Exhibit 10.4

 

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Interchange Corporate Center
450 Plymouth Road, Suite 400
Plymouth Meeting, PA 19462-1644
Ph. (610) 832-8240

 

SUBORDINATION AGREEMENT

 

I.      PARTIES

 

The parties to this Agreement are:

 

1.     Primoris Services
Corporation                                                                                                      ,
hereinafter called Contractor.

 

2.     Christopher S. Wallace, as Sellers’
Representative                                                                           ,
hereinafter called Creditor.

 

3.     Liberty Mutual Insurance Company and any other company that is part of or
added to the Liberty Mutual Group and for which Liberty Mutual Surety
underwrites surety business, hereinafter called “Surety”. For the purposes of
this Agreement, the definition of Surety shall include Safeco Insurance Company
of America, General Insurance Company of America, First National Insurance
Company of America, Safeco National Insurance Company (individually and
collectively the “Safeco Insurance Companies”).

 

II.    RECITALS:

 

This Agreement is entered into based upon the following facts and circumstances:

 

(1)

From time to time Contractor may request Surety to execute instruments of
suretyship on its behalf, hereinafter called Bonds.

 

 

(2)

Contractor is indebted to Creditor in the sum of
$16,711,967                                          , as evidenced by that
certain Convertible Promissory Note dated November 12, 2010 in favor of certain
stockholders of Rockford Holdings Corporation hereinafter called “Promissory
Note”.

 

 

(3)

Contractor and Creditor desire Surety to furnish Bonds as requested by
Contractor and as an inducement therefor enter into the following Agreement.

 

III.   COVENANTS:

 

In consideration of the furnishing of any such Bonds by Surety, Contractor and
Creditor hereby agree as follows:

 

1.     Creditor hereby subordinates all rights and claims against Contractor on
account of the above mentioned indebtedness to any and all rights and claims of
Surety on account of Loss as defined herein. Loss shall mean any and all loss or
expense of whatever kind, including interest, court costs and counsel fees which
Surety incurs or sustains as a result of or in connection with any Bond
furnished by Surety. Originals or photocopies of claim drafts, or of payment
records kept in the ordinary course of business, including computer print-outs,
verified by affidavit, shall be prima facie evidence of the fact and amount of
Surety’s loss and Surety shall be entitled to reimbursement for any and all
disbursements made by it in good faith, under the belief that it was liable, or
that such disbursement was necessary or expedient.

 

2.     Surety’s Loss shall be paid in full out of the assets of the Contractor
before any payment on account of the above mentioned indebtedness is made to or
realized by Creditor.

 

3.     Creditor hereby assigns to Surety all of its rights and claims, including
its security, if any, on account of such indebtedness so that in the event of
receivership, bankruptcy or insolvency of Contractor, Surety may enforce such
rights and claims and may have dividends thereon until Surety is reimbursed in
full for its Loss.

 

4.     Unless specifically permitted in paragraph 11 below or Surety provides
its express written consent, Creditor and Contractor agree that until Surety has
been provided with competent legal evidence of the release or exoneration of
each and every Bond, the mentioned indebtedness shall remain unchanged and
unliquidated; that neither Creditor nor Contractor will by act or omission
procure or permit the reduction of such indebtedness; nor will Creditor sell,
transfer or hypothecate said indebtedness.

 

5.     Creditor agrees that in the event of a breach of any of the terms of this
Agreement, all funds, the value of any property and any benefit received by
Creditor in connection with such breach shall be returned by Creditor to
Contractor upon Surety’s demand. Contractor further agrees to compensate Surety
for any damage the Surety sustained that was caused by or contributed to by any
breach of the Agreement, including, but not limited to any breach of the
Agreement by Creditor.

 

6.     This Agreement shall apply to Bonds heretofore or hereafter executed and
furnished by Surety, procured by Surety, or executed by any other surety as sole
surety or as co-surety, and the rights hereunder shall inure to the benefit of
Surety, such other surety, if any, and their reinsurers, if any.

 

7.     This Agreement shall apply to Bonds executed both before and after the
effective date of this Agreement including any alterations, renewals, extensions
and modifications thereof.

 

8.     The Surety’s ability to exercise any particular right or remedy under
this Agreement, shall not be prejudiced by either a delay or failure to exercise
such right or remedy. The obligations of the Creditor and Contractor hereunder
shall be in addition to, and not in lieu of, their obligations to the Surety
under any other agreements, including but not limited to the General Agreement
of Indemnity executed in favor of the Surety, and in the event of any conflict
or inconsistency between the terms of this Agreement and the terms of any other
agreements, the term or interpretation most favorable to the Surety, as
determined by the Surety, shall control. Creditor and Contractor further
acknowledge each has been provided with an opportunity to consult its own
counsel prior to execution hereof.

 

9.     Notwithstanding this Agreement, Surety has no obligation to issue Bonds
requested by Contractor or Creditor.

 

10.   This Agreement may not be terminated without the prior written consent of
all parties hereto. In the event that all liability under the Bonds issued to
Contractor has been extinguished, in the sole and absolute discretion of the
Surety, Surety shall not withhold its consent to terminate this Agreement.

 

11.   NOTWITHSTANDING the foregoing provisions, Contractor shall be entitled to
make and Creditor shall be entitled to receive: a) payouts as set forth in
Section 2.1(B)(iv)(b) & (c) of the Promissory Note; and b) installments no
greater than the normally scheduled principal and interest amounts as set forth
in the Promissory Note. In the event that Contractor desires to make and
Creditor desires to receive any other prepayment or accelerated payment, the
Contractor and/or the Creditor must provide Surety with 30 days prior written
notice sent by certified mail (“Surety Notice”) of its request to make such a
payment. Surety retains the right to expressly consent to such a payment,
however, if Surety withholds its consent, Surety will provide written notice to
both Contractor and Creditor within 30 days of receipt of the Surety Notice. Any
payment made in violation of this paragraph shall be considered a breach of this
Agreement as described in paragraph 5 and Surety shall be entitled to all
remedies as described herein. Provided, however, that no payments of any kind
may be made while any Loss remains unpaid to the Surety, or should Contractor be
in breach of the General Agreement of Indemnity, this Agreement, or any other
agreement executed in favor of Surety.

 

12.   Any notice given to Surety or Contractor hereunder shall be given in
writing and sent to the respective parties or their designated representative at
the address below:

 

If to Surety:

 

Liberty Mutual Surety

 

If to Creditor:

 

Christopher S. Wallace

 

 

450 Plymouth Road, Suite 400

 

 

 

Second City Capital Corporation

 

 

Plymouth Meeting, PA 19462

 

 

 

1075 West George Street, Suite 2600

 

 

ATTN: Home Office Underwriter

 

 

 

Vancouver, BC, Canada V6E 3C9

 

 

 

 

 

 

 

If to Contractor:

 

Primoris Services Corporation

 

 

 

 

 

 

26000 Commercenter Drive

 

 

 

 

 

 

Lake Forest, CA 92630

 

 

 

 

 

 

ATTN: General Counsel

 

 

 

 

 

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DATED as of this 12th day of November, 2010.

 

WITNESS/ATTEST

 

 

Primoris Services Corporation

 

 

(CORPORATION/PARTNER/PERSON as CONTRACTOR)

 

 

 

 

 

By:

/s/ Brian Pratt

(SEAL)

 

 

 

 

 

Title:

Chief Executive Officer

 

 

 

 

 

Christopher S. Wallace, as Sellers’ Representative

 

 

(CREDITOR)

 

 

 

 

 

By:

/s/ Christopher S. Wallace

(Seal)

 

 

 

 

 

Title:

Sellers’ Representative

 

 

 

 

 

LIBERTY MUTUAL INSURANCE COMPANY

 

 

(SURETY)

 

 

 

 

 

By:

/s/ Brett D. Asmus

(Seal)

 

 

 

Attorney-in-Fact

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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