Document:

Exhibit
10.6

 

	
  

  	
   

  	
  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.

  	
  Michael
  D. Killgore, 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
  American, 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 Fifty Three Million Five Hundred
  Thousand Dollars ($53,500,000), as evidenced by that certain Promissory Note
  dated December 15, 2009 in favor of the members of James Construction Group,
  L.L.C., 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 Corporaiton

  	
  If
  to Creditor:

  	
  Michael
  D. Killgore

  
	
   

  	
   

  	
  333
  South Wabash Avenue

  	
   

  	
  17653
  Cross Boulevard

  
	
   

  	
   

  	
  Chicago,
  IL 60604

  	
   

  	
  Baton
  Rouge, LA 70810

  
	
   

  	
   

  	
  Attn:
  Chief Underwriting Officer

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  If
  to Contractor:

  	
  Primoris Services
  Corporation

  	
   

  
	
   

  	
   

  	
  26000 Commercentre Drive

  	
   

  
	
   

  	
   

  	
  Lake Forest, CA 92630

  	
   

  
	
   

  	
   

  	
  Attn: General Counsel

  	
   

  
						

 

	
  DATED as of this 18th day of December, 2009.

  

 

WITNESS/ATTEST

 

	
   

  	
   

  	
  Primoris
  Services Corporation

  	
   

  
	
   

  	
   

  	
  (CORPORATION/PARTNER/PERSON
  as CONTRACTOR)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  /s/
  Kay Gooding & /s/ Hays Alexander

  	
   

  	
  By:

  	
  /s/
  Brian Pratt

  	
  (SEAL)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Michael
  D. Killgore, as Sellers’ Representative

  	
   

  
	
  /s/
  Donald B. Bonaventure

  	
   

  	
  (CREDITOR)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Michael D. Killgore

  	
  (Seal)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  LIBERTY
  MUTUAL INSURANCE COMPANY

  	
   

  
	
   

  	
   

  	
  (SURETY)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Michael McGowan

  	
  (Seal)

  
	
   

  	
   

  	
  Attorney-in-Fact

  	
   

  
									

 

	
  PRIMORIS
  LMS-4500 (Allowance of Normally Scheduled Payments)

  	
   

  	
  Rev. 9/09Exhibit 10.7

 

PROMISSORY NOTE

 

	
  $1,966,000.00

  	
   

  	
  December 18, 2009

  
	
   

  	
   

  	
  Baton Rouge, Louisiana

  

 

FOR VALUE RECEIVED, JAMES CONSTRUCTION GROUP, L.L.C.,
a Florida limited liability company (“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 One Million Nine Hundred Sixty-Six
Thousand and No/100 Dollars ($1,966,000.00).

 

This note is issued
pursuant to the Membership Interest Purchase Agreement dated as of November 18,
2009 (as amended, modified or supplemented, the “Purchase
Agreement”) by and among Issuer, the Holders, Primoris Services Corporation
and Michael D. Killgore, as Sellers’ Representative.

 

All principal under this note shall be paid in full
prior to January 15, 2010.

 

Issuer shall have no right
to set off against payments due under this note.

 

Each Holder constituted and appointed Michael D.
Killgore as Sellers’ Representative pursuant to the terms and provisions of Section 9.19
of the Purchase Agreement.

 

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 Sellers’ Representative and any such assignment without such
written consent shall be void.

 

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

 

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.

 

 

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 Delaware, without regard
to the conflicts of law provisions of the State of Delaware, or of any other
state. Venue for all proceedings shall be in Harris County, Texas.  Each of the parties
submits to the exclusive jurisdiction of any federal court sitting in the State
of Texas, County of Harris, in any action or proceeding arising out of or
relating to this note and agrees that all claims in respect of the action or
proceeding may be heard and determined in any such court.  Each party also agrees not to bring any
action or proceeding arising out of or relating to this note in any other
court.  Each of the parties waives any
defense of inconvenient forum to the maintenance of any action or proceeding so
brought and 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 the Purchase
Agreement.  Nothing in this Paragraph,
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.

 

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.

 

[Remainder of page intentionally
blank]

 

2

 

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

 

 

	
   

  	
  JAMES CONSTRUCTION GROUP, L.L.C.,

  
	
   

  	
  a limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Michael D. Killgore

  
	
   

  	
  Michael D. Killgore, Manager

  

 

 

EXHIBITS:

 

A             List of Holders and
Principal Amounts

 

 

[Signature
page to Distribution Promissory Note]

 

3

 

EXHIBIT A

 

HOLDERS AND PRINCIPAL
AMOUNTS

 

	
   

  	
   

  	
  Note Allocation(1)

  	
   

  
	
  Family Members

  	
   

  	
   

  	
   

  
	
  Dominic
  Iafrate

  	
   

  	
  $

  	
  235,920.00

  	
   

  
	
  Angelo
  Iafrate

  	
   

  	
  $

  	
  235,920.00

  	
   

  
	
  Trust
  for Stephen M. Iafrate

  	
   

  	
  $

  	
  196,600.00

  	
   

  
	
  Trust
  for Dominic A. Iafrate

  	
   

  	
  $

  	
  196,600.00

  	
   

  
	
  Trust
  for Jaclyn Iafrate

  	
   

  	
  $

  	
  137,620.00

  	
   

  
	
  Trust
  for Danielle M. Iafrate

  	
   

  	
  $

  	
  137,620.00

  	
   

  
	
  Trust
  for Anthony C. Iafrate

  	
   

  	
  $

  	
  137,620.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Management Members

  	
   

  	
   

  	
   

  
	
  Mike
  Killgore

  	
   

  	
  $

  	
  131,066.67

  	
   

  
	
  Donald
  Bonaventure

  	
   

  	
  $

  	
  131,066.66

  	
   

  
	
  Danny
  Hester

  	
   

  	
  $

  	
  131,066.67

  	
   

  
	
  Rodney
  James

  	
   

  	
  $

  	
  58,980.00

  	
   

  
	
  Charles
  Poole

  	
   

  	
  $

  	
  58,980.00

  	
   

  
	
  Bruce
  Hix

  	
   

  	
  $

  	
  49,150.00

  	
   

  
	
  Conrad
  Bourg

  	
   

  	
  $

  	
  39,320.00

  	
   

  
	
  Tommy
  Lasseigne

  	
   

  	
  $

  	
  29,490.00

  	
   

  
	
  Kan
  Janke

  	
   

  	
  $

  	
  29,490.00

  	
   

  
	
  Thomas
  Love Jr

  	
   

  	
  $

  	
  29,490.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total
  Note

  	
   

  	
  $

  	
  1,966,000.00

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