CONSTRUCTION AGREEMENT

This Construction Agreement (the “Agreement”) is made this ___ day of _________,
20___ (the “Effective Date”) by and between __________________, an _____________ with a
mailing address of ________________________ (“Owner”) and _________________, an
_____________ with a mailing address of ________________________ (“Contractor”).

BACKGROUND INFORMATION

A. Owner is the fee simple owner of the real estate commonly known as
____________________________ (the “Premises”).

B. Owner desires Contractor to construct certain improvements to the Premises in

accordance with the terms of this Agreement.

AGREEMENT

NOW THEREFORE, in consideration of the mutual covenants contained herein, and

for other good and valuable consideration the receipt and sufficiency of which is hereby
acknowledged, Contractor and Owner hereby agree as follows:

ARTICLE I
PERFORMANCE OF THE WORK

1.1 The Work. Contractor agrees to furnish or cause to be furnished all labor and materials
necessary to construct the improvements upon the Premises in accordance with the plans
prepared by ______________________ dated ___________, 20___, and attached hereto as
Exhibit “A” and the specifications attached hereto as Exhibit “B”. Exhibits “A” and “B” are
hereinafter collectively referred to as the “Plans and Specifications”. The construction shall be
performed in accordance with the Plans and Specifications (except as to minor deviations
permitted pursuant to 1.5 of this Section) which Plans and Specifications have been examined
and approved by Owner. The construction undertaking as described in this Section is hereinafter
sometimes referred to as the “Work”.

1.2 Time of Performance. Contractor can neither imply nor guarantee a firm completion and
availability date. However, Contractor will use commercially reasonable efforts to complete the
construction of the Work by ___________, 20___ (the “Scheduled Completion Date”). Owner
acknowledges that Contractor’s ability to meet the construction schedule described above will be
directly affected by any Change Order(s), as defined herein, requested by Owner, Owner’s
failure to timely select any options not heretofore specified within the Plans and Specifications,
and/or Owner’s interference with the construction process itself. Further, Contractor shall not be
liable for any delay in the completion of construction caused by weather, fire, or other casualty
or act of God, nor shall Contractor be liable for any delay in the completion of the construction
caused by governmental control, inability to obtain materials or supplies, or other regulations,
restrictions, or conditions over which Contractor has no reasonable control. Delays in
construction arising as a result of the events described in this Section 1.2 are hereinafter
sometimes collectively referred to as “Excused Construction Delays”. Contractor shall not be
obligated to compensate Owner for any losses or damages arising as a result of Excused
Construction Delays.

1.3 Laws; Regulations. Contractor shall obtain all permits necessary for the performance of
the Work, and Contractor shall cause all subcontractors to obtain any permits necessary for the
performance of the Work undertaken by such subcontractor (except as provided to the contrary
within Article VIII herein). Contractor and all subcontractors employed by Contractor shall
comply with all applicable federal, state, city, and local laws, ordinances, codes and regulations
governing the Work and the materials furnished pursuant to this Agreement. Owner
acknowledges that Contractor’s relationship with the individual building inspectors is important
to the timely completion of the Work, and accordingly Owner agrees not to obstruct such
relationships or to otherwise harass the building inspectors reviewing the Work.

1.4 Workmanship. Construction of the Work shall substantially conform to the Plans and
Specifications allowing for minor deviations occasioned by expediency, practicality, and the
availability of labor and materials provided Contractor agrees not to materially deviate from the
Plans and Specifications without first notifying Owner of the same. In the event Owner does not
thereafter notify Contractor of Owner’s objection to the same in writing within seventy-two (72)
hours, Owner shall be deemed to have consented to the same. Further, Contractor expressly
reserves the right to make such modifications, additions, or deletions to the Plans and
Specifications as may be required by a mortgagee which holds a mortgage upon the Premises, or
as may be necessary in order to meet any applicable federal, state, city and local building or
zoning code requirements. The costs of any changes arising as a result of the requirements of
any mortgagee holding a mortgage upon the Premises or as are necessary to comply with
applicable laws/codes as described in the immediately preceding sentence shall be paid by
Owner.

1.5 Change Orders. Prior to completion of the Work and except as permitted pursuant to the
operation of Section 1.4 above, no alteration shall be made to the Plans and Specifications
without the prior written approval of Contractor and Owner. If Owner requests changes to the
Plans and Specifications, Contractor shall prior to commencing the alteration submit to Owner a
written proposal for the cost or credit associated with the completion of such alteration. If Owner
approves such proposal, the same shall constitute a Change Order (“Change Order”) and the
Contract Price, Scheduled Completion Date, and the Work to be performed hereunder shall be
amended accordingly, and such alterations shall thereafter be completed by Contractor in
accordance with the requirements of this Agreement. If Owner does not approve such proposal,
Contractor shall not be obligated to construct such alterations. Owner shall pay in full for the
cost of any Change Order, if applicable, at the time of approving such proposal unless otherwise
mutually agreed by Owner and Contractor; provided, however in no event shall the payment for
such Change Order be made later than at the time the next progress payment is made.

ARTICLE II
CONTRACT PRICE
2.1 Contract Price. Owner shall pay Contractor for performance of the Work, subject to
additions and deletions as herein provided, the sum of _____________________ and ___/100
Dollars ($______________) (the “Contract Price”), payable as set forth in Sections 2.2 and 2.3
of this Section.

2.2 Payment of Contract Price.

The Contract Price shall be due and payable as follows:

A. $_____________ construction deposit due upon execution of this

Agreement (the “Deposit”). Contractor retains the right to use the Deposit for construction or
other purposes and Owner acknowledges that the Deposit shall not be subject to any escrow,
trust, or security agreement, nor shall interest accrue thereon.

B. The remainder of the Contract Price shall be paid as progress payments as provided
herein.

2.3 Progress Payments.

2.3.1 Upon a request by Contractor for a payment (“Application for Payment”), Owner shall
make payments on the balance of the Contract Price remaining due to Contractor as invoiced by
Contractor on a monthly basis. Each Application for Payment shall contain an itemization of the
Work completed during the subject period for which payment is being requested.

2.3.2 Subject to the limitations herein provided, Owner will pay and/or will authorize
Owner’s lender to pay the amount described above within five (5) business days after Contractor
submits the Application for Payment. Owner or Owner’s lender’s inspector may inspect the
Work described in any Application for Payment submitted by Contractor; provided, however,
such inspection shall not suspend, delay, or otherwise affect Owner’s obligation to make such
payment within the time period described above, unless Owner or Owner’s lender can reasonably
demonstrate that the Work has not been performed in accordance with the Plans and
Specifications.

2.3.3 Owner agrees that the failure of Contractor to complete any item not required by
the appropriate governmental authority in order to issue a Certificate of Occupancy shall not
operate to delay the payment of the monies due under this Agreement. Further, Contractor shall
not be obligated to establish an escrow for items which may be incomplete as of the date
Contractor requests the delivery of the final payment. Payments which are due and unpaid shall
bear interest from the date such payment is due until paid in full at the rate of eight percent (8%)
per annum.

2.3.4 Notwithstanding anything previously set forth in this Section to the contrary,
Contractor and Owner acknowledge that in the event Owner has secured financing for the
payment of the Contract Price from a lender (as opposed to the situation where the Owner has
provided Contractor with other evidence of Owner’s ability to satisfy the Contract Price without
the need of a construction loan) that Owner’s lender may wish to modify certain aspects of the
schedule and method for making the payments described within this Section, and to this end
Contractor and Owner agree to undertake reasonable modifications to the same provided such
proposed modifications do not cause either party any undue hardships. Any such modifications
shall be reduced to writing and signed by both parties.

ARTICLE III
INDEPENDENT CONTRACTOR

Owner and Contractor agree that Contractor is serving as an independent contractor under
this Agreement and that all employees, laborers, and subcontractors employed by Contractor in
connection with performing the Work shall, except as provided in Article VIII herein, be the
employees or agents of and the responsibility of Contractor. Contractor shall be responsible for
satisfying all state and federal employment laws and regulations with respect to such laborers
and employees hired by Contractor including, without limitation, all applicable income tax
withholding requirements, social security withholding requirements, unemployment
compensation premiums, workers compensation premiums, fair labor standards laws,
employment discrimination laws, civil rights laws and occupational safety laws.

ARTICLE IV
INSURANCE

Contractor shall, at Contractor’s cost, maintain workers’ compensation insurance for its
employees and commercial general liability insurance in an amount of at least One Million and
00/100 Dollars ($1,000,000.00). Contractor shall ensure that any subcontractors used in
connection with the Work carry commercial general liability insurance with policy limits equal
or greater to the limits carried by Contractor as well as workers’ compensation insurance. Owner
shall, at Owner’s cost, maintain adequate liability insurance and property insurance on an “all-
risk” policy form, including builder’s risk, in the amount of the Contract Price plus the value of
subsequent modifications and cost of materials supplied and installed by others comprising the
total value for the Work on a replacement cost basis. Such property insurance shall be
maintained until final payment has been made to Contractor.

ARTICLE V
LIENS

Provided Owner makes all payments when due hereunder, Contractor shall maintain the
Premises free of all mechanic’s liens for labor or materials furnished pursuant to this Agreement.
Notwithstanding the aforementioned, Owner agrees that Contractor shall be entitled to negotiate
for the removal of any such lien with the subcontractor responsible therefor; provided, however,
that within sixty (60) days after Owner notifies Contractor that a mechanic’s lien has been
recorded, Contractor either: (A) shall remove such lien by payment of or bonding off at
Contractor’s expense, or; (B) shall pay into escrow with an agent mutually selected by
Contractor and Owner a sum equal to the amount of such lien. Notwithstanding the above
provisions, Owner shall be liable for the cost of removing any liens recorded against the
Premises as a result of Owner failing to make timely payments or Owner otherwise interfering or
delaying the progress of the Work performed pursuant to this Agreement.

ARTICLE VI
POSSESSION

Owner hereby grants to Contractor a license that is irrevocable and coupled with an
interest during the performance of the Work to exclusively enter upon the Premises for the
performance of the Work, and Owner hereby grants to Contractor the right to exclusively occupy
and possess the Premises prior to the delivery of the Certificate of Occupancy and the
corresponding final progress payment, subject only to the limited privilege of Owner or its
agents to enter upon the Premises for the purpose of inspection. When entering upon the
Premises, neither Owner nor its agents shall unreasonably interfere with, restrict, interrupt,
harass, or obstruct construction or its progress in any manner. Owner shall not communicate any
criticisms, changes, or any other matter to any subcontractor or laborer except in the presence of
and with the approval of Contractor. In the event Owner or its agents cause such interference or
obstruction, Contractor shall be entitled to undertake reasonable actions to restrain Owner or its
agents from further entries upon the Premises until after completion of construction of the Work,
delivery of the Certificate of Occupancy, and receipt of the final progress payment. Further,
Owner acknowledges that if Owner (including invitees and guests of Owner) visit the Premises
prior to the completion of the Work, such visit shall be at Owner’s risk. In this respect, by the
execution of this Agreement, Owner further releases, discharges, indemnifies and agrees to hold
Contractor and its employees, subcontractors and materialmen harmless from any and all claims,
costs (including attorney fees), liability or damages arising as a result of such visit, including
injury to person or property.

ARTICLE VII
DEFAULT

7.1 Events of Default. The following occurrences shall constitute events of default under
this Agreement:

A. Owner fails to pay any progress payment as it becomes due;

B. Contractor fails to timely satisfy or bond-off a mechanic’s lien; or

C. A party fails to perform any other duty or obligation undertaken herein within ten (10)
days after receipt of written notice thereof from the other party.

7.2 Default by Owner. In the event of a default by Owner, Contractor shall be entitled to
cease or suspend the performance of any further Work and retain the Deposit paid to Contractor
on account for any damages incurred by Contractor and proceed with an action at law or in
equity to recover all damages arising from such breach including, but not limited to, direct,
indirect, consequential, and/or incidental damages. To this end and without limitation,
Contractor shall be entitled to recover from Owner as an element of the damages incurred by
Contractor the reasonable attorney’s fees and other professional fees, including the fees of expert
witnesses, incurred by Contractor as a result of such default.

7.3 Default by Contractor. If Contractor fails or refuses to perform Contractor’s obligations

under this Agreement and if such default is substantial and material and does not fall within the
scope of this Article VII, and if such default continues for ten (10) days after written notice of
the default from Owner, then Owner shall be entitled to terminate this Agreement and to receive
the return of the Deposit made by Owner hereunder, subject to payment for any Work which was
completed prior to such termination. To this end and without limitation, Owner shall be entitled
to recover from Contractor as an element of the damages incurred by Owner the reasonable
attorney’s fees and other professional fees, including the fees of expert witnesses, incurred by
Owner as a result of such default

ARTICLE VIII
SELECTION OF SUBCONTRACTORS

8.1 Subcontractors Generally. Contractor shall generally select the subcontractors and/or
materialmen to provide the services and/or materials to complete the Work.

8.2 Owner’s Selection of Subcontractors. In the event Owner requests that Contractor
utilize the services or acquire materials from a particular subcontractor and/or materialmen, or in
the event Owner elects independent of this Agreement to utilize the services or acquire materials
from a particular subcontractor and/or materialmen, and in the event Contractor consents to the
same (provided, however, Contractor may withhold its consent to the same in its sole and
absolute discretion), then Owner by such request or action specifically waives any warranties,
delays, responsibilities, or liabilities as against Contractor which may arise as a result of the use
of such subcontractor and/or materialmen, and the portion of the Work and/or materials
completed or supplied by such subcontractors and/or materialmen. In addition in such event,
Owner shall be responsible for (and shall require each such subcontractor and/or materialmen to
be responsible for) obtaining all licenses, permits and inspections associated with the portion of
the Work completed by such subcontractors and/or materialmen, and maintaining liability
insurance and benefit coverages (i.e., workers compensation coverages, unemployment
compensation coverages, etc.) relating to such subcontractor and/or materialmen. To this end,
Owner further releases, discharges, indemnifies, and agrees to hold Contractor and its
employees, subcontractors, and materialmen harmless from any and all claims, costs (including
attorney’s fees and other professional fees), liability or damages arising as a result of the failure
of Owner (or Owner’s subcontractors and/or materialmen) to comply with the obligations of this
Section. Further, during the period such subcontractors and/or materialmen are working at the
Premises and thereafter upon completion of the portion of the Work undertaken by such
subcontractor and/or materialmen, Owner shall be responsible for obtaining and shall require
such subcontractor and/or materialmen to provide appropriate lien waivers attesting to the
amount of the Work so completed, the number and names of sub-subcontractors, laborers, or
other materialmen utilized, and the amount of monies received from the Owner for such Work to
date. The terms and conditions of this Section are intended to be applicable notwithstanding
whether or not the subcontractor and/or materialmen receive the compensation due them directly
from Owner or indirectly from Owner by virtue of the payment of the same through Contractor.

ARTICLE IX
OWNER’S USE OF ARCHITECT AND/OR ENGINEER; EFFECT ON LOCAL CODES
AND INDUSTRY STANDARDS

In the event Owner retains (or has retained) an architect to provide or modify the Plans
and/or an engineer to seal or certify the Plans, Contractor assumes no responsibility to assure that
the Plans are drawn or written by the architect or sealed or certified by the engineer (as
applicable) in accordance with industry standards, applicable laws, statutes or local building code
requirements or regulations and to this end notwithstanding any terms or conditions of this
Agreement to the contrary, Contractor shall not be liable for any costs, expenses or damages
arising to Owner in the event such Plans fail to comply with applicable laws, ordinances, codes
and regulations and/or industry standards provided Contractor completed the Work in
accordance with such Plans.

ARTICLE X
RIGHT TO TERMINATE, REMOVE MATERIALS, SUPPLIES AND TOOLS

Notwithstanding any other language in the Agreement, Contractor may terminate this
Agreement by providing ten (10) days written notice of termination to Owner. In such event,
Owner agrees to pay Contractor for all labor and materials supplied by Contractor and/or its
subcontractors and/or materialmen prior to the date of termination. Further, notwithstanding any
other language in this Agreement, in the event Owner orders Contractor off the job or Contractor
voluntarily leaves the job as a result of the default of Owner in accordance with Article VII
herein (or other applicable law), Contractor reserves the right, and Owner agrees to allow
Contractor and Contractor’s subcontractors and materialmen to visit the Premises to retrieve
tools, equipment, uninstalled materials and supplies which are rightfully the property of
Contractor and Contractor’s subcontractors and materialmen, provided, however, Contractor
agrees on behalf of Contractor and Contractor’s subcontractors and materialmen not to remove
any uninstalled materials and supplies for which Contractor has already been paid by Owner
pursuant to a progress payment.

ARTICLE XI
WAIVER OF OWNER AND INDEMNIFICATION OF CONTRACTOR

In the event that as a result of the default of Owner Contractor voluntarily leaves the job
in accordance with Section VII herein (or other applicable law), or in the event (except for those
situations where the Contractor is in default hereunder) Owner orders Contractor to stop work, or
otherwise removes Contractor from the job, Owner waives any claims for subsequent damage to
the Premises due to the stop work order or the removal or withdrawal of Contractor from the job
including, but not limited to, damage from the natural elements or as a result of third parties
arising as the result of Work in progress not being adequately secured or protected, and Owner
agrees to indemnify and hold Contractor harmless from any costs, expenses, including attorney’s
fees, and other professional fees, liabilities or damages arising as a result of Contractor’s pre-
existing contractual arrangement with any subcontractor or materialmen.

ARTICLE XII
COMPLETION OF THE WORK

The Work shall be deemed to be complete (“Substantial Completion”) upon the earlier of
the approval of the final inspection of the Premises the appropriate building inspector, the
issuance of a Certificate of Occupancy by the applicable governmental authority, or the approval
of the Premises by Owner’s lending institution. Owner agrees that the failure of Contractor to
complete any pre-occupancy/walk-through item or other minor items not required by the
appropriate governmental entity in order to issue a Certificate of Occupancy shall not be grounds
to withhold payment from Contractor, nor shall Contractor be required to set up an escrow or to
accept less than the full amount required hereunder because of such incomplete items, provided
that Contractor undertakes in writing to complete such items within a reasonable time after
receipt of the final progress payment. In the event an escrow is required by Owner’s lending
institution, or a completion, performance, or similar bond is required by the appropriate
governing authority, and the same relates to obligations of Owner, Owner’s agents or
subcontractors or the requirements of Owner’s lending institution, then the funds necessary to
establish the escrow or pay for the bond shall be provided by Owner; provided, however, nothing
set forth within the preceding sentence is intended to require the Owner to provide funds for such
escrow, or such completion, performance, or similar bond if the portion of the Work for which
such escrow, or such completion, performance, or similar bond as required relates to items for
which Owner has already heretofore paid Contractor.

ARTICLE XIII
OWNERSHIP OF PLANS

In the event Contractor has provided the Plans to be used under this Agreement, Owner
acknowledges that Owner shall have no ownership rights in the Plans and that Owner shall be
liable to Contractor for the reuse or resale of the Plans. In the event Owner has provided the
Plans to be used under this Agreement, Owner acknowledges that Owner shall have no claims
against Contractor for any deficiencies arising under the Plans.

ARTICLE XIV
LIMITED WARRANTY

Contractor warrants that all construction related to the Work substantially conforms with
the Plans and Specifications and Change Orders, if any, and that the materials that were used
with respect to the Work were new (unless expressly agreed upon by the parties), and that the
Work was completed in a workmanlike manner. Within one (1) year from the issuance of the
final Certificate of Occupancy, Contractor will repair or replace, at Contractor’s option, any
defects in material or workmanship. Owner agrees to accept a reasonable match in any repair or
replacement in the event the original item is no longer available. Owner hereby grants Contractor
the right and ability to investigate, resolve, and cure, when determined necessary, any alleged
construction defect before Owner may commence legal action for any purpose. This limited
warranty does not cover the following items: (A) damages from the elements (such as fire, wind,
hail, lighting, ground movement or other natural occurrence or casualty); (B) misuse, abuse,
ordinary wear and tear, and/or the failure of Owner to follow proper operating instructions or to
otherwise fail to properly maintain the Premises; (C) damages from the failure of utility services;
(D) damages related to items not furnished by Contractor, including damage to personal property
and defects in materials and workmanship or negligence attributable to persons other than
Contractor, or its subcontractors, suppliers or employees; (E) items arising after the one (1) year
period referenced above; (F) incidental or consequential damages, such as loss of the use of the
Premises, including secondary damages and damages from mental anguish; (G) damages to
anyone other than the original Owner; (H) defects in appliances and equipment and other
miscellaneous items that are covered by manufacturers’ warranties, however, Contractor
warrants that appliances shall be properly installed; (I) conditions or damages caused or
aggravated by any failure to give notice to Contractor within a reasonable time that inhibits
Contractor’s opportunity to take remedial action or denial of or lack of cooperation with
Contractor’s right to cure; and (J) any aesthetic changes to materials which do not compromise
the structural integrity of the materials. Contractor shall assign and pass through to Owner (to
the extent they are assignable) the manufacturers’ warranties on all appliances and equipment.
NOTICE: APPLIANCES, EQUIPMENT OR OTHER COMPONENTS SUPPLIED OR
INSTALLED UNDER A MANUFACTURER’S WARRANTY WILL BE REPAIRED OR
SERVICED BY THE MANUFACTURER OR DESIGNATED SERVICE PERSONNEL AND
NOT CONTRACTOR. CONTRACTOR MAKES NO OTHER EXPRESS WARRANTIES
RELATIVE TO THE WORK OTHER THAN THE WARRANTIES CONTAINED
HEREIN.

ARTICLE XV
MISCELLANEOUS

15.1 Amendment and Waiver. This Agreement may only be amended or

modified by an instrument in writing executed by all of the parties hereto.

15.2 Notices. Any notices or other communications required or permitted

hereunder shall be sufficiently given if delivered personally or sent by registered or certified
mail, postage prepaid, addressed to the respective parties at the addresses set forth above, or at
such other address as shall be furnished in writing by any party to the others, and shall be
deemed to have been given as of the date so delivered or deposited in the United States mail, as
the case may be.

15.3 Choice of Law/Venue. It is the intention of the parties that the laws of
Texas should govern the validity of this Agreement, the construction of its terms, and the
interpretation of the rights and duties of the parties and that the proper venue for any action
arising from this Agreement shall be the state or federal courts located in _________ County,
[STATE].

15.4 Section and Other Headings. Section, paragraph, and other headings
contained in this Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
 15.5 Counterpart Execution. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which together shall
constitute but one and the same instrument.

15.6 Gender. All personal pronouns used in this Agreement shall include the
other genders whether used in the masculine or feminine or neuter gender, and the singular shall
include the plural whenever and as often as may be appropriate.

15.7 Parties in Interest. All of the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of, and be enforceable by, the parties hereto and
their successors and assigns.

15.8 Integrated Agreement. This Agreement constitutes the entire agreement between the
parties hereto, and there are no agreements, understandings, restrictions, warranties, or
representations between the parties other than those set forth herein or herein provided for which
relate to the subject matter of this Agreement.

15.9 Severability. The invalidity or unenforceability of any provision of this Agreement in

any particular respect shall not affect the validity and enforceability of any other provision of this
Agreement or of the same provision in any other respect.

IN WITNESS WHEREOF, Owner and Contractor have executed this Agreement on the
dates set forth below.

OWNER: CONTRACTOR:

__________________ __________________

By:_________________ By:_________________

Its:_________________ Its:_________________