Exhibit 10.1

 

CREDIT AGREEMENT

 

(LETTER OF CREDIT)

 

This Agreement (the “Agreement”) is made and entered into as of September 23,
2011, by and between BANK OF THE WEST (the “Bank”) and PRIMORIS SERVICES
CORPORATION (the “Borrower”), on the terms and conditions that follow:

 

SECTION

 

1

 

DEFINITIONS

 

1.1           Certain Defined Terms:  Unless elsewhere defined in this
Agreement, the following terms shall have the following meanings (such meanings
to be generally applicable to the singular and plural forms of the terms
defined):

 

1.1.1        “Business Day”: shall mean a day, other than a Saturday or Sunday,
on which commercial banks are open for business in California.

 

1.1.2        “Collateral”: shall mean the property described in Section 3,
together with any other personal or real property in which the Bank may be
granted a lien or security interest to secure payment of the Obligations.

 

1.1.3        “Debt”:  shall mean all liabilities of the Borrower less
Subordinated Debt, if any.

 

1.1.4        “EBITDA”:  shall mean earnings exclusive of extraordinary gains and
before deductions for interest expense, taxes, depreciation and amortization
expense.

 

1.1.5        “Effective Tangible Net Worth”:  shall mean the Borrower’s stated
net worth plus Subordinated Debt but less all intangible assets of the Borrower
(i.e., goodwill, trademarks, patents, copyrights, organization expense, and
similar intangible items including, but not limited to, investments in and all
amounts due from affiliates, officers or employees).

 

1.1.6        “Environmental Claims”: shall mean all claims, however asserted, by
any governmental authority or other person alleging potential liability or
responsibility for violation of any Environmental Law or for Discharge or injury
to the environment or threat to public health, personal injury (including
sickness, disease or death), property damage, natural resources damage, or
otherwise alleging liability or responsibility for damages (punitive or
otherwise), cleanup, removal, remedial or response costs, restitution, civil or
criminal penalties, injunctive relief, or other type of relief, resulting from
or based upon (a) the presence, placement, discharge, emission or release
(including intentional and unintentional, negligent and non-negligent, sudden or
non-sudden, accidental or non-accidental placement, spills, leaks, Discharges,
emissions or releases) of any Hazardous Material at, in, or from property,
whether or not owned by the Borrower, or (b) any other circumstances forming the
basis of any violation, or alleged violation, of any Environmental Law.

 

1.1.7        “Environmental Laws”: shall mean all federal, state or local laws,
statutes, common law duties, rules, regulations, ordinances and codes, together
with all administrative orders, directed duties, requests, licenses,
authorizations and permits of, and agreements with, any governmental
authorities, in each case relating to environmental, health, safety and land use
matters; including but not limited to the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (“CERCLA”), the Clean Air Act, the
Federal Water

 

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Pollution Control Act of 1972, the Solid Waste Disposal Act, the Federal
Resource Conservation and Recovery Act, the Toxic Substances Control Act, the
Emergency Planning and Community Right-to-Know Act, the California Hazardous
Waste Control Law, the California Solid Waste Management, Resource, Recovery and
Recycling Act, the California Water Code and the California Health and Safety
Code.

 

1.1.8        “Environmental Permits”:  shall have the meaning provided in
Section 5.11 hereof.

 

1.1.9        “ERISA”:  shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, including (unless the context otherwise
requires) any rules or regulations promulgated thereunder.

 

1.1.10      “Event of Default”:  shall have the meaning set forth in Section 7.

 

1.1.11      “Expiration Date”:  shall mean August 31, 2012, or the date of
termination of the Bank’s commitment to lend under this Agreement pursuant to
Section 8, whichever shall occur first.

 

1.1.12      “Hazardous Materials”:  shall mean all those substances which are
regulated by, or which may form the basis of liability under, any Environmental
Law, including all substances identified under any Environmental Law as a
pollutant, contaminant, hazardous waste, hazardous constituent, special waste,
hazardous substance, hazardous material, or toxic substance, or petroleum or
petroleum derived substance or waste.

 

1.1.13      “Indebtedness”:  shall mean, with respect to the Borrower, (i) all
indebtedness for borrowed money or for the deferred purchase price of property
or services in respect of which the Borrower is liable, contingently or
otherwise, as obligor, guarantor or otherwise, or in respect of which the
Borrower otherwise assures a creditor against loss and (ii) obligations under
leases which shall have been or should be, in accordance with generally accepted
accounting principles, reported as capital leases in respect of which the
Borrower is liable, contingently or otherwise, or in respect of which the
Borrower otherwise assures a creditor against loss. The word “Indebtedness” also
includes expenses incurred by the Bank to enforce obligations of the Borrower
under this Agreement, together with interest on such amounts as provided in this
Agreement, and all other obligations, debts, and liabilities of the Borrower to
the Bank as well as all claims by the Bank against the Borrower that are now or
hereafter existing, voluntary or involuntary, due or not due, absolute or
contingent, liquidated or unliquidated, whether the Borrower may be liable
individually or jointly with others, whether recovery upon such Indebtedness may
be or hereafter may become barred by any statute of limitations, and whether
such Indebtedness may be or hereafter may become otherwise unenforceable.

 

1.1.14      “Letter of Credit Facility”:  shall mean the credit facility
described as such in Section 2.

 

1.1.15      “Obligations”:  shall mean all amounts owing by the Borrower to the
Bank pursuant to this Agreement including, but not limited to, the unpaid
principal amount of any loans or advances.

 

1.1.16      “Ordinary Course of Business”:  shall mean, with respect to any
transaction involving the Borrower or any of its subsidiaries or affiliates, the
ordinary course of the Borrower’s business, as conducted by the Borrower in
accordance with past practice and undertaken by the Borrower in good faith and
not for the purpose of evading any covenant or restriction in this Agreement or
in any other document, instrument or agreement executed in connection herewith.

 

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1.1.17      “Permitted Liens”:  shall mean: (i) liens and security interests
securing indebtedness owed by the Borrower to the Bank; (ii) liens for taxes,
assessments or similar charges not yet due; (iii) liens of materialmen,
mechanics, warehousemen, or carriers or other like liens arising in the Ordinary
Course of Business and securing obligations which are not yet delinquent;
(iv) purchase money liens or purchase money security interests upon or in any
property acquired or held by the Borrower in the Ordinary Course of Business to
secure Indebtedness outstanding on the date hereof or permitted to be incurred
herein; (v) liens and security interests which, as of the date hereof, have been
disclosed to and approved by the Bank in writing; and (vi) those liens and
security interests which in the aggregate constitute an immaterial and
insignificant monetary amount with respect to the net value of the Borrower’s
assets.

 

1.1.18      “Subordinated Debt”:  shall mean such liabilities of the Borrower
which have been subordinated to those owed to the Bank in a manner acceptable to
the Bank.

 

1.2           Accounting Terms:  All references to financial statements, assets,
liabilities, and similar accounting items not specifically defined herein shall
mean such financial statements or such items prepared or determined in
accordance with generally accepted accounting principles consistently applied
and, except where otherwise specified, all financial data submitted pursuant to
this Agreement shall be prepared in accordance with such principles.

 

1.3           Other Terms:  Other terms not otherwise defined shall have the
meanings attributed to such terms in the Uniform Commercial Code as in effect on
July 1, 2001 and from time to time thereafter.

 

SECTION

 

2

 

CREDIT FACILITIES

 

2.1   LETTER OF CREDIT FACILITY

 

2.1.1        Letter of Credit Facility:  The Bank agrees to issue commercial
and/or standby letters of credit (each a “Letter of Credit”) on behalf of the
Borrower of up to $8,000,000.00.

 

For the purposes hereof, any Letters of Credit issued and outstanding for the
account of the Borrower as of the date hereof shall be deemed to be issued
hereunder.

 

(i)            Upon the Bank’s request, the Borrower shall promptly pay to the
Bank issuance fees and such other fees, commissions, costs and any out-of-pocket
expenses charged or incurred by the Bank with respect to any Letter of Credit.

 

(ii)           The commitment by the Bank to issue Letters of Credit shall,
unless earlier terminated in accordance with the terms of the Agreement,
automatically terminate on the Expiration Date of the Letter of Credit Facility
and no Letter of Credit shall expire on a date which is after the Expiration
Date.

 

(iii)          Each Letter of Credit shall be in form and substance satisfactory
to the Bank and in favor of beneficiaries satisfactory to the Bank, provided
that the Bank may refuse to issue a Letter of Credit due to the nature of the
transaction or its terms or in connection with any transaction where the Bank,
due to the beneficiary or the nationality or residence of the beneficiary, would
be prohibited by any applicable law, regulation or order from issuing such
Letter of Credit.

 

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(iv)          Prior to the issuance of each Letter of Credit, but in no event
later than 10:00 a.m. (California time) on the day such Letter of Credit is to
be issued (which shall be a Business Day), the Borrower shall deliver to the
Bank a duly executed form of the Bank’s standard form of application for
issuance of a Letter of Credit with proper insertions.

 

(v)           The Borrower shall, upon the Bank’s request, promptly pay to and
reimburse the Bank for all costs incurred and payments made by the Bank by
reason of any future assessment, reserve, deposit or similar requirement or any
surcharge, tax or fee imposed upon the Bank or as a result of the Bank’s
compliance with any directive or requirement of any regulatory authority
pertaining or relating to any Letter of Credit.

 

2.2           Late Payment:  In addition to any other rights the Bank may have
hereunder, if any payment of principal or interest or any portion thereof, under
this Agreement is not paid within 15 days of when due, a late payment charge
equal to five percent (5%) of such past due payment may be assessed and shall be
immediately payable.

 

SECTION

 

3

 

COLLATERAL

 

3.1           The Collateral:  To secure payment and performance of all the
Borrower’s Obligations under this Agreement and all other liabilities, loans,
guarantees, covenants and duties owed by the Borrower to the Bank, whether or
not evidenced by this or by any other agreement, absolute or contingent, due or
to become due, now existing or hereafter and howsoever created, the Borrower
hereby grants the Bank a security interest in and to all of the following
property:

 

(i)            Deposit Accounts.  Account No(s). 246-48238 maintained with Bank
of the West and all substitutions thereof, together with all interest accruing
thereunder and therefrom. The Collateral shall be controlled by instructions of
Bank without further consent from Borrower and without regard to any
inconsistent or conflicting instructions given to Bank by Borrower including any
directions made or checks drawn for the disposition of funds.

 

The Bank’s security interest in the Collateral shall be a continuing lien and
shall include the proceeds and products of the Collateral including, but not
limited to, the proceeds of any insurance thereon.

 

Borrower hereby consents to and instructs Bank to file financing statements in
all locations deemed appropriate by the Bank from time to time.

 

The security interest granted to Bank in the Collateral shall not secure or be
deemed to secure any Indebtedness of the Borrower to the Bank which is, at the
time of its creation, subject to the provisions of any state or federal consumer
credit or truth-in-lending disclosure statutes.

 

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SECTION

 

4

 

CONDITIONS PRECEDENT

 

4.1           Conditions Precedent:  The obligation of the Bank to make the
first extension of credit to or on account of the Borrower hereunder is subject
to the conditions precedent that the Bank shall have received before the date of
such first extension of credit all of the following, in form and substance
satisfactory to the Bank:

 

(i)            Authority to Borrow.  Evidence that the execution, delivery and
performance by the Borrower of this Agreement and any document, instrument or
agreement required hereunder have been duly authorized.

 

(ii)           Fees.  Payment of all of the Bank’s out-of-pocket expenses in
connection with the preparation and negotiation of this Agreement.

 

(iii)          Miscellaneous.  Such other evidence as the Bank may request to
establish the consummation of the transaction contemplated hereunder and
compliance with the conditions of this Agreement.

 

4.2           Conditions Precedent to All Extensions of Credit:  The obligation
of the Bank to make each advance or each other extension of credit, as the case
may be, to or on account of the Borrower (including the initial advance or the
first extension of credit) shall be subject to the further conditions precedent
that, on the date of each advance or each extension of credit and after the
making of such advance or extension of credit:

 

(i)            Reporting Requirements.  The Bank shall have received the
documents set forth in Section 6.1.

 

(ii)           Subsequent Approvals.  The Bank shall have received such
supplemental approvals, opinions or documents as the Bank may reasonably
request.

 

(iii)          Representations and Warranties.  The representations contained in
Section 5 and in any other document, instrument or certificate delivered to the
Bank hereunder are true, correct and complete.

 

(iv)          Event of Default.  No event has occurred and is continuing which
constitutes, or with the lapse of time or giving of notice or both, would
constitute an Event of Default.

 

(v)           Collateral.  The security interest in the Collateral has been duly
authorized, created and perfected with first priority and is in full force and
effect.

 

The Borrower’s acceptance of the proceeds of any loan, advance or extension of
credit or the Borrower’s execution of any document or instrument evidencing or
creating any Obligation hereunder shall be deemed to constitute the Borrower’s
representation and warranty that all of the above statements are true and
correct.

 

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SECTION

 

5

 

REPRESENTATIONS AND WARRANTIES

 

The Borrower hereby makes the following representations and warranties to the
Bank, which representations and warranties are continuing:

 

5.1           Status:  The Borrower’s correct legal name is as stated in this
Agreement and the Borrower is a corporation duly organized and validly existing
under the laws of Delaware and with its chief executive office in the state of
California and is properly licensed and is qualified to do business and in good
standing in, and, where necessary to maintain the Borrower’s rights and
privileges, has complied with the fictitious name statute of every jurisdiction
in which the Borrower is doing business.

 

5.2           Authority:  The execution, delivery and performance by the
Borrower of this Agreement and any instrument, document or agreement required
hereunder have been duly authorized and do not and will not: (i) violate any
provision of any law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award presently in effect having application to the
Borrower; (ii) result in a breach of or constitute a default under any material
indenture or loan or credit agreement or other material agreement, lease or
instrument to which the Borrower is a party or by which it or its properties may
be bound or affected; or (iii) require any consent or approval of its
stockholders or violate any provision of its articles of incorporation or
by-laws.

 

5.3           Legal Effect:  This Agreement constitutes, and any instrument,
document or agreement required hereunder when delivered hereunder will
constitute, legal, valid and binding obligations of the Borrower enforceable
against the Borrower in accordance with their respective terms.

 

5.4           Fictitious Trade Styles:  There are no fictitious trade styles,
fictitious trade names, assumed business names or trade names (defined herein as
“Trade Name”) used by the Borrower in connection with its business operations.
The Borrower shall notify the Bank not less than 30 days prior to effecting any
change in the matters described herein or prior to using any other Trade Name at
any future date, indicating the Trade Name and State(s) of its use.

 

5.5           Financial Statements:  All financial statements, information and
other data which may have been or which may hereafter be submitted by the
Borrower to the Bank are true, accurate and correct and have been or will be
prepared in accordance with generally accepted accounting principles
consistently applied and accurately represent the financial condition or, as
applicable, the other information disclosed therein.  Since the most recent
submission of such financial information or data to the Bank, the Borrower
represents and warrants that no material adverse change in the Borrower’s
financial condition or operations has occurred which has not been fully
disclosed to the Bank in writing.

 

5.6           Litigation:  Except as have been disclosed to the Bank in writing,
there are no actions, suits or proceedings pending or, to the knowledge of the
Borrower, threatened against or affecting the Borrower or the Borrower’s
properties before any court or administrative agency which, if determined
adversely to the Borrower, would have a material adverse effect on the
Borrower’s financial condition or operations or on the Collateral.

 

5.7           Title to Assets:  The Borrower has good and marketable title to
all of its assets (including, but not limited to, the Collateral) and the same
are not subject to any security interest, encumbrance, lien or claim of any
third person except for Permitted Liens.

 

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5.8           ERISA:  If the Borrower has a pension, profit sharing or
retirement plan subject to ERISA, such plan has been and will continue to be
funded in accordance with its terms and otherwise complies with and continues to
comply with the requirements of ERISA.

 

5.9           Taxes:  The Borrower has filed all tax returns required to be
filed and paid all taxes shown thereon to be due, including interest and
penalties, other than such taxes which are currently payable without penalty or
interest or those which are being duly contested in good faith.

 

5.10         Margin Stock.  The proceeds of any loan or advance hereunder will
not be used to purchase or carry margin stock as such term is defined under
Regulation U of the Board of Governors of the Federal Reserve System.

 

5.11         Environmental Compliance.  The operations of the Borrower comply,
and during the term of this Agreement will at all times comply, in all respects
with all Environmental Laws; the Borrower has obtained all licenses, permits,
authorizations and registrations required under any Environmental Law
(“Environmental Permits”) and necessary for its ordinary course operations, all
such Environmental Permits are in good standing, and the Borrower is in
compliance with all material terms and conditions of such Environmental Permits;
neither the Borrower nor any of its present property or operations is subject to
any outstanding written order from or agreement with any governmental authority
nor subject to any judicial or docketed administrative proceeding, respecting
any Environmental Law, Environmental Claim or Hazardous Material; there are no
Hazardous Materials or other conditions or circumstances existing, or arising
from operations prior to the date of this Agreement, with respect to any
property of the Borrower that would reasonably be expected to give rise to
Environmental Claims; provided, however, that with respect to property leased
from an unrelated third party, the foregoing representation is made to the best
knowledge of the Borrower.  In addition, (i) the Borrower does not have any
underground storage tanks that are not properly registered or permitted under
applicable Environmental Laws, or that are leaking or disposing of Hazardous
Materials off-site, and (ii) the Borrower has notified all of their employees of
the existence, if any, of any health hazard arising from the conditions of their
employment and have met all notification requirements under Title III of CERCLA
and all other Environmental Laws.

 

SECTION

 

6

 

COVENANTS

 

The Borrower covenants and agrees that, during the term of this Agreement, and
so long thereafter as the Borrower is indebted to the Bank under this Agreement,
the Borrower will, unless the Bank shall otherwise consent in writing:

 

6.1           Reporting and Certification Requirements:  Deliver or cause to be
delivered to the Bank in form and detail satisfactory to the Bank:

 

(i)            Not later than 120 days after the end of each of the Borrower’s
fiscal years, a copy of the annual audited financial report of the Borrower for
such year, prepared by a firm of certified public accountants acceptable to Bank
and accompanied by an unqualified opinion of such firm.

 

(ii)           Not later than 45 days after the end of each quarter, a copy of
the Borrower’s financial statement as of the end of such period.

 

(iii)          Concurrently with the delivery of the financial reports required
hereunder, a compliance certificate stating that the Borrower is in compliance
with all covenants contained herein and that no Event of Default or potential
Event of Default has

 

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occurred or is continuing, and certified to by the chief financial officer of
the Borrower.

 

(iv)          Promptly upon the Bank’s request, such other information
pertaining to the Borrower, the Collateral or any guarantor hereunder as the
Bank may reasonably request.

 

6.2           Financial Condition:  The Borrower promises and agrees, during the
term of this Agreement and until payment in full of all of the Borrower’s
Obligations, the Borrower will maintain at all times:

 

(i)            A minimum Effective Tangible Net Worth of at least
$90,000,000.00, to be measured on a quarterly basis.

 

(ii)           A ratio of not less than 1.25 to 1 where the numerator is EBITDA,
minus Cash Paid Taxes and Cash Paid Dividends, and the denominator is Cash Paid
Interest Expense, plus Scheduled Principal Payments on Senior Debt and
Subordinated Debt, measured on a quarterly basis.

 

6.3           Preservation of Existence; Compliance with Applicable Laws: 
Maintain and preserve its existence and all rights and privileges now enjoyed;
and conduct its business and operations in accordance with all applicable laws,
rules and regulations.

 

6.4           Merge or Consolidate:  Not liquidate or dissolve, merge or
consolidate with or into, or acquire any other business organization.

 

6.5           Maintenance of Insurance: Keep and maintain the Collateral insured
for not less than its full replacement value against all risks of loss and
damage and maintain insurance in such amounts and covering such risks as is
usually carried by companies engaged in similar businesses and owning similar
properties in the same general areas in which the Borrower operates and maintain
such other insurance and coverages as may be required by the Bank.  All such
insurance shall be in form and amount and with companies satisfactory to the
Bank.

 

With respect to insurance covering properties in which the Bank maintains a
security interest or lien, such insurance shall name the Bank as loss payee
pursuant to a loss payable endorsement satisfactory to the Bank and shall not be
altered or canceled except upon 10 days’ prior written notice to the Bank.  Upon
the Bank’s request, the Borrower shall furnish the Bank with the original policy
or binder of all such insurance.

 

6.6           Maintenance of Collateral and Other Properties:  Except for
Permitted Liens, keep and maintain the Collateral free and clear of all levies,
liens, encumbrances and security interests (including, but not limited to, any
lien of attachment, judgment or execution) and defend the Collateral against any
such levy, lien, encumbrance or security interest; comply with all laws,
statutes and regulations pertaining to the Collateral and its use and operation;
execute, file and record such statements, notices and agreements, take such
actions and obtain such certificates and other documents as necessary to
perfect, evidence and continue the Bank’s security interest in the Collateral
and the priority thereof; maintain accurate and complete records of the
Collateral which show all sales, claims and allowances; and properly care for,
house, store and maintain the Collateral in good condition, free of misuse,
abuse and deterioration, other than normal wear and tear.  The Borrower shall
also maintain and preserve all its properties in good working order and
condition in accordance with the general practice of other businesses of similar
character and size, ordinary wear and tear excepted.

 

6.7           Payment of Obligations and Taxes:  Make timely payment of all
assessments and taxes and all of its liabilities and obligations including, but
not limited to, trade payables, unless the same are being contested in good
faith by appropriate proceedings with the appropriate court or regulatory
agency.  For purposes hereof, the Borrower’s issuance of a check, draft or
similar instrument without delivery to the intended payee shall not constitute
payment.

 

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6.8           Depository Relationships:  Maintain its primary business
depository relationship with Bank, including general, operating and
administrative deposit accounts and cash management services.

 

6.9           Inspection Rights and Accounting Records:  The Borrower will
maintain adequate books and records in accordance with generally accepted
accounting principles consistently applied and in a manner otherwise acceptable
to Bank, and, at any reasonable time and from time to time, permit the Bank or
any representative thereof to examine and make copies of the records and visit
the properties of the Borrower and discuss the business and operations of the
Borrower with any employee or representative thereof.  If the Borrower shall
maintain any records (including, but not limited to, computer generated records
or computer programs for the generation of such records) in the possession of a
third party, the Borrower hereby agrees to notify such third party to permit the
Bank free access to such records at all reasonable times and to provide the Bank
with copies of any records which it may request, all at the Borrower’s expense,
the amount of which shall be payable immediately upon demand.

 

6.10         Transfer Assets: Not, after the date hereof, sell, contract for
sale, convey, transfer, assign, lease or sublet, any of its assets (including,
but not limited to, the Collateral) except in the Ordinary Course of Business
and, then, only for full, fair and reasonable consideration.

 

6.11         Change in Nature of Business:  Not make any material change in its
financial structure or the nature of its business as existing or conducted as of
the date hereof.

 

6.12         Maintenance of Jurisdiction:  Borrower shall maintain the
jurisdiction of its organization and chief executive office, or if applicable,
principal residence, as set forth herein and not change such jurisdiction name
or form of organization without 30 days prior written notice to Bank.

 

6.13         Compensation of Employees:  Compensate its employees for services
rendered at an hourly rate at least equal to the minimum hourly rate prescribed
by any applicable federal or state law or regulation.

 

6.14         Notice:  Give the Bank prompt written notice of any and all
(i) Events of Default; (ii) litigation, arbitration or administrative
proceedings to which the Borrower is a party or which affects the Collateral;
(iii) other matters which have resulted in, or might result in a material
adverse change in the Collateral or the financial condition or business
operations of the Borrower, and (iv) any enforcement, cleanup, removal or other
governmental or regulatory actions instituted, completed or threatened against
the Borrower or any of its properties.

 

6.15         Environmental Compliance:  The Borrower shall conduct its
operations and keep and maintain all of its property in compliance with all
Environmental Laws and, upon the written request of the Bank, the Borrower shall
submit to the Bank, at the Borrower’s sole cost and expense, at reasonable
intervals, a report providing the status of any environmental, health or safety
compliance, hazard or liability.

 

6.16         Loan to Collateral Value:  So long as there are any outstanding
Indebtedness under this Agreement, the ratio of outstanding Indebtedness to the
value of the Collateral at its then current market value (as determined by the
Bank) shall not be greater than 100% (the “Loan-to-Collateral Ratio”).  To the
extent that such Loan-to-Collateral Ratio is not maintained, the Borrower shall
promptly, upon the Bank’s request:  (i) assign and pledge to the Bank such
additional assets of a character satisfactory to the Bank and having a market
value sufficient to reinstate and maintain such Loan-to-Collateral Ratio or
(ii) make a payment to the Bank in an amount sufficient to reduce the
outstanding principal balance of the Indebtedness under this Agreement so that
the Loan-to-Collateral Ratio is reinstated and maintained.

 

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SECTION

 

7

 

EVENTS OF DEFAULT

 

Any one or more of the following described events shall constitute an event of
default (an “Event of Default”) under this Agreement:

 

7.1           Non-Payment:  Any Borrower shall fail to pay the principal amount
of any Obligations when due or interest on the Obligations within 5 days of when
due.

 

7.2           Performance Under This Agreement:  The Borrower shall fail in any
material respect to perform or observe any term, covenant or agreement contained
in this Agreement or in any document, instrument or agreement relating to this
Agreement or any other document or agreement executed by the Borrower with or in
favor of Bank and any such failure shall continue unremedied for more than 30
days after the occurrence thereof.

 

7.3           Representations and Warranties; Financial Statements:  Any
representation or warranty made by the Borrower under or in connection with this
Agreement or any financial statement given by the Borrower or any guarantor
shall prove to have been incorrect in any material respect when made or given or
when deemed to have been made or given.

 

7.4           Other Agreements:  If there is a default under any agreement to
which Borrower is a party with Bank or with a third party or parties resulting
in a right by the Bank or by such third party or parties, whether or not
exercised, to accelerate the maturity of any Indebtedness.

 

7.5           Insolvency:  The Borrower or any guarantor shall:  (i) become
insolvent or be unable to pay its debts as they mature; (ii) make an assignment
for the benefit of creditors or to an agent authorized to liquidate any
substantial amount of its properties and assets; (iii) file a voluntary petition
in bankruptcy or seeking reorganization or to effect a plan or other arrangement
with creditors; (iv) file an answer admitting the material allegations of an
involuntary petition relating to bankruptcy or reorganization or join in any
such petition; (v) become or be adjudicated a bankrupt; (vi) apply for or
consent to the appointment of, or consent that an order be made, appointing any
receiver, custodian or trustee, for itself or any of its properties, assets or
businesses; or (vii) in an involuntary proceeding, any receiver, custodian or
trustee shall have been appointed for all or substantial part of the Borrower’s
or guarantor’s properties, assets or businesses and shall not be discharged
within 30 days after the date of such appointment.

 

7.6           Execution:  Any writ of execution or attachment or any judgment
lien shall be issued against any property of the Borrower and shall not be
discharged or bonded against or released within 30 days after the issuance or
attachment of such writ or lien.

 

7.7           Suspension:  The Borrower shall voluntarily suspend the
transaction of business or allow to be suspended, terminated, revoked or expired
any permit, license or approval of any governmental body necessary to conduct
the Borrower’s business as now conducted.

 

7.8           Material Adverse Change:  If there occurs a material adverse
change in the Borrower’s business or financial condition, or if there is a
material impairment of the prospect of repayment of any portion of the
Obligations or there is a material impairment of the value or priority of the
Bank’s security interest in the Collateral, or if a Borrower who is a natural
person shall die.

 

7.9           Change in Ownership:  There shall occur a sale, transfer,
disposition or encumbrance (whether voluntary or involuntary), or an agreement
shall be entered into to do so, with respect to more than 10% of the issued and
outstanding capital stock of the Borrower.

 

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7.10         Impairment of Collateral.  There shall occur any injury or damage
to all or any part of the Collateral or all or any part of the Collateral shall
be lost, stolen or destroyed.

 

SECTION

 

8

 

REMEDIES ON DEFAULT

 

Upon the occurrence of any Event of Default, the Bank may, at its sole and
absolute election, without demand and only upon such notice as may be required
by law:

 

8.1           Acceleration:  Declare any or all of the Borrower’s indebtedness
owing to the Bank, whether under this Agreement or any other document,
instrument or agreement, immediately due and payable, whether or not otherwise
due and payable.

 

8.2           Cease Extending Credit:  Cease extending credit to or for the
account of the Borrower under this Agreement or under any other agreement now
existing or hereafter entered into between the Borrower and the Bank.

 

8.3           Termination:  Terminate this Agreement as to any future obligation
of the Bank without affecting the Borrower’s obligations to the Bank or the
Bank’s rights and remedies under this Agreement or under any other document,
instrument or agreement.

 

8.4           Letters of Credit:  Require the Borrower to pay immediately to the
Bank, for application against drawings under any outstanding Letters of Credit,
the outstanding principal amount of any such Letters of Credit which have not
expired.  Any portion of the amount so paid to the Bank which is not applied to
satisfy draws under any such Letters of Credit or any other obligations of the
Borrower to the Bank shall be repaid to the Borrower without interest.

 

8.5           Protection of Security Interest:  Make such payments and do such
acts as the Bank, in its sole judgment, considers necessary and reasonable to
protect its security interest or lien in the Collateral. The Borrower hereby
irrevocably authorizes the Bank to pay, purchase, contest or compromise any
encumbrance, lien or claim which the Bank, in its sole judgment, deems to be
prior or superior to its security interest.  Further, the Borrower hereby agrees
to pay to the Bank, upon demand therefor, all expenses and expenditures
(including attorneys’ fees) incurred in connection with the foregoing.

 

8.6           Foreclosure:  Enforce any security interest or lien given or
provided for under this Agreement or under any security agreement, mortgage,
deed of trust or other document, in such manner and such order, as to all or any
part of the properties subject to such security interest or lien, as the Bank,
in its sole judgment, deems to be necessary or appropriate and the Borrower
hereby waives any and all rights, obligations or defenses now or hereafter
established by law relating to the foregoing.  In the enforcement of its
security interest or lien, the Bank is authorized to enter upon the premises
where any Collateral is located and take possession of the Collateral or any
part thereof, together with the Borrower’s records pertaining thereto, or the
Bank may require the Borrower to assemble the Collateral and records pertaining
thereto and make such Collateral and records available to the Bank at a place
designated by the Bank.  The Bank may sell the Collateral or any portions
thereof, together with all additions, accessions and accessories thereto, giving
only such notices and following only such procedures as are required by law, at
either a public or private sale, or both, with or without having the Collateral
present at the time of the sale, which sale shall be on such terms and
conditions and conducted in such manner as the Bank determines in its sole
judgment to be commercially reasonable.  The Collateral may be disposed of in
its then condition without any preparation or processing.  In connection with
any disposition of the Collateral, the Bank may disclaim any warranty relating
to title, possession or quiet enjoyment.  Any deficiency which

 

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exists after the disposition or liquidation of the Collateral shall be a
continuing liability of the Borrower to the Bank and shall be immediately paid
by the Borrower to the Bank.  Further, the Borrower hereby agrees to pay to the
Bank, upon demand therefore, all expenses and expenditures (including attorney’s
fees) incurred in connection with the foregoing.

 

8.7           Non-Exclusivity of Remedies:  Exercise one or more of the Bank’s
rights set forth herein or seek such other rights or pursue such other remedies
as may be provided by law, in equity or in any other agreement now existing or
hereafter entered into between the Borrower and the Bank, or otherwise.

 

8.8           Application of Proceeds:  All amounts received by the Bank as
proceeds from the disposition or liquidation of the Collateral shall be applied
to the Borrowers’ indebtedness to the Bank as follows:  first, to the costs and
expenses of collection, enforcement, protection and preservation of the Bank’s
lien in the Collateral, including court costs and reasonable attorneys’ fees at
trial and on appeal, whether or not suit is commenced by the Bank; next, to
those costs and expenses incurred by the Bank in protecting, preserving,
enforcing, collecting, liquidating, selling or disposing of the Collateral;
next, to the payment of accrued and unpaid interest on all of the Obligations;
next, to the payment of the outstanding principal balance of the Obligations;
and last, to the payment of any other indebtedness owed by the Borrowers to the
Bank. Any excess Collateral or excess proceeds existing after the disposition or
liquidation of the Collateral will be returned or paid by the Bank to the
Borrowers.

 

If any non-cash proceeds are received in connection with any sale of Collateral,
the Bank shall not apply such non-cash proceeds to the Obligations unless and
until such proceeds are converted to cash; provided, however, that if such
non-cash proceeds are not expected on the date of receipt thereof to be
converted to cash within one year after such date, the Bank shall use
commercially reasonable efforts to convert such non-cash proceeds to cash within
such one year period.

 

SECTION

 

9

 

MISCELLANEOUS

 

9.1           Default Interest Rate:  If an Event of Default, or an event which,
with notice or passage of time could become an Event of Default, has occurred or
is continuing, the Borrower shall pay to the Bank interest on any Obligations
payable under this Agreement at a rate which is 5% in excess of a variable rate
per annum equivalent to an index for a variable interest rate which is quoted,
published or announced from time to time by the Bank as its Prime Rate and as to
which loans may be made by the Bank at, below or above such Prime Rate (the
“Prime Rate”).  Interest shall be adjusted concurrently with any change in the
Prime Rate.

 

9.2           Right of Setoff.  To the extent permitted by applicable law, Bank
reserves a right of setoff in all Borrower’s accounts with Bank (whether
checking, savings, or some other account).  This includes all accounts Borrower
holds jointly with someone else and all accounts Borrower may open in the
future.  Borrower authorizes Bank, to the extent permitted by applicable law, to
charge or setoff all sums owing on the debt against any and all such accounts,
and, at Bank’s option, to administratively freeze all such accounts to allow
Bank to protect Bank’s charge and setoff rights provided in this paragraph.

 

9.2           Reliance and Further Assurances:  Each warranty, representation,
covenant, obligation and agreement contained in this Agreement shall be
conclusively presumed to have been relied upon by the Bank regardless of any
investigation made or information possessed by the Bank and shall be cumulative
and in addition to any other warranties, representations, covenants and
agreements which the Borrower now or hereafter shall give, or cause to be given,
to the Bank.  Borrower agrees to execute all documents and instruments and to
perform such acts as the Bank may reasonably deem necessary to confirm and
secure to the Bank all rights and remedies conferred upon the Bank by this
agreement and all other documents related thereto.

 

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9.3           Attorneys’ Fees:  Borrower shall pay to the Bank all costs and
expenses, including but not limited to reasonable attorneys fees, incurred by
Bank in connection with the administration, enforcement, including any
bankruptcy, appeal or the enforcement of any judgment or any refinancing or
restructuring of this Agreement or any document, instrument or agreement
executed with respect to, evidencing or securing the indebtedness hereunder.

 

9.4           Notices:  All notices, payments, requests, information and demands
which either party hereto may desire, or may be required to give or make to the
other party hereto, shall be given or made to such party by hand delivery or
through deposit in the United States mail, postage prepaid, or by facsimile
delivery, or to such other address as may be specified from time to time in
writing by either party to the other.

 

To the Borrower:

 

To the Bank:

 

 

 

PRIMORIS SERVICES CORPORATION

 

BANK OF THE WEST

26000 Commercentre Drive

 

Sherman Oaks Office (CBC)

Lake Forest, CA 92630

 

15165 Ventura Boulevard

Attn:

Alfons Theeuwes

 

Sherman Oaks, CA 91403

 

SVP Finance & Accounting

 

Attn:

David Alterman

 

 

 

Vice President

 

 

 

 

 

 

FAX:

(818) 728-3611

 

9.5           Waiver:  Neither the failure nor delay by the Bank in exercising
any right hereunder or under any document, instrument or agreement mentioned
herein shall operate as a waiver thereof, nor shall any single or partial
exercise of any right hereunder or under any other document, instrument or
agreement mentioned herein preclude other or further exercise thereof or the
exercise of any other right; nor shall any waiver of any right or default
hereunder, or under any other document, instrument or agreement mentioned
herein, constitute a waiver of any other right or default or constitute a waiver
of any other default of the same or any other term or provision.

 

9.6           Conflicting Provisions:  To the extent the provisions contained in
this Agreement are inconsistent with those contained in any other document,
instrument or agreement executed pursuant hereto, the terms and provisions
contained herein shall control.  Otherwise, such provisions shall be considered
cumulative.

 

9.7           Binding Effect; Assignment:  This Agreement shall be binding upon
and inure to the benefit of the Borrower and the Bank and their respective
successors and assigns, except that the Borrower shall not have the right to
assign its rights hereunder or any interest herein without the prior written
consent of the Bank.  The Bank may sell, assign or grant participation in all or
any portion of its rights and benefits hereunder.  The Borrower agrees that, in
connection with any such sale, grant or assignment, the Bank may deliver to the
prospective buyer, participant or assignee financial statements and other
relevant information relating to the Borrower and any guarantor.

 

9.8           Jurisdiction:  This Agreement, any notes issued hereunder, the
rights of the parties hereunder to and concerning the Collateral, and any
documents, instruments or agreements mentioned or referred to herein shall be
governed by and construed according to the laws of the State of California
without regard to conflict of law principles, to the jurisdiction of whose
courts the parties hereby submit.

 

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9.9           Waiver Of Jury Trial.  THE BORROWER AND BANK ACKNOWLEDGE THAT THE
RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL RIGHT, AND THAT IT MAY BE WAIVED
UNDER CERTAIN CIRCUMSTANCES.  TO THE EXTENT PERMITTED BY LAW EACH PARTY, AFTER
CONSULTING (OR HAVING THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF ITS CHOICE,
WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION RELATED TO THIS
AGREEMENT OR ANY OTHER DOCUMENT, INSTRUMENT OR TRANSACTION BETWEEN THE PARTIES.

 

9.10         Judicial Reference Provision.  In the event the above Jury Trial
Waiver is unenforceable, the parties elect to proceed under this Judicial
Reference Provision.  With the exception of the items specified below, any
controversy, dispute or claim between the parties relating to this Agreement or
any other document, instrument or transaction between the parties (each, a
Claim), will be resolved by a reference proceeding in California pursuant to
Sections 638 et seq. of the California Code of Civil Procedure, or their
successor sections, which shall constitute the exclusive remedy for the
resolution of any Claim, including whether the Claim is subject to reference. 
Venue for the reference will be the Superior Court in the County where real
property involved in the action, if any, is located, or in a County where venue
is otherwise appropriate under law (the Court). The following matters shall not
be subject to reference: (i) nonjudicial foreclosure of any security interests
in real or personal property, (ii) exercise of self-help remedies (including
without limitation set-off), (iii) appointment of a receiver, and (iv)
temporary, provisional or ancillary remedies (including without limitation writs
of attachment, writs of possession, temporary restraining orders or preliminary
injunctions). The exercise of, or opposition to, any of the above does not waive
the right to a reference hereunder.

 

The referee shall be selected by agreement of the parties. If the parties do not
agree, upon request of any party a referee shall be selected by the Presiding
Judge of the Court.  The referee shall determine all issues in accordance with
existing case law and statutory law of the State of California, including
without limitation the rules of evidence applicable to proceedings at law. The
referee is empowered to enter equitable and legal relief, and rule on any motion
which would be authorized in a court proceeding, including without limitation
motions for summary judgment or summary adjudication. The referee shall issue a
decision, and pursuant to CCP §644 the referee’s decision shall be entered by
the Court as a judgment or order in the same manner as if tried by the Court.
The final judgment or order from any decision or order entered by the referee
shall be fully appealable as provided by law. The parties reserve the right to
findings of fact, conclusions of law, a written statement of decision, and the
right to move for a new trial or a different judgment, which new trial if
granted, will be a reference hereunder.  AFTER CONSULTING (OR HAVING THE
OPPORTUNITY TO CONSULT) WITH COUNSEL OF ITS CHOICE, EACH PARTY AGREES THAT ALL
CLAIMS RESOLVED UNDER THIS REFERENCE PROVISION WILL BE DECIDED BY A REFEREE AND
NOT A JURY.

 

9.11         Counterparts:  This Agreement may be executed in any number of
counterparts and all such counterparts taken together shall be deemed to
constitute one and the same instrument.

 

9.12         Headings:  The headings herein set forth are solely for the purpose
of identification and have no legal significance.

 

9.13         Entire Agreement and Amendments:  This Agreement and all documents,
instruments and agreements mentioned herein constitute the entire and complete
understanding of the parties with respect to the transactions contemplated
hereunder.  All previous conversations, memoranda and writings between the
parties pertaining to the transactions contemplated hereunder not incorporated
or referenced in this Agreement or in such documents, instruments and agreements
are superseded hereby. This Agreement may be amended only by an instrument in
writing signed by the Borrower and the Bank.

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first hereinabove written.

 

 

BANK:

 

BORROWER:

 

 

 

BANK OF THE WEST

 

PRIMORIS SERVICES CORPORATION

 

 

 

BY:

/s/ David Alterman

 

BY:

/s/ Peter J. Moerbeek

NAME: David Alterman, Vice President

 

NAME: Peter J. Moerbeek, EVP/CFO

 

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