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ST0003-CS080325 (2) THE.CITY.OF COPPELL ~C?-'_. '.."~<' S"";,, l_~'" , ~,;;( :j::'(.)!?fil.,.11;? '."'" ~.'Iio.Y -<J, ~." ~,'0'~.T::";' ~ \':"7-'"';;-. "~.' ,-..,:~ ' pz ',r.'J- ,~_..~ f- ''V''"''";>--~'' '.."""" .~__ / ....cc"".". ,.- ,"~ C\ f:' """4i-;7 ~ . ......- ~ q ,\' A.s' \ '0 March 25, 2008 Robert Garay, Estimator Texas United Excavators, L.L.C. P.O, Box 111520 Carrollton, Texas 75011 RE: Reconstruction of Coppell Road, Project #ST 00-03 Dear Mr. Garay: The City of Coppell has completed our evaluation of your company's bid on the referenced proj ect. Based on your letter of March 10, 2008 requesting to revise your bid, and the outcome of our meeting with you and Mr. Uriarte, we have deemed Texas United Excavators to be a non-responsive bidder. The City will therefore reject your bid and evaluate the next low bid. We appreciate your interest in working for the City of Coppell, and we encourage you to bid again in the future. Sincerely, t~.~ Keith Marvin, P.E. Proj ect Engineer Phone: 972/304/3681 Fax: 972/304-3570 cc: lerod Anderson, Purchasing Manager David Dodd, City Attorney 255 PARKWAY * P_O BOX 9478 * COPPELL TX 75019 * TEL 972/4620022 * FAX 972/3043673 THE.CITY.OF COPPELL ., ~/.. '!/JJ/ol' Robert Garay, Estimator Texas United Excavators, L.L.c. P.O. Box 111520 Carrollton, Texas 75011 RE: Reconstruction of Coppell Road, ST 00-03 Dear Mr. Garay: We are in receipt of your letter of March 10,2008 regarding your bid on ST 00-03, Coppell Road. In your letter you are requesting to modify your bid. In reading through the provisions of the bid documents, and in discussing this issue with both the Purchasing Manager, and the City Attorney we find that there is no provision for modification of bids after the official bid opening. The city is currently in the process of evaluating your bid, including reviewing the qualification material submitted by your firm. In the event your reference checks and qualification materials check out ok it will be our intention to award the contract based on your official bid amount. If the contract is awarded to your firm you will be expected to complete the project as bid. If you reject the award of the contract based on the original bid we will have no choice but to file a claim with your bonding company under the provisions of the Bid Bond. We look forward to the opportunity to discuss this issue further. Sincerely, /.1 -'- ~.........-.- ..-' .~~ Keith Marvin, P.E. Project Engineer Phone: 9721304/3681 Fax: 972/304-3570 255 PARKWAY * P.O.BOX 9478 * COPPELL TX 75019 * TEL 972/462 0022 * FAX 972/304 3673 wIIf TEHftS U ~ E HCflU8IIUlS L .L.C WET UTILITIES · PLUMBING · EROSION March 10,2008 City of Coppell, Purchasing Office 255 Parkway Blvd. Coppell Town Center Coppell, Texas 75039 Attention: Mr. Keith Martin Re: Reconstruction of Coppell Rd. Coppell, Texas Dear Mr. Martin: First of all I would like to thank you and the City of Coppell for giving us the opportunity to re-evaluate our bid and for being such open minded about the situation, it speaks greatly of the city of Coppel!. Unfortunately we have found a few errors in our bid and we apologize tremendously for this mistake, we will do what it takes to come out of this unfortunate mishap and to establish a good relationship with the city of Coppell. I and the owner would like to meet with you and all involved to discuss in detail where we came up short in our bid. I hope to hear from you or your office sometime this week. Below are the items showing the correct total pricing: (1) Item #2 - Traffic Control- 1 Lump Sum = $153,190.00 (Cone. Barrier Wall) (2) Item #3 - Prep ROW - 1 Lump Sum = $100,500.00 (Trucking Due to Excv.) (3) Item #4 - Unclass. St. Excv. - 18,169 CY @ $9.00 CY = $ 163,521 (4) Items #32 - #42 CL III RCP (Total Material Cost) = $94,000.00 (Clerical Error used '06 prices instead of '08). New Total Bid = $2,676,151.02 Original Total Bid = $2,307,366.30 Total Difference = $368,784.72 Please do not hesitate to contact us with any questions or comments. Very truly yours, [~~rs,/~ Robert Garay ~ Estimator U Cell # 972-955-8978 Fax # 972-446-0161 E-mail: r.garay@tuexcavators.com PO Box 111520. Carrollton, Texas 75011 . tel: 972.731.0300' fax: 972.446.2585 . TEHM U ~ E Ht.B..IUlIDBS L.L.C WET UTILITIES · PLUMBING · EROSION Project Name: Reconstruction ofCoppell Rd. City of Coppell, TX. 255 Parkway Blvd. Coppell Town Center Purchasing Office Enclosed for your use is the equipment list and technical managerial experience information for this project: EQUIPMENT PROJECT SUPERVISION I. 1997 Caterpillar Excavator 330 DL 2. 2005 Caterpillar Excavator 320 CL 3. 2007 Caterpillar Compactor 433 E 4. 1996 Caterpillar Wheel Loader 928 G2 5. 2000 Caterpillar Motor Grader 160 H 6. 2005 Ford Water Truck 2,500 Gal. 7. 1992 Gomaco Paver Project Manager: Joseph R. Hill- 15 Yrs. of Underground Construction Experience. As well as numerous Osha Certifications. Utility Superintendent: Jimmy Evans - 25 Yrs. of Utility Construction and Management along with an Extensive list of Osha Certifications. Paving Superintendent: Billy Gilbert - over 30 Yrs. Of experience in the paving industry and surveying. Sincerely, R bert Garay Estimator r. garay(mtuexcavators. com Cell# 972-955-8978 Fax # 972-446-0161 PO Box 111520. Carrollton, Texas 75011 . tel: 972.731.0300. fax: 972.446.2585 I"~ UN/tEll LETTER OF TRANSMITTAL Date: 03/11/20081 Project: Reconstruction of Coppell Rd. Attention: Mr. Keith Martin Re: Qualification of Low Bidder I EXCAVATORS L"",!:.L.C. " ~ df1 it TEXAS UNITED EXCAVATORS P.O. BOX 111520 CARROLL TON, TEXAS 75011 Cell: 972-955-8978 Fax: 972-446-0161 TO: City Of Coppell 255 Parkway Blvd. Coppell Town Center Coppell, Texas 75039 We are Sending You: Requested Information COPIES I DATE NO. DESCRIPTION ,_.~~_ I 03/10/2008 1 Qualification of Low Bidder information requested by the City of Coppel!. t- Due within 5 Days of bid opening. c---~-_._-._..~T 1 I 03/10/2008 2 Letter regarding bid discrepencies. -. --~.. I --~-+--~- ._~_.'~_-iM._- I ------ -+ ._____-.-1 These are Transmitted as Checked: Resumbit _ Copies for Approval Submit _Copies for Distribution Return Corrected Prints Returned for Corrections Provide Payment and Performance Bonds Provide Maintenance Bond Provide Insurance Certificate For Approval X For Your Use X As Requested X For Review and Comment ----~ For Bids Due 20_ ___ __ Approved as Submitted Approved as Noted REMARKS COpy TO: File SIGNED: TEXAS UNITED EXCAVATORS, LLC FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2006 with ACCOUNTANTS' REVIEW REPORT GbL OROIAN, GUEST & LITTLE, P.e. CElITIFIED PUBUC ACCOUNTANTS & ADVISORS 11955 Network-San Antonio, Texas 78249-3399- (21O)641-5600-Fax (21O)641-5605-www.txcpa.com ACCOUNTANTS' REVIEW REPORT To the Members Texas United Excavators, LLC San Antonio, Texas We have reviewed the accompanying balance sheet of Texas United Excavators, LLC as of December 31, 2006, and the related statements of income, changes in members' capital, and cash flows for the years then ended, in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. All information included in these financial statements is the representation of the management of Texas United Excavators, LLC. A review consists principally of inquiries of Company personnel and analytical procedures applied to financial data. It is substantially less in scope than an audit in accordance with generally accepted auditing standards, the objective of which is to express an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion or any other form of assurance on them. Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in conformity with generally accepted accounting principles. Our review was made for the purpose of expressing limited assurance that there are no material modifications that should be made to the financial statements in order for them to be in conformity with generally accepted accounting principles. The information included in the accompanying schedules of construction costs, operating expenses, incomplete contracts, completed contracts and earnings is presented only for supplementary analysis purposes. Such information has been subjected to the inquiry and analytical procedures applied-in the review of the basic financial statements, and we are not aware of any material modifications that should be made thereto. ~/ ~f";:'4 A Professional Corporation March 2, 2007 Member of American Institute of Certified Public Accountants Table of Contents Accountants' Review Report..................................................................................................................... 1 Balance Sheet ................................................................................................................. ................ ........... 2 Statement of Income........... .......................................................................... ......... ..................... ............... 4 Statement of Changes in Members' Capital.............................................................................................. 5 Statement of Cash Flows. .......... ...... ........ ...... ...... ..... ....... ...... .......... ......... ........ ......... ................................ 6 Notes to Financial Statements ....... ......... ............ ....... ..... ...... ............ ....... ................. ........ ...... ........ ........... 7 SUDDlementary Infonnation Schedule of Construction Costs............ ............ ....... ................... .......... ...... ... ........ ......... ......................... 14 Schedule of Operating Expenses ........ ....... ............. ..... ...... ............... .......... ........ .......... .............. ............. 15 Schedule of IncoIllplete Contracts ....... ..... ..... ....... ..... ....... ....... ..... ............... ................ ............................ 16 Schedule of Completed Contracts ... ........ ...... ....... ............ ...... ......... .......... ........ ......... ....... ....... ............... 17 Schedule of Earnings.. ........... .................................... ...... ............... .......... ................ ........ ....................... 18 TEXAS UNITED EXCAVATORS, LLC BALANCE SHEET DECEMBER 31,2006 ASSETS Current assets: Cash and cash equivalents Contract receivables Retainage receivables Cost in excess of billings Employee advances Inventory Carpet deposit Prepaid insurance $ 173,831 1,577,796 256,304 135,921 5,813 52,211 3,000 19,302 Total current assets 2,224,178 Property and equipment: FumitlU'e, fixtures and office equipment Transportation Machinery and equipment Improvements Less; accumulated depreciation 110,543 883,769 1,636,025 10,213 (478,119) Total property and equipment 2,162,431 Other assets: Lease deposit Bond deposit 5,000 5,000 Total other assets 10,000 . Total assets $ 4,396,609 See accompanying accountants' review report 2 TEXAS UNITED EXCAVATORS, LLC BALANCE SHEET DECEMBER 31,2006 LIABUJTIES AND MEMBERS' CAPITAL Current liabilities: Accounts payable - trade Credit cards payable Payroll taxes payable Billings in excess of costs on uncompleted contracts Line of credit payable Notes payable - current portion $ 1,220,915 63,301 60,219 29,699 42,037 494,613 Total current liabilities 1,910,784 Long-term liabilities: Notes payable, net of current portion 1,382,585 Total long-term liabilities 1,382,585 Members' capital: Members' capital (as restated, see Note 10) 1,103,240 Total members' capital 1,103,240 Total liabilities and members' capital $ 4,396,609 See accompanying accountants' review report 3 TEXAS UNITED EXCAVATORS, LLC STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 2006 Revenue Construction costs Gross profit Genem1 and administrative expenses Operating income Other income (expense): Interest income Miscellaneous expense Interest expense Loss on disposition of assets Total other income ( expense) Net income See accompanying accountants' review report 4 $ 11,963,711 (8,889,843) 3,073,868 2,426,124 647,744 518 (21) (89,161) (30,020) (118,684) $ 529,060 TEXAS UNITED EXCAVATORS, LLC STATEMENT OF CHANGES IN MEMBERS' CAPITAL FOR THE YEAR ENDED DECEMBER 31, 2006 Luis Uriarte Javier Lopez Total Members' capital, January 1, 2006 (as restated) $ 390,720 $ 79,055 $ 469,775 Net income 443,996 85,064 529,060 Contributions by members 104,405 104,405 Ending members' capital $ 939,121 $ 164,119 $ 1,103,240 See accompanying accountants' review report 5 TEXAS UNITED EXCAVATORS, LLC STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2006 Cash flows from operating activities: Net income Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation Loss on disposition of property and equipment (Increase) decrease in assets: Trade receivables Retainage receivables Inventory Cost in excess of billings Prepaid expenses Other assets Increase (decrease) in liabilities: Accounts payable - trade Accounts payable - payroll taxes Credit card payable W ork-in-process overbillings Net cash provided by operating activities $ 529,060 335,824 30,020 (937,332) (256,304) (52,211) (135,921) (19,302) (13,813) 1,016,099 39,906 63,301 29,699 629,026 Cash flows from investing activities: Purchases of property and equipment Proceeds from disposition of equipment Net cash used by investing activities (1,527,378) 208,699 (1,318,679) Cash flows from financing activities: Line of credit borrowings, net Cash paid on borrowings Proceeds from borrowings Proceeds from members Net cash provided by financing activities (52,963) (565,701) 1,360,502 104,405 846,243 Net increase in cash and cash equivalents Cash and cash equivalents--beginning of year Cash and cash equivalents--end of year 156,590 17,241 $ 173,831 Supplemental information: Cash paid during the year for interest Property and equipment purchased through financing. $ 89,161 $ 1,346,493 See accompanying accountants' review report 6 TEXAS UNITED EXCAVATORS, LLC NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2006 NOTE 1- NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES Nature of Operations Texas United Excavators, LLC installs wet utilities and plumbing for public and private entities. The utility division performs rehabilitation and infrastructure improvements for municipalities as well as residential and commercial development for private companies. The plumbing division primarily installs the plumbing for new residential construction, with a small portion of work in multi-family buildings. Basis of Accounting Texas United Excavators, LLC (the Company) was organized in Texas as a limited liability company on December 27, 2002. The principal members of Texas United Excavators, LLC are Luis Uriarte and Javier Lopez. The Company prepares its financial statements on the accrual basis of accounting. Under this basis of accounting, revenues are recorded when earned and expenses recognized when incurred. Property and Equipment Property and equipment are recorded at cost and are depreciated over their estimated useful lives using the straight-line method for financial reporting purposes. For income tax purposes, the accelerated method is used. The cost of maintenance and repairs is charged to expense when incurred. All costs of improvements to property and equipment are capitalized. On the sale or retirement of these assets, the cost and related accumulated depreciation are eliminated from their respective accounts and the resulting gain or loss is included in income. Contract Revenue RecoQ11ized on the Percentae:e-Of-ColDDletion Method The Company recognizes contracts for excavating, plumbing, and utility infrastructure projects using the percentage-of-completion method based on contract costs incurred to date compared with the total estimated contract costs. Customer-furnished materials, labor and equipment, and in certain cases subcontractor materials, labor and equipment, are included in revenues and cost of revenues when management believes that the Company is responsible for the ultimate acceptability of the project. Contracts are segmented between type of services, such as excavating, plumbing and utility infrastructure projects, and accordingly, gross margin related to each activity is recognized as those separate services are rendered. Charges to total estimated contract cost or losses, if any, are recognized in the period in which they are determined. Claims against customers are recognized as revenue upon settlement. Revenues recognized in excess of amounts billed are classified as current assets under cost in excess of billings on uncompleted contracts. Amounts billed to customers in excess of revenues recognized to date are classified as current liabilities under billings in excess of costs on uncompleted contracts. Changes in project performance and conditions, estimated profitability, and final contract settlements may result in future revisions to excavating, plumbing, and utility infrastructure contract cost and revenue. 7 TEXAS UNITED EXCAVATORS, LLC NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2006 NOTE 1 - NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (continued) Cash and Cash Equivalents For purposes of the statement of cash flows, management considers cash on hand and cash in banks to be cash and cash equivalents. Inventory Inventory represents copper wire, pvc piping, fixtures and other miscellaneous items used in their operations. These items are expected to be used in the short term and are reported at cost. Use of Estimates The preparation of financial statements in confonnity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Income Taxes Texas United Excavators, LLC is a limited liability company. The Company has elected to be taxed as a partnership for federal income tax purposes. The Company's taxable income or loss is allocated to members in accordance with their respective percentages of ownership. Therefore, no percentages or liability of income taxes has been included in the financial statements. NOTE 2 - TRADE ACCOUNTS RECEIVABLE Trade accounts receivable are recorded when invoices are issued and are presented on the balance sheet net of allowance for doubtful accounts. Contract receivables are written off when they are determined to be uncollectible. The allowance for doubtful accounts is estimated based on the existing economic conditions in the industry and the financial stability of its customers. The Company believes no allowance for doubtful accounts is necessary at December 31, 2006. The accounts receivable due from customers at December 31, 2006 is $1,577,796, all of which is uncollateralized. Management fully expects to collect all amounts in accounts receivable. Retainage has not been billed on current or recently completed jobs and has been accrued on the fInancial statements. NOTE 3 - CONCENTRATIONS The Company had trade accounts receivable from two customers of $548,729 and $327.310 at December 31,2006, each of which represents more than 10% of reported receivables. The Company had revenues from two customers of $1,550.011 and $1,452,959 for the year ended December 31, 2006, each of which represents more than 10% of reported revenues. 8 TEXAS UNITED EXCAVATORS, LLC NOTES TO FINANCIAL STATEMENTS DECEMBER 31,2006 NOTE 4 - UNCOMPLETED CONTRACTS Cost and billings on uncompleted contracts are summarized as follows: Costs incurred on uncompleted contracts Estimated earnings Billings to date Total Included in accompanying balance sheet under the following titles: Cost in excess of billings on uncompleted contracts Billings in excess of costs on uncompleted contracts Billings in excess of costs on uncompleted contracts, net NOTE 5 - LONG-TERM DEBT Long-term debt consists of the following at December 31,2006: Note payable to Chrysler Financial in monthly installments of $624 including principal and interest at 6.19% begjnning April 14, 2003 through March 14, 2008, collateralized by a 2003 Dodge Ram 3500 Note payable to Ingersoll-Rand Financial Services in monthly installments of $212 including principal and interest at 6.75% beginning July 20, 2003 through through June 20, 2008, collateralized by equipment Note payable to Chrysler Financial in monthly installments of $660 including principal and interest at 2.9% beginning August 26, 2003 through July 26, 2008, collateralized by a 2003 Dodge Ram 3500 Note payable to Chrysler Financial in monthly installments of $683 including principal and interest at 2.9% begjnning January 10, 2004 through December 15, 2008, collateralized by a 2004 Dodge Ram 3500 Note payable to Ford Credit in monthly installments of $794 including principal and interest at 4.90% beginning October 15, 2004 through September 15, 2009, collateralized by a 2005 Ford F-250 Note payable to Komatsu Financial in monthly installments of $2,364 including principal and interest at 3.76% beginning February 10, 2005 through December 10, 2008, collateralized by equipment Note payable to Compass Bank in monthly installments of $795 including principal and interest at 6.44% beginning February 18, 2005 through January 18, 2009, collateralized by a 2004 Dodge 3500 9 $ 2,289,137 666.633 2,955,770 2.849.548 $ 106.222 $ 135,921 ( 29.699) $ 106.222 $ 2,194 3,607 12,063 14,945 23,897 59,101 18,380 TEXAS UNITED EXCAVATORS, LLC NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2006 NOTE 5 - LONG-TERM DEBT (continued) Note payable to Ingersoll-Rand Financial Services in monthly installments of$I,301 including principal and interest at 1% beginning April 13, 2005 through March 13, 2008, collateralized by equipment $ 19,387 Note payable to Ford Credit in monthly installments of$864 including principal and interest at 8.99% beginning April 24, 2005 through March 24,2009, collateralized by a 2005 Ford F-450 20,900 Note payable to Caterpillar Financial in monthly installments of $3,073 including principal and interest at 3.19% beginning May 5,2005 through April 6, 2010, collateralized by equipment 119,781 Note payable to Ford Credit in monthly installments of$867 including principal and interest at 8.99% beginning May 9,2005 through April 9, 2009, collateralized by a 2005 Ford F-450 20,909 Note payable to Ford Credit in monthly installments of$823 including principal and interest at 8.54% beginning December 20, 2005 through November 20, 2009, collateralized by a 2006 Ford F-450 25,330 Note payable to Ford Credit in monthly installments of $799 including principal and interest at 8.54% beginning December 20, 2005 through November 20, 2009, collateralized by a 2006 Ford F-350 24,486 Note payable to Ford Credit in monthly installments of $529 including principal and interest at 8.99% beginning February 13,2006 through January 13, 2009, collateralized by a 2006 Ford F-150 11,462 Note payable to Ford Credit in monthly installments of$511 including principal and interest at 8.99% beginning April 1, 2006 through March 1,2009, collateralized by a 2006 Ford F-150 12,423 Note payable to Ford Credit in monthly installments of$511 including principal and interest at 8.99% beginning April 1, 2006 through March I, 2009, collateralized by a 2006 Ford F-150 12,423 Note payable to Ford Credit in monthly installments of $492 including principal and interest at 8.99% beginning May 1,2006 through April I, 2010, collateralized by a 2006 Ford Explorer Note payable to Komatsu Financial in monthly installments of $4,869 including principal and interest at 3% beginning May 9, 2006 through December 9, 2010, collateralized by equipment 16,961 220,385 Note payable to Ford Credit in monthly installments of $530 including principal and interest at 8.49% beginning May 15, 2006 through April 15, 2010, collateralized by a 2006 Ford F-150 18,335 10 TEXAS UNITED EXCAVATORS, LLC NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2006 NOTE 5 - LONG-TERM DEBT (continued) Note payable to Ford Credit in monthly installments of$530 including principal and interest at 8.49% beginning May 15, 2006 through April 15, 2010, collateralized by a 2006 Ford F-150 Note payable to Caterpillar Financial in monthly installments of $2,847 including principal and interest at 3.18% beginning May 19, 2006 through February 17, 2011, collateralized by equipment Note payable to Ford Credit in monthly installments of $448 including principal and interest at 8.49% beginning June 19,2006 through May 19,2010, collateralized by a 2006 Ford F-150 Note payable to Ford Credit in monthly installments of $448 including principal and interest at 8.49% begjnning June 19,2006 through May 19,2010, collateralized by a 2006 Ford F-150 Note payable to FordCredit in monthly installments of $509 including principal and interest at 8.49% beginning June 19, 2006 through May 19, 2010, collateralized by a 2006 FordF-150 Note payable to Caterpillar Financial in monthly installments of $3,998 including principal and interest at 7.81 % beginning July 1, 2006 through June 1, 2011, collateralized by equipment Note payable to Land Rover Capital in monthly installments of$1,941 including principal and interest at 9.49% beginning July 22,2006 through June 22, 2011, collateralized by a 2006 Land Rover Note payable to DaimlerChrysler Financial in monthly installments of $825 including principal and effective interest at 4.94% beginning August 12,2006 through July 12, 2010, collateralized by a 2006 Dodge Sprinter Note payable to DaimlerChrysler Financial in monthly installments of $825 including principal and effective interest at 5.09% beginning September 10, 2006 through August 10,2010, collateralized by a 2006 Dodge Sprinter Note payable to Komatsu Financial in monthly installments of $3,285 including principal and interest at 2.35% beginning October 3, 2006 through September 15, 2010, collateralized by equipment Note payable to Caterpillar Financial in monthly installments of $629 including principal and interest at 11.105% beginning October 20, 2006 through September 20, 2010, collateralized by equipment Note payable to Ford Credit in monthly installments of$548 including principal and interest at 8.99% beginning December 16, 2006 through November 16,2010, collateralized bya2oo7 Ford F-150 11 $ 18,285 143,537 15,812 15,805 17,984 181,790 85,216 32,446 33,045 144,907 23,057 21,598 TEXAS UNITED EXCAVATORS, LLC NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2006 NOTE 5 - LONG-TERM DEBT (continued) Note payable to Ford Credit in monthly installments of $548 including principal and interest at 8.99% beginning December 16,2006 through November 16,2010, collateralized by a 2007 Ford F-150 $ 21,548 Note payable to GE Capital in monthly installments of $5,715 including principal and effective interest at 3.9% beginnine December 19, 2006 through November 19, 2010, collateralized by equipment 248,471 Note payable to Navistar Financial in monthly installments of $3,500 including principal and effective interest at 10.15% beginning January 1, 2007 through December 1, 2011, collateralized by equipment 164,146 Note payable to Land Rover Capital in monthly installments of $1,162 including principal and effective interest at 11.29% beginning January 1, 2007 through December 1, 2011, collateralized by a 2006 Range Rover Sport Less current portion 52.582 1,877,198 494.613 Total long-term debt $ 1.382 585 Maturities of payables for the next five years are as follows: December 31, 2007 December 31, 2008 December 31, 2009 December 31, 2010 December 31, 2011 $ 494,613 494,518 436,027 352,354 99.686 Total $ 1.877.198 NOTE 6 - LINE OF CREDIT The Company has a line of credit with a bank. Terms of the underlying credit agreement call for all accounts receivable and general intangibles to serve as collateral, with interest due monthly at 8%. The maximum credit line, which matures June 1,2007, is $125,000. NOTE 7 - LEASE COMMITMENT The Company leases building space under a twelve month lease effective September 1, 2006. The Company may exercise a lease option prior to the expiration of the lease to rent the space for two additional periods of one year each on the same terms provided in the lease. Future obligations over the primary lease term are $70,400. 12 TEXAS UNITED EXCAVATORS, LLC NOTESTOFmANC~STATEMENTS DECEMBER 31, 2006 NOTE 8 - BACKLOG (compiled) At December 31, 2006, the Company had agreements on which work has not begun. The applicable future revenues and costs from these agreements are $4,707,897 and $4,081,900, respectively. These agreements and the resulting revenue and cost are not audited or reviewed and are presented for informational pwposes only. The actual revenues and costs may differ due to change orders and other unknown events. NOTE 9 - PRIOR PERIOD ADJUSTMENT The opening balances at January 1, 2006 have been restated to correct an error concerning the overstatement of previously reported fixed assets. The effect of this restatement decreases fixed assets by $122,221, decreases accumulated depreciation by $55,541 and decreases members' capital for Luis Uriarte and Javier Lopez of $53,344 and $13,336, respectively, as of the beginning of the year. The effect on net income in the two preceding years was $8,767 for 2005 and $57,913 for 2004. 13 SUPPLEMENTARY INFORMATION Damaged property Depreciation Equipment mobilization Equipment rental Fuel Inspections Labor Licenses and permits Materials Payroll taxes Subcontractors Utilities Total construction costs TEXAS UNITED EXCAVATORS, LLC SCHEDULE OF CONSTRUCTION COSTS FOR THE YEAR ENDED DECEMBER 31, 2006 $ 15,507 180,075 11,000 285,464 202,163 5,184 705,813 28,313 6,111,369 59,378 1,270,018 15,559 $ 8,889,843 See accompanying accountants' review report 14 TEXAS UNITED EXCAVATORS, LLC SCHEDULE OF OPERATING EXPENSES FOR THE YEAR ENDED DECEMBER 31,2006 General and administrative expenses: Advertising Bad debts Bank charges Blueprints and copies Contract labor Depreciation Dues and subscriptions Insurance Legal and professional fees Meals and entertainment Miscellaenous Office expenses Office supplies Penalties Postage Rent Repairs and maintenance Safety training fees Salaries and wages Security Small tools Taxes - payroll Telephone and mobile expense Travel Uniforms Utilities Vehicle expense Warehouse expense $ 32,088 15,691 692 4,250 475 155,749 13,482 307,900 75,307 39,235 21,514 24,124 7,337 12,932 3,483 77 ,223 122,587 6,201 1,218,850 691 9,979 94,639 64,550 7,717 10,068 10,416 87,279 1,665 Total general and administrative expensesa $ 2,426,124 See accompanying accountants' review report 15 TEXAS UNITED EXCAVATORS, LLC SCHEDULE OF INCOMPLETE CONTRACTS DECEMBER 31, 2006 Cost and Billings in Estimated Excess of Total Total Billed Earnings in Cost and Contract Estimated Total Costs % Revenues Including Excess of Estimated Description Amount Costs to Date Complete Earned Rctainage Billings Earnings City of Irving Section m $ 353,462 $ 311,000 $ 237,000 76.21 % $ 269,359 $ 233,586 $ 35,773 $ Seagoville Villas II & m 822,292 723,000 337,137 46.63% 383,437 407,039 23,602 Horizon / Thbbs Storm Sewer 1,698,615 1 ,290,000 1,315,000 101.94% 1,731,534 1,631,386 100,148 Edwards Church Road 975,519 682,850 400,000 58.58% 571,440 577,537 6,097 $3,849,888 $3,006,850 $2,289,137 $2,955,770 $2,849,548 $ 135,921 $ 29,699 See accompanying accountants' review report 16 TEXAS UNITED EXCAVATORS, LLC SCHEDULE OF COMPLETED CONTRACTS DECEMBER 31, 2006 Contract Cost of Description Amount Revenues Gross Profit Hilton Garden Inn $ 340,000 $ 305,000 $ 35,000 Morningstar Sewer "37,228 25,266 11,962 Woods of Timberlake 5 & 2B 287,103 261,264 25,839 Freemen Baptist Church 59,680 47,744 11,936 Hallmark Baptist Church 87,403 65,552 21,851 Midway Baptist Church 186,024 135,800 50,224 Miltron Street Townhomes 43,077 39,200 3,877 Deer Chase Duncanville 48,633 39,400 9,233 Villas of Seagoville Plumbing 280,000 251,830 28,170 Villas of Forest Hill Plumbing 314,000 279,454 34,546 Eldorado Mazda 29,000 23,107 5,893 Main Street Market 42,000 34,989 7,011 1 st National Bank: Fannersville 119,675 109,857 9,818 George Mixon Addition 25,409 22,584 2,825 Arbor Crossing 165,121 147,615 17,506 Timberglen Library 95,950 86,438 9,512 Alley Rehab 308,045 253,312 54,733 City of The Colony, Texas 174,718 142,335 32,383 Highland Village 309,620 287,500 22,120 Cedar Plaza Townhouses 482,648 317,000 165,648 $ 3,435,334 $ 2,875,247 $ 560,087 See accompanying accountants' review report 17 TEXAS UNITED EXCAVATORS, LLC SCHEDULE OF EARNINGS DECEMBER 31, 2006 Revenues Cost of Description Earned Revenues Gross Profit Contracts completed during the year $ 3,435,334 $ 2,875,247 $ 560,087 Contracts in progress at year end 2,955,770 2,289,137 666,633 Short-term plumbing work 5,572,607 3,725,459 1,847,148 $11 ,963,711 $ 8,889,843 $ 3,073,868 See accompanying accountants' review report 18 INDUSTRIAL LEASE AGREEMENT between ARTX, INC., a Texas corporation, as Landlord and Texas United Excavators, L.L.C., a Texas limited liability company, as Tenant Septembe~ 1, 2006 TABLE OF CONTENTS ~ ARTICLE I D EFINlTI 0 NS ..................................................................................................................................... 1 ARTICLE II LEASE GRA.NT ....... .... ............. ...... ........... ... ......... ........................... ...... ...... .................... ......... ........ 1 ARTICLE m IMPROVEMENTS; ALTERATIONS ............................................................................................ I Section 111.1 Improvements; Alterations ................................................................................................... ........ I Section 111.2 Mechanic's Liens .... .... ............ .......... ...... ........... ......... ................ ............... ... .................. .............. 2 ARTICLE IV RENT .............. .......... ................................... ......... ..... ......................... ........................ ............... ........ 2 Section IV.I Payment of Rent ............................ ..... ..... ......... ..................... ........................................................ 2 Section IV.2 Rent Adjustment .......... ....................... ....................... .................... ........ ........ ....... ...... ................... 2 Section W.3 Security Deposit ....................... .............................. ......... .......................................................... ..... 2 Section IV.4 Survival of Obligations ... .................... ..................... ................. ........... ................................... .......2 Section IV.5 Delinquent Payments .. .............................. ............... .......................... ............ ..... ............... ............ 2 Section IV.6 Basic Rental Adjustment for the Construction Allowance ............................................................3 ARTICLE V OTHER ASSESSMENTS .................................................................................................................. 3 AR TI CLE VI UTILITIES ........................................................................................................................................ 3 ARTICLE VII USE; HAZARDOUS MATERIALS; COMPLIANCE WITH LAWS ......................................3 Section VIl.l Permitted Use. .................................................................... ...............................................................3 Section VI 1.2 Hazardous Materials ......................................................... .. ..... ..... .............. ............. ....... ......... ........ 3 Section VII.3 Compliance with Laws and Ordinances ......................... ...............................................................5 ARTICLE VIII MAINTENANCE ................................................................ ............... ............................. ....... ............5 Section VIlLI Maintenance Responsibilities ........................................... .... ........ ........................................... ........ 5 Section VIII.2 Waste ............................. .... ...................... ........................... ....................... ............ ............................ 5 Section VIII.3 Landlord's Right to Make Repairs ................................. ...............................................................5 Section VIllA Tenant's Right to Make Repairs ..................................... ...............................................................5 ARTICLE IX SURRENDER .......................................................................... ....................... ........................................5 ARTICLE X NET LEASE ...........__............................................................... ............................................................... 6 ARTICLE XI ASSIGNMENT AND SUBLETTING ................................ ...............................................................6 Section XLI Transfers ........................ ..... ............... ................................... ............................... ......... ....................... 6 Section X 1.2 Excess Rent ................................ ................. ........................ ............................ ...................................6 ARTICLE XII INDEMNITY .......................................................................... .............................. ................. ................ 6 ARTICLE xm SUBORDINATION AND ESTOPPELS ....................... ...............................................................6 Section XIII. 1 Subordination ......................... ..... ...................................... ........................ .... .... ........... ....................6 Section XIll.2 Estoppel Certificates ........................................................ ...............................................................7 ARTICLE XIV INSPECTION ................................................................................................................................. 7 ARTICLE XV INSURANCE ................................................................................................................................... 7 Section XV. I Casualty Insurance .......................................................................................................................7 Section XV.2 Liability Insurance ......... ............... ...... .......... .............. ............ ......................... ...................... ......7 Section XV.3 Certificates ........... ......... ............. .......... ........ ............................... .................... ....... ......... .............. 8 Section XV A Waiver of Subrogation .. ......... .......... .... ............. ........... ....... ........ ................ ...................... .... ..... ...8 Section XV.5 Personal Property Insurance..... ...... ........ .... ................ ..................................... ..............................8 ARTICLE XVI CASUALTY .................................................................................................................................... 8 ARTICLE XVTT CONDEMNATION ......................................... 8 ARTICLE XVIII HOLDING 0 VER ........................................................................................................................ 8 ARTICLE XIX TAXES ON TENANT'S PROPERTY ............................................................................................. ARTICLE XX EVENTS OF D EF A UL T ..................................................................................................................9 ARTICLE XXI REMEDIES ................................... .................................................................................................. 9 ARTICLE XXII MECHAN! C'S LIEN ................................................................................................................... 10 ARTICLE X7-'m SIGNS ... .... .............................................................. ...................... ........... .... ............................. 10 AR TI CLE XXIV N OTI CES .................................................................................................................................... 1 0 ARTICLE XXV QUIET ENJOYMENT ................................................................................................................11 ARTICLE XXVI EXISTENCE OF BROKER ......................................................................................................11 ARTICLE XXVII NOTICE TO LENDER ............................................................................................................11 ARTICLE XXIll EXTENSION OPTION ............................................................................................................. 11 ARTICLE XXIX OPTION TO PURCHASE ........................................................................................................ 12 Section XXIX. 1 Option........ ...... ... ......... .... ..... ......... ...... ......... ...... ....... ... ........... ..... ..... ............. .......... ... .... ... ..... 12 Section XXIX.2 Purchase Price and Closing .................................................................................................... 12 Section XXIX.3 Landlord's Option ................ ........... ....... ...... .................... ..... ..... .......... ...... ..... ................ ........ 12 ARTICLE XXX GUARANTY ........................ ........... ....... ............................... ....... ............ .............. ....... .... ..... ..... 12 ARTICLE XXXI MISCELLANEOUS .................................................................................................................. 13 Section XXX 1.1 Surrender of Premises .............. ......... ...... ........... .,. ......... ......... ........ ..... ..... ........... .................. 13 Section XXXI.2 Attorney's Fees .............. ........................ ................ .................................. ...... ....... ......... ......... 13 Section XXXI.3 Separability ............. ........................... ......... ......... .............. .... .......... .......... ............. ......... ....... 13 Section XXXU Gender ............. .................... ........... ..... ........................................ .......... ...... .... ........................ 13 Section XXXI.5 Captions ............... ......... ......... .... ......... .......... ................ ............ ....... ........... ...... ............. ......... 13 Section XXXI.6 Entire Agreement.......................... ..................... .................. ........ ........... ..................... ........... 13 Section XXXI. 7 Waiver .............................................. ................. .......... ....................... ............................ ........ 13 Section XXXI.8 Binding Effect ................................ ......... .................. ......................... ................ .............. ...... 13 Section XXXI.9 Governing Law and Place of Performance.......................................................................... ....13 11 Exhibits: ~ Exhibit "Aft -w.'f F ~I~~ '.9J Exhibit")T- Goamrrty r 111 INDUSTRIAL LEASE AGREEMENT THIS INDUSTRIAL LEASE AGREEMENT (the "Lease") is made and entered into by and between the Landlord and Tenant hereinafter named. ARTICLE I DEFINITIONS The following definitions and basic provisions shall be used in conjunction with and limited by the reference thereto in the provisions of this Lease: (a) "Landlord ARTX, Inc., a Texas limited partnership. (b) "Tenant.: Texas United Excavators, L.L.C., a Texas limited liability company. (c) "Premises.": That certain real property descn1>ed on Exhibit "A" attached hereto and made a part hereof ("Lot 6") and that certain real property descnOed in Exhibit "A-I" attached hereto and made a part hereof (the "Storage Area" and collectively with Lot 6, the "Land"), together with any improvements now or hereafter located thereon which improvements are collectively called the "Building." (d) "Lease Term": A period commencing on the first of September, 2006 and ending twelve (12) months thereafter (the "Expiration Date). (e) "Basic Rental": $8,800.00 per month. rr::J) (f) "Security Deposit": S19,999.88'~ S,OCO. o\.!!7 (g) "Permitted Use" : Conducting a utility, plumbing and mechanical contracting business with related office use on Lot 6 and storage of materials, equipment and vehicles, subject to applicable governmental restrictions and requirements on the Storage Area. (h) "Maximum Rate": The maximum rate of interest permitted by applicable law. (i) "Additional Rent": All sums of money, other than Basic Rental, which become due under this Lease. Basic Rental and Additional Rent shall collectively constitute the "Rent" or "Rentals" due or to become due under this Lease and are herein so called. ARTICLE II LEASE GRANT Landlord, in consideration of the Basic Rental to be paid and the other covenants and agreements to be performed by Tenant and upon the terms and conditions hereinafter stated, does hereby lease, demise and let unto Tenant the Premises commencing on the Commencement Date, or as adjusted as hereinafter provided and ending on the last day of the Lease Term, unless sooner terminated as herein provided. The Premises are subject to, and Tenant covenants and agrees to comply with, the easements, restrictions, reservations and other matters of record as presented in ExhIbits" A" and "C". ARTICLE m IMPROVEMENTS; ALTERATIONS Section 111.1 Improvements; Alterations. Any subsequent structural improvements or alterations to the Premises maybe installed by Tenant, at its sole expense, subject to Landlord's prior written consent, which shall not be unreasonably withheld, conditioned or delayed. Tenant may make non-structural improvements or alterations to the Premises tb.. do not affuct 1 ~ ~ / any of the Building systems without Landlord's prior written consent Approval by Landlord of any of Tenanfs drawings and plans and specifications prepared in connection with any improvements in the Premises shall not constitute a representation or warranty of Landlord as to the adequacy or sufficiency of such drawings, plans and specifications, or the improvements to which they relate, for any use, purpose, or condition, but such approval shall merely be the consent of Landlord as required hereunder. Notwithstanding anything in this Lease to the contrary, Tenant shall be responsible for the cost of all work required to comply with the retrofit requirements of the Americans with Disabilities Act of 1990 or other applicable laws pertaining to accessibility of the Premises by disabled or handicapped persons, and all rules, regulations, and guidelines promulgated thereunder, as the same may be amended from time to time, necessitated by any installations, additions, or alterations made in or to the Premises at the request of or by Tenant or by Tenant's use of the Premises, regardless of whether such cost is incurred in connection with retrofit work required in the Premises,iRGl>,i1....g fA. W~ (K GW'iRl'g iR A~t "R"). Section ll.1.2 Mechanic's Liens. Tenant shall not permit any mechanic's liens to be filed against the Premises for any work performed, materials furnished, or obligation incurred by or at the request of Tenant If such a lien is filed, then Tenant shall, within ten (10) days after Landlord has delivered notice of the filing to Tenant, either pay the amount of the lien or diligently contest such lien and deliver to Landlord a bond or other security reasonably satisfactory to Landlord If Tenant fails to timely take either such action, then Landlord may pay the lien claim without inquiry as to the validity thereof: and any amounts so paid, including expenses and interest, shall be paid by Tenant to Landlord within ten (10) days after Landlord has delivered to Tenant an invoice therefor. ARTICLE IV RENT Section IV.I Payment of Rent. Tenant promises and agrees to pay Landlord the Basic Rental, without deduction or set off, for each and every month of the Lease Term at the address set forth in Article XXIV. or at such other address as Landlord may specify from time to time by written notice delivered in accordance herewith. Any term or provision of this Lease to the contrary notwithstanding, the covenant and obligation of Tenant to pay Rent hereunder shall be independent from any obligations, warranties, representations, express or implied, if any, of Landlord herein contained. Section IV.l Rent Adjustment. The Basic Rental installment for the first month, or portion thereof, of the Lease Term together with the Security Deposit shall be due and payable by Tenant to Landlord contemporaneously with the execution hereof: and subsequent monthly installments shall be due and payable, without demand, on or before the first day of each calendar month during the Lease Term. Basic Rental for any fractional month at the beginning or end of the Lease Term shall be prorated based on the actual number of days in such month. Section I V.3 Security Deposit. The Security Deposit shall be held by Landlord without liability for interest and as security for the performance by Tenant of Tenant's covenants and obligations under this Lease, it being expressly understood that such deposit shall not be considered an advance payment of Rent or a measure of Landlord's damages in case of default by Tenant Upon the occurrence of any event of default by Tenant, Landlord may, from time to time, without prejudice to any other remedy of Landlord hereunder, use the Security Deposit to the extent necessary to make good any arrearages of Basic Rental and any other damage, injury, expense (including attorney's fees) or liability caused to Landlord by such event of default. Following any such application of the Security Deposit, Tenant shall pay to Landlord on demand the amount so applied in order to restore the Security Deposit to its original amount If Tenant is not then in default hereunder, any remaining balance of the Security Deposit shall be returned by Landlord to Tenant upon expiration or earlier termination of this Lease. If Landlord transfers its interest in the Premises during the Lease Term, Landlord may assign the Security Deposit to the transferee and thereafter shall have no further liability for the return of the Security Deposit. Section IV.4 Survival of Obligations. Notwithstanding any expiration or earlier termination of this Lease, Tenanfs obligation to pay any and all Additional Rent under this Lease shall continue and shall coverall periods up to the date this Lease expires or is terminated. Tenant's obligation to pay any and all Additional Rent under this Lease and Landlord's and Tenant's obligation to make the adjustments referred to in this Lease shall survive the expiration of the Lease Term or earlier termination of this Lease. Section IV.S Delinquent Payments. Provided the Landlord is not otherwise in default, if any Basic Rental or Additional Rent payment required to be paid or which becomes due under this Lease is not paid by the tenth (10th) day 2 following the day on which it is due, a service charge of five percent (5%) of such amounts due shall become due and payable in addition to the amounts due. Said service charge is for the purpose of reimbursing Landlord for the extra costs and expenses in connection with the handling and processing of late payments. In addition to such service charge, if any Basic Rental or Additional Rent payment is not paid by the tenth (10.") day following the day on which it becomes due, Tenant shall pay to Landlord, in addition to such Basic Rental or Additional Rent payment, interest on such Basic Rental or Additional Rent payment calculated at the Maximum Rate from the tenth (10) day such Basic Rental or Additional Rent payment was due until paid by Tenant. ARTICLE V OTHER ASSESSMENTS Tenant covenants and agrees that it shall be responsible, as Additional Rent, for all real estate taxes, special assessments, water rates and charges, sewer rates and charges, charges for public utilities, street lighting, all other charges, costs, fees, and expenses of complying with any restrictive covenants or similar agreements to which the Premises are subject, and all interest and late charges if Tenant fails to pay any such taxes or charges before they become delinquent. ARTICLE VI UTILITIES Landlord agrees to provide water, gas, sewer, electricity, and telephone service connections to the Premises; but Tenant shall pay for all water, gas, heat, light, power, telephone, sewer, fire sprinkler, lawn sprinkler charges and other utilities and services used on or from the Premises, together with any taxes, penalties, surcharges or the like pertaining thereto and any maintenance charges for utilities and shall furnish all electric light bulbs and tubes. Unless caused by Landlord or its agents or representatives, Landlord shall in no event be liable for any interruption or failure of utility services on the Premises. ARTICLE VII USE; HAZARDOUS MATERIALS; COMPLIANCE WITH LAWS Section VII.I Permitted Use. Tenant shall use the Premises only for the Permitted Use. Tenant will not occupy or use the Premises, or permit any portion of the Premises to be occupied or used, for any business or purpose other than the Permitted Use or for any use or purpose which is unlawful in part or in whole or deemed to be disreputable in any manner or extra hazardous on account of fire, nor permit anything to be done which will in any way increase the rate of fire insurance on the Building or contents. Tenant will conduct its business and control its agents, employees and invitees in such a manner as not to create any nuisance. Tenant will maintain the Premises in a clean, healthful and safe condition. Section VII.2 Hazardous Materials. (a) As used in this Lease, the term "Hazardous Material" means any substance presently listed, defined, designated or classified as hazardous, toxic, radioactive, or dangerous, or otherwise regulated, under any Environmental Law. Hazardous Substance includes any substance to which exposure is regulated by any government authority or any Environmental Law including, without limitation, any toxic waste, pollutant, cont.aminant, hazardous substance, toxic substance, hazardous waste, special waste, industrial substance or petroleum or any derivative or by-product thereot: radon, radioactive material, asbestos or asbestos-containing material, urea formaldehyde foam insulation, lead or polychlorinated biphenyls. (b) As used in this Lease, the term "Hazardous Materials Laws" shall mean all federal, state and local laws, ordinances and regulations relating to (x) the protection, preservation or restoration of the environment (including, without limitation, air, water vapor, surface water, groundwater, drinking water supply, 3 surface land, subsurface land, plant and animal life or any other natural resource) or to human health or safety or (y) the exposure to, or the use, storage, recycling, treatment, generation, transportation, processing, handling, labeling, production, release or disposal of Hazardous Materials, in each case as amended. The term Hazardous Materials Laws includes, without limitation, (i) the Federal Comprehensive Environmental Response Compensation and Liability Act of 1980, the Superfund Amendments and Reauthorization Act, the Federal Water Pollution Control Act of 1972, the Federal Clean Air Act, the Federal Clean Water Act, the Federal Resource Conservation and Recovery Act of 1976 (including the Hazardous and Solid Waste Amendments thereto), the Federal Solid Waste Disposal and the Federal Toxic Substances Control Act, the Federal Insecticide, Fungicide and Rodenticide Act, the Federal Occupational Safety and Health Act of 1970, each as amended, and (iI) any common law or equitable doctrine (including, without limitation, injunctive relief and tort doctrines such as negligence, nuisance, trespass and strict liability) that may impose liability or obligations for injuries or damages due to, or threatened as a result ot: the presence ot: effects of or exposure to any Hazardous Materials, (c) Tenant shall not cause or permit any Hazardous Material to be generated, produced, brought upon, used, stored, treated or disposed of in or about the Premises, by Tenant, its agents, employees, licensees, invitees, business associates, sublessees, assigns, contractors, subcontractors or others acting for or on behalf of Tenant (collectively, "Tenant Related Party") without the prior written consent of Landlord, If Landlord consents to the generation, production, use, storage, treatment or disposal of Hazardous Materials in or about the Premises by Tenant or any Tenant Related Party, then, in addition to any other requirements or conditions that Landlord may impose in connection with such consent, (i) Tenant promptly shall deliver to Landlord copies of all permits, approvals, filings. reports and hazardous waste marlifests reflecting the legal and proper generation, production, use, storage, treatment or disposal of all Hazardous Materials generated, used, stored, treated or removed from the Premises and, upon Landlord's request, copies of all hazardous waste manifests relating thereto, and (ii) upon expiration of the Lease Term or earlier termination of this Lease, Tenant shall cause all Hazardous Materials arising out of or related to the use or occupancy of the Premises by Tenant or any Tenant Related Party to be removed from the Premises and transported for use, storage or disposal in accordance with all applicable laws, regulations and ordinances, and Tenant shall repair all damage to the Premises caused by such removal. Tenant shall provide Landlord with evidence reasonably satisfactory to Landlord of compliance with all applicable laws, regulations and ordinances. (d) In the event that Hazardous Materials are discovered upon, in, or under the Premises, and the applicable governmental agency or entity having jurisdiction over the Premises requires the removal of such Hazardous Materials, Tenant shall be responsible for removing those Hazardous Materials arising out of or related to the use or occupancy of the Premises by Tenant or any Tenant Related Party. Notwithstanding the foregoing, Tenant shall not take any remedial action in or about the Premises, nor enter into any settlement agreement, consent decree or other compromise with respect to any claiIns relating to any Hazardous Material in any way connected with the Premises without first notifying Landlord of Tenant's intention to do so and affording Landlord the opportunity to appear, intervene or otherwise appropriately assert and protect Landlord's interest with respect thereto. Tenant immediately shall notify Landlord in writing of: (i) any spill. release, discharge or disposal of any Hazardous Material in, on or under the Premises or any portion thereot: (ii) any enforcement, cleanup, removal or other governmental or regulatory action instituted, contemplated or threatened pursuant to any Hazardous Materials Laws; (Hi) any claim made or threatened by any person against Tenant or the Premises relating to damage, contribution, cost recovery, compensation, loss or injury resulting from or claimed to result from any Hazardous Materials; and (iv) any reports made to any environmental agency arising out of or in connection with any Hazardous Materials in, on or removed from the Premises, including any complaints, notices, warnings, reports or asserted violations in connection therewith. Tenant also shall supply to Landlord as promptly as possible, and in any event within ten (10) business days after Tenant first receives or sends the same, copies of all claims, reports, complaints, notices, warnings or asserted violations relating in any way to the Premises or Tenants use thereof. (e) In the event (i) Hazardous Materials are discovered upon, in or under the Premises or the Property and (ii) Landlord has been given written notice of the discovery of such Hazardous Materials, then and in that event Landlord may voluntarily, but shall not be obligated to (unless the existence of such Hazardous Materials has resulted from the acts of Landlord, its agents, employees, licensees, invitees, business associates, assigns, contractors, subcontractors or others acting for or on behalf of Landlord (collectively, "Landlord Related Parry"), take all necessary action to bring the Premises and the Property into compliance with Hazardous Materials Laws at Landlord's sole cost ("Landlord's Remediation Activities"). Tenant agrees not to interfere unreasonably with. Landlord's Remediation Activities, and should Landlord elect to pursue Landlord's Remediation Activities; Landlord agrees to perform such activities so as not to interfere unreasonably with Tenant's occupancy and operations of the Premises. 4 (f} The respective rights and obligations of Landlord and Tenant under this Section 7.2 shall survive the expiration of the Lease Term or earlier termination of this Lease. Section VII.3 Compliance with Laws and Ordinances. (a) Tenant shall use its diligent good faith efforts to comply with all laws, ordinances, orders, rules, regulations and other requirements of governmental authority pertaining to or governing Tenant's particular use and occupancy of the Premises, whether now in force or hereafter enacted, including, without limitation, the Americans with Disabilities Act (the "ADA") (as it applies to the interior of the Leased Premises or use of the Premises in general) and all applicable federal, state or local laws, regulations, orders, judgments and decrees regarding health or safety and Hazardous Materials Laws, including without limitation the application for and maintenance of all required permits, the submittal of all notices and reports, proper labeling, training and record keeping, and timely and appropriate response to any release or other discharge by Tenant of a Hazardous Materials under Hazardous Materials Laws. (b) Landlord shall use its diligent good faith efforts to comply with all laws, ordinances, orders, rules, regulations and other requirements of governmental authority pertaining to or governing Landlord's ownership, maintenance and repair of the Premises, whether now in force or hereafter enacted, including, without limitation, the ADA and all Hazardous Materials Laws, including without limitation the application for and maintenance of all required permits, the submittal of all notices and reports, proper labeling, training and record keeping, and timely and appropriate response to any release or other discharge by Landlord of a Hazardous Materials under Hazardous Materials Laws. ARTICLE VIn MAINTENANCE Section VILt Maintenance Responsibilities. Landlord's sole maintenance responsibilities under this Lease shall be, to make, at its expense, all structural repairs to the roof, foundation and outside walls of the Premises. Landlord shall not be required to furnish any services or facilities or to make any other repairs or alterations in, about or to the Premises or to any improvements hereafter erected thereon. Tenant hereby assumes the full and sole responsibility, at its sole cost, for the condition, operation, repair, replacement, maintenance and management of all other portions of the Premises and all improvements hereafter erected thereon. Section VIll.2 Waste. Tenant shall not do or suffer any waste or damage, disfigurement or injury to the Premises, or any improvements hereafter erected thereon, or to the fixtures or equipment therein, or permit or suffer any overloading of the floors or other use of the Premises that would place an undue stress on the same or any portion thereof beyond that for which the same was designed. Section Vll.3 Landlord's Right to Make Repairs. If Tenant fails to perform any of its obligations under this Article vm within thirty (30) days after Tenant has been notified of the need for such repair, then Landlord may, if it so elects, in addition to any other remedies provided herein, perform such repairs and maintenance. Any sums expended by Landlord in effecting such repairs and maintenance shall be due and payable, on demand. Section VIlA Tenant's Right to Make Repairs. If Landlord fails to perform any of its obligations under this Article vm within thirty (30) days after Landlord has been notified of the need for such repair, then Tenant may, if it so elects, in addition to any other remedies provided herein, perform such repairs and maintenance. Any sums expended by Tenant in effecting such repairs and maintenance shall be due and payable, on demand. ARTICLE IX SURRENDER 5 At the expiration of the Lease Term or earlier ten:nmation of this Lease, Tenant shall deliver up the Premises with all improvements located thereon (including all mechanical, plumbing and HV AC systems) in good repair and condition, reasonable wear and tear excepted, and shall deliver to Landlord all keys to the Premises. Tenant shall also remove all trash and debris from the Premises and leave same in a "broom clean" condition. The cost and expense of any repairs necessary to restore the condition of the Premises to the condition in which they are to be delivered to Landlord shall be borne by Tenant All furniture, movable trade fixtures and equipment installed by Tenant may be removed by Tenant at the expiration of the Lease Term or earlier termination of this Lease if Tenant so elects, and shall be so removed if required by Landlord. or if not so removed shall, at the option of Landlord. become the property of Landlord All such installations, removals and restoration shall be accomplished in a good. workmanlike manner so as not to damage the Premises or the primary structure or structural qualities of the Building, the other improvements or the plumbing, electrical lines or other utilities. ARTICLE X NET LEASE Landlord and Tenant do each state and represent that it is the intention of each of them that this Lease be interpreted and construed as a triple net lease, and all Basic Rental and Additional Rent shall be paid by Tenant to Landlord without abatement, deduction, diminution, deferment, suspension, reduction or setoff. ARTICLE XI ASSIGNMENT AND SUBLETTING Section XLI Transfers. Tenant shall not have the right to assign this Lease or to sublet the whole or any part of the Premises without the prior written consent of Landlord. which consent shall not be unreasonably withheld. conditioned or delayed. Notwithstanding any permitted assignment or subletting, Tenant shall at all times remain directly, primarily and fully responsible and liable for the payment of the Rent herein specified and for compliance with all of its other obligations under the terms, provisions and covenants of this Lease. Upon the occurrence of an "event of default" as hereinafter defined. if the Lease is assigned or the Premises or any part thereof is sublet, Landlord. in addition to any other remedies herein provided. or provided by law, may at its option collect directly from such assignee or subtenant all rents becoming due to Tenant under such assignment or sublease and apply such rents against any sums due to Landlord from Tenant hereunder, and no such collection shall be construed to constitute a novation or a release of Tenant from the further performance of Ten ant's obligations hereunder. Tenant shall not mortgage, pledge or otherwise encumber its interest in this Lease or in the Premises. Section XL2 Excess Rent. If Landlord consents to Tenant assigning its interest under this Lease or subletting all or any portion of the Premises, Tenant shall pay to Landlord (in addition to the Basic Rental and all other amounts payable by Tenant under this Lease) fifty percent (50010) of the rents and other considerations payable by such assignee or subtenant in excess of the Basic Rental otherwise payable by Tenant from time to time under this Lease. Said additional amount shall be paid to Landlord immediately upon receipt by Tenant of such rent or other considerations from the assignee or subtenant. ARTICLE XII INDEMNITY Landlord shall not be liable to Tenant or Tenant's employees, agents, patrons or visitors, or to any other person whomsoever, for any injury to person or damage to property on or about the Premises, except injury to persons or damage to property caused by Landlord or Landlord Related Party, and Tenant hereby covenants and agrees that it will at all times defend. indemnify and hold safe and harmless the Premises, Landlord. Landlord's agents and employees from any loss, liability, claims, suits, costs, expenses, including without limitation attorney's fees and damages, both real and alleged. arising out of any such damage or injury. The provisions of this paragraph shall survive the expiration of the Lease Term or earlier termination of this Lease. ARTICLE XIll SUBORDINATION AND ESTOPPELS Section XllLI Subordination. Tenant accepts this Lease subject to any deeds of trust, security interests or mortgages which might now or hereafter constitute a lien upon the Premises and to deed restrictions, zoning ordinances and other building and fire ordinances and governmental regulations relating to the use of the Premises. At 6 p@ Landlord's sole cost and expense, Tenant shall at any time hereafter, on demand, execute any instruments, releases or other documents that may be required by any mortgagee for the purpose of subjecting and subordinating this Lease to the lien of any such deed of trust, secwity interest or mortgage. Tenant agrees to attorn to any mortgagee, trustee under a deed of trust or purchaser at a foreclosure sale or trustee's sale as Landlord under this Lease. With respect to any deed of 1nJst, seeurity interest or mortgage hereafter constituting a lien on the Premises, Landlord, at its sole option, shall have the right to waive the applicability of this paragraph so that this Lease will not be subject and subordinate to any such deed of 1nJst, secwity interest or mortgage. Section XllI.2 Estoppel Certificates. At Landlord's sole cost, Tenant agrees to furnish, from time to time when requested by Landlord, to the holder of any deed of trust, mortgage, or other instrument of seewity, or the lessor under any ground lease or lIDderlying lease covering all or any part of the Building or the improvements therein or the Land situated beneath the Building, or any interest of Landlord therein, a certificate signed by Tenant confirming and containing such factual certifications and representations reasonably deemed appropriate by the party requesting such certificate, and Tenant shall, within ten (10) days following receipt of said proposed certificate from Landlord, return a fully executed copy of said certificate to Landlord. ARTICLE XIV INSPECTION Landlord and Landlord's agents and representatives shall have the right to enter upon and inspect the Premises at any reasonable time during normal business hours, for the purpose of ascertaining the condition of the Premises or in order to make such repairs as may be required or permitted to be made by Landlord, and Landlord's agents and representatives shall have the right to enter upon the Premises at any reasonable time during business hours for the purpose of showing the Premises and shall have the right to erect on the Premises a suitable sign indicating the Premises are available for lease or for sale. ARTICLE :xv INSURANCE Section XV.1 Casualty Insurance. Tenant, at its sole cost and expense, shall obtain and continuously maintain in full force and effect during the Lease Term, commencing with the Commencement Date, policies of insurance covering the Premises and the Building, naming Landlord, as an additional insured, against (a) loss or damage by fire (b) loss or damage from such other risks or hazards including, but not limited to, windstorm, hail, explosion, vandalism, riot and civil commotion, damage from vehicles, smoke damage, water damage and debris removal; (c) loss for flood if the Premises are in a designated flood or flood insurance area. At all times, such insurance coverage shall be in an amount equal to 100% of the then "full replacement cost" of the Building. "Full Replacement Cost" shall be interpreted to mean the cost of replacing the improvements without deduction for depreciation or wear and tear, and it shall include a reasonable sum for architectural, engineering, legal, administrative and supervisory fees connected with the restoration or replacement of the Building in the event of damage thereto or destruction thereof. Section XV.2 Liability Insurance. During the Lease Term, Tenant, at its sole cost and expense, shall obtain and continuously maintain in full force and effect the following insurance coverage: (a) Comprehensive general liability insurance against any loss, liability or damage on, about or relating to the Premises, or any portion thereot: with limits of not less than Two Million Dollars ($2,000,000.00) combined single limit, per occurrence and aggregate, coverage on an occurrence basis. Any such insurance obtained and maintained by Tenant shall name Landlord as an additional insured therein and shall be obtained and maintained from and with a reputable and financially sound insurance company authorized to issue such insurance in the state in which the Premises are located. (b) Such other insurance and in such amounts as may from time to time be reasonably required by Landlord, against other insurable hazards which at the time are commonly insured against in the case of premises and/or buildings or improvements similar in construction, design, general location, use and occupancy to those on or appurtenant to the Premises. 7 Section XV.3 Certificates. Tenant shall provide full certificates of insurance for each policy required under this Article XV stating that (i) such policy shall not be canceled or materially changed without at least thirty (30) days prior written notice to Landlord, and (ii) the insurance as to the interest of Landlord shall not be invalidated by any act or neglect of Landlord or Tenant All policies of insurance shall be written in companies reasonably satisfactory to Landlord and licensed in the state in which the Premises are located. Such certificates of insurance shall be in a form reasonably acceptable to Landlord, shall be delivered to Landlord upon commencement of the term and prior to expiration of such policy, new certificates of insurance, shall be delivered to Landlord not less than twenty (20) days prior to the expiration of the then current policy term. Section XV.4 Waiver of Subrogation. Tenant hereby waives, releases and discharges Landlord, its agents and employees from all claims whatsoever arising out of loss, claim, expense or damage to or destruction covered or coverable by insurance required under this Article XV notwithstanding that such loss, claim, expense or damage may have been caused in part by Landlord, its agents or employees, and Tenant agrees to look to the insurance coverage only in the event of such loss. Tenant shall cause the policies of insurance required by this Article XV to be issued with an endorsement acknowledging this waiver. Section XV.S Personal Property Insurance. Tenant shall maintain insurance coverage upon Tenant's business and upon all personal property of Tenant or the personal property of others kept, stored or maintained on the Premises against loss or damage by fire, windstorm or other casualties or causes for such amount as Tenant may desire, and Tenant agrees that such policies shall contain a waiver of subrogation clause as to Landlord. ARTICLE XVI CASUALTY If the Premises shall be damaged by fire, the elements, unavoidable accident or other casualty, but are not thereby rendered untenantable in whole or in part, Landlord shall promptly at its own expense cause such damage to be repaired, and the Basic Rental shall be abated by the portion of the Premises rendered untenantable; if by reason of such occurrence the Premises shall be rendered wholly untenantable, Landlord shall promptly at its own expense cause such damage to be repaired, and the Basic Rental meanwhile shall be abated in whole, unless within thirty (30) days after said occurrence Landlord shall give Tenant written notice that it has elected not to reconstruct the destroyed Premises, in which event this Lease and the tenancy hereby created shall cease as of the date of said occurrence and the Basic Rental shall be abated as of such date. Landlord shall not be required to repair or replace any property which the Tenant may be entitled to remove from the Premises or any improvements or alterations made by Tenant (except in the event such improvements or alterations are covered by insurance). No damages, compensation or claims shall be payable by Landlord for inconvenience, loss of business or annoyance arising from any repair OF restoration of the Premises. All Basic Rental paid in advance shall be apportioned in accordance with the foregoing provisions as of the date of such damage. ARTICLE XVII CONDEMNATION If the whole of the Premises or such portion thereof as shall make the Premises untenantable, or all means of access thereto shall be condemned or sold under threat of condemnation, this Lease shall terminate and Tenant shall have no claim against Landlord or to any portion of the award in condemnation for the value of any unexpired term of this Lease, but this shall not limit Tenant's right to compensation from the condemning authority for the value of any of Tenant's property taken (other than Tenants leasehold interest in the Premises) and Tenant's moving expenses, provided same does not reduce the award to Landlord In the event of a temporary taking, this Lease shall not terminate, but the term hereof shall be extended by the period of the taking and the Basic Rental shall abate in proportion to the area taken for the period of such taking. In the event of a partial taking which does not terminate this Lease, the Rent shall be equitably adjusted as determined by both Landlord and Tenant. 8 ARTICLE XVIII HOLDING OVER If Tenant. or any of its successors-in interest. occupy the Premises, or any part thereof after the expiration of the Lease Term. unless otherwise agreed in writing, such holding over shall constitute and be construed as tenancy from month-to-month only, at a Basic ,rental equal to the Basic Rental payable for the last month of the Lease Term plus fifty percent (50%) of such amount. Such occupancy by Tenant. or any of its successors, for any part of a month shall entitle Landlord to collect the Rent called for under this paragraph for the entirety of such month. The provisions of this paragraph shall not be construed as Landlord's consent for the Tenant to hold over. ARTICLE XIX TAXES ON TENANT'S PROPERTY Tenant shall be liable for all taxes levied or assessed against personal property, finniture or fixtures placed by Tenant in the Premises. If any such taxes for which Tenant is liable are levied or assessed against Landlord or Landlord's property and if Landlord elects to pay the same or if the assessed value of Landlord's property is increased by inclusion of personal property, finniture or fixtures placed by Tenant in the Premises, and Landlord elects to pay the taxes based on such increase, Tenant shall pay to Landlord upon demand that part of such taxes for which Tenant is primarily liable hereunder. ARTICLE XX EVENTS OF DEFAULT The following events shall be deemed to be events of default by Tenant under this Lease: (a) Tenant shall fail to pay any of the Basic Rental or Additional Rent and such failure shall continue for a period often (10) days after written notice to Tenant of such failure. (b) Tenant shall fail to comply with any term, provision or covenant of this Lease, other than the payment of Rent, and shall not cure such failure within thirty (30) days after written notice to Tenant of such failure, or, if such failure cannot reasonably be cured within the said thirty (30) day period, Tenant fails to commence to cure such failure within such thirty (30) day period and thereafter diligently pursues the same to completion. (c) Tenant shall make an assignment for the benefit of creditors. (d) Tenant shall file a petition under any section or chapter of the United States Bankruptcy Code, as amended, or under any similar law or statute of the United States or any State thereof, or Tenant shall be adjudged bankrupt or insolvent in proceedings filed against Tenant thereunder and such adjudication shall not be vacated or set aside within sixty (60) days. (e) A receiver or trustee shall be appointed for all or substantially all of the assets of Ten ant and such receivership shall not be terminated or stayed within sixty (60) days. ARTICLE XXI REMEDIES Upon the occurrence of any event of default specified in Article XX hereof, Landlord shall have the option to pursue anyone or more of the following remedies without any notice or demand whatsoever: (a) Terminate this Lease, in which event Tenant shall immediately surrender the Premises to Landlord, and if Tenant fails to do so, Landlord may, without prejudice to any other remedy which it may have for possession or arrearages in Rent. enter upon and take possession and expel or remove Tenant and any other person who may be occupying said Premises or any part thereof; and Tenant agrees to pay to Landlord on demand the amount of all loss and damage which Landlord may suffer by reason of such termination, whether through inability 9 to relet the Premises on satisfactory terms or otherwise, including the loss of Rent for the remainder of the Lease Term. (b) Enter upon and take possession of the Premises, without terminating this Lease, and expel or remove Tenant and any other person who may be occupying the Premises or any park thereof and if Landlord so elects, relet the Premises on such terms as Landlord shall deem advisable and receive the Basic Rental thereof; and Tenant agrees to pay to Landlord on demand any deficiency that may arise by reason of such reletting for the remainder of the Lease Term. The deficiency to be paid by Tenant to Landlord shall be the equivalent of the amount of the Basic Rental and Additional Rent which would be payable under this Lease by Tenant, less the net proceeds of any reletting by Landlord after deducting all of Landlord's reasonable expenses in connection with such reletting, including, without limitation, all repossession costs, brokerage commissions, legal expenses, attorneys' fees, alteration costs and expenses of preparation of the Premises or any portion thereot: for such reletting. (c) Enter upon the Premises and perform whatever Tenant is obligated to perform under the terms of this Lease; and Tenant agrees to reimburse Landlord on demand for any reasonable expenses which Landlord may incur in thus effecting compliance with Tenant's obligations under this Lease. (d) Pursue the constitutional, statutory or contractual Landlord's lien for Rent that Landlord may have. Pursuit of any of the foregoing remedies shall not preclude pursuit of any of the other remedies herein provided or any other remedies provided by law, nor shall pursuit of any remedy herein provided constitute a forfeiture or waiver of any Rent due to Landlord hereunder or of any damages accruing to Landlord by reason of the violation of any of the terms, provisions and covenants herein contained. Landlord's acceptance of Rent following an event of default hereunder shall not be construed as Landlord's waiver of such event of default. No waiver by Landlord of any violation or breach of any of the terms, provisions, and covenants herein contained shall be deemed or construed to constitute a waiver of any other violation or breach of any of the terms, provisions, and covenants herein contained. Forbearance by Landlord to enforce one or more of the remedies herein provided upon an event of default shall not be deemed or construed to constitute a waiver of any other violation or default. The loss or damage that Landlord may suffer by reason of termination of this Lease or the deficiency from any reletting as provided for above shall include the expense of repossession and any repairs undertaken by Landlord following possession and the cost incurred by the Landlord to relet the Premises. Should Landlord at any time terminate this Lease for any default, in addition to any other remedy Landlord may have, Landlord may recover from Tenant all damages Landlord may incur by reason of such default, including the cost of recovering the Premises and the loss of Rent for the remainder of the Lease Term. ARTICLE XXIT MECHANIC'S LIEN Tenant shall have no authority, express or implied, to create, place or allow any Lien or encumbrance of any kind or nature whatsoever upon, or in any manner to bind, the interest of Landlord in the Premises or to charge the Rent payable hereunder for any claim in favor of any person dealing with Tenant, including those who may furnish materials or perform labor for any construction or repairs, and each such claim shall attach to, if at all, only the leasehold interest granted to Tenant by this instrument. Tenant covenants and agrees that it will payor cause to be paid all sums legally due and payable by it on account of any labor performed or materials furnished in connection with any work performed on the Premises on which any lien is or can be validly and legally asserted against its leasehold interest in the Premises or the improvements thereon and that it will save and hold Landlord harmless from any and all loss, cost or expense based on or arising out of asserted claims or liens against the leasehold estate or against the right, title and interest of Landlord in the Premises or under the terms of this Lease. ARTICLExxm SIGNS Tenant shall have the right to install signs upon the Premises only when first approved in writing by Landlord and subject to any applicable governmental laws, ordinances, restrictions, regulations and other requirements. Tenant shall remove all such signs upon the expiration of the Lease Term or earlier termination of this Lease. Such installations and removals shall be made in such manner as to avoid injury to or defacement of any 10 a2J , buildings or other improvements on the Premises, and Tenant shall repair any injury or defacement, including without limitation discoloration, caused by such installation or removal. ARTICLE XXIV NOTICES Any notice required hereunder shall be in writing and shall be deemed effective when delivered and shall be deemed delivered when actually delivered whether or not receipt has been accepted by the following: Landlord: ARTX, Inc. 1455 Halsey Way Carrollton, Texas 75011 Attn.: John Grimes Tenant: Texas United Excavators, L.L.C., a Texas limited liabilit 1451 Halsey Way Attn.: Luis A. Uriarte Carrollton, Texas 75007 QUIET ENJOYMENT So long as no event of default exists, Tenant shall peaceably and quietly hold and enjoy the Premises for the Lease Term, without hindrance from Landlord, subject to the terms and conditions of this Lease. ARTICLE XXVI EXISTENCE OF BROKER Tenant represents and warrants that it has not contacted or dealt with any real estate broker or agent in connection with the execution of this Lease. Tenant and Landlord agree to defend, indemnify and hold the other party harmless against all liabilities and costs (including, but not limited to, attorney's fees) incurred by the other party as a result of the other party's breach of any covenant, agreement, warranty or representation contained in this Article XXVI. ARTICLE XXVII NOTICE TO LENDER If the Premises or the Building or any part thereof are at any time subject to a first mortgage or a first deed of trust or other similar instrument and this Lease or the rentals are assigned to a mortgagee, trustee or beneficiary and Tenant is given written notice thereot: including the post office address of such assignee, then Tenant shall not take any action on account of any default on the part of Landlord without first giving written notice by certified or registered mail, return receipt requested, to such assignee, specifying the default in reasonable detail, and affording such assignee a reasonable opportunity to perform, at its election, for and on behalf of Landlord. ARTICLE XXVIII LEASE OPTION Provided Tenant is not in default of this Lease, Tenant may exercise Lease Option prior to expiration oflease two (2) additional periods of one (1) year each on the same terms provided in this Lease (except as set forth below), by delivering written notice of the exercise thereof to Landlord not later than five (5) months before the expiration of the Lease Term. On or before the commencement date of the extended Lease Term in question, Landlord and Tenant 11 ~)I'.Jn,J~~ / shall execute an amendment to this Lease extending the Lease Term on the same terms provided in' , exceptV ~ 1he Basic _ payable fur each month dwing such .-.led Lease Term shall be the ~ rate for Lease renewal transactions, at the commencement of such extended Lease Term, for space of equivalent quality, size, utility and location, with the length of the extended Lease Term and the credit standing of Tenant to be taken into account Landlord, upon receipt of Tenant's notice, shall have thirty (30) days to deliver a written proposal to Tenant outlining Landlord's reasonable determination of the prevailing rental rate. Tenant shall have thirty (30) days to accept or reject Landlord's proposal. Failure to respond shall be deemed rejection. Tenant shall have no further renewal options unless expressly granted by Landlord in writing. ARTICLE XXIX PURCHASE OPTION Provided Tenant is not in default of this Lease, Tenant may purchase the building known as 1451 Halsey Way, Carrollton, Texas 75007 for the price of One Million Eight Hundred Thousand ($1,800,000.00) Dollars and No Cents. Landlord and or assigns retains the right of first refusal to finance the loan if the sale is financed by Tenant, providing terms are equal to or better than market terms. With respect to Tenant's option, notice to exercise Purchase Option must be in writing four (4) months prior to expiration of lease. ARTICLE XXX GUARANTY As a condition to Landlord's obligations under this Lease, Tenant shall cause to be delivered to Landlord a guaranty from "Tenant": Texas United Excavators, L.L.C., a Texas limited liability company form of Exlnbit "0" attached hereto and made a part hereof. If Tenant fails to provide such guaranty within fifteen (15) days from the Effective Date, Landlord may terminate this Lease upon notice to Tenant and thereafter the parties shall have no further obligations hereunder. ARTICLE XXXI MISCELLANEOUS Section XXXI.I Surrender of Premises. No act or thing done by Landlord or its agents during the Lease Term hereby granted shall be deemed an acceptance ofa surrender of the Premises, and no agreement to accept a surrender of the Premises shall be valid unless the same be made in writing and subscribed by the Landlord. Section XXXI.2 Attorney's Fees. If as a result of any default by one party in its obligations under this Lease it is necessary for the other party to bring any action to enforce or defend any of such party's rights hereunder, then the prevailing party in any final non-appealable judgment shall be entitled to recover its reasonable attorneys' fees andcosts from the other party in addition to any other relief afforded Section XXXI.3 Separability. If any clause or provision of this Lease is illegal, invalid or unenforceable under present or future laws, then and in that eveQ.t, it is the intention of the parties hereto that the remainder of this Lease shall not be affected thereby, and it is also the intention of the parties to this Lease that in lieu of each clause or provision of this Lease that is illegal, invalid, or unenforceable, there be added as a part of this Lease a clause or provision as similar in terms to such illegal, invalid or unenforceable clause or provision as may be possible and be legal, valid and enforceable. Section XXXI.4 Gender. Words of any gender used in this Lease shall be held and construed to include any other gender, and words in the singular number shall be held to include the plura~ unless the context otherwise requires. Section XXXI.5 Captions. The captions contained in this Lease are for convenience of reference only, and in no way limit or enlarge the terms and conditions of this Lease. Section XXXL6 Entire Agreement. Neither party to this Lease has made or relied on any representations, warranties, covenants or agreements with respect to the Premises or any other matters affecting or relating to this Lease except as contained herein and this Lease supersedes and replaces any prior representations, ~ 12 r warranties, covenants or agreements, whether written or oral, which may have been made by either party with respect to the Premises or other matters contained in this Lease. This Lease contains the entire agreement between the parties hereto with respect to the Premises and all other matters contained in this Lease and this Lease may not be altered, changed or amended, except by instrument in writing signed by both parties hereto. Section XXXI. 7 Waiver. No provision of this Lease shall be deemed to have been waived by Landlord unless such waiver be in writing signed by Landlord and addressed to Tenant, nor shall any custom or practice which may grow up between the parties in the admini!<tration of the terms hereofbe construed to waive or lessen the right of Landlord to insist upon the performance by Tenant in strict accordance with the terms hereof. Section XXXI.S Binding Effect The terms, provisions, covenants and conditions contained in this Lease shall apply to, inure to the benefit of; and be binding upon the parties hereto, and upon their respective successors in interest and legal representatives, except as otherwise herein expressly provided. Section XXXI.9 Governing Law and Place of Performance. This Lease shall be governed by the laws of the State of Texas, and Tenant shall perform all covenants, conditions and agreements contained herein, including but not limited to payment of Rent, in Dallas County, Texas. 13 Executed by Landlord and Tenant this Ist day of September, 2006 (the "Effective Date"). LANDWRD: By: Name: John Title: Chief Financial Officer By: Name: Lius . Uriarte Title: President Exhibit "B" Guaranty # As a material inducement to Landlord to enter into the Industrial Lease Agreement, August 31, 2600' (the "Lease"), between ARTX, Inc., as Landlord, and Texas United Excavators, as Tenant, the undersigned ("Guarantor") hereby unconditionally and irrevocably guarantees the complete and timely performance of each obligation of Tenant under the Lease and any extensions or renewals of and amendments to the Lease. This Guaranty is an absolute, primary, continuing, and general guaranty of payment and performance and is independent of Tenant's obligations under the Lease. Guarantor waives any right to require Landlord to (i) join Tenant with Guarantor in any suit arising under this Guaranty, (ii) proceed against or exhaust any security given to secure Tenant's obligations under the Lease, or (ill) pursue or exhaust any other remedy in Landlord's power. Landlord and Tenant may, without notice or demand and without affecting Guarantor's liability hereunder, from time to time, compromise, extend or otherwise modify any or all of the terms of the Lease. Guarantor hereby waives all demands for performance, notices of performance, and notices of acceptance of this Guaranty. The liability of Guarantor under this Guaranty will not be affected by (i) the release or discharge of Tenant from, or impairment, limitation or modification ot: Tenant's obligations under the Lease in any bankruptcy, receivership, or other debtor relief proceeding, whether state or federal and whether voluntary or involuntary; (ii) the rejection or disaffirmance of the Lease in any such proceeding; or (ill) the cessation by operation of law of the liability of Tenant under the Lease. Guarantor shall pay to Landlord all reasonable costs incurred by Landlord in enforcing this Guaranty . eluding, without limitation, reasonable attorneys' fees and expenses). EXHIBIT "D" - Form of Guaranty, Solo Page By: , '\\11- ~( ~hiMt .il/ ., " . 73.44' , . NlN ~. FlR. ElE:v - 4&S.eO" '\ \. \. \ " \. " \ " \. \. ", '\ \. .- \. " (' ~ ~+ ~. 2'_ "'"i ~~ 'Q,), \9 9> " . ... _;p, . ..". '. "'-'-'-~. --.-- hq;~.. 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