Document:

Exhibit 10.6

 

SUBORDINATION AGREEMENT

 

THIS SUBORDINATION AGREEMENT (this “Agreement”) is entered into
as of November 12, 2010 by and among Christopher S. Wallace, as Sellers’
Representative (“Junior Lender”), Primoris Services Corporation, a Delaware
corporation (“Debtor”), and Michael D. Killgore, as Sellers’
Representative (“James Lender”), with reference to the following facts:

 

R E C I T A L S

 

A.            In connection
with that certain Membership Interest Purchase Agreement by and among Debtor, the
members of James Construction Group, L.L.C., and James Lender, Debtor has
issued to James Lender that certain Promissory Note in the original principal
amount of $53,500,000 (the “James Note”).

 

B.            In connection
with that certain Agreement and Plan of Merger by and among Debtor, Primoris
Merger Sub, Inc., Rockford Holdings Corporation and Junior Lender, Debtor
has issued to Junior Lender that certain Promissory Note in the original
principal amount of $16,711,967 (the “Junior Note”).

 

C.            Section 8.1
of the James Note requires the Junior Note to be subordinated in right of
payment to the payment of the James Note.

 

A G R E E M E N T

 

NOW, THEREFORE, in consideration of the foregoing, the parties hereto
agree as follows:

 

ARTICLE 1

SELECTED DEFINITIONS

 

1.1           Definitions.  The following capitalized terms shall have
the meanings given to them below:

 

(a)           “Bankruptcy Code” means 11 U.S.C. §§101,
et seq.

 

(b)           “James Lender Event of Default” means an
“Event of Default” described in Section 5 of the James Note.

 

(c)           “James Indebtedness” means all
obligations of Debtor now or hereafter existing under the James Note whether
for principal, interest (including, without limitation, interest, as provided
in the James Note, accruing after the filing of a petition initiating any
proceeding referred to in Section 2.2(a), whether or not such
interest accrues after the filing of such petition for purposes of the
Bankruptcy Code or is an allowed claim in such proceeding), fees, expenses or
otherwise.

 

 

(d)           “Subordinated Debt” means all
obligations of Debtor now or hereafter existing under the Junior Note, whether
for principal, interest (including, without limitation, interest accruing after
the filing of a petition initiating any proceeding referred to in Section 2.2(a),
whether or not such interest accrues after the filing of such petition for
purposes of the Bankruptcy Code or is an allowed claim in such proceeding),
fees, expenses or otherwise.

 

ARTICLE 2

SUBORDINATION

 

2.1           Subordinated Debt Subordinate to
James Indebtedness. 
Debtor and Junior Lender agree that the Subordinated Debt is and shall
be subordinate, to the extent and in the manner hereinafter set forth, to the
prior payment in full of all James Indebtedness.

 

2.2           Events of Subordination.

 

(a)           In the event of any dissolution,
winding up, liquidation, arrangement, reorganization, adjustment, protection,
relief or composition of Debtor or its debts, whether voluntary or involuntary,
in any bankruptcy, insolvency, arrangement, reorganization, receivership,
relief or other similar case or proceeding under any federal or state
bankruptcy or similar law or upon any federal or state bankruptcy or similar
law or upon an assignment for the benefit of creditors or any other marshalling
of the respective assets and liabilities of Debtor or otherwise, (i) James
Indebtedness shall first be paid in full before Junior Lender or its successors
or assigns holding any of the Subordinated Debt shall be entitled to receive
any payment of all or any of the Subordinated Debt, and (ii) any payment
or distribution of any kind (whether in cash, property or securities) that
otherwise would be payable or deliverable upon or with respect to the
Subordinated Debt in any such case, proceeding, assignment, marshalling or
otherwise shall be paid or delivered directly to James Lender for application
(in the case of cash) to, or as collateral (in the case of noncash property or
securities) for, the payment or prepayment of the James Indebtedness until the
James Indebtedness shall have been paid in full.

 

(b)           In the event that Junior
Lender receives notice that any James Lender Event of Default shall have
occurred and be continuing, no payment shall be made by or on behalf of Debtor
for or on account of any Subordinated Debt, Junior Lender will take no steps,
whether by suit or otherwise to compel or enforce the collection of the
Subordinated Debt, and Junior Lender shall not take or receive from Debtor,
directly or indirectly, in cash or other property or by set-off or in any other
manner, including, without limitation, from or by way of collateral, payment of
all or any of the Subordinated Debt.

 

(c)           In the event that any
Subordinated Debt is declared due and payable before its stated maturity, James
Lender shall be entitled to receive payment in full of all amounts due or to
become due on or in respect of all James Indebtedness before the holders of the
Subordinated Debt are entitled to receive any payment by Debtor on account of
the Subordinated Debt.

 

2

 

(d)           So long as no James Lender
Event of Default has occurred and is continuing, Junior Lender may accept from
Debtor regularly scheduled payments of principal and interest on the Junior
Note.  Debtor shall not make, and Junior
Lender shall not accept, any prepayments under the Junior Note without the
prior written consent of James Lender.

 

2.3           In Furtherance of Subordination.

 

(a)           If any proceeding referred
to in Section 2.2(a) above is commenced by or against Debtor,

 

(i)            James Lender is hereby
irrevocably authorized and empowered (in its own name or in the name of Junior
Lender), but shall have no obligation, to demand, sue for, collect and receive
every payment or distribution referred to in Section 2.2(a) and
give acquittance therefor and to file claims and proofs of claim and take such
other action as it may deem necessary or advisable for the exercise or
enforcement of any of the rights or interests of James Lender hereunder; and

 

(ii)           Junior Lender shall duly and
promptly take such action as James Lender may reasonably request, at the
expense of James Lender (A) to collect the Subordinated Debt for the
account of James Lender and to file appropriate claims or proofs of claim in
respect of the Subordinated Debt, (B) to execute and deliver to James Lender
such powers of attorney, assignments, or other instruments as James Lender may
reasonably request in order to enable James Lender to enforce any and all
claims with respect to the Subordinated Debt, and (C) to collect and
receive any and all payments or distributions which may be payable or
deliverable upon or with respect to the Subordinated Debt.

 

(b)           All payments or
distributions upon or with respect to the Subordinated Debt which are received
by Junior Lender contrary to the provisions of this Article shall be
received in trust for the benefit of James Lender, shall be segregated from
other funds and property held by Junior Lender and shall be forthwith paid over
to James Lender in the same form as so received (with any, necessary
endorsement) to be applied (in the case of cash) to, or held as collateral (in
the case of noncash property or securities) for, the payment or prepayment of
the James Indebtedness.

 

2.4           Rights of Subrogation.  No payment or distribution to James Lender
pursuant to the provisions of this Article shall entitle Junior Lender to
exercise any right of subrogation in respect thereof until the James
Indebtedness shall have been paid in full.

 

2.5           Further Assurances.  Junior Lender and Debtor each will, at any
time and from time to time, promptly execute and deliver all further
instruments and documents, and take all further action, that may be reasonably
necessary, or that James Lender may reasonably request, in order to protect any
right or interest granted or purported to be granted hereby or to enable James
Lender to exercise and enforce their respective rights and remedies hereunder.

 

3

 

2.6           Agreements in Respect of
Subordinated Debt.

 

(a)           To be effective, all
amendments, waivers or other modifications of this Agreement, and any agreement
supplemental to this Agreement shall be executed by each of the parties hereto.

 

(b)           Junior Lender shall promptly
notify James Lender of the occurrence of any default under the Subordinated
Debt.

 

2.7           Agreement by Debtor.  Debtor agrees that it will not make any
payment of any of the Subordinated Debt, or take any other action, in
contravention of the provisions of this Agreement.

 

2.8           Waiver.  Except for the notice required in Section 2.10,
Junior Lender and Debtor, each hereby waives promptness, diligence, notice of
acceptance and any other notice with respect to any of the James Indebtedness
and any requirement that James Lender protect, secure, perfect or insure any
security interest or lien or any property subject thereto or exhaust any right
or take any action against Debtor or any other person or entity or any
collateral.  Notwithstanding the
foregoing, this waiver shall not apply to any notice requirements to Debtor by
James Lender under the James Note.

 

2.9           No Waiver, Remedies.  No failure on the part of James Lender to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise of any other right.  The remedies herein provided are cumulative
and not exclusive of any remedies provided by law.

 

2.10         Notice of Default by James Lender.  James Lender agrees that it will give notice
to Junior Lender substantially contemporaneous to the notice given to Debtor of
a James Lender Event of Default. 
Furthermore, James Lender agrees that it will give Junior Lender advance
written notice of any foreclosure sale or other similar disposition of any
collateral of Debtor for the benefit of James Lender.

 

2.11         Continuing and Binding Effect.   This Agreement shall be continuing and
binding until written notice of its discontinuance shall be provided by James
Lender to Junior Lender, or shall continue to remain in full force and effect
until all James Indebtedness shall have been fully paid and satisfied.

 

ARTICLE 3

MISCELLANEOUS

 

3.1           Conflicts.  If there is any conflict between any term or
condition of this Agreement and any term or condition of the James Note or the
Junior Note, the provisions of this Agreement shall control.

 

3.2           Notices.  Any notice required or permitted hereunder
shall be given in writing and shall be deemed given (i) when delivered if
in person or by telecopy, (ii) three (3) days after being deposited,
postage prepaid, in the U.S. Mail addressed as follows:

 

4

 

If to Junior Lender:                              Christopher S.
Wallace

Second City Capital Corporation

1075 West George Street, Suite 2600

Vancouver, BC, Canada V6E 3C9

Telephone:            (604) 806-3350

Facsimile:               (604) 661-4873

 

If to Debtor:                                          Primoris
Services Corporation

26000 Commercentre Drive

Lake Forest, CA 
92630

Telephone:            (949) 598-9242 

Facsimile:               (949) 595-5544

Attn:                       General Counsel

 

If to James Lender:                               Michael D.
Killgore

17653 Cross Boulevard

Baton Rouge, LA 70810

 

3.3           Counterparts.  This Agreement may be executed in one or more
counterparts each of which shall be deemed an original but all of which, when
taken together, shall be deemed to be one and the same instrument.

 

3.4           Governing Law.  This Agreement shall be construed with the
laws of the State of California without regard to conflict of law principles.

 

5

 

IN WITNESS WHEREOF, each of the parties have caused this Agreement to
be executed by their duly authorized representatives as of the date first above
written.

 

	
  Junior
  Lender:

  	
  /s/
  Christopher S. Wallace

  
	
   

  	
  Christopher
  S. Wallace, as Sellers’ Representative

  
	
   

  	
   

  
	
   

  	
   

  
	
  Debtor:

  	
  Primoris
  Services Corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  John P. Schauerman

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  EVP,
  Corporate Development

  
	
   

  	
   

  
	
   

  	
   

  
	
  James
  Lender:

  	
  /s/
  Michael D. Killgore

  
	
   

  	
  Michael
  D. Killgore, as Sellers’ Representative

  

 

[Signature Page to Subordination Agreement]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

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