Exhibit 10.1


 


THIS
NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.  THIS NOTE AND THE COMMON SHARES ISSUABLE UPON
CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID
ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER, THAT SUCH
REGISTRATION IS NOT REQUIRED.


 


THE
INDEBTEDNESS EVIDENCED BY THIS NOTE IS SUBORDINATED TO ANY AND ALL INDEBTEDNESS
OF THE ISSUER TO THE PRIVATEBANK AND TRUST COMPANY OR ITS SUCCESSORS AND
ASSIGNS (“THE PRIVATEBANK”) IN THE MANNER AND TO THE EXTENT SET FORTH IN THAT
CERTAIN SUBORDINATION AGREEMENT BETWEEN THE HOLDERS AND THE PRIVATEBANK, DATED NOVEMBER
12, 2010, TO WHICH REFERENCE IS HEREBY MADE FOR A MORE FULL STATEMENT
THEREOF.  THE HOLDER HAS AGREED THEREBY
NOT TO SELL, ASSIGN, TRANSFER, PLEDGE OR HYPOTHECATE THIS NOTE WITHOUT THE
PRIVATEBANK’S WRITTEN CONSENT.


 


CONVERTIBLE PROMISSORY NOTE


 


	
  $16,711,967

  	
   

  	
  November 12, 2010

  
	
   

  	
   

  	
  Lake Forest, California

  



 


FOR
VALUE RECEIVED, PRIMORIS SERVICES CORPORATION, a Delaware corporation (“Issuer”), promises to pay to the order of
each of the individuals set forth on Exhibit A hereto (each a, “Holder” and collectively, the “Holders”), the specific principal amounts next to each such
Holder’s name as set forth on Exhibit A hereto with an aggregate
principal sum of Sixteen Million Seven Hundred Eleven Thousand Nine Hundred
Sixty-Seven Dollars ($16,711,967), together with interest as computed below.


 


This
Note is issued pursuant to the Agreement and Plan of Merger of even date
herewith (as amended, modified or supplemented, the “Merger Agreement”) by and between
Issuer, the Holders and Rockford Holdings Corporation (“Rockford”).


 


The
following is a statement of the rights of each Holder and the conditions to
which this Note is subject, and to which each Holder, by the acceptance of this
Note, agrees:


 


1.             Certain Definitions.  The following
terms, when used in this Note, shall have the following meanings.  Any of these terms may, unless the context
otherwise requires, be used in the singular or plural depending on the
reference.  Capitalized terms used
but not otherwise defined herein shall have the meanings ascribed to them in
the Merger Agreement.


 


“Affiliate” has the meaning
set forth in Rule 12b-2 of the regulations promulgated under the
Securities Exchange Act of 1934, as amended (“Exchange Act”).


 

















 


“Applicable Interest Rate” means the rate
per annum equal to:


 


a.             five percent
(5%) during the period beginning on the Issuance Date and ending on the First
Period Termination Date;


 


b.             seven percent
(7%) during the period beginning on the First Period Termination Date and
ending on the date twenty-four (24) months after the Issuance Date; and


 


c.             eight percent
(8%) thereafter.


 


“Common Stock” means Issuer’s common stock, $.0001 par value
per share.


 


“Event of Default” shall have the meaning
set forth in Section 5.


 


“First Period Termination Date” shall mean that date which is
twelve (12) months after the Issuance Date.


 


“Holder” means the Persons specified in the
introductory paragraph of this Note or any Person who shall at the time be the
registered holder of this Note.


 


“Holders’ Representative”
means Christopher S. Wallace, or any individual appointed as a successor
Holders’ Representative pursuant to Section 7 hereof.


 


“Issuance Date” means [November 1],
2010.


 


“Issuer” includes Primoris Services
Corporation, a Delaware corporation, and any Person which shall succeed to or
assume the obligations of Issuer under this Note, provided, however, that
Issuer shall not be released hereunder except pursuant to a written release
executed by Holders’ Representative or by payment in full of all the Obligations.


 


“James Note” means that promissory note in the original
principal amount of Fifty-Three Million Five Hundred Thousand Dollars
($53,500,000.00) dated December 18, 2009, issued to the Holders listed in Exhibit A
to said promissory note.


 


“Loan A” means that Nine Million Six Hundred Sixty-Nine
Thousand One Hundred Dollars ($9,669,100) portion of the Note that is subject
to certain payments of principal as more fully outlined in Section 2.1(A) below.


 


“Loan B” means that Seven Million Forty-Two Thousand Eight
Hundred Sixty-Seven Dollars ($7,042,867) portion of the Note that is subject to
certain payments of principal and certain rights of conversion into Issuer
common stock as more fully outlined in Sections 2.1(B) and (C) below.


 


“Maturity Date” means October 31, 2013.


 


“Merger Agreement” shall have the meaning
set forth in the second introductory paragraph of this Note.


 


2

















 


“Net Equity” means the amount of cash proceeds received by
Issuer in connection with the offering of any capital equity of Issuer or any
of its Affiliates minus any expenses incurred in connection with such
offering, including but not limited to attorneys’ fees, underwriters’ fees and
accountants’ fees.


 


“Note” means this Convertible Promissory
Note.


 


“Obligations” means and includes all loans,
advances, debts, liabilities and obligations, howsoever arising, owed by Issuer
to the Holders of every kind and description (whether or not evidenced by any
note or instrument and whether or not for the payment of money), now existing
or hereafter arising under or pursuant to the terms of this Note, including,
all interest, fees, charges, expenses, attorneys’ fees and costs and
accountants’ fees and costs chargeable to and payable by Issuer hereunder.


 


“Person” means and includes an individual,
an individual or entity serving in the capacity as a trustee of a trust or the
trust itself, a partnership, a corporation (including a business trust), a
joint stock company, a limited liability company, an unincorporated
association, a joint venture or other entity or a governmental authority.


 


“Qualified Debt” means the amount of cash proceeds received
by Issuer or any of its Affiliates in connection with the incurrence of any
indebtedness except for indebtedness under a bank line of credit (provided that
with respect to indebtedness under a line of credit to finance the acquisition
of a business whatever the structure, this exception shall be limited to an
outstanding balance of $10,000,000 in the aggregate at any time) or
indebtedness incurred to finance operating expenses, equipment and capital
expenditures (but specifically excluding any capital expenditures associated
with the acquisition of a business whatever the structure) incurred by Issuer or
any of its Affiliates in the ordinary course of business.


 


“Subordination Agreements” means
the subordination agreements with The PrivateBank and Trust Company, Liberty
Mutual Insurance Company, and the holders of the James Note subordinating, in
accordance with their terms, the Note to Issuer’s senior lender, bonding agency
and the holders of the James Note all as attached hereto as Exhibit B.


 


2.             Payments of Principal and
Interest; Default Interest Rate; Late Fees.


 


2.1           Payments of Principal and
Interest.  Beginning
on the Issuance Date, the outstanding principal balance of this Note shall bear
interest at the Applicable Interest Rate and shall be computed on the basis of
a 365-day year and the actual number of days elapsed.


 


2.1(A)         Repayment of Loan A.


 


(i)            All accrued and unpaid
interest on the unpaid principal balance of Loan A shall be payable monthly in
arrears on the first (1st) day of each
month (each, a “Payment Date”) commencing December 1, 2010 (the “Initial
Payment Date”).


 


3

















 


(ii)           In addition to the interest
payments described above, Issuer shall make monthly principal payments on
Loan A in the amount of Two Hundred Sixty-Eight Thousand Five Hundred
Eighty-Six Dollars ($268,586) commencing on the Initial Payment Date and
continuing on each Payment Date thereafter until Loan A is paid in full.


 


(iii)          Unless sooner paid, all
amounts outstanding under Loan A shall be due and payable in full on the
Maturity Date.


 


(iv)          Issuer shall prepay Loan A
in an amount equal to (i) Fifteen percent (15%) of Net Equity raised in
excess of Ten Million Dollars ($10,000,000), if any, plus
(ii) thirty-three percent (33%) of Qualified Debt raised, if any.


 


(v)           Any prepayment of Loan A,
whether required or discretionary, shall be applied first to expenses due the
Holders including without limitation late fees, second to accrued interest due,
and third to principal applied in inverse order of when such principal is
scheduled to be paid.


 


(vi)          Any prepayment required by Section 2.1(A)(iv) above
shall be due within ten (10) business days of the receipt of such cash
proceeds by Issuer.


 


2.1(B)          Repayment of Loan B.


 


(i)            All accrued and unpaid
interest on the unpaid principal balance of Loan B shall be payable monthly in
arrears on each Payment Date commencing with the Initial Payment Date.


 


(ii)           In addition to the interest
payments described above, Issuer shall make monthly principal payments on
Loan B in the amount of One Hundred Sixty-Six Thousand Six Hundred Sixty-Seven
Dollars ($166,667) commencing on the Initial Payment Date and continuing on
each Payment Date thereafter until Loan B is paid in full; provided, however,
subsequent to the final payment being made on the James Note, Issuer shall
increase monthly principal payments on Loan B to Two Hundred Fifty Thousand
Dollars ($250,000) per month beginning the first calendar month after the James
Note has been paid off in full.


 


(iii)          Unless sooner paid, all
amounts outstanding under Loan B shall be due and payable in full on the
Maturity Date.


 


(iv)          Issuer shall prepay Loan B
as follows:


 


(a)           in an amount equal to ten
percent (10%) of Net Equity raised in excess of Ten Million Dollars
($10,000,000), if any;


 


4

















 


(b)           in an amount equal to
$1,000,000 on April 5, 2011 if Rockford has achieved its Target EBITDA for
the 2010 Earnout Period as defined in the Merger Agreement; and


 


(c)           in an amount equal to
$1,000,000 on April 5, 2012 if Rockford has achieved its Target EBITDA for
the 2011 Earnout Period as defined in the Merger Agreement.


 


(v)           Any prepayment of Loan B,
whether required or discretionary, shall be applied first to expenses due the
Holders including without limitation any late fees, second to accrued interest
due, and third to principal applied in inverse order of when such principal is
scheduled to be paid.


 


(vi)          Any prepayment required by Section 2.1(B)(iv)(a) above
shall be due within fifteen (15) days of the receipt of such cash proceeds by
Issuer.  Any prepayment required by
either Sections 2.1B(iv)(b) or (c) shall be due within fifteen (15)
days of a final determination of Target EBITDA for such Earnout Period as
required by Section 2.8 of the Merger Agreement.


 


2.1(C)          Optional Conversion of Loan B.


 


(i)            Subject to the terms of this
Section 2.1(C), any Holder shall have the right (“Conversion
Right”), but not the obligation, at any time after the First Period
Termination Date, to individually convert all (but not less than all) of its
proportionate outstanding principal balance of Loan B into fully paid and
nonassessable shares of Common Stock at the conversion price set forth in Section 2.1(C)(ii) (the
“Conversion Price”). The shares of
Common Stock to be issued upon such conversion are herein referred to as the “Conversion Shares.” 
Issuer shall give written notice to Holder’s Representative ten (10) days
prior to any voluntary prepayment of Loan B, and any Holder shall have seven (7) days
from the date of such written notice to elect to execute the Conversion Right
subject to the restrictions and requirements set forth in Section 2.1(C)(iv).  If any Holder fails to exercise the
Conversion Right within said seven (7) day period, such Holder will not be
allowed to exercise the Conversion Right until such prepayment has occurred.  Issuer shall give written notice to Holder’s
Representative fifteen (15) days after Issuer receives a written letter of
intent in connection with raising any Net Equity in excess of Ten Million
Dollars ($10,000,000) and any Holder shall have seven (7) days from the
date of such written notice to elect to exercise the Conversion Right subject
to the restrictions and requirements set forth in Section 2.1(C)(iv).  If any Holder fails to exercise the
Conversion Right within said seven (7) day period, such Holder will not be
allowed to exercise the Conversion Right until after such funding proposed in
the letter of intent occurs or such letter of intent expires or is terminated.


 


5

















 


(ii)           Subject to adjustment as
provided in Section 2.1(C)(v) hereof, the Conversion Price per share
of Common Stock shall be equal to the Closing Stock Price.


 


(iii)          Notwithstanding anything to
the contrary contained in this Note, this Note shall not be convertible by any
Holder hereof, and Issuer shall not effect any conversion of this Note or
otherwise issue any shares of Common Stock pursuant hereto, either (i) prior
to the First Period Termination Date, or (ii) to the extent (but only to
the extent) that after giving effect to such conversion, the sum of the number
of shares of Common Stock issued under this Note plus the number of shares of
Common Stock issued under the Merger Agreement would exceed 9.9% of Issuer’s
outstanding shares of Common Stock (as presently constituted) (the “Conversion Limitation”). 
No prior inability to convert this Note pursuant to this paragraph shall
have any effect on the applicability of the provisions of this paragraph with
respect to any subsequent determination of convertibility.  The provisions of this paragraph shall be
implemented in a manner otherwise than in strict conformity with the terms of
this paragraph to correct this paragraph (or any portion hereof) which may be
defective or inconsistent with the intended Conversion Limitation herein contained
or to make changes or supplements necessary or desirable to properly give
effect to such Conversion Limitation. The limitations contained in this
paragraph shall apply to any successor Holder of this Note.  The holders of Common Stock shall be third
party beneficiaries of this paragraph and Issuer may not waive this paragraph
without the consent of holders of a majority of its Common Stock.


 


(iv)          In the event that a Holder
elects to convert all (but not less than all) of its proportionate outstanding
principal balance of Loan B into Common Stock after the First Period
Termination Date, the Holder shall give notice of such election by delivering
an executed and completed notice of conversion in the form of Exhibit C
attached hereto (“Notice of Conversion”)
to Issuer.  A Holder’s proper election to
convert shall be irrevocable.  On each
Conversion Date (as hereinafter defined) and in accordance with its Notice of
Conversion, the Holder shall make the appropriate reduction to the principal balance
as entered in its records.  Each date on
which a Notice of Conversion is delivered to Issuer in accordance with the
provisions hereof shall be deemed a Conversion Date (the “Conversion
Date”).


 


(v)           Issuer will cause its
transfer agent to transmit one or more certificates representing the Conversion
Shares to the Holder within five (5) business days after receipt by Issuer
of the Notice of Conversion.   In the
case of the exercise of the conversion rights set forth herein the conversion
privilege shall be deemed to have been exercised, and the Conversion Shares
issuable upon such conversion, shall be deemed to have been issued upon the
deemed delivery date to Issuer of the Notice of 


 


6

















 


Conversion.  The Holder shall be treated for all purposes
as the record holder of such Common Stock on such deemed delivery date.  Each certificate representing Conversion
Shares shall bear a customary restricted stock legend and the Conversion Shares
shall be transferrable only in accordance with the Securities Act of 1933, as
amended.


 


(vi)          Any accrued and unpaid
interest in respect of principal converted into Common Stock shall be payable
on the next scheduled Payment Date.  For
the avoidance of doubt, interest shall cease to accrue on the Conversion Date
as to any principal converted.


 


(vii)         The Conversion Price and
number and kind of shares or other securities to be issued upon conversion
determined pursuant to Sections 2.1(C)(i) and (ii), shall be subject to
adjustment from time to time upon the happening of certain events while this
conversion right remains outstanding, as follows:


 


(a)           If Issuer at any time shall,
by reclassification or otherwise, change the Common Stock into the same or a
different number of securities of any class or classes, this Note, as to the
unpaid principal balance, shall thereafter be deemed to evidence the right to
purchase an adjusted number of such securities and kind of securities as would
have been issuable as the result of such change with respect to the Common
Stock immediately prior to such reclassification or other change.


 


(b)           If the shares of Common
Stock are subdivided or combined into a greater or smaller number of shares of
Common Stock, or if a dividend is paid on the Common Stock in shares of Common
Stock, the Conversion Price shall be proportionately reduced in case of
subdivision of shares or stock dividend or proportionately increased in the
case of combination of shares, in each such case by the ratio which the total
number of shares of Common Stock outstanding immediately after such event bears
to the total number of shares of Common Stock outstanding immediately prior to
such event.


 


(viii)        During the period the
conversion right exists, Issuer will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the issuance
of Common Stock upon the full conversion of the remaining principal balance of
Loan B.  Issuer represents that upon
issuance, such shares will be duly and validly issued, fully paid and
non-assessable.  Issuer agrees that its
issuance of this Note shall constitute full authority to its officers, agents,
and transfer agents who are charged with the duty of executing and issuing
stock certificates to execute and issue the necessary certificates for shares
of Common Stock upon the conversion of Loan B.


 


7

















 


2.2           Default Interest Rate.  If any amount of principal or interest on
this Note is not paid when due the entire outstanding principal balance of the
Note shall bear interest at a rate to the Applicable Interest Rate plus two
percent (2%) from the due date of such installment of such principal or
interest until such default is cured by the payment of all principal and
interest and late fees then due (“Default Interest”).  The incurrence of Default Interest shall not
excuse late payment.


 


2.3           Late Fees.  Should any payment under this Note not be
paid when due and payable, it is recognized by Issuer that the Holders will
incur extra expenses for handling the delinquent payment.  The exact amount of said extra expenses is
impossible to ascertain at this time, but a charge of two percent (2%) of the
amount of the delinquent payment would be a fair approximation of the expense
so incurred by the Holders.  Therefore,
in the event a payment is received more than ten (10) days after the date
on which it was due, Issuer shall, without notice and without prejudice to
the right of the Holders to declare an Event of Default or to collect any other
amounts due hereunder, pay to the Holders a “late charge” equal to two percent
(2%) of the amount of the delinquent payment. 
At the option of Issuer, said late charge may be added to the principal
under this Note.


 


2.4           No Right of Offset.  Other than as allowed in the Merger Agreement, Issuer
shall have no right to set off against payments due under this Note.


 


2.5           Allocation Among Holders. All payments
under this Note whether principal, interest, late fees, and expenses shall be
paid to the Holders pro rata based on the principal balance due each Holder.


 


3.             Payment
on Non-Business Days. Whenever any payment to be made shall be
due on a Saturday, Sunday or a public holiday under the laws of the State of
California, such payment may be due on the next succeeding business day and
such next succeeding day shall be included in the calculation of the amount of
accrued interest payable on such date.


 


4.             Prepayment.  Upon ten (10) days prior written notice
to the Holders, Issuer may prepay this Note in whole or in part, without
premium or fee and such prepayment will be applied by Holder in accordance with
Section 2.1(A)(v) and 2.1(B)(v) above, pro-rata to the amounts
outstanding under Loan A and Loan B.


 


5.             Events of
Default.  The
occurrence of any of the following shall constitute an “Event of Default” under this Note:


 


5.1           Failure to
Pay.  Issuer shall fail to pay when
due any payment required under the terms of this Note by the end of the tenth
day following the due date.


 


5.2           Breaches of
Covenants.  Issuer
shall fail to observe or perform any covenant set forth in Section 8
and such failure shall continue for twenty
(20) days after Issuer’s receipt of Holder’s written notice to Issuer of
such breach.


 


8

















 


5.3           Voluntary
Bankruptcy or Insolvency Proceedings.  Issuer shall (i) apply for or consent to
the appointment of a receiver, trustee, liquidator or custodian of itself or of
all or a substantial part of its property, (ii) be unable, or admit in
writing its inability, to pay its debts generally as they mature, (iii) make
a general assignment for the benefit of its or any of its creditors, (iv) be
dissolved or liquidated, (v) become insolvent (as such term may be defined
or interpreted under any applicable statute), (vi) commence a voluntary
case or other proceeding seeking liquidation, reorganization or other relief
with respect to itself or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or consent to any such relief or to the
appointment of or taking possession of its property by any official in an
involuntary case or other proceeding commenced against it, or (vii) take
any action for the purpose of effecting any of the foregoing.


 


5.4           Involuntary
Bankruptcy or Insolvency Proceedings.  Proceedings for the appointment of a
receiver, trustee, liquidator or custodian of Issuer or of all or a substantial
part of its property, or an involuntary case or other proceedings seeking
liquidation, reorganization or other relief with respect to Issuer or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in
effect shall be commenced and an order for relief entered or such proceeding
shall not be dismissed or discharged within sixty (60) days of commencement.


 


5.5           Cessation of Business.  Issuer dissolves, is subject to liquidation
or ceases to conduct business in the ordinary course.


 


5.6           Change of Control.  Notwithstanding the foregoing, this Note,
plus all accrued interest, shall be paid in full within 30 days after a Change
of Control. A “Change of Control” shall be deemed to have occurred if, at any
time, (a) Buyer ceases to control Rockford or to be entitled to elect all
of the members of the board of directors or managers of Rockford; or (b) all
or substantially all of any of the assets of Buyer or Rockford are sold in one
transaction or a series of transactions to any Person or related group of
Persons; or (c) Buyer or Rockford are merged with or into another Person
except for a merger in which the stockholders of Issuer immediately prior to
the merger continue to beneficially own at least a majority of the equity in
the combined entity immediately after the merger; or (d) the filing of a
certificate of dissolution or the equivalent for Buyer or Rockford, or (e) the
lapse of ninety (90) days after the notice to Buyer of revocation without a
reinstatement of Buyer’s charter within thirty (30) days after receipt of
notice of this revocation is received by Buyer.


 


5.7           Levy or Seizure.  The attachment, seizure or levy under legal
process, which is not removed within forty-five days, upon assets of Issuer or
any of its Affiliates that are material to the operation of the business of
Buyer and its subsidiaries when taken as a whole.


 


5.8           Declaration of Event of Default.  Only the Holder’s Representative may declare
an Event of Default.


 


6.             Rights of Holder Upon Default.  Upon the occurrence or existence
of any Event of Default (other than an Event of Default referred to
in Sections 5.3 and 5.4) and at any time thereafter during the
continuance of such Event of Default, Holder may declare all outstanding
Obligations payable by Issuer hereunder to be immediately due and payable
without presentment, demand, protest or any other notice of any kind, all of
which are hereby expressly waived; provided, however,
if the Event of Default is the failure to pay as set forth in Section 5.1
and the reason for Issuer’s failure to pay is that Issuer is contractually
prohibited from making a 


 


9

















 


payment due to the terms of the Subordination
Agreements, then the Holders shall not be entitled to declare all outstanding
Obligations payable by Issuer until the earlier of (a) the date that is
180 days after the date that the Event of Default was triggered, or (ii) the
date 10 days after the contractual prohibition to payment has been
removed.  Upon the occurrence or
existence of any Event of Default described in Sections 5.3 and 5.4,
immediately and without notice, all outstanding Obligations payable by Issuer
hereunder shall automatically become immediately due and payable, without
presentment, demand, protest or any other notice of any kind, all of which are
hereby expressly waived.  In addition to
the foregoing remedies, upon the occurrence or existence of any Event of
Default, Holder may exercise any other right power or remedy permitted by law,
either by suit in equity or by action at law, or both.


 


7.             Holders Representative.  Each Holder by
executing this Note hereby constitutes and appoints Christopher S. Wallace as
Holders’ Representative, pursuant to the terms and provisions of Section 9.18
of the Merger Agreement.


 


8.             Certain Covenants.  While any amount is outstanding under this
Note, without the prior written consent of the Holders’ Representative, Issuer
shall not:


 


8.1           Incur any obligations for
seller financing associated with the acquisition of a business (whatever the
structure) without making it contractually subordinated in right of payment to
the payment of this Note; or


 


8.2           make any payment on account
of indebtedness of Issuer that has been contractually subordinated in right of
payment to this Note; or


 


8.3           except for regular, in terms
of purpose, quarterly dividends, make any distribution or declare or pay any
dividends (in cash or other property, other than common stock); or


 


8.4           if Issuer is not permitted
by the senior lender and/or surety company that are parties to the
Subordination Agreements to make the prepayments required under Section 2, Issuer
shall not consummate the transaction that would have required the prepayment;
or


 


8.5           purchase, acquire, redeem,
or retire any of any common stock of Issuer, whether now or hereafter
outstanding, unless the principal balance of this Note is less than Ten Million
Dollars ($10,000,000).


 


9.             Successors
and Assigns.  Subject to
the restrictions on transfer described in Sections 11 and 12, the
rights and obligations of Issuer and Holders of this Note shall be binding upon
and benefit the successors, assigns, heirs, administrators and transferees of
the parties.


 


10.           Waiver and
Amendment.  Any
provision of this Note may be amended, waived or modified upon the written
consent of Issuer and the Holders’ Representative.


 


11.           Transfer of
this Note.  With
respect to any offer, sale, assignment or other disposition of this Note, any
Holder will give written notice to Issuer prior thereto, describing the
identity of the assignee thereof, and such transfer shall be effectively
following the written consent of Issuer which shall not be unreasonably withheld.


 


10
















 


12.          Assignment by Issuer.  Neither this Note nor any of the rights,
interests or obligations hereunder may be assigned, by operation of law or
otherwise, in whole or in part, by Issuer without the prior written consent of
the Holders’ Representative and any such assignment without such written
consent shall be void.


 


13.          Notices.  All notices,
requests, demands, claims, and other communications hereunder will be in
writing. Any notice, request, demand, claim, or other communication hereunder
shall be deemed duly given on the earlier of (a) when actually received, (b) two
business days after it is sent by overnight courier, or (c) two business
days after it is sent by registered or certified mail (return receipt
requested, postage prepaid) and addressed to the intended recipient as set
forth below:


 


If to Holders or Holders’ Representative:


 


c/o
Christopher Wallace
 Second City Capital Corporation

1075 West George Street, Suite 2600

Vancouver, BC, Canada V6E 3C9
 Telephone:        (604)
806-3350

Facsimile:         (604)
661-4873


 


Copy to:


 


Ball Janik LLP


15 SW Colorado Avenue, Suite 3


Bend, OR 97702


Telephone: (541) 617-1309


Facsimile (541) 617-8824

Attn:  Robert Stout, Esq.


 


And:


 


If to Issuer:


 


PRIMORIS SERVICES CORPORATION

26000 Commercentre Drive

Lake Forest, CA  92630

Telephone:        (949) 598-9242 

Facsimile:         (949) 595-5544

Attn:    General Counsel


 


11

















 


Copy to:


 


Rutan & Tucker, LLP

611 Anton Blvd., Suite 1400

Costa Mesa, CA 92626

Telephone:         (714) 641-5100

Facsimile:          (714)
546-9035

Attn:      George Wall, Esq.


 


Either
Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been
duly given unless and until it actually is received by the intended
recipient.  Either Party may change the
address to which notices, requests, demands, claims, and other communications
hereunder are to be delivered by giving the other Party notice in the manner
herein set forth.


 


14.          Payment.  Payment shall be made in lawful tender of the
United States.


 


15.          Usury.  In the event any interest is paid on this
Note which is deemed to be in excess of the then legal maximum rate, then that
portion of the interest payment representing an amount in excess of the then
legal maximum rate shall be deemed a payment of principal and applied against
the principal of this Note.


 


16.          Expenses; Waivers.  Issuer agrees to pay all costs and expenses
of collection incurred by the Holders in connection with enforcement of this
Note whether incurred prior to or after an action is instituted by Holders. If
action is instituted to collect this Note, the non-prevailing party promises to
pay all costs and expenses, including, without limitation, reasonable attorneys’
fees, expert fees and all other costs, incurred by the prevailing party in
connection with such action. Such expenses, costs and fees include but are not
limited to those which may be incurred in connection with all appearances and
other activity in bankruptcy or insolvency proceedings involving the Issuer or
the enforcement of the Note, the defense of any claims or causes of action
against the Holders, and in the negotiation or settlement by the Holders of any
modification or compromise, or request for same, regarding the performance by
Issuer of any of its obligations hereunder, all without regard to any
statutory, judicial, administrative or other schedule for reimbursement or
payment of legal fees.  Issuer hereby
waives notice of default, presentment or demand for payment, protest or notice
of nonpayment or dishonor and all other notices or demands relative to this
instrument.


 


17.          Governing
Law; Venue; Arbitration.  This Note and all actions arising out of or
in connection with this Note shall be governed by and construed in accordance
with the laws of the State of California, without regard to the conflicts of
law provisions of the State of California, or of any other state.  Venue for all proceedings shall be in Orange
County, California.  Each of the Parties agrees that all claims in respect
of any Action (as defined in the Merger Agreement) or proceeding arising out of
or relating to this Note shall be determined and resolved pursuant to Section 9.15
of the Merger Agreement.  Each of the
Parties waives any defense of inconvenient forum to the maintenance of any
action or proceeding so brought and 


 


12

















 


waives any bond, surety, or other
security that might be required of the other Party with respect thereto.  Either Party may make service on the other
Party by sending or delivering a copy of the process to the Party to be served
at the address and in the manner provided for the giving of notices in Section 13
above.  Nothing in this Section 17,
however, shall affect the right of either Party to serve legal process in any
other manner permitted by law or at equity. 
Each Party agrees that a final judgment in any action or proceeding so
brought shall be conclusive and may be enforced by suit on the judgment or in
any other manner provided by law or at equity.


 


18.          Failure or Indulgence
Not Waiver. No failure or delay on the part of the Holders in
the exercise of any power, right or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such power,
right or privilege preclude other or further exercise thereof or of any other
right, power or privileges. All rights and remedies existing hereunder are
cumulative to, and not exclusive of, any rights or remedies otherwise available.


 


19.          Notices Regarding Equity
or Qualified Debt.  If
Issuer or any of its Affiliates raise additional capital that results in Net
Equity or increase the balance due under any Qualified Debt, then Issuer shall
notify Holders of same.


 


20.          Right of Set-Off.  Issuer shall have a right of set-off against
this Note pursuant to Section 8.15 of the Merger Agreement.  The exercise of such right of set-off by
Issuer in good faith, whether or not ultimately determined to be justified,
will not constitute an Event of Default.


 


[SIGNATURE ON NEXT PAGE]


 


13

















 


IN
WITNESS WHEREOF, Issuer has caused this Note to be issued as of the date
first written above.


 


 


	
   

  	
  PRIMORIS
  SERVICES CORPORATION,

  
	
   

  	
  a
  Delaware corporation

  
	
   

  	
   

  
	
   

  	
  /s/
  Brian Pratt

  



 


 


EXHIBITS:


 


A                                       List of Holders
and Principal Amounts


B                                       Subordination Agreements


C                                       Notice of
Conversion


 


[Signature page to
Convertible Promissory Note]


 


14

















 


EXHIBIT A


 


HOLDERS AND PRINCIPAL AMOUNTS


 


	
  Holders

  	
   

  	
  Note Allocation(1)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Second City Capital Corporation

  	
   

  	
  $

  	
  14,420,106

  	
   

  
	
  Lemmie Rockford

  	
   

  	
  1,602,234

  	
   

  
	
  CCH Partners Holdings

  	
   

  	
  34,481

  	
   

  
	
  Fortress Value Recovery Fund I LLC

  	
   

  	
  655,146

  	
   

  
	
  Total

  	
   

  	
  $

  	
  16,711,967

  	
   

  



 

















 


EXHIBIT B


 


SUBORDINATION AGREEMENTS


 

















 


EXHIBIT C


 


NOTICE OF CONVERSION


 


(To be executed by Holder in order to convert Loan B under the Note)


 


The
undersigned Holder hereby elects to convert
$                                        
of the remaining principal balance due to the undersigned Holder in respect of
Loan B under the Convertible Promissory Note (“Note”) issued by PRIMORIS
SERVICES CORPORATION, a Delaware corporation (“Issuer”) on
                              
      , 2010 into Shares of Common Stock of the
Issuer according to the terms and conditions set forth in the Note. The
effective date of conversion shall be the date this Notice of Conversion is
deemed received by Issuer under the terms and conditions of the Note.


 


	
  Date:

  	
   

  
	
   

  	
   

  
	
  Conversion
  Price:

  	
   

  
	
   

  	
   

  
	
  Shares
  To Be Delivered:

  	
   

  
	
   

  	
   

  
	
  Signature:

  	
   

  
	
   

  	
   

  
	
  Print
  Name:

  	
   

  
	
   

  	
   

  
	
  Address: