Exhibit 10.7


 


	
  


  	
   

  	
  CNA Center

  333 S. Wabash Avenue, 41st Floor

  Chicago, IL 60604

  Ph. (312) 822-5000

  



 


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.              CNA Surety Corporation, on
its own behalf, and on behalf of its affiliates and subsidiaries Continental
Casualty Company, National Fire Insurance Company of Hartford, American
Casualty Company of Reading, Pennsylvania, The Continental Insurance Company,
Firemen’s Insurance Company of Newark, New Jersey, Western Surety Company,
Universal Surety of America, Surety Bonding Company of America, hereinafter
called “Surety”.


 


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 Sixteen Million Seven Hundred Eleven Thousand Nine
Hundred Sixty-Seven Dollars ($16,711,967), as evidenced by that certain
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, until the entire debt is paid in lawful money of the
United States of America: a) installments no greater than the normally
scheduled principal and interest amounts as set forth in the Promissory Note;
and b)  prepayments or accelerated
payments, as set forth in 2.1(a)(i) and 2.1(a)(ii) of the Promissory
Note.  In the event that Contractor
desires to make and Creditor desires to receive any other prepayment or
accelerated payment including but not limited to the prepayment set forth in
2.1(a)(iii) (hereinafter “Qualified Debt Prepayment”), the Contractor
and/or Creditor must provide Surety with 30 days prior written notice sent by
certified mail (‘Surety Notice”) of its request to make such a repayment.  Surety retains the right to expressly consent
to such a Qualified Debt Prepayment, 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 Qualified Debt Prepayment 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 therein.  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 to be given
hereunder shall be given in writing and sent to the respective parties or their
designated representative as the address below:


 


	
  If to Surety: CNA Surety Corporation

  	
   

  	
  If
  to Creditor:

  	
   

  	
  Christopher
  S. Wallace

  
	
   

  	
  333
  South Wabash Avenue

  	
   

  	
   

  	
   

  	
  Second
  City Capital Corporation

  
	
   

  	
  Chicago, IL
  60604

  	
   

  	
   

  	
   

  	
  1075
  West George Street, Suite 2600

  
	
   

  	
  Attn:
  Chief Underwriting Officer

  	
   

  	
   

  	
   

  	
  Vancouver, BC, Canada V6E 3C9

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  If to Contractor:

  	
  Primoris
  Services Corporation

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  26000 Commercentre Drive

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Lake Forest, CA 92630

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Attn: General Counsel

  	
   

  	
   

  	
   

  	
   

  



 


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


 


	
  WITNESS/ATTEST

  	
   

  	
  Primoris
  Services Corporation

  	
   

  
	
   

  	
   

  	
  (CORPORATION/PARTNER/PERSON
  as CONTRACTOR)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  John P. Schauerman

  	
  (SEAL)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Executive
  Vice President, Corporate Development.

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Christopher
  S. Wallace, as Sellers’ Representative

  	
   

  
	
   

  	
   

  	
  (CREDITOR)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Christopher S. Wallace

  	
  (Seal)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Sellers’
  Representative

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  CNA
  SURETY CORPORATION

  	
   

  
	
   

  	
   

  	
  (SURETY)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Paul A. Kitchell

  	
  (Seal)

  
	
   

  	
   

  	
   

  	
  Attorney-in-Fact

  	
   

  



 


 


	
  PRIMORIS
  LMS-4500 (Allowance of Normally Scheduled Payments)

  	
   

  	
  Rev. 9/09