiqirising die above applialioc, the AGENT caci6es 10 die
                                                                                                                                                                  Oilmr dllt .die work lW progressed 10 the point indicad; chat to the ben
           9. BALANCE TO FINISH (INCLUDING UTAINAGE                                                                                                               of hil lmowhdge, .infutnlllticn aod belef, the quaaityof th.e "WO.tk~ i:i
              (Lino l lcas Liae 6)                                                             s                         10,62.l,648.00                           acccndw:ie with the Cmctact documro.tt; and tLat the <:oanctOl' is elllidorl
                                                                                                                                                                  to pa')lllellt of the AMOUNT CEKIFIED.

               CHANGE OlU>Ell SUMMARY                                  ADDl1tONS                               DEDUCJ'JONS
                Change Orders approved                                                                                                                            AMOUNT CER.111<'.IED ••••• , •
                in nrc.vious mnnths bv Owner                                                                                                                      COR-PI;AN OORREC1lONS

                Tolal 8tlnroved this Month                                                                                                                        BY:                                                                          DA"re:
                            TOTALS                                                    0.00                                                          0.00          Thts c:ma tiu.lo ii not 111aati1ble. Th• AMOlNI' CEllTmBD is pt,yable obly 1o ll&Acc of 11•J1M11l are witbo11t
                Net changed bv Ch.a!ll!'e Orders                                                                                                    0.00          prajlld.ice ID 111Yrialill of 1 INSULA N                                          52,3'19                                 0                                 0                  52,349
        5Q2 HOLLOW-CORE METAL DOORS                            51, 103                         10, 138                              10,13&    20%           40,965        1,011
        507 GLASS ANO GLAZING                                  24,701                                0                                   0                  24,701                    (
        ~09 CARPENTRY                                          48,795                                0                                   0                  48,795                    (
        510 HARDWARE                                           37,6D1                                0                                   0                  37,601                    (
        614 DRYWALL                                           150,917                                0                                   0                 150,917                    (
        515 CEILINGS                                           12,408                                0                                   0                  12,40R                    (
        51~   OAINTING                                        288,257                                0                                   0                 288,                       (
          -    CO~TINUATION  SHEET
               APPLICATION AND CERTIFICATE FOR ~AYMENT, containing
                                                                                                                     APPLICATION NO:
                                                                                                                     APPLICATION DATE:
                                                                                                                                                          1
                                                                                                                                                    Funding
               Contractor's signed Certification Is atfached.                                                        PERIOD TO:              August14,2002         ....N
               In tabulatioml beeow, amounts are staead to the nearest dolar.                                        WUlacy Count, Detention Cent9r                'I""
                                                                                                                     PROJECT NUMBER:                 09-016

t<')
                                                                                                        RIALS           TOTAL
C'i                                                                                                PRESENTI..Y        COMPt.E.TEO       {G+C)    TO FINISH
a..                                                                                                 STORED            AND STORED                   (C-G)
                                                                                                     (NOTIN             TO DATE
                                                                                                     DOR                  +E+F
0                 519    TILE AND MARBLE                                28,610                0                                   a                   26,610
..
.-1

Q)                52.1RESILIENT FLOORING                                45,321                0                                     0                 45,321
                  522.SPECIAL FLOORS                                    37,037                0                                     0                 37,037
t<')              523 IVETAL PARTITIONS                                  5,901                0                                     0                  5,901               (

8                 525 PL:UMBING                                      1,101,421          399,620                             399,820       36%        701,601     39,98:
C'i
                   529 EQUIP~NT                                        496,000                a                                     0                496,000               r
00
                    530 HVAC                                           988,315           4'1,418                             41\,418       5%        91Q,899      4.84:
  en                535 ELECTRICAL                                   1,122.,135         112,2.14                            112.214       10%       1,00Q,921    11.22'
                                                                                                                                                                     87~
 ~                  540 FIRE SPRINKLER SYSTEM                          174,352            8,718                               8,71B        5%         165,634
                    545 MISCELLANEOUS SPECIALTIES                       31,819                 0                                  0                    31,519          (

                    566 SECURITY MISCEUANEOUS
                                                                ..   1,916,784           57,5°'4                             57,504        3%       1,859,280     5,75!
                ALl.500 SERIES TO ALS                                6,591,826     0    636,8 0                  0          636,810       10%       5,955,0 6    63,68·

                   401   PROJECT SUPERVI ION                           326,000           74,980                               74,980      23%        251,02.0     7,49l
 r--               402   JOB MOBILIZATION                               43,176           1:7,270                              17,270      40%          25,906     1,72i
 0                                                                      60,225           13,852                               13,852      23%          "48,373    1,38!
 .-1               403   GENERAL CONDITIONS
 ""
 If')
      I            404
                   405
                         PROJECT UTILITIES
                         PLANS & PERMITS
                                                                         12,000
                                                                         10,0_00
                                                                                          1,800
                                                                                         10,000
                                                                                                                               1,800
                                                                                                                              f0,000
                                                                                                                                          15%
                                                                                                                                         100%
                                                                                                                                                       10,200
                                                                                                                                                             0
                                                                                                                                                                    18(
                                                                                                                                                                  1,00(
 ~
 '<:t
                   406   CLEAN-UP                                        30,000               0                                    0                   30,000              (
    .......        407   TRAVELJPER DIEM EXPENSE                         53,000          12,190                               12.191>     23%         40,810      f,21E
    C'i
                   409   DEVELOPMENT/DESIGN COST                      1,102,000        1,102,00Q                           1,1Q2,00D     1otw.             0     55,10(
     x                   PRECONSTRUCTION EXPENSE                        460,000          460,000                             460,000     100%              0               c
                   410
    L:!            420   INSURANCE                                     2.47,308          247,308                             247,30&     100%              0               (

                   421   PMT/PERF. BOND                                168,220           188,220                             168,220                       0                   (
    I-
    (fJ         ALL400   SERIES TOTAL                                 2,511,92.9   0   2,10. 0                   0                                   404,309     68,10E
     .......      ALL    TOTAL    NTRACTCOST                         14. 79 DOD    0   3,904110                  0                                 to 37<1,seo   24775E
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                950 17th Sheet, Si;ait. 650
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,l\CORJ>   isi-S (7197)                                                                                                                        OACORD CORPORATION 1888
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ACOFW 21.S (7197)                                                                                                                OACORD CORPORATION 1988

                                                                                                                                                         129
   CERTIFICATE OF                                NER            0
  SUBSTANTJAL                              11..-_(HITECT        0
                                           CONTRACTOR          0
  COMPLETION                               FIELD               0
                                           OTHER               0
  AJA DOCUMENT G704

  PROJECT:          Willacy County Detention                         ARCHITECT:        Aguir·re Corporation
  (name address)    Facility
                    1601 Buffalo Drive                               ARCHITECT'S PROJECT NUMBER:
                    Raymondville, Texas 78580
  TO (Owner):
                                                                     CONTRACTOR:         Hale-Mills Construction, Lt
           f'Willacy County Public                           --i    CONTRACT FOR:         Willacy County Detention
             Facility Corporation
             546 W. Hidalgo Street                                                        Facility
             Raymondville, Texas 78580
           L                                                 _J     CONTRACT DATE:          June        1 0,   2002
  DATE OF ISSUANCE: October 6,                  2003

  PROJECT OR DESIGNATED PORTION SHALL INCLUDE:

 The Work performed under this·Contract has been reviewed and found to be substantially complete. The Date of Substantial
 Completion of the Project or portion thereof designated above is hereby established as July 2 9, 2      3            oo
 which is also the date of commencement of applicable warranties required by the Contract Documents, except as stated below.

                                   DEFINITION OF DATE OF SUBSTANTIAL·COMPLETION
 The Date of Substantial Completion of the Work or designated portion thereof is the Date certified by the Architect when
 construction is sufficiently complete, in accordance with the Contract Documents, so the Owner can occupy or utilize the
 Work or designated portion thereof for the use for which it is intended, as expressed in the Contract Documents.

 A list of items to be completed or corrected, prepared by the Contractor and verified and amended by the Architect, is
 attached hereto. The failure to include any items on such list does not alter the responsibility of the Contractor to complete all
 Work· in accordance with the Contract Documents. The date of commencement of warranties for items on the attached list will
 be the da.te of final payment u~less otherwise agreed t~o;nw~~

     Aguirre Corporation                                     ~                                                        /"t::J~~~
 ARCHITECT                                                   BY                                     .                 [)AjE

 The Contractor will complete or correct the Work on the Ii                                                                         days
 from the above Date of Substantial Completion.

    Hale-Mills Construction, Ltd.                                                                                     1u 11 }       )
 CONTRACTOR                                                                                                           ~
 The Owner accepts the Work or designated portion thereof as substantially complete            d will assume full possession thereof
 at                                            (time) on                                                                1       ,
                                                                                                                              {date).

   Willacy County Public Facility                                                                                       II 0/o1
 OWNER corpora ti on                                         BY                                                       DA1E

The responsibilities of the Owner and the Contractor for security, maintena
and insurance shall be as follows:
(Note-Owner's and Contractor's legal and insurance counsel should determine and review insurance requirements and coverage; Contractor
shall secure consent of surety company. if any.)

   Nner assumes all responsibility for security, maintenance, utilites and insurance.

AIA DOCUMENT G704 • CERTIFICATE OF SUBSTANTIAL COMPLETION • APRIL 1976 EDITION • AIA 8                                  130
© 1978 •THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVE., N.W., WASHINGTON, D.C 20006                              (;704-1978
EXHIBIT B
 AGREEMENT

 Made as of the twenty-ninth day of June in the year of 2004.

 BETWEEN the owner:

County Jail Public Facility Corporation of Willacy County, Texas
546 West Hidalgo Street

Raymondville, Texas 78580

and the Design/Builder:

Hale-Mills Construction, Ltd.
4130 Bellaire Boulevard, Suite 210
Houston, Texas 77025

For the following Project:

         ~and constructionof the will consist of a one story, 96 bed, secure adult
detention facility, expandable by 96 beds, with an area of approximately 26,000 square
feet. The facility will be designed to meet the requirements of the Texas Commission on
Jail Standards and will comply with applicable local, state and national codes. The
facility will be monitored through closed circuit television and operable remotely through
the use of a central control panel located in the central Control Room.

        The Sheriffs administrative offices will contain all functional spaces necessary to
support the sheriffs office and his stafl: including a sheriff's lobby with public
restrooms, clerical office, multi-agency office, chiefs offices, Sheriffs office, dispatch
room, 911 room, communications sergeants office, investigators offices, civil process
office, deputies office, patrol sergeants office evidence storage, arsenal and keIUlel for the
drug dogs. On the opposite side of the sheriff's lobby will be a squad room/conference
room, break room and multi-purpose room. A separate Department of Public Safety
("DPS'') room will be located in the administrative area and will have a private entranc.e.
The jail lobby will have a separate entrance for the public, adjacent to the DPS. The
ceiling in these areas will be acoustical ceiling tile. The floors in these areas will be
carpet or vinyl composition tile. The walls will be metal studs with gypsum wall board
or concrete masonry unit.

        The Intake Area will contain an intake/booking counter, female holding, male
holding, violent cell, shakedown, female detox, male detox, inmate property storage, and
inmate clothing issue. The ceiling in the Intake Area will be composed of hollow core
concrete planks. The floors will be sealed concrete and the walls will be grouted,
reinforced concrete masonry units.

                                          a e 1 of26
                                           EXHIBIT
                                                                                                 132
                                             cQ
        The Secure Area (inmate housing area) will contain (12) separation cells, (10) 8-
person multi-occupancy cells, and (1) 4-person multi-occupancy cell. Inmate Visitation
and Public/Attorney Visitation rooms will be located near the Jail Lobby. The Line-Up
room will be located across from the Viewing/Statement room. The Medical Room will
be located adjacent to the Kitchen and the Laundry will be adjacent to Intake. There is a
Multi-purpose Room, Commissary, ample Storage and Janitor's Closets. The inmate
outdoor recreation area will be configured as an interior courtyard and will be visible
from Central Control. The Jail Administrator's office will be located next to Central
Control. All passage from the secure area to non-secure area will be through security
vestibules with interlocking doors. The ceiling in the Secure Area will be composed of
hollow core concrete planks. The floors will be sealed concrete and the walls will be
grouted, reinforced concrete masonry units. All inmate plumbing fixtures will be
security-type stainless steel fixtures. The doors in the secure area will be security hollow
metal and the door hardware will be detention hardware.

        The kitchen will be designed to accommodate food preparation for 100-200
inmates. It wiH be fully equipped with the appropriate kitchen equipment and food
storage areas. The ceiling in the kitchen will be security gypsum board and /or hollow
core concrete planks. The floors will be sealed, non-porous concrete and the walls will
be reinforced concrete masonry units.

        The vehicular sallyport will be fully secured and will accommodate a full size
inter-city bus.

       The facility will be constructed of tilt-up concrete panel exterior walls. The
building structure will be steel framed with a metal roof.
The architectural services described in Article 3 will be provided by:

       F. C. Cuny Corporation
       4222 Rosehill Rd., Suite 7
       Garland, Texas 75043

who is lawfully licensed to practice architecture in the State of Texas.

                                       ARTICLE 1

                               GENERAL PROVISIONS

1.1    BASIC DEFINITIONS

1.1.1 The Contract Documents consist of this Agreement; the Design/Builder's Proposal
and written addenda to the Proposal identified in Article 14, the Construction Documents
approved by the Owner in accordance with Subparagraph 3.2.3 and Modifications issued
after execution of this Agreement. A Modification is a Change Order or a written
amendment to this Agreement signed by both parties, or a Construction Change Directive
issued by the Owner in accordance with Paragraph 8 .3.

                                        Page 2 of26

                                                                                               133
1.1.2 The tenn ''Work" means the planning, design., construction, fmancing, operation
and management services provided (or caused to be provided) by the Design/Builder to
fulfill the Design/Builder's obligations.

1.2     EXECUTION, CORRELATION AND INTENT

1.2.1 It is the intent of the Owner and the Design/Builder that the Contract Documents
include all items necessary for proper execution and completion of the Work. The
Contract Documents are complementary, and what is required by one shall be as binding
as if required by all; performance by the Design/Builder shall be required only to the
extent consistent with and reasonably inferable from the Contract Documents as being
necessary to produce the intended results. Words that have well known technical or
construction industry meanings are used in the Contract Documents in accordance with
such recognized meanings.

1.2.2 If the Design/Builder believes or is advised by the Architect or by another design
professional retained to provide services on the Project that implementation of any
instruction received from the Owner would cause a violation of any applicable law, the
Design/Builder shall notify the Owner in writing. Neither the Design/Builder nor the
Architect shall be obligated to perform any act which either believes will violate any
applicable law.

1.2.3 Nothing contained in this Agreement shall create a contractual relationship
between the Owner and any person or entity other than the Design/Builder.

1.3   OWNERSHIP AND USE OF DOCUMENTS

1.3.1 Drawings, specifications, and other documents and electronic data furnished by
the Design/Builder are instruments of service. The Design/Builder's Architect and other
providers of professional services shall retain all common law, statutory and other
reserved rights, including copyright in those instruments of service furnished by them.
Drawings, specifications, and other documents and electronic data are furnished for use
solely with respect to this Agreement. The Owner shall be permitted to retain copies,
including reproducible copies, of the drawings, specifications, and other documents and
electronic data furnished by the

Design/Builder for information and reference in connection with the Project except as
provided in Subparagraphs 1.3.2 and 1.3.3.

1.3.2 Drawings, specifications, and other documents and electronic data furnished by
the Design/Builder shall not be used by the Owner or others on other projects, for
additions to this Project or for completion of this Project by others, except by agreement
in writing and with appropriate compensation to the Design/Builder, unless the
Design/Builder is adjudged to be in default under this Agreement or under any other
subsequently executed agreement.

1.3.3 If the Design/Builder defaults in the Design/ Builder's obligations to the Owner,
the Architect shall grant a license to the Owner to use the drawings, specifications, and
other documents and electronic data furnished by the Architect to the Design/Builder for
                                      Page 3 of26

                                                                                             134
 the completion of the Project, conditioned upon the Owner's execution of an agreement to
 cure the Design/Builder's default in payment to the Architect for services previously
 performed and to indemnify the Architect with regard to claims arising from such reuse
 without the Architect's professional involvement.

 1.3.4 Submission or distribution of the Design/Builder's documents to meet official
 regulatory requirements or for similar purposes in connection with the Project is not to be
 construed as publication in derogation of the rights reserved in Subparagraph 1.3.1.

                                       ARTICLE2

                                         OWNER
2.1     The Owner shall designate a representative authorized to act on the Owner's
behalf with respect to the Project. The Owner or such authorized representative shall
examine documents submitted by the Design/Builder and shall render decisions in a
timely manner and in accordance with the schedule accepted by the Owner. The Owner
may obtain independent review of the Contract Documents by a separate architect,
engineer, contractor or cost estimator under contract to or employed by the Owner. Such
independent review shall be undertaken at the Owner's expense in a timely manner and
shall not delay the orderly progress of the Work.

2.2    The Owner may appoint an on-site project representative to observe the Work and
to have such other responsibilities as the Owner and the Design/Builder agree in writing.

2.3     The Owner shall cooperate with the Design/Builder in securing building and other
permits, licenses and inspections. The Design/Builder shall be required to pay the fees
for such pennits, licenses and inspections.

2.4     The Owner shall disclose, to the extent known to the Owner, the results and
reports of prior tests, inspections or investigations conducted for the Project involving:
structural or mechanical systems; chemical, air and water pollution; hazardous materials;
or other environmental and subsurface conditions. The Owner shall disclose all
information known to the Owner regarding the presence of pollutants at the Project's site.

2.5   The Owner shall furnish all legal, accounting and insurance counseling services as
may be necessary at any time for the Project, including such auditing services as the
Owner may require to verify the Design/Builder's Applications for Payment.

2.6    Those services, infonnation, surveys and reports required by Paragraphs 2.4
through 2.6 which are within the Owner's control shall be furnished at the Owner's
expense, and the Design/Builder shall be entitled to rely upon the accuracy and
completeness thereof, except to the extent the Owner advises the Design/Builder to the
contrary in writing.

2.7    If the Owner requires the Design/Builder to maintain any special insurance
coverage, policy, amendment, or rider, the Owner shall pay the additional cost thereof,
except as otheiwise stipulated in this Agreement.
                                       Page 4 of26

                                                                                               135
 2.8   If the Owner has actual knowledge of a fault or defect in the Work or
 nonconformity with the Design/Builder's Proposal or the Construction Documents, the
 Owner shall give prompt written notice thereof to the Design/Builder.

 2.9     The Owner shall, at the request of the Design/Builder, prior to execution of this
 Agreement and promptly upon request thereafter, furnish to the Design/Builder
 reasonable evidence that financial arrangements have been made to fulfill the Owner's
 obligations under the Contract.

2.10 The Owner shall communicate with persons or entities employed or retained by
the Design/Builder through the Design/Builder, unless otherwise directed by the
Design/Builder. However, breach of contract by the Design/Builder shall allow direct
communication with persons or entities employed or retained by the Design/Builder.

                                        ARTICLE3

                                    DESIGN/BIDLDER

3.1      SERVICES AND RESPONSIBILITIES

3.1.1 Design services required by this Agreement shall be performed by quaJified
architects and other design professionals.     The contractual obligations of such
professional persons or entities are undertaken and perfonned in the interest of the
Design/Builder.

3 .1.2 The agreements between the Design/Builder and the persons or entities identified
in this Agreement, and any subsequent modifications, shall be in writing. These
agreements, including financial arrangements with respect to this Project, shall be
promptly and fully disclosed to the Owner upon request.

3.1.3 The Design/Builder shalJ be responsible to the Owner for acts and omissions of
the Design/Builder's employees, subcontractors and their agents and employees, and
other persons, including the Architect and other design professionals, performing any
portion of the Design/Builder's obligations under this Agreement.

3.2      BASIC SERVICES

3.2. t   The Design/Builder's Basic Services are described below and in Article 14.

3.2.2 The Design/Builder shall designate a representative authorized to act on the
Design/Builder's behalf with respect to the Project.

3 .2.3 The Design/Builder shall submit Construction Documents for review and
approval by the Owner. Construction Documents may include drawings, specifications,
and other documents and electronic data setting forth in detail the requirements for
construction of the Work, and shall:

         .1     be consistent with the intent of the Design/Builder's Proposal;
                                        Page 5 of26

                                                                                             136
         .2     provide information for the use of those in the building trades; and

        .3      include documents customarily required for regulatory agency approvals.

 3.2.4 The Design/Builder, at the expense of the Design/Builder, with the assistance of
 the Owner, shall file documents required to obtain necessary approvals of governmental
 authorities having jurisdiction over the Project.

3.2.5 Unless otherwise provided in the Contract Documents, the Design/Builder shall
provide or cause to be provided and shall pay for design services, labor, materials,
equipment, tools, construction equipment and machinery, water, heat, utilities,
transportation and other facilities and services necessary for proper execution and
completion of the Work, whether temporary or pennanent and whether or not
incorporated or to be inco1porated in the Work.

3.2.6 The Design/Builder shall be responsible for all construction means, methods,
techniques, sequences and procedures, and for coordinating all portions of the Work
under this Agreement.

3.2.7 The Design/Builder shall keep the Owner and Trustee informed of the progress
and quality of the Work on a monthly basis.

3.2.8 The Design/Builder shall be responsible for correcting Work which does not
confonn to the Contract Documents.

3.2.9 The Design/Builder warrants to the Owner that materials and equipment furnished
under the Contract will be of good quality and new unless otherwise required or
permitted by the Contract Documents, that the construction will be free from faults and
defects, and that the construction will conform with the requirements of the Contract
Documents. Construction not conforming to these requirements, including substitutions
not properly approved by the Owner, shall be corrected in accordance with Article 9.

3.2.10 The Design/Builder shall pay all sales, consumer, use and similar taxes which had
been legally enacted at the time the Design/Builder's Proposal was first submitted to the
Owner, and shall secure and pay for building and other permits and governmental fees,
licenses and inspections necessary for the proper execution and completion of the Work
which are either customarily secured after execution of a contract for construction or are
legally required at the time the Design/Builder's Proposal was first submitted to the
Owner. It being clearly understood that this is a Separated Contract and the Owner shall
cause to be provided to the Design/Builder, by the County Jail Public Facility
Corporation of Willacy County, Texas, a Tax Exemption Certificate, which will allow the
material and equipment purchased for this project to be purchased without any State
Taxes being owed or paid. In order to comply with the sales tax law of the State of
Texas, this Agreement shall be considered a separated contract with the costs of Materials
and Equipment to be $2,741,364.00 and the costs of Services to be $2,335,236.00, when
combined the total contract amount is $5,076,600.00.

                                        Page 6 of26

                                                                                             137
 3.2.11 The Design/Builder shall comply with and give notices required by laws,
 ordinances, rules, regulations and lawful orders of public authorities relating to the
 Project.

3.2.12 The Design/Builder shall pay royalties and license fees for patented designs,
processes or products. The Design/Builder shall defend suits or claims for infiingement
of patent rights and shall hold the Owner harmless from loss on account thereof, but shall
not be responsible for such defense or loss when a particular design, process or product of
a particular manufacturer is required by the Owner. However, if the Design/Builder has
reason to believe the use of a required design, process or product is an infringement of a
patent, the Design/Builder shall be responsible for such loss unless such information is
promptly furnished to the Owner.

3.2.13 The Design/Builder shall keep the premises and surrounding area free from
accumulation of waste materials or rubbish caused by operations under this Agreement.
At the completion of the Work, the Design/Builder shall remove from the site waste
materials, rubbish, the Design/Builder's tools, construction equipment, machinery, and
surplus materials.

3.2.14 The Design/Builder shall notify the Owner when the Design/Builder believes that
the Work or an agreed upon portion thereof is substantially completed. If the Owner
concurs, the Design/Builder shall issue a Certificate of Substantial Completion which
shall establish the Date of Substantial Completion, shall state the responsibility of each
party for security, maintenance, heat, utilities, damage to the Work and insurance, shall
include a list of items to be completed or corrected and shall fix the time within which the
Design/Builder shall complete items listed therein. Disputes between the Owner and
Design/Builder regarding the Certificate of Substantial Completion shall be resolved in
accordance with provisions of Article 10.

3.2.15 The Design/Builder shall maintain at the site for the Owner one record copy of the
drawings, specifications, product data, samples, shop drawings, Change Orders and other
modifications, in good order and regularly updated to record the completed construction.
These shall be delivered to the Owner upon completion of construction and prior to final
payment.

3.2.16 The Design/Builder shall facilitate, at the Owner's request the acquisition of the
land and furnish services of land surveyors, geotechnical engineers and other consultants
for subsoil, air and water conditions when such services are deemed necessary by the
Design/Builder to properly carry out the design services required by this Agreement.

3 .2.17 The Design/Builder shall use his best efforts to develop subcontractor interest in
the Project and shall furnish to the Owner and Architect for their information a list of
possible subcontractors, including suppliers who are to furnish materials or equipment
fabricated to a special design, from whom proposals will be requested for each principal
portion of the Work. The Architect will promptly reply in writing to the Design/Builder
if the Architect or Owner knows of any objection to such subcontractor or supplier. The
receipt of such list shall not require the Owner or Architect to investigate the
qualifications of proposed subcontractors or suppliers, nor shall it waive the right of the
Owner or Architect later to object to or reject any proposed subcontractor or supplier.
                                       Page 7 of26

                                                                                               138
 The Design/Builder shall seek to solicit bids from these qualified subcontractors and
 suppliers to furnish services for all construction aspects of the Project covered by this
 Agreement.

 3.3   ADDITIONAL SERVICES

3.3.1 The services described in this Paragraph 3.3 are not included in Basic Services
unless so identified in Article 14, and they shall be paid for by the Owner as provided in
this Agreement, in addition to the compensation for Basic Services. The services
described in this Paragraph 3.3 shall be provided only if authorized or confirmed in
writing by the Owner.

3.3.2 Making revisions in drawings, specifications, and other docwnents or electronic
data when such revisions are required by the enactment or revision of codes, laws or
regulations subsequent to the preparation of such documents or electronic data.

3.3.3 Providing consultation concerning replacement of Work damaged by fire or other
cause during construction, and furnishing services required in connection with the
replacement of such Work. However, replacement of Work damaged by acts of the
Design/Builder or his sub-contractors shall not be considered additional services.

3.3.4 Providing services in connection with a public hearing, arbitration proceeding or
legal proceeding, except where the Design/Builder is a party thereto.

3.3.5 Providing coordination of construction performed by the Owner's own forces or
separate contractors employed by the Owner, and coordination of services required in
connection with construction performed and equipment supplied by the Owner.

3.3.6 Preparing a set of reproducible record documents or electronic data showing
significant changes in the Work made during construction shall not be an additional
charge.

3.3.7 Providing assistance in the utilization of equipment or systems such as
preparation of operation and maintenance manuals, training personnel for operation and
maintenance, and consultation during operation.

                                      ARTICLE4

                                          TIME

4.1    Unless otherwise indicated, the Owner and the Design/Builder shall perform their
respective obligations as expeditiously as is consistent with reasonable skill and care and
the orderly progress of the Project.

4.2     Time limits stated in the Contract Documents are of the essence. The Work to be
performed under this Agreement shall commence upon receipt of a notice to proceed
unless otherwise agreed and, subject to authorized Modifications, Substantial Completion
shall be achieved on or before the date established in Article 14.
                                       Page S of26

                                                                                              139
 4.3    Substantial Completion is the stage in the progress of the Work when the Work or
 designated portion thereof is sufficiently complete in accordance with the Contract
 Documents so the Owner can occupy or utilize the Work for its intended use.

 4.4     Based on the Design/Builder's Proposal, a construction schedule shall be provided
 consistent with Paragraph 4.2 above.

4.5     If the Design/Builder is delayed at any time in the progress of the Work by an act
or neglect of the Owner, Owner's employees, or separate contractors employed by the
Owner, or by material changes ordered in the Work, or by labor disputes, fire, unusual
delay in deliveries, adverse weather conditions not reasonably anticipatable, unavoidable
casualties or other causes beyond the Design/Builder's control, or by delay authorized by
the Owner pending arbitration, or by other causes which the Owner and Design/Builder
agree may justify delay, then the Contract Time shall be reasonably extended by Change
Order.

                                      ARTICLES

                                      PAYMENTS

5.1   PROGRESS PAYMENTS

       .1        S.1.1 The Design/Builder shall deliver to the Owner itemized
            Applications for Payment in such detail as indicated in Article 14.

5.1.2 Within ten (10) days of the Owner's receipt of a properly submitted and correct
Application for Payment, the Owner shall make payment to the Design/Builder less
retainage of 5% of the amount otherwise payable.

5.1.3 The Application for Payment shall constitute a representation by the
Design/Builder to the Owner that the design and construction have progressed to the
point indicated, the quality of the Work covered by the application is in accordance with
the Contract Documents, and the Design/Builder is entitled to payment in the amount
requested.

5.1.4 Upon receipt of payment from the Owner, the Design/Builder shall promptly pay
the Architect, other design professionals and each contractor the amount to which each is
entitled in accordance with the tenns of their respective contracts.

5.1.5 The Owner shall have no obligation under this Agreement to pay or to be
responsible in any way for payment to the Architect, another design professional or a
contractor performing portions of the Work.

5.1.6 Neither progress payment nor partial or entire use or occupancy of the Project by
the Owner shall constitute an acceptance of Work not in accordance with the Contract
Documents.

                                      Page 9 of26

                                                                                             140
 5.1.7 The Design/Builder warrants that title to all construction covered by an
 Application for Payment will pass to the Owner no later than the time of payment. The
 Design/Builder further warrants that upon submittal of an Application for Payment all
 construction for which payments have been received from the Owner shall be free and
 clear of liens, claims, security interests or encumbrances in favor of the Design/Builder or
 any other person or entity performing construction at the site or furnishing materials or
 equipment relating to the construction.

5.1.8 At the time of Substantial Completion, the Owner shall pay the Design/Builder
the retainage less the reasonable cost to correct or complete incorrect or incomplete
Work. Final payment of such withheld sum shaJI be made upon correction or completion
of such Work.

S.2   FINAL PAYMENT

 5.2.1 Neither final payment nor amounts retained, if any, shall become due until the
 Design/Builder submits to the Owner: (1) final application for payment; (2) an affidavit
 that payrolls, bills for materials and equipment, and other indebtedness connected with
 the Work for which the Owner or Owner's property might be responsible or encumbered
 (less amounts withheld by the Owner) have been paid or otherwise satisfied; (3) a
 certificate evidencing that insurance required by the Contract Documents to remain in
force after final payment is currently in effect and will not be canceled or allowed to
expire until at least 30 days' prior written notice has been given to the Owner; (4) a
written statement that the Design/Builder knows of no substantial reason that the
insurance will not be renewable to cover the period required by the Contract Documents;
(4) consent of surety, if any, to final payment. If a contractor or other person or entity
entitled to assert a lien against the Owner's property refuses to furnish a release or waiver
required by the Owner, the Design/Builder may furnish a bond satisfactory to the Owner
to indemnify the Owner against such lien. If such lien remains unsatisfied after payments
are made, the Design/Builder shall indemnify the Owner for all loss and cost, including
reasonable attorneys' fees incurred as a result of such lien.

5.2.2 When the Work has been completed and the contract fully perfonned, the
Design/Builder shall submit a final application for payment to the Owner, who shall
make final payment within 30 days of receipt.

5.2.3 The making of final payment shall constitute a waiver of claims by the Owner
except those arising from:

      .1      liens, claims, security interests or encumbrances arising out of the
      Contract and unsettled;

      .2    failure of the Work to comply with the requirements of the Contract
      Documents; or

      .3       terms of special warranties required by the Contract Documents.

                                       Page 10 of26

                                                                                                141
 5.2.4 Acceptance of final payment shall constitute a waiver of all claims by the
 Design/Builder except those previously made in writing and identified by the
 Design/Builder as unsettled at the time of final Application for Payment.

 5.3     INTEREST PAYMENTS

 5.3.1    Payments due the Design/Builder under this Agreement which are not paid when
          due shall bear interest from the date due at the rate specified in Article 13, or in
          the absence of a specified rate, at the legal rate prevailing where the Project is
          located.

5.3.2     Payments due the Owner under this Agreement which are not paid when due shall
          bear interest from the date due at the rate specified in Article 13, or in the absence
          of a specified rate, at the legal rate prevailing where the Project is located.

ARTICLE6

PROTECTION OF PERSONS AND PROPERTY

6.1    The Design/Builder shall be responsible for initiating, maintaining and providing
supervision of all safety precautions and programs in connection with the performance of
this Agreement.

6.2    The Design/Builder shall take reasonable precautions for the safety of, and shall
provide reasonable protection to prevent damage, injury or loss to: (1) employees on the
Work and other persons who may be affected. thereby; (2) the Work and materials and
equipment to be incorporated therein, whether in storage on or off the site, under care,
custody, or control of the Design/Builder or the Design/Builder's contractors; and (3)
other property at or adjacent thereto, such as trees, shrubs, lawns, walks, pavements,
roadways, structures and utilities not designated for removal, relocation or replacement in
the course of construction.

6.3     The Design/Builder shall give notices and comply with applicable laws,
ordinances, rules, regulations and lawful orders of public authorities bearing on the safety
of persons or property or their protection from damage, injury or loss.

6.4    The Design/Builder shall promptly remedy damage and loss {other than damage
or loss insured under property insurance provided or required by the Contract
Documents) to property at the site caused in whole or in part by the Design/Builder, a
contractor of the Design/Builder or anyone directly or indirectly employed by any of
them, or by anyone for whose acts they may be liable.

                                         ARTICLE?

                                INSURANCE AND BONDS

7.1      DESIGN/BUILDER'S LIABILITY INSURANCE

                                         Page 11 of26

                                                                                                   142
 7.1.1 The Design/Builder shalJ purchase from and maintain, in a company or companies
 lawfully authorized to do business in the jurisdiction in which the Project is located and
 approved by Owner, such insurance as will protect the Design/Builder from claims set
 forth below which may arise out of or result from operations under this Agreement by the
 Design/Builder or by a contractor of the Design/Builder, or by anyone directly or
 indirectly employed by any of them, or by anyone for whose acts any of them may be
 liable:

      .1      claims under workers' compensation, disability benefit and other similar
      employee benefit laws that are applicable to the Work to be performed;

      .2       claims for damages because of bodily injury, sickness or disease, or death;

      .3       claims for damages because of bodily injury, sickness or disease, or death
      of persons other than the Design/Builder's employees;

      .4       claims for damages for personal injury liability coverage which are
      sustained (1) by a person as a result of an offense directly or indirectly related to
      employment of such person by the Design/Builder or (2) by another person;

      .5        claims for damages, other than to the Work itself, because of injury to or
      destruction of tangible property, including loss of use resulting therefrom;

      .6      claims for damages because of bodily injury, death of a person or property
      damage arising out of ownership, maintenance or use of a motor vehicle; and

      .7      claims involving contractual liability insurance applicable to the
      Design/Builder's obligations under Paragraph 11.5.

7.1.2 The insurance required by Subparagraph 7.1.1 shall be written for not less than
limits of liability specified in this Agreement or required by law, whichever coverage is
greater. Coverages, whether written on an occurrence or claims-made basis, shall be
maintained without interruption from date of commencement of the Work until date of
final payment and termination of any coverage required to be maintained after final
payment. Schedule of coverage is attached herewith as Exhibit I.

7.1.3 Certificates of insurance acceptable to the Owner shall be delivered to the Owner
immediately after execution of this Agreement. These certificates and the insurance
policies required by this Paragraph 7.1 shall contain a provision that coverages afforded
under the policies will not be canceled or allowed to expire until at least 30 days' prior
written notice has been given to the Owner. If any of the foregoing insurance coverages
are required to remain in force after final payment, an additional certificate evidencing
continuation of such coverage shall be submitted with the application for final payment.

7.2   OWNER'S LIABILITY INSURANCE

7 .2.1 The Design/Builder shall be responsible to provide "Additionally Insured"
coverage for the Owner to satisfy the usual liability exposures of the Owner for work
performed by the Design/Builder. Optionally, the Owner may purchase and maintain
                                      Page 12 of26

                                                                                              143
other insurance for self-protection against claims which may arise from operations under
this Agreement. The Design/Builder shall not be responsible for purchasing and
maintaining this optional Owner's liability insurance unless specifically required by the
Contract Documents.

7.3     PROPERTY INSURANCE

7.3.1 Unless otherwise provided under this Agreement, the Design/Builder shall
purchase and maintain, in a company or companies authorized to do business in the
jurisdiction, and acceptable to the Owner, in which the principal improvements are to be
located, property insurance upon the Work to the full insurable value thereof on a
replacement cost basis without optional deductibles. Such property insurance shall be
maintained, unless otherwise provided in the Contract Documents or otherwise agreed in
writing by all persons and entities who are beneficiaries of such insurance, until
substantial completion. This insurance shall include interests of the Owner, the
Design/Builder, and their respective contractors and subcontractors in the Work.

7.3.2 Property insurance shall be on an all-risk policy fonn and shall insW"e against the
perils of fire and extended coverage and physical loss or damage including, without
duplication of coverage, theft, vandalism, malicious mischief, collapse, falsework,
temporary buildings and debris removal including demolition occasioned by enforcement
of any applicable legal requirements, and shall cover reasonable compensation for the
services and expenses of the Design/Builder's Architect and other professionals required
as a result of such insured loss. Coverage for other perils shall not be required unless
otherwise provided in the Contract Documents.

7.3.3   Reserved.

7.3.4 Unless otherwise provided, the Design/Builder shall purchase and maintain such
boiler and machinery insurance required by this Agreement or by law, which shall
specifically cover such insured objects during installation and until final acceptance by
the Owner. This insurance shall include interests of the Owner, the Design/Builder, the
Design/Builder's contractors and subcontractors in the Work, and the Design/Builder's
Architect and other design professionals. The Owner and the Design/Builder shall be
named insureds.

7.3 .5 A loss insured under the property insurance purchased by the Design/Builder
described above in 7.3.2 shall be adjusted by the Owner and made payable to the Owner
for the insureds, as their interests may appear, subject to requirements of any applicable
mortgagee clause and of Subparagraph 7.3 .10. The Design/Builder shall pay contractors
their shares of insurance proceeds received by the Design/Builder, and by appropriate
agreement, written where legally required for validity, shall require contractors to make
payments to their subcontractors in similar manner.

7.3.6 If the Design/Builder requests in writing that insurance for risks other than those
described herein or for other special hazards be included in the property insurance policy,
the Owner shall, if possible, obtain such insurance, and the cost thereof shall be charged
to the Design/Builder by appropriate Change Order.

                                      Page 13 of26

                                                                                              144
 7.3.7 Before an exposure to loss may occur, the Owner shall file with the
 Design/Builder a copy of each policy that includes insurance coverages required by this
 Paragraph 7.3 .Each policy shall contain all generally applicable conditions, definitions,
 exclusions and endorsements related to this Project. Each policy shall contain a provision
 that the policy will not be canceled or allowed to expire until at least 30 days' prior
 written notice has been given to the Design/Builder.

 7.3.8 The Owner and the Design/Builder waive all rights against each other and the
Architect and other design professionals, contractors, subcontractors, agents and
employees, each of the other, for damages caused by fire or other perils to the extent
covered by property insurance obtained pursuant to this Paragraph 7.3 or other property
insurance applicable to the Work, except such rights as they may have to proceeds of
such insurance held by the Owner. The Owner or Design/Builder, as appropriate, shall
require from contractors and subcontractors by appropriate agreements, written where
legally required for validity, similar waivers each in favor of other parties enumerated in
this Paragraph 7.3. The policies shall provide such waivers of subrogation by
endorsement or otherwise. A waiver of subrogation shall be effective as to a person or
entity even though that person or entity would otherwise have a duty of indemnification,
contractual or otherwise, did not pay the insurance premium directly or indirectly, and
whether or not the person or entity had an insurable interest in the property damaged.

7.3.9 If required in writing by a party in interest, the Owner shall, upon occurrence of
an insured loss, give bond for proper performance of the Owner's duties. The cost of
required bonds shall be charged against proceeds received. The Owner shall deposit in a
separate account proceeds so received, which the Owner shall distribute in accordance
with such agreement as the parties in interest may reach, or in accordance with an
arbitration award in which case the procedure shall be as provided in Article 10. If after
such loss no other special agreement is made, replacement of damaged Work shall be
covered by appropriate Change Order.

7.3.10 The Owner shall have power to adjust and settle a loss with insurers unless one of
the parties in interest shall object in writing, within five (5) days after occurrence of loss
to the Owner's exercise of this power, if such objection be made, the parties shall enter
into dispute resolution under procedures provided in Article 10. If distribution of
insurance proceeds by arbitration is required, the arbitrators will direct such distribution.

7.3.11 Partial occupancy or use prior to Substantial Completion shall not commence
until the insurance company or companies providing property insurance have consented
to such partial occupancy or use by endorsement or otherwise. The Owner and the
Design/Builder shall take reasonable steps to obtain consent of the insurance company or
companies and shall not. without mutual written consent, take any action with respect to
partial occupancy or use that would cause cancellation, lapse or reduction of coverage.

7.4    PERFORMANCE AND PAYMENT BOND

7.4.l The Design/Builder shall furnish bonds covering faithful performance of the
Agreement and payment obligations arising thereunder. Bonds may be obtained through
the Design/Builder's usual source, with Owner's approval, and the cost thereof shall be

                                       Page 14 of26

                                                                                                 145
 included in the Guaranteed Maximum Price stipulated in Section 13.1.1. The amount of
 each bond shall be equal to one hundred percent (100%) of the GMP.

7.5    LOSS OF USE INSURANCE

7.5.1 The Design/Builder will add coverage to their Builders Risk policy and maintain
such insurance as will insure the Owner against loss of use of the Owner's property, for a
period not-to-exceed 12-months, due to fire or other hazards, however caused. Such
coverage is limited to an insurable loss, as defined in the property insurance provisions,
and an amount of $ 1,977.00 per day.

                                      ARTICLES

                              CHANGES IN THE WORK

8.1    CHANGES

8.1.1 Changes in the Work may be accomplished after execution of this Agreement,
without invalidating this Agreement, by Change Order, Construction Change Directive,
or order for a minor change in the Work.

8.1.2 A Change Order shall be based upon agreement between the Owner and the
Design/Builder; a Construction Change Directive may be issued by the Owner without
the agreement of the Design/Builder, an order for a minor change in the Work may be
issued by the Design/Builder alone.

8.1.3 Changes in the Work shall be performed under applicable provisions of the
Contract Documents, and the Design/Builder shall proceed promptly, unless otherwise
provided in the Change Order, Construction Change Directive, or order for a minor
change in the Work.

8.1.4 If unit prices are stated in the Contract Documents or subsequently agreed upon,
and if quantities originally contemplated are so changed in a proposed Change Order or
Construction Change Directive that application of such unit prices to quantities of Work
proposed will cause substantial inequity to the Owner or the Design/Builder, the
applicable unit prices shall be equitably adjusted.

8.2   CHANGE ORDERS

8.2.1 A Change Order is a written instrument prepared by the Design/Builder and
signed by the Owner and the Design/Builder, stating their agreement upon all of the
following:

      .1      a change in the Work;

      .2      the amount of the adjustment, if any, in the Contract Sum; and

      .3      the extent of the adjustment, if any, in the Contract Time.

                                      Page IS of26

                                                                                             146
 8.2.2 If the Owner requests a proposal for a change in the Work from the
 Design/Builder and subsequently elects not to proceed with the change, a Change Order
 shall be issued to reimburse the Design/Builder for any costs incurred for estimating
 services, design services or preparation of proposed revisions to the Contract Documents.

 8.3    CONSTRUCTION CHANGE DIRECTIVES

8.3.1 A Construction Change Directive is a written order prepared and signed by the
Owner, directing a change in the Work prior to agreement on adjustment, if any, in the
Contract Sum or Contract Time, or both. Both parties to this Agreement agree to make
every effort to not issue or use any Construction Change Directives in this work.

8.3.2 Except as otherwise agreed by the Owner and the Design/Builder, the adjustment
to the Contract Sum shall be determined on the basis of reasonable expenditures and
savings of those performing the Work attributable to the change, including the
expenditures for design services and revisions to the Contract Documents. In case of an
increase in the Contract Sum, the cost shall include a reasonable allowance for overhead
and profit. In such case, the Design/Builder shall keep and present an itemized
accounting together with appropriate supporting data for inclusion in a Construction
Change Directive. Unless otherwise provided in the Contract Documents, costs for these
puzposes shall be limited to the following:

       .1       costs of labor, including social security, old age and wiemployment
       insurance, fringe benefits required by agreement or custom, and workers'
       compensation insurance;

       .2        costs of materials, supplies and equipment,          including cost of
       transportation, whether incorporated or consumed;

       .3        rental costs of machinery and equipment exclusive of hand tools, whether
       rented from the Design/Builder or others;

       .4        costs of premiums for all bonds and insurance permit fees, and sales, use
       or similar taxes;

       .5        additional costs of supervls1on and field office personnel directly
       attributable to the change; and fees paid to the Architect, engineers and other
       professionals.

8.3.3 Pending final determination of cost to the Owner, amounts not in dispute may be
included in Applications for Payment. The amount of credit to be allowed by the
Design/Builder to the Owner for deletion or change which results in a net decrease in the
Contract Sum will be actual net cost. When both additions and credits covering related
Work or substitutions are involved in a change, the allowance for overhead and profit
shall be figured on the basis of the net increase, if any, with respect to that change.

8.3.4 When the Owner and the Design/Builder agree upon the adjustments in the
Contract Sum and Contract Time, such agreement shall be effective immediately and

                                      Page 16 of26

                                                                                             147
 shall be recorded by preparation and execution of an appropriate Construction Change
 Directive.

 8.4   MINOR CHANGES IN THE WORK

 8.4.1 The Design/Builder shall have authority to make minor changes in the
 Construction Documents and construction consistent with the intent of the Contract
 Documents when such minor changes do not involve adjustment in the Contract Sum or
 extension of the Contract Time. The Design/Builder shall promptly inform the Owner, in
 writing, of minor changes in the Construction Documents and construction.

 8.5   CONCEALED CONDITIONS

8.5.1 If conditions are encountered at the site which are (1) subsurface or otherwise
concealed physical conditions which differ materially from those indicated in the
Contract Documents, or (2) unknown physical conditions of an unusual nature which
differ materially from those ordinarily found to exist and generally recognized as inherent
in construction activities of the character provided for in the Contract Documents, then
notice by the observing party shall be given to the other party promptly before conditions
are disturbed and in no event later than 21 days after first observance of the conditions.
The Contract Sum shall be equitably adjusted for such concealed or unknown conditions
by Change Order upon claim by either party made within 21 days after the claimant
becomes aware of the conditions.

8.6    REGULATORY CHANGES

8.6.1 The Design/Builder shall be compensated for changes in the construction
necessitated by the enactment or revision of codes, laws or regulations subsequent to the
submission of the Design/Builder's Proposal.

                                      ARTICLE9

                              CORRECTION OF WORK

9.1     The Design/Builder shall promptly correct Work rejected by the Owner, or his
designee, or known by the Design/Builder to be defective or failing to conform to the
requirements of the Contract Documents, whether observed before or after Substantial
Completion and whether or not fabricated, installed or completed. The Design/Builder
shall bear costs of correcting such rejected Work, including additional testing and
inspections.

9.2     If, within one (1) year after the date of Substantial Completion of the Work or,
after the date for commencement of warranties established in a written agreement
between the Owner and the Design/Builder, or by terms of an applicable special warranty
required by the Contract Docwnents, any of the Work is found to be not in accordance
with the requirements of the Contract Documents, the Design/Builder shall correct it
promptly after receipt of a written notice from the Owner to do so unless the Owner has
previously given the Design/Builder a written acceptance of such condition.

                                      Page 17 of26

                                                                                              148
9.3     Nothing contained in this Article 9 shall be construed to establish a period of
limitation with respect to other obligations which the Design/Builder might have under
the Contract Documents. Establishment of the time period of one (1) year as described in
Subparagraph 9.2 relates only to the specific obligation of the Design/Builder to correct
the Work, and has no relationship to the time within which the obligation to comply with
the Contract Documents may be sought to be enforced, nor to the time within which
proceedings may be commenced to establish the Design/Builder's liability with respect to
the Design/Builder's obligations other than specifically to correct the Work.

9.4     If the Design/Builder fails to correct nonconforming Work as required or fails to
carry out Work in accordance with the Contract Documents, the Owner, by written order
signed personally or by an agent specifically so empowered by the Owner in writing, may
order the Design/Builder to stop the Work, or any portion thereof, until the cause for such
order has been eliminated; however, the Owner's right to stop the Work shall not give rise
to a duty on the part of the Owner to exercise the right for benefit of the Design/Builder
or other persons or entities.

9.5     If the Design/Builder defaults or neglects to carryout the Work in accordance with
the Contract Docmnents and fails within seven (7) days after receipt of written notice
from the Owner to commence and continue correction of such default or neglect with
diligence and promptness, the Owner may give a second written notice to the
Design/Builder and, seven (7) days following receipt by the Design/Builder of that
second written notice and without prejudice to other remedies the Owner may have,
correct such deficiencies. In such case an appropriate Change Order shall be issued
deducting from payments then or thereafter due the Design/Builder, the costs of
correcting such deficiencies including Owner costs and expenses related thereto. If the
payments then or thereafter due the Design/Builder are not sufficient to cover the amount
of the deduction, the Design/Builder shall pay the difference to the Owner. Such action
by the Owner shall be subject to dispute resolution procedures as provided in Article I 0.

                                      ARTICLE 10

DISPUTE RESOLUTION, MEDIATION AND ARBITRATION

10.1 Claims, disputes or other matters in question between the parties to this
Agreement arising out of or relating to this Agreement or breach thereof shall be subject
to and decided by mediation or arbitration. Such mediation or arbitration shall be
conducted in accordance with the Construction Industry Mediation or Arbitration Rules
of the American Arbitration Association currently in effect.

10.2 In addition to and prior to arbitration, the parties shall endeavor to settle disputes
by mediation. Demand for mediation shall be filed in writing with the other party to this
Agreement and with the American Arbitration Association. A demand for mediation
shall be made within a reasonable time after the claim, dispute or other matter in question
has arisen. In no event shall the demand for mediation be made after the date when
institution of legal or equitable proceedings based on such claim, dispute or other matter
in question would be barred by the applicable statutes ofrepose or limitations.

                                      Page 18of26

                                                                                              149
10.3 Demand for arbitration shall be filed in writing with the other party to this
Agreement and with the American Arbitration Association. A demand for arbitration
shall be made within a reasonable time after the claim, dispute or other matter in question
has arisen. In no event shall the demand for arbitration be made after the date when
institution of legal or equitable proceedings based on such claim, dispute or other matter
in question would be barred by the applicable statutes of repose or limitations.

 10.4 An arbitration pursuant to this Article may be joined with an arbitration involving
common issues of law or fact between the Design/Builder and any person or entity with
whom the Design/Builder has a contractual obligation to arbitrate disputes. No other
arbitration arising out of or relating to this Agreement shall include, by consolidation.
joiner or in any other manner, an additional person or entity not a party to this Agreement
or not a party to an agreement with the Design/Builder, except by written consent
containing a specific reference to this Agreement signed by the Owner, the
Design/Builder and any other person or entities sought to be joined. Consent to
arbitration involving an additional person or entity shall not constitute consent to
arbitration of any claim, dispute or other matter in question not described in the written
consent or with a person or entity not named or described therein. The foregoing
agreement to arbitrate and other agreements to arbitrate with an additional person or
entity duly consented to by the parties to this Agreement shall be specifically enforceable
in accordance with applicable law in any court having jurisdiction thereof.

10.S The award rendered by the arbitrator or arbitrators shall be final, and judgment
may be entered upon it in accordance with applicable law in any court having jurisdiction
thereof.

                                     ARTICLE11

                          MISCELLANEOUS PROVISIONS

11.1 Unless otherwise provided, this Agreement shall be governed by the law of the
place where the Project is located.

11.2 SUBCONTRACTS

11.2.1 The Design/Builder, as soon as practicable after execution of this Agreement,
shall furnish to the Owner in writing the names, address, telephone numbers, fax numbers
and representatives names of the persons or entities the Design/Builder will engage as
contractors for the Project.

11.3 WORK BY OWNER OR OWNER'S CONTRACTORS

11.3 .1 The Owner reserves the right to perfonn construction or operations related to the
Project with the Owner's own forces, and to award separate contracts in connection with
other portions of the Project or other construction or operations on the site under
conditions of insurance and waiver of subrogation identical to the provisions of this
Agreement. If the Design/Builder claims that delay or additional cost is involved because
of such action by the Owner, the Design/Builder shall assert such claims as provided in
Subparagraph 11.4.
                                      Page 19 of26

                                                                                              150
 11.3.2 The Design/Builder shall afford the Owner's separate contractors reasonable
 opportwiity for introduction and storage of their materials and equipment and
 perfonnance of their activities and shall connect and coordinate the Design/Builder's
 construction and operations with theirs as required by the Contract Documents.

 11.3.3 Costs caused by delays or by improperly timed activities or defective construction
 shall be borne by the party responsible therefor.

 11.4 CLAIMS FOR DAMAGES

11.4.1 If either party to this Agreement suffers injury or damage to person or property
because of an act or omission of the other party, of any of the other party's employees or
agents, or of others for whose acts such party is legally liable, written notice of such
injury or damage, whether or not insured, shall be given to the other party within a
reasonable time not exceeding 21 days after first observance. The notice shall provide
sufficient detail to enable the other party to investigate the matter. If a claim of
additional cost or time related to this claim is to be asserted, it shall be filed in writing.

11.S INDEMNIFICATION

 11.5.l To the fullest extent permitted by law, the Design/Builder shall indemnify and
hold hannless the Owner, Owner's consultants, and agents and employees of any of them
from and against claims, damages, losses and expenses, including but not limited to
attorneys' fees, arising out of or resulting from performance of the Work, provided that
such claim, damage, loss or expense is attributable to bodily injury, sickness, disease or
death, or to injury to or destruction of tangible property (other than the Work itself)
including loss of use resulting therefrom, but only to the extent caused in whole or in part
by negligent acts or omissions of the Design/Builder, anyone directly or indirectly
employed by the Design/Builder or anyone for whose acts the Design/Builder may be
liable, regardless of whether or not such claim, damage, loss or expense is caused in part
by a party indemnified hereunder. Such obligation shall not be construed to negate,
abridge, or reduce other rights or obligations of indemnity which would otherwise exist
as to a party or person described in this Paragraph 11.5.

11.5.2 In claims against any person or entity indemnified under this Paragraph 11.5 by
an employee of the Design/Builder, anyone directly or indirectly employed by the
Design/Builder or anyone for whose acts the Design/Builder may be liable, the
indemnification obligation under this Paragraph 11.5 shall not be limited by a limitation
on amount or type of damages, compensation or benefits payable by or for the
Design/Builder under workers' compensation acts, disability benefit acts or other
employee benefit acts.

11.6 SUCCESSORS AND ASSIGNS

11.6.1 The Owner and Design/Builder, respectively, bind themselves, their partners,
successors, assigns and legal representatives to the other party to this Agreement and to
the partners, successors and assigns of such other party with respect to all covenants of
this Agreement. Neither the Owner nor the Design/Builder shall assign this Agreement
                                       Page 20 of26

                                                                                                 151
without the written consent of the other. The Owner may assign this Agreement to any
institutional lender providing construction financing, and the Design/Builder agrees to
execute all consents reasonably required to facilitate such an assigrunent. If either party
makes such an assigrunent, that party shall nevertheless remain legally responsible for all
obligations under this Agreement, unless otherwise agreed by the other party.

11.7 TERMINATION OF PROFESSIONAL DESIGN SERVICES

11.7.1 Prior to termination of the services of the Architect or any other design
professional designated in this Agreement, the Design/Builder shalJ identify to the Owner
in writing another architect or other design professional with respect to whom the Owner
has no reasonable objection, who will provide the services
originally to have been provided by the Architect or other design professional whose
services are being terminated.

11.8   EXTENT OF AGREEMENT

11.8.1 This Agreement represents the entire agreement between the Owner and the
Design/Builder and supersedes prior negotiations, representations or agreements, either
written or oral. This Agreement may be amended only by written instrument and signed
by both the Owner and the Design/Builder.

                                     ARTICLE12

                      TERMINATION OF mE AGREEMENT

12.1 TERMINATION BY mE OWNER

12.1.1 This Agreement may be terminated by the Owner upon 14 days' written notice to
the Design/Builder in the event that the Project is abandoned. If such termination occurs,
the Owner shall pay the Design/Builder for Work completed and for proven loss
sustained upon materials, equipment, tools, and construction equipment and machinery,
including reasonable profit and applicable damages.

12.1.2 If the Design/Builder defaults or persistently fails or neglects to carry out the
Work in accordance with the Contract Documents or fails to perform the provisions of
this Agreement, the Owner may give written notice that the Owner intends to terminate
this Agreement. If the Design/Builder fails to correct the defaults, failure or neglect
within seven (7) days after being given notice, the Owner may then give a second written
notice and, after an additional seven (7) days, the Owner may without prejudice to any
other remedy terminate the employment of the Design/Builder and take possession of the
site and of all materials, equipment, tools and construction equipment and machinery
thereon owned by the Design/Builder and finish the Work by whatever method the
Owner may deem expedient. If the unpaid balance of the Contract Sum exceeds the
expense of finishing the Work and all damages incurred by the Owner, such excess shall
be paid to the Design/Builder. If the expense of completing the Work and all damages
incurred by the Owner exceeds the unpaid balance, the Design/Builder shall pay the
difference to the Owner. This obligation for payment shall survive termination of this
Agreement.
                                      Page 21 of26

                                                                                              152
 12.2    TERMINATION BY THE DESIGN/BUILDER

  12.2.l If the Owner fails to make payment when due, or the work is stopped for 30 days
 by causes outside of the control of the Design/Builder, the Design/Builder may give
 written notice of the Design/Builder's intention to terminate this Agreement or seek
 adjustment in price and time. If the Design/Builder fails to receive payment within seven
 (7) days after receipt of such notice by the Owner, the Design/Builder may give a second
 written notice and, seven (7) days after receipt of such second written notice by the
 Owner, may terminate this Agreement, or the Design/Builder will receive an adjustment
 for price and time, and recover from the Owner payment for Work executed and for
 proven losses sustained or increases anticipated upon materials, equipment, tools, and
 construction equipment and machinery, including reasonable profit and applicable
 damages.

The owner shall compensate the Design/Builder in accordance with Article 5, Payments,
and the other provisions of this Agreement as described below.

                                         ARTICLE13

                               BASIS OF COMPENSATION

13.1 COMPENSATION

+3-:t:+-F61'--t:he..D.efil&!i!Rnilctr.r'i:: nerfonnance of the Work, as described in Paragraph 3.2
and including any other services IiSfedin-J\rticle-14.as.p!'rt nflhci;r. ~P.TVir.P.~ thP. OwnP.r
shall pay the Design/Builder in current funds the Contract Sum as       follows:
The sum of the cost of the Work, including the Design/Builder's fee are guaranteed by the
Design/Builder as a Stipulated Sum, subject to additions and deductions by changes in
Work as provided in the Agreement, the Stipulated Sum of Five Million, Seventy-Six
Thousand, Six Hundred and No cents ($5,076,600.00). In order to comply with the sales
tax law of the State of Texas, this Agreement shall be considered a separated contract,
with the Cost of Materials and Equipment to be $2,741.364.00 and the Cost of Services to
be $2,335.236.00, when combined, the total contract amount is $5,076,600.00. The
Stipulated Sum includes $100,00.00 for furniture, fixtures and equipment.

13:T:2-Notwithstanding-afty-provis1en-herei.n.1Q.11)e_~ontrary, any obligations or liabilities
of any kind of Owner or any of its officers, employees, agents or representatives under
this Agreement shall be payable solely from the proceeds of the County Jail Public
Facility Corporation of Willacy County, Texas Project Revenue Bonds, Series 2004, and
the Construction Account established pursuant to a Trnst Indenture, dated as of the 1st
day of July, 2003 (the "Indenture''), by and between Owner and U.S. Bank, National
Association, (the "Trustee"). This Agreement is not intended to create nor does it create
any liability on the part of the persons or entity referenced in the previous sentenance
except to the extent such liabilities are paid and can be paid from funds in the above
referenced constust account.

                                         Page 22 of26

                                                                                                     153
ARTICLE 14

OTHER CONDITIONS AND SERVICES

14.1 The Basic Services to be performed shall be commenced on June 29, 2004 and,
subject to authorized adjustments and to delays not caused by the Design/Builder,
Substantial Completion shall be achieved in the contract time of three hundred and
sixty-five (365) calendar days (Contract Time).

Should the Design/Builder fail to substantially complete the Project within the Contract
Time, subject to extensions pursuant to this Agreement, the Design/Builder agrees to
pay the Owner as liquidated damages for each and everyday of delay beyond the
Contract Time the sum of One Thousand Nine Hundred Seventy Seven Dollars and No
Cents ($1,977.00) per day, which sum is hereby, in view of the difficulty of estimating
such damages, agreed upon, fixed, and determined by the parties hereto, as the
liquidated damages that the Owner will suffer by such default and not by way of
penalty, and shall be deducted as such from the "Balance Due Design Builder."

14.2   The Basic Services beyond those described in Article 3 are as follows:

NONE

14.3   Additional Services beyond those described in Article 3 are as follows:

NONE

14.4   The Design/Builder shall submit an Application for Payment on the First (1st)
       day of each month.

14.5   The Design/Builder shall provide monthly progress reports with current photographic
       documentation with each pay request.
NONE
14.6 The Design/Builder shall provide documentation of acceptable roofing
     preparation and installation from roofing manufacturer prior to substantial
     completion, and during installation, inspection of roofing continuously to insure
     compliance.

14.7   The Design/Builder will provide updated graphic monthly schedule.

14.8   To the extent that any Owner covenants contained in this Agreement or the
       performance thereof conflict with the provisions(or performance thereof) of the
       Indenture Agreement, dated as of                     , by and between the
       Owner and Hudspeth County, Texas, the provisions of the Indenture Agreement
       shall control.

                                      Page 23of26

                                                                                        154
This Agreement entered into as of the day and year first written above.

OWNER                                         DESIGN/BUILDER

                                              !(~~P~nney,
                                                    1- {
                                             !Kendall
                                                                          . -I
                                                              President of KGP'
County Jail Public Facility Corporation of   Management, LLC                 .'
Willacy County, Texas                        Hale-Mills Construction, Ltd. I

                                    Page24of26

                                                                                  155
                                                EXHIBIT 1
      ACORD.                  CERTIFICATE OF LIABILITY INSURANCE                                                          3-
                                                                                                                                   ftt!Oal"''1           °"IUllODIW'Y1
                                                                                                                                                           06/24/04
                                                                     TllllCERTIFIC4TlllllSUEDASAllATTUOFltl..._TIDN
                                                                     ONLY AllD COltPl!llS llOtUOHT$ UJllOlt Tiii! Cl!llT1f1CATI!
 !Ibo 'fr;m•p~tioa. aro11p, Lt.Jl:J~L
                    C:ocporaUon
                  546 Mht IU.d.fl190 Street
                  1'4~DdVil1e 'l:lC 71580
                                                                   .........,...,.,,..
                                                                   lilPOll 1.0 oaUO.AllC.fi CR IJAALITY Cl ..,, KltlO lPzJN M             NJUMA, fTI IGINTS :::ia

                                                             Page25 of26

                                                                                                                                                                            156
      ACORD.                                   CERTIFICATE OF LIABILITY INSURANCE
                                                                                                  TI411CER11FICATE • ISIUEOA8A llAT11!R Of'ntl'ORMA1ION
                                                                                                  ONLY AHO COIWPl,_S HO RlGltTll Ul'Olt THI! Cl!ft.Tlf!CATI!:
 !l'bc      '1'.t:."lllSpoZ't~tJ.OD                       CJ.t:oup, X.td.                         HOLCE1!. TNll C:!Anl'JCAff OOIES NOT AlllEND. U.TENO 011
 11111 w11crest Gre
                                                                                                                                                       '   ~   .
                                                                                           I
                                                                                                                                                                                 I

                                                                                                                                                                            .    'I 5, UllO, 000.
                                                                                                                                                                                ·, 5,oo_o ,ooo._
 •             x;                                                  MllMl22S04                  Ot/10/0l              o;/Jo/o.
                      '
                      I

 D
      ~SCOM'ttdAT-.::M
      e: ....... O'"'E'ltlt    L.!MM..:v   I
                                                ANO
                                                                  ;seH0010UO.ft                10/at/03; 10/28/04 ..
                                                                                                                                             X•            ''.....I    '   ..    I   ;1 ,_!_Cl~ ,~0!.

                                         .. ·"
~-----------~-------------------~~---------------
                                                                                                              j
                                                                                                                                                  '
                                                                                                                                                                            ·•, l~11!(1D,0'1).
                                                                                                                                                                                11.000.0".

 a , auildK• • at.re
,___ .,_,.,. ~--"eo.T•tt.1:•~ ·'A>~·:a
                                                                                               Ol/JOID•' OJ/J0/05.
                                                                     ··~·,u.;;ai~.,.-Oil;:li-"'.
Rof'.1tr•11ee--Cou11ty Jail. Cert1t1eau Koldltt' 1• inaluc!H aa a;n Additiooal
:i:aauHd u reapects eeuerlll Liabtl1ty ud wa1-ver ~ lllbr09ation applie•.
                                                                                                                  =-------------------1               ·-       Oac:r.
                                                                                                                                                                                     .....--....--.;;.;._i

                                                                                                                                                                                     t1s,ooo,ooo

Koskera• CClapU&Atlon !OJ.icy prOVidea                                             CIOVeft§O   ;for ClU.f .::O!N '8011 -
~'llt.1..,.                     otticexa.

CEllTIFICATlr lfOLDFR
                                                                                                tHo,.l\b AW cw,,.~ CA:tc1n•10 PQ.H;lit: . . C:&H!Jl.LIO ll'ON                              nc U.PJt.A110ff
                                                                                                O.l'f-'-",-IUll...,>MU"'•"'u.ttt0t......,.'ta...._ 30                                      0..-.-rn-1
                     U.5. llllnJc Rational. Aaaociation                                         rt01a 1c,, ••cucr•r..1.ltHUl.OUI lMNW                 ru ftllr.LY.1 •u'F ,.•    .Mt. 1t,1u,~..: """"'"
                     l&D 11th at.ra.t, Suite ftSO                                               lilPOlr Ml 0...~TIOlt CA LIA&Lfl'I 01         >-"'""°""°"""            NMJllOA ITS Mlllwuuax c:o 80242                                                          "'"""""''~)

                                                                                    Page 26 of26

                                                                                                                                                                                                             157
                                                                                                                                             Hale-Mills
                                                                                                                                           APR l 3 70W1

 I AJA Document G704'" - 2000                                                                                                      Construction, Ltd

 Certificate of Substantial Completion
 PROJECT:                                        PROJECT NUMBER:        /04-01                                                        OWNER: 181
 (Name and addres.v);                            CONTRACT FOR: General Construction
 Willacy County Sheriffs Office                                                                                                  ARCHITECT: 181
                                                 CONTRACT DATE: June 29, 2004
 1371 Industrial Park Drive                                                                                                   CONTRACTOR:       181
 Raymondville, Texas 78580
                                                                                                                                        FIELD: 181
 TO OWNER:                                       TO CONTRACTOR:
 (Name and address):                             (Name and address):                                                                   OTHER:O
 County Jail Public Facility Corporation         Hale-Mills Construction, Ltd.
 of Willacy County, Texas                        4130 Bellaire Boulevard, Suite 210
 546 West Hildalgo                               Houston, Texas 77025
 Raymondville, Teicas 78580

 PROJECT OR PORTION OF THE PROJECT DESIGNATED FOR PARTIAL OCCUPANCY OR USE SHALL INCLUDE:

 Entire Project

 The Work perfonned under this Contract has been reviewed and found, to the Architect's best knowledge, information and belief,
 to be substantially complete. Substantial Completion is the stage in the progress of the Work when the Work or designated
 portion 1s sufficiently complete in accordance with the Contract Documents so that the Owner can occupy or utilize the Work for
 its intended use. The date of Substantial Completion of the Project or portion designated above is the date of issuance established
 by this Certificate, which is also the date of commencement of applicable warranties required by the Contract Documents, except
 as stated below:

 Warranty                                                                   Date of Commencement
 March 30, 2005                                                             March 30, 2005

 FCCunyCorporation
-AR-CH---'ITE--CT____,______
                                           ~_-ri~__..    ~/5 /05
                                            ~ .....,.D-AT=e-1-6F,,.....,J5s~s-=uA:;....,.biC~e--:;_.,;:=---

 A list of items to be completed or corrected is auached hereto. The failure to include any items on such list docs not alter the
 responsibility of the Contractor to complete all Work in accordance with the Contract Documents. Unless otherwise agreed lo in
 writing, the date of commencement of warranties for items on the allached list will be the date of issuance of the final Certificate
 of Payment or the date of final payment.

 Cost estimate of Work that is Incomplete or defective: s o.oo

The Contractor will complete or correct the ork on            e ist of items attached hereto within 111irty ( 30) days from the above
date of Substantial Completion.            .                                                               J )
Hale-Mills Construction, Ltd.
CONTRACTOR
                                                         '              •                             ~
                                                                                                    DA E/
                                                                                                             fI {;...~
The Owner accepts the Work or designated portion as substantially co               cte and will assume full possession at 10:00 a.m. (time)
on March 30, 2005 (date).

County Jail Public Facility
Corporation of Willacy County,
Teicas
OWNER

AIA Document G704TI• -2000. Copyright C) 1963, 1978, 1992 and 2000 by The American lnstltule ol Architects. All rights res&rved. WA!'NING: This
AIA9 Document Is protected by U.S. Cop~lght Law and 1n1ernetlonal Trealles. Unauthorized reproduction or distribution of this AIA Document, or             1
any portion of It, may result In &evete clvll and crlmJnal penalties, and will be prosecuted to the maximum extent possible under the law. This
document was produced by AIA software at 13:51 :19 on 04/01/2005 under Order No.1000120966_ 1 which expires on 5/28/2005, and Is not for resale.
uaer Notea:                                                                                                                                  (885531343)

                                                                                                                                               158
EXHIBIT C
            Standard Form of Agreement Between
            Owner and Design-Builder - Lump Sum
                This document has been amended and revised from its standard form.

This AGREEMENT is made as of the /'lJ.c.,day of 1             Lin the year of 2006, by and
between the following parties, for services in       conne~ with      the Project identified
below.

OWNER:

The Willacy County Loca] Government Corporation
190 North 3rc1 Street
Courthouse Annex
Raymondville, Texas 78580

DESIGN-BUILDER:
HMC Contracting South Texas, L.L.C.
4130 Bellaire Boulevard, Suite 210
Houston, Texas 77025-1044

PROJECT:

Willacy County 2000 Bed ICE Facility
WiUacy County, Texas

In consideration of the mutual covenants and obJigations contained herein, Owner and
Design-Builder agree as set forth herein.

                                           Article l
                                        Scope of Work

1.1 Design-Builder shall perform all design and construction services, and provide all
    material, equipment, tools and labor, necessary to complete the Work described in
     and reasonably inferable from the Contract Documents.

154912 2068.1                                 EXHIBIT

                                                                                               160
 1.2 A description of the Project is attached as part of Exhibit A. This description is for
     general purposes only - the Project may have different technical attributes not
     described in this Exhibit or described differently in this Exhibit.

                                        Article 2
                                   Contract Documents

 2.1 The Contract Documents are comprised of the following:

          .1    All written modifications, amendments and change m:dei:s. to this
                Agreement issued in accordance with DBIA Document J'ln '\~'\ Standard
                Form of General Conditions of Contract Between Owner-and Design-
                Builder (1998 Edition) as amended ("General Conditions of Contract");

          .2    This Agreement, including all exhibits and attachments1 executed by
                Owner and Design-Builder;

         .3     The General Conditions of Contract;

         .4     Construction Documents prepared in accordance with Section 2.4 of the
                General Conditions of Contract along with a description of the Project,
                attached as Exhibit A;

         .5     Attached as Exhibit B, Design-Builder's Applications for Payment.

         .6     Attached Exhibit C, Design-Builder's Certificate of Insurance .

         .7     Attached Exhibit D, Payment and Performance Bonds .

         .8     Attached as Exhibit E, the list of drawings as of the effective date of this
                Agreemen~   which may be modified.

                                        Article 3
                                Interpretation and Intent

3.1 The Contract Documents are intended to permit the parties to complete the Work and
all obligations required by the Contract Documents within the Contract Time(s) for the
Contract Price. The Contract Documents are intended to be complementary and
interpreted in harmony so as to avoid conflict, with words and phrases interpreted in a
manner consistent with construction and design industry standards. In the event of any
inconsistency, conflict, or ambiguity between or among the Contract Documents, the
Contract Documents shall take precedence in the order in which they are listed in Section
2.1 hereof.

3.2 Terms, words and phrases used in the Contract Documents, including this Agreement,
shall have the meanings given them in the General Conditions of Contract.

154912 2066.1                                2

                                                                                               161
3.3 The Contract Documents form the entire agreement between Owner and Design-
Builder and by incorporation herein are as fully binding on the parties as if repeated
herein. No oral representations or other agreements regarding the Work have been made
by the parties except as specifically stated in the Contract Documents.

                                      Article 4
                              Ownership of Work Product

4.1 Work Product. All drawings, specifications and other documents and electronic data
furnished by Design-Builder to Owner under this Agreement ("Work Product") are
deemed to be instruments of service and Design-Builder shall retain the ownership and
property interests therein, including the copyrights thereto.

4.2 Upon Owner's payment in full for all Work perfonned under the Contract
Documents, the drawings, specifications, models, renderings, work product, instruments
of service and other documents shall become the property of the Owner. Owner may
utilize such drawings, specifications, models, renderings, work product, instruments of
service and other documents only for the repair, maintenance, modification, expansion or
renovation of the Project. Nevertheless, it is understood by Owner that all such
Drawings, Specifications, models, renderings, work product, instruments of service and
other documents may be inappropriate for use in the construction of any other project.
Therefore, Design-Builder shall not be responsible for the use or workability of such
drawings, specifications, models, renderings, work product, instruments of service and
other documents in connection with any project other than the Project for which they
were specifically prepared. OWNER SHALL INDEMNIFY, DEFEND AND HOLD
DESIGN-BUILDER HARMLESS OF AND FROM ANY AND ALL CLAIMS,
DEMANDS AND CAUSES OF ACTION, INCLUDING ATIORNEY'S FEES AND
LITIGATION COSTS, ARISING OUT OR RELATING TO OWNER'S USE OF
DRAWINGS, SPECIFICATIONS, MODELS, RENDERINGS, WORK PRODUCT,
INSTRUMENTS OF SERVICE AND OTHER DOCUMENT FOR THIS PROJECT ON
ANY OTHER PROJECT.

                                       Article 5
                                     Contract Time

5.1 Date of Commencement. The Date of Commencement shall be June 21, 2006 ("Date
of Commencement").

5.2 Substantial Completion and Final Completion

5.2.1 The Project will be completed in two phases. The First Phase ("Phase l ")shall be
the substantial completion of facilities (excluding the support building) to be able house
500 inmates and shall be substantially completed within 40 days of the Date of
Commencement. The Second Phase ("Phase 2") will be the substantial completion of
faci1ities to be able to house an additional 1500 imnates (for a total of 2000 inmates), as
well as substantial completion of the support building, within 90 days of the Date of

154912 2068.1                               3

                                                                                              162
 Commencement. The substantial completion of Phase 2 shall be referred to in the
 Contract Documents as the "Scheduled Substantial Completion Date."

 5.2.2 Intentionally left blank.
 5.2.3 Final Completion of the Work, including the support building, shall be achieved
 120 days after the Date of Commencement.

 5.2.4 AU of the dates set forth in this Article 5 ("Contract Time(s)") shall be subject to
 adjustment in accordance with the General Conditions of Contract. The Contract Time
 shall be extended if ICE grants time extensions to Owner and/or Willacy County, Texas,
 for the same amount of time granted by ICE, unless agreed otherwise.

 5.3 Time is of the Essence. Owner and Design-Builder mutually agree that time is of the
 essence with respect to the dates and times set forth in the Contract Documents.

5.4 Liquidated Damages. Design-Builder understands that if Substantial Completion is
not attained by the Scheduled Substantial Completion Date, Owner will suffer damages
which are difficult to determine and accurately specify. Design-Builder agrees that if
Substantial Completion is not attained by thirty (30) days after the Scheduled Substantial
Completion Date (the "LO Date"), Designer-Builder shall pay Owner Twenty Five
Thousand Dollars ($25,000) as liquidated damages for each day that Substantial
Completion extends beyond the LD Date. The liquidated damages provided herein shall
be in lieu of all liability for any and all extra costs, losses, expenses, claims, penalties and
any other damages, whether special or consequential, and of whatsoever nature incurred
by Owner which are occasioned by any delay in achieving Substantial Completion.

                                         Article 6
                                       Contract Price

6.1 Contract Price. Owner shall direct the Trustee to pay Design-Builder's Applications
for Payment attached to this Agreement in the total sum of Fifty Million Dollars
($50,000,000) ("Contract Price"), subject to adjustments made in accordance with the
General Conditions of Contract.

6.2 Materials incorporated into this project are exempt from State Sales tax according to
provisions of the Texas Tax Code, Chapter 151, Subsection H. The Owner shall provide
to Design-Builder a limited sales, excise and use tax permit or exemption certificate
which shall enable Design-Builder to buy the materials to be incorporated into the Work
without paying tax due at time of purchase. This is a separated contract as that term is
used the Texas Tax Code and applicable Texas law and the Owner agrees and
acknowledges that it is purchasing the material for the Work separately from the labor for
the Work. Material for the Work totals $19,997,000 and labor for the Work totals
$30,003,000. This paragraph is meant to meet the separated contract definition under the
Texas Tax Code and the laws of Texas.

154912 2068.1                                 4

                                                                                                   163
 6.3. Upon Substantial Completion of the Project, Design Builder will provide Owner a
 certification that the Project has been substantially completed. Design-Builder will also
 provide a final release for all payments made by Owner and a consent of surety. Upon
 Final Completion, Design-Builder shall supply a list of all subcontractors utilized by
 Design-Builder and all applicable warranties.

6.4 Design-Builder guarantees to complete the Project for the Contract Price, which
cannot be modified by either party except by a Change Order signed by both parties
pursuant to Article 9 of the General Conditions.

                                        Article 7
                                  Procedure for Payment

7 .1 Progress Payments

7.1.l Design-Builder's Applications for Payment are attached to this Agreement as
Exhibit B. By the execution of this Agreement, Owner hereby approves the Applications
for Payment and agrees to take all actions necessary to fund such Applications for
Payment.

7.1.2 Owner agrees that the Trustee can pay the Applications for Payment upon
submission by Design-Builder of the Applications for Payment to the Trustee.

7 .2 Source of Funds. Design-Builder and Owner acknowledge and agree that the funding
for payments due under this Agreement shall come from the Construction Fund
established pursuant to the Trust Indenture by the Trustee, U.S. Banlc, N.A. (the
"Trustee").

7.3 (Intentionally Left Blank)

7 .4 Record Keeping and Finance Controls. In light of the fact that this is a stipulated swn
contract, Design-Builder shall have no obligation to keep records, books, correspondence,
receipts, subcontracts, purchase orders, vouchers, memoranda or other data relating to the
Work and no records shall be open for inspection by any party. Design-Builder agrees to
cooperate with Owner in coajunction with any reporting required of Owner by ICE or the
Federal Government in connection with the Project.

                                          Article 8
                                 (Intentionally Left Blank)

                                       Article 9
                             Representatives of the Parties

154912 2068.1                                5

                                                                                               164
 9 .1 Owner's Representatives

 9.1.1 Owner designates the individuals listed below as its Senior Representatives
 ("Owner's Senior Representatives"), which such individuals have the authority and
 responsibility for avoiding and resolving disputes under Section 10.2.3 of the General
 Conditions of Contract:

 Emilio Vera, President
 Abiel Cantu, Vice-President
 Aurelio Guerra, Secretarytrreasurer
 Noe Loya
 Simon Salinas

 9.1.2 Owner designates the individual listed below as its Owner's Representative, which
 individual has the authority and responsibility set forth in Section 3.4 of the General
 Conditions of Contract: (Identify individual's name, title, address and telephone numbers)
Mr. Emilio Vera, President
The Willacy County Local Government Corporation
190 North 3rd Street
Courthouse Annex
Raymondville, Texas 78580

9.1.3. Owner may designate another representatfVe by providing written notice to Design-
Builder (the "Assigned Representative"). Design-Builder shall reimburse Owner for
Assigned Representative's costs, not to exceed $30,000.

9.2 Design-Builder's Representatives

9.2.1 Design-Builder designates the individual listed below as its Senior Representative
("Design-Builder's Senior Representative"), which individual has the authority and
responsibility for avoiding and resolving disputes under Section 10.2.3 of the General
Conditions of Contract:

Mr. Philip K. Packer
President ofHMC Contracting South Texas, L.L.C.
4130 Bellaire Blvd., Suite 210
Houston, Texas 77025-1044
(713) 665-1100

9.2.2 Design-Builder designates the individual listed below as its Design-Builder's
Representative, which individual has the authority and responsibility set forth in Section
2.1. l of the General Conditions of Contract:
Mr. Philip K. Packer
President of HMC Contracting South Texas, L.L.C.
4130 Bellaire Blvd., Suite 210

154912 2068.1                               6

                                                                                              165
 Houston, Texas 77025-1044
 (713) 665-1100

                                       Article 10
                                   Bonds and Insurance

 10.1 Insurance. Design-Builder shall procure in accordance with Article 5 of the General
 Conditions of Contract the insurance coverages set forth iri Exhibit C.

10.2 Bonds and Other Perfonnance Security. Design-Builder shall provide the folJowing
performance bond and labor and material payment bond or other performance security:

See Exhibit D.

                                        Article 11
                                     Other Provisions

11.1 Other provisions, if any, are as follows:   (Insert any additional provisions)

         11.1.1        Willacy County, Texas shall be a direct, third party beneficiary of
                       this Agreement and shall be bound by the dispute resolution
                       procedures contained in Article 10 of the General Conditions of the
                       Contract.

In executing this Agreement, Owner and Design-Builder each individually represents that
it has the necessary financial resources to fulfill its obligations under this Agreement, and
each has the necessary corporate approvals to execute this Agreement, and perform the
services described herein.

OWNER:                                                                 DESIGN-BUILDER:
THE WILLACY COUNTY LOCAL                                               HMC CONTRACTING
GOVERNMENT CORPORATION                                                 SOUTI-1 TEXAS, L.L.C.

154912 2068.1                                7

                                                                                                166
                       7--
                         ~·   ~/
                                   .
            C ..~&'           ~,-
                       .

       President

  .)
_./

       154912 2068.1                8

                                        167
                                          EXHIBIT "An
                                       LIST OF DRAWINGS

                     Willacy 2000 Bed Federal Temporary Detention Facility
                                     1800 Industrial Drive
                                  Raymondville, Texas 78580

       Sheet                              Title                    Date      Addendum
 Cl of B        Sheet Title                                      06/14 '06
C2of8           Gradina Plan                                     06/14 06
C3of B          Dimension Control Plan                           06J'14 06
C4of8           SWPPP                                            06 14106
CS of B         Water and Sanltarv Sewer Plan                    06, 14 06
C6 of B         S.H. 186 R.O. Water and Sanltarv Sewer Aerial    06/14, 06
C7of 8          Off-Site Water and Sanitarv Sewer Plan           06/14,'06
CB ofB          Sanitary Sewer Forced Main from S.H. 186         06/14 06
A0.1            General Information                              06/14/06
A1.0            Phasina Site Plan                                06/14/06
Al.1           Site Plans and Details                            06/14/06
A2.1           Overall Admin Floor Plan                          06/14 06
A2.1A-B        Admln Aoor Plan Areas "A" and "B"                 06/14/06
A2.2           Housina Floor Plan                                06/14/06
A2.3           Overall Admin Reflected CellinQ Plan              06/14/06
A2.4           Admin Reflected Celling Plan Areas "A" and "B"    06/14/06
A3.1           Admln Exterior Efevations                         06/14/06
A8.1           Wall tvoes/Miflwork elevatlons/Millwork details   06/14/06
51.0           General Notes                                     06/14/06
52.0           Foundation Plan and Sections                      06/14/06
52.1           Foundation Plan                                   06/14/06
52.2           Foundation Sections                               06/14/06
P06126.0       70.0' x 205.0' Corrections Facllitv               06/13/06
P06126.1       Column Base Lavout                                06/13/06
P06126.2       70.0' x 205.0' Concrete Details                   06/13/06
S-1            70.0' Structures Section and Base Details         06/14/06
S-2            70.0' Structure Purlln and Solice Details         06/14/06
5-3            70.0' Hemispherical End Details                   06/14/06

                                                                                        168
     HMC Contracting South Texas, L.L.C.
 SOLD TO:       The Willacy County Local Government Corporation
                546 W. Hidalgo
                Raymondville, Texas 78580

 Project        Willacy County 2000 Bed ICE Facility        Invoice Date: June 22, 2006
                Pay Application No. 1

                           Description                                     Amount

Trustee to fund@ Financial Closing                                         $25,000,000.00

                                                     SUB-TOTAL            $25,000,000.00

                                                          TOTAL           $25,000,000.00

WIRING INSTRUCTIONS

FROST NATIONAL BANK
HOUSTON,TEXAS77040

ROUTINGNO.: 114000093

HMC CONTRACTING SOUTH TEXAS, L.L.C.
ACCOUNTNO.: 5099-46349

Submitted to the Trustee pursuant to Article 7.1.2, for the payment due from the Trustee.

                        4130 Bellaire Boulevard, Suite 210
                              Houston, Texas 77027
                  Telephone 713.665.1100 Facsimile 713.665.4944

                                                                                            169
     HMC Contracting South Texas, L.L.C.
SOLD TO:       The Willacy County Local Government Corporation
               546 W. Hidalgo
               Raymondville, Texas 78580

Project        Willacy County 2000 Bed ICE Facility        Invoice Date: June 22, 2006
               Pay Application No. 2

                           Description                                     Amount

Trustee to fund 30 days after payment of Pay Application No. 1            $12,500,000.00

                                                     SUB-TOTAL            $12,500,000.00

                                                          TOTAL           $12,500,000.00

WIRING INSTRUCTIONS

FROST NATIONAL BANK
HOUSTON, TEXAS 77040

ROUTING No.: 114000093

HMC CONTRACTING SOUTH TEXAS,      L.L.C.
ACCOUNTNO.: 5099-46349

Submitted to the Trustee pursuant to Article 7.1.2, for the payment due from the Trustee.

                         4130 Bellaire Boulevard, Suite 210
                               Houston, Texas 77027
                   Telephone 713.665.1100 Facsimile 713.665.4944

                                                                                            170
      HMC Contracting South Texas, L.L.C.
 SOLD TO:       The Willacy County Local Government Corporation
                546 W. Hidalgo
                Raymondville, Texas 78580

 Project:       Willacy County 2000 Bed ICE Facility        Invoice Date: June '12, 2006
               Pay Application No. 3

                            Description                                    Amount

 Trustee to fund 30 days after payment of Pay Application No. 2            $12,500,000.00

                                                     SUB-TOTAL            $12,500,000.00

                                                           TOTAL          $12,500,000.00

WIRING INSTRUCTIONS

FROSTNATJONAL BANK
HOUSTON,TEXAS77040

ROUTING No.: 114000093

HMC CONTRACTING SOUTH TEXAS,      L.L.C.
ACCOUNT No.: 5099-46349

Submitted to the Trustee pursuant to Article 7.1.2, for the payment due from the Trustee.

                        4130 Bellaire Boulevard, Suite 210
                              Houston, Texas 77027
                  Telephone 713.665.1100 Facsimile 713.665.4944

                                                                                            171
          ACORD.                   CERTIFICATE OF LIABILITY INSURANCE                                                                                     CSR JN
                                                                                                                                                    3-HALJ:M
                                                                                                                                                                       I          OAT& (MMIDOIYYYYJ
                                                                                                                                                                                     07/07/06
I   l'IWOUCER                                                                                       THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION
                                                                                                    ONLY AND CONFERS NO RIGHTS UPON THE C!RT1FICATE
     le ~ransportation Group, Ltd.                                                                  HOLDER. THIS CERTIFICATE DOES NOT AMEND, EXTEND OR
    illll Wilcrest Green, 1325                                                                      ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW.
    Houston TX 77042
    Phone:713-785-6785 rax:713-7&5-B7&5                                                          INSURERS AFFORDING COVERAGE                                                        NAIC#
    IN~
                                                                                                  INSURER"'-     l l • t - t. . .l'uqlUo JdnH     z....
                                                                                                  INSURERS:

                       nxas.
                       HMC Contractin9 South
                              LLC
                         30 Bellaire l~vd. 1210
                       Houston TX 770
                                                                                                 INSURERC:
                                                                                                 INSURERO:
                                                                                                                                                                                               -·--
                                                                                                 INSURERE
    COVERAGES
        THE POLICIES Of INSUR!'J>ICE LISTED BEi.OW HAVE BEEN ISSUED TO THE INSURED NAMED /ISOVE FOR THE POI.ICY PERIOD INDICATED NOTWITI ~ST)ljl/()ING
        />NYREOUIRE~NT. TERM OR CONDITION OF /'HI CONTRACT OR OTHER OOCLMENT WITii RESPECT TO WICH THIS CERTIFICATE MAY BE ISSUED OR
        MAY PERTAIN, THE INSURAJ>iCE AFFORCEO BY TH: POLICIES DESCRIBED HEREIN IS SUB..ECT TO ALL THE TERMS. EXCLLSIONS AND CONDfTIONS Of SUCH
        POLICIES AGGREGATE LIMITS SliO'l\"N MAY HAVE BffN REDUCED DY PAID CLAIMS

    i.m    ~               'l'll'E OF -..RANCE                    POLICY NUMBER               Dll11i .~ ...        11AT1i IMllllWm')                                 LIMITS

                -GENERAL UA81UTY

                - :J   COMMERCIAL GENERAL LIABILITY
                                                                                                                                        EACH OCCURRENCE

                                                                                                                                        ~(&oCN.nc.1                           's
                -          CLAIMS MADE     D     OCCl.R                                                                                 ~D
                                                                                                                                       >---·
                                                                                                                                               EXP (Any one person)           $

                -                                                                                                                      PERSON.al. & ADV 1"4.AJRY
                                                                                                                                        GENERAL AGGREGATE
                                                                                                                                                                              •
                                                                                                                                                                              $
                                                                                                                                                                                                      ·-
                -GENt AGGREGAlE LIMIT l'PPllES PER                                                                                      PROOUCTS • CO"IPIOP AGG            s
                -1POLICYn~                   nLOC                                                                                                                          -----
                AUTOMOBILE LIABILITY
               ,_..                                                                                                                    Cot.elNED SINGLE LIMIT                 $
                                                                                                                                       (Ee accident)
                -      ANY ALITO
                       ALL OWNED ALITOS
                 -                                                                                                                     BOOIL Y INJURY

               -,.._   SCHEDULED ALITOS
                       HIRED AUTOS
                                                                                                                                       {Pe< person)
                                                                                                                                                                              '
                                                                                                                                       EIODIL Y INJl.RV                       $
                       NON-OWNt;ll !WTOS                                                                                               (Per 1cc1dertl
               ,.._
               ,.._                                                                                                                    PROPERTY DA'llAGE
                                                                                                                                       (Per eccidort)
                                                                                                                                                                              '
               FlllARAGEUABLllY

                       ANY AUTO
                                                                                                                                       AUTO ONL V • EAACCIDENT

                                                                                                                                       OTHER JtWi
                                                                                                                                       AUTOONLV:
                                                                                                                                                              EAACC
                                                                                                                                                                     AGG
                                                                                                                                                                              '
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               :Joccun D                                                                                                                -··
                                                                                                                                       AGGREGATE                              '
                                          CLAIMS r.wJE
                                                                                                                                                                           '
               =i      DEOUCTIBLE
                       RETENflON      $
                                                                                                                                                              -·~'
                                                                                                                                                                           '  $
                                                                                                                                                                              I
           WORKERS COMPENSATION NID
           Efil'LOYERS' LIABILITY
                                                                                                                                              lrciRV'Lw I IVEit
                                                                                                                                       E L EACH ACCIDENT                      $
           ANY PROPRIETOflA"AATNER/EXECUTIVE
           OfflCERIMEhEER EXO.UDEO?
           If VU•. doscr1be tnder
           SPECIAL PROVISIONS b -
                                                                                                                                       E L. DISEASE • EA EMPLOYEE
                                                                                                                                       EL. DISEASE· POLICY LIMIT
                                                                                                                                                                           '
                                                                                                                                                                           I
           OTHl!R

    A      suilders Risk                                  IMC   120667643 001                   07/07/06              11/07/06                  Per occ.                          $50,000,000
                                                                                                ,......,_                                       Wind oco.                         $10,000,000
,w~-· "" ,,_,OF QPERA,.....,.. f LOC:A11yow r ._.es f                         Y•

 ae:  Willacy County 2000 Bed ICB !'acility.
 Deductible•: $50,000 per occurrence; $250,000 or Sl of the Total Value•
 Installed Of the project(s) suffering loss at the time of loss whichever i•
 greAter.

CERTIFICATE HOLDER                                                                               CANCELLATION
                                                                                                  SHOUl.11 Nff Of THE ABOVE DESCRIBED POLICES BE CANCELLED BEFORll TI-E EXPIRATION
                                                                                WILCllY
                                                                                                  DATE THEREOF. TIE ISSUING IN8URM WILL ENDEAVOR TO MAIL                   30         DAYS wmTEN
                     Willacy County Public Facility                                               NOTICE TO THE CERTIFICATE HOl.DER NAMED TO THE l.&FT, BL.IT FAILURE TO DO SO SHALL
                     Corporation                                                                  IMPOIE NO OBUOATION OR LIABILl'IY OF Ntf KlND UPON ™E INSURER, ITS AGEHTS OR
                     546 w. Hir:Salgo street
                                                                                                  RE!PRESEHTATIVE8.
                     Raymondville, TX 78580

ACORD 2512001/Dll}                                                                                                                                        @ACORD CORPORATION 1988

                                                                                                                                                                                            172
      AC080.                    CERTIFICATE OF LIABILITY INSURANCE                                                                                             CSR .JN
                                                                                                                                                          3-IUU.DS
                                                                                                                                                                           I         DAlli fMMIDDNYYYI
                                                                                                                                                                                           07/07/06
IPROOUCER                                                                                                  THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION
                                                                                                           ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE
     ~e   Transportation Group, Ltd.                                                                       HOLDER. THIS CERTIFICATE DOES NOT AMEND, EXT!ND OR
 11111 Wilcrest Green, 1325                                                                                ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW.
 Houston '1'X 77042
  Phone:713-785-6785                              rax:713-7B5-B785                                       INSURERS AFFORDING COVERAOE                                                       NAIC#
                                                                   ·--~
 INSURED                                                                                                 INSURER A:      W•1tchMte1: Sut:plus Lin•• lnJ..
                                                                                                         INSURERS
                   HMC contracting south                                                                 INSURERC;
                   Texas. LLC
                   4130 Bellai~e Blvd. #210                                                              INSURERD:
                   Houston TX 7025
                                                                                                         INSURER E'

 COVElllAGES
     n£ POLICIES Of INSl.RANCE LISTED BElOW HAVE BEEN ISSUED TO THE INS!JlED NAMED /'BOVE FOR Tl-IE POLICY PERIOD INDICATED NOTWITHSTANDING
     ANY REQUIREMENT. TERM OR COfl[)JnON Of N>IV CONTRACT OR 01lER DOCUMENT WITrl RESPECT TO WHICH Tl-115 CERTIFICATE lllAY BE ISSUED OR
     MAY PERTAIN. THE INSU1ANCE Af'FORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS, EXCLUSIONS AND CONDITIONS OF SIJCH
     POLICIES AGGREGATE LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS

"LiR NSRi                TIPE OF INSURANCE                                POl.ICf   NUMBER             i>Aii~~....         UATE•-u~                                      L!Mln

              GENERAL LIABIUTY                                                                                                                  EACH OCCURRENCE                  $
             -                                                                                                                                  PR£MISES~"::;~.,
            -
            ._
                   COMMER<: 1AL GENERAL l IABILllY

                   :=J   CLAIMS MADE       D          OCCUR                                                                                     MEO EXP (Any one person)
                                                                                                                                                                                 $
                                                                                                                                                                                 $
                                                                                                                                                                                      ·-

            --                                                                                                                                  PERSONAL & NJV INJLA1Y
                                                                                                                                               GENERAi. AOORFGAlE
                                                                                                                                                                                 $
                                                                                                                                                                                 $
             GENt. AGGREGATE LIMIT APPLIES PER

             n     POLICY   r111&             nlOC
                                                                                                                                                PRODUCTS • COWP/OP AGG
                                                                                                                                                                                 '
            --
             AVTOMOBILE LIAlllLITY

                   Nl'INJTO
                   H.l D'MED AIJfOS
                                                                                                                                               COMBll'ED SING! E LIMIT
                                                                                                                                               [Ee SCCldOnl)                     $

            -      !iOElll.lEO AUfOS
                                                                                                                                               BOOIL Y IN..URY
                                                                                                                                               (Per pmon)                        $
            --     HIREDMJTO&
                                                                                                                                                                                             ···----
            -                                                                                                                                  BOOIL Y INJURY

            -- NCll+O't'IM!O AIJl'OS
                                                                                                                                               {Per acclaert)
                                                                                                                                                                               '
            -                                                                                                                                  PROPERTY DAA'ACE
                                                                                                                                               {Per ecctderi)                  •
             GARAGE UABUTY                                                                                                                     AUTO OM. Y • EA ACCIDENT          $
                                                                                                                                                                                                       -----
                                                                                                                                                                               •'
                                                                                                                                                                   EAACC
            RANYl'JJTO                                                                                                                         011-I
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                                                                                                                                                                      N3G
                                                                                                                                               EACH OCCURRENCE
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            :J     OCCUR        D        CLAIMS M'IDE                                                                                          AGGREGATE                       $'
            =i     DEDUCTIBLE
                   RElENTION         $
                                                                                                                                                                               $

                                                                                                                                                                               •'
       WORKER8 COMPENSATION AND
       EMPLOYER8' UABll.rrY
                                                                                                                                                  lrciiWi:iMiiS I 1-Eii
                                                                                                                                               EL EACH ACCIDENT                $
       /WY PROPRIETOR/PllITTNER/EXECUTlVE
       OFFICERMBles: $50,000 per occurrence; $250,000 o.r 5% of the Total values
Installed Cf the projec::t(s) suffering loss at the time Of loss whichever is
greater.

CERTlflCATE HOLDER                                                                                      CANCELLATION
                                                                                                         SHOULD Nfi OF THE ABOVE DESCRIBED l'OLICIE9 BE ClololCELLED BEFORE TIE E~PIRATION
                                                                                           USBADl!!N
                 u.s. Bank National ASsociation                                                          DATE THEREOF, THE 188UING INSURER WLL ENDEAVOR TO MAL              30              DAYS Wllll"TEN
                 As 'l'rustee                                                                            NOTICE TO THE   CER11~1CATE   MOLDER NAMED TO THE LEFT, BUT FAl.URE TO DO SO SHAU.
                 950 17th Street, Suite 650                                                              IMPOSE NO OBLIGATION OR LIMIL11Y Of~ KIND UPON THE INSURER, ITS AGENTS OR
                 Mail stop CNDT 0665
                 Denver, CO 80202                                                                        REPRESliNTAllVES,

ACORD 25 12001/08)                                                                                                                                             Ii ACORD CORPORATION 1988

                                                                                                                                                                                                 173
    The Willacy County Local Government Corporation                            PAYMENT
                                                                                  BOND

                                                                           Bond #61BCSEB5978
                                        PAYMENT BOND

   STATE OF TEXAS              §
                               §
   COUNTY OF WILLACY           §

   KNOWN ALL MEN BY THESE PRESENTS: That HMC Contracting South Texas, L.L.C., as
  principal, and Hartford Fire Insurance Company authorized under the laws of the State of Texas
  to act as surety on bonds for principals, are held and finnly bound unto The Willacy County
  Local Government Corporation as Obligee (Owner), in the penal sum of Fifty Million DoJJars
  ($50,000,000.00) for the payment whereof, the said Principal and Surety bind themselves, and
  their heirs, administrators, executors, successors arid assigns, jointly and severally, by these
  presents:

 WHEREAS, the Principal has entered into a certain written contract with the Owner, effective as
 of the 29th day of June, 2006, (the "Contract"} to commence and complete the construction of
 certain improvements described as follows:

 Willacy County 2000 Bed ICE Facility
 Willacy County, Texas

 which Contract, including the Contract Documents as defined therein, is hereby referred to and
 made a part hereof as fulJy and to the same extent as if copied at length herein.

NOW THEREFORE, THE CONDITION OF THIS OBLIGATION IS SUCH, that if the said
Principal shall pay all claimants supplying labor or material to it or a subcontractor in the
prosecution of the Work provided for in said Contract, then, this obligation shall be void;
otherwise to remain in full force and effect;

PROVIDED, HOWEVER, that this bond is executed pursuant to the provisions of Chapter 2253
of the Texas Govenunent Code as amended and all liabilities on this bond shall be determined in
accordance with the provisions of said Statute to the same extent as if it were copied at length
herein.

Surety, for value received, stipulates and agrees that no change, extension of time, alteration or
addition to the terms of the Contract, or to the Work performed thereunder, or the plans,
specifications, or drawings accompanying the same, shall in any way affect its obligation on this
bond, and it does hereby waive notice of any such change, extension of time, alteration or
addition to the tenns of the Contract, or to the Work to be perfonned thereunder.

154173 1562.0
                                                                                                     174
       The Willacy County Local Government Corporation
                                                                               PAYMENT
                                                                                  BOND

      IN WITNESS
             1        WHEREOF, the said Principal and Surety have signed and sealed this instrument
      this 28 h day of June, 2006.

     NOTICE: THE ADDRESS OF THE SURETY COMPANY TO WHICH ANY NOTICE
        OF CLAIM SHOULD BE SENT MAY BE OBTAINED FROM THE TEXAS
      DEPARTMENT OF INSURANCE BY CALLING ITS TOLL-FREE TELEPHONE
                          NUMBER: 1-800-252-3439.

154173 1562.0

                                                                                                175
    The WiUacy County Local Goverrunent Corporation                      PERFORMANCE
                                                                                BOND

                                                                             Bond #61BCSEB5978
                                      PERFORMANCE BOND

   STATE OF TEXAS               §
                                §
   COUNTY OF WILLACY            §

  KNOWN ALL MEN BY THESE PRESENTS: That HMC Contracting South Texas, L.L.C., as
  principal, and Hartford Fire Insurance Company authorized under the laws of the State of Texas
  to act as surety on bonds for principals, are held and firmly bound unto The Willacy County
  Local Government Corporation as Obligee (Owner), in the penal sum of Fifty MiJJion Dollars
  ($50,000,000) for the payment whereof, the said Principal and Surety bind themselves, and their
  heirs, administrators, executors, successors and assigns, jointly and severaUy, by these presents:

  WHEREAS, the Principal has entered into a certain written contract with the Owner, effective as
  of the 291h day of June 2006, (the "Contract") to commence and complete the construction of
  certain improvements described as follows:

 WilJacy County 2000 Bed ICE Facility
 Willacy County, Texas

 which Contract, induding the Contract Documents as defined therein, is hereby referred to and
 made a part hereof as fully and to the same extent as if copied at length herein.

 NOW THEREFORE, THE CONDITION OF THIS OBLIGATION IS SUCH, that if the said
 Principal shall faithfully perform said Contract Work, then this obligation shall be void;
 otherwise to remain in full force and effect;

Whenever, Contractor shalJ be, and be declared by Owner in a written notice to Surety, to be in
default under the Contract, the Owner having performed Owner's obligations thereunder, the
Surety may promptly remedy the default, or shall promptly:

         I.     Complete the Contract in accordance with its tenns and conditions, or

        2.     Obtain a bid or bids for completing the Contract in accordance with its terms and
conditions, and upon determination by Surety of the lowest responsible bidder, or, if the Owner
elects, upon determination by the Owner and the Surety jointly of the lowest responsible bidder,
arrange for a contract between such bidder and Owner, and make available as Work progresses
(even though there should be a default or succession of defaults under the contract or contracts of
completion arranged under this paragraph) sufficient funds to pay the cost of completion less the
balance of the Contract Price; but not exceeding, including other costs and damages for which

154172 1562.0
                                                                                                      176
     The WiJlacy County Local Government Corporation                         PERFORMANCE
                                                                                    BOND

     the Surety may be liable hereunder, the amount set forth in this first paragraph hereof. The term
    ..balance of the Contract Price," as used in this paragraph, shall mean the total amount payable
    by Owner to Contractor under the Contract and any amendments thereto, less the amount
    properly paid by Owner to Contractor.

            Surety shalJ have no further or other obligations other than those set forth above.

           As a condition precedent to coverage under this Bond, Owner must give Surety its
   written notice of Contractor's default no later than ninety one (91) days from the earliest to occur
   of the following: (i) the date of any abandonment or tennination of the Contract; (ii) the date
  final payment is made to the Contractor under the Contract; or (iii) the date Contractor last
  performed Work under the Contract, excluding any warranty work. Any default declared by
  Owner or demand made against the Surety by Owner outside of this time frame is not covered by
  this Bond and Surety shall have no liability therefore.

          Any suit under this bond must be instituted before the expiration of twenty-five (25)
  months from the date on which the right of action accrues, but if this provision is prohibited by
  law or if any Jaw provides for a lesser period of time then it shall be deemed to be amended as so
  to be equal to the minimum period of limitation allowed by such Jaw.

        No right of action shall accrue on this Bond to or for the use of any person or entity other
 than the Owner and its successors or assigns. The terms and conditions of this Bond shall be
 binding upon Contractor, Surety, Owner and their respective successors or assigns.
          Surety, for value received, stipulates and agrees that no change, extension of time,
 alteration or addition to the terms of the Contract, or to the Work performed thereunder, or the
 plans, specifications, or drawings accompanying the same, shall in any way affect its obligation
 on this Bond, and it does hereby waive notice of any such change, extension of time, alteration or
 addition to the terms of the Contract, or to the Work to be perfonned thereunder.

IN WITNESS WHEREOF, the said Principal and Surety have signed and sealed this instrument
this 28th day of June 2006.

154172 1562.0

                                                                                                      177
       The Willacy County Local Government Corporation
                                                                 PERFORl\tlANCE
                                                                         BOND

      Principal, H1'1C Contracting South Texas, L.L.C.

      By:       (~L­
      Title:zf;l:~i-
     AddrlsS: 41:".- i..Jli.1 , 1 ~ :J   1L   1k 11i- 1 /,, _,
     Telephone: (713) 665-1100                    '
     Fax: (713) 665-4944

154172 1562,0

                                                                                  178
                                             HARTFORD FIRE INSURANCE COMPANY
                                                                      Hartford, Connectlcut

                                                                    POWER OF ATTORNEY
                      Know all man by these Presents, That HARTFORD FIRE INSURANCE COMPANY, a corporation duly organized
      under the laws of ltla State of Connecticut, and having its principal office in the Cily of Hartford, County of Hartford, Slate of Connecticut,
      does hereby make, constitute and appoint

                                                            JIM HOWSE and/orJODI N.EAL
                                                                of HOUS1'0N, TEXAS
     Its true and lawful Attorney(s)-ln-Facl, with lull power and aulhority to each ol said Allomey(s)-in-Fac;t. In the.Ir separate capacity if more
     than one is named above, lo sign, execute and ac:lcnowladga any and •ff bonds and Ul1dertakings and other wrl"ngs obligatory in the
     natute lhetaof on behalf of Iha Company In ils business of guaranteeing the fldellty of pefSOOS holding places of public or privare trust:
     guaranteeing the per!om\ance of contn;icts other lhan insurance polcies; guaranteeing the perlormarn;e of insurance contracts where
     surety bonds are accaptecl by stales and municipalities. end executing or guarenlUing bonds and undel1akif1!1S required or permllled in
     all actions 01 ptoeffdings 0t by law aHowed, and to bind HARTFORD FIRE INSURANCE COMPANY thereby as ftilly and to lhe same
    exlenl as if such bGnds and under1akings afld other writings obllgatory in Iha nature thereof were signed by an Executive Offieer of
    HARTFORD FIRE INSURANCE COMPANY and sealed and etteslecl by one olher of such Officers. and hereby ratifies and confirms an
    thar lls said Attorney(s)-ln-Facl may do In pursuance hereof.
   This Power of AUomey is granted under and by aulhorfty of the By-Laws of HARTFORD FIRE INSURANCE COMPANY, ("the Company")
   as amended by the Board of Directors at a meeting duly called and held on July 9, 1997. as follows:

                                                                           ARTICLE       IV

                 SECTION 7. The President or any Vice President or Ass!Slant Vlca-Pruldllftl, acting with any Secimiy or Assistant Seaelafy shal have power
    and    llUlllOlllY lo 9ign and necuta ind attach the seal of the company to bond& and -attaklngs, l1ICllftglVUnee. contracts of Indemnity and other
    wtllift911 obllgaloiy in the llelure thereof, and suC11 lns11ument• so llgnlld and .-tell. with or without the -    SHI, shaM be valld and binding upon
    llleCompall)I

            SECT!QN I. Tiie P!Hidllftl or •'"I Vk:e-PretilMRI or ~ Asliltlnl Va PnttldM! llCtinO wilh any Secretary or Aaslstant SeCl9tl•)'. aliaW have
   power and ..,ll!Orily lo appcrinr, lot p.uposes Ont>/ of •xecutlng and aa.slln!I bonClr. Hd ~ and other writings obfi9alory in rhe nature theJeOf.

                                         rw-..
   one or mot• residllnl Vice Presidents. AISldlftl Assislllnl SllCtei.rles llftd AtlCrnlryll-ln-Fact and It any time to"'"'°"" any cUCll residellt Voce-Presklenr.
   resident Aui«Canl Seet.wty, OI AllOM•)"/n.FllCI, and revolCe Ille - r Md aulllclrily giWll IO him.

              llosolved, lhol UHr .,._...of_,,~        -     ol fie~ ...,. ~. . ._ID ... ~ -               ol - - or lo any c.llllclla ~ lheJelO by

   -
                                                     the -
   oucuted ond eatliledby,....,........,__ ......,.
   lacslmlle, and any sudl power ol-...,        artna •udl r.-..1e slgnalunts or taCllimle Hal Shal be - - -,. -   fie ~nY - .,, such -
                                                  IUl lhdbe walicl-bindlng UP"" N C - I l l . . M.,._mpoclllo llljl bon6 orV--.. lowlllcll Kil
                                                                                                                                                 ro

          In Wttnea Whereof, HARTFORD FIRE INSURANCE COMPANY hlS caused Chase presents to be signed by                                        Jes Asaistanl I/lee
   President, and its c;orporate seal to be hereto affiqd, duly attested by q Secnllary, this 15111 day of September, 1997.
  Attest:

   ~L.a.---                                                                                   cY- ~ ~
                                                                                              HARTFORD FIRE INSURANCE COMPANY

 Richard A. Hermanson. Secretary                                                              John F. Burke, Asaislant Vice President

   STATE OF CONNECTICUT}
                                            SS.
  COUHlY OF HARTFORD

  On this 15th day of September, A.O. 1997, before me penionally came John F. Burke, to me known, who being by me duly sworn. did
  depose and say: that he resides in the County of Haltfon:I. State of Connecticut. that he is the Assistant Vice-President of HARTFORD
  FIRE tNSURANCE COMPANY. the c:orporallon described in end which llll8Qlled the above instrument that he knows the seat of lhe
  aeld corporation: that the seal effilled IO the saJd lnelrument is such corporate seal; that it was 10 affixed by order of the Board of
  Oltedora of said cotporalion and that he signed his name thereto by like oofer.

 STATE OF CONNECTICUT}

 COUNlY OF HARTFORD
                                           SS.                         @~~~
                                                                       Cl:RTIFICATE                    M:rCommisri1111 hpiao1 M. 30, 199!1
          I, the undersigned. Secrelary of HARTFORD FIRE INSURANCE COMPANY. I Connedk:ut Corpotallol\, 00 HEREBY CERTIFY
 that lhe foregoing and attached POWER OF ATTORNEY remains In fua force and has not been revoked; and fuf1hermant, lhat Mic:lo IV.
 Sections 7 and 8 of Iha By-I.awl of HARTFORD FIRE INSURANCE COMPANY, set lofth Ill the Power of Attorney, are hO'N In force.

            Signed amhealed at the City of Haftfonl.                                 Dated Iha      28th            day or      June 1 2006

                                                                                              Robert L. Post, Secretary

Form $JS07·9 (Hll) Printed in U.S.A.
                                                                                                                                                                      179
          DI I A

         DlSIGN·IUflD
         INSTITUTE OF AMERICA

STANDARD FORM OF GENERAL
CONDITIONS OF CONTRACT
BETWEEN OWNER AND
DESIGN-BUILDER

                                180
                                                                 DI I A

                                                                 Dr5161·1UflD
                                                                 INSTllUTE Of AMERICA

              Standard Form of General Conditions
         of Contract Between Owner and Design-Builder
                             This document has been amended and revised from its standard form.

                                                              Table of Contents

Article 1:    General ......................................................................................................................................3

Article 2:    Design-Builder's Services and Responsibilities .........................................................................3

Article 3:    Owner's Services and Responsibilities ......................................................................................6

Article 4:    Hazardous Conditions and Differing Site Conditions .................................................................7

Article 5:    Insurance and Bonds .................................................................................................................7

Article 6:    Payment .....................................................................................................................................8

Article 7:    lndemnification .........................................................................................................................10

Article 8:
              Time .........................................................................................................................................11

Article 9:    Changes to the Contract Price and Time .................................................................................11

Article 10:   Contract Adjustments and Oisputes ......................................................................................... 12

Article 11:
              Stop Work and Termination for Cause ....................................................................................13

Article 12:   Miscellaneous ..........................................................................................................................15

                                                                                                                                                             181
                         Article 1                              1.2.9    Subcontractor is any person or entity retained by
                                                                Design-Builder as an independent contractor to perfonn a
                         General                                portion of the Work and shalJ include materialmen and
                                                                suppliers.
  1.l      Mutual Obligations
                                                                1.2.10 Sub-Subcontractor is any person or entity
 1.1.l    Owner and Design-Builder commit at all times          retained by a Subcontractor as an independent contractor
 to cooperate fully with each other, and proceed on the         to perform any portion of a Subcontractor's Work and
 basis of trust and good faith, to pennit each party to         shall include materialmen and suppliers.
 realize the benefits afforded under the Contract
 Documents.                                                     1.2.J 1 Substantial Completion is the date on which the
                                                                Work, or an agreed upon portion of the Work, is
 1.2       Basic Definitions                                    sufficiently complete so that Owner can occupy and use
                                                                the Project.
 1.2.J   Agreement refers to the executed contract
 between Owner and Design-Builder ,DBIA Document               1.2.12 Work is comprised of all Design-Builder's
 No. 525, Standard Form ofAgreement Between Owner              design, construction and other services required by the
 and Design-Builder c Lump Sum (1998 Edition) as               Contract Documents, including procuring and furnishing
 amended by the parties.                                       all materials, equipment, services and labor reasonably
                                                               inferable from the Contract Documents.
 1.2.2   Day or Days shall mean calendar days unless
 otherwise specifically noted in the Contract Documents.                              Article 2
1.2.3    Design Consultant is a qualified, licensed design            Design-Builder's Services and
professional who is not an employee of Design-Builder,                      Responsibilities
but is retained by Design-Builder, or employed or
retained by anyone under contract with Design-Builder or       2.1       General Services
Subcontractor, to furnish design services required under
the Contract Documents.                                        2.1.1    Design-Builder's Representative shall be
                                                               reasonably available to Owner and shall have the
1.2.4    Hazardous Conditions are any materials, wastes,       necessary expertise and experience required to supervise
substances and chemicals deemed to be hazardous under          the Work.       Design-Builder's Representative shall
applicable Legal Requirements, or the handling, storage,       communicate regularly with Owner and shall be vested
remediation, or disposal of which are regulated by             with the authority to act on behalf of Design-Builder.
applicable Legal Requirements.                                 Design-Builder's Representative may be replaced only
                                                               with the mutual agreement of Owner and Design-Builder.
1.2.5 General Conditions of Contract refer to this
DBIA Document No. 535, Standard Form of Gene1·a/
Conditions of Contract Between Owner and Design-               2.1.2   Design-Builder shall provide Owner with a
Builder ( 1998 Edition) as amended by the parties.             monthly status report detailing the progress of the Work.

1.2.6 Legal Requirements arc all applicable federal,
state and local Jaws, codes, ordinances, rules, reguJations,   2.2      Design Professional Services
orders and decrees of any government or quasi-
govemment entity having jurisdiction over the Project or       2.2.l     Design-Builder shall, consistent with applicable
Site, the practices involved in the Project or Site, or any    state licensing laws, provide through qualified, licensed
Work.                                                          design professionals employed by Design-Builder,
                                                               procured from qualified, independent licensed Design
l.2.7    (lntentionaJJy Left Blank)                            Consultants or from subcontractors/vendors fabricating
                                                               materials and/or equipment for the Project, the necessary
1.2.8 Site is the land or premises on which the Project        design services, including architectural, engineering and
is located.                                                    other design professional services, for the preparation of
                                                               the required drawings, specifications and other design

                                                                                                                   Page 3

                                                                                                                       182
 submittals to permit Design-Builder to complete the            2.6.1    Except as identified in an Owner's Permit List
 Work consi~1ent with the Contract Docwnents. Nothing          which may be attached as an exhibit to the Agreement,
 in the Contract Documents is intended or deemed to            Design-Builder shall obtain and pay for all necessary
 create any legal or contractual relationship between          permits, approvals, licenses, government charges and
 Owner and any Design Consultant.                              inspection fees required for the prosecution of the Work
                                                               by any government or quasi-government entity having
 2.3      Standard of Care for Design Professional             jurisdiction over the Project.
          Services
                                                               2.6.2     Owner shall provide reasonable assistance to
 2.3.1    The standard of care for all design professional     Design-Builder in obtaining those pennits, approvals and
 services performed to execute the Work shall be the care      licenses that are necessary for the design and construction
 and skill ordinarily used by members of the design            of the Project.
 profession practicing under similar conditions at the same
 time and locality of the Project.                             2.7      Design-Builder's Construction Phase
                                                                        Services
 2.4      Design Development Services
                                                              2.7.1     Design-Builder shall provide through itself or
 2.4.1    Design-Builder    has     provided    Owner         Subcontractors the necessary supervision, labor,
 design/conccptua1 submissions that have been approved        inspection, testing, start-up, material, equipment,
 by Owner and are attached as Exhibit A to the                machinery, temporary utilities and other tempordry
 Agreement.                                                   facilities to permit Design-Builder to complete
                                                              construction of the Project consistent with the Contract
2.4.2     Design-Builder may submit to Owner                  Documents.
Construction Documents setting forth in greater detail
drawings and specifications describing the requirements       2.7.2     Design-Builder shall perform all construction
for construction of the Work.            The Construction     activities efficiently and with the requisite expertise, skill
Documents shall be consistent with the intent defined in      and competence to satisfy the requirements of the
the previously approved design submissions identified in      Contract Docwnents. Design-Builder shall at all times
the Agreement. Owner acknowledges that the Project            exercise complete and exclusive control over the means,
will not be designed to meet or comply with any type of       methods, sequences and techniques of construction.
State, Federal or voluntary jail or prison design standards
that may or may not be applicab]e to the Project. Design-     2.7.3   Design-Builder     shaJl    employ       only
Builder shall proceed with construction in accordance         Subcontractors who are duly licensed and qualified to
with the Construction Documents, if any are created.          perfonn the Work consistent with the Contract
                                                              Documents.
2.S      Legal Requirements
                                                              2.7.4     Design-Builder assumes responsibility to Owner
2.5.1     Design-Builder shall perform the Work in            for the proper performance ofthe Work of Subcontractors
accordance with atJ Legal Requirements and shall provide      and any acts and omissions in connection with such
all notices applicable to the Work as required by the         performance. Nothing in the Contract Documents is
Legal Requirements.                                           intended or deemed to create any legal or contractual
                                                              relationship between Owner and any Subcontractor or
2.5.2    The Contract Priceand/orContractTime(s) shall        Sub-Subcontractor, including but not limited to anythird-
be adjusted to compensate Design-Builder for the effects      party beneficiary rights.
of any changes in the Legal Requirements enacted after
the date of the Agreement affecting the performance of        2.7 .S   Design-Builder shall coordinate the activities of
the Work. Such effects may include, without limitation,       all Subcontractors. If Owner performs other work on the
revisions Design-Builder is required to make to the           Project or at the Site with separate contractors under
Construction Documents because of changes in Legal            Owner's control, Design-Builder agrees to reasonably
Requirements.                                                 cooperate and coordinate its activities with those of such
                                                              separate contractors so that the Project can be completed
2.6      Government Approvals and Permits                     in an orderly and coordinated manner without
                                                              unreasonable disruption.

                                                                                                                     Pagc4

                                                                                                                         183
                                                                2.9.1     Design-Builder warrants to Owner that the
 2.7.6     Design-Builder shall keep the Site reasonably        construction, including all materials and equipment
 free from debris, trash and construction wastes to pennit      furnished as part of the construction, shall be new unless
 Design-Builder to perfonn its construction services            otherwise specified in the Contract Documents, of good
 efficiently, safely and without interfering with the use of    quality, in conformance with the Contract Documents and
 adjacent land areas. Upon Substantial Completion of the        free of defects in materials and workmanship. Design-
 Work, or a portion of the Work, Design-Builder shall           Builder's warranty obligation excludes defects caused by
 remove all debris, trash, construction wastes, materials,      abuse, alterations, or failure to maintain the Work by
 equipment, machinery and tools arising from the Work or        persons other than Design-Builder or anyone for whose
 applicable portions thereof to pennit Owner to occupy the     acts Design-Builder may be liable. Nothing in this
 Project or a portion of the Project for its intended use.     warranty is intended to limit any manufacturer's warranty
                                                               which provides Owner with greater warranty rights than
 2.8      Design-Builder's Responsibility for Project          set forth in this Section 2.9 or the Contract Documents.
          Safety                                               Design-Builder will provide Owner with all
                                                               manufacturers• warranties upon either Substantial or Final
 2.8.1   Design-Builder recognizes the importance of           Completion. Where a manufacturer's or third party
 perfomling the Work in a safe manner so as to prevent         warranty has been provided to Owner, Owner agrees that
 damage, injury or loss to (i) all individuals at the Site,    Design-Bui Ider will have oo further liability with respect
whether working or visiting, (ii) the Work, including          to the subject of the manufacturer's or third party
materials and equipment incorporated into the Work or          warranty and Owner agrees to look solely to such
stored on-Site or off-Site, and (iii) all other property at    manufacturer or third party for any warranty claim with
the Site or adjacent thereto. Design-Builder assumes           respect to such items and hereby ·specifically releases
responsibility for implementing and monitoring all safety      Design-Builder of and from any such claims.
precautions and programs related to the performance of
the Work.                                                      2.10     Correction of Defective Work

 2.8.2     Design-Builder and Subcontractors shall comply      2.10.1 Design-Builder agrees to correct any Work that
 with all Legal Requirements relating to safety, as well as    is found to not be in confonnance with the Contract
 any Owner-specific safety requirements set forth in the       Documents, including that part of the Work subject to
 Contract Documents, provided that such Owner-specific         Section 2.9 hereof, within a period of one year from the
 requirements do not violate any applicable Legal              date of Substantial Completion of the Work or any
Requirement. Design-Builder will immediately report in         portion of the Work, or within such longer period to the
writing any safety-related injury, loss, damage or accident    extent required by the Contract Documents, provided
arising from the Work to Owner's Representative and, to        such work is not the subject of a manufacturers warranty
the extent mandated by Legat Requirements, to all              as described in Article 2.9.1 above.
government or quasi-government authorities having
jurisdiction over safety-related matters involving the         2.10.2 Design-Builder shaH, within seven (7) days of
Project or the Work.                                           receipt of written notice from Owner that the Work is not
                                                               in conformance with the Contract Documents, take steps
2.8.3     Design-Builder's responsibility for safety under     to commence correction of such nonconforming Work,
this Section 2.8 is not intended in any way to relieve         including the correction, removal or replacement of the
Subcontractors and Sub-Subcontractors of their own             nonconforming Work and any damage caused to other
contractual and legal obligations and responsibility for (i)   parts of the Work affected by the no~conforming Work,
complying with all Legal Requirements, including those         provided such work is not the subject of a manufacturer's
related to health and safety matters, and {ii) taking all      or third party warranty as described in Article 2.9.1
necessary measures to implement and monitor all safety         above.     If Design-Builder fails to commence the
precautions and programs to guard against injury, losses,      necessary steps within such seven (7) day period, Owner,
damages or accidents resulting from their performance of       in addition to any other remedies provided under the
the Work.                                                      Contract Documents, may provide Design-Builder with
                                                               written notice that Owner will commence correction of
2.9      Design-Builder's Warranty                             such nonconforming Work with its own forces. If Owner
                                                               does perfonn such corrective Work, Design-Builder shall
                                                               be responsible for all reasonable costs incurred by Owner

                                                                                                                   Page5

                                                                                                                      184
 in performing such correction. If the nonconforming
 Work creates an emergency requiring an immediate               3.4       Owner,s Representative
 response, the seven (7) day periods identified herein shall
 be deemed inapplicable.                                        3.4. 1     Owner's Representative shall be responsible for
                                                                providing Owner-supplied information and in a timely
 2.10.3 The one year period referenced in Section 2.10.1        manner to pennit Design-Builder to fulfill its obligations
 above applies only to Design-Builder's obligation to           under the Contract Documents. Owner's Representative
 correct nonconforming Work not the subject of a                shall also provide Design-Builder with prompt notice ifit
 manufacturer's or third party warranty and is not intended     observes any failure on the part of Design-Builder to
 to constitute a period oflimitations for any other rights or   fulfill its contractual obligations, including any errors,
 remedies Owner may have regarding Design-Builder's             omissions or defects in the performance of the Work.
 other obligations under the Contract Documents.                Failure to provide such notice to Design-Builder shall
                                                                constitute a complete waiver of any claims by Owner
                        Article 3                               relating to such matters.

 Owner's Services and Responsibilities                          3.5      Government Approvals and Permits

 3.1      Duty to Cooperate                                     3.5.1     Owner shall provide reasonable assistance to
                                                                Design-Builder in obtaining those permits, approvals and
3.1.1    Owner shall, throughout the performance of the         licenses that are Design-Builder's responsibility.
Work, cooperate with Design-Builder and perfonn its
responsibilities, obligations and services in a timely          3.6      Owner,s Separate Contractors
manner to facilitate Design-Builder's timely and efficient
performance of the Work and so as not to delay or               3.6.1     Owner is responsible for all work performed on
interfere with Design-Builder's performance of its              the Project or at the Site by separate contractors wider
obligations under the Contract Documents.                       Owner's control. Owner shall contractually require its
                                                                separate contractors to cooperate with, and coordinate
3.1.2     If required by this Agreement, Owner shall            their activities so as not to interfere with, Design-Builder
provide timely reviews and approvals of submissions             in order to enable Design-Builder to timely complete the
consistent with the tumarowtd times set forth in Design-        Work consistent with the Contract Documents.
Builder' s schedule.
                                                                3.7      Owner,s Responsibility for Maintenance
3.2       Furnishing of Services and Information
                                                                3.7.1     Owner shall be responsible for maintaining the
3.2.1    Owner is responsible for securing and executing        Work after Final Completion by Design-Builder. Owner
all necessary agreements with adj accnt land or property        warrants and represents to Design-Builder that it will
owners and any easements that are necessary to enable           provide all necessary maintenance and upkeep of the
Design-Builder to perfonn the Work. Owner is further            structure, systems, equipment and appurtenances
responsible for all costs, including attorneys' fees,           furnished and installed by Design-Builder hereunder.
incurred in securing these necessary agreements.

3.3      Financial Information

3.3.1    Design-Builder shall cooperate with the
reasonable requirements of Owner's lenders or other
financial sources.     Notwithstanding the preceding
sentence, after execution of the Agreement, Design-
Builder shall have no obligation to execute for Owner or
Owner's lenders or other financial sources any documents
or agreements that require Design-Builder to assume
obligations or responsibilities greater than those existing
obligations Design-Builder that may exist under the
Contract Documents.

                                                                                                                     Page6

                                                                                                                          185
                        Article 4                             INCLUDING ATTORNEYS' FEES AND EXPENSES,
                                                              ARISING OUT OF OR RESULTING FROM THE
   Hazardous Conditions and Differing                         PRESENCE, REMOVAL OR REMEDIATION OF
            Site Conditions                                   HAZARDOUS CONDITIONS AT THE SITE.

 4.l      Hazardous Conditions                               4.1.6   Notwithstanding the preceding provisions ofthis
                                                             Section 4.1, Owner is not responsible for Hazardous
 4.1.1     Unless otherwise expressly provided in the        Conditions introduced to the Site by Design-Builder,
 Contract Documents to be part of the Work, Design-          Subcontractors or anyone for whose acts they may be
 Builder is not responsible for any Hazardous Conditions     liable. DESIGN-BUILDER SHALL INDEMNIFY,
 encountered at the Site.        Upon encountering any       DEFEND AND HOLD HARMLESS OWNER AND
 Hazardous Conditions, Design-Builder will stop Work         OWNER'S OFFICERS, DIRECTORS, EMPLOYEES
 immediately in the affected area and duly notify Owner      AND AGENTS FROM AND AGAINST ALL CLAIMS,
 and, if required by Legal Requirements, all government      WSSES, DAMAGES, LIABILITIES AND EXPENSES,
 or quasi-government entities with jurisdiction over the     INCLUDING AITORNEYS' FEES AND EXPENSES,
 Project or Site.                                            ARISING OUT OF OR RESULTING FROM THOSE
                                                             HAZARDOUS CONDITIONS INTRODUCED TO THE
4.1.2     Upon receiving notice of the presence of           SITE BY DESIGN-BUILDER, SUBCONTRACTORS
suspected Hazardous Conditions, Owner shall take the         OR ANYONE FOR WHOSE ACTS THEY MAY BE
necessary measures required to ensure that the Hazardous     LIABLE.
Conditions are remediated or rendered harmless. Such
necessary measures shal1 include Owner retaining             4.l       Differing Site Conditions
qualified independent experts to (i) ascertain whether
Hazardous Conditions have actually been encountered,         4.l.l      Concealed or latent physical conditions or
and, if they have been encountered, (ii) prescribe the       subsurface conditions at the Site that (i) materially differ
remedial measures that Owner must take either to remove      from the conditions indicated in the Contract Documents
the Hazardous Conditions or render the Hazardous             or (ii) are of an unusual nature, differing materially from
Conditions harmless.                                         the conditions ordinarily encountered and generaJiy
                                                             recognized as inherent in the Work are collectively
4.J.3     Design-Builder shalJ be obligated to resume        referred to herein as "Differing Site Conditions." If
Work at the affected area of the Project only after          Design-Builder encounters a Differing Site Condition,
Owner's expert provides it with written certification that   Design-Builder will be entitled to an adjustment in the
(i) the Hazardous Conditions have been removed or            Contract Price and/or Contract Time(s) to the extent
rendered harmless and (ii) all necessary approvals have      Design-Builder's cost and/or time of performance are
been obtained from all government and quasi-government       adversely impacted by the Differing Site Condition.
entities having jurisdiction over the Project or Site.
                                                             4.2.2     Upon encountering a Differing Site Condition,
4.1.4    Design-Builder will be entitled, in accordance      Design-Builder shall provide prompt written notice to
with these General Condltions of Contract, to an             Owner of such condition, which notice shall not be later
adju&1ment in its Contract Price and/or Contract Time(s)     than fourteen (14) days after such condition has been
to the extent Design-Builder's cost and/or time of           encountered.     Design-Builder shall, to the extent
performance have been adversely impacted by the              reasonably possible, provide such notice before the
presence of Hazardous Conditions.                            Differing Site Condition has been substantially disturbed
                                                             or altered.
4.1.5 TO THE FULLEST EXTENT PERMITTED
BY LAW, OWNER SHALL INDEMNIFY, DEFEND                                               Article 5
AND HOLD HARMLESS DESIGN-BUILDER,
DESIGN CONSULTANTS, SUBCONTRACTORS,                                       Insurance and Bonds
ANYONE EMPLOYED DfRECTL Y OR INDIRECTLY
FOR ANY OF THEM, AND THEIR OFFICERS,                         5.1      Design-Builder's Insurance Requirements
DIRECTORS, EMPLOYEES AND AGENTS, FROM
AND AGAINST ANY AND ALL CLAIMS, LOSSES,                      5.1.1    Design-Builder is responsible for procuring and
DAMAGES, LIABILITIES   AND    EXPENSES,                      maintaining from insurance companies authorized to do

                                                                                                                  Page 7

                                                                                                                       186
 business in the state in which the Project is located, the    Subcontractors and Sub-Subcontractors, and shall insure
 insurance coverages set forth in the attached Exhibit C.      against the perils of fire and extended coverage, theft,
                                                               vandalism, malicious mischief, collapse, flood,
 5.1.2    Design-Builder's liability insurance set forth in    earthquake, debris removal and other perils or causes of
 Exhibit C shall specifically delete any design-build or       loss as called for in the Contract Documents. The
 similar exclusions that could compromise coverages            property insurance shall include physical loss or damage
 because of the design-build delivery of the Project.          to the Work, including materials and equipment in transit,
                                                               at the Site or at another location as may be indicated in
 5.J .4    To the extent Owner requires Design-Builder or      Design-Builder's Application for Payment and approved
 any Design Consultant to provide professional liability       by Owner.
 insurance for claims arising from the negligent
 performance of design services by Design-Builder or the       5.3.2    Owner and Design-Builder waive against each
 Design Consultant, the coverage limits, duration and         other and Owner's separate contractors, Design
 other specifics of such insurance shall be as set forth in   Consultants, Subcontractors, agents and employees of
 the Agreement. Any professional liability policy shall       each and all of them, all damages covered by property
 specifically delete any design-build or similar exclusions   insurance provided herein, except such rights as they may
 that could compromise coverages because of the design-       have to the proceeds of such insurance. Design-Builder
 build delivery of the Project. Such policies shall be        and Owner shall, where appropriate, require similar
 provided prior to the commencement of any design             waivers of subrogation from Owner's separate
 services hereunder.                                          contractors, Design Consultants and Subcontractors and
                                                              shall require each of them to include similar waivers in
S.1.S     Prior to commencing any construction services       their contracts.
hereunder, Design-Builder shall provide Owner with
certificates evidencing that (i) all insurance obligations    5.4      Bonds and Other Performance Security
required by the Contract Docwnents are in fuJl force and
in effect and will remain in effect for the duration          5.4.1    Copies of the performance and payment bonds
required by the Contract Documents and (ii) no insurance      for the Project are attached as Exhibit D to the Standard
coverage will be canceled, renewal refused, or materially     Fonn of Agreement Between Owner and Design-Builder
changed unless at least thirty (30) days prior written        - Lump Sum. The owner acknowledges that the surety on
notice is given to Owner.                                     such bonds (and the Design-Builder) shall not be liable or
                                                              responsible in any way for the items, or the
5.2       Owner's Liability Insurance                         reimbursement of items, set forth in the Initial
                                                              Application for Payment as described in Article 6.2.4
5.2.1    Owner shall procure and maintain from                below.
insurance companies authorized to do business in the
state in which the Project is located such liability                                 Article 6
insurance to protect Owner from claims which may arise
from the performance of Owner's obligations under the                               Payment
Contract Documents or Owner's conduct during the
course of the Project.                                        6.1      Applications for Payment

S.3       Property Insurance                                  6.1.1    The proposed Application for Payments are
                                                              attached to the Agreement. Design-Builder shall submit
5.3.J     Unless otherwise provided in the Contract           for Owner's review its Application for Payment. The
Documents, Design-Builder shall procure and maintain          Applications shall be paid in accordance with the terms of
from insurance companies authorized to do business in         the Agreement.
the state in which the Project is located property
insurance upon the entire Project to the full insurable       6.2      Initial Application for Payment
value of the Project, including professional fees, overtime
premiums and all other expenses incurred to replace or        6.2.1     Design-Builder's Initial Application for Payment
repair the insured property. The property insurance           will include funds for disbursements to third parties for
obtained by Design-Builder shall include as additional        land acquisition, all pre-construction development costs
insureds the interests of Owner, Design Consultants,          and fees, insurance, bond fees, travel and legal expense

                                                                                                                  Page 8

                                                                                                                      187
 reimbursement, design consultant and pre-development            6.6      Substantial Completion
 fees. Design-Builder is performing this function at the
 request of Owner and has not participated in the               6.6.J     Design-Builder shall notify Owner when it
 negotiation or creation of these obligations and, therefore,   believes the Work, or to the extent pennitted in the
 does not assume, and express disclaims, any liability or       Contract Documents, a portion of the Work, is
 warranty obligations with respect to such activities. This     substantially complete. Within five (5) days of Owner's
 Initial Application for Payment will be paid at the            receipt of Design-Builder's notice, Owner and Design-
 financial dosing of the transaction for the Project            Builder will jointly review such Work. Design-Builder
                                                                shall prepare and issue a Certificate of Substantial
 6.3      Disputes over Payments                                Completion that will set forth (i) the date of Substantial
                                                                Completion of the Work or portion thereof, (ii) the
6.3.1      On or before the date established in the             remaining items of Work that have to be completed
Agreement, Owner shall pay Design-Builder all amounts           before final payment, (iii) provisions (to the extent not
properly due. If Owner determines that Design-Builder is        already provided in the Contract Documents) establishing
not entitled to all or part ofan Application for Payment, it    Owner's and Design-Builder's responsibility for the
will notify Design-Builder in writing at least five (5) days    Project's security, maintenance, utilities and insurance
prior to the date payment is due. The notice shall indicate     pending final payment and (iv) an acknowledgment that
the specific amounts Owner disputes, the reasons and            warranties commence to run on the date of Substantial
contractual basis for such disputes, and the specific           Completion, except as may otherwise be noted in the
measures Design-Builder may take to rectify Owner's             Certificate of Substantial Completion.
concerns. Design-Builder and Owner will attempt to
resolve Owner's concerns prior to the date payment is            6.6.2    Owner, at its option, may U.'le a portion of the
due. If the parties cannot resolve such concerns, Owner          Work which has been determined to be substantially
must pay Design-Builder and Owner may pursue its rights          complete, provided, however, that (i) a Certificate of
under the Contract Documents, including those under              Substantial Completion has been issued for the portion of
Article 10 hereof.                                              Work addressing the items set forth in Section 6.6.1
                                                                above, (ii) Design-Builder and Owner have obtained the
                                                                consent of their sureties and insurers, and to the extent
6.4      Right to Stop Work and Interest                        applicable, the appropriate government authorities having
                                                                jurisdiction over the Project, and (iii) Owner and Design-
6.4.1    If Owner fails to pay Design-Bw1deranyamount           Builder agree that Owner's use or occupancy will not
that becomes due, Design-Builder, in addition to all other      interfere with Design-Builder's completion of the
remedies provided in the Contract Documents, may stop           remaining Work.
Work pursuant to Section 11.3 hereof. All payments due
and unpaid shall bear interest at the rate set forth in the     6.7      Final Payment
Agreement.
                                                                6.7.l     After receipt ofa Final Application for Payment
                                                                from Design-Builder, Owner shall make final payment by
6.5      Design-Builder's Payment Obligations                   the time required in the Agreement, provided that Design-
                                                                Builder has completed all of the Work in conformance
6.5.1     Design-Builder wilJ pay Design Consultants and        with the Contract Documents.
Subcontractors in accordance with its contractual
obligations to such parties. Design-Builder will impose         6.7.2    At the time of submission of its Final
similar requirements on Design Consultants and                  Application for Payment, Design-Builder shall provide
Subcontractors to pay those parties with whom they have         the following infonnation:
contracted. Design-Builder will indemnify and defend
Owner against any claims for payment and mechanic's                      .1   (intentionally left blank);
liens as set forth in Section 7.3 hereof.
                                                                         .2   a general release executed by Design-
                                                                              Builder waiving, upon receipt of final
                                                                              payment by Design-Builder, a11 claims,
                                                                              except those claims previously made in

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                                                                                                                       188
                writing to Owner and remaining unsettled        time, Design-Builder shall promptly, at Design-Builder's
                at the time of final payment;                   option and at Design-Builder's expense, (i) modify the
                                                                Work so as to avoid infringement of any such patent or
          .3    consent ofDesign-Builder's surety, if any,      copyright or (ii) replace said Work with Work that does
                to finaJ payment;                               not infringe or violate any such patent or copyright.

          .4    all operating manuals, warranties and other     7.1.3     Sections 7.1.1 and 7.1.2 above shall not be
                deliverables required by the Contract          applicable to any suit, claim or proceeding based on
                Documents; and                                 infringement or violation of a patent or copyright (i)
                                                               relating solely to a particular process or product of a
          .5   certificates of insurance confirming that       particular manufacturer specified by Owner and not
               required coverages will remain in effect        offered or recommended by Design-Builder to Owner or
               consistent with the requirements of the         (ii) arising from modifications to the Work by Owner or
               Contract Documents.                             its agents after acceptance of the Work. If the suit, claim
                                                               or proceeding is based upon events set forth in the
 6.7.3    Upon making final payment, Owner waives all          preceding sentence, Owner shall defend, indemnify and
claims against Design-Builder except claims relating to        hold harmless Design-Builder to the same extent Design-
(i) Design-Builder's failure to satisfy its payment            Builder is obligated to defend, indemnify and hold
obligations, if such failure affects Owner's interests, (ii)   hamlless Owner in Section 7 .1.1 above.
Design-Builder's failure to complete the Work consistent
with the Contract Documents, including defects appearing       7.1.4       The obligations set forth in this Section 7.1 shalt
after Substantial Completion and (iii) the terms of any        constitute the sole agreement between the parties reJating
special warranties required by the Contract Documents,         to Ii ability for infringement of violation of any patent or
specifically excluding manufacturers' warranties.              copyright.

                       Article 7                               7.2       Tu Claim Indemnification

                  Indemnification                              7.2.1     If, in accordance with Owner's direction, an
                                                               exemption for all or part of the Work is claimed for taxes,
7.1      Patent and Copyright Infringement                     Owner shall indemnify, defend and hold harmless Design-
                                                               Builder from and against any liability, penalty, interest,
7.1.l     Design-Builder shall defend any action or            fine, tax assessment, attorneys' fees or other expenses or
proceeding brought against Owner based on any claim            costs incurred by Design-Builder as a result of any action
that the Work, or any part thereof, or the operation or use    taken by Design-Builder in accordance with Owner's
of the Work or any part thereof, constitutes infringement      directive.
of any United States patent or copyright, now or hereafter
issued. Owner shall give prompt written notice to              7.3      Payment Claim lndemnitlcation
Design-Builder of any such action or proceeding and will
reasonably provide authority, information and assistance       7.3.1     Providing that Owner is not in breach of its
in the defense of same. Design-Builder shall indemnify         contractual obligation to make payments to Design-
and hold hann.less Owner from and against all damages          Builder for the Work, Design-Builder shall indemnify,
and costs, including but not limited to attorneys' fees and    defend and hold hannless Owner from any claims or
expenses awarded against Owner or Design-Builder in            mechanic's liens brought against Owner or against the
any such action or proceeding. Design-Builder agrees to        Project as a result of the failure of Design-Builder, or
keep Owner informed of all developments in the defense         those for whose acts it is responsible, to pay for any
of such actions.                                               services, materials, labor, equipment, taxes or other items
                                                               or obligations furnished or incurred for or in connection
7.1.2    If Owner is enjoined from the operation or use        with the Work. Within three (3) days ofreceiving written
of the Work, or any part thereof, as the result of any         notice from Owner that such a claim or mechanic's lien
patent or copyright suit, claim, or proceeding, Design-        has been filed, Design-Builder shall commence to take
Builder shall at its sole expense take reasonable steps to     the steps necessary to discharge said claim or lien,
procure the right to operate or use the Work. If Design-       including, if necessary, the furnishing of a mechanic's
Builder cannot so procure such right within a reasonable       Hen bond.

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                                                                                                                            189
                                                                 8.2.1    If Design-Builder is delayed in the performance
 7.4       Design-Builder's General Indemnification              of the Work due to acts, omissions, conditions, events, or
                                                                circumstances beyond its control and due to no fault of its
 7.4. l    Design-BuiJder, to the fullest extent pennitted by    own or those for whom Design-Builder is responsible, the
 law, shall indemnify, hold hannless and defend Owner, its      Contract Time(s) for performance shall be reasonably
 officers, directors, employees and agents from and againi.t    extended by Change Order. By way of example, events
 claims, losses, damages, liabilities, including attorneys'     that will entitle Design-Builder to an extension of the
 fees and expenses, for bodily injury, sickness or death,       Contract Time(s) include acts or omissions of Owner or
 and property damage or destruction (other than to the          anyone under Owner's control (including separate
 Work itself) to the extent resulting from the negligent acts   contractors), changes in the Work, unavailability of
 or omissions of Design-Builder, Design Consultants,            materials/equipment at the price contemplated by Design-
 Subcontractors, anyone employed directly or indirectly by      Builder when establishing the Contract Price, Differing
 any of them or anyone for whose acts any of them may be        Site Conditions, Hazardous Conditions, wars, floods,
 liable.                                                        labor disputes, unusual delay in transportation, epidemics
                                                                abroad, earthquakes, adverse weather conditions not
7.4.2     lf an employee of Design-Builder, Design              reasonably anticipated, and other acts of God.
Consultants, Subcontractors, anyone employed directly or
indirectly by any of them or anyone for whose acts any of       8.2.2    In addition to Design-Builder's right to a time
them may be liable has a claim against owner, its               extension for those events set forth in Section 8.2.1
officers, directors, employees, or agents, Dcsign-              above, Design-Builder shall also be entitled to an
Builder's indemnity obligation set forth in Section 7.4.1       appropriate adjustment of the Contract Price.
above shall not be limited by any limitation on the
amount of damages, compensation or benefits payable by                                 Article 9
or for Design-Builder,           Design      Consultants,
Subcontractors, or other entity under any employee                    Changes to the Contract Price and
benefit acts, including workers' compensation or                                    Time
disability acts.
                                                                9.1      Change Orders
7.S       Owner's General Indemnification
                                                                9.1.1    A Change Order is a written instrument issued
7.5.1      Owner, to the fullest extent permitted by law,       after execution of the Agreement signed by Owner and
shall indemnify, hold harmless and defend Design-               Design-Builder, stating their agreement upon an of the
 Builder and any of Design-Builder's officers, directors,       following:
employees, or agents from and against claims, losses,
damages, liabilities, including attorneys' fees and                      .I   The scope of the change in the Work;
expenses, for bodily injury, sickness or death, and
property damage or destruction (other than to the Work                   .2   The amount of the adjustment to the
itself) to the extent resulting from the negligent acts or                    Contract Price; and
omissions of Owner, Owner's separate contractors or
anyone for whose acts any of them may be liable.                         .3   The extent of the adjustment to the
                                                                              Contract Time(s).
                       Article 8
                                                                9.1.2     All changes in the Work authorized by
                         Time                                   applicable Change Order shall be performed under the
                                                                applicable conditions of the Contract Documents,
8.1      Obligation to Achieve the Contract Times               provided that Owner covenants to Design-Builder that it
                                                                has sufficient funds to pay for any changes in the Worlc.
8.1. l   Design-Builder agrees that it will commence            Owner and Design-Builder shall negotiate in good faith
performance of the Work and achieve the Contract                and as expeditiously as possible the appropriate
Time(s) in accordance with Article 5 of the Agreement.          adjustments for such changes.

8.2      Delays to the Work                                     9.1.3   If Owner requests a proposal for a change in the
                                                                Work from Design-Builder and subsequently elects not to

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                                                                                                                       190
 proceed with the change, a Change Order shall be issued      reasonable time, not to exceed twenty-one (2 I) days, after
 to reimburse Design-Builder for reasonable costs incurred    the occurrence giving rise to the claim for relief or after
 for estimating services, design services and services        the claiming party reasonably should have recognized the
 involved in the preparation of proposed revisions to the     event or condition giving rise to the request, whichever is
 Contract Documents.                                          later. Such notice shall include sufficient information to
                                                              advise the other party of the circumstances giving rise to
 9.2      (intentionally left blank)                          the claim for relief, the specific contractual adjustment or
                                                              relief requested and the basis of such request.

 9.3      Minor Changes in the Work                           10.2      Dispute Avoidance and Resolution

9.3.l     Minor changes in the Work do not involve an         10.2.1 The parties are fully committed to working with
adjustment in the Contract Price and/or Contract Time(s)      each other throughout the Project and agree to
and do not materially and adversely affect the Work,          communicate regularly with each other at all times so as
including the design, quality, perfonnance and                to avoid or minimize disputes or disagreements. If
workmanship required by the Contract Documents.               disputes or disagreements do arise, Design-Builder and
Design-Builder may make minor changes in the Work             Owner each commit to resolving such disputes or
coni.istent with the intent of the Contract Documents,        disagreements in an amicable, professional and
provided, however that Design-Builder shall record such       expeditious manner so as to avoid unnecessary losses,
changes on the documents maintained by Design-Builder.        delays and disruptions to the Work.

9.4       Contract Price Adjustments                          10.2.2 Design-Builder and Owner will first attempt to
                                                              resolve disputes or disagreements at the field level
9.4.1    The increase or decrease in Contract Price           through    discussions   between    Design-Builder's
resulting from a change in the Work shall be determined       Representative and Owner's Representative.
by the agreement between Owner and Design-Builder.
                                                              10.2.3 Jf a dispute or disagreement cannot be resolved
9.5       Emergencies                                         through Design-Builder's Representative and Owner's
                                                              Representative, Design-Builder's Senior Representative
9.5.l    In any emergency affecting the safety ofpersons      and Owner's Senior Representative, upon the request of
and/or property, Design-Builder shall act, at its             either party, shall meet as soon as conveniently possible,
discretion, to prevent threatened damage, iajury or loss.     but in no case later than thirty (30) days after such a
Any change in the Contract Price and/or Contract Time(s)      request is made, to attempt to resolve such dispute or
on account of emergency work shall be determined as           disagreement. Prior to any meetings between the Senior
provided in this Article 9.                                   Representatives, the parties will exchange relevant
                                                              information that will assist the parties in resolving their
                      Article 10                              dispute or disagreement.

  Contract Adjustments and Disputes                           10.2.4 If after meeting the Senior Representatives
                                                              determine that the dispute or disagreement cannot be
10.1     Requests for Contract Adjustments and                resolved on terms satisfactory to both parties, the parties
         Relief                                               shall submit the dispute or disagreement to non-binding
                                                              mediation. The mediation shall be conducted by a
10.1.1 If either Design-Builder or Owner believes that        mutually agreeable impartial mediator, or if the parties
it is entitled to relief against the other for any event      cannot so agree, a mediator designated by the American
arising out of or related to the Work or Project, such        Arbitration Association ("AAA") pursuant to its
party shall provide written notice to the other party ofthe   Construction Industry Mediation Rules. The mediation
basis for its claim for relief. Such notice shall, if         will be governed by and conducted pursuant to a
possible, be made prior to incurring any cost or expense      mediation agreement negotiated by the parties or, if the
and in accordance with any specific notice requirements       parties cannot so agree, by procedures established by the
contained in applicable sections of these General             mediator. The local of the mediation shall be conducted
Conditions of Contract. In the absence of any specific        in Houston, Texas.
notice requirement, written notice shall be given within a

                                                                                                                  Page 12

                                                                                                                            191
 l 0.3    Arbitration                                          WARRANTY, TORT (INCLUDING NEGLIGENCE),
                                                               STRICT LIABILITY OR OTHERWISE, INCLUDING
10.3.l Any claims, disputes or controversies between           BUT NOT LIMITED TO LOSSES OF USE, PROFITS,
the parties arising out of or relating to the Agreement, or    BUSINESS, REPUTATION OR FINANCING.
the breach thereof, the Project or any transaction or
occurrence arising out of or relating to the Project which     10.S.Z The consequential damages limitation set forth
have not been resolved in accordance with the procedures       in Section 10.5.I above is not intended to affect the
set forth in Section 10.2 above shall be decided by            payment ofliquidated damages, if any, set forth in Article
arbitration in accordance with the Construction Industry       5 of the Agreement, which both parties recognize has
Arbitration Rules of the AAA then in effect, unless the        been established, in part, to reimburse Owner for some
parties mutually agree otherwise.. The hearing locale          damages that might otherwise be deemed to be
shall be in Houston, Texas.                                    consequential.

10.3.Z The award of the arbitrator(s) shall be final and                             Article 11
binding upon the parties without the right of appeal to the
courts. Judgment may be entered upon it in accordance
                                                                Stop Work and Termination for Cause
with applicable law by any court having jurisdiction
thereof.                                                       11.1     Owner's Right to Stop Work
 10.3.3 Design-Builder and Owner expressly agree that
                                                               ll.1.J Owner may, without cause and for its
any arbitration pursuant to this Section 10.3 may be
                                                               convenience, order Design-Builder in writing to stop and
joined or consolidated with any arbitration involving any
                                                               suspend the Work. Such suspension shall not exceed
other person or entity (i) necessary to resolve the claim,
                                                               sixty ( 60) consecutive days or aggregate more than ninety
dispute or controversy, or (ii) substantially involved in or
                                                               (90) days during the duration of the Project.
affected by such claim, dispute or controversy. Both
Design-Builder and Owner will include appropriate
                                                               11.1.1 Design-Builder is entitled to seek an adjustment
provisions in all contracts they execute with other parties
                                                               ofthe Contract Price and/or Contract Time(s) if its cost or
in connection with the Project to require suchjoinder or       time to perform the Work has been adversely impacted by
consolidation.                                                 any suspension of stoppage of work by Owner.

10.3.4 The prevailing party in any arbitration, or any
                                                               11.2     Owner's Right to Perform and Terminate for
other final, binding dispute proceeding upon which the                  Cause
parties may agree, shall be entitled to recover from the
other party reasonable attorneys' fees and expenses
                                                               11.2.1 If Design-Builder persistently fails to (i) provide
incurred by the prevailing party.                              a sufficient number of skilled workers, (ii) supply the
                                                               materials required by the Contract Oocumcnt'I, (iii)
10.4     Duty to Continue Performance                          comply with applicable Legal Requirements, (iv) timely
                                                               pay, without cause,            Design Consultants or
10.4.t Unless provided to the contrary in the Contract         Subcontractors, (v) prosecute the Work with promptness
Documents, Design-Builder shall continue to perform the        and diligence to ensure that the Work is completed by the
Wark and Owner shall continue to satisfy its payment           Contract Time(s), as such times may be adjusted, or (vi)
obligations to Design-Builder, pending the final               perform material obligations under the Contract
resolution of any dispute or disagreement between              Documents during the perfonnance of the Work, then
Design-Builder and Owner.                                      Owner, in addition to any other rights and remedies
                                                               provided in the Contract Documents, shall have the rights
10.S     CONSEQUENTIAL DAMAGES                                 set forth in Sections 11.2.2 and 11.2.3 below.
10.5.lNOTWITHSTANDING ANYTHING HEREIN                          1 t.Z.Z Upon the occurrence of an event set forth in
TO THE CONTRARY (EXCEPT AS SET FORTH IN                        Section 11.2.1 above, Owner may provide written notice
SECTION 10.5.2 BELOW), NEITHER DESIGN-                         to Design-Builder that it intends to tenninate the
BUILDER NOR OWNER SHALL BE LIABLE TO THE                       Agreement unless the problem cited is cured, or
OTHER FOR ANY CONSEQUENTIAL LOSSES OR                          commenced to be cured, within seven (7) days ofDesign-
DAMAGES, WHETHER ARISING IN CONTRACT,                          Builder's receipt of such notice. If Design-Builder fails

                                                                                                                   Page 13

                                                                                                                        192
 to cure, or reasonably commence to cure, such problem,                .2    Owner's failure to pay amounts properly
 then Owner may give a second written notice to Design-                      due under Design-Builder's Application
 Builder of its intent to terminate within an additional                     for Payment.
 seven (7) day period. If Design-Builder, within such
 second seven (7) day period, fails to cure, or reasonably   11.3.2    Should any of the events set forth in Section
 commence to cure, such problem, then Owner may              11.3.1 above occur, Design-Builder has the right to
 declare the Agreement terminated for default by             provide Owner with written notice that Design-Builder
 providing written notice to Design-Builder of such          will stop work unless said event is cured within seven (7)
 declaration and after obtaining written approval from the   days from Owner's receipt of Design-Builder's notice. If
 Trustee of the same, which shall be an express condition    Owner does not cure the problem within such seven (7)
 precedent to tenninating this agreement for default.        day period, Design-Builder may stop work. In such case,
                                                             Design-Builder shall be entitled to make a claim for
  1 1.2.3 Upon declaring the Agreement terminated            adjustment to the Contract Price and Contract Time(s) to
  pursuant to Section 11.2.2 above, Owner may enter upon     the extent it has been adversely impacted by such
 the premises and take possession, for the purpose of        stoppage.
 completing the Work, of all materials, equipment,
 scaffolds, tools, appliances and other items thereon,       11.4     Design-Builder's Right to Terminate for
 which have been purchased or provided for the                        Cause
 performance of the Work and paid for by Owner, all of
 which Design-Builder hereby transfers, assigns and sets     11.4.1 Design-Builder, in addition to any other rights
 over to Owner for such purpose, and to employ any           and remedies provided in the Contract Documents or by
 person or persons to complete the Work and provide all      law, may terminate the Agreement for cause for the
 of the required labor, services, materials, equipment and   following reasons:
 other items. In the event of such termination, Design-
 Builder shall not be entitled to receive any further                 .1    The Work has been stopped for sixty (60)
 payments under the Contract Documents until the Work                       consecutive days, or more than ninety (90)
 shall be finally completed in accordance with the                          days during the duration of the Project,
Contract Documents. At such time, if the unpaid balance                     because of court order, any government
of the Contract Price exceeds the cost and expense                          authority having jurisdiction over the
incurred by Owner in completing the Work, such excess                       Work, or orders by Owner under Section
shall be paid by Owner to Design-Builder. If Owner's                        I 1.1.1 hereof, provided that such
cost and expense of completing the Work exceeds the                         stoppages are not due to the acts or
unpaid balance ofthe Contract Price, then Design-Builder                    omissions of Design-Builder or anyone for
shall be obligated to pay the difference to Owner. Such                     whose acts Design-Builder may be
costs and expense shall include not only the cost of                        responsible.
completing the Work, but also losses, damages, costs and
expense, including attorneys' fees and expenses, incurred             .2    Owner's failure to provide Design-Builder
by Owner in connection with the reprocurement and                           with any infonnation, pennits or approvals
defense of claims arising from Design-Builder's default,                    that are Owner's responsibility under the
subject to the waiver of consequential damages set forth                    Contract Documents which result in the
in Section 10.5 hereo[                                                      Work being stopped for sixty (60)
                                                                            consecutive days, or more than ninety (90)
11.3     Design-Builder's Right to Stop Work                                days during the duration of the Project,
                                                                            even though Owner has not ordered
11.3.1 Design-Builder may, in addition to any other                         Design-Builder in writing to stop and
rights afforded under the Contract Documents or at law,                     suspend the Work pursuant to Section
stop work for the following reasons:                                        11.1.I hereof.

        ,l    Owner's failure to provide financial                    .3    Owner's failure to cure the problems set
              assurances as required under Section 3.3                      forth in Section l I .3. 1 above after Design-
              hereof; or                                                    Builder has stopped the Work.

                                                                                                                   Page 14

                                                                                                                         193
  11.4.2 Upon the occurrence of an event set forth in           11.5.2 The rights and remedies under Section I l .5.1
  Section 11.4.1 above, Design-Builder may provide              above shall not be deemed to limit the ability of the non-
 written notice to Owner that it intends to terminate the       Bankrupt Party to seek any other rights and remedies
 Agreement unless the problem cited is cured, or                provided by the Contract Documents or by law, including
 commenced to be cured, within seven (7) days of                its ability to seek relief from any automatic stays under
 Owner's receipt of such notice. If Owner fails to cure, or     the United States Bankruptcy Code or the right ofDesign-
 reasonably commence to cure, such problem, then                Builder to stop Work under any applicable provision of
 Design-Builder may give a second written notice to             these General Conditions of Contract.
 Owner of its intent to terminate within an additional seven
 (7) day period. If Owner, within such second seven (7)                               Article 12
 day period, fails to cure, or reasonably commence to cure,
 such problem, then Design-Builder may declare the                                Miscellaneous
 Agreement tenninated for default by providing written
 notice to Owner of such declaration. In such case,             12.1     Assignment
 Design-Builder shall be entitled to recover in the same
 manner as if Owner had tenninated the Agreement for its       12.1.1 Neither Design-Builder nor Owner shall, without
 convenience under Article 8 of the Agreement.                 the written consent of the other assign, transfer or sublet
                                                               any portion or part of the Work or the obligations
 11.5     Bankruptcy of Owner or Design-Builder                required by the Contract Documents.

11.S.1 If either Owner or Design-Builder institutes or         12.2      Successorship
has instituted against it a case wider the United States
Bankruptcy Code (such party being referred to as the           12.2.1 Design-Builder and Owner intend tllat the
"Bankrupt Party"), such event may impair or frustrate the      provisions of the Contract Documents are binding upon
Bankrupt Party's ability to perfonn its obligations under      the parties, their employees, agents, heirs, successors and
the Contract Documents. Accordingly, should such event         assigns.
occur:
                                                               12.3     Governing Law
         .1    The Bankrupt Party, its trustee or other
               successor, shall furnish, upon request of       12.3.1 The Agreement and all Contract Documents
               the non-Bankrupt Party, adequate                shall be governed by the laws of the place of the Project,
               assurance of the ability of the Bankrupt        without giving effect to its conflict oflaw principles.
               Party to perform all future material
               obligations under the Contract Documents,       12.4     Severability
               which assurances shall be provided within
               ten (10) days after receiving notice of the     12.4.1 If any provision or any part of a provision of the
               request; and                                    Contract Documents shall be finally detennined to be
                                                               superseded, invalid, illegal, or otherwise unenforceable
         .2   The Bankrupt Party shall file an                 pursuant to any applicable Legal Requirements, such
              appropriate action within the bankruptcy         determination shall not impair or otherwise affect the
              court to seek assumption or rejection of the     validity, legality, or enforceability of the remaining
              Agreement within sixty (60) days of the          provision or parts of the provision of the Contract
              institution of the bankruptcy filing and         Documents, which shall remain in full force and effect as
              shall diligently prosecute such action.          if the unenforceable provision or part were deleted.

If the Bankrupt Party fails to comply with its foregoing       12.5     No Waiver
obligations, the non-Bankrupt Party shall be entitled to
request the bankruptcy court to reject the Agreement,          12.5.1 The failure of either Design-Builder or Owner to
declare the Agreement terminated and pursue any other          insist, in any one or more instances, on the performance
recourse available to the non-Bankrupt Party under this        of any of the obligations required by the other under the
Article 11.                                                    Contract Documents shall not be construed as a waiver or
                                                               relinquishment of such obligation or right with respect to
                                                               future performance.

                                                                                                                  Page 15

                                                                                                                      194
                                                             person to the individual intended to receive such notice,
12.6     Headings                                            (ii) four (4) days after being sent by registered or certified
                                                             mail, postage prepaid to the address indicated in the
12.6.1 The headings used in these General Conditions         Agreement or (iii) if transmitted by facsimile, by the time
ofContract, or any other Contract Document, are for ease     stated in a machine generated confirmation that notice
of reference only and shall not in any way be construed to   was received at the facsimile number of the intended
limit or alter the meaning of any provision.                 recipient.

12.7     Notice                                              12.8     Amendments

12.7.1 Whenever the Contract Documents require that          12.8.1 The Contract Documents may not be changed,
notice be provided to the other party, notice will be        altered, or amended in any way except in writing signed
deemed to have been validly given (i) if delivered in        by a duly authorized representative of each party.

                                                                                                                  Page 16

                                                                                                                         195
          106      16:44            9404540798                                                                                                                PAGE   01/01
         1008 D4:38pm           Fralll"HALE I        CONSTRUCTION                                                                      r..549 P.002/002 F-914

             -AJA Document G704" - 2000
             Celtificate of Substantial Completion
            PROJECT:                                        PROJEcTNtJ11sER:..       ICE F flit                                           Otterator            ~
           (f./tJmeandadrin:uJ:                             cDNTRACTFOR·ZOOO             Bed
                                                                                           ac: Y                                   ·      l~
Wi 11 acy Count}' 2000 Bed ICE                              CONTRACT L'IATE: July 19' 2006                                  ..;q   I.:;       ARCl11TECT: 181
Facil 1·ty                                                                         0                                                        CONTAACTOR:       ®
1800 Industrial Drive, Raymondvi11e. TX 7858
           TO OWHER:                                       TO CCNTUCTOR:               HMC Contract;iing south Texas, LLCFIELC: 181
           (Nnm~   ""'"dtlru1J:                            fN~mi c:ndOtldrrvJ:         4130 Bel 1a He Blvd J. Ste. 210                            OTHER: 0
The Willacy County Local Gov. Corp                                                     Heaston, Texas 77u25
190 North 3rd-Street
Raymondville, Texas 78580
           PROJF.CT OR PORTION OFTHS PllOJ!ef flHlatlATED FOR PARTIAL OCCUPANCY CR USE 8HAl.L INtlUDE:

      The occupancy Certificate was issued by t~e City of Raymondville on ~eptembe~ 8, 2006
          'Jbe Work pcrtonne.f under di.la Cotuncr his bc:cn revic:wc:d •nd fbuncl. co 1hc Anihl•' i; bm knewledp. lntonnatio.n and beliu(,
          to be subsbtlllllllY D)lllplttl!. Sllbsunllal Complcdon Sit lltc •blp In die Pftlllftlll DC die Work whi=n the Work or dcaignaied
          ponion Is sufflclcndy complcre In ue11ntani:i: with 1hc ConlrBCt Documents sa diat I.ho Ownllf c1n oceisp1 or udtl:rc me Wark                  rar
          Its Intended u.ce. Tbr- dare oM11b1ttu11laJ Complctjon of die PR)jec1 or portion desigaatcd above is r.ila de of l.uu:11tca mrablbhed
          by Cl1is Ccrtl~, ~'hid! it also 1hc dace ot COfnGICllCC"911iat of Op,pJicable wunndet requited by chc Ccmcnct D~menn. i:xccpt
          ., s~tcd below:

         A list oflrcms 1a be o:amplcted or corrected is machi:d lll!nKo. The tillun: ro include any ilems on svdl llsr docs nor :alter the
         re!lflD~iliL)J ol lhc Cannc:t111r to compl&Ua all Work in =il!Cort!:mG15 wllh the CQ11trac' DOCllllllUlll. Unlc:l1 odle.rwlae llfil'lllld (O in
         wrldnf. the date ar O.lmmtl\l:Cl1Vlftt Of Wllmlnlies fot hc:nu On lhc: lltl.acihcd list wlJl be tho dPla of lniJlftlCC Of TJle fin I( Cc:nfru:au:
         of Payment ar Illa date at final paymmr.

         Cost estimate otWarkihat ls·incomplAto ord~fcctiYl!:
        The Contractor will aalnfJalC Ot COrt9Ct chc Wart Oil
        date ar SubstmtiDI Campktioa.

HMC   contrac.ti ng        Sou!bh Texas~ LLC~.--+-...w:..,~~---­
        coNTRACTDR                                        BY

        11\e 09.'ne:t acceprs d~ Wort "'° doalsna,itd po                                                                                       a,m.{1imi::)
        an                     :lace).

 Management Tra1n~ng Corppratio.,."---------
      Opel"itor                                                                                              DATE
                                                      t maintenance, utilities and insurance.
        owner assume:; a11 responsibi11t.Y f or secur1 :y,
EXHIBIT D
            Standard Form of Agreement Between
            Owner and Design-Builder ... Lump Sum
             1 'his document has been amended and revised from its standard form.

   This AGREEMENT is made as of the . ?O~ day of~n the year of 2007, by and
   between the following parties, for services in connection with the Project identified
   below.

   OWNER:

  The Willacy County Local Government Corporation
  190 North 3rd Street
  Courthouse Annex
  Raymondville, Texas 78580

  DESIGN-BUfLDER:
 HMC Contracting South Texas. L.L.C.
 2900 Wesleyan, Suite J75
 Houston, Tex.as 77027

 PROJECT:

I 000 Bed Addition to the Willacy County fCE Detention Facility
Willacy County, Texa~

In consideration of the mutual covenants and obligations contained herein, Owner and
Design-Builder agree as set forth herein.

                                      Artide 1
                                   Scope of Work

I. I Design-Builder shall perform all design and constmction services, and provide all
     material, equipment, tools and labor, necessary to complete the Work described in
     and reasonably inferable from the Contract Documents.

                                       EXHIBIT

                                        q                                                  198
1.2 A description of the Project is attached as part of Exhihit A. This description is for
    general purposes only - the Project may have different technical attributes not
    described in this Exhibit or described differently in this Exhibit.

                                         Article 2
                                   Contract Documents

2.1 The Contract Documents nrc comprised of the following:

        .I      All written modifications, amendments and change orders to this
                Agreement issued in accordance with DBIA Document No. 535, Standard
                Form of General Conditions of Contract Between Owner and Design-
                Builder (1998 Edition) as amended ("General Conditions of Contract");

        .2      This Agreement, including all exhibits and attachments, executed by
                Owner and Design-Builder;

        .3      The General Conditions of Contract;

        .4      Construction Documents prepared in accordance with Section 2.4 of the
                General Conditions of Contract along wilh a description of the Project,
                attached as Exhibit A;

        .5      Attached as Exhibit 8, Design-Builder's Ap1>lications for Payment and
                Requisitions for Payment to Trustee .

        .6      Attached Exhibit C, Design-Builder's Certificate ofinsurance.

        .7      Attached Exhibit D, Payment and Performance Bonds .

        .8      Attached as Exhibit E, the list of drawings as of the effective date of this
                Agreement, which may be modified.

                                        Article 3
                                Interpretation and Intent

3.1 The Contract Documents are intended to permit the parties to complete the Work and
all obligations required by the Contract Documents within the Contract Time(s) tbr the
Contract Price. The Contract Documents are intended to be complementary and
interpreted in hannony so as to avoid conflict, with words and phrases interpreted in a
manner consistent with construction and design industry standards. fn the event of any
inconsistency, conflict, or ambiguity between or among the Contract Documents, the
Contract Documents shall take precedence in the order in which they are listed in Section
2.1 hereof.

171620 2066 1                                 2

                                                                                               199
3.2 Terms, words and phrases used in the Contract Documents, including this Agreement,
shall have the meanings given them in the General Conditions of Contract.

3.3 The Contract Documents fonn the entire agreement between Owner and Design-
Builder and by incorporation herein are as fully binding on the parties as if repeated
herein. No oral representations or other agreements regarding the Work have been made
by the parties except as specifically :;laled in the Contract Documents.

                                        Article 4
                             Ownership of Work Product

4. I Work Product. All drawings, specifications and other documents nnd electronic data
furnished by Design-Builder to Owner under this Agreement (''Work Product") are
deemed to be instruments of service and Design-Builder shall retain the ownership and
property interests therein, including the copyrights thereto.

4.2 Upon Owner's payment in full for all Work perfonned under the Contract
Documents, the drawings, specifications, models, renderings, work product, instruments
of service and other documents shall become the property of the Owner. Owner may
utilize such drawings, specifications, models, renderings, work product. instruments of
service and other documents onJy for the repair, maintenance, modification, expansion or
renovation of the Project. Nevertheless, it is understood by Owner that all such
Drawings, Specifications, models. renderings, work product, instruments of service and
other documents may be inappropriate for use= in the construction of any other project.
Therefore. Design-Builder shall not be responsible for the use or workability of suc;:h
drawings, spt..oeiflcations, models, rendering.~ work product, instruments of service and
other documents in connection with any project other than the Pr~ect for which they
were specifically prepnrcd. OWNER SHALL INDEMNIFY, DEFEND AND HOLD
DESIGN-BUILDER HARMLESS OF AND FROM ANY AND ALL CLAIMS,
DEMANDS AND CAUSES OF ACTION, INCLUDING AITORNEY'S FEES AND
LITrGATION COSTS, ARISING OUT OR RELATING TO OWNER'S L'SE OF
DRA WTNGS, SPECIFICATIONS, MODELS, RENDERINGS, WORK PR.ODlXT,
lNSTRUMENTS Of SERVICE AND OTHER DOCUMENT FOR THIS PROJECT Ol'i
ANY OTHER PROJECT.

                                       Article 5
                                     Contract Time

5. I Date of Commencement. The Work shall commence within five (5) days of
Contractor's receipt of I) Owner's Notice to Proceed 2) the execution of this Agreement
by both parties and the receipt of some by Contractor, and 3) payment of Contractor's
initial Application for Payment payable at the financial closing of the transaction for the
Project (..Date of Commencement") ~111less the parties mutually agree otherwise in
writing.

5.2 Substantial Completion and Final Completion

171620 2068.1                                3

                                                                                              200
5.2.l Substantial Completion of the entire Work shall be achieved no later than 180
calendar days after the Date of Commencement ("Scheduled Substantial Completion
Date").

5.2.2 Intentionally left blank.

5.2.3 Final Completion of the Work, including the support building, shall be achieved
120 days after the Date of Commencement.

5.2.'1 All of che dates set forth in this Article 5 ("Contract Time(s)") shall be subject to
adjustment in accordance with the General Conditions of Contract. The Contract Time
shall be extended if ICE grants time extensions to Owner and/or Willacy County, Texas,
for the same amount of time granted by ICE, unless agreed otherwise.

5.3 Time is of the Essence. Owner and Design-Builder mutually agree that time is of the
essence with respect to the dates and times set forth in the Contract Documents.

5.4 Liquidated Damages. Design-Builder understands that if Substantial Completion is
not attained b) the Scheduled Substantial Completion Date, Owner will suffer damages
which are difficult to determine and accurately specify. Design-BuilJer agrees lhat if
Substantial Completion is not attained by thirty (30) days after the Scheduled Substantial
Completion Date (the "LO Date"), Designer-Builder shall pay Owner Thirteen Thousand
Seven Hundred Twenty Five Dollars ($13,725.00} as liquidated damages for each day
that Substantial Completion extends beyond the LO Date. The liquidated damages
provided herein shall be in lieu of all liability for any and all extra costs. losses. expenses.
claims, penaltieli and any other damages, whether special or consequential, and of
whatsoever nature incurred by Owner which are occasioned by any 1.hday in achieving
Substantial Completion.

                                           Article 6
                                       Contract Price

6. I Contract Price. Owner shall direct the Trustee to pay Design-Builder's Applications
for Payment attached to this Agreement in the total sum of Forty-three Million One
Hundred Seventy-two Thousand Three Hundred Twenty Seven Dollars ($43, 172,327)
("Contract Price"), subject to adjustments made in accordance with lh1: General
Conditions of Contract.

6.2 Materials incorporated into this project are exempt from State Sales tax according to
provisions of the Texas Tax Code, Chapter 151, Sub!lection H. The Owner shall provide
to Design-Builder a limited sales, excise and use tax permit or exemption certificate
which shall enable Design-Builder to buy the materials to be incorporated into the Work
without paying tax due at time of purchase. This is a separated contract as that term is
used the Texas Tax Code and applicable Texas law and the Owner agrees and
acknowledges that it is purchasing th~ material for the Work separately from the lahor for
the Work. Material for the Work totals $24,176,503 and labor for the Work totals

171620 2068 1                                  4

                                                                                                   201
;

     $18,995,824. This paragraph is meant to meet the separated contract definition under the
     Texas Tax Code and the laws of Texas.

     6.3. Upon Substantial Completion of Lhe Project, Design Builder will provide Owner a
     certification that the Project has been substantially completed. Design-Builder will also
     provide a final release for all payments made by Owner and a consent of surety. Upon
     Final Completion, Design-Builder shall supply a list of all subcontractors utilized by
     Design-Builder and all applicable warranties.

     6.4 Design-Builder guarantees to complete the Project for the Contract Price, which
     cannot be modified by either party except by a Change Order signed by both parties
     pursuant to Article 9 of the General Conditions.

                                            Article 7
                                      Procedure for Payment

     7.1 Progress Paymenlc;

     7.1. l Design-Builder's Applications for Payment are attached to this Agreement as
     Exhibit B. By the execution of this Agreement, Owner hereby approves the Applications
     for Payment and agrees to take all actions necessary to fund such Applications for
     Payment, including the execution of the Requisitions attached as Exhibit B at closing.

    7.1.2 Owner agrees that the Trustee can pay the Applications for Payment upon
    submission by Design-Builder of the executed Requisitions for Payment to the Trustee,
    without the need for any additional information or consent from the Owner.

    7.2 Source of Funds. Design-Builder and Owner acknowledge and agree that the fonding
    for payments due under this Agreement shall come from the Construction Fund
    established pursuant to the Trust Indenture by the Trustee, U.S. Bank, N.A. (the
    "Trustee").

    7.3 (Intentionally Left Blank)

    7.4 Record Keeping and Finance Controls. In light of the fact that this is a stipulated sum
    contract, Design-Builder shall have no obligation to kl.-ep records, books, correspondence,
    receipts, subcontracts, purchase orders, vouchers, memoranda or other data relating to the
    Work and no records shall be open for inspection by any part). Design·Builder agrees to
    cooperate with Owner in conjunction with any reporting required of Owner by !CE or the
    Federal Government in connection >Aith the Project.

                                              Article 8
                                     (Intentionally Left Blank)

    171620 2068.1
                                                 s

                                                                                                  202
                                        Article9
                              Representatives of the Parties

9.1 Owner's Representatives

9.1. I Owner designates the individuals listed below as its Senior Representatives
("Owner's Senior Representatives"), which such individuals have the authority and
responsibility for avoiding and resolving disputes under Section 10.2.3 of the General
Conditions of Contract:

9.1.2 Owner designates the individual listed below as its Owner's Representative, which
individual has the authority and responsibility set forth in Section 3.4 of the General
Conditions of Contract; (Identify individual's namc.1idc. add~s ind telephone numbmJ

The Willacy County Local Government Corporation
190 North 3r:1 Street
Courthouse Annex
Raymondville, Texas 78580

9.2 Design-Ruilder's Representatives

9.2.J Design-Builder designates the individual listed below as its Senior Representative
("Design-Builder's Senior Representative"), which individual has the authority and
responsibility for avoiding and reo;olving disputes under Section I 0.2.3 of the General
Conditions of Contract:

Mr. Philip K. Packer
President ofHMC Contracting South Texas. L.L.C.
2900 Weslayan, Suite 375
Houston, Texas 77027
(713) 665-1100

9.2.2 Design-Builder designates the individual listed below as its Design-Builder's
Representative, which individual has the authority and responsibility set forth in Section
2.1.l of the General Conditions of Contract:
Mr. Philip K. Packer
President of HMC Contracting South Texas, L.L.C.
2900 Wesleyan, Suite 375
Houston, Texas 77027
(713) 665-1100

171620 206&.1                               6

                                                                                             203
                                                     Article 10
                                              Bonds and Insurance

       l 0.1 Insurance. IJesign-Builder shall procure in accordance with Article 5 of the General
       Conditions of Contract the insurance coverages set forth in Exhibit C.

       10.2 Bonds and Other Performance Security. Design-Builder shall provide the following
       perfonnance bond and labor and material payment bond or other performance security:

       See Exhibit D.

                                                     Article 11
                                                 Other Provisions

       11.1 Other provisions, if any, are as follows: (lnsen 11ny addftlon•I ~\lsions)
               11.1.l            Willacy County, Texas shnll be a direct, third party beneficiary of
                                 this Agreement and shall he bound by the dispute resolution
                                 procedures contained in Article I0 of the General Conditions of the
                                 Contract.

       In executing this Agreement, Owner and Design-Builder each individually represents that
       it has the necessary financial resources to fulfill its obligations under this Agreement, and
       each has the necessary corporate approvals to execute this Agreement, antl perfonn the
       services descrihed herein.

       OWNER:                                                                DESlGN-BUILDER:
       THE WILLACY COUNTY LOCAL                                              HMC CONTRACTING

                                                                             SOffel~/
       GOVERNMEl'T CORPORATION . _,.-;

    c~~President                                                             yfusi ent

-----------------------------------·-·-·--·--
                                                                                                       204
         DB I A

         ~
         DESIGH•IUllD
         INSTJTllTE OF AMUICA

STANDARD FORM OF GENERAL
CONDITIONS OF CONTRACT
BETWEEN OWNER AND
DESIGN-BUILDER

                                205
                                                                 DB I A

                                                                 ~
                                                                 DHIGN·JOILD
                                                                 IHSTll UIf OF AMEllC4

             Standard Form of General Conditions
        of Contract Between Owner and Design-Builder
                              This documr.nt Jra.y heen amemkd and revised/ram it.s stando.rdform.

                                                               Table of Contents

Article 1:      General ......................................................................................................................................3

Article 2:       Design-Bullder·e Services and ResponslblllUes ......................................................................... 3

Article 3:       Owner's Services and Responaibilities ...................................................................................... 6

Article 4:      Hazardou5 Conditions and Differing Site Conditions .............................................................. 7

Article 5:      Insurance and Bonds ................................................................................................................... 7

Article 6:      Payment. ....................................................................................................................................8

Article 7:       lndemniflcation .......................................................................................................................... 10

Article 8:
                Tlme ..........................................................................................................................................11

Article 9:       Changes to the Contract Price and Time ................................................................................. 11

Article 10: Contract.Adjustments and Disputes .........................................., ........................................ 12

Article 11:
                 Stop Work and Termination for Cause ................................................................................... 13

Article 12: Miscellaneous ......................................................................................................................... 15

                                                                                                                                                                    206
                        Article 1                                   1.2.9    Subcontractor ls any person or entity retained by
                                                                    Design-Builder as an independent contractor to perfonn a
                         General                                    po11lon of the Work and shall include materialmen and
                                                                    suppliers.
1.1      Mutual Obligations
                                                                    1.2.10 Sub-Subcontractor is any person or entity
1.1.l    Owner and Design-Builder commit at all times               retained by a Subcontractor as an independent contractor
to cooperate fully with each other, and proceed on the              to perfonn any portion of a Subcontractor's Work and
basis of trust and good faith, to permit each party to              shall include materialmen and suppliers.
realize the benefits afforded under the Contract
Documents.                                                          1.2.11 Substantial Completion is the date on which the
                                                                    Work, or an agreed upon portion of the Work, is
1.2      Buie DefloHiolls                                           ~ufficiently complete so that Owner and/or Operator
                                                                    would be able to use the Project for training andtor
l,2.1   Agreement refenc to the txi:cuted contract                  operations.
between Owner llJ1d Design-Builder ,DBIA Document
No. 525, Standard Form of Agreement Betw~en Owner                   1.2.12 Work is comprised of all Design-Builder's
and Design-Builder - Lump Sum (1998 Edition) as                     design, construction and other services requited by the
amended by the parties.                                             Contract Documents, including procuring and furnishing
                                                                    all materials, equipment. servicu and labor reasonably
1.2.l Day or Days shall mean calendar days unless                   inferable from the Contract DoCUlJ'lents.
otherwise specifically noted in the Contract Documents.
                                                                                           Article 2
1.2.3     DeJign Consultant is e qualified, licensed design
professional who Is noc an employee of Design-Builder,                       Deslgn-Bullder's Services and
but Is retained by Design-Builder, or employed or                                  ResponslbllltJes
retained by anyone under contract with Design-Builder or
Subcuntractor, to furnish design services required under            2.1       General Services
the Contract Documents.
                                                                    1..1.1   Design·Bullder's Representative shall be
l.l.4    Hazardous Conditions are any materials, wastes,            reasonably available to Owner end shall have the
substances and chemicals deemed to be hazardous under               necessary expertise and experience required to supervise
applicable Lesa I Rcquiremenl1, or the h1111dling, storage,         the Work.      Design·Bullder's Representative shall
remediation, or disposal of which are regulated by                  communicate regulady with Ownel' a11d shall be vested
applicable Legal Requirements.                                      w'ith the authority tc act on behalf of Design-Builder.
                                                                    Design-Builder's Representative may be replaced only
1.2.5     GenemJ Conditions of Contract refer to lhi5               with lhe mutual agreement of Owner and DesigTI-Builder.
DBIA Document No. 53S, Stamlard Form of Genaral
CondJ1ionJ of Contracs Berween Owne1· and Destl{l'l-
Bul/der (1998 Edition) as amended by the parties.                   2.1.2   Design-Builder shall provide Owner with a
                                                                    monthly status report detailing the progress oi !he Wurk.
1.2.6       ugal Requirements are all 11pplicable federal,
state ll!ld local laws, codes, ordillllllces, rules, regulations,
orders and decrees of 1111y government or quasi·                    l.2       DesI:n Professional Services
government entity havingjurudiction over the Project or
Site, the practices involved In the Project or Site, or any         l.2.1     Design-Builder shall, consistent with appliC11.ble
Work.                                                               state licensing laws, provide through qualified, licensed
                                                                    design professionals employed by Design-Builder,
1.2. 7    (Intentionally Left Bl Mk)                                procured from qualified, independent licensed Design
                                                                    Consultants or from subcontr8Ctors/vendors fabricating
1.2.8     Site is the land or premises on which the Project         materials and/or equ\ pment for the Project, the necessary
ls located.                                                         design services, including architecturul, engineering and
                                                                    other design professional services, for the preparation of

                                                                                                                          Page3

                                                                                                                                   207
lhe required drawings, specifications and other design
submitto.ls to pennlt Design-Builder to complete the          2.6.1     Except as identified in an Owner's Pennit List
Work consistent with the Contracl. Documents. Nothini:        which may be attached as an exhibit to the Agreement,
Jn the Contract Documents Is intended or deemed to            Design-Builder shall obtain a11d pay for all necessary
create any legal or conll"actual relationship between         permits, approvals, licenses, government charges and
Owner and any Design Consultant.                              inspection fees required for the prosecution of the Work
                                                              by any government or quasi-government entity having
l.3      Standard of Cart for Design Profes1lon11l            jurisdiction over the Project.
         Services
                                                              2.6.2     Owner shall provide reasonable assistance to
2.3.1    The standard of care for all desi~ professional      Design-Bullder in obtaining those pennits, approvals and
seivices perfonned to ~ecute the Work shall be the care       licenses that arc ne~sary for the design and construction
and skill ordinarily used by members of the design            of the ProjecL
profession practicing under similar conditions at the same
time and locality of the Project.                             2.7      Deslgn-Bul1d•r's Construction PhQe
                                                                       Servic~s
l.4      Design Development Services
                                                              2.7.1     Desl~n-Builder sh.all provide through itself or
l.4.1    Design-Builder    has     provided    Owner          Subcontractors the necessary supervision, labor,
design/conceptual submissions that have been approved         inspection, testing, start-up, material, equipment,
by Owner 11ml llTC isllached as Exhibit A to the              mechh1eiy, temporary utilities and other temporary
Agreement.                                                    facilities to permit Design-Builder to CQmpiete
                                                              construction of the Project consistent with the Contract
2.4.2     Desii!l·Builder may submit to Owner                 Documenls.
Construction Documents setting forth in greater detail
drawings and specifications dc:lcrlblng the requirements      2.7.2     Design-Builder shall perfonn all construction
for construction of the Work. The construction                activities efficiently and with the requisite expertise, skill
Documents shall be consistent with the intent defined In      and competence to satisfy the requirements of the
the previously approved design submissions identified in      Contract Documents. Design-Builder shall at all times
the Agreement. Owner acknowledges that the Projecl            exercise complete and exclusive control over the means,
will not be designed to meet or comply with any type uf       methods, sequences and techniques ot' construction.
State, Federal or voluntary jail or prison design standards
that may or may not be applicable to the Project. Design·     2.7.3   Design-Builder     shall    employ       only
Builder shall proceed with construction In accordance         Subcontractors who ore duly licensed and qualified to
with the Construction Documents, if any are created.          perform the Work consistent with the Contract
                                                              Documents.
l.S      ~Ill   Requlresnenu
                                                              2.7.4     Design-Builder assumes responsibility to Owner
1.5.1      Design-Builder shall perfonn the Work in           for the proper performance of the Worl< ofSubcon1ractors
accordance with all Legal Requirements and shall provide      1111d any acts and omissions In connection with such
o.11 notices applicable to the Work as required by I.he       performtlnce. Nothing in the Contract Documents is
Legal Requirements.                                           intended or deemed to create any legal or contractual
                                                              relationship between Owner and any Subcontractor or
2.5.2     The Contract Price and/or Contract Time(s) shall    Sub-Subcontractor, including but not limited to any third·
be adjusted to compensate Design-Builder for the effects      party beneficiary rights.
of' any changes in the Legal Requirements enacted after
the date of the Agreement affecting the pcrfonnance of        l. 7.5   Design-Builder shall coordinate the activities of
the Work. Such effectS may include, without limitation,       all Subcontractors. lfOwner performs other work on the
revisions Design-Builder is required to make to the           Project or at the Site with separate contractors under
Construction Documents because of changes in Leglll           Owner's control, Design-Builder agrees to reasonably
Requirements.                                                 cooperate and coordinate its activities wilh those of such
                                                              separate contractors so that the Project can be completed
2.6      Government Approvals and Permits

                                                                                                                               208
in an orderly ond coordinated manner without
unreasonable disruption.                                        2.9.l     o~sign-BLlilder warrants to Owner that the
                                                                construction, including all materials and equipment
2.7.6     Design-Builder shall keep the Site reusonably         furnished as part of the construction, shall be new unless
free from debris, trash and construction wastes to pennit       otherwise specified In the Contract Documents, of good
Design-Builder to perform Its construction services             quality, in conformance with the Contract Documents and
efficiently, safely and without interfering with the use of     free of defects in materials and workmanship. Design.
adjacent land areas. lipon Substantial Completion of the        Builder's warranty obligation excludes defects caused by
Work, or a portion of the Worlc, Desien-Builder shall           abuse. elterations. or failure to maintain the Worlc by
remove all debris, trash, construction wastes, materials.       persons other than Design-Builder or anyone for whose
equipment, machinery and tools arising from the Work or         acts Design-BuUder may be liable. Nothing in this
applicable portions thereof to pennit Owner to occupy the       warranty is intended to limit any manufacturer's warranty
Project or a portion of the Project for its intended use.       which provides Owner with greater warranty rights than
                                                                set forth in this Section 2.9 or the Contract Documents.
2.8      Design-Builder's ResponslbUity fur Project             Design-Builder will provide Owner with all
         Safefy                                                 manufacturers' warranties upon either Substantial or
                                                                Final Complet[on. Where a manufacturer's or third party
2.8.1    Design-Builder recognizes the Importance of            warranty has been provided to Owner, Owner agrees that
performing the Work in a safe manner so as to prevent           Design-Builder will have no further liability with respect
damage, iajury or loss to (i) all individuals at the Site,      to the subject of the manufacturer's or third party
whether working or visitfog, (ii) the Work, including           warranty and owner agrees to look solely to such
materials and equipment incorporated into the Work or           manufacturer or third party f1Jr >111y warranty claim with
stored on-Site or off-Site, 1111d (iii) all other property at   respect to such items and hereby specifically releases
lhe Site or adjacent thereto. Design-Builder assumes            Design-Builder of end from any such claims.
responsibility for implementing and monitoring all safety
precautions and programs related to the perfonnance of          2.10     Correction of Defective Work
the Work.
                                                                2.10.1   Design-Builder agrec.1 to correct iUIY Work \hat
2.8.2     Design-Builder and :Subcontractors shall comply       is found to not be in conformance with the Contract
with all Legal Requirements relatlng to safety, as well as      Documents, including that part of the Work subject to
any Owner-specific safety requirements set forth In the         Section 2.9 hereof, within a period of one year from tbe
Contract Documents, provid1;:d that such Owner-specific         date of Substantial Completion of the Work or any
requirements do not violate any applicable Legal                portion of the Work, or within such longer period to the
Rcquircmenl Design-Builder will Immediately report In           extent required by the Contract Documents, provided
writing any safety-related injury, loss, damage or accident     ~w:h work ls not the subject of a manufacturers warranty
arising from the Work to Owner's Representative and, to         as described in Article 2.9. l above.
the extent mandated by Legal Requirements, to all
government or quasi-government authorities having               Z.10.l    Design-Builder shafl, within seven (7) days of
jurisdicLion over safety-related matters involving the          receipt of written notice from Owner that the Work is not
Project or the Work.                                            in conformance with the Contract Documents, take steps
                                                                to commence correction of such nonconfonning Work,
2.8.3     lJesign-Builder's responsibility for safety under     Including the correction, removal or replacement 1,1f th"
this Section 2.8 is not Intended in any way to relieve          nonconforming Work and any dam1111e caused to other
Subcontractors and Sub-Subcontractors of their own              parts of the Work ftffected by the nonconforming Work,
contr11Ctual and legal obligations and responsibility for (i)   provided such work is not the subject of a manufacrurer' s
complyin& with all Legal Requirements, including those          or third party warranty as described in Article 2.9. I
related to health and safety maners, and (ii) taking ell        above. If Design-Builder fails to commence the
necessary measures lo implement and monitor all safety          necessary steps within such seven (7) day period, Owner,
precautions 11nd programs to guard against injury, losses,      in addition to any other remedie.~ provided under the
damage.~ or accidents resulting from their performance of       Conlract Documents, may provide Design-Builder with
the Work.                                                       written notice tbal Owner will commence correction of
                                                                such nonconfonning Work with its own forces. If Owner
2.9      De.sign-Builder's W11rranty                            does perform such corrective Work, Design-Builder shall

                                                                                                                     age

                                                                                                                             209
be responsible for all reasonable costs incurred by Owner      3.3.1     Design-Builder shall cooperate with the
in performing such correction. If the nonconforming            rellllOnable requirements of Owner's lenders or other
Work creates an emergency requiring an immediate               financial sources.       Nohvithstanding the preceding
response, the seven (7) day periods identified herein shall    sentence, after execution of the Agreement, Design-
be deemed inapplicable.                                        Buildcr shall have no obligation to execute for Owner ur
                                                               Owner's lendor& or other financial sources any documents
2.10.3 The one year period referenced in Section 2.10.1        or agreements that require Design-Builder to assume
above applies only to Dt:Sigr1-Builder's obligation to         obligations or re.'lponsibilitiCll greater than those existing
correct nonconfonning Work not the subject of a                obligations Design-Builder that may exist under the
manufacturer'~ or third party warranty and Is not Intended      Contract Documents.
to constitute a period oflimltations for any other rights or
remedies Owner may have regarding Design-Builder's             3.4       Owner's Representative
other obligations under the Contract Documents.
                                                               3.4.l      Owner's Representative shall be responsible for
                       Article 3                               providing Owner-supplied infonnation and in a timely
                                                               manner to permit IJesign-Builder to fulfill its obligations
 owner's Services and Responsibilities                         under the Contract Documents. Owner's Representative
                                                               shalt also provide Design-Builder with prompt notice if it
3.1       Duty to Cooperate                                    observes any failure on the part of Design-Builder to
                                                               fulfill its contractual obligations, including any errors,
3.1.1     Owner 5hall, throughout the performance of the       omissions or defects in the performance of the Work.
Work, cooperate with Design-Builder and perform lts            Fllilure to provide such notice to Design-Builder shall
responsibilities, obligations 11nd services in a timely        constitute a complete waiver of any daims by OWner
manner to facilitate Design-Builder's timely and efficient     relating to such matters.
performance of the Work and so as not to delay or
interfere with Design-Builder's performance of Its              3.5       Government Approvall and Permits
obli,&ations under the Contract Documents.
                                                                3.5.1     Owner shall provide reasonable assistance to
 3.1.2    If required by this Agreement, Owner shall            Deslgn-Huilder in obtaining those pennits, approvals and
 provide timely reviews and approvals of submissions            licenses thal are Design-Builder's responsibility.
 consistent with the turnaround times set forth in Design·
 Builder's schedule.                                            3.6       Owner's Separate Coatractors

 3.2       Furnbhin& of Servien and IJaformatlon                3.6.1     Owner is responsible for all work perfonned on
                                                                the Pruj~cl or at the Site by separate contractors under
 3.2.1     Owner is responsible for securing and executing      Owner's control. Owner shall contractually require its
 all necessary agreements with adjacent land or property        separate contr11Ctors to cooperate with, and coordinate
 owners and any easements that are necessary to enable          their activities so as not to inteTfere with, Design-Builder
 Design-Builder to perform the Work. Owner is further           in order lo enable D1;11ign-Buildcr to timely complete the
 respo1111ible for all costs, including attorneys' fees,        Work consistent with the Contract Documents.
 incurred in securing these necessary e.greemcnts.
                                                                 3.7       Owner's Rerponslbllity ror Maintenance
  3.3      Finanetal Information
                                                                 3.7.I      Owner shall be n::spon8ible for maintaining the
                                                                 Work after Final Completion by Design-Builder. Owner
                                                                 warrants and represents to Design-Builder that it will
                                                                 provide all necessary maintenance and upkeep of the
                                                                 llinJcture, systems, equipment and appurtenances
                                                                 furnished and installed by Design-Auilder hereunder.

                                                                                                                         Page6

                                                                                                                                 210
                      Article 4                              INCLUDINO ATIORNEYS' FEES AND EXPENSES,
                                                             ARISING OUT OF OR RESULTING FROM THE
  Hazardous Conditions and Differing                         PRESENCE, REMOVAL OR REMEDIATION OF
           Site Conditions                                   HAZARDOUS CONDITIONS AT THE SITE.

4,1      Ha:r.ardons Conditionx                              4.1.6   Notwithstanding the preceding provisions of this
                                                             Section 4.1, Owner is not responsible for Hazardou3
4, t.1    Unless otherwise expressly provided in the         Conditions introduced to the Site by Design-Builder,
Contract Documents to be part of the Work, Design·           Subcontractors or anyone for whose acts they may be
Builder is not re.sponsible for any Hazardous C'.tmdition~   liable. DESION-BUILDER SHALL INDEM?\TFY,
encountered at the Site. Upon encountering any               DEFEND AND HOLD HARMLESS OWNER AND
Hazardous Conditions, Design-Builder will stop Work          OWNER'S OFFICERS, DIRECTORS, EMPLOYEES
Immediately in the affected area and duly notify Owner       AND AGENTS FROM AND AGAINST ALL CLAIMS,
and, if required by Legal Requirements, all government       LOSSES, DAMAGES, LIABILI'nES AND EXPENSES,
or quasi-government entities with jurisdiction over the      IJ;;CLUDING AlTORNEYS' FEES AND ID":f~'·E,_ !             r:
                                                                                                                                               "-1 1 '""!,CH , .. ;5 Cl.:H! ,;;lC>,!E l/ll'f S:£ !SS_.:,".) Ci<
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          Liability and Waiver 0£ Subrogation appl.ies as required by contxact.
          Certificate Holder is included as Mortqaqee on tbe Buil.ders Risk Pol.icy as
          re•peats Willacy County ~ocal Government Corporation.

          CERTIFICATE! HOLDER                                                                                                                             CANC:1!;LLATION
                                                                                                                                                                                                                 --· -·------
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                                950 17th Streot, Suite 650                                                                                                ll!tf"OS! NO OBUGATIO~. OR UA81~JTY OF :..~f Kl~;::i U?ON ThE                           .·.s ... ~E.R,    IT!. .l..Gb'flS Lt-"
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    Certificate                                                          an Additional                                                            as respects General
    Liability and                         Waive~ 0£           SW:>roqation applies.

   ,_C_E_R_T-ll'l_C_A_T_E_H_O_l_D_E_R_ ..         ----·------------C~AHC--""E_L_LA_Tl_O_N                                                             _____
                                                                                                  ffYLC:RAY               SHOU'.D ANY OF TI1~ QIO\IE OESCRISEO POLICl~S ~E CM:~ELLEO 8Ef0Rf                                             ™" E>Pl'IAT'ON
                                                                                                                          OATE THEREOF. THE 133~i:io l/ISURER "c.L ENOEAY1E LEFT, ~1;HNl~f TO oc •O 3HAl.L
                        GoverlllDSnt corporation                                                                          11.tPOSI! ~O OSl.IOA110M OR LIABILITY OF AHY KltlO llP0'1 l>1S INSUP.-+--·--~

 CS                   Wa.._ ii.      -~Sewer         Plan                                      8 10      07

 Sl.J                  '""""                                                                   a 10      07
      .1                .,._.,         ""' ""'•ndation Plan                                    .I 10     U7

      .4              _.....,. •• nn           ""' "'"" Plan                                   8 10 01

 Sl.11.                 ,.. •                 -~     -·n                                       • la      DJ'

~SJ::':!,1'-----IH"""~~;,i,
 53.2               .... ...
                                            ~~~i::::.:··~~~·~n'---------+-··~·~u~u•--ir-~
                                                   Piii'                   • 10 07        -
 SJ.]                                                                                          •   • n n7

 ...~.4                 "'" "" Bu!Jdm .., rv """"                                              a ''-D    07

58.1                  Panel     ~~    - · v....                                                I "' 07                    I
      .2              p...,Jaint - -                                        ••.   »»   >
                                                                                                I 1• 07
                                                                                           ..j.-_1,:::1...,.!'---1------.i
      .3              p.....,                                                                  814107
      .4              -               --·                                                      8:iD07
      .'i             P11111I         -      """                                               a 10      n7
    Ll:               ~-              -~                                                       8   •u    07

 AZ.1A                  nnr """'-Area A                       ··-------1--!!'~'-~'0':'u~·-+------1
 A2.IB                 """Plan···-•                                            a 19 07

       ll".           Housina Roar"""' • ""'a C                                                • 10 'D>'       8 S4 07
      .20             --~Fluor Plan •Ania D                                                    8 •   0
                                                                                                         '"
                                                                                                           7
                                                                                                               8 ri4 07

 AB.J                  ..,.,..,_ . - J__.._.. ~--                                              I l

M•"t                                        "Hedlanll:ll Plan                                  8 tftJ07
M-4                                         ° Ml!Clutnlral PIE                                 a ID/17
M·S                                       -., _         _,Plan                                 l/1GJ07
M-6                   a o n • - - Madll....,,, Plan                                            a/1M07
1+7                   I - Mmln llldn - - Plan                                                  8/10107

OE3. I                Olierd -            ..,,_, ""'"                                          8/10107
t'Ofl...,..~.1.A___   , _ ....,.0 .._Area A                                                    8fln 1 n7
                                                                                                               --~
OE3.•B               ....__,.__PlanAn>•8                                                       8/10107
u."'"'1.,,,__2_ _-1'Sle-'-'Tl.5lc.f'l-""bl!!LI!&._P_,,,,, Conduit Run<                         111n1n7

                                                                                                                              235
                EXHIBIT"E"
            UST OF DRAWINGS

Wiiiacy county Proc:esstng Facility Exp!lnSion

                                                 236
                                                    EXHIBIT•e•
                                                 UST OF DRAWINGS

                            Wiiiacy County ProcMSing Facility Expansion

      Slleet                                     Title                  Date           ltev1
Cl             Olmension Control Plan                              • 10 07
C2              '~dlna/Pavtnn Plan                                 • 10 07
0              Draln:ine Area Man                                  • 10 07
Of              [)r.ljnanePlan                                     • 10 07
C5             Water&. Sarur- Sawer Plan                           • 10 07
51.1            ,........ Notes                                    8 10 07
s2.1            """"""'Bu ~ -·ndation Plan                         • 10 07
52.2           HQuclnn Bui                                         • 10 07
                                  ""Fo1""""""' Plan
52.3           Houann        .... IVI nundatlon Plan               • 10 07
52.4
52.5
                Houslnn
               Admln ~
                             -·
                            T~ ~
                                    ~
                                      -·~•non Plan
                                      ""•ndatlon Plan
                                                                     10 07
                                                                     10 07
52.6           Admln ~                                             • 10 07
52.7            Mlll~nn•n~
                            """"' ""
                                    - "'"'nation Plan
                                      -·~·t1on Plan                  10 07
52.8
53.1           ....... .............
                ..., 111111"'.., Foundatlon Plan
                                      ~ rv Plan
                                                                     10 07
                                                                     10 07
53.2
53.3           :Mnr.Oll innr ..,..,....,ule                      • 10 07
0F5.01         Overall ~r~ute                                      8 10 07
DEl>.00        Daor""' · ............, f"""" Elevatlons            • 10 07
M-1
M-2
                ""'' -
               lnri oor ,_ ~~nlcal Plan
                                           _,n Mechanical Plan     • 10 07
                                                                   • 10 07
M-3
M-4
M-5
                ....
               Bu                 ....., _,.,,anlcal Plan
                    '""'Kkhen """' Mechanical Plan
               Bunks/Kltdlen Sirin Mechanical Plan
                                                                   8 10 07
                                                                   R 1n ,
                                                                   l/10/fr1
                                                                                ....
~              Bunksl!Clkhen Blda Mechanical Plan                  1/10/07
M-7            Exlstlnll Ad!nln Blda Mechanical Plan                   a11n11r7
M-8            fxlsttna Admln 8111<1 Medlantcal Plan                   1110/07
M-9            Eldsti110 Admln Rlrln Mechanlcal Plan                   8110/07
M-10           Exlstin" Admln Blda Mechanlcal Plan                     8110/07
M·ll           Mechan1r111 ~ulgs                                       1/10107
 DE2.1         Overall LJnh~nn ........,, Plan                         8110107
 DE2.1A        Uohtlna Demo Plan Area A                                1/10107
 OEZ.18        UnhUnn De~ Plan Area 8                                  1110/07
 DE3.1         Overall Pnwer Demo Plan                                 1110107
 DE3.1A        Power Demo Plan Area A                                  l/1ft/ft7
 DE3.18        Power Demo Plan Area B                                  1110/07
 El.2          Sit!! Tel Data &. Prtmarv Conduit R•""'                 1110/07

                                                                                                    237
                                              EXHIBIT"E"
                                           UST OF DRAWINGS

                       Wiiiacy County Processing F•dllty Expansion

    Sheet                                   Tiiie               o.m        "9¥1
E2.1          Overall Lklhtlna Plan                            1/10/07
E2.1A         Uahtfna Plan Area A                              1/11)/07
E2.1B         Llahttna Plan Area B                             1/10107
E2.2         l~n Housirui Uahtlna Plan                         1/10/07
E2.2A         Housinn I ltlhttno Plan Area A                   1/10/07
IF7.JA        Ho11<:1n11 L111htrno Plan A"'a B                 1/10/07
E2.2r         Houslno llllhtlno Plan Area c                    1111)/07
E2.20         HoUSlno L"'hH"" Plan Area D                      1110/07
E2.3          New A.rtmln Uohttno Plan                         1/10/tn
E2.4          Indoor Recreation Uohllna Plan                   1110/07
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IF1.18        Power Plan Area B                                1/10/07
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E4.1          Overall HVAC Power Plan                          1110/07
E4.1A         HVAC Power Plan Area A                           1110/07
E4.1B         HVAC Power Plan Area B                           l/IO/D7
E4.2          Overall HOUSlno HVAC Power Plan                  8/10107
 E4.2A       IMnusfno HVAC Power Plan"""' A                    1/10/07
 E4.2B        Houslno HVAC Power Plan Area B                   l/10107
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 ES.2         Schedules lit Dt...r                             &ltflltn
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IP.2.1        Houston Sewer Plan Area A                        1/10/07
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 P.4.2         Sewer Plan Allmln llulldlna                     8/10107
p_.. ,        Water Plan Admin Bulldinn                        8/10/07
p ~.1          ISO Riser n..tlllls                             1/10/"7
1c:..n.oo      General -            and svmoo11 """"d          1/10/07
Sel.00         Securlv Electronics Ovenill Site Plan           l/U/07
le..~   nn     5ea.1r1v Electronlc:s overall Floor Plan        1/10/07
Se2.01         Securtv Electronics Partial Floor Plan          1110/07
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Se3.00        ,c-........ Elearonlc:s Partial Floor Plan       l/10/07
5e4.00         Securllv Electronics Overall Floor Plan         1/10/07
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 <:..4.02     '"-''""" F1o..+nv>1C5 Partlal Floor Plan         8/18/07
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 Se4.04       I""'°',....,, Ela..mnJcs Partial Floor Plan      8110/07
 Se5.00       1.............. Efectronlcs Overall Floor Plan   1110/07
 199-FS01      IOtch""'l.aunci-v Plan View                     l/1fllfl7
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 199.fS04     IEaulament Schedule                              8/10/07

                                                                                  238
                                                              DI I A

                                                              ~
                                                              DESIGN·IUllD
                                                              INSTJTUT£ OF AMEllCA

                            Certificate of Substantial Completion

                                                                                Date of Substantial                  January 31, 2008
                                                                                Comoletion:

 Project:    1,086 Bed Addition to the Willacy County ICE                       Desian-Builder's Proiect No:         07-06
             Detention Facility
             Willacy County, Texas                                              Date Of Agreement                    August 30, 2007

Owner:       The Willacy County Local Government Corporation                    Design-Builder:     HMC Contracting South Texas, LLC
             190 North 3111 Street                                                                  2900 Weslayan, Suite 375
             Courthouse Annex                                                                       Houston, Texas n021
             Raymondville, Texas 78580

This Certificate of Substantial Completion applies to all Work as defined in DBIA Contract Dated August 30, 2007,
General Conditions of Contract, or to the following portion of the Work only;

      itantial Completion for: 1,086 Bed Housing Building Expansion, Administratton Expansion and Remodel,
kiw..reation Building, and MTC Administration Building.

Owner and Design-Builder have jointly inspected the Work and have verified that the Work identified above was
substantially complete in accordance with the requirements of the Contract Documents on the above-stated Date of
Substantial Completion. The following items of Work remain to be completed prior to final payment (if necessary, attach
list):

Attached Punch List

Except as noted below, warranties related to the Work identified above                to which this Certificate of Substantial Completion
applies, commence to run on the date of Substantial ComP,I · ·

                                                                                                                                    ,..
                                                                          DESIGN-BUILDER:
                                                                          By:

Printed Name and Tltle:       Emilio Vera, Commissioner                   Printed Name and TiOe:      Kenda I Phin      President

Date:                                                                     Date:

OPERATOR:                                                                 DESIGNER:
By:                          ~~                                           By:

p       1 Name and Title:   ;5/Jz.pk'I\ l'.'>OIMS - Qtt168 S.W.3d 313, 319 (Tex. App. Dallas 2005). Moreover, Willacy County was not

even a signatory to the agreements, and as such, has not consented to arbitration. The fact that the

parties to the Agreements designated Willacy as a third party beneficiary does not rise to the level

of making it a signatory or giving its assent to waive its right to a judicial forum. None of the cases

cited by the Defendants hold otherwise. The Court further agrees with the reasons set forth in

Plaintiffs' Response to Defendants' Motion as to why arbitration cannot be compelled under these

circumstances.

        IT IS SO ORDERED.

                                                                                                 418
EXHIBIT F
                                               CAUSE NO.: 2014-CV-0103A

WILLACY COUNTY,                                                 § IN THE TEXAS DISTRICT COURT
                                               Plaintiff        §
                                                                §
vs.                                                             §
                                                                §
HALE-MILLS CONSTRUCTION, LTD.;                                  § 197TH JUDICIAL DISTRICT
HALE-MILLS CONSTRUCTION, INC.;                                  §
HMC CONTRACTING SOUTH TEXAS,                                    §
LLC;                                                            §
and MANAGEMENT & TRAINING                                       §
CORPORATION d/b/a MTC/GSA-TEXAS,                                §
                      Defendants                                § WILLACY COUNTY, TEXAS

WILLACY COUNTY'S PLEA TO THE JURISDICTION AND RESPONSE TO PLEA IN
     ABATEMENT AND OPPOSITION TO ARBITRATION BEFORE AAA

TO THE HONORABLE JUDGE OF THIS COURT:
         COME NOW, the Plaintiff County of Willacy, Texas, by and through their respective
attorneys of record, and files this its Response To Plea In Abatement And Opposition To
Arbitration Before AAA, and as grounds therefore would show unto the Court as follows:
                                                           I.
                                                     INTRODUCTION

         Plaintiff County of Willacy, Texas, respectfully submits this Response to Defendants'

Plea in Abatement and Motion to Compel Arbitration, set for hearing in this Court on January

21, 2015, and by undersigned counsel would respectfully show the Court:

         Defendants make much hay out of the fact that they claim to have four different

agreements, with four different arbitration clauses, covering (at least) four different transactions

that are alleged by Defendants to be implicated in this case. But Defendants' miss the point and

cannot prevail because:
              irBlb~©
               g·31--p ·K·
             'JAN 2 0 2015
      GllbArt Lozano Dist CleJk, Willacy Co.
                                                                                               84
      By ~Rt.:;j          st"'       Deputy
           •   Under the case Town of Highland Park, Defendant's Motion to Compel is
               tantamount to an action to enforce the contract against Willacy County, an action
               against which Willacy County has unwaivable sovereign immunity-this Court
               thus lacks jurisdiction to enforce such a contractual right against the County;

           •   Willacy County is not a party to the Arbitration agreements, and cannot be made a
               party by implication or supposition;

           •   Defendants have not attached the alleged contracts, nor authenticated them-
               therefore, there is no evidence for this Court to conduct a "trial" as is required
               under the statute;

           •   Even if sovereign rights had not been waived, Willacy County's claims are
               incident to the contract and Willacy is not attempting to enforce the contract-
               therefore, there is no basis to enforce the agreement on estoppel grounds; and

           •   The arbitration clauses are unconscionable and therefore, unenforceable under the
               Texas Arbitration Act.

       Any of one of these reasons is sufficient to deny the motion. Together, they are a bulwark

against Defendants' impotent attempt to enforce an unenforceable and unconscionable agreement

that the County never signed and never agreed to be bound by.

       Accordingly, this Court should deny the Plea in Abatement and Motion to Compel

Arbitration.

                                               II.

                            ARGUMENTS AND AUTHORITIES

A. WILLACY COUNTY'S PLEA TO THE JURISDICTION: The Agreement to Arbitrate
   is Invalid and Unenforceable Against Willacy County Because there Was Lack of
   Capacity to Bind Willacy County to an Arbitration Agreement
       None of the agreements purports to bind Willacy County. Nor do any of the Signatories

have the authority to bind Willacy County to waive its sovereign rights. It is well-established

now that forcing a County into arbitration implicates the county's sovereign rights. See Town of

Highland Park v. Iron Crow Constr., Inc., 168 S.W.3d 313, 319 (Tex. App. Dallas 2005)

("Because its contract with Highland Park provided for binding arbitration in the event of a

                                                                                             85
dispute between the parties, Iron Crow was seeking to enforce Highland Park's performance

under that contract. Therefore, sovereign immunity was indeed implicated here.").

       In Town of Highland Park, the town was a signatory to the contract and the Court still

refused to allow it to compel arbitration. 168 S.W.3d at 319. The Court held that a motion or

action to enforce an Arbitration clause is essentially a suit to enforce the terms of a contract, a

suit against which the County has sovereign immunity. Id. The Court noted that only the

legislature can waive immunity which it did not in this case. Id. The court of appeals also held

that the Federal Arbitration Act did not apply because both the plaintiff and the defendant were

Texas residents (as is the case here: Willacy and Hale-Mills are Texas residents); and even if the

FAA did apply, it could not preempt the sovereign rights of the County. Id. at 317-318.

Therefore, this Court lacks jurisdiction to enforce the Arbitration Agreement against Willacy

County.

       The Agreements' arbitration clauses are completely unenforceable against Willacy

County absent an express and unambiguous agreement by Willacy County to waive its right to be

a party in a court of law. In another case analogous to this one, in Texas Natural Resource

Conservation Commission v. IT-Davy, 74 S.W.3d 849 (Tex. 2002), the Texas Supreme Court

rejected the argument that a contractual provision providing that disputes could be decided by

arbitration could be enforced against the County. Id. at 857-58. The court held that since only the

Legislature could waive sovereign immunity, "administrative agents," even those with authority

to enter into contracts such as the County Judge, had no authority to bind the County. Id.

       Likewise, in Fluor Daniel, Inc. v. Travis County, 2003 U.S. App. LEXIS 8138, *4 (5th

Cir. Tex. Apr. 30, 2003), the Fifth Circuit held that Travis County had not waived its rights as a

sovereign in a contract with Fluor, despite the fact that the County Judge had signed the contract.

                                                                                               86
The Court held that only "the legislative body of the county-the commissioner's court--can

waive sovereign immunity." Id at *5. And moreover, even then it must be "clear and

unambiguous." Id In that case, the Court held that Travis County-even though it arguably

invoked the jurisdiction of the court by filing counterclaims-had not waived any of its

sovereign rights not to be brought into court without its express consent. It is also well-

established that these rights cannot be waived through the conduct of the county. See Webb

County v. Khaledi Props., 2013 Tex. App. LEXIS 9063, 3 (Tex. App. San Antonio July 24,

2013).

         Here, the contractual provision hailing Willacy County into arbitration is a violation of

the above case law and rules. The various corporate entities lacked capacity to bind the County

to those agreements in any way, fashion or form. And Defendants cannot prove otherwise.

Therefore, the Motion must fail.

B. There is No Valid Agreement to Arbitrate Between Defendants and Willacy County-
   In Fact the Agreements Preclude Arbitration in this Instance
         To compel arbitration, a party must show that there is a valid arbitration agreement and

that the claims raised fall within the agreement's scope. In re Kellogg Brown & Root, Inc., 166

S.W.3d 732, 737 (Tex. 2005) (orig. proceeding); see also Tex. Civ. Prac. Rem. Code §

171.00l(a). Without an agreement to arbitrate, arbitration cannot be compelled. J.M Davidson,

128 S.W.3d at 227 (citing Freis v. Canales, 877 S.W.2d 283, 284 (Tex. 1994) (orig.

proceeding)).

         A court determines the validity of an arbitration agreement by applying state contract law

principles. See J.M Davidson, Inc. v. Webster, 128 S.W.3d 223, 227 (Tex. 2003). Any

presumption in favor of arbitration only arises after a valid agreement to arbitrate is established

                                                                                              87
to exist-the presumption does not apply to construing the existence of the agreement itself. See

In re Kellogg Brown & Root, Inc., 166 S.W.3d at 737.

        1. The Arbitration Agreements Are Not With the County of Willacy And
           Therefore Cannot be Enforced Against the County

       The four putative arbitration agreements are between Hale Mills et al. and Willacy

County Public Facility Corporation (Exhibit A), between Hale-Mills Construction Ltd. and

County Jail Public Facility Corporation of Willacy County (Exhibit B), HMC Contracting South

Texas LLC and the Willacy County Local Government Corporation (Exhibit C), and HMC

Contracting South Texas LLC and Willacy County Local Government Corporation (Exhibit D).

       Willacy County is not a signatory to any of the agreements. Moreover, none of the above-

identified corporate signatories is a plaintiff in this lawsuit. Therefore, there is no contractual

basis to enforce the agreements against Willacy County.

       Willacy County's claims for breach of implied warranty, negligence/unjust enrichment

and for fraud in the inducement "relate" to the contracts, but do not actually depend upon them.

As one Court of Appeals explained, "a non-signatory cannot be compelled to arbitrate when

claims merely 'touch matters' covered by a contract or 'are dependent upon' a contract; instead,

the claims must rely on the terms of the contract." Carr v. Main Carr Dev., LLC, 337 S.W.3d

489, 498 (Tex. App. Dallas 2011) (citing Hill v. G.E. Power Sys., Inc., 282 F.3d 343, 348-49 (5th

Cir. 2002). "Where the obligations arise under general law"-e.g., here, the law of negligence,

anti-fraud and implied warranty-then a non-signatory to the agreement cannot be compelled to

arbitrate. Id. As the Weekley court observed, "claims must be brought on the contract (and

arbitrated) if liability arises solely from the contract or must be determined by reference to it."

Weekley, 180 S.W.3d at 132 (emphasis added). Conversely, " ... claims can be brought in tort

(and in court) if liability arises from obligations imposed by law." Id.

                                                                                              88
        Here, Defendants' motion is completely silent as to what of the contractual language

themselves Willacy's claims would rely upon. Willacy's claim for breach of contract/warranty, is

not an attempt to enforce any of the specific terms of the agreements. It is well-established that a

warranty and defect claims can be brought by third parties to the contract without enforcing any

specific terms of the contract. See Landmark Org., L.P. v. Tremco Inc., 2010 Tex. App. LEXIS

5052, *29 (Tex. App. Austin 2010). Likewise, seeking restitution for negligence or unjust

enrichment and fraud in the inducement does not invoke any terms of the agreement.

        Defendant cite the case In re NEXT Fin. Group Inc., 271 S.W.3d 263, 267 (Tex. 2008)

for the proposition that "[a] third-party beneficiary to a contract can be compelled to arbitrate

under an arbitration provision in the contract." But this is not what the court in In re NEXT held

at all. There, the Court held that a non-signatory third-party beneficiary could enforce an

arbitration clause against one of the signatories. The case here is the opposite-a signatory (Hale

Mills or HMC) is trying to force a non-signatory (Willacy County) into arbitration. Defendant

cites no other case or statute that specifically allows for arbitration clauses to be enforced against

a non-signatory, even if that non-signatory is a putative third-party beneficiary.

        Furthermore, Defendants admit that Willacy County is not a party to any of the

agreements, and is only designated as a third-party beneficiary in three of the four agreements.

Thus, that agreement and its claims fall outside of Hale-Mills' own contractual argument that a

third-party beneficiary may be compelled to arbitration under all the agreements.

        However, because Willacy is named as a Third-Party beneficiary is not enough to compel

it to arbitration if it is not invoking the contract specifically-its claims are merely incident to the

contract.

       2. Defendants Cannot Establish That the Non-Parties Can be Bound to the
            Arbitration Clause

                                                                                                  89
           Defendants are attempting to bring parties to the arbitration table that cannot be seated

there under Defendants' own arbitration clauses. For instance, the Arbitration agreements

expressly exclude arbitration with non-signatories to the Agreement. Specifically, the agreements

provide, for example, that:

               No other arbitration arising out of or relating to this Part 2 Agreement
               shall include by consolidation, joinder, or in any other manner, an
               additional person or entity not a party to this Part 2 Agreement or not a
               party to an Agreement with [Hale-Mills], except by written consent[.] 1

Thus, by the plain language, Willacy County cannot be compelled to arbitration under this

provision since Willacy County is not a signatory to any of the arbitration agreements either, nor

are four two of the three co-defendant entities. Thus, this lawsuit brought by Willacy as against

the non-signatory defendants must continue.

           3. Defendants Cannot Established That a Valid Arbitration Agreement Exists,
              Therefore, This Court Need Not Try the Matter

           The Texas Civil Practice & Remedies Code states that "If there is a substantial bona fide

dispute as to whether an agreement to arbitrate exists, the court shall try the issue promptly and

summarily."). See Tex. Civ. Prac. Rem. Code § 171.023(b) (emphasis added). Here, there is a

substantial dispute as to whether an agreement to arbitrate exists between the County and the

Defendants. Thus, this Court is to try the issue summarily-but how can the Court try this issue

when there is not proper evidence before the Court? It cannot.

           Defendants only attach snippets of what they claim to be agreements to arbitrate.

However, it is prima facie accepted law that to be valid, an arbitration clause must be part of an

otherwise enforceable written agreement. See Bennett v. Leas, 2008 Tex. App. LEXIS 4817, *8-

9 (Tex. App. Corpus Christi June 26, 2008); Tex. Civ. Prac. Rem. Code§ 171.021(b).

1
    See Exhibit A to Amended Motion.

                                                                                               90
        Defendants ask this court to assume without evidence-not even an affidavit-that their

snippets are part of enforceable contracts. Yet, the contracts have not been presented in full to the

Court with signatures, dates or other matters governing the scope of the claims or issues covered

by the Agreements. They have not been properly authenticated or otherwise presented properly

to the Court as certified copies or genuine facsimiles. This is grounds for striking the evidence

and not considering it-it constitutes hearsay. Wortham v. Otis Elevator Co., 2000 Tex. App.

LEXIS 3443, *8 (Tex. App. Dallas May 25, 2000) (sustaining trial court striking of summary

evidence where "documents constituted hearsay and were not properly authenticated").

       Therefore, before this court is no evidence of an enforceable agreement containing an

enforceable arbitration clause. Defendants' say-so is not enough. Defendants mere attachment of

pieces of paper constitute hearsay and is plenary grounds for striking the evidence. Wortham,

2000 Tex. App. LEXIS 3443, *8. Because there is no evidence in favor of the Defendants, there

need be no summary trial. And for that reason alone, the Motion fails on its face.

C. The Claims Do Not Fall Within the Scope of Any of the Submitted Agreements

       Defendants have not presented the agreements, and therefore, there is no basis for this

Court to say that the claims fall within the scope of the agreements or their arbitration clauses. It

is fundamental law that a court cannot compel arbitration of claims that are not covered by the

arbitration clause. See In re Kellogg Brown & Root, Inc., 166 S.W.3d 732, 737 (Tex. 2005)

(orig. proceeding); see also Tex. Civ. Prac. Rem. Code§ 171.00l(a).

       Therefore, because Defendants have not made even the most fundamental showing of

how the allegations or the claims actually arise under the Agreements bearing the arbitration

clauses, they cannot hope to establish that arbitration is necessary.

D. The Purported Arbitration Agreements are Unconscionable

                                                                                                91
        Section 171.022 of the Texas Civil Practices and Remedies Code states that "[a] court

may not enforce an agreement to arbitrate if the court finds the agreement was unconscionable at

the time the agreement was made." "An unconscionable contract provision is defined as one that

'is grossly unreasonable or unconscionable in light of the mores and business practices of the

time and place as to be unenforceable according to its literal terms.'" BDO Seidman, LLP v. JA.

Green Dev. Corp., 327 S.W.3d 852, 859 (Tex. App. Dallas 2010) (quoting Gillman v. Chase

Manhattan Bank, N.A., 73 N.Y.2d 1 (N.Y. 1988)). Unconscionability has a procedural dimension

as well as a substantive one. Id

        Here, the Agreements were procedurally unconscionable. They were standard form

agreements that were compelled on the County. Moreover, they were procedure through a

process that included two officials who accepted bribes and ultimately pled guilty to criminal

charges of bribery. 2 The agreements are substantively unconscionable because they select the

American Arbitration Association, which requires high up-front fees and arbitrator costs-all of

which the Willacy County taxpayers would have to bare. The taxpayers should not be the victims

of a bribery scandal and shoddy workmanship on a prison that is at the root of this issue.

        For these reasons, the arbitration clause should not be enforced.

                                                   III.

                                            CONCLUSION

        For the foregoing reason, this Court should deny Defendants' Plea in Abatement and

Motion to Compel Arbitration, and set this matter for trial on the merits.

2
 See www.myplainview.com/article 439ed742-bbc0-5lde-8368-26btu30b4c35.html (last visited January 20,
2015).

                                                                                                       92
Respectfully submitted,

LAW OFFICE OF RAMON GARCIA, P.C.
222 West University Drive
Edinburg, Texas 78539
(956) 383-7441I(956)381-0825-Facsimile
e-mail address(s): EArellano@ramongarcia-law.com
                   or rsalinas@ramongarcia-law.com

By:        ~
          HON. RAMON GARCIA
          State Bar No.: 07641800
          HON. EMERSON E. ARELLANO
          State Bar No.: 24067490
      &
          Hon. BRUCE STECKLER
          State Bar No.: 00785039
          THE STECKLER LAW GROUP, LLP
          12720 Hillcrest Road, Suite 1045
          Dallas, Texas 75230
          (972) 387-4040
          (972) 387-4041
&
          HON. MANUEL SOLIS
          State Bar No.: 18826790
          6657 Navigation
          Houston. TX 77011
          (713) 844-2700
          (281) 754-4681
&
          HON. DAN RIOS
          State Bar No.: 00784844
          323 Nolana Loop
          McAllen, TX 78504
          (956) 630-9401
          (956) 682-0566
          Counselor(s) for Willacy County

                                             93
                             CERTIFICATE OF SERVICE

  I, EMERSON E. ARELLANO, do hereby certify that on the 20th day of January, 2015, a
true and correct copy of the foregoing WILLACY COUNTY'S PLEA TO THE
JURISDICTION AND RESPONSE TO PLEA IN ABATEMENT AND OPPOSITION TO
ARBITRATION BEFORE AAA filed and a true and a correct copy of the foregoing was issued
via e-mail addresses and facsimile transmission to:

                                       William B. Westcott
                                            Kristi Belt
                                    ANDREWS MYERS, P .C.
                                   3900 Essex Lane, suite #800
                                       Houston, TX 77027
                            (713) 850-4200 I (713)850-4211 - Facsimile
        e-mail address(s): Ben.ewestcott@µndrewsmyers.com or kblet@1indrewsmyers.com
       Counsel/or Defendants Hale-Mills Construction, LTD, Hale-Mills Construction, Inc.
                             and HMC Contracting South Texas, LLC

                                             EMERSON E. ARELLANO

                                                                                     94
                                                   LAw OFFICE OF

                                          RAMON GARCIA
                                            A PROFESSIONAL CORPORATION
                                            -222
                                             --    - - •!• - - - - -
                                                 W. UNIVERSITY DRIVE
                                              EDINBURG, TEXAS 78539
                                              rgarcia@ramongarcia-law.com
       RAMON GARCIA                                                               TELEPHONE: (956) 383-7441
                                                                                  FACSIMILE: (956) 381-0825

                                                 January 20, 2015

      Hon. Gilbert Lozano                                    ISSUED VIA: Hand-Delivery (only)
      WILLACY COUNTY DISTRICT CLERK
      Willacy County Courthouse
      546 West Hidalgo Avenue
      Raymondville, Texas 78580

      Re: Cause No. 2014-cv-0103-A; Willacy County vs. Hale-Mills Construction, Ltd.; Hale-Mills
      Construction, Inc.; HMC Contracting South Texas, LLC; and Management & Training
      Corporation d/h/a MTC/GSA-TEXAS; situated before the 19'J'h Judicial District Court, the
      Honorable Judge Migdalia Lopez, presiding.

      Dear Mr. Lozano:

      Regarding the above referenced cause and style, please for filing an original & five copies of the
      following:

              1)          Willacy County's Plea To The Jurisdiction And Response To Plea
                          In Abatement And Opposition To Arbitration Before AAA;

      Please stamp file our copy and return said stamped copy for our files in the enclosed metered
      envelope.

      Should you have any questions, please do not hesitate to contact me, Rosie Salinas at (956) 383-
      7441. Lastly, thank you for your assistance and cooperation in this matter.

      Respectfully submitted,

                      E OF RAMON GARCIA, P.C.

        //L/~·~~
...__-'-""osie Salinas,
      Assistant to Judge Ramon Garcia & Attorney Emerson E. Arellano

                                                                                                     95