Document:

Exhibit
10.1

 

 

Execution Version

 

J.P. MORGAN SECURITIES LLC

JPMORGAN CHASE BANK, N.A.

383 Madison Avenue

New York, New York 10179

 

November 14, 2010

 

Caterpillar
Inc.

100
NE Adams Street

Peoria, Illinois  61629

Attention:  Edward J. Scott, Treasurer

 

PROJECT BADGER

$8.6 Billion Senior Bridge
Term Loan Credit Facility

Commitment Letter

 

Ladies
and Gentlemen:

 

Caterpillar
Inc. (“you”
or “Caterpillar”)
have advised J.P. Morgan Securities LLC (“J.P. Morgan”) and JPMorgan Chase Bank, N.A. (“JPMorgan Chase Bank”;
together with J.P. Morgan, the “Commitment Parties”) that you, directly
or through one of your wholly owned domestic subsidiaries, intend to acquire
(the “Acquisition”) all of the equity interests of a company previously
identified to us as “Badger” (the “Company”), and to consummate the
other Transactions (such term and each other capitalized term used but not
defined herein having the meaning assigned to such term in the Summary of
Principal Terms and Conditions attached hereto as Exhibit A (the “Term
Sheet”)).

 

You
have further advised us that, in connection therewith, Caterpillar wishes to
obtain the senior bridge term loan credit facility (the “Bridge Facility”)
described in the Term Sheet, in an aggregate principal amount of up to $8.6
billion.

 

J.P.
Morgan is pleased to advise you that it is willing to act as the sole lead
arranger and sole bookrunner for the Bridge Facility, and JPMorgan Chase Bank
is pleased to advise you of its commitment to provide the entire amount of the
Bridge Facility.  This Commitment Letter
and the Term Sheet set forth the principal terms and conditions on and subject
to which JPMorgan Chase Bank is willing to make available the Bridge Facility.

 

It
is agreed that J.P. Morgan will act as the sole lead arranger and sole bookrunner
in respect of the Bridge Facility (in such capacity, the “Lead Arranger”),
and that JPMorgan Chase Bank will act as the sole administrative agent in
respect of the Bridge Facility.  You
agree that, as a condition to the commitment and agreements hereunder, no other
agents, co-agents or arrangers will be appointed, no other titles will be
awarded and no compensation (other than that expressly contemplated by the Term
Sheet and Fee Letter referred to below) will be paid in connection with the
Bridge Facility unless you and we shall so agree.

 

We
intend, prior to and/or after the execution of the Bridge Facility
Documentation (as defined below), to syndicate the Bridge Facility to a group
of lenders (together with JPMorgan Chase Bank, the “Lenders”) to be
mutually agreed by us and you.  We intend
to commence syndication efforts promptly upon the execution of this Commitment
Letter and public announcement of the Transactions, and you agree to actively
assist us in completing a Successful 

 

 

Syndication
(as defined in the Fee Letter).  Such
assistance shall include, until the earlier to occur of (i) a Successful
Syndication and (ii) sixty (60) days after execution and delivery of this
Commitment Letter by you and the Commitment Parties or such longer period as
you and we may mutually agree, (a) your using commercially reasonable
efforts to ensure that any syndication efforts benefit materially from your
existing lending and investment banking relationships and the existing lending
and investment banking relationships of the Company, (b) direct contact
between senior management, representatives and advisors of you (and your using
commercially reasonable efforts to cause direct contact between senior
management, representatives and advisors of the Company) and the proposed
Lenders, (c) assistance by you (and your using commercially reasonable
efforts to cause the assistance by the Company) in the preparation of a
customary confidential information memorandum for the Bridge Facility and other
marketing materials and presentations to be used in connection with the
syndication, in each case in form and substance customary for transactions of
this type and otherwise reasonably satisfactory to the Lead Arranger (the “Information
Materials”), (d) your promptly preparing and providing (and use of
commercially reasonable efforts to cause the Company to promptly prepare and
provide) to us all customary information with respect to Caterpillar, the
Company and their respective subsidiaries, the Transactions and the other transactions
contemplated hereby, including all financial information and projections giving
pro forma effect to the Transactions (the “Projections”), as we may
reasonably request, (e) prior to the launch of the syndication, having an
indicative pro forma ratings assessment giving effect to the Transactions from
each of Standard & Poor’s Ratings Service (“S&P”) and Moody’s
Investors Service, Inc. (“Moody’s”), (f) if requested, the
hosting, with the Lead Arranger, of one or more meetings of prospective Lenders,
and (g) your using commercially reasonable efforts to execute and deliver
definitive documentation with respect to the Bridge Facility, consistent with
the terms set forth herein and in the Term Sheet and otherwise reasonably
satisfactory to you and the Lead Arranger (the “Bridge Facility
Documentation”) or, if applicable, one or more Joinder Agreements (as
defined below), in each case as soon as reasonably practicable following
commencement of syndication of the Bridge Facility.  You agree, at the request of the Lead
Arranger, to assist in the preparation of a version of the Information
Materials to be used in connection with the syndication of the Bridge Facility,
consisting exclusively of information and documentation that is either (i) publicly
available or (ii) not material with respect to Caterpillar, the Company or
their respective affiliates or any of their respective securities for purposes
of United States federal and state securities laws.  Without limiting your obligations to assist
with syndication efforts as set forth above, JPMorgan Chase Bank agrees that
the completion of a Successful Syndication (as defined in the Fee Letter) is
not a condition to the initial funding under the Bridge Facility.

 

J.P.
Morgan, in its capacity as Lead Arranger will manage all aspects of any
syndication in consultation with Caterpillar, including decisions as to the
selection of institutions to be approached and when they will be approached,
when their commitments will be accepted, which institutions identified by the
two of us will participate, the allocation of the commitments among the
Lenders, and any naming rights.  In its
capacity as Lead Arranger, J.P. Morgan will have no responsibility other than
to arrange the syndication as set forth herein and in no event shall be subject
to any fiduciary or other implied duties.

 

You
hereby represent and covenant that (with respect to Information (as defined
below) and Projections relating to the Company and its affiliates, to the best
of your knowledge) (a) all written information, taken as a whole (and
including Caterpillar’s and the Company’s public filings with the SEC that have
been delivered to us or are otherwise publicly available at the time such
Information is furnished), other than the Projections and information of a
general economic or industry nature (the “Information”) that has been or
will be made available to us by or on behalf of you or any of your
representatives is or will be, when furnished, complete and correct in 

 

2

 

all
material respects and does not or will not, when furnished, contain any untrue
statement of a material fact or omit to state a material fact necessary in
order to make the statements contained therein not materially misleading in light
of the circumstances under which such statements are made and (b) the
Projections that have been or will be made available to us by or on behalf of
you or any of your representatives have been or will be prepared in good faith
based upon accounting principles consistent in all material respects with the
historical audited financial statements of Caterpillar (except as otherwise
expressly disclosed in such Projections) and upon assumptions that you believe
to have been reasonable at the time made and at the time the related
Projections are made available to us (it being understood that any such
Projections are subject to significant uncertainties and contingencies, many of
which are beyond your control, that no assurance can be given that such
Projections will be realized and that actual results may differ from such
Projections and that such differences may be material).  You agree that if at any time prior to the
Closing Date, any of the representations in the preceding sentence would be
incorrect in any material respect if the Information and Projections were being
furnished, and such representations were being made, at such time, then you
will promptly supplement the Information and the Projections so that (with
respect to Information and Projections relating to the Company and its
affiliates, to the best of your knowledge) such representations will be correct
in all material respects under those circumstances.  You understand that, in arranging and
syndicating the Bridge Facility, we may use and rely on the Information and the
Projections without independent verification thereof.

 

As
consideration for the commitment and agreements of the Commitment Parties
hereunder, you agree to cause to be paid the nonrefundable fees set forth in
this Commitment Letter and in the fee letter dated the date hereof and
delivered herewith (the “Fee Letter”).

 

Each
Commitment Party’s commitment and agreements hereunder are subject to:

 

(a)           since the date hereof there shall not
have occurred and be continuing as of or otherwise arisen before the Effective
Time (as defined in the Merger Agreement) any Closing Company Material Adverse
Effect (as defined below);

 

(b)           such Commitment Party’s satisfaction
that, prior to Successful Syndication (as defined in the Fee Letter), there shall
be no competing offering, placement or arrangement of any of debt securities or
commercial bank or other credit facilities of Caterpillar, the Company or their
respective subsidiaries (including engaging in discussions concerning such
offering, placement or arrangement) (other than (i) the Permanent
Financing, (ii) indebtedness of the Company and its subsidiaries permitted
to be incurred pursuant to the terms of the Merger Agreement (as in effect on
the date hereof without giving effect to any consents granted thereunder), (iii) indebtedness
of Caterpillar’s captive finance subsidiaries, (iv) indebtedness under the
existing credit facilities of Caterpillar, (v) indebtedness incurred by
Caterpillar and its subsidiaries in the ordinary course of business and (vi) any
other financing reasonably agreed by the Lead Arranger);

 

(c)           the negotiation, execution and
delivery of the Bridge Facility Documentation;

 

(d)           one or more investment banks
reasonably satisfactory to the Lead Arranger (collectively, the “Investment
Bank”) shall have been engaged to publicly sell or privately place the
Permanent Financing and other debt and equity securities for the purpose of
replacing or refinancing the Bridge Facility;

 

3

 

(e)           (i) compliance by you with your
agreement in the fourth and fifth paragraphs of this Commitment Letter (except
to the extent noncompliance therewith has not materially impeded the
syndication of the Bridge Facility) and (ii) no event of default (as set
forth in the Term Sheet) or event that, given the passage of time or notice,
would result in an event of default; and

 

(f)            the other conditions set forth on Exhibit B.

 

For
the purposes hereof, “Company Material Adverse Effect” means any state
of facts, change, development, event, effect, condition, occurrence, action or
omission that would, individually or in the aggregate, reasonably be likely to
(i) result in a material adverse effect on the business, assets,
properties, financial condition or 
results of operations of the Company and its Subsidiaries, taken as a
whole, or (ii) prevent, substantially impede or substantially delay the
consummation by the Company of the Merger or the other transactions
contemplated by the Merger Agreement, other than, any such state of facts,
change, development, event, effect, condition, occurrence, action or omission
to the extent relating to or resulting from (A) changes or conditions
affecting the economy or financial markets in general or changes in political
or regulatory conditions generally, (B) changes in the businesses and
industries in which the Company and its Subsidiaries operate, to the extent
such changes do not affect the Company and its Subsidiaries, taken as a whole,
in a materially disproportionate manner relative to other participants of
similar size and scope in such businesses and industries, (C) the
announcement of the Merger Agreement (including any impact on or disruptions in
relationships with customers, suppliers, distributors, dealers, employees or
other similar relationships), (D) changes in Law or GAAP, or any
interpretation thereof, (E) any failure to meet financial projections,
forecasts, estimates or budgets, provided, that, the exception in this
clause shall not exclude a determination that a fact, change, effect,
development, event, condition, occurrence, action or omission underlying such
failure has resulted in a Company Material Adverse Effect, (F) any action
or forbearance from taking an action, required by the terms of the Merger
Agreement or to which Caterpillar otherwise consents in writing, or which
Caterpillar requests, (G) change in prices or trading volume of the
Company Common Stock, provided, that, the exception in this clause shall
not exclude a determination that a fact, change, effect, development, event,
condition, occurrence, action or omission underlying such decline has resulted
in a Company Material Adverse Effect or (H) acts of terrorism or war not
directed at the Company or any of its Subsidiaries (whether or not  declared) or natural disasters occurring after the date
hereof, and “Closing Company Material Adverse Effect” means a Company
Material Adverse Effect, but not taking into account in such determination any
adverse effect from any state of facts, change, development, event, effect,
condition, occurrence, action or omission that is reasonably apparent from the
Company Letter  (except as otherwise
provided therein) or from the description of the factual matters set forth in
the Filed SEC Documents (excluding for this purpose disclosures in the Filed
SEC Documents that are (x) in the “Risk Factors” sections of the Filed SEC
Documents or (y) cautionary, predictive or forward-looking in
nature).  The capitalized terms used in
this paragraph and not otherwise defined in this Commitment Letter shall have
the meanings set forth in the Merger Agreement as in effect on the date hereof.

 

Notwithstanding
anything in this Commitment Letter, the Fee Letter or the Bridge Facility
Documentation to the contrary, (a) the only representations relating to
the Company and its subsidiaries and their respective businesses, assets and
liabilities the making of which shall be a condition to availability of the
Bridge Facility on the Closing Date shall be such of the representations made
by or on behalf of the Company and its subsidiaries in the Merger Agreement as
are material to the interests of the Lenders, but only to the extent that you
have (or a subsidiary has) the right to terminate your (or its) obligations
under the Merger Agreement as a 

 

4

 

result
of a breach of such representations in the Merger Agreement, (b) the only
other representations of Caterpillar the making of which shall be a condition
to availability of the Bridge Facility on the Closing Date shall be the
Specified Representations (as defined below) and (c) the terms of the
Bridge Facility Documentation shall be in a form such that they do not impair
availability of the Bridge Facility on the Closing Date if the conditions set
forth in this paragraph, the preceding paragraph and Exhibit B are
satisfied.  For purposes hereof, “Specified
Representations” means the representations and warranties set forth
in the Term Sheet relating to corporate existence and power, corporate
authorization and no contravention, governmental authorization with respect to
the Bridge Facility, binding effect and margin regulations.

 

You
agree (a) to indemnify and hold harmless the Commitment Parties, their
affiliates and their respective directors, employees, advisors, and agents
(each, an “indemnified person”), members and successors and assigns from
and against any and all losses, claims, damages and liabilities to which any
such indemnified person may become subject arising out of or in connection with
this Commitment Letter, the Bridge Facility, the use of proceeds thereof, the
Transactions or any related transaction or any claim, litigation, investigation
or proceeding relating to any of the foregoing, and to reimburse each
indemnified person upon demand for any reasonable legal or other expenses
incurred in connection with investigating or defending any of the foregoing; provided that the foregoing
indemnity will not, as to any indemnified person, apply to losses, claims,
damages, liabilities or related expenses to the extent they arise from the
willful misconduct or gross negligence of such indemnified person, and
(b) to reimburse each Commitment Party and its affiliates from time to
time, upon presentation of a summary statement, for all reasonable out-of-pocket
expenses (including, but not limited to, due diligence expenses, consultants’
fees and expenses, syndication expenses, travel expenses and fees, charges and
disbursements of counsel identified in the Term Sheet (and, if reasonably
necessary, of one local counsel in any relevant jurisdiction for all
indemnified persons unless, in the reasonable opinion of an indemnified person,
representation of all indemnified persons by such counsel would be
inappropriate due to the existence of an actual or potential conflict of
interest)), in each case, incurred in connection with the Bridge Facility and
the related documentation (including this Commitment Letter and the Bridge
Financing Documentation) or the administration, amendment, modification or
waiver thereof, whether or not the Closing Date occurs or any Bridge Facility
Documentation is executed and delivered or any extensions of credit are made
under the Bridge Facility. 
Notwithstanding any other provision of this Commitment Letter, no
indemnified person shall be liable for any indirect, special, punitive or
consequential damages in connection with its activities related to the Bridge
Facility.

 

Notwithstanding
any other provision of this Commitment Letter, no indemnified person shall be
liable for any damages arising from the use by others of Information or other
materials obtained through electronic telecommunications or other information
transmission systems, other than for direct, actual damages resulting from the
gross negligence or willful misconduct of such indemnified person.  You shall not, without the prior written
consent of an indemnified person (which consent shall not be unreasonably
withheld), effect any settlement of any pending or threatened proceeding
against an indemnified person in respect of which indemnity could have been
sought hereunder by such indemnified person unless (i) such settlement
includes an unconditional release of such indemnified person from all liability
or claims that are the subject matter of such proceeding and (ii) does not
include any statement as to any admission of fault, culpability or a failure to
act by or on behalf of any indemnified person.

 

You
acknowledge that each Commitment Party and its affiliates (the term “Commitment
Party” as used below in this paragraph being understood to include such
affiliates) may be providing debt financing, equity capital or other services
(including financial advisory services) 

 

5

 

to
other companies in respect of which you may have conflicting interests
regarding the transactions described herein and otherwise.  No Commitment Party will use confidential
information obtained from you by virtue of the transactions contemplated hereby
or its other relationships with you in connection with the performance by such
Commitment Party of services for other companies, and no Commitment Party will
furnish any such information to other companies.  You also acknowledge that no Commitment Party
has any obligation to use in connection with the transactions contemplated
hereby, or to furnish to you, confidential information obtained by us from
other companies.  You further acknowledge
that J.P. Morgan is a full service securities firm and J.P. Morgan may from
time to time effect transactions, for its own or its affiliates’ account or the
account of customers, and hold positions in loans, securities or options on
loans or securities of Caterpillar and its affiliates, of the Company and its
affiliates and of other companies that may be the subject of the transactions
contemplated by this Commitment Letter.

 

Each
Commitment Party may employ the services of its affiliates in providing certain
services hereunder and, in connection with the provision of such services, may
exchange with such affiliates information concerning you and the other
companies that may be the subject of the transactions contemplated by this
Commitment Letter, and, to the extent so employed, such affiliates shall be
subject to the obligations of and entitled to the benefits afforded such
Commitment Party hereunder; and provided that no Commitment Party shall be
relieved of any of its obligations hereunder or under the applicable financing
documentation, including any obligation in respect of its commitment in respect
of the Bridge Facility, in the event such affiliates shall fail to perform such
obligation in accordance with the terms hereof.

 

You
further acknowledge and agree that (a) each of us, on the one hand, and
you, on the other hand, have an arm’s-length business relationship that does
not directly or indirectly give rise to, nor do you rely on, any fiduciary duty
on the part of any of us, (b) you are capable of evaluating and
understanding, and you understand and accept, the terms, risks and conditions
of the transactions contemplated by this Commitment Letter, and (c) you
waive, to the fullest extent permitted by law, any claims you may have against
any of us for breach of fiduciary duty or alleged breach of fiduciary duty and
agree that none of us shall have any liability (whether direct or indirect) to
you in respect of such a fiduciary duty claim or to any person asserting a
fiduciary duty claim on behalf of or in right of you, including your
stockholders, employees or creditors. 
Additionally, you acknowledge and agree that each of us is not advising
you as to any legal, tax, investment, accounting or regulatory matters in any
jurisdiction (including, without limitation, with respect to any consents
needed in connection with the transactions contemplated hereby).  You shall consult with your own advisors
concerning such matters and shall be responsible for making your own
independent investigation and appraisal of the transactions contemplated hereby
(including, without limitation, with respect to any consents needed in connection
therewith), and we shall have no responsibility or liability to you with
respect thereto.  Any review by us of
Caterpillar, the Company, the Transactions, the other transactions contemplated
hereby or other matters relating to such transactions will be performed solely
for our benefit and shall not be on behalf of you or any of your affiliates.

 

This
Commitment Letter shall not be assignable by you without the prior written
consent of each Commitment Party (and any purported assignment without such consent
shall be null and void), is intended to be solely for the benefit of the
parties hereto and is not intended to confer any benefits upon, or create any
rights in favor of, any person other than the parties hereto and the
indemnified persons.

 

6

 

Each Commitment
Party may assign all or a portion of its commitment hereunder to one or more
prospective Lenders (i) that are accepted by you in writing, or (ii) that
you have identified to us in writing on or prior to the date hereof (each, a “Permitted
Assignee”), whereupon such Commitment Party shall be released from all or
the portion of its commitment hereunder so assigned; provided that no such assignment shall relieve the
Commitment Parties of their obligations hereunder, except to the extent such
assignment is evidenced by, at our election, (i) a customary joinder
agreement (a “Joinder Agreement”) pursuant to which such lender agrees
to become party to this agreement and extend commitments directly to you on the
terms set forth herein, and which shall not add any conditions to the
availability of the Bridge Facility or change the terms of the Bridge Facility
or increase compensation payable by you in connection therewith except as set
forth in the Commitment Letter and the Fee Letter and which shall otherwise be
reasonably satisfactory to you and us, or (ii) the Bridge Facility
Documentation. The Joinder Agreements will include a provision allowing
Caterpillar, at Caterpillar’s expense, to replace any such additional Lender
party thereto that has (or is controlled by or under common control with any
person or entity that has) been deemed insolvent or become subject to a
bankruptcy, insolvency, receivership, conservatorship or other similar
proceeding, or that refuses to execute, or materially delays in executing, the
Bridge Facility Documentation agreed with the Lead Arranger with respect to the
Bridge Facility, with another financial institution selected by Caterpillar in
consultation with the Lead Arranger.  Each
Commitment Party shall maintain the confidentiality of the information received
from you or the Company or any of your respective subsidiaries that is not
available to that Commitment Party on a nonconfidential basis prior to
disclosure by you or the Company or any of your respective subsidiaries, except
that information may be disclosed (a) to its affiliates and to its and its
affiliates’ respective managers, administrators, trustees, partners, directors,
members, officers, employees, agents, advisors and other representatives who
are involved in the transactions contemplated hereby or otherwise have a need
to know (it being understood that the persons to whom such disclosure is made
will be informed of the confidential nature of such information and instructed
to keep such information confidential), (b) to the extent required, in the
reasonable determination of the disclosing party, by any regulatory authority
purporting to have jurisdiction over it, (c) to the extent required by
applicable laws or regulations or by any subpoena or similar legal process, (d) to
any other party to this Commitment Letter, (e) in connection with the
administration of the Commitment Letter, (f) with your consent or (g) to
the extent such information (x) becomes publicly available other than as a
result of a breach of this provision or any other breach of an obligation of
confidentiality or (y) become available on a non-confidential basis to the
Commitment Party from a source other than you or the Company.  Any person required to maintain the
confidentiality of information as provided in the preceding sentence shall be
considered to have complied with its obligation to do so if such person has
exercised the same degree of care to maintain the confidentiality of such
information as such person would accord to its own confidential information,
but in no event less than a reasonable degree of care.

 

This Commitment
Letter may not be amended or waived except by an instrument in writing signed
by you and each Commitment Party.  This Commitment
Letter may be executed in any number of counterparts, each of which shall be an
original and all of which, when taken together, shall constitute one
agreement.  Delivery of an executed
signature page of this Commitment Letter by facsimile or other electronic
transmission shall be effective as delivery of a manually executed counterpart
hereof.  You acknowledge that information
and documents relating to the Bridge Facility may be transmitted through
SyndTrak, Intralinks, the internet, e-mail or similar electronic
transmission systems, and that none of us shall be liable for any damages
arising from the unauthorized use by others of information or documents
transmitted in such manner, other than for direct, actual damages resulting
from the gross negligence or willful misconduct of such indemnified
person.  With the prior written consent
of Caterpillar, the Lead

 

7

 

Arranger may place
advertisements in financial and other newspapers and periodicals or on a home page or
similar place for dissemination of information on the Internet or worldwide web
as it may choose, and circulate similar promotional materials, after the
closing of the Transactions in the form of a “tombstone” or otherwise
describing the names of you and your affiliates (or any of them), and the
amount, type and closing date of such Transactions, all at the expense of the
Lead Arranger.  This Commitment Letter
and the Fee Letter are the only agreements that have been entered into among us
with respect to the Bridge Facility and set forth the entire understanding of
the parties with respect thereto.  THIS COMMITMENT LETTER AND ANY CLAIM,
CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO THIS COMMITMENT LETTER SHALL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK.  EACH PARTY HERETO
IRREVOCABLY AGREES TO WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING, CLAIM OR
COUNTERCLAIM BROUGHT BY OR ON BEHALF OF ANY PARTY RELATED TO OR ARISING OUT OF
THIS COMMITMENT LETTER OR THE PERFORMANCE OF SERVICES HEREUNDER; provided,
however, that the interpretation of the definition of “Company Material Adverse
Effect” for purposes of this Commitment Letter shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts
of laws.

 

Each party hereto
irrevocably and unconditionally submits to the exclusive jurisdiction of
(a) any state or federal court sitting in the County and City of New York
and (b) any state or federal court sitting in the City of Chicago, Illinois
over any suit, action or proceeding arising out of or relating to this letter
agreement.  Service of any process,
summons, notice or document by registered mail addressed to you or us shall be
effective service of process against such person for any suit, action or
proceeding brought in any such court. 
You and we irrevocably and unconditionally waive any objection to the
laying of venue of any such suit, action or proceeding brought in any such
court and any claim that any such suit action or proceeding has been brought in
an inconvenient forum.  A final judgment
in any such suit, action or proceeding brought in any such court may be
enforced in any other courts to whose jurisdiction you or we are or may be
subject, by suit upon judgment.

 

This
Commitment Letter is delivered to you on the understanding that neither this
Commitment Letter, the Term Sheet or the Fee Letter nor any of their terms or
substance shall be disclosed, directly or indirectly, to any other person
(including, without limitation, other potential providers or arrangers of
financing) except (a) to your officers, directors, employees, attorneys,
agents, accountants and advisors who are directly involved in the consideration
of this matter on a confidential basis, (b) (i) in any legal,
judicial or administrative proceeding, (ii) as otherwise required by
applicable law, regulation or compulsory legal process or as requested by a
governmental authority, or (iii) in the case of this Commitment Letter and
the contents hereof (but not the Fee Letter and the contents thereof) as you
may determine is reasonably advisable to comply with your obligations under
securities and other applicable laws and regulations (in each case pursuant to
this clause (b), you agree, to the extent permitted by law, to inform us
promptly thereof prior to such disclosure), and (c) to the Company and its
officers, directors, employees, attorneys, accountants and advisors on a
confidential and need-to-know basis (but not the Fee Letter and the contents
thereof unless redacted in a form acceptable to the Commitment Parties in their
absolute discretion); provided
that you may disclose this Commitment Letter and the contents hereof (but not
the Fee Letter or the contents thereof) (x) in any prospectus or other
offering memorandum relating to any offering of the Permanent Financing or (y) to
any rating agency in connection with the Acquisition; provided, further, that the foregoing restrictions
shall cease to apply (except in respect of the Fee Letter and the contents
thereof) after this 

 

8

 

Commitment
Letter has been accepted by you and this Commitment Letter has become publicly
available as a result of its disclosure in accordance with the terms of this
paragraph.

 

Each
of the Commitment Parties hereby notifies you that, pursuant to the
requirements of the USA PATRIOT Act, Title III of Pub. L. 107-56 (signed into
law on October 26, 2001) (the “PATRIOT Act”), it is required to
obtain, verify and record information that identifies the Borrower (as defined
in the Term Sheet), which information includes names and addresses and other
information that will allow such Lender to identify the Borrower in accordance
with the PATRIOT Act.

 

The
compensation, reimbursement, indemnification and confidentiality provisions
contained herein and in the Fee Letter and any other provision herein or
therein which by its terms expressly survives the termination of this
Commitment Letter shall remain in full force and effect regardless of whether
definitive financing documentation shall be executed and delivered and
notwithstanding the termination of this Commitment Letter or the commitment
hereunder; provided that your obligations with respect to
indemnification of Lenders and the Administrative Agent (in each case, in such
capacity) shall automatically terminate and be superseded by the provisions of
the Bridge Facility Documentation upon the execution thereof.

 

If
the foregoing correctly sets forth our agreement, please indicate your
acceptance of the terms hereof and of the Term Sheet and the Fee Letter by
returning to us executed counterparts hereof and of the Fee Letter not later
than 10:00 a.m., New York City time, on November 15, 2010.  This offer will automatically expire at such
time if we have not received such executed counterparts in accordance with the
preceding sentence.  In the event that (i) the
Closing Date does not occur on or before November 30, 2011; provided
that in the event the Termination Date (as defined in the Merger Agreement) is
extended pursuant to Section 7.01(b)(i) of the Merger Agreement, such
date shall be similarly extended, but no later than June 30, 2012, (ii) the
Merger Agreement is terminated without the consummation of the Acquisition
having occurred or (iii) the closing of the Acquisition shall occur
without use of the Bridge Facility, then this Commitment Letter and our
commitment hereunder and our agreements to perform the services described
herein shall automatically terminate without further action or notice and
without further obligation to you unless the Commitment Parties shall, in their
discretion, agree to an extension. 
Before such date and subject to the preceding paragraph, you may
terminate the commitments hereunder by written notice to us at any time.

 

[Remainder of this page intentionally left blank]

 

9

 

We
are pleased to have been given the opportunity to assist you in connection with
this important financing.

 

	
   

  	
  Very
  truly yours,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  J.P.
  MORGAN SECURITIES LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/
  Thomas D. Cassin

  
	
   

  	
   

  	
  Name:
  Thomas D. Cassin

  
	
   

  	
   

  	
  Title:
  Managing Director

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  JPMORGAN
  CHASE BANK, N.A.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/
  Robert P. Kellas

  
	
   

  	
   

  	
  Name:
  Robert P. Kellas

  
	
   

  	
   

  	
  Title:
  Executive Director

  

 

 

Accepted
and agreed to as of the date first above written:

 

	
  CATERPILLAR INC.

  
	
   

  
	
  By

  	
  /s/
  Edward J. Scott

  	
   

  
	
   

  	
  Name:
  Edward J. Scott

  	
   

  
	
   

  	
  Title: Corporate Treasurer

  	
   

  

 

 

 

 

EXHIBIT A

 

PROJECT BADGER

$8.6 Billion Senior Bridge Term Loan Credit Facility

Summary of Principal Terms and Conditions

 

	
  Borrower:

  	
  Caterpillar
  Inc. (the “Borrower”).

  
	
   

  	
   

  
	
  Transactions:

  	
  The
  Borrower intends to acquire (the “Acquisition”) all of the equity interests
  of a company previously identified to us as “Badger” (the “Company”),
  pursuant to an Agreement and Plan of Merger, dated as of November 14,
  2010(as amended, the “Merger Agreement”), among the Borrower, a wholly-owned
  subsidiary of the Borrower and the Company for an aggregate cash
  consideration (the “Cash Consideration”), all as set forth in the
  Merger Agreement. In connection with the Acquisition, the Borrower intends to
  (a) obtain a senior bridge term loan credit facility described below
  under the caption “Bridge Facility”, (b) repay outstanding indebtedness
  of the Company and its subsidiaries and (c) pay the fees and expenses
  incurred in connection with the foregoing (the “Transaction Costs”).
  It is anticipated that some or all of the Bridge Facility will be replaced or
  refinanced by (i) the issuance of senior unsecured notes (the “Senior Notes”)
  and/or equity securities by the Borrower through a public offering or in a
  private placement (the “Permanent Financing”) and (ii) certain cash available
  on the balance sheet of the Borrower. The transactions described in this
  paragraph are collectively referred to herein as the “Transactions”.

  
	
   

  	
   

  
	
  Administrative
  Agent:

  	
  JPMorgan
  Chase Bank, N.A. (“JPMorgan Chase Bank” and, in such capacity, the “Administrative
  Agent”).

  
	
   

  	
   

  
	
  Sole
  Lead Arranger and Sole Bookrunner:

  	
  J.P.
  Morgan Securities LLC (in such capacity, the “Lead Arranger”).

  
	
   

  	
   

  
	
  Lenders:

  	
  A
  syndicate of banks, financial institutions and other entities, including
  JPMorgan Chase Bank, arranged by the Lead Arranger (collectively, the “Lenders”).

  
	
   

  	
   

  
	
  Bridge
  Facility:

  	
  A
  senior bridge term loan credit facility in an aggregate principal amount of
  up to $8.6 billion (the “Bridge Facility”).

  
	
   

  	
   

  
	
  Purpose:

  	
  The
  proceeds of the Bridge Facility will be used by the Borrower (a) to pay
  the Cash Consideration and (b) to pay the Transaction Costs.

  

 

 

	
  Availability:

  	
  The
  Bridge Facility may be drawn in a single drawing on the closing date of the
  Acquisition (the date of such drawing being the “Closing Date”), which
  shall occur on or prior to November 30, 2011; provided that in the event
  the Termination Date (as defined in the Merger Agreement) is extended
  pursuant to Section 7.01(b)(i) of the Merger Agreement, such date
  shall be similarly extended, but no later than June 30, 2012. Amounts
  borrowed under the Bridge Facility that are repaid or prepaid may not be
  reborrowed.

  
	
   

  	
   

  
	
  Interest
  Rates and Fees:

  	
  As
  set forth on Annex I hereto.

  
	
   

  	
   

  
	
  Final
  Maturity and Amortization:

  	
  The
  Bridge Facility will mature on the first anniversary of the Closing Date.
  There will be no scheduled amortization.

  
	
   

  	
   

  
	
  Mandatory
  Prepayments and Commitment Reductions:

  	
  On
  or prior to the Closing Date, the aggregate commitments in respect of the
  Bridge Facility under the Commitment Letter or under the Bridge Facility
  Documentation (as applicable) shall be permanently reduced, and after the
  Closing Date, the aggregate loans under the Bridge Facility shall be prepaid,
  in each case, dollar-for-dollar, by the following amounts:

  
	
   

  	
   

  
	
   

  	
  (a) 100% of the net cash proceeds of all
  asset sales or other dispositions of property by the Borrower and its
  subsidiaries (including proceeds from the sale of stock of any subsidiary of
  the Borrower and insurance and condemnation proceeds), subject to exceptions
  and reinvestment provisions to be agreed upon; and

  
	
   

  	
   

  
	
   

  	
  (b) 100% of the net cash proceeds received
  from any issuance of debt, equity or equity-linked securities (in a public
  offering or private placement) by the Borrower or any of its subsidiaries
  (subject to exceptions to be agreed, including, without limitation,
  (i) indebtedness of Caterpillar’s captive finance subsidiaries,
  (ii) indebtedness under the existing credit facilities of Caterpillar,
  (iii) indebtedness incurred by Caterpillar and its subsidiaries in the
  ordinary course of business and (iv) any other financing reasonably
  agreed by the Lead Arranger).

  
	
   

  	
   

  
	
  Voluntary
  Prepayments and Reductions in Commitments:

  	
  Voluntary
  reductions of the unutilized portion of the commitments under the Bridge
  Facility and prepayments of borrowings thereunder will be permitted at any
  time, in minimum principal amounts to be agreed upon, without premium or
  penalty, subject to reimbursement of the Lenders’ redeployment costs in the
  case of a prepayment of Adjusted LIBOR borrowings other than on the last day
  of the relevant interest period.

  

 

A-2

 

	
  Representations
  and Warranties:

  	
  Substantially
  the same as those contained in the Borrower’s Credit Agreement (Four-Year
  Facility) dated as of September 16, 2010 (as in effect on the date
  hereof and disregarding any amendment or modification thereto made after the
  date hereof) (the “Existing Credit Agreement”), including: (a) corporate
  existence and power; (b) corporate authorization and no contravention; (c) governmental
  authorization; (d) binding effect; (e) accuracy of information and
  no material adverse change; (f) litigation; (g) use of proceeds and
  margin regulations; (h) ERISA; and (i) taxes.

  
	
   

  	
   

  
	
  Conditions
  Precedent to Borrowing on the Closing Date:

  	
  A
  borrowing under the Bridge Facility on the Closing Date will be subject
  solely to the conditions precedent set forth in paragraph 11 of the
  Commitment Letter and Exhibit B to the Commitment Letter.

  
	
   

  	
   

  
	
  Affirmative
  Covenants:

  	
  Substantially similar to those found in the
  Existing Credit Agreement including preservation of existence; compliance
  with laws; maintenance of properties; payment of taxes and other claims; use
  of proceeds; delivery of financial statements; delivery of certificates and
  other information; provision of notices for events of default, proceedings,
  ERISA events, or ratings changes.

  
	
   

  	
   

  
	
  Negative
  Covenants:

  	
  Substantially similar to those found in the
  Existing Credit Agreement including limitation on liens; and limitation on
  consolidations, mergers and dispositions of all or substantially all assets.

  
	
   

  	
   

  
	
  Financial
  Covenant:

  	
  Consolidated Net Worth (as defined in the Existing
  Credit Agreement) of Caterpillar shall not be less than $9,000,000,000.

  
	
   

  	
   

  
	
  Events
  of Default:

  	
  Change
  of control and others substantially similar to (and no more restrictive as to
  the Borrower than) those found in the Existing Credit Agreement (including
  notice and grace periods), including, without limitation, non-payment of
  principal, when due, or interest or fee payments; failure of any
  representation or warranty to be true and correct in any material respect
  when made or deemed made (subject to the provisions of paragraph 11 of the
  Commitment Letter); failure to perform or observe covenants or agreements in
  the loan documents, including the Fee Letter; cross-default to other material
  Debt for the Borrower or any subsidiary; bankruptcy or insolvency of the
  Borrower or any material subsidiary; judgments; defaults arising with respect
  to requirements of ERISA and invalidity of 

  

 

A-3

 

	
   

  	
  any
  Bridge Facility Documentation.

  
	
   

  	
   

  
	
  Voting:

  	
  Actions/amendments/waivers
  requiring the consent of all Lenders include: increase in aggregate
  commitments; reduction of principal, interest rates, or fees; postponement of
  dates fixed for payment of principal, interest or fees; modification of
  “Required Lenders” definition and other voting provisions; change of “pro
  rata” sharing provisions. Otherwise the instructions/approval of Required
  Lenders (i.e., Lenders holding a majority of the aggregate commitments prior
  to the Closing Date; thereafter, Lenders holding a majority of the aggregate
  principal balance outstanding) shall control.

  
	
   

  	
   

  
	
  Cost
  and Yield Protection:

  	
  Usual
  for facilities and transactions of this type, including customary tax
  gross-up provisions.

  
	
   

  	
   

  
	
  Assignments
  and Participations:

  	
  Prior
  to the Closing Date, the Lenders will be permitted to assign commitments
  under the Bridge Facility with the consent of the Borrower (not to be
  unreasonably withheld or delayed); provided
  that such consent of the Borrower shall not be required (i) if such
  assignment is made to another Lender under the Bridge Facility or an
  affiliate or approved fund of any such Lender or (ii) if such assignment
  is made to a Permitted Assignee. From the Closing Date, the Lenders will be
  permitted to assign loans under the Bridge Facility with the consent of the
  Borrower (not to be unreasonably withheld or delayed); provided that no
  consent of the Borrower shall be required in connection with an assignment
  (x) to another Lender or Lender’s affiliate or (y) to a Permitted
  Assignee. All assignments require the consent of the Administrative Agent
  (not to be unreasonably withheld or delayed). Each assignment shall be (i) of
  all or a proportionate part of all rights and obligations of the assigning
  Lender, (ii) in a minimum amount of $5,000,000 and increments of
  $1,000,000 in excess thereof, (iii) evidenced by an executed assignment
  and acceptance form delivered to the Administrative Agent, and
  (iv) accompanied by the payment of a $3,500 assignment processing fee to
  Administrative Agent. No such assignment shall result in any Lender having a
  commitment which is greater than 20% of the total commitment without the
  consent of the Borrower. 

   

  Lenders
  may sell participations without the consent of any person, so long as any
  such participation does not create rights in participants to approve
  amendments or waivers, except amendments, modifications, or 

  

 

A-4

 

	
   

  	
  waivers
  with respect to a decrease in fees, principal, or interest rates, or an
  extension of any date fixed for payments.

  
	
   

  	
   

  
	
  Defaulting
  Lenders:

  	
  Usual
  for facilities and transactions of this type, including the suspension of
  voting rights and rights to receive certain fees, and the termination or
  assignment of commitments or loans of defaulting Lenders, including the right
  of the Borrower to replace defaulting Lenders.

  
	
   

  	
   

  
	
  Expenses
  and Indemnification:

  	
  The
  Borrower will indemnify the Lead Arranger, the Administrative Agent, the
  Lenders, their respective affiliates, successors and assigns and the
  officers, directors, employees, agents, advisors, controlling persons and
  members of each of the foregoing (each, an “Indemnified Person”) and hold
  them harmless from and against all costs, expenses (including reasonable
  fees, disbursements and other charges of counsel) and liabilities of such
  Indemnified Person arising out of or relating to any claim or any litigation
  or other proceeding that relates to the Transactions, including the financing
  contemplated hereby, the Acquisition or any transactions in connection
  therewith; provided
  that no Indemnified Person will be indemnified for any cost, expense or
  liability that resulted from (i) its gross negligence or willful
  misconduct or (ii) the violation by such Indemnified Person of any law,
  regulation, ordinance, or judicial or governmental agency order. In addition,
  the Borrower shall pay all reasonable out-of-pocket expenses (including,
  without limitation, reasonable fees, disbursements and other charges of
  counsel identified in the Term Sheet (and, if reasonably necessary, of one
  local counsel in any relevant jurisdiction for all Indemnified Persons
  unless, in the reasonable opinion of an Indemnified Person, representation of
  all Indemnified Persons by such counsel would be inappropriate due to the
  existence of an actual or potential conflict of interest)) of (a) the
  Lead Arranger and the Administrative Agent in connection with the syndication
  of the Bridge Facility and the preparation and administration of the
  definitive documentation, and amendments, modifications and waivers thereto,
  and (b) the Lead Arranger, the Administrative Agent and the Lenders for
  enforcement costs associated with the Bridge Facility.

  
	
   

  	
   

  
	
  Governing
  Law and Forum:

  	
  Governing
  law: New York. 

  Forum: New York, New York and Chicago, Illinois

  

 

A-5

 

	
  Lead
  Arranger’s Counsel:

  	
  Davis
  Polk & Wardwell LLP

  

 

A-6

 

ANNEX I

 

	
  Interest
  Rates:

  	
  The
  interest rates under the Bridge Facility will be, at the option of the
  Borrower, (a) Adjusted LIBOR plus the Applicable Adjusted LIBOR Margin
  (as defined below) or (b) ABR plus the Applicable Adjusted LIBOR Margin
  minus 1.00%. 

  
	
   

  	
   

  
	
   

  	
  The
  Borrower may elect interest periods of 1, 2 or 3 months for Adjusted LIBOR
  borrowings. Calculation of interest shall be on the basis of the actual
  number of days elapsed in a year of 360 days (or 365 or 366 days, as the case
  may be, in the case of ABR loans based on the prime rate) and interest shall
  be paid (i) at the end of each interest period and no less frequently
  than quarterly, in the case of Adjusted LIBOR advances and
  (ii) quarterly, in the case of ABR advances. 

  
	
   

  	
   

  
	
   

  	
  ABR
  is the Alternate Base Rate, which is the highest of (a) the
  Administrative Agent’s Prime Rate, (b) the Federal Funds Effective Rate
  plus 1⁄2 of 1.0%, and (c) Adjusted LIBOR for a one-month interest period,
  plus 1.0%. 

  
	
   

  	
   

  
	
   

  	
  Adjusted
  LIBOR will at all times include statutory reserves.

  

 

Applicable
Adjusted LIBOR Margin:

 

	
  Ratings(1)

  	
   

  	
  A/A2

  	
   

  	
  A-/A3

  	
   

  	
  BBB+/Baa1

  	
   

  	
  BBB/Baa2

  
	
  Closing Date until 89 days following the Closing
  Date.

  	
   

  	
  125.0 bps

  	
   

  	
  150.0 bps

  	
   

  	
  175.0 bps

  	
   

  	
  200.0 bps

  
	
  90th day following the Closing Date until 179th
  day following the Closing Date

  	
   

  	
  150.0 bps

  	
   

  	
  175.0 bps

  	
   

  	
  200.0 bps

  	
   

  	
  225.0 bps

  
	
  180th day following the Closing Date until 269th
  day following the Closing Date

  	
   

  	
  187.5 bps

  	
   

  	
  212.5 bps

  	
   

  	
  237.5 bps

  	
   

  	
  262.5 bps

  
	
  From the 270th day following the Closing Date.

  	
   

  	
  237.5 bps

  	
   

  	
  262.5 bps

  	
   

  	
  287.5 bps

  	
   

  	
  312.5 bps

  

 

(1)  Based on ratings of long-term senior unsecured debt of the
Borrower from S&P and Moody’s.  If
the Borrower is split rated, the Applicable Adjusted LIBOR Margin will be
determined based on the higher of the two ratings, except if the lower of such
ratings is more than one level below the higher of such ratings, in which case
the Applicable Adjusted LIBOR Margin will be determined based on the level that
is one level below the higher of such ratings.

 

 

	
  Default Rate:

  	
  At
  any time when the Borrower is in default in the payment of any amount of
  principal due under the Bridge Facility, the overdue amount shall bear
  interest at 2% above the rate otherwise applicable thereto.  Overdue interest, fees and other amounts shall
  bear interest at 2% above the rate applicable to ABR loans.

  
	
   

  	
   

  
	
  Undrawn Commitment Fee:

  	
  The
  Borrower will pay a fee (the “Undrawn Commitment Fee”) on the undrawn
  portion of the commitments in respect of the Bridge Facility for the ratable
  benefit of the Lenders, payable quarterly in arrears and upon the termination
  of such commitments, at a rate per annum of 15.0 bps.

  
	
   

  	
   

  
	
  Duration Fees:

  	
  The
  Borrower will pay a fee (the “Duration Fee”), for the ratable
  benefit of the Lenders, in an amount equal to (i) 0.50% of the aggregate
  principal amount of the loans under the Bridge Facility outstanding on the
  date which is 90 days after the Closing Date, due and payable in cash on such
  90th day (or if such day is not a business day, the next business day); (ii) 0.75%
  of the aggregate principal amount of the loans under the Bridge Facility
  outstanding on the date which is 180 days after the Closing Date, due and
  payable in cash on such 180th day (or if such day is not a business day, the
  next business day); and (iii) 1.25% of the aggregate principal amount of
  the loans under the Bridge Facility outstanding on the date which is 270 days
  after the Closing Date, due and payable in cash on such 270th day (or if such
  day is not a business day, the next business day).

  

 

2

 

EXHIBIT B

 

PROJECT BADGER

$8.6 Billion Senior Bridge Term Loan Credit Facility

Summary of Additional Conditions Precedent(2)

 

The
initial borrowing under the Bridge Facility shall be subject to the following
additional conditions precedent:

 

1.                                       The Acquisition
shall be consummated simultaneously (or substantially simultaneously) with the
closing of the Bridge Facility in accordance with the Merger Agreement and the
Merger Agreement shall not have been amended or modified, and no condition
shall have been waived or consent granted, in any respect that is materially
adverse to the Lenders without the Lead Arranger’s prior written consent (such
consent not to be unreasonably withheld or delayed).

 

2.                                       All governmental
and third-party approvals necessary in connection with the Transactions and the
financing thereof (except for those with respect to which the failure to have
obtained approval could not reasonably be expected to have a material adverse
effect on Caterpillar and its subsidiaries or the Transactions) shall have been
obtained on satisfactory terms and be in full force and effect.

 

3.                                       The Lead
Arranger shall have received (a) U.S. GAAP audited consolidated balance
sheets and related statements of income, stockholders’ equity and cash flows of
each of Caterpillar and the Company for the three most recent fiscal years
ended at least 90 days prior to the Closing Date and (b) U.S. GAAP
unaudited consolidated and (to the extent available) consolidating balance sheets
and related statements of income, stockholders’ equity and cash flows of each
of Caterpillar and the Company for each subsequent fiscal quarter ended at
least 60 days before the Closing Date, which financial statements shall meet
the requirements of Regulation S-X under the Securities Act of 1933, as
amended, and all other accounting rules and regulations of the SEC
promulgated thereunder applicable to a registration statement under such Act on
Form S-1.

 

4.                                       The
Administrative Agent shall have received legal opinions, corporate
organizational documents, good standing certificates, resolutions and other
customary closing certificates as are customary for transactions of this type
and reasonably satisfactory to the Administrative Agent.

 

5.                                       Caterpillar shall
have a minimum rating of its senior unsecured long-term indebtedness giving
effect to the Transactions from each of S&P and Moody’s of BBB+ and Baa1
respectively, in each case with stable/stable or better outlook.

 

(2)  All capitalized terms used but not defined herein have the
meanings given to them in the Commitment Letter to which this Exhibit B is
attached, including Exhibits A thereto.

 

 

6.                                       The Commitment
Parties shall have received all fees and invoiced expenses required to be paid
on or prior to the Closing Date pursuant to the Fee Letter or otherwise.

 

7.                                       The Commitment
Parties shall have received, at least five business days prior to the Closing
Date, all documentation and other information required by regulatory
authorities under applicable “know your customer” and anti-money laundering rules and
regulations, including, without limitation, the PATRIOT Act.

 

2Exhibit 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
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Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00181-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00181-of-00352.parquet"}]]