SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
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Date
of Report (Date of earliest event
reported)
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July
31,
2008
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RHAPSODY
ACQUISITION CORP.
(Exact
name of registrant as specified in its charter)
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Delaware
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005-52203
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20-4743916
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(State
or other jurisdiction
of
incorporation)
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(Commission
File
Number)
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(IRS
Employer
Identification
No.)
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26000
Commercentre Drive, Lake Forest,
CA 92630
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(Address
of principal executive
offices)
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(Zip
Code)
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Registrant’s
telephone number, including area
code
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(949)
598-9242
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825
Third Avenue, 40
th
Floor, New York, NY 10022
(Former
name or former address, if changed since last report)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (
see
General
Instruction A.2. below):
o
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
o
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
o
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
o
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Item
1.01.
Entry
into a Material Definitive Agreement
As
disclosed under the headings “The Merger Proposal” and “The Merger Agreement”
beginning at pages 49 and 74, respectively, and elsewhere in Amendment No.
4 to
our Registration Statement on Form S-4 (333-150343) (“S-4”), which disclosures
are incorporated herein by reference, we entered into an Agreement and Plan
of
Merger dated as of February 19, 2008, as amended as of May 15, 2008, among
Rhapsody Acquisition Corp., a Delaware corporation (“we” or “us”), Primoris
Corporation, a Nevada corporation (“Primoris”) and certain stockholders of
Primoris. A copy of the merger agreement is incorporated by reference as
Exhibit 2.1 to this report.
Item
2.01
of this report discusses the consummation of the merger and various other
transactions and events contemplated by the merger agreement and is incorporated
herein by reference. As discussed in Item 2.01, in connection with the merger,
we and/or Primoris entered into a voting agreement and executive employment
agreements,
Also,
we
entered into an escrow agreement with Brian Pratt, as representative of
Primoris’s stockholders, and Continental Stock Transfer & Trust Company, as
escrow agent, the form of which agreement is listed as Exhibit 10.14 to this
report. The escrow agreement provides a fund for payment to us with respect
to
our post-closing rights to indemnification under the merger agreement for
breaches of representations and warranties and covenants by Primoris and its
former stockholders and foreign managers. A discussion of the escrow agreement
is contained under the heading “The Merger Proposal - Indemnification of
Rhapsody” beginning at page 50 of the S-4 and is incorporated herein by
reference.
We
entered into lock-up agreements with each of the former Primoris stockholders
and foreign managers, pursuant to which those holders agreed not to sell any
of
the shares of our common stock that they receive as a result of the merger
during the twelve-month period after the closing date of the merger. During
that
period, no private sales of such shares may be made unless the transferee agrees
to a similar restriction. We also agreed to register for resale (effective
after
such twelve-month period) under the Securities Act of 1933, as amended
(“Securities Act”), the shares of our common stock received by
former Primoris stockholders who may be deemed “affiliates” of ours under
Rule 144 of the Securities Act. The form of lock-up agreement is listed as
Exhibit 10.21 to this report.
In
addition, as referenced in Item 5.02 of this report, our board of directors
and
stockholders adopted a 2008 Long-Term Equity Incentive Plan.
Item
2.01.
Completion
of Acquisition or Disposition of Assets
On
July
31, 2008, we completed the acquisition of Primoris pursuant to the merger
agreement referenced in Item 1.01 of this report. Although we are the legal
acquirer, the merger is being accounted for as a reverse acquisition in
accordance with U.S. generally accepted accounting principles. Under this method
of accounting, we are treated as the “acquired” company for financial reporting
purposes. This determination was primarily based on Primoris comprising the
ongoing operations of the combined entity and senior management of the combined
company. In accordance with guidance applicable to these circumstances, the
merger is considered to be a capital transaction in substance. Accordingly,
for
accounting purposes, the merger is being treated as the equivalent of Primoris
issuing stock for our net assets, accompanied by a recapitalization. Our net
assets are being stated at historical cost, with no goodwill or other intangible
assets recorded. Financial operations prior to the merger will be those of
Primoris.
Item
2.01(f) of Form 8-K states that if the registrant was a shell company like
we
were immediately before the transaction disclosed under Item 2.01 (i.e., the
reverse acquisition), then the registrant must disclose the information that
would be required if the registrant were filing a general form for registration
of securities on Form 10. Accordingly, we are providing below the information
that would be included in a Form 10 if we were to file a Form 10. Please
note that the information provided below relates to the combined company after
the acquisition of Primoris, unless otherwise specifically indicated or the
context otherwise requires.
FORM
10 INFORMATION
Item
1.
Business
.
The
disclosures under the heading “Business of Primoris” beginning at page 114 of
the S-4 are incorporated herein by reference.
Item
1A.
Risk
Factors
.
The
information and disclosures included or incorporated by reference in this report
contain forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995, which statements generally include the plans
and
objectives of management for future operations, including plans and objectives
relating to our future economic performance and our current beliefs regarding
revenues we might earn if we are successful in implementing our business
strategies. The forward-looking statements are based on current
expectations or beliefs. For this purpose, statements of historical fact
may be deemed to be forward-looking statements. Forward-looking statements
include statements which are predictive in nature, which depend upon or refer
to
future events or conditions, or which include words such as “continue,”
“efforts,” “expects,” “anticipates,” “intends,” “plans,” “believes,”
“estimates,” “projects,” “forecasts,” “strategy,” “will,” “goal,” “target,”
“prospects,” “optimistic,” “confident” or similar expressions. In
addition, any statements concerning future financial performance (including
future revenues, earnings or growth rates), on-going business strategies or
prospects, and possible future company actions, which may be provided by
management, are also forward-looking statements. We caution that these
statements by their nature involve risks and uncertainties, and actual results
may differ materially depending on a variety of important factors, some of
which
are listed below. These forward-looking statements speak only as of the date
of
this report. We undertake no obligation to revise or update publicly any
forward-looking statement for any reason, except as otherwise required by
law.
An
investment in our company involves significant risks. You should carefully
consider the following risk factors, together with all of the other information
included in this report, before you decide whether to invest in us. If any
of
the following risks develop into actual events, our business, financial
condition or results of operations could be adversely affected in a material
way. This could cause the trading price of our common stock to decline, perhaps
significantly, and you therefore may lose all or part of your
investment.
Our
financial and operating results may vary significantly from quarter-to-quarter,
which may adversely affect the value of our common
stock.
Our
quarterly results may be adversely affected by:
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Changes
in our mix of customers, projects, contracts and
business;
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Regional
and/or general economic conditions;
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Variations
and changes in the margins of projects performed during any particular
quarter;
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Increases
in the costs to perform services caused by changing weather
conditions;
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The
termination of existing agreements or
contracts;
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The
budgetary spending patterns of
customers;
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Increases
in construction costs that we may be unable to pass through to our
customers;
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Cost
or schedule overruns on fixed-price
contracts;
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Availability
of qualified labor to execute specific
projects;
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Changes
in bonding requirements and bonding availability applicable to existing
and new agreements;
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Costs
we incur to support growth internally or through acquisitions or
otherwise;
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The
timing and volume of work under contract;
and
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Losses
experienced in our operations not otherwise covered by
insurance.
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Accordingly,
our operating results in any particular quarter may not be indicative of the
results that you may expect for any other quarter or for the entire year. Such
quarterly fluctuations in our financial and operating results may affect the
value of our common stock.
Our
business is labor intensive. It also depends on key personnel and we may not
be
able to operate and grow our business effectively if we lose the services of
any
of our key personnel or are unable to attract qualified and skilled personnel
in
the future. This could lead to a decrease in our overall competitiveness,
resulting in an adverse affect on our business, operating results, financial
condition and value of our stock.
We
are
dependent upon the efforts of our key personnel and our ability to retain them
and hire other qualified employees. In particular, we are dependent upon the
management and leadership of Brian Pratt, who is our Chief Executive Officer,
as
well as other members of senior management listed in the section titled
“Directors and Executive Officers” The loss of any of our executive officers or
other key personnel could affect our ability to run our business
effectively.
Competition
for senior management personnel is intense and we may not be able to retain
our
personnel even though we have entered into employment agreements with certain
of
them. The loss of any key personnel requires the remaining key personnel to
divert immediate and substantial attention to seeking a replacement. An
inability to find a suitable replacement for any departing executive officer
on
a timely basis could adversely affect our ability to operate and grow our
business.
Our
ability to maintain our productivity and profitability may also be limited
by
our ability to employ, train and retain skilled personnel necessary to meet
our
requirements. We may not be able to maintain an adequate skilled labor force
necessary to operate efficiently and to support our growth strategy. We have
from time-to time experienced shortages of certain types of qualified personnel.
For example, there is a shortage of engineers, project managers, field
supervisors, and other skilled workers capable of working on and supervising
the
construction of underground and industrial facilities, as well as providing
engineering services. The supply of experienced engineers, project managers,
field supervisors and other skilled workers may not be sufficient to meet
current or expected demand. The commencement of new, large-scale infrastructure
projects or increased demand for workers available to us, could affect our
business, even if we are not awarded such projects. Labor shortages or increased
labor costs could impair our ability to maintain our business or grow our
revenues. If we are unable to hire employees with the requisite skills, we
may
also be forced to incur significant training expenses. The occurrence of any
of
the foregoing could have an adverse effect on our business, operating results,
financial condition and value of our stock.
We
may be unsuccessful at generating internal growth, which may affect our ability
to expand our operations or grow our business, which may cause an adverse effect
on our financial condition, results of operations and cash
flows.
Our
ability to generate internal growth will be affected by, among other factors,
our ability to:
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Increase
the number of projects performed for existing
customers;
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Hire
and retain qualified personnel;
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Successfully
bid for new projects; and
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Adapt
the range of services we offer to address our customers’ evolving
construction needs.
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In
addition, our customers may reduce the number or size of projects available
to
us due to their inability to obtain capital. Many of the factors affecting
our
ability to generate internal growth may be beyond our control, and we cannot
be
certain that our strategies will be successful or that we will be able to
generate cash flow sufficient to fund our operations and to support internal
growth. If we are unsuccessful, we may not be able to achieve internal growth,
expand our operations or grow our business and the failure to do so could have
an adverse effect on our financial condition, results of operations and cash
flow.
Demand
for our services may decrease during an economic recession, and such lack of
demand may adversely affect our business.
The
engineering and construction industries historically have experienced cyclical
fluctuations in financial results due to economic recessions, downturns in
business cycles of our customers, material shortages, price increases by
subcontractors, interest rate fluctuations, and other economic factors beyond
our control. If the general level of economic activity deteriorates, our
customers may delay or cancel upgrades, expansions, and/or maintenance and
repairs to their systems. Many factors, including the financial condition of
the
industry, could adversely affect our customers and their willingness to fund
capital expenditures in the future.
We
are
also dependent on the amount of work our customers outsource. In a slower
economy, our customers may decide to outsource less infrastructure services,
resulting in a lower demand for our services. In addition, consolidation,
competition or capital constraints in the industries we serve may result in
reduced spending by, or the loss of, one or more of our customers.
We
derive a significant portion of our revenues from a few customers, and the
loss
of one or more of these customers could have significant effects on our
revenues, resulting in adverse effects on our financial condition, results
of
operations and cash flows.
Our
customer base is highly concentrated, with our top ten customers accounting
for
45.1% of our revenue in 2007 and 42.2% of our revenue in 2006. Our largest
customer in 2007 was Jacobs Engineering, which accounted for 10.2% of our
revenue and our largest customer in 2006 was San Diego Gas & Electric, which
accounted for 10.8% of our total revenue for the period. Our revenue could
significantly decline if we lose one or more of our significant customers.
In
addition, revenues under our contracts with significant customers may vary from
period-to-period depending on the timing and volume of work which such customers
order in a given period and as a result of competition from the in-house service
organizations of several of our customers. Reduced demand for our services
or a
loss of a significant customer could have an adverse effect on our financial
condition, results of operations and cash flows.
Our
actual cost may be greater than expected in performing our fixed-price and
unit-price contracts, causing us to realize significantly lower profits on
our
projects, which would have an adverse effect on our financial condition, results
of operations and cash flows.
We
currently generate, and expect to continue to generate, a portion of our revenue
and profits under fixed-price and unit-price contracts. The portion of revenue
generated from fixed-price and unit-price contracts for 2007, 2006 and 2005
was
64%, 79% and 68%, respectively. For the three months ended March 31, 2008 and
2007, the portion of revenue generated from fixed-price and unit-price contracts
was 63% and 77%, respectively. The portion of gross profit generated from
fixed-price and unit-price contracts for 2007, 2006 and 2005 was 51%, 56% and
37%, respectively. For the three months ended March 31, 2008 and 2007, the
portion of gross profit generated from fixed-price and unit-price contracts
was
50% and 58%, respectively. We must estimate the costs of completing a particular
project to bid for these types of contracts. The actual cost of labor and
materials, however, may vary from the costs we originally estimated and we
may
not be successful in recouping additional costs from our customers. These
variations, along with other risks inherent in performing fixed-price and
unit-price contracts, may cause gross profits for a project to differ from
those
we originally estimated and could result in reduced profitability or losses
on
projects due to changes in a variety of factors such as:
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Failure
to properly estimate costs of engineering, materials, equipment or
labor;
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Unanticipated
technical problems with the structures, materials or services being
supplied by us, which may require that we spend our own money to
remedy
the problem;
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Project
modifications creating unanticipated
costs;
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Changes
in the costs of equipment, materials, labor or
subcontractors;
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Our
suppliers’ or subcontractors’ failure to
perform;
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Difficulties
by our customers to obtain required governmental permits or
approvals;
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Changes
in local laws and regulations;
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Delays
caused by local weather conditions;
and
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Exacerbation
of any one or more of these factors as projects grow in size and
complexity. Depending upon the size of a particular project, variations
from the estimated contracts costs could have an adverse effect on
our
financial condition, results of operations and cash
flows.
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We
may lose business to competitors through the competitive bidding processes,
which loss of business could have an adverse effect on our financial condition,
results of operations and cash flows.
We
are
engaged in highly competitive businesses in which customer contracts are often
awarded through bidding processes based on price and the acceptance of certain
risks. We compete with other general and specialty contractors, both foreign
and
domestic, including large international contractors and small local contractors.
The strong competition in our markets requires maintaining skilled personnel,
investing in technology and also puts pressure on profit margins. Because of
this, we could be prevented from obtaining contracts for which we have bid
due
to price, greater perceived financial strength and resources of our competitors
and/or perceived technology advantages.
We
may pay our suppliers and subcontractors before receiving or ever receiving
payment from our customers for the related services, which may adversely affect
our financial condition, results of operations and cash
flows.
We
use
subcontractors and material suppliers for portions of certain work, and our
customers pay us for those related services. If we pay our suppliers and
subcontractors for materials purchased and work performed for customers who
fail
to pay, or such customers delay in paying us for the related work or materials,
we could experience a material adverse effect on our financial condition,
results of operations and cash flows.
Our
unionized workforce may strike or commence work stoppages, which could adversely
affect our operations.
As
of
December 31, 2007, approximately 73% of our field labor employees were covered
by collective bargaining agreements. Although the majority of these agreements
prohibit strikes and work stoppages, we cannot be certain that strikes or work
stoppages will not occur in the future. Strikes or work stoppages would
adversely impact our relationships with our customers and could have an adverse
effect on our financial condition, results of operations and cash
flow.
Our
business growth could outpace the capability of our internal infrastructure
and
may prohibit us from expanding our operations or execute our business plan,
which failures may adversely affect the value of our common
stock.
Our
internal infrastructure may not be adequate to support our operations as they
expand. To the extent that we are unable to buy or build equipment necessary
for
a project, either due to a lack of available funding or equipment shortages
in
the marketplace, we may be forced to rent equipment on a short-term basis or
to
find alternative ways to perform the work without the benefit of equipment
ideally suited for the job, which could increase the costs of completing the
project. We often bid for work knowing that we will have to rent equipment
on a
short-term basis and we include our assumptions of market equipment rental
rates
into our bid. If market rates for rental equipment increase between the time
of
bid submission and project execution, our margins for the project may be
reduced. In addition, our equipment requires continuous maintenance, which
we
generally provide through our own repair facilities. If we are unable to
continue to maintain the equipment in our fleet, we may be forced to obtain
additional third-party repair services at a higher cost or be unable to bid
on
contracts.
A
significant portion of our business depends on our ability to provide surety
bonds and we may be unable to compete for or work on certain projects if we
are
not able to obtain the necessary surety bonds, which failure to capture or
compete for such work could result in an adverse effect on our financial
condition, results of operations and cash flows.
Our
contracts frequently require that we provide to our customers payment and
performance bonds. Furthermore, under standard terms in the surety market,
sureties issue or continue bonds on a project-by-project basis and can decline
to issue bonds at any time or require the posting of additional collateral
as a
condition to issuing or renewing any bonds.
Current
or future market conditions, as well as changes in our sureties’ assessment of
our operating and financial risk, could cause our surety providers to decline
to
issue or renew, or substantially reduce the amount of bonds for our work and
could increase our bonding costs. These actions could be taken on short notice.
If our surety providers were to limit or eliminate our access to bonding, our
alternatives would include seeking bonding capacity from other sureties, finding
more business that does not require bonds and posting other forms of collateral
for project performance, such as letters of credit or cash. We may be unable
to
secure these alternatives in a timely manner, on acceptable terms, or at all.
Accordingly, if we were to experience an interruption or reduction in the
availability of bonding capacity, we may be unable to compete for or work on
certain projects and such interruption or reduction could have an adverse effect
on our financial condition, results of operations and cash flows.
Our
bonding requirements may limit our ability to incur indebtedness, which would
limit our ability to refinance our existing credit facilities or to execute
our
business plan, and potentially result in an adverse effect on our
business.
Our
ability to obtain surety bonds depends upon various factors including our
capitalization, working capital and amount of our indebtedness. In order to
help
ensure that we can obtain required bonds, we may be limited in our ability
to
incur additional indebtedness that may be needed to refinance our existing
credit facilities upon maturity and to execute our business plan. Our inability
to incur additional indebtedness could have an adverse effect on our business,
operating results and financial condition.
Our
business may be affected by difficult work sites and environments that may
adversely affect our ability to procure materials and labor, which may adversely
affect our overall business.
We
perform our work under a variety of conditions, including, but not limited
to,
difficult and hard to reach terrain, difficult site conditions and busy urban
centers where delivery of materials and availability of labor may be impacted.
Performing work under these conditions can slow our progress, potentially
causing us to incur contractual liability to our customers. These difficult
conditions may also cause us to incur additional, unanticipated costs that
we
might not be able to pass on to our customers.
Inability
to perform our obligations under EPC contracts may lead to higher costs, which
would adversely affect our business.
EPC
(Engineer, Procure and Construct) contracts require us to perform a range of
services for our customers, some of which we routinely subcontract to other
parties. The portion of revenue generated from EPC contracts for 2007, 2006
and
2005 was 9%, 9% and 7%, respectively. For the three months ended March 31,
2008
and 2007, the portion of revenue generated from EPC contracts was 4% and 10%,
respectively. The portion of gross profit generated from EPC contracts for
2007,
2006 and 2005 was 0%, 3% and 4%, respectively. For the three months ended March
31, 2008 and 2007, the portion of gross profit generated from EPC contracts
was
3% and 8%, respectively. We believe that these types of contracts will become
increasingly prevalent in our industry. In most instances, these contracts
require completion of a project by a specific date, achievement of certain
performance standards or performance of our services at certain standards of
quality. If we subsequently fail to meet such dates or standards, we may be
held
responsible for costs resulting from such failure. Our inability to obtain
the
necessary material and equipment to meet a project schedule or the installation
of defective material or equipment could have an adverse effect on our financial
condition, results of operations and cash flows.
We
require subcontractors to assist us in providing certain services and we may
be
unable to retain the necessary subcontractors to complete certain projects
resulting in an adverse affect against our business.
We
use
subcontractors to perform portions of our contracts and to manage workflow,
particularly for design, engineering, procurement and some foundation work.
We
are not dependent on any single subcontractor. However, general market
conditions may limit the availability of subcontractors on which we rely to
perform portions of our contracts, causing delays and increases in our costs
that could have an adverse effect on our financial condition, results of
operations and cash flows.
Backlog
may not be realized or may not result in revenues or profits, which failure
in
realizing revenues or profits could result in an adverse effect on our financial
condition, results of operations and cash flows.
Backlog
is difficult to determine accurately and different companies within our industry
may define backlog differently. We refer to “backlog” as our estimated revenue
on uncompleted contracts, including the amount of revenue on contracts on which
work has not begun, minus the revenue we have recognized under such contracts.
We calculate backlog differently for different types of contracts. For our
fixed
price contracts, we include the full remaining portion of the contract in our
calculation of backlog. For our unit-price, time-and-equipment,
time-and-materials and cost-plus contracts, we do not include any revenue in
the
calculation of backlog, regardless of the duration of the contract. In addition,
we work with some of our customers under master service agreements (“MSAs”). We
do not include any projected revenue from MSA’s in our calculation of
backlog.
Most
contracts may be terminated by our customers on short notice, typically 30
to 90
days, but sometimes less. Reductions in backlog due to cancellation by a
customer or for other reasons could significantly reduce the revenue and profit
we actually receive from contracts in backlog. In the event of a project
cancellation, we may be reimbursed for certain costs but we typically have
no
contractual right to the total revenues reflected in our backlog. Projects
may
remain in backlog for extended periods of time. Given these factors and our
method of calculating backlog, our backlog at any point in time may not
accurately represent the revenue that we expect to realize during any period
and
our backlog as of the end of a fiscal year may not be indicative of the revenue
we expect to earn in the following fiscal year. Consequently, there can be
no
assurances as to the accuracy of our customers’ requirements or our estimates.
Inability to realize revenue from our backlog could have an adverse effect
on
our financial condition, results of operations and cash flows.
Our
use of percentage-of-completion accounting could result in a reduction or
elimination of previously reported profits, which reduction or elimination
may
result in an adverse effect on our financial condition, results of operations
and cash flows.
As
discussed in our “Management’s Discussion and Analysis of Financial Condition
and Results of Operations — Critical Accounting Policies” and in the
notes to our consolidated financial statements, our revenue is recognized on
a
percentage-of-completion method of accounting, using the cost-to-cost method,
where revenues are estimated based on the percentage of costs incurred to date
to total estimated costs. This method is used because management considers
expended costs to be the best available measure of progress on these contracts.
This accounting method is standard for fixed-price contracts. The
percentage-of-completion accounting practice we use results in our recognizing
contract revenues and earnings ratably over the contract term in proportion
to
our incurrence of contract costs. The earnings or losses recognized on
individual contracts are based on estimates of contract revenues, costs and
profitability. Contract losses are recognized in full when determined, and
contract profit estimates are adjusted based upon ongoing reviews of contract
profitability. Penalties are recorded when known or finalized, which generally
is during the latter stages of the contract. In addition, we record adjustments
to estimated costs of contracts when we believe the change in estimate is
probable and the amounts can be reasonably estimated. These adjustments could
result in both increases and decreases in profit margins. Actual results could
differ from estimated amounts and could result in a reduction or elimination
of
previously recognized earnings. In certain circumstances, it is possible that
such adjustments could be significant and could have an adverse effect on our
financial condition, results of operations and cash flows.
Our
financial results are based upon estimates and assumptions that may differ
from
actual results and such errors between the estimates and actual results may
have
an adverse effect on our financial condition, results of operations and cash
flows.
In
preparing our consolidated quarterly and annual financial statements in
conformity with GAAP, many estimates and assumptions are used by management
in
determining the reported revenues and expenses recognized during the periods
presented, and disclosures of contingent assets and liabilities known to exist
as of the date of the financial statements. These estimates and assumptions
must
be made because certain information that is used in the preparation of our
financial statements cannot be calculated with a high degree of precision from
data available, is dependent on future events, or is not capable of being
readily calculated based on generally accepted methodologies. Often times,
these
estimates are particularly difficult to determine and we must exercise
significant judgment. Estimates may be used in our assessments of the allowance
for doubtful accounts, useful lives of property and equipment, fair value
assumptions in analyzing goodwill and long-lived asset impairments, self-insured
claims liabilities, revenue recognition under percentage-of-completion
accounting and provisions for income taxes. From time-to-time we may publicly
provide earnings or other forms of guidance, which reflect our predictions
about
future revenue, operating costs and capital structure, among other factors.
These predictions may be impacted by estimates, as well as other factors that
are beyond our control and may not turn out to be correct. Actual results for
all estimates could differ materially from the estimates and assumptions that
we
use, which could have an adverse effect on our financial condition, results
of
operations and cash flows.
The
timing of new contracts may result in unpredictable fluctuations in our cash
flow and profitability, which could adversely affect our
business.
A
substantial portion of our revenues are derived from project-based work that
is
awarded through a competitive bid process. The portion of revenue generated
from
the competitive bid process for 2007, 2006 and 2005 was 44%, 63% and 72%,
respectively. For the three months ended March 31, 2008 and 2007, the portion
of
revenue generated from the competitive bid process was 43% and 78%,
respectively. It is generally very difficult to predict the timing and
geographic distribution of the projects that we will be awarded. The selection
of, timing of or failure to obtain projects, delays in award of projects, the
re-bidding or termination of projects due to budget overruns, cancellations
of
projects or delays in completion of contracts could result in the
under-utilization of our assets and reduce our cash flows. Even if we are
awarded contracts, we face additional risks that could affect whether, or when,
work will begin. For example, some of our contracts are subject to financing,
permitting and other contingencies that may delay or result in termination
of
projects. This can present difficulty in matching workforce size and equipment
location with contract needs. In some cases, we may be required to bear the
cost
of a ready workforce and equipment that is larger than necessary, resulting
in
unpredictability in our cash flow, expenses and profitability. If any expected
contract award or the related work release is delayed or not received, we could
incur substantial costs without receipt of any corresponding revenues. Moreover,
construction projects for which our services are contracted may require
significant expenditures by us prior to receipt of relevant payments by a
customer and may expose us to potential credit risk if such customer should
encounter financial difficulties. Finally, the winding down or completion of
work on significant projects that were active in previous periods will reduce
our revenue and earning if such significant projects have not been replaced
in
the current period.
If
we fail to integrate future acquisitions successfully, we may experience
operational challenges and risk which may have an adverse effect on our business
and results of operations.
As
part
of our growth strategy, we may acquire companies that expand, complement, or
diversify our business. Future acquisitions may expose us to operational
challenges and risks, including the diversion of management’s attention from our
existing business, the failure to retain key personnel or customers of an
acquired business, the assumption of unknown liabilities of the acquired
business for which there are inadequate reserves and the potential impairment
of
acquired intangible assets. Our ability to sustain our growth and maintain
our
competitive position may be affected by our inability to successfully integrate
any businesses acquired.
We
will incur increased costs as a result of being a public company, which expenses
may adversely affect our business.
As
a
public company, we will incur significant legal, accounting and other expenses
that Primoris did not incur as a private company. In addition, the
Sarbanes-Oxley Act of 2002, as well as new rules subsequently implemented by
the
Securities and Exchange Commission and/or The Nasdaq Stock Market, have required
changes in corporate governance practices of public companies. We expect these
new rules and regulations to significantly increase our legal and financial
compliance costs and to make some activities more time-consuming and costly.
For
example, in anticipation of becoming a public company, we created additional
board committees and adopted policies regarding internal controls and disclosure
controls and procedures. In addition, we will incur additional costs associated
with our public company reporting requirements and transitioning out of our
previous reporting status as a “blank check” company. We also expect these new
rules and regulations to make it more difficult and more expensive for us to
obtain director and officer liability insurance and we may be required to accept
reduced policy limits and coverage or incur substantially higher costs to obtain
the same or similar coverage. As a result, it may be more difficult for us
to
attract and retain qualified persons to serve on our board of directors or
as
executive officers. We are currently evaluating and monitoring developments
with
respect to these new rules, and though we cannot accurately predict the amount
of additional costs we may incur, or the timing of such costs, we currently
estimate that we will incur an additional $1,500,000 of annual recurring general
and administrative costs for public company costs.
Our
business may be materially adversely impacted by regional, national and/or
global requirements to significantly limit or reduce greenhouse gas emissions
in
the future.
Greenhouse
gases that result from human activities, including burning of fossil fuels,
have
been the focus of increased scientific and political scrutiny and are being
subjected to various legal requirements. International agreements, national
laws, state laws and various regulatory schemes limit or otherwise regulate
emissions of greenhouse gases, and additional restrictions are under
consideration by different governmental entities. We derive a significant amount
of revenues and contract profits from engineering and construction services
to
clients that own and/or operate a wide range of process plants and own and/or
operate electric power generating plants that generate electricity from burning
natural gas or various types of solid fuels. These plants emit greenhouse gases
as part of the process to generate electricity or other products. Compliance
with the existing greenhouse gas regulation may prove costly or difficult.
It is
possible that owners and operators of existing or future process plants and
electric generating plants could be subject to new or changed environmental
regulations that result in significantly limiting or reducing the amounts of
greenhouse gas emissions, increasing the cost of emitting such gases or
requiring emissions allowances. The costs of controlling such emissions or
obtaining required emissions allowances could be significant. It also is
possible that necessary controls or allowances may not be available. Such
regulations could negatively impact client investments in capital projects
in
our markets, which could negatively impact the market for our products and/or
services. This could materially adversely affect our business, financial
condition, results of operations and cash flows.
Our
international operations expose us to legal, political and economic risks in
different countries as well as currency exchange rate fluctuations that could
harm our business and financial results.
During
fiscal 2007, revenue attributable to services outside of the United States
accounted for approximately 5% of our total revenue. This revenue is derived
primarily from Ecuador and Canada. There are risks inherent in doing business
internationally, including:
|
|
•
|
Imposition
of governmental controls and changes in laws, regulations, policies,
practices, tariffs and taxes;
|
|
|
•
|
Political
and economic instability;
|
|
|
•
|
Changes
in U.S. and other national government trade policies affecting the
market
for our services;
|
|
|
•
|
Potential
non-compliance with a wide variety of laws and regulations, including
the
U.S. Foreign Corrupt Practices Act and similar non-U.S. laws and
regulations; and
|
|
|
•
|
Currency
exchange rate fluctuations, devaluations and other conversion
restrictions.
|
Any
of
these factors could have a material adverse affect on our business, financial
condition, results of operations and cash flows. We review foreign operations
annually to determine the viability and outlook for those
operations.
Our
outstanding warrants and options may be exercised in the future, which would
increase the number of shares eligible for future resale in the public market
and result in dilution to our stockholders.
As
of
July 31, 2008, we had outstanding warrants and options to purchase an aggregate
of 7,211,364 shares of common stock. To the extent such warrants or options
are
exercised, additional shares of our common stock will be issued, which will
result in dilution to our stockholders and increase the number of shares
eligible for resale in the public market. Sales of substantial numbers of such
shares, as well as the sale of shares issued pursuant to the incentive
compensation plan, in the public market could adversely affect the market price
of our common stock.
The
Nasdaq Global Market may delist our securities from quotation on its exchange,
which could limit investors’ ability to make transactions in our securities and
subject us to additional trading restrictions.
Our
common stock is currently listed on The Nasdaq Global Market. If Nasdaq delists
our securities from trading on its exchange, we could face significant material
adverse consequences, including:
|
|
•
|
a
limited availability of market quotations for our
securities;
|
|
|
•
|
a
limited amount of news and analyst coverage for our company;
and
|
|
|
•
|
a
decreased ability to issue additional securities or obtain additional
financing in the future.
|
We
are deemed a “controlled company” within the meaning of The Nasdaq Global Market
listing requirements and, as a result, are exempt from certain corporate
governance requirements, which may result in reduced corporate governance
protections to our stockholders.
Because
Brian Pratt controls more than 50% of the voting power of our common stock,
we
are considered a “controlled company” for purposes of The Nasdaq Global Market
listing requirements. As such, we are permitted, and have elected, to opt out
of
The Nasdaq Global Market listing requirements that would otherwise require
our
board of directors to have a majority of independent directors, our board
nominations to be selected, or recommended for the board’s selection, either by
a nominating committee comprised entirely of independent directors or by a
majority of independent directors and our compensation committee to be comprised
entirely of independent directors. Accordingly, you may not have the same
protections afforded to stockholders of companies that are subject to all of
The
Nasdaq Global Market corporate governance requirements. The audit committee
will
be comprised entirely of independent directors.
Three
of our directors are significant stockholders, which makes it possible for
them
to have significant influence over the outcome of all matters submitted to
our
stockholders for approval and which influence may be alleged to conflict with
our interests and the interests of our other
stockholders.
Three
of
our directors own an aggregate of approximately 53.5% of the outstanding shares
of our common stock. On his own, with the revocable proxies that have been
granted to him, Brian Pratt beneficially owns and has the power to vote
approximately 75.1% of the outstanding shares of our common stock. These
stockholders will have significant influence over the outcome of all matters
submitted to our stockholders for approval, including the election of our
directors and other corporate actions. In addition, such influence by one or
more of these affiliates could have the effect of discouraging others from
attempting to purchase us, take us over, and/or reducing the market price
offered for our common stock in such an event.
Our
rights to indemnification from Primoris’s former stockholders for damages
arising out of our merger with Primoris is limited in most instances to those
claims where damages exceed $1,400,000, is limited in all instances to the
shares placed in escrow and is our sole remedy under the merger
agreement.
In
connection with our merger with Primoris, 1,807,110 of the shares of our common
stock issuable to Primoris’s former stockholders and foreign managers were
deposited in escrow to provide a fund for payment to us with respect to our
rights to indemnification under the merger agreement for breaches of
representations, warranties and covenants by Primoris. Most claims for
indemnification may only be asserted by us once the damages exceed a $1,400,000
deductible and are only indemnifiable to the extent the damages exceed that
amount, except that claims made with respect to representations and warranties
relating to outstanding capitalization, title to Primoris shares, and certain
tax and environmental matters are not subject to the deductible. Accordingly,
it
is possible that we will not be entitled to indemnification even if Primoris
is
found to have breached certain of its representations, warranties and covenants
contained in the merger agreement if such breach would result in damages to
us
of less than $1,400,000. Also, our aggregate rights to indemnification for
all
claims are limited to the shares placed in escrow. Upon the later of 30 days
after we file our annual report on Form 10-K for our 2008 fiscal year or July
31, 2009, 1,445,688 shares of our common stock (less any shares applied in
satisfaction of, or reserved with respect to, indemnification claims made prior
to such date) shall be released from escrow to the former Primoris stockholders
and foreign managers. The remaining shares of common stock in escrow will be
available only with respect to our rights to indemnification relating to certain
tax and environmental matters. On August 1, 2011, all shares of our common
stock
remaining in escrow (less any shares reserved with respect to indemnification
claims made prior to such date) shall be released to the former Primoris
stockholders and foreign managers. Once all the shares of our common stock
are
released from escrow, we will have no claim for indemnity under the merger
agreement. These rights to indemnity are our sole remedy with respect to claims
for money damages relating to the merger and merger agreement.
Item
2.
Financial
Information
.
The
“Selected Historical Financial Information” beginning at page 25 of the S-4 is
incorporated herein by reference. “Primoris’s Management’s Discussion and
Analysis of Financial Condition and Results of Operations” beginning at page 128
of the S-4 is incorporated herein by reference.
Item
3.
Properties
.
The
disclosures under the heading “Business of Primoris - Facilities” at page 124 of
the S-4 are incorporated herein by reference.
Item
4.
Security
Ownership of Certain Beneficial Owners and Management
.
The
following table sets forth information regarding the beneficial ownership of
our
common stock as of July 31, 2008, immediately following consummation of the
merger, by:
|
|
•
|
each
person known by us to be the beneficial owner of more than 5% of
our
outstanding shares of common stock;
|
|
|
•
|
each
of our named executive officers and directors;
and
|
|
|
•
|
all
of our executive officers and directors as a
group.
|
Immediately
following consummation of the merger on July 31, 2008, we had 30,394,800 shares
of common stock outstanding, including 447,461 shares of common stock that
were
voted against the merger and may ultimately be converted into cash by holders
who perfect their conversion rights. Except as described in the footnotes to
the
table, beneficial ownership is determined in accordance with Rule 13d-3
promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended, and generally includes voting or investment
power with respect to securities. Except as indicated below, we believe that
each holder possesses sole voting and investment power with respect to all
of
the shares of the common stock owned by that holder, subject to community
property laws where applicable. In computing the number of shares beneficially
owned by a holder and the percentage ownership of that holder, shares of common
stock underlying derivative securities held by that holder that are currently
exercisable or convertible or are exercisable or convertible within the 60
days
after the date of the table, as applicable, are deemed outstanding. Those
shares, however, are not deemed outstanding for the purpose of computing the
percentage ownership of any other person or group. The inclusion of shares
in
this table as beneficially owned is not an admission of beneficial
ownership.
All
1,125,000 shares of our outstanding common stock owned by our stockholders
prior
to our initial public offering, including shares then held by Eric S. Rosenfeld,
were placed in escrow with Continental Stock Transfer & Trust Company, as
escrow agent, pursuant to an escrow agreement listed as Exhibit 10.10 to this
report, as described under the heading “Certain Relationships and Related Person
Transactions - Inside Stockholder Escrow” beginning at page 160 of the
S-4.
A
7.5%
portion of the shares of common stock that we issued in the merger with
Primoris, including 7.5% of the shares shown in the table below as held by
Brian
Pratt and the voting group, John P. Schauerman, John M. Perisich, Alfons
Theeuwes, and Arline Pratt were placed in escrow with Continental Stock Transfer
& Trust Company, as escrow agent, pursuant to an escrow agreement listed as
Exhibit 10.14 to this report, as referenced in Item 1.01 of this report. In
addition, all shares held by former Primoris stockholders and the foreign
managers of Primoris, including those referenced in the immediately preceding
sentence, are subject to lock-up agreements, the form of which is listed as
Exhibit 10.21 of this report, as referenced in Item 1.01 of this
report.
|
Name
and Address of Beneficial Owner
(1)
|
|
Number
of Shares of Common Stock
Beneficially
Owned
|
|
Percent
of Common Stock Beneficially Owned
|
|
|
Brian
Pratt and voting group
|
|
|
22,820,400
(2
|
)
|
|
75.08
|
%
|
|
John
P. Schauerman
|
|
|
1,161,000
(3
|
)
|
|
3.82
|
%
|
|
Eric
S. Rosenfeld
(4)
|
|
|
1,985,476
(5
|
)
|
|
6.35
|
%
|
|
Peter
J. Moerbeek
(6)
|
|
|
--
|
|
|
--
|
|
|
Stephen
C. Cook
(7)
|
|
|
--
|
|
|
--
|
|
|
David
D. Sgro
(8)
|
|
|
21,000
|
|
|
*
|
|
|
Thomas
E. Tucker
(9)
|
|
|
--
|
|
|
--
|
|
|
John
M. Perisich
|
|
|
108,000
(10
|
)
|
|
*
|
|
|
Alfons
Theeuwes
|
|
|
351,000
(11
|
)
|
|
1.15
|
%
|
|
Arline
Pratt
(12)
|
|
|
2,516,400
(13
|
)
|
|
8.28
|
%
|
|
All
directors and executive officers as a group
(9 persons)
|
|
|
26,446,876
|
|
|
84.61
|
%
|
___________
*
Less
than
1%.
|
(1)
|
Unless
otherwise indicated, the business address of each of the individuals
is
26000 Commercentre Drive, Lake Forest, California 92630. Messrs.
Pratt,
Schauerman, Rosenfeld, Moerbeek, Cook, Sgro and Tucker are directors
of
our company. Messrs. Pratt, Schauerman, Perisich and Theeuwes are
executive officers of our company.
|
|
(2)
|
Includes
14,072,400 shares of common stock that are owned by Mr. Pratt in
his name
and 81,000 shares of common stock that are owned by his spouse, Barbara
Pratt. In addition, Mr. Pratt has the power to vote an additional
8,667,000 shares of common stock pursuant to revocable proxies granted
to
him by the following group of stockholders, which proxies are revocable
at
any time by the grantor of each respective proxy and expire on July
31,
2011: Arline Pratt, trustee of the Pratt Family Trust and the Pratt
Family
Bypass Trust (see footnote 13 below); Scott E. Summers, trustee of
the
Scott E. Summers and Sherry L. Summers Family Trust dated August
21, 2001;
John P. Schauerman (see footnote 3 below); John C. Pratt; Timothy
R.
Healy; Gregory N. Pratt; Alfons Theeuwes (see footnote 11 below);
Donald
K. Brown; Anthony L. Leggio, trustee of the Anthony L. Leggio Separate
Property Trust Dated June 2, 1997; Geoff B. Pratt; Kenneth J. Borja;
David
J. Baker and Janice M. Baker, trustees of the Revocable Living Trust
dated
12/8/1994; Darryl Oscars; Donald and Linda Trisch; John M. Perisich,
trustee of the Perisich Family Trust dated July 11, 2007 (see footnote
10
below); and Combustion Automation Ltd., which entity is owned and
controlled by Roger Newnham.
|
|
(3)
|
Power
to vote the shares of common stock is held by Brian Pratt pursuant
to a
revocable proxy. The proxy is revocable at any time by Mr. Schauerman
and
expires on July 31, 2011.
|
|
(4)
|
The
business address of Mr. Rosenfeld is 825 Third Avenue, 40
th
Floor, New York, New York 10022.
|
|
(5)
|
Includes
106,840 shares of common stock held by the Rosenfeld 1991 Children’s
Trust, power to vote or dispose of which is held by Mr. Rosenfeld’s wife
as sole trustee, and 863,636 shares of common stock issuable upon
exercise
of warrants held by Mr. Rosenfeld.
|
|
(6)
|
The
business address of Mr. Moerbeek is 10913 Metronome Drive, Houston,
Texas
77043.
|
|
(7)
|
The
business address of Mr. Cook is 7500 San Felipe, Suite 600, Houston,
Texas
77063.
|
|
(8)
|
The
business address of Mr. Sgro is 825 Third Avenue, 40
th
Floor, New York, New York 10022.
|
|
(9)
|
The
business address of Mr. Tucker is 3 Upper Newport Plaza Drive, Newport
Beach, California 92660.
|
|
(10)
|
Power
to dispose of the shares is held by Mr. Perisich as trustee of the
Perisich Family Trust dated July 11, 2007. Power to vote the shares
of common stock is held by Brian Pratt pursuant to a revocable proxy.
The
proxy is revocable at any time by Mr. Perisich and expires on July
31,
2011.
|
|
(11)
|
Power
to vote the shares of common stock is held by Brian Pratt pursuant
to a
revocable proxy. The proxy is revocable at any time by Mr. Theeuwes
and
expires on July 31, 2011.
|
|
(12)
|
The
business address of Ms. Pratt is 402 Fairway Drive, Bakersfield,
California 93309.
|
|
(13)
|
Represents
2,208,600 shares of common stock held by the Pratt Family Trust and
307,800 shares of common stock held by the Pratt Family Bypass Trust.
Power to dispose of the shares is held by Arline Pratt as the sole
trustee
of both the Pratt Family Trust and the Pratt Family Bypass Trust.
Power to
vote the shares of common stock is held by Brian Pratt pursuant to
a
revocable proxy granted by Ms. Pratt as trustee of each trust. Each
proxy
is revocable at any time by Ms. Pratt as trustee and expires on July
31, 2011. Upon the expiration or revocation of the proxies, power
to vote
the shares of common stock held by the Pratt Family Trust and the
Pratt
Family Bypass Trust will be held by Ms. Pratt as trustee of each
trust.
|
Upon
consummation of the merger on July 31, 2008, our board of directors and
executive officers were reconstituted as follows:
|
Name
|
|
Age
|
|
Position
|
|
Brian
Pratt
|
|
56
|
|
Chairman
of the Board, Chief Executive Officer,
President
and Director
|
|
|
|
|
|
|
|
John
P. Schauerman
|
|
51
|
|
Chief
Financial Officer and Director
|
|
|
|
|
|
|
|
Eric
S. Rosenfeld
|
|
51
|
|
Director
|
|
|
|
|
|
|
|
Peter
J. Moerbeek
|
|
60
|
|
Director
|
|
|
|
|
|
|
|
Stephen
C. Cook
|
|
58
|
|
Director
|
|
|
|
|
|
|
|
David
D. Sgro
|
|
32
|
|
Director
|
|
|
|
|
|
|
|
Thomas
E. Tucker
|
|
65
|
|
Director
|
|
|
|
|
|
|
|
John
M. Perisich
|
|
43
|
|
Senior
Vice President, General Counsel and Secretary
|
|
|
|
|
|
|
|
Alfons
Theeuwes
|
|
56
|
|
Senior
Vice President of Accounting and
Finance
|
During
the three-year period following the closing, Mr. Rosenfeld will be entitled
to
appoint a person to be an observer at board meetings and to receive all
information distributed to the board members while acting in such capacity.
During such period, Mr. Rosenfeld may appoint the person then serving as
observer for election to the board in place of its then-designee and the
then-designee shall serve as observer for the balance of the period. Arnaud
Ajdler, who was one of our directors immediately prior to the merger, is
initially serving as observer. We anticipate that at some point during the
term
being served by David D. Sgro as a director, Mr. Ajdler will be designated
to replace Mr. Sgro as a director and Mr. Sgro will thereafter serve as observer
for the balance of the three-year period.
Biographical
and other information regarding our directors and executive officers and the
board observer is disclosed in the “The Director Election Proposal” beginning at
page 98 of the S-4 and is incorporated herein by reference.
Directors
Pratt, Moerbeek, Schauerman, Cook and Tucker were designees of the former
Primoris stockholders, and directors Rosenfeld and Sgro were designees of Mr.
Rosenfeld. Certain of the former Primoris stockholders who are parties to the
merger agreement (i.e., Brian Pratt, John P. Schauerman, the Summers Trust
and
Timothy R. Healy) and Mr. Rosenfeld entered into a voting agreement with us
at
the time of closing of the merger that provides that they will each vote their
shares of our common stock in favor of the election of such persons as directors
of our company in specified classes in all elections prior to the annual meeting
that will be held in 2011. A copy of the form of voting agreement is
incorporated by reference as Exhibit 10.19 to this report.
Item
6.
Executive
Compensation
.
The
disclosures under the headings “The Director Election Proposal - Compensation
Committee Information,” “The Director Election Proposal - Compensation of
Officers and Directors” and “The Director Election Proposal - Employment
Agreements” beginning at pages 103, 104 and 106, respectively, of the S-4 are
incorporated herein by reference. Copies of our executive employment agreements
are incorporated by reference as Exhibits 10.15 through 10.18 to this
report.
Item
7.
Certain
Relationships and Related Transactions, and Director
Independence
.
The
disclosures under the heading “Certain Relationships and Related Person
Transactions” beginning at page 160 of the S-4 are incorporated herein by
reference.
Nasdaq
listing standards that became applicable to us following the merger define
an
“independent director” as a person, other than an executive officer of a company
or any other individual having a relationship which, in the opinion of the
issuer’s board of directors, would interfere with the exercise of independent
judgment in carrying out the responsibilities of a director. Consistent with
these considerations, our board of directors has affirmatively determined that,
upon election to our board of directors on the closing of the merger,
Messrs. Moerbeek, Cook and Tucker became the independent directors of our
company.
Upon
the
closing of the merger, a number of the former Primoris stockholders delivered
revocable proxies to Brian Pratt covering their shares of our common stock
(see
the beneficial ownership disclosures relating to Mr. Pratt contained under
the heading “Item 4. Security Ownership of Certain Beneficial Owners and
Management” above in this Item 2.01 and Item 5.01 of this report). Through the
ownership of his own shares and through these revocable proxies, Mr. Pratt
held
more than 50% of the voting power of our company immediately after the merger.
As a result, we are considered a “controlled company” for purposes of Nasdaq
listing requirements (a corporation of which more than 50% of the voting power
is held by an individual, a group or another company). Therefore, we are not
subject to Nasdaq listing requirements that would otherwise require our board
of
directors to have a majority of independent directors and our compensation
and
nominating committees to be composed entirely of independent directors.
Accordingly, our stockholders do not have the same protections afforded to
stockholders of companies that are subject to those Nasdaq corporate governance
requirements, and the ability of our independent directors to influence our
business policies and affairs is likely be substantially reduced.
Item
8.
Legal
Proceedings
.
The
disclosures contained under the headings “Other Information Related to Rhapsody
- Legal Proceedings” and “Business of Primoris - Legal Proceedings” contained at
pages 111 and 125, respectively, of the S-4 are incorporated herein by
reference.
Item
9.
Market
Price of and Dividends on the Registrant’s Common Equity and Related Stockholder
Matters
.
The
disclosures contained under the heading “Price Range of Rhapsody Securities and
Dividends” at page 166 of the S-4 are incorporated herein by reference.
Immediately following consummation of the merger, there were approximately
55
holders of record of our common stock, six holders of record of our warrants
and
one holder of record of our units. We believe that the number of beneficial
holders of our common stock is in excess of 400.
Effective
August 4, 2008, our units, common stock and warrants that formerly were traded
on the OTC Bulletin Board began trading on The Nasdaq Global Market under the
symbols PRIMU, PRIM and PRIMW, respectively.
Item
10.
Recent
Sales of Unregistered Securities
.
The
disclosures contained in Part II - Item 5 of our annual report on Form 10-KSB
regarding sales of unregistered securities are incorporated herein by
reference.
As
described in our Form 10-KSB, on October 10, 2006, we consummated our initial
public offering. After deducting certain underwriting discounts and commissions
and offering expenses, the total net proceeds to us from the offering were
$38,833,559, of which $38,028,250 was deposited into a trust fund. In addition,
all of the proceeds from the simultaneous private sale of warrants were
deposited into the trust fund, for a total of $39,278,250 deposited into the
trust fund. The proceeds not placed in the trust fund became available to be
used to pay our costs and expenses.
On
July
31, 2008, the trust fund was liquidated and the proceeds ($41,299,855, including
earned interest that had not been used to fund our operations prior to the
merger) were distributed. Of these proceeds, $776,782 was distributed to
EarlyBirdCapital, Inc. ($414,000 of deferred underwriting fees, $360,000 of
investment banking fees and $2,782 of deal-related out-of-pocket expenses),
$612,916 was distributed for services provided in relation to the merger
transaction ($366,746 for legal, $9,600 for accounting, $42,697 for printing,
$52,245 for investor relations, $13,500 for proxy solicitation, $8,128 for
data
services, and $120,000 for NASDAQ filing fees), $52,500 to Crescendo Advisors
II
LLC for monthly administrative fees in arrears, $6,580 to BDO Seidman, LLP
for
the review of our June 30, 2008 Form 10-QSB, $190,000 to us to pay accrued
taxes and other accrued expenses for Rhapsody Acquisition Corp., and the
remaining $39,661,076 to us for general corporate use.
Holders
of 447,461 shares of our common stock voted against the merger with Primoris.
If
conversion rights are exercised with respect to all of those shares, then the
holders of those shares would receive approximately $7.98 per share, or an
aggregate of $3,570,739, from the funds that had been held in the trust
fund.
The
disclosures contained in Item 3.02 of this report are incorporated herein by
reference.
Item
11.
Description
of Registrant’s Securities to be Registered
.
The
disclosures contained in our Form 8-A/12B filed with the Securities and Exchange
Commission on July 31, 2008 are incorporated herein by
reference.
Item
12.
Indemnification
of Directors and Officers
.
The
disclosures contained under the heading “Indemnification of Directors and
Officers” beginning at page 153 of the S-4 are incorporated herein by reference.
Item
13.
Financial
Statements and Supplementary Data
.
The
financial statements contained or incorporated in Item 9.01 of this report
are
incorporated herein by reference.
Item
14.
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
.
The
disclosures contained in Item 4.01 of this report are incorporated herein by
reference.
Item
15.
Financial
Statements and Exhibits
.
The
financial statements and exhibits listed in Item 9.01 of this report are
incorporated herein by reference.
Item
3.02.
Unregistered
Sales of Equity Securities
The
description of the issuance of shares of our common stock to Primoris’s foreign
managers contained in Item 5.01 of this report is incorporated herein by
reference. The issuance was made pursuant to Regulation S (“Regulation S”)
promulgated under the Securities Act of 1933 (“Securities Act”) as a transaction
not requiring registration under Section 5 of the Securities Act. The
transaction was an offshore transaction where no directed selling efforts were
made in the United States and appropriate offering restrictions were
implemented. The foreign managers represented their intentions to acquire the
shares for investment only and not with a view to or for sale in connection
with
any distribution, and appropriate restrictive legends were affixed to the
certificates representing the shares. The foreign managers also had adequate
access, through business or other relationships, to information about
us.
Item
3.03.
Material
Modification to Rights of Security Holders
The
disclosures contained in Item 5.03 of this report are incorporated herein by
reference. In addition, the common stock purchase warrants that we issued in
an
offering that closed simultaneously with our initial public offering in October
2006 became exercisable in accordance with their terms upon consummation of
the
merger. A specimen warrant certificate is listed as Exhibit 4.3 to this
report.
Item
5.01.
Changes
in Control of Registrant
A
change
in control of our company occurred on July 31, 2008 in connection with the
merger described in Item 2.01. The disclosures contained or incorporated by
reference in Item 2.01 of this report are incorporated herein by reference.
The
former Primoris stockholders received pursuant to the merger agreement, and
Primoris’s foreign managers received pursuant to certain termination agreements,
an aggregate of (i) 24,094,800 shares of our common stock at the closing of
the
merger (subject to reduction in the event of exercise of dissenter’s rights by
any of the Primoris stockholders) plus (ii) the right to receive 2,500,000
shares of our common stock for each of the fiscal year ending December 31,
2008
and 2009 during which we achieve specified EBITDA (as defined in the merger
agreement) milestones. Of the aggregate number of shares of our common stock
issued in the merger to the holders of all issued and outstanding shares of
common stock of Primoris and the foreign managers, the foreign managers received
in the aggregate (a) 507,600 shares of our common stock at the closing of the
merger (subject to reduction in the event of exercise of dissenter’s rights by
any of the Primoris stockholders) plus (b) the right to receive 52,667 shares
of
our common stock for each of the fiscal years ending December 31, 2008 and
2009
during which we achieve specified EBITDA milestones. The shares of our common
stock issued to the foreign managers were issued in connection with and in
consideration for their entering into certain termination agreements with us
and
Primoris. The shares of our common stock issued to the Primoris stockholders
were issued in exchange for their shares of common stock of Primoris. Of the
shares we issued at the closing, 1,807,110 were placed in escrow to provide
a
fund to satisfy our rights to indemnification. Immediately prior to the closing
of the merger, Primoris made a $48,946,661 cash distribution to its
stockholders.
To
our
knowledge, no person or group of persons, as such terms are used in
Section 13(d)(3) of the Securities Exchange Act of 1934, is in control of
our company, except as described in Item 2.01 of this report under the heading
“Item 4. Security Ownership of Certain Beneficial Owners and Management.”
Information regarding beneficial ownership of our company prior to the change
in
control is included under the heading “Beneficial Ownership of Securities”
beginning at page 156 of the S-4 and is incorporated herein by reference. The
voting agreement entered into in connection with the merger is discussed in
Item
2.01 of this report under the heading “Item 5. Directors and Executive
Officers.”
Item
5.02.
Departure
of Directors or Certain Officers; Election of Directors; Appointment of Certain
Officers; Compensatory Arrangements of Certain Officers
The
information contained in Item 2.01 of this report under the headings “Item 5.
Directors and Executive Officers,” “Item 6. Executive Compensation,” “Item 7.
Certain Relationships and Related Transactions, and Director Independence” and
“Item 12. Indemnification of Directors and Officers” is incorporated herein by
reference.
In
addition, in connection with the merger, our board of directors and stockholders
approved the adoption of our 2008 Long-Term Equity Incentive Plan. The incentive
plan is listed as Exhibit 10.20 to this report and is described under the
heading “The Incentive Compensation Plan Proposal” beginning at page 92 of the
S-4, which description is incorporated herein by reference.
Item
5.03.
Amendments
to Articles of Incorporation or Bylaws; Change in Fiscal
Year
Our
certificate of incorporation was amended and restated following board and
stockholder approval in conjunction with the merger agreement. The amendments
accomplished by the amended and restated certificate of incorporation are
described under the heading “The Charter Amendment Proposals” at pages 89 to 90
of the S-4, except that we have not changed our corporate name.
Our
bylaws were amended and restated by our board of directors on August 5, 2008.
The substantive revisions were as follows:
|
·
|
Our
amended and restated bylaws provide that a special meeting of our
stockholders must be called by our corporate secretary at the request
in
writing by holders of not less than 10% of the total voting power
of all
of our outstanding securities then entitled to vote. Prior to the
amendment and restatement, our bylaws required the request in writing
of
stockholders owning a majority in amount of our entire capital stock
then
entitled to vote to call a special meeting of
stockholders.
|
|
·
|
Our
amended and restated bylaws state that, if a quorum is not present
or
represented at any meeting of the stockholders, then either the
chairperson of the meeting or the stockholders holding a majority
of the
shares represented at the meeting in person or by proxy shall have
the
power to adjourn the meeting. Our bylaws prior to amendment and
restatement stated that only the stockholders holding a majority
of the
shares represented at the meeting in person or by proxy, but not
the
chairperson of the meeting, had the power to adjourn the
meeting.
|
|
·
|
Our
bylaws prior to amendment and restatement had a provision specifically
providing that any transaction questioned in any stockholders’ derivative
suit, or any other suit to enforce alleged rights of us or any of
our
stockholders, on the ground of lack of authority, defective or irregular
execution, adverse interest of any director, officer or stockholder,
nondisclosure, miscomputation or the application of improper principles
or
practices of accounting, could be approved, ratified and confirmed
before
or after judgment by our board of directors or by our common stock
holders
and, if so approved, ratified or confirmed, would have the same force
and
effect as if the questioned transaction had been originally duly
authorized, and said approval, ratification or confirmation would
be
binding upon us and all of our stockholders and would constitute
a bar to
any claim or execution of any judgment in respect of such questioned
transaction. Our amended and restated bylaws do not have such a
provision.
|
|
·
|
The
authorized number of directors under our amended and restated bylaws
shall
by seven until changed by resolution of our board of directors. Under
our
bylaws prior to amendment and restatement, the number of directors
could
be not less than one nor more than nine, the exact number to be fixed
from
time to time by our board of
directors.
|
|
·
|
Our
bylaws prior to amendment and restatement required that our board
of
directors hold its annual meeting immediately after our annual meeting
of
stockholders. There is no such requirement under our amended and
restated
bylaws.
|
|
·
|
Under
our amended and restated bylaws, special meetings of our board of
directors may be called by the chairman of the board, our chief executive
officer, our president, our secretary or by any two directors. Our
bylaws
prior to amendment and restatement provided that special meetings
of our
board of directors could only be called by our chief executive officer
or
a majority of our board of
directors.
|
|
·
|
Our
amended and restated bylaws have a provision regarding approval of
loans
to our officers and employees. There was no similar provision under
our
bylaws prior to amendment and
restatement.
|
|
·
|
Our
amended and restated bylaws state that any director, or our entire
board
of directors, may be removed by the affirmative vote of at least
a
majority of our outstanding shares entitled to vote at an election
of
directors, but that such removal may only be for cause. Under our
bylaws
prior to amendment and restatement, directors could be removed with
or
without cause.
|
|
·
|
Our
amended and restated bylaws provide that for director nominations
or other
business to be properly brought before a meeting of stockholders
by a
stockholder, a stockholder’s notice must be delivered to our corporate
secretary:
|
|
o
|
In
the case of an annual meeting:
|
|
§
|
the
close of business on the forty-fifth day before the first anniversary
of
the date on which we first mailed our proxy materials for our prior
year’s
annual meeting of stockholders;
|
|
§
|
provided,
however, that if the date of the meeting has changed more than thirty
days
from the date of our prior year’s meeting, then in order for the
stockholder’s notice to be timely it must be delivered to our corporate
secretary a reasonable time before we mail our proxy materials for
the
current year’s meeting. “Reasonable time” shall conclusively be deemed to
coincide with any adjusted deadline publicly announced by us pursuant
to
Rule 14a-5(f) promulgated under the Securities Exchange Act of 1934,
as
amended, or otherwise.
|
|
o
|
In
the case of a special meeting, the close of business on the seventh
day
following the day on which public announcement is first made of the
date
of the special meeting.
|
Under
our
bylaws prior to amendment and restatement, for director nominations or other
business to be properly brought before a meeting of stockholders by a
stockholder, a stockholder’s notice had to be delivered to our corporate
secretary not less than sixty days nor more than ninety days prior to the
meeting; provided, however, that in the event that less than seventy days
’
notice
or prior
public disclosure of the date of the annual meeting was given or made to
stockholders, notice by a stockholder, to be timely, had to be received no
later
than the close of business on the tenth day following the day on which the
notice of the date of the annual meeting was mailed or the public disclosure
was
made, whichever first occurred.
Our
amended and restated bylaws also modified the information required to be set
forth in a stockholders notice as compared to the requirements under our bylaws
prior to amendment and restatement.
|
·
|
Our
amended and restated bylaws contain a provision regarding providing
notice
to our stockholders by means of electronic transmission. There was
no
similar provision under our bylaws prior to amendment and
restatement.
|
Copies
of
our amended and restated certificate of incorporation and bylaws are listed
as
Exhibits 3.1 and 3.2 in Item 9.01(d) of this report and incorporated herein
by
reference.
On
August
5, 2008, our board of directors approved a change in our fiscal year end from
March 31 to December 31. No transition report is required to be filed
because we are a former shell company that will file updated financial
information through June 30, 2008 in an amendment to this
report.
Item
5.06.
Change
in Shell Company Status
As
a
result of the merger described in Item 2.01, we ceased being a shell company.
The disclosures contained in Item 2.01 of this report are incorporated herein
by
reference.
Item
9.01.
Financial
Statements and Exhibits
(a)
Financial
Statements of Businesses Acquired
The
following financial statements of Primoris Corporation, a Nevada corporation,
and its subsidiaries are included or incorporated by reference in this
report:
|
Annual
Financial Statements
|
Page
|
|
|
|
|
Report
of Independent Registered Public Accounting Firm
|
FS-18
(*)
|
|
|
|
|
Consolidated
Balance Sheets as of December 31, 2007 and 2006
|
FS-19
(*)
|
|
|
|
|
Consolidated
Statements of Income for the Years Ended December 31, 2007, 2006
and
2005
|
FS-20
(*)
|
|
|
|
|
Consolidated
Statements of Stockholders’ Equity for the Years Ended December 31,
2007, 2006 and 2005
|
FS-21
(*)
|
|
|
|
|
Consolidated
Statements of Cash Flows for the Years Ended December 31, 2007, 2006
and
2005
|
FS-22
(*)
|
|
|
|
|
Notes
to Financial Statements
|
FS-24
(*) to
FS-39
(*)
|
|
|
|
|
Interim
Financial Statements
|
|
|
|
|
|
Condensed
Consolidated Balance Sheets as of June 30, 2008 (Unaudited) and December
31, 2007
|
(**)
|
|
|
|
|
Condensed
Consolidated Statements of Income and Retained Earnings for the Three
and
Six Months Ended June 30, 2008 and 2007 (Unaudited)
|
(**)
|
|
|
|
|
Condensed
Consolidated Statements of Cash Flows for the Three and Six Months
Ended
June 30, 2008 and 2007 (Unaudited)
|
(**)
|
|
|
|
|
Notes
to Condensed Consolidated Financial Statements (Unaudited)
|
(**)
|
|
|
|
|
Condensed
Consolidated Balance Sheets as of March 31, 2008 (Unaudited) and
December
31, 2007
|
FS-2
(*)
|
|
|
|
|
Condensed
Consolidated Statements of Income and Retained Earnings for the Three
Months Ended March 31, 2008 and 2007 (Unaudited)
|
FS-3
(*)
|
|
|
|
|
Condensed
Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 2008 and 2007 (Unaudited)
|
FS-4
(*)
|
|
|
|
|
Notes
to Condensed Consolidated Financial Statements (Unaudited)
|
FS-5
(*) to
FS-17
(*)
|
(b)
Pro
Forma Financial Information
The
following unaudited pro forma financial information is included or incorporated
by reference in this report:
|
Description
|
Page
|
|
|
|
|
Unaudited
Pro Forma Condensed Combined Financial Information Introductory
Description
|
81
(*)
|
|
|
|
|
Unaudited
Pro Forma Condensed Combined Balance Sheet as of March 31, 2008 and
Notes
thereto
|
83
to 85 (*)
|
|
|
|
|
Unaudited
Pro Forma Condensed Combined Statement of Operations for the Three
Months
Ended March 31, 2008 and the Year Ended December 31, 2007 and Notes
thereto
|
86
to 88 (*)
|
|
|
|
|
Unaudited
Pro Forma Condensed Combined Financial Information Introductory
Description
|
(**)
|
|
|
|
|
Unaudited
Pro Forma Condensed Combined Balance Sheet as of June 30, 2008 and
Notes
thereto
|
(**)
|
|
|
|
|
Unaudited
Pro Forma Condensed Combined Statement of Operations for the Six
Months
Ended June 30, 2008 and the Year Ended December 31, 2007 and Notes
thereto
|
(**)
|
|
(*)
|
Incorporated
by reference to the corresponding page contained in Amendment No.
4 to
Form S-4 (Registration No. 333-150343) that we filed on July 9,
2008.
|
|
(**)
|
To
be filed by amendment to this Form 8-K no later than 45 days after
the
date of filing of this report.
|
(c)
Shell
Company Transaction
The
disclosures contained in Items 9.01(a) and (b) of this report are incorporated
herein by reference.
|
Exhibit
No.
|
Description
|
|
|
|
|
2.1
|
Agreement
and Plan of Merger dated as of February 19, 2008 by and among Rhapsody
Acquisition Corp., Primoris Corporation and certain stockholders
of
Primoris Corporation (1)
|
|
|
|
|
3.1
|
Second
Amended and Restated Certificate of Incorporation of Rhapsody Acquisition
Corp. (6)
|
|
|
|
|
3.2
|
Amended
and Restated Bylaws of Rhapsody Acquisition Corp. (*)
|
|
|
|
|
4.1
|
Specimen
Unit Certificate (2)
|
|
|
|
|
4.2
|
Specimen
Common Stock Certificate (2)
|
|
|
|
|
4.3
|
Specimen
Warrant Certificate (3)
|
|
Exhibit
No.
|
Description
|
|
|
|
|
4.4
|
Form
of Unit Purchase Option Granted to Representative (4)
|
|
|
|
|
4.5
|
Form
of Warrant Agreement between Continental Stock Transfer & Trust
Company and the Registrant (3)
|
|
|
|
|
10.1
|
Letter
Agreement among the Registrant, EarlyBirdCapital, Inc. and Eric S.
Rosenfeld (2)
|
|
|
|
|
10.2
|
Letter
Agreement among the Registrant, EarlyBirdCapital, Inc. and Arnaud
Ajdler
(2)
|
|
|
|
|
10.3
|
Letter
Agreement among the Registrant, EarlyBirdCapital, Inc. and Leonard
B.
Schlemm (2)
|
|
|
|
|
10.4
|
Letter
Agreement among the Registrant, EarlyBirdCapital, Inc. and Jon Bauer
(2)
|
|
|
|
|
10.5
|
Letter
Agreement among the Registrant, EarlyBirdCapital, Inc. and Colin
D. Watson
(2)
|
|
|
|
|
10.6
|
Letter
Agreement among the Registrant, EarlyBirdCapital, Inc. and David
D. Sgro,
CFA (2)
|
|
|
|
|
10.7
|
Letter
Agreement among the Registrant, EarlyBirdCapital, Inc. and Greg Monahan
(2)
|
|
|
|
|
10.8
|
Letter
Agreement among the Registrant, EarlyBirdCapital, Inc. and Joel Greenblatt
(2)
|
|
|
|
|
10.9
|
Form
of Investment Management Trust Agreement between Continental Stock
Transfer & Trust Company and the Registrant (2)
|
|
|
|
|
10.10
|
Form
of Stock Escrow Agreement between the Registrant, Continental Stock
Transfer & Trust Company and the Initial Stockholders
(2)
|
|
|
|
|
10.11
|
Form
of Letter Agreement between Crescendo Advisors II LLC and Registrant
regarding administrative support (2)
|
|
|
|
|
10.12
|
Form
of Registration Rights Agreement among the Registrant and the Initial
Stockholders (2)
|
|
|
|
|
10.13
|
Form
of Subscription Agreement among the Registrant, Graubard Miller and
each
of Eric S. Rosenfeld, Leonard B. Schlemm, Jon Bauer, Colin D. Watson
and
Gotham Capital V (2)
|
|
|
|
|
10.14
|
Form
of Escrow Agreement among Rhapsody Acquisition Corp., Brian Pratt,
as
Representative, and Continental Stock Transfer & Trust Company, as
Escrow Agent (1)
|
|
|
|
|
10.15
|
Employment
Agreement of Brian Pratt, dated February 19, 2008 (#)
(*)
|
|
|
|
|
10.16
|
Employment
Agreement of John P. Schauerman, dated February 18, 2008 (#)
(*)
|
|
|
|
|
10.17
|
Employment
Agreement of John M. Perisich, dated February 18, 2008 (#)
(*)
|
|
|
|
|
10.18
|
Employment
Agreement of Alfons Theeuwes, dated February 18, 2008 (#)
(*)
|
|
Exhibit
No.
|
Description
|
|
|
|
|
10.19
|
Form
of Voting Agreement dated as of July 31, 2008 among the Registrant,
Eric
S. Rosenfeld, Brian Pratt, John P. Schauerman, the Scott E. Summers
and
Sherry L. Summers Family Trust Dated August 21, 2001, and Timothy
R. Healy
(*)
|
|
|
|
|
10.20
|
2008
Long-Term Equity Incentive Plan (#) (1)
|
|
|
|
|
10.21
|
Form
of Lock-Up Agreement by and among Rhapsody Acquisition Corp. and
the
former stockholders and foreign managers of Primoris Corporation
(5)
|
|
|
|
|
10.22
|
Indemnity
Agreement dated 2004 by and among Primoris Corporation; ARB, Inc.;
ARB
Structures, Inc.; Cardinal Contractors; Onquest, Inc.; and Liberty
Mutual
Insurance Company (*)
|
|
|
|
|
10.23
|
Loan
and Security Agreement dated as of March 22, 2007 between Primoris
Corporation and LaSalle Bank National Association (*)
|
|
|
|
|
10.24
|
First
Amendment to Loan and Security Agreement between Primoris Corporation
and
LaSalle Bank National Association (*)
|
|
|
|
|
10.25
|
Second
Amendment to Loan and Security Agreement between Primoris Corporation
and
LaSalle Bank National Association (*)
|
|
|
|
|
14.1
|
Code
of Ethics (**)
|
|
|
|
|
21.1
|
Subsidiaries
of the Registrant (*)
|
_______________
|
(#)
|
Management contract or compensatory plan, contract
or
arrangement.
|
|
(**)
|
To be filed as an exhibit to the Registrant's
Current
Report on Form 8-K for August 5, 2008 and incorporated herein by
reference.
|
|
(1)
|
Attached
as an annex to the Registrant’s Registration Statement on Form S-4/A (File
No. 333-150343) filed with the Securities and Exchange Commission
on July
9, 2008 and incorporated herein by
reference.
|
|
(2)
|
Filed
as an exhibit to the Registrant’s Registration Statement on Form S-1 (File
No. 333-134694) filed with the Securities and Exchange Commission
on June
2, 2006 and incorporated herein by
reference.
|
|
(3)
|
Filed
as an exhibit to the Registrant’s Registration Statement on Form S-1/A
(File No. 333-134694) filed with the Securities and Exchange Commission
on
August 28, 2006 and incorporated herein by
reference.
|
|
(4)
|
Filed
as an exhibit to the Registrant’s Registration Statement on Form S-1/A
(File No. 333-134694) filed with the Securities and Exchange Commission
on
July 14, 2006 and incorporated herein by
reference.
|
|
(5)
|
Filed
as an exhibit to the Registrant’s Registration Statement on Form S-4 (File
No. 333-150343) filed with the Securities and Exchange Commission
on April
21, 2008 and incorporated herein by
reference.
|
|
(6)
|
Filed
as an exhibit to the Registrant’s Registration Statement on Form 8-A/12B
(File No. 001-34145) filed with the Securities and Exchange Commission
on
July 31, 2008 and incorporated herein by
reference.
|
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
|
|
|
|
|
Date:
August 6, 2008
|
RHAPSODY
ACQUISITION CORP.
|
|
|
|
|
|
By:
|
/s/ John
P.
Schauerman
|
|
|
John
P. Schauerman,
|
|
|
Chief
Financial Officer
|
EXHIBIT
ATTACHED TO THIS FORM 8-K
|
Exhibit
No.
|
Description
|
|
|
|
|
3.2
|
Amended
and Restated Bylaws of Rhapsody Acquisition Corp.
|
|
|
|
|
10.15
|
Employment
Agreement of Brian Pratt, dated February 19, 2008
|
|
|
|
|
10.16
|
Employment
Agreement of John P. Schauerman, dated February 18,
2008
|
|
|
|
|
10.17
|
Employment
Agreement of John M. Perisich, dated February 18, 2008
|
|
|
|
|
10.18
|
Employment
Agreement of Alfons Theeuwes, dated February 18, 2008
|
|
|
|
|
10.19
|
Form
of Voting Agreement dated as of July 31, 2008 among the Registrant,
Eric
S. Rosenfeld, Brian Pratt, John P. Schauerman, the Scott E. Summers
and
Sherry L. Summers Family Trust Dated August 21, 2001, and Timothy
R.
Healy
|
|
|
|
|
10.22
|
Indemnity
Agreement dated 2004 by and among Primoris Corporation; ARB, Inc.;
ARB
Structures, Inc.; Cardinal Contractors; Onquest, Inc.; and Liberty
Mutual
Insurance Company
|
|
|
|
|
10.23
|
Loan
and Security Agreement dated as of March 22, 2007 between Primoris
Corporation and LaSalle Bank National Association
|
|
|
|
|
10.24
|
First
Amendment to Loan and Security Agreement between Primoris Corporation
and
LaSalle Bank National Association
|
|
|
|
|
10.25
|
Second
Amendment to Loan and Security Agreement between Primoris Corporation
and
LaSalle Bank National Association
|
|
|
|
|
21.1
|
Subsidiaries
of the Registrant
|
Exhibit
3.2
AMENDED
AND RESTATED
BYLAWS
OF
RHAPSODY
ACQUISITION CORP.
a
Delaware corporation
PREAMBLE
These
bylaws are subject to, and governed by, the General Corporation Law of the
State
of Delaware (the “Delaware General Corporation Law”) and the certificate of
incorporation, as it may be amended from time to time, of RHAPSODY ACQUISITION
CORPORATION, a Delaware corporation (the “Corporation”). In the event of a
direct conflict between the provisions of these bylaws and the mandatory
provisions of the Delaware General Corporation Law or the provisions of the
certificate of incorporation, such provisions of the Delaware General
Corporation Law or the certificate of incorporation of the Corporation, as
the
case may be, will be controlling.
ARTICLE
I
CORPORATE
OFFICES
1.1
REGISTERED
OFFICE
The
registered office of the Corporation shall be at 615 S. DuPont Highway, Kent
County, Dover, Delaware
.
The
name of the registered agent of the Corporation at such location is National
Corporate Research, Ltd. The registered office of the Corporation may be changed
from time to time by the board of directors in the manner provided by law and
need not be identical to the principal place of business of the
Corporation.
1.2
OTHER
OFFICES
The
Corporation may also maintain or establish an office or offices at such other
place or places, within or without the State of Delaware, as the board of
directors may from time to time determine by resolution.
ARTICLE
II
MEETINGS
OF STOCKHOLDERS
2.1
PLACE
OF
MEETINGS
Meetings
of stockholders shall be held at any place, within or outside the State of
Delaware, designated by the board of directors. The board of directors may,
in
its sole discretion, determine that a meeting of stockholders shall not be
held
at any place, but may instead be held solely by means of remote communication
as
authorized by Section 211(a)(2) of the Delaware General Corporation Law. In
the
absence of any such designation, meetings of stockholders shall be held at
the
principal office of the Corporation.
2.2
ANNUAL
MEETING
The
annual meeting of the stockholders shall be held each year at such place within
or without the State of Delaware and on a date and at a time as may be
designated from time to time by the board of directors, for the purpose of
electing directors and for the transaction of any and all such other business
as
may properly be brought before the meeting. Any and all business of any nature
or character whatsoever may be transacted, and action may be taken thereon,
at
any annual meeting, except as otherwise provided by law or by these
bylaws.
2.3
SPECIAL
MEETING
Special
meetings of the stockholders for any purpose or purposes, unless otherwise
prescribed by law, may be called by the board of directors, the chairman of
the
board, the chief executive officer or president (in the absence of a chief
executive officer), and shall be called by the secretary of the Corporation
at
the request in writing by holders of not less than 10% of the total voting
power
of all outstanding securities of the Corporation then entitled to vote. Each
special meeting of stockholders shall be held, respectively, at any place within
or without the State of Delaware as determined by the board of directors, or
as
designated in a waiver of notice signed by all of the stockholders then entitled
to vote.
If
a
special meeting is called by any person or persons other than the board of
directors, the chairman of the board, the chief executive officer or the
president, then the request shall be in writing, specifying the time of such
meeting and the general nature of the business proposed to be transacted, and
shall be delivered personally or sent by registered mail or by telegraphic
or
other facsimile transmission to the secretary of the Corporation. The secretary
shall cause notice to be promptly given to the stockholders entitled to vote,
in
accordance with the provisions of Sections 2.4 and 2.5 of these bylaws, that
a
meeting will be held at the time requested by the person or persons calling
the
meeting. No business may be transacted at such special meeting other than the
business specified in such notice to stockholders. Nothing contained in this
paragraph of this Section 2.3 shall be construed as limiting, fixing or
affecting the time when a meeting of stockholders called by action of the board
of directors may be held.
2.4
NOTICE
OF
MEETINGS OF STOCKHOLDERS
All
notices of meetings with stockholders shall be in writing and shall be sent
or
otherwise given in accordance with Section 2.5 or Article IX of these bylaws
not
less than ten (10) nor more than sixty (60) days before the date of the meeting
to each stockholder entitled to vote at such meeting. The notice shall specify
the place, date, and hour of the meeting, the means of remote communication,
if
any, by which stockholders and proxy holders may be deemed to be present in
person and vote at such meeting, and, in the case of a special meeting, the
purpose or purposes for which the meeting is called.
2.5
MANNER
OF
GIVING NOTICE; AFFIDAVIT OF NOTICE
Written
notice of any meeting of stockholders, if mailed, is given when deposited in
the
United States mail, postage prepaid, directed to the stockholder at his address
as it appears on the records of the Corporation or, if electronically
transmitted, as provided in Article IX of these bylaws. An affidavit of the
secretary or an assistant secretary or of the transfer agent of the Corporation
that the notice has been given shall, in the absence of fraud, be prima facie
evidence of the facts stated therein.
2.6
QUORUM;
REQUIRED VOTE
The
holders of a majority of the stock issued and outstanding and entitled to vote
thereat, present in person or represented by proxy, shall constitute a quorum
at
all meetings of the stockholders for the transaction of business, except where
otherwise provided by statute, the certificate of incorporation or these bylaws.
Any shares, the voting of which at such meeting has been enjoined, or which
for
any reason cannot be lawfully voted at such meeting, shall not be counted to
determine a quorum at such meeting. Any meeting at which a quorum is present
may
continue to transact business until adjournment notwithstanding the withdrawal
of enough stockholders to leave less than a quorum. Except as otherwise provided
by law, the certificate of incorporation or these bylaws, in all matters other
than the election of directors, the affirmative vote of the majority of the
shares present in person or represented by proxy at a meeting at which a quorum
is present and entitled to vote on the subject matter shall be the act of the
stockholders. Directors shall be elected by a plurality of the shares present
in
person or represented by proxy at a meeting at which a quorum is present and
entitled to vote on the election of directors. Except as otherwise provided
by
law, the certificate of incorporation or these bylaws, where a separate vote
by
a class or series or classes or series is required, a majority of the
outstanding shares of such class or series or classes or series, present in
person or represented by proxy, shall constitute a quorum entitled to take
action with respect to that vote on that matter and the affirmative vote of
the
majority of shares of such class or series or classes or series present in
person or represented by proxy at the meeting shall be the act of such call
or
series or classes or series.
2.7
ADJOURNED
MEETING; NOTICE
If
a
quorum is not present or represented at any meeting of the stockholders, then
either (i) the chairperson of the meeting or (ii) the stockholders holding
a
majority of the shares represented thereat in person or by proxy shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum is present or represented. When
a
meeting is adjourned to another time or place, unless these bylaws otherwise
require, notice need not be given of the adjourned meeting if the time, place
if
any thereof, and the means of remote communications if any by which stockholders
and proxy holders may be deemed to be present in person and vote at such
adjourned meeting are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the Corporation may transact any business that
might have been transacted at the original meeting. If the adjournment is for
more than 30 days, or if after the adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given to
each
stockholder of record entitled to vote at the meeting.
The
chairperson of any meeting of stockholders shall determine the order of business
and the procedure at the meeting, including such regulation of the manner of
voting and the conduct of business.
2.8
VOTING
The
stockholders entitled to vote at any meeting of stockholders shall be determined
in accordance with the provisions of Section 2.11 of these bylaws, subject
to
the provisions of Section 217 of the Delaware General Corporation Law (relating
to voting rights of fiduciaries, pledgors and joint owners of stock) and Section
218 of the Delaware General Corporation Law (relating to voting trusts and
other
voting agreements).
Except
as
may be otherwise provided in the certificate of incorporation or these bylaws,
each stockholder shall be entitled to one vote for each share of capital stock
held by such stockholder.
2.9
WAIVER
OF
NOTICE
Whenever
notice is required to be given under any provision of the Delaware General
Corporation Law or of the certificate of incorporation or these bylaws, a
written waiver thereof, signed by the person entitled to notice, or a waiver
by
electronic transmission by the person entitled to notice, whether before or
after the time of the event for which notice is to be given, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute
a
waiver of notice of such meeting, except when the person attends a meeting
for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders need be specified in any written
waiver of notice or any waiver by electronic transmission unless so required
by
the certificate of incorporation or these bylaws.
2.10
STOCKHOLDER
ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless
otherwise provided in the certificate of incorporation, any action required
to
be taken at any annual or special meeting of stockholders of the Corporation,
or
any action which may be taken at any annual or special meeting of such
stockholders, may be taken without a meeting, without prior notice and without
a
vote, if a consent or consents in writing, setting forth the action so taken
and
bearing the dates of signature of the stockholders who signed the consent or
consents, shall be signed by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted.
Prompt
notice of the taking of the corporate action without a meeting by less than
unanimous written consent shall be given to those stockholders who have not
consented in writing and who, if the action had been taken at a meeting, would
have been entitled to notice of the meeting if the record date for such meeting
had been the date that written consents signed by a sufficient number of holders
to take the action were delivered to the Corporation as provided in Section
228
of the Delaware General Corporation Law. In the event that the action which
is
consented to is such as would have required the filing of a certificate under
any provision of the Delaware General Corporation Law, if such action had been
voted on by stockholders at a meeting thereof, the certificate filed under
such
provision shall state, in lieu of any statement required by such provision
concerning any vote of stockholders, that written consent has been given in
accordance with Section 228 of the Delaware General Corporation Law. Any action
taken pursuant to such written consent or consents of the stockholders shall
have the same force and effect as if taken by the stockholders at a meeting
thereof.
2.11
RECORD
DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS
In
order
that the Corporation may determine the stockholders entitled to notice of or
to
vote at any meeting of stockholders or any adjournment thereof, or entitled
to
express consent to corporate action in writing without a meeting, or entitled
to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion
or exchange of stock or for the purpose of any other lawful action, the board
of
directors may fix, in advance, a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted
by
the board of directors, and shall not be more than sixty (60) nor less than
ten
(10) days before the date of such meeting, nor more than ten (10) days after
the
date upon which the resolution fixing the record date for a written consent
is
adopted by the board of directors, nor more than sixty (60) days prior to any
other action.
If
the
board of directors does not so fix a record date:
(i)
The
record date for determining stockholders entitled to notice of or to vote at
a
meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held.
(ii)
The
record date for determining stockholders entitled to express consent to
corporate action in writing without a meeting, when no prior action by the
board
of directors is necessary, shall be the day on which the first written consent
is delivered to the Corporation as provided in Section 213(b) of the Delaware
General Corporation Law.
(iii)
The
record date for determining stockholders for any other purpose shall be at
the
close of business on the day on which the board of directors adopts the
resolution relating thereto.
A
determination of stockholders of record entitled to notice of or to vote at
a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the board of directors may fix a new record date for the adjourned
meeting.
2.12
PROXIES
Each
stockholder entitled to vote at a meeting of stockholders or to express consent
or dissent to corporate action in writing without a meeting may authorize
another person or persons to act for him by proxy authorized by an instrument
in
writing or by a transmission permitted by law filed in accordance with the
procedure established for the meeting, but no such proxy shall be voted or
acted
upon after three years from its date, unless the proxy provides for a longer
period. The revocability of a proxy that states on its face that it is
irrevocable shall be governed by the provisions of Section 212 of the Delaware
General Corporation Law.
2.13
LIST
OF
STOCKHOLDERS ENTITLED TO VOTE
The
officer who has charge of the stock ledger of the Corporation shall prepare
and
make, at least ten (10) days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. The Corporation shall
not
be required to include electronic mail addresses or other electronic contact
information on such list. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten (10) days prior to the meeting, either:
(i)
on a reasonably accessible electronic network, provided that the information
required to gain access to such list is provided with the notice of the meeting;
or (ii) during ordinary business hours, at the Corporation’s principal executive
office; or (iii) if not so specified, at the place where the meeting is to
be
held. In the event the Corporation determines to make the list available on
an
electronic network, the Corporation may take reasonable steps to ensure that
such information is available only to stockholders of the Corporation. If the
meeting is to be held at a place, then the list shall be produced and kept
at
the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present. If the meeting is to be held solely
by means of remote communication, then the list shall also be open to the
examination of any stockholder during the whole time of the meeting on a
reasonably accessible electronic network, and the information required to access
such list shall be provided with the notice of the meeting. Such list shall
presumptively determine the identity of the stockholders entitled to vote at
the
meeting and the number of shares held by each of them.
2.14
NOMINATIONS
AND PROPOSALS
Nominations
of persons for election to the board of directors of the Corporation and the
proposal of business to be considered by the stockholders may be made at any
meeting of stockholders only (a) pursuant to the Corporation’s notice of
meeting, (b) by or at the direction of the board of directors or (c) by any
stockholder of the Corporation who was a stockholder of record at the time
of
giving of notice provided for in these bylaws, who is entitled to vote at the
meeting and who complies with the notice procedures set forth in this Section
2.14; provided that stockholder nominations of persons for election to the
board
of directors of the Corporation at a special meeting may only be made if the
board of directors has determined that directors are to be elected at the
special meeting.
For
nominations or other business to be properly brought before a meeting of
stockholders by a stockholder pursuant to clause (c) of the preceding sentence,
the stockholder must have given timely notice thereof in writing to the
secretary of the Corporation and such other business must otherwise be a proper
matter for stockholder action. To be timely, a stockholder’s notice must be
delivered to the secretary of the Corporation not later than: (A) in the case
of
an annual meeting, the close of business on the forty-fifth (45
th
)
day
before the first anniversary of the date on which the Corporation first mailed
its proxy materials for the prior year’s annual meeting of stockholders;
provided, however, that if the date of the meeting has changed more than thirty
(30) days from the date of the prior year’s meeting, then in order for the
stockholder’s notice to be timely it must be delivered to the secretary of the
Corporation a reasonable time before the Corporation mails its proxy materials
for the current year’s meeting; provided further, that for purposes of the
preceding sentence, a “reasonable time” shall conclusively be deemed to coincide
with any adjusted deadline publicly announced by the Corporation pursuant to
Rule 14a-5(f) or otherwise; and (B) in the case of a special meeting, the
close of business on the seventh (7
th
)
day
following the day on which public announcement is first made of the date of
the
special meeting. In no event shall the public announcement of an adjournment
of
a meeting of stockholders commence a new time period for the giving of a
stockholder’s notice as described above.
Such
stockholder’s notice shall set forth (a) as to each person whom the stockholder
proposes to nominate for election or reelection as a director all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors in an election contest, or is otherwise
required, in each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (or any successor thereto, “Exchange Act”) and Rule
14a-11 thereunder (or any successor thereto) (including such person’s written
consent to being named in the proxy statement as a nominee and to serving as
a
director if elected); (b) as to any other business that the stockholder proposes
to bring before the meeting, a brief description of the business desired to
be
brought before the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such stockholder and
the
beneficial owner, if any, on whose behalf the proposal is made, the text of
the
proposal or business (including the text of any resolutions proposed for
consideration and in the event that such business includes a proposal to amend
the bylaws of the Corporation, the language of the proposed amendment); and
(c)
as to the stockholder giving the notice and the beneficial owner, if any, on
whose behalf the nomination or proposal is made (i) the name and address of
such
stockholder, as they appear on the Corporation’s books, and of such beneficial
owner, (ii) the class and number of shares of the Corporation that are owned
beneficially and of record by such stockholder and such beneficial owner, (iii)
a representation that the stockholder is a holder of record of stock of the
Corporation entitled to vote at such meeting and intends to appear in person
or
by proxy at the meeting to propose such business or nomination, and (iv) a
representation whether the stockholder or the beneficial owner, if any, intends
or is part of a group that intends (X) to deliver a proxy statement and/or
form
of proxy to holders of at least the percentage of the Corporation’s outstanding
capital stock required to approve or adopt the proposal or elect the nominee
and/or (Y) otherwise to solicit proxies from stockholders in support of such
proposal or nomination.
The
Corporation may require any proposed nominee to furnish such other information
as it may reasonably require to determine the eligibility of such proposed
nominee to serve as a director of the Corporation. Notwithstanding any provision
of these bylaws to the contrary, no business shall be conducted at a meeting
of
stockholders except in accordance with the procedures set forth in this Section
2.14.
For
purposes of this Section 2.14, “public announcement” shall include disclosure in
a press release reported by the Dow Jones News Service, Associated Press,
Reuters, Market Wire or comparable national news service or in a document
publicly filed by the Corporation with the Securities and Exchange Commission
pursuant to Section 13, 14 or 15(d) of the Exchange Act.
Notwithstanding
the foregoing provisions of this Section 2.14, a stockholder shall also comply
with all applicable requirements of the Exchange Act and the rules and
regulations thereunder with respect to the matters set forth in this Section
2.14. Nothing in this Section 2.14 shall be deemed to affect any rights (1)
of
stockholders to request inclusion of proposals in the Corporation’s proxy
statement pursuant to Rule 14a-8 under the Exchange Act, if applicable to the
Corporation, or (2) of the holders of any series of preferred stock to elect
directors pursuant to any applicable provisions of the certificate of
incorporation.
Except
as
otherwise provided by law, the chairperson of the meeting shall have the power
and duty to determine whether a nomination or any business proposed to be
brought before the meeting was made or proposed, as the case may be, in
accordance with the procedures set forth in this Section 2.14 and, if any
proposed nomination or business was not made or proposed in compliance with
this
Section 2.14, to declare that such nomination shall be disregarded or that
such
proposed business shall not be transacted.
ARTICLE
III
DIRECTORS
3.1
POWERS
Subject
to the provisions of the Delaware General Corporation Law and any limitations
in
the certificate of incorporation or these bylaws relating to action required
to
be approved by the stockholders or by the outstanding shares, the business
and
affairs of the Corporation shall be managed and all corporate powers shall
be
exercised by or under the direction of the board of directors.
3.2
NUMBER
OF
DIRECTORS
The
authorized number of directors of the Corporation shall be seven (7) until
changed by resolution of the board of directors. No reduction of the authorized
number of directors shall have the effect of removing any director before that
director’s term of office expires.
3.3
ELECTION,
QUALIFICATION AND TERM OF OFFICE OF DIRECTORS
The
board
of directors shall be divided into three classes designated as Class A, Class
B
and Class C, respectively. Directors shall be assigned to each class in
accordance with a resolution or resolutions adopted by the board of directors
and shall be elected as described in the certificate of
incorporation.
All
elections of directors shall be by written ballot, unless otherwise provided
in
the certificate of incorporation. If authorized by the board of directors,
such
requirement of a written ballot shall be satisfied by a ballot submitted by
electronic transmission, provided that any such electronic transmission must
be
either set forth or be submitted with information from which it can be
determined that the electronic transmission was authorized by the stockholder
or
proxy holder.
Notwithstanding
the foregoing provisions of this Section 3.3, each director shall serve until
his or her successor is duly elected and qualified or until his or her death,
resignation or removal. No decrease in the number of directors constituting
the
board of directors shall shorten the term of any incumbent director.
3.4
RESIGNATION
AND VACANCIES
Any
director may resign at any time upon notice given in writing or by electronic
transmission to the secretary of the Corporation. When one or more directors
so
resigns and the resignation is effective at a future date, a majority of the
directors then in office, including those who have so resigned, shall have
power
to fill such vacancy or vacancies, the vote thereon to take effect when such
resignation or resignations shall become effective, and each director so chosen
shall hold office as provided in this Section in the filling of other
vacancies.
Any
vacancies on the board of directors resulting from death, resignation,
disqualification, removal, newly created directorships or other causes shall,
except as otherwise provided by the Delaware General Corporation Law or by
the
certificate of incorporation, be filled only by the affirmative vote of a
majority of the remaining directors then in office, even though less than a
quorum of the board of directors, or by a sole remaining director. Whenever
the
holders of any class or classes of stock or series thereof are entitled to
elect
one or more directors by the provisions of the certificate of incorporation,
vacancies and newly created directorships of such class or classes or series
may
be filled by a majority of the directors elected by such class or classes or
series thereof then in office, or by a sole remaining director so elected.
Any
director elected in accordance with the preceding sentence shall hold office
for
the remainder of the full term of the class of directors in which the new
directorship was created or the vacancy occurred and until such director’s
successor shall have been elected and qualified.
3.5
PLACE
OF
MEETINGS; MEETINGS BY TELEPHONE
The
board
of directors of the Corporation may hold meetings, both regular and special,
either within or outside the State of Delaware.
Unless
otherwise restricted by the certificate of incorporation or these bylaws,
members of the board of directors, or any committee designated by the board
of
directors, may participate in a meeting of the board of directors, or any
committee, by means of conference telephone or other communications equipment
by
means of which all persons participating in the meeting can hear each other,
and
such participation in a meeting shall constitute presence in person at the
meeting.
3.6
REGULAR
MEETINGS
Regular
meetings of the board of directors may be held without notice at such time
and
at such place as shall from time to time be determined by resolution of the
board.
3.7
SPECIAL
MEETINGS; NOTICE
Special
meetings of the board of directors may be called by the chairman of the board
or
the chief executive officer or the president or the secretary or by any two
directors. Notice of the time and place of special meetings shall be delivered
either personally by hand, by courier or by telephone, sent by United States
first-class mail, postage prepaid, sent by facsimile or sent by electronic
mail,
directed to each director at that director’s address, telephone number,
facsimile number or electronic mail address, as the case may be, as shown on
the
Corporation’s records.
If
the
notice is (i) delivered personally by hand, by courier or by telephone, (ii)
sent by facsimile or (iii) sent by electronic mail, it shall be delivered or
sent at least twenty-four (24) hours before the time of the holding of the
meeting. If the notice is sent by United States mail, it shall be deposited
in
the United States mail at least four (4) days before the time of the holding
of
the meeting. Any oral notice may be communicated to the director. The notice
need not specify the place of the meeting (if the meeting is to be held at
the
Corporation’s principal executive office) nor the purpose of the meeting. It
shall not be necessary that the same method of giving notice be employed in
respect of all directors, but one permissible method may be employed in respect
of any one or more, and any other permissible method or methods may be employed
in respect of any other or others.
3.8
QUORUM
At
all
meetings of the board of directors, a majority of the authorized number of
directors shall constitute a quorum for the transaction of business, and the
act
of a majority of the directors present at any meeting at which there is a quorum
shall be the act of the board of directors, except as may be otherwise
specifically provided by statute or by the certificate of incorporation. If
a
quorum is not present at any meeting of the board of directors, then the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum is present. A
meeting at which a quorum is initially present may continue to transact business
notwithstanding the withdrawal of directors, if any action taken is approved
by
at least a majority of the required quorum for that meeting.
3.9
WAIVER
OF
NOTICE
Whenever
notice is required to be given under any provision of the Delaware General
Corporation Law or of the certificate of incorporation or these bylaws, a
written waiver thereof, signed by the person entitled to notice, or a waiver
by
electronic transmission by the person entitled to notice, whether before or
after the time of the event for which notice is to be given, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute
a
waiver of notice of such meeting, except when the person attends a meeting
for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders need be specified in any written
waiver of notice or any waiver by electronic transmission unless so required
by
the certificate of incorporation or these bylaws.
3.10
BOARD
ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless
otherwise restricted by the certificate of incorporation or these bylaws, any
action required or permitted to be taken at any meeting of the board of
directors, or of any committee thereof, may be taken without a meeting if all
members of the board or committee, as the case may be, consent thereto in
writing or by electronic transmission and the writing or writings or electronic
transmission or transmissions are filed with the minutes of proceedings of
the
board or committee. Such filing shall be in paper form if the minutes are
maintained in paper form and shall be in electronic form if the minutes are
maintained in electronic form.
3.11
FEES
AND
COMPENSATION OF DIRECTORS
Unless
otherwise restricted by the certificate of incorporation or these bylaws, the
board of directors shall have the authority to fix the compensation of
directors.
3.12
APPROVAL
OF LOANS TO OFFICERS OR EMPLOYEES
The
Corporation may lend money to, or guarantee any obligation of, or otherwise
assist any officer or other employee of the Corporation or of its subsidiary,
including any officer or employee who is a director of the Corporation or its
subsidiary, whenever, in the judgment of the directors, such loan, guaranty
or
assistance may reasonably be expected to benefit the Corporation and is not
prohibited by applicable laws, rules or regulations. The loan, guaranty or
other
assistance may be with or without interest and may be unsecured, or secured
in
such manner as the board of directors shall approve, including, without
limitation, a pledge of shares of stock of the Corporation.
3.13
REMOVAL
OF DIRECTORS
Except
as
may be provided in the Delaware General Corporation Law, the certificate of
incorporation or these bylaws, any director, or the entire board of directors
of
the Corporation may be removed at any time, but only for cause. The removal
shall be accomplished by the affirmative vote, at a special meeting of
stockholders called for that purpose in the manner provided in these bylaws,
of
the holders of at least a majority of the outstanding shares entitled to vote
at
an election for directors.
3.14
INTERESTED
TRANSACTIONS
No
contract or transaction between the Corporation and one or more of its directors
or officers, or between the Corporation and any other corporation, partnership,
association, or other organization in which one or more of its directors or
officers are directors or officers, or have a financial interest, shall be
void
or voidable solely for this reason, or solely because the director or officer
is
present at or participates in the meeting of the board of directors or committee
thereof which authorizes the contract or transaction, or solely because his
or
their votes are counted for such purpose, if (i) the material facts as to his
or
their relationship or interest and as to the contract or transaction are
disclosed or are known to the board of directors or the committee, and the
board
of directors or committee in good faith authorizes the contract or transaction
by the affirmative votes of a majority of the disinterested directors, even
though the disinterested directors be less than a quorum; or (ii) the material
facts as to his or their relationship or interest and as to the contract or
transaction are disclosed or are known to the stockholders entitled to vote
thereon, and the contract or transaction is specifically approved in good faith
by vote of the stockholders; or (iii) the contract or transaction is fair as
to
the Corporation as of the time it is authorized, approved or ratified, by the
board of directors, a committee thereof or the stockholders. Common or
interested directors may be counted in determining the presence of a quorum
at a
meeting of the board of directors or of a committee which authorizes the
contract or transaction.
ARTICLE
IV
COMMITTEES
4.1
COMMITTEES
OF DIRECTORS
The
board
of directors may, by resolution passed by a majority of the whole board,
designate one or more committees, with each committee to consist of one or
more
of the directors of the Corporation. The board may designate one or more
directors as alternate members of any committee, who may replace any absent
or
disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he
or
they constitute a quorum, may unanimously appoint another member of the board
of
directors to act at the meeting in the place of any such absent or disqualified
member. Any such committee, to the extent provided in the resolution of the
board of directors or in the bylaws of the Corporation, shall have and may
exercise all the powers and authority of the board of directors in the
management of the business and affairs of the Corporation, and may authorize
the
seal of the Corporation to be affixed to all papers that may require it; but
no
such committee shall have the power or authority to (i) amend the certificate
of
incorporation (except that a committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares of stock adopted
by the board of directors as provided in Section 151(a) of the Delaware General
Corporation Law, fix any of the preferences or rights of such shares relating
to
dividends, redemption, dissolution, any distribution of assets of the
Corporation or the conversion into, or the exchange of such shares for, shares
of any other class or classes or any other series of the same or any other
class
or classes of stock of the Corporation), (ii) approve or adopt, or recommend
to
the stockholders, any matter expressly required by the Delaware General
Corporation Law to be submitted to stockholders for approval, (iii) adopt,
amend
or repeal any bylaw of the Corporation, or (iv) declare any
dividend.
The
board
of directors may at any time increase or decrease the number of members of
a
committee or terminate the existence of a committee. The board of directors
may
at any time and for any reason remove any individual committee member or fill
any committee vacancy created by death, resignation, removal or increase in
the
number of members of a committee.
4.2
COMMITTEE
MINUTES
Each
committee shall keep regular minutes of its meetings and report the same to
the
board of directors when required.
4.3
MEETINGS
AND ACTION OF COMMITTEES
Meetings
and actions of committees shall be governed by, and held and taken in accordance
with, the provisions of Article III of these bylaws, Section 3.5 (place of
meetings and meetings by telephone), Section 3.6 (regular meetings), Section
3.7
(special meetings and notice), Section 3.8 (quorum), Section 3.9 (waiver of
notice), Section 3.10 (adjournment and notice of adjournment), and Section
3.11
(action without a meeting), with such changes in the context of those bylaws
as
are necessary to substitute the committee and its members for the board of
directors and its members; provided, however, that the time of regular meetings
of committees and special meetings of committees may also be called by
resolution of the board of directors and that notice of special meetings of
committees shall also be given to all alternate members, who shall have the
right to attend all meetings of the committee. The board of directors may adopt
rules for the government of any committee not inconsistent with the provisions
of these bylaws.
4.4
ADVISORY
COMMITTEES
The
board
of directors may, by resolution passed by a majority of the whole board,
designate one or more advisory committees, with each committee to consist of
one
or more of the directors of the Corporation or any other such persons as the
board may appoint. The board may designate one or more persons as alternate
members of any committee, who may replace any absent or disqualified member
at
any meeting of the committee. Members who are not board members shall not have
the responsibilities or obligations of board members nor be deemed directors
of
the Corporation for any purpose.
ARTICLE
V
OFFICERS
5.1
OFFICERS
The
officers of the Corporation shall be a chief executive officer, a secretary,
and
a chief financial officer. The Corporation may also have, at the discretion
of
the board of directors, a chairman of the board, a vice chairman of the board,
a
treasurer, one or more presidents, one or more vice presidents, one or more
assistant vice presidents, assistant secretaries, assistant treasurers, and
any
such other officers as may be appointed in accordance with the provisions of
these bylaws. Any number of offices may be held by the same person.
5.2
APPOINTMENT
OF OFFICERS
The
board
of directors shall appoint the officers of the Corporation, except such officers
as may be appointed in accordance with the provisions of Sections 5.3 or 5.5
of
these bylaws, subject to the rights, if any, of an officer under any contract
of
employment.
5.3
SUBORDINATE
OFFICERS
The
board
of directors may appoint, or empower the chief executive officer or, in the
absence of a chief executive officer, one or more presidents, to appoint, such
other officers and agents as the business of the Corporation may require, each
of whom shall hold office for such period, have such authority, and perform
such
duties as are provided in these bylaws or as the board of directors may from
time to time determine.
5.4
REMOVAL
AND RESIGNATION OF OFFICERS
Subject
to the rights, if any, of an officer under any contract of employment, any
officer may be removed, either with or without cause, by an affirmative vote
of
the majority of the board of directors at any regular or special meeting of
the
board or, except in the case of an officer chosen by the board, by any officer
upon whom such power of removal may be conferred by the board of
directors.
Any
officer may resign at any time by giving written notice to the board of
directors, president or secretary of the Corporation. Any resignation shall
take
effect at the date of the receipt of that notice or at any later time specified
in that notice; and, unless otherwise specified in that notice, the acceptance
of the resignation shall not be necessary to make it effective. Any resignation
is without prejudice to the rights, if any, of the Corporation under any
contract to which the officer is a party.
5.5
VACANCIES
IN OFFICES
Any
vacancy occurring in any office of the Corporation shall be filled by the board
of directors or as provided in Section 5.2.
5.6
CHAIRMAN
OF THE BOARD
The
chairman of the board, if such an officer be elected, shall, if present, preside
at meetings of the board of directors and exercise and perform such other powers
and duties as may from time to time be assigned to him by the board of directors
or as may be prescribed by these bylaws. If there is no chief executive officer
or president, then the chairman of the board shall also be the chief executive
officer of the Corporation and shall have the powers and duties prescribed
in
Section 5.7 of these bylaws.
5.7
CHIEF
EXECUTIVE OFFICER
Subject
to such supervisory powers, if any, as may be given by the board of directors
to
the chairman of the board, if there be such an officer, the chief executive
officer of the Corporation shall, subject to the control of the board of
directors, have general supervision, direction, and control of the business
and
affairs of the Corporation and shall report directly to the board of directors.
All other officers, officials, employees and agents shall report directly or
indirectly to the chief executive officer. The chief executive officer shall
see
that all orders and resolutions of the board of directors are carried into
effect. He shall serve as the chairperson and preside at all meetings of the
stockholders and, in the absence or nonexistence of a chairman of the board,
at
all meetings of the board of directors. He shall have the general powers and
duties of management usually vested in the chief executive officer of a
Corporation, and shall have such other powers and duties as may be prescribed
by
the board of directors or these bylaws.
5.8
PRESIDENT
The
president may assume and perform the duties of the chief executive officer
in
the absence or disability of the chief executive officer or whenever the office
of the chief executive officer is vacant. When acting as the chief executive
officer, a president shall have all the powers of, and be subject to all the
restrictions upon, the chief executive officer. The president of the Corporation
shall exercise and perform such powers and duties as may from time to time
be
assigned to him by the board of directors, the chairman of the board, the chief
executive officer or as may be prescribed by these bylaws. The president shall
have authority to execute in the name of the Corporation bonds, contracts,
deeds, leases and other written instruments to be executed by the Corporation.
In the absence or nonexistence of the chairman of the board and chief executive
officer, he shall preside at all meetings of the stockholders and, in the
absence or nonexistence of a Chairman of the board of directors and chief
executive officer, at all meetings of the board of directors and shall perform
such other duties as the board of directors may from time to time
determine.
5.9
VICE
PRESIDENTS
In
the
absence or disability of the chief executive officer and any president, the
vice
presidents, if any, in order of their rank as fixed by the board of directors
or, if not ranked, a vice president designated by the board of directors, shall
perform all the duties of a president and when so acting shall have all the
powers of, and be subject to all the restrictions upon, a president. The vice
presidents shall have such other powers and perform such other duties as from
time to time may be prescribed for them respectively by the board of directors,
these bylaws, the chairman of the board, the chief executive officer or, in
the
absence of a chief executive officer, one or more of the
presidents.
5.10
SECRETARY
The
secretary shall keep or cause to be kept, at the principal executive office
of
the Corporation or such other place as the board of directors may direct, a
book
of minutes of all meetings and actions of directors, committees of directors,
and stockholders. The minutes shall show the time and place of each meeting,
whether regular or special (and, if special, how authorized and the notice
given), the names of those present at meetings of the board of directors or
committees, the number of shares present or represented at meetings of
stockholders, and the proceedings thereof.
The
secretary shall keep, or cause to be kept, at the principal executive office
of
the Corporation or at the office of the Corporation’s transfer agent or
registrar, as determined by resolution of the board of directors, a share
register, or a duplicate share register, showing the names of all stockholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates evidencing such shares, and the number and date of
cancellation of every certificate surrendered for cancellation.
The
secretary shall give, or cause to be given, notice of all meetings of the
stockholders and of the board of directors required to be given by law or by
these bylaws. He or she shall keep the seal of the Corporation, if one be
adopted, in safe custody and shall have such other powers and perform such
other
duties as may be prescribed by the board of directors or by these
bylaws.
5.11
CHIEF
FINANCIAL OFFICER
The
chief
financial officer shall keep and maintain, or cause to be kept and maintained,
adequate and correct books and records of accounts of the properties and
business transactions of the Corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, retained earnings,
and shares. The books of account shall at all reasonable times be open to
inspection by any director.
The
chief
financial officer shall deposit all monies and other valuables in the name
and
to the credit of the Corporation with such depositories as the board of
directors may designate. The chief financial officer shall disburse the funds
of
the Corporation as may be ordered by the board of directors, shall render to
the
chief executive officer or, in the absence of a chief executive officer, any
president and directors, whenever they request it, an account of all his or
her
transactions as chief financial officer and of the financial condition of the
Corporation, and shall have such other powers and perform such other duties
as
may be prescribed by the board of directors or these bylaws. The chief financial
officer may be the treasurer of the Corporation.
5.12
TREASURER
The
treasurer shall keep and maintain, or cause to be kept and maintained, adequate
and correct books and records of accounts of the properties and business
transactions of the Corporation, including accounts of its assets, liabilities,
receipts, disbursements, gains, losses, capital, retained earnings, and shares.
The books of account shall at all reasonable times be open to inspection by
any
director.
The
treasurer shall deposit all monies and other valuables in the name and to the
credit of the Corporation with such depositories as the board of directors
may
designate. The treasurer shall disburse the funds of the Corporation as may
be
ordered by the board of directors, shall render to the chief executive officer
or, in the absence of a chief executive officer, any president and directors,
whenever they request it, an account of all his or her transactions as treasurer
and of the financial condition of the Corporation, and shall have such other
powers and perform such other duties as may be prescribed by the board of
directors or these bylaws.
5.13
ASSISTANT
SECRETARY
The
assistant secretary, or, if there is more than one, the assistant secretaries
in
the order determined by the stockholders or board of directors (or if there
be
no such determination, then in the order of their election) shall, in the
absence of the secretary or in the event of his or her inability or refusal
to
act, perform the duties and exercise the powers of the secretary and shall
perform such other duties and have such other powers as the board of directors
or the stockholders may from time to time prescribe.
5.14
ASSISTANT
TREASURER
The
assistant treasurer, or, if there is more than one, the assistant treasurers,
in
the order determined by the stockholders or board of directors (or if there
be
no such determination, then in the order of their election), shall, in the
absence of the treasurer or in the event of his or her inability or refusal
to
act, perform the duties and exercise the powers of the treasurer and shall
perform such other duties and have such other powers as the board of directors
or the stockholders may from time to time prescribe
.
5.15
AUTHORITY
AND DUTIES OF OFFICERS
In
addition to the foregoing authority and duties, all officers of the Corporation
shall respectively have such authority and perform such duties in the management
of the business of the Corporation as may be designated from time to time by
the
board of directors or the stockholders.
ARTICLE
VI
INDEMNITY
6.1
INDEMNIFICATION
OF DIRECTORS AND OFFICERS
The
Corporation shall, to the fullest extent and in the manner permitted by the
Delaware General Corporation Law as it presently exists or may hereafter be
amended, indemnify and hold harmless each of its directors and officers who
was
or is made or is threatened to be made a party or is otherwise involved in
any
action, suit or proceeding, whether civil, criminal or administrative or
investigative (a “proceeding”), by reason of the fact that he or she, or a
person for whom he or she is the legal representative, is or was a director,
officer, employee or agent of the Corporation or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, non-profit entity or other
enterprise, including service with respect to employee benefit plans, against
all liability and loss suffered and expenses reasonably incurred by such person
in connection with any such action, suit, or proceeding. The Corporation shall
be required to indemnify a person in connection with a proceeding initiated
by
such person only if the proceeding was authorized by the board of directors
of
the Corporation.
6.2
INDEMNIFICATION
OF OTHERS
The
Corporation shall have the power, to the fullest extent and in the manner
permitted by the Delaware General Corporation Law as it presently exists or
may
hereafter be amended, to indemnify and hold harmless, each of its employees
and
agents who was or is made or is threatened to be made a party or is otherwise
involved in any action, suit or proceeding, whether civil, criminal or
administrative or investigative (a “proceeding”) by reason of the fact that he
or she, or a person for whom he or she is the legal representative, is or was
an
employee or agent of the Corporation or is or was serving at the request of
the
Corporation as an employee or agent of another corporation, partnership, joint
venture, trust, non-profit entity or other enterprise, including service with
respect to employee benefit plans, against all liability and loss suffered
and
expenses reasonably incurred by such person in connection with any such action,
suit, or proceeding.
6.3
INSURANCE
The
Corporation may purchase and maintain insurance on behalf of any person who
is
or was a director, officer, employee or agent of the Corporation, or is or
was
serving at the request of the Corporation or its subsidiaries as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him against
such liability under the provisions of the Delaware General Corporation
Law.
6.4
EXPENSES
The
Corporation shall pay the expenses incurred by any officer or director of the
Corporation, and may pay the expenses incurred by any employee or agent of
the
Corporation, in defending any proceeding in advance of its final disposition;
provided, however, that the payment of expenses incurred by a person in advance
of the final disposition of the proceeding shall be made only upon receipt
of an
undertaking by the person to repay all amounts advanced if it should ultimately
be determined that he is not entitled to be indemnified by the Corporation
under
this Article VI or otherwise. Such expenses incurred by other employees and
agents described in Section 6.2 of this Article VI may be so paid upon such
terms and conditions, if any, as the board of directors deems
appropriate.
6.5
OTHER
INDEMNIFICATION
The
indemnification and advancement of expenses provided by, or granted pursuant
to,
this Article VI shall not be deemed exclusive of any other rights to which
those
seeking indemnification or advancement of expenses may be entitled under any
bylaw, agreement, vote of stockholders or disinterested directors or otherwise,
both as to action in such person’s official capacity and as to action in another
capacity while holding such office. However, the Corporation’s obligation, if
any, to indemnify a person who was or is serving at its request as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, non-profit entity or other enterprise shall be reduced by any amount
such
person may collect as indemnification from such other corporation, partnership,
joint venture, trust, non-profit entity or other enterprise.
6.6
AMENDMENT
OR REPEAL
Any
repeal or modification of the foregoing provisions of this Article VI shall
not
adversely affect any right or protection hereunder of any person in respect
of
any act or omission occurring prior to the time of such repeal or
modification.
6.7
MERGER
OR
CONSOLIDATION
For
purposes of this Article VI, references to “the Corporation” shall include, in
addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger which,
if its separate existence had continued, would have had power and authority
to
indemnify its directors, officers, and employees or agents, so that any person
who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, non-profit entity or other enterprise, shall stand in
the
same position under this Article VI with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if
its
separate existence had continued.
6.8
SEVERABILITY
The
invalidity or unenforceability of any provision of this Article VI shall not
affect the validity or enforceability of the remaining provisions of this
Article VI.
ARTICLE
VII
RECORDS
AND REPORTS
7.1
MAINTENANCE
AND INSPECTION OF RECORDS
The
Corporation shall, either at its principal executive office or at such place
or
places as designated by the board of directors, keep a record of its
stockholders listing their names and addresses and the number and class of
shares held by each shareholder, a copy of these bylaws as amended to date,
accounting books, and other records.
Any
stockholder of record, in person or by attorney or other agent, shall, upon
written demand under oath stating the purpose thereof, have the right during
the
usual hours for business to inspect for any proper purpose the Corporation’s
stock ledger, a list of its stockholders, and its other books and records and
to
make copies or extracts therefrom. A proper purpose shall mean a purpose
reasonably related to such person’s interest as a stockholder. In every instance
where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney
or
such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
Corporation at its registered office in Delaware or at its principal executive
office.
7.2
INSPECTION
BY DIRECTORS
Any
director shall have the right to examine the Corporation’s stock ledger, a list
of its stockholders, and its other books and records for a purpose reasonably
related to his position as a director. The Court of Chancery is hereby vested
with the exclusive jurisdiction to determine whether a director is entitled
to
the inspection sought. The Court of Chancery may summarily order the Corporation
to permit the director to inspect any and all books and records, the stock
ledger, and the stock list and to make copies or extracts therefrom. The Court
of Chancery may, in its discretion, prescribe any limitations or conditions
with
reference to the inspection, or award such other and further relief as the
Court
may deem just and proper.
7.3
REPRESENTATION
OF SHARES OF OTHER CORPORATIONS
The
chairman of the board, the chief executive officer, the chief financial officer
or any other person authorized by the board of directors or the chief executive
officer, is authorized to vote, represent, and exercise on behalf of the
Corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of the Corporation. The authority granted
herein may be exercised either by such person directly or by any other person
authorized to do so by proxy or power of attorney duly executed by such person
having the authority.
ARTICLE
VIII
GENERAL
MATTERS
8.1
CHECKS
From
time
to time, the board of directors shall determine by resolution which person
or
persons may sign or endorse all checks, drafts, other orders for payment of
money, notes or other evidences of indebtedness that are issued in the name
of
or payable to the Corporation, and only the persons so authorized shall sign
or
endorse those instruments.
8.2
EXECUTION
OF CORPORATE CONTRACTS AND INSTRUMENTS
The
board
of directors, except as otherwise provided in these bylaws, may authorize any
officer or officers, or agent or agents, to enter into any contract or execute
any instrument in the name of and on behalf of the Corporation; such authority
may be general or confined to specific instances. Unless so authorized or
ratified by the board of directors or within the agency power of an officer,
agent or employee, no officer, agent or employee shall have any power or
authority to bind the Corporation by any contract or engagement or to pledge
its
credit or to render it liable for any purpose or for any amount.
8.3
STOCK
CERTIFICATES; PARTLY PAID SHARES
The
shares of the Corporation shall be represented by certificates, provided that
the board of directors of the Corporation may provide by resolution or
resolutions that some or all of any or all classes or series of its stock shall
be uncertificated shares. Any such resolution shall not apply to shares
represented by a certificate until such certificate is surrendered to the
Corporation. Notwithstanding the adoption of such a resolution by the board
of
directors, every holder of stock represented by certificates and upon request
every holder of uncertificated shares shall be entitled to have a certificate
signed by, or in the name of the Corporation by the chairman or vice chairman
of
the board of directors, or a president or vice president, and by the treasurer
or an assistant treasurer, or the secretary or an assistant secretary of the
Corporation representing the number of shares registered in certificate form.
Any or all of the signatures on the certificate may be a facsimile. In case
any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate has ceased to be such officer, transfer
agent
or registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer, transfer agent
or
registrar at the date of issue.
The
Corporation may issue the whole or any part of its shares as partly paid and
subject to call for the remainder of the consideration to be paid therefor.
Upon
the face or back of each stock certificate issued to represent any such partly
paid shares, upon the books and records of the Corporation in the case of
uncertificated partly paid shares, the total amount of the consideration to
be
paid therefor and the amount paid thereon shall be stated. Upon the declaration
of any dividend on fully paid shares, the Corporation shall declare a dividend
upon partly paid shares of the same class, but only upon the basis of the
percentage of the consideration actually paid thereon.
8.4
SPECIAL
DESIGNATION ON CERTIFICATES
If
the
Corporation is authorized to issue more than one class of stock or more than
one
series of any class, then the powers, the designations, the preferences, and
the
relative, participating, optional or other special rights of each class of
stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights shall be set forth in full or summarized on the face
or back of the certificate that the Corporation shall issue to represent such
class or series of stock; provided, however, that, except as otherwise provided
in Section 202 of the Delaware General Corporation Law, in lieu of the
foregoing requirements there may be set forth on the face or back of the
certificate that the Corporation shall issue to represent such class or series
of stock a statement that the Corporation will furnish without charge to each
stockholder who so requests the powers, the designations, the preferences,
and
the relative, participating, optional or other special rights of each class
of
stock or series thereof and the qualifications, limitations or restrictions
of
such preferences and/or rights.
8.5
LOST
CERTIFICATES
Except
as
provided in this Section 8.5, no new certificates for shares shall be issued
to
replace a previously issued certificate unless the latter is surrendered to
the
Corporation and canceled at the same time. The Corporation may issue a new
certificate of stock or uncertificated shares in the place of any certificate
theretofore issued by it, alleged to have been lost, stolen or destroyed, and
the Corporation may require the owner of the lost, stolen or destroyed
certificate, or his legal representative, to give the Corporation a bond
sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or
the
issuance of such new certificate or uncertificated shares.
8.6
CONSTRUCTION;
DEFINITIONS
Unless
the context requires otherwise, the general provisions, rules of construction,
and definitions in the Delaware General Corporation Law shall govern the
construction of these bylaws. Without limiting the generality of this provision,
the singular number includes the plural, the plural number includes the
singular, and the term “person” includes both a corporation and a natural
person.
8.7
DIVIDENDS
The
directors of the Corporation, subject to any restrictions contained in either
the Delaware General Corporation Law or the certificate of incorporation, may
declare and pay dividends upon the shares of its capital stock. Dividends may
be
paid in cash, in property, or in shares of the Corporation’s capital
stock.
The
directors of the Corporation may set apart out of any of the funds of the
Corporation available for dividends a reserve or reserves for any proper purpose
and may abolish any such reserve. Such purposes shall include but not be limited
to equalizing dividends, repairing or maintaining any property of the
Corporation, and meeting contingencies.
8.8
FISCAL
YEAR
The
fiscal year of the Corporation shall end on December 31 of each year until
changed by the board of directors.
8.9
SEAL
The
Corporation may adopt a corporate seal, which shall be adopted and which may
be
altered by the board of directors. The Corporation may use the corporate seal
by
causing it or a facsimile thereof to be impressed or affixed or in any other
manner reproduced.
8.10
TRANSFER
OF STOCK
Stock
of
the Corporation shall be transferable in the manner prescribed by law and in
these bylaws. Transfers of certificated stock shall be made on the books of
the
Corporation only by the person named in the certificate or by his attorney
lawfully constituted in writing and upon the surrender of the certificate
therefor, which shall be canceled before a new certificate shall be issued.
Transfers of uncertificated stock shall be made on the books of the Corporation
only by the person then registered on the books of the Corporation as the owner
of such shares or by such person's attorney lawfully constituted in writing
and
written instruction to the Corporation containing such information as the
Corporation or its agents may prescribe. No transfer of uncertificated stock
shall be valid as against the Corporation for any purpose until it shall have
been entered in the stock records of the Corporation by an entry showing from
and to whom transferred. The Corporation shall have no duty to inquire into
adverse claims with respect to any stock transfer unless (a) the Corporation
has
received a written notification of an adverse claim at a time and in a manner
which affords the Corporation a reasonable opportunity to act on it prior to
the
issuance of a new, reissued or re-registered share certificate, in the case
of
certificated stock, or entry in the stock record books of the Corporation,
in
the case of uncertificated stock, and the notification identifies the claimant,
the registered owner and the issue of which the share or shares is a part and
provides an address for communications directed to the claimant; or (b) the
Corporation has required and obtained, with respect to a fiduciary, a copy
of a
will, trust, indenture, articles of co-partnership, bylaws or other controlling
instruments, for a purpose other than to obtain appropriate evidence of the
appointment or incumbency of the fiduciary, and such documents indicate, upon
reasonable inspection, the existence of an adverse claim. The Corporation may
discharge any duty of inquiry by any reasonable means, including notifying
an
adverse claimant by registered or certified mail at the address furnished by
him
or, if there be no such address, at his residence or regular place of business
that the security has been presented for registration of transfer by a named
person, and that the transfer will be registered unless within thirty days
from
the date of mailing the notification, either (a) an appropriate restraining
order, injunction or other process issues from a court of competent
jurisdiction; or (b) an indemnity bond, sufficient in the Corporation’s judgment
to protect the Corporation and any transfer agent, registrar or other agent
of
the Corporation involved from any loss which it or they may suffer by complying
with the adverse claim, is filed with the Corporation.
8.11
STOCK
TRANSFER AGREEMENTS
The
Corporation shall have power to enter into and perform any agreement with any
number of stockholders of any one or more classes of stock of the Corporation
to
restrict the transfer of shares of stock of the Corporation of any one or more
classes owned by such stockholders in any manner not prohibited by the Delaware
General Corporation Law.
8.12
REGISTERED
STOCKHOLDERS
The
Corporation shall be entitled to recognize the exclusive right of a person
registered on its books as the owner of shares to receive dividends and to
vote
as such owner, shall be entitled to hold liable for calls and assessments the
person registered on its books as the owner of shares, and shall not be bound
to
recognize any equitable or other claim to or interest in such share or shares
on
the part of another person, whether or not it shall have express or other notice
thereof, except as otherwise provided by the laws of Delaware.
ARTICLE
IX
NOTICE
BY ELECTRONIC TRANSMISSION
Without
limiting the manner by which notice otherwise may be given effectively to
stockholders pursuant to the Delaware General Corporation Law, the certificate
of incorporation or these bylaws, any notice to stockholders given by the
Corporation under any provision of the Delaware General Corporation Law, the
certificate of incorporation or these bylaws shall be effective if given by
a
form of electronic transmission consented to by the stockholder to whom the
notice is given. Any such consent shall be revocable by the stockholder by
written notice to the Corporation. Any such consent shall be deemed revoked
if:
(i) the Corporation is unable to deliver by electronic transmission two
consecutive notices given by the Corporation in accordance with such consent;
and (ii) such inability becomes known to the secretary or an assistant secretary
of the Corporation or to the transfer agent, or other person responsible for
the
giving of notice. However, the inadvertent failure to treat such inability
as a
revocation shall not invalidate any meeting or other action.
Any
notice given pursuant to the preceding paragraph shall be deemed given: (i)
if
by facsimile telecommunication, when directed to a number at which the
stockholder has consent to receive notice; (ii) if by electronic mail, when
directed to an electronic mail address at which the stockholder has consented
to
receive notice; (iii) if by a posting on an electronic network together with
separate notice to the stockholder of such specific posting, upon the later
of
(A) such posting and (B) the giving of such separate notice; and (iv) if by
any
other form of electronic transmission, when directed to the stockholder. An
affidavit of the secretary or an assistant secretary or of the transfer agent
or
other agent of the Corporation that the notice has been given by a form of
electronic transmission shall, in the absence of fraud, be prima facie evidence
of the facts stated therein. Notice by a form of electronic transmission shall
not apply to Sections 164, 296, 311, 312 or 324 of the Delaware General
Corporation Law.
An
“electronic transmission” means any form of communication, not directly
involving the physical transmission of paper, that creates a record that may
be
retained, retrieved, and reviewed by a recipient thereof, and that may be
directly reproduced in paper form by such a recipient through an automated
process.
ARTICLE
X
AMENDMENTS
These
bylaws may be amended, altered or repealed, and new bylaws may be adopted,
by
the stockholders entitled to vote. However, the Corporation may, in its
certificate of incorporation, confer the power to adopt, amend, alter or repeal
bylaws upon the board of directors. The fact that such power has been so
conferred upon the directors shall not divest the stockholders of the power,
nor
limit their power to adopt, amend, alter or repeal bylaws.
Exhibit
10.15
EMPLOYMENT
AGREEMENT
BETWEEN
Primoris
Corporation
AND
Brian
Pratt
February
19, 2008
EMPLOYMENT
AGREEMENT
THIS
EMPLOYMENT AGREEMENT is made and entered into as of February 19, 2008, and
effective as of the Closing Date (as hereinafter defined), by and among Primoris
Corporation, a Nevada corporation (the "
Employer
"),
and
Brian Pratt (the "
Employee
").
WHEREAS,
pursuant to that certain Agreement And Plan of Merger by and among Rhapsody
Acquisition Corp., Primoris Corporation and certain of the shareholders of
Primoris Corporation dated February 19, 2008 ("the
Merger
Agreement
"),
a
closing date for the consummation of a prospective merger is defined therein
(the "
Closing
Date
");
WHEREAS,
the Employer desires to employ the Employee, and the Employee desires to accept
such employment, on the terms and subject to the conditions hereinafter set
forth;
NOW,
THEREFORE, in consideration of the covenants contained herein and other good
and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows.
1.
Definitions
.
Generally,
defined terms used in this Agreement are defined in the first instance in which
they appear herein. In addition, the following terms and phrases shall have
the
following meanings:
"
Board
"
shall
mean the board of directors of Employer.
"
Business
Day
"
shall
mean any day that is not a Saturday, Sunday, or a day on which banking
institutions in California are not required to be open.
"C
ause
"
shall
mean the Employee's:
(i)
failure
to devote substantially all his working time to the business of Employer and
its
Affiliates and Subsidiaries;
(ii)
willful
disregard of his duties, or his intentional failure to act where the taking
of
such action would be in the ordinary course of the Employee's duties
hereunder;
(iii)
gross
negligence or willful misconduct in the performance of his duties
hereunder;
(iv)
commission
of any act of fraud, theft or financial dishonesty, or any felony or criminal
act involving moral turpitude; or
(v)
unlawful
use (including being under the influence) of alcohol or drugs or possession
of
illegal drugs while on the premises of the Employer or any of its Affiliates
or
while performing duties and responsibilities to the Employer and its
Affiliates.
"
Confidential
Information
"
shall
mean all proprietary and other information relating to the business and
operations of Employer, which has not been specifically designated for release
to the public by an authorized representative of Employer, including, but not
limited to the following: (i) information, observations, procedures and data
concerning the business or affairs of Employer; (ii) products or services;
(iii)
costs and pricing structures; (iv) analyses; (v) drawings, photographs and
reports; (vi) computer software, including operating systems, applications
and
program listings; (vii) flow charts, manuals and documentation; (viii) data
bases; (ix) accounting and business methods; (x) inventions, devices, new
developments, methods and processes, whether patentable or unpatentable and
whether or not reduced to practice; (xi) customers, vendors, suppliers and
customer, vendor and supplier lists; (xii) other copyrightable works, (xiii)
all
production methods, processes, technology and trade secrets and (xiv) all
similar and related information in whatever form. Confidential Information
will
not include any information that has been published in a form generally
available to the public prior to the date the Employee proposes to disclose
or
use such information. Confidential Information will not be deemed to have been
published merely because individual portions of the information have been
separately published, but only if all material features comprising such
information have been published in combination.
"
Disability
"
shall
mean the Employee's inability, due to physical or mental illness or disability,
to perform the essential functions of his employment with the Employer, even
with reasonable accommodation that does not impose an undue hardship on the
Employer, for more than sixty (60) consecutive days, or for any ninety (90)
days
within any one year period, unless a longer period is required by federal or
state law, in which case such longer period will be applicable. The Employer
reserves the right, in good faith, to make the determination of Disability
under
this Agreement based on information supplied by the Employee and/or his medical
personnel, as well as information from medical personnel selected by the
Employer or its insurers.
"
Employer
"
shall
mean Primoris Corporation and any of its Subsidiaries.
"
Person
"
shall
be construed broadly and shall include, without limitation, an individual,
a
partnership, an investment fund, a limited liability company, a corporation,
an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization and a governmental entity or any department, agency or political
subdivision thereof.
"
Subsidiary
"
or
"
Subsidiaries
"
shall
have the meaning as defined in the Merger Agreement.
"
Termination
Date
"
shall
mean the effective date of the termination of the Employee's employment
hereunder, which (i) in the case of termination by resignation, shall mean
the
date that is ninety (90) days following the date of the Employee's written
notice to the Employer of his resignation; provided, however, that the Employer
may accelerate the Termination Date; (ii) in the case of termination by reason
of death shall mean the date of death; (iii) in the case of termination by
reason of Disability, shall mean the date specified in the notice of such
termination delivered to the Employee by the Employer; (iv) in the case of
a
Termination for Cause or a Termination without Cause, shall mean the date
specified in the written notice of such termination delivered to the Employee
by
the Employer; (iv) in the case of termination by mutual agreement shall mean
the
date mutually agreed to by the parties hereto and (v) in the case of nonrenewal,
shall mean the expiration of the Employment Period.
2.
Employment
.
a.
Initial
Term
.
The
Employer shall employ the Employee, and the Employee accepts employment with
the
Employer, upon the terms and conditions set forth in this Agreement. The initial
term of this Agreement (the "
Initial
Term
")
shall
be for a period of five (5) years commencing on the date hereof, unless
terminated earlier pursuant to Article 5 hereof; provided, however, that
Employee's obligations in Article 11 and Article 12 hereof shall continue in
effect after such termination.
b.
Additional
Terms
.
This
Agreement may be extended beyond the Initial Term upon the mutual consent and
agreement of Employee and Employer. The Initial Term and additional terms,
if
any, shall collectively be referred to herein as the "Employment
Period".
3.
Position
and Duties
.
During
the Employment Period, the Employee shall serve as the Chief Executive Officer,
reporting to the Board, and shall have the usual and customary duties,
responsibilities and authority of such position. During the Employment Period
the Employee shall also serve as a member of the Board of Directors of Employer.
In addition, during the Employment Period, if elected or appointed thereto,
shall serve as an officer and/or member of the board of any Subsidiary of
Employer as reasonably requested by the Employer and its Subsidiaries, in each
case, without additional compensation hereunder. The Employee hereby accepts
such employment and positions and agrees to diligently and conscientiously
devote his full and exclusive business time, attention, and best efforts in
discharging and fulfilling his duties and responsibilities hereunder. The
Employee shall comply with the Employer's policies and procedures and the
direction and instruction of the Board and the Employee shall not engage in
any
business activity which, in the reasonable judgment of the Board, conflicts
with
the duties of the Employee hereunder, whether or not such activity is pursued
for gain, profit or other pecuniary advantage. Notwithstanding the above,
nothing in this Article shall prohibit or restrict Employee from engaging,
in or
holding any passive investment, including any equity interest, in any business
activity.
4.
Compensation
.
(a)
Salary
.
During
the Employment Period, the Employer shall pay the Employee base salary (the
"
Base
Salary
")
at the
rate of Five Hundred Thousand Dollars ($500,000) per annum, payable in equal
installments twice monthly on Employer’s regular payroll dates, less applicable
deductions and withholdings.
(b)
Performance
Bonus
.
In
addition to the Base Salary, during the Employment Period the Employee shall
be
eligible to receive a cash bonus (the "
Bonus
")
with
respect to each calendar year as of the last day of which the Employee is
employed by the Employer. The amount of the Bonus, if any, payable in respect
of
any calendar year will be determined at the sole discretion of Employer by
the
Board or compensation committee of the Board (the "
Compensation
Committee
").
The
Bonus, if any, payable with respect to a calendar year shall be paid within
thirty (30) days following the rendering of Employer's audited financial
statements for the relevant calendar year.
(c)
Benefits
and Perquisites
.
In
addition to the Base Salary, Employee shall be entitled to all other benefits
of
employment provided to other employees of Employer; provided, however, that
during the term of this Agreement Employee shall be entitled to three (3) weeks
of vacation per annum. Additional benefits and perquisites will be provided
subject to Employer's policies and practices in effect and then in place at
the
Closing Date, and the terms of applicable benefit plans and arrangements as
in
effect from time to time.
(d)
Reimbursements
.
The
Employer shall reimburse the Employee for all reasonable and necessary
business-related expenses incurred by him in the course of performing his duties
under this Agreement which are consistent with Employer's policies and practices
in effect and then in place at the Closing Date, including travel, entertainment
and other business expenses, subject to the Employer's requirements with respect
to reporting and documentation of such expenses.
(e)
Deductions
and Withholding
.
The
Employer shall deduct from any payments to be made by it to or on behalf of
the
Employee under this Agreement any amounts required to be withheld in respect
of
any federal, state or local income or other taxes.
(f)
Annual
Review of Base Salary
.
The
Board (or the Compensation Committee) shall undertake a review of the Base
Salary not less frequently than annually during the Employment Period and may
increase, but not decrease, the rate of Base Salary from the rate then in
effect.
(g)
Use
of Employer Aircraft
.
In
addition to all business related uses of any aircraft owned or leased by
Employer during the Employment Period, Employee shall be entitled to use of
said
aircraft up to one-hundred (100) hours during each calendar year
hereunder.
5.
Termination
of Employment
.
The
Employee's employment under this Agreement shall be terminated upon the earliest
to occur of the following events:
(a)
Termination
for Cause
.
The
Employer may in its sole discretion terminate this Agreement and the Employee's
employment hereunder for Cause at any time and with or without advance notice
to
the Employee.
(b)
Termination
without Cause
.
The
Employer may terminate this Agreement and the Employee's employment hereunder
without Cause at any time, with or without notice, for any reason or no reason
(and no reason need be given).
(c)
Mutual
Agreement
.
This
Agreement and the Employee's employment hereunder may be terminated by the
mutual written agreement of the Employer and the Employee.
(d)
Termination
by Death or
Disability. This Agreement and the Employee's employment hereunder shall
automatically terminate upon the Employee's death or Disability.
(e)
Resignation
.
The
Employee may terminate this Agreement and his employment hereunder upon ninety
(90) days advance written notice to the Employer.
(f)
Nonrenewal
.
In the
event either party does not elect to renew the term of this Agreement, this
Agreement and the Employee's employment hereunder shall automatically terminate
as of the expiration of the current term in effect.
6.
Compensation
upon Termination
.
(a)
General
.
In the
event of the Employee's termination of employment for any reason, the Employee
or his estate or beneficiaries shall have the right to receive the
following:
(i)
the
unpaid portion of the Base Salary and paid time off accrued and payable through
the Termination Date;
(ii)
reimbursement
for any expenses for which the Employee shall not have been previously
reimbursed, as provided in Section 4(d); and
(iii)
continuation
of health insurance coverage rights, if any, as required under applicable
law.
(b)
Termination
for Cause, Resignation, Mutual Agreement or Nonrenewal
.
In the
event of the Employee's termination of employment by reason of (i) Termination
for Cause, (ii) Resignation, (iii) Mutual Agreement or (iv) Nonrenewal, the
Employer shall have no current or further obligations (including Base Salary)
to
the Employee under this Agreement other than as set forth in Section
6(a).
(c)
Termination
without Cause or by Death or Disability
.
Subject
to Section 6(d), in the event of the Employee's termination of employment
hereunder by reason of (i) Termination without Cause or (ii) death or
Disability, the Employee shall be entitled to the following (the "
Severance
Benefits
"):
(i)
a
lump
sum equal to one-half of the annual Base Salary in effect upon the Termination
Date, payable within fifteen (15) days following the Termination
Date;
(ii)
a
pro
rata amount of a Bonus, if any, which would have been payable to the Employee
for the calendar year in which the Termination Date occurs, determined after
the
end of the calendar year in which such Termination Date occurs and equal to
the
amount which would have been payable to the Employee if his employment had
not
been terminated during such calendar year multiplied by the fraction, the
numerator of which is the number of whole months the Employee was employed
by
the Employer during such calendar year and the denominator of which is 12.
Any
pro rata bonus payable under this Section 6(c)(ii) shall be paid in a lump
sum
at the time bonuses for such calendar year are otherwise payable to senior
executives of the Employer; and
(iii)
in
the
event that the Employee elects COBRA benefits, the Employer shall pay the
Employee's share of the premium for such COBRA benefits until the earlier of
(i)
one year after the Termination Date; or (ii) the date that Employee obtains
comparable health benefits through new employment.
(d)
General
Release
.
Notwithstanding any provision to the contrary in this Agreement, the foregoing
Severance Benefits under Section 6(c) shall not apply and the Employer shall
have no obligations to pay or provide any Severance Benefits (other than upon
the Employee's termination of employment by reason of death), unless the
Employee signs, delivers and does not rescind or revoke a general release,
substantially in the form attached hereto as Exhibit A, of all known and unknown
claims of the Employee (and his affiliates, successors, heirs and assigns and
the like) against Employer and the Board.
(e)
The
rights of the Employee set forth in this Section 6 are intended to be the
Employee's exclusive remedy for termination and, to the greatest extent
permitted by applicable law, the Employee waives all other
remedies.
7.
Insurance
.
Employer
may, for its own benefit, maintain "key man" life and disability insurance
policies covering the Employee. The Employee will cooperate with Employer and
provide such information or other assistance as they may reasonably request
in
connection with obtaining and maintaining such policies.
8.
Exclusive
Services
.
During
the term of this Agreement, the Employee will not accept or perform any work,
consulting, or other services for any other business entity or for remuneration
of any kind, without written approval by the Board.
9.
The
Employee's Termination Obligations
.
The
Employee hereby acknowledges and agrees that all personal property and equipment
furnished to or prepared by the Employee in the course of or incident to his
employment hereunder belongs to Employer and shall be promptly returned to
Employer upon termination of the Employee's employment. The term "personal
property" includes, without limitation, all office equipment, laptop computers,
cell phones, books, manuals, records, reports, notes, contracts, requests for
proposals, bids, lists, blueprints, and other documents, or materials, or copies
thereof (including computer files), and all other proprietary and
non-proprietary information relating to the business of Employer. Following
termination of his employment hereunder, the Employee will not retain any
written or other tangible material containing any proprietary or non-proprietary
information of Employer.
10.
Acknowledgment
of Protectable Interests
.
The
Employee acknowledges and agrees that his employment with Employer involves
building and maintaining business relationships and good will on behalf of
the
Employer with customers, and other professional contractors, subcontractors,
employees and staff, and various providers and users of services related to
Employer’s business; that he is entrusted with proprietary, strategic and other
confidential information which is of special value to Employer; and that the
foregoing matters are significant interests which the Employer is entitled
to
protect.
11.
Confidential
Information
.
The
Employee agrees that all Confidential Information that comes or has come into
his possession by reason of his employment hereunder is the property of the
Employer and shall not be used except in the course of employment by Employer
and for Employer's exclusive benefit. Further, the Employee shall not, during
his employment or thereafter, disclose or acknowledge the content of any
Confidential Information to any person who is not an employee of Employer
authorized to possess such Confidential Information. Upon termination of
employment, the Employee shall deliver to Employer all documents, writings,
electronic storage devices, and other tangible things containing any
Confidential Information and the Employee shall not make or retain copies,
excerpts, or notes of such information.
12.
Nonsolicitation/Nondisparagement
.
In
the
event of the termination of this Agreement for any reason, the Employee shall
not, for a period of two (2) years thereafter, directly or
indirectly:
(a)
solicit,
induce or encourage any employee of Employer to terminate his or her employment
with Employer;
(b)
make
any
disparaging public statement concerning Employer; or
(c)
use
Employer's Confidential Information to induce, attempt to induce or knowingly
encourage any Customer (as defined below) of Employer to divert any business
or
income from Employer, or to stop or alter the manner in which they are then
doing business with Employer. The term "
Customer
"
with
respect to Employer shall mean any individual or business firm that is, or
within the prior twenty-four (24) months was, a customer or client of Employer,
or whose business was actively solicited by Employer at any time, regardless
of
whether such customer was generated, in whole or in part, by the Employee's
efforts.
13.
Damages
For Improper Termination With Cause
.
In
the
event that the Employer terminates this Agreement and the Employee’s employment
hereunder for "Cause," but it subsequently is determined by an arbitrator or
a
court of competent jurisdiction, as the case may be, that the Employer did
not
have Cause for the termination, then for purposes of this Agreement, the
Employer's decision to terminate shall be deemed to have been a termination
without Cause, and the Employer shall be obligated to pay the Severance Benefits
specified under Section 6(c), and only that amount.
14.
Arbitration
.
Any
controversy or dispute arising out of, based upon, or relating to this
Agreement, its enforcement or interpretation, or because of an alleged breach,
default, or misrepresentation in connection with any of its provisions, or
arising out of, based upon, or relating in any way to the Employee's employment
or association with Employer, or termination of the same, including, without
limiting the generality of the foregoing, any questions regarding whether a
particular dispute is arbitrable, and any alleged violation of statute, common
law or public policy, including, but not limited to, any state or federal
statutory claims, shall be submitted to final and binding arbitration in Orange
County, California, in accordance with the JAMS Employment Arbitration Rules
and
Procedures, before a single neutral arbitrator selected from the JAMS panel,
or
if JAMS is no longer able to supply the arbitrator, such arbitrator shall be
selected from the American Arbitration Association, in accordance with its
National Rules for the Resolution of Employment Disputes (the arbitrator
selected hereunder, the "
Arbitrator
").
Provisional injunctive relief may, but need not, be sought by either party
to
this Agreement in a court of law while arbitration proceedings are pending,
pursuant to California Code of Civil Procedure section 1281.8, and any
provisional injunctive relief granted by such court shall remain effective
until
the matter is finally determined by the Arbitrator. Final resolution of any
dispute through arbitration may include any remedy or relief which the
Arbitrator deems just and equitable, including any and all remedies provided
by
applicable state or federal statutes. At the conclusion of the arbitration,
the
Arbitrator shall issue a written decision that sets forth the essential findings
and conclusions upon which the Arbitrator's award or decision is based. Any
award or relief granted by the Arbitrator hereunder shall be final and binding
on the parties hereto and may be enforced by any court of competent
jurisdiction. The parties acknowledge and agree that they are hereby waiving
any
rights to trial by jury in any action, proceeding or counterclaim brought by
either of the parties against the other in connection with any matter whatsoever
arising out of or in any way connected with this Agreement or the provision
of
services under this Agreement. The Employer will pay the arbitrator's fees
and
arbitration expenses and any other costs associated with the arbitration or
arbitration hearing that are unique to arbitration. Subject to the provisions
of
Section 25, the parties shall each pay their own deposition, witness, expert
and
attorneys' fees and other expenses as and to the same extent as if the matter
were being heard in court.
15.
Representations/Warranties
.
The
Employee represents and warrants that he is under no contractual or other
obligation that would prevent him from accepting the Employer's offer of
employment as set forth herein.
16.
Entire
Agreement
.
This
Agreement is intended by the parties to be the final expression of their
agreement with respect to the employment of the Employee by Employer and may
not
be contradicted by evidence of any prior or contemporaneous agreement
(including, without limitation any term sheet or similar agreement entered
into
between Employer and the Employee). The parties further intend that this
Agreement shall constitute the complete and exclusive statement of its terms
and
that no extrinsic evidence whatsoever may be introduced in any judicial,
administrative, or other legal proceeding to vary the terms of this
Agreement.
17.
No
Representations
.
No
person
or entity has made or has the authority to make any representations or promises
on behalf of' any of the parties which are inconsistent with the representations
or promises contained in this Agreement, and this Agreement has not been
executed in reliance on any representations or promises not set forth herein.
Specifically, no promises, warranties or representations have been made by
anyone on any topic or subject matter related to the Employee's relationship
with the Employer or any of their executives or employees, including but not
limited to any promises, warranties or representations regarding future
employment, compensation, benefits, any entitlement to equity interests in
Employer or regarding the termination of the Employee's employment. In this
regard, the Employee agrees that no promises, warranties or representations
shall be deemed to be made in the future unless they are set forth in writing
and signed by an authorized representative of the Employer.
18.
Amendments
.
This
Agreement may be modified only by agreement of the parties by a written
instrument executed by the parties that is designated as an amendment to this
Agreement.
19.
Severability
and Non-Waiver/Survival
.
Any
provision of this Agreement (or portion thereof) which is deemed invalid,
illegal or unenforceable in any jurisdiction shall, as to that jurisdiction
and
subject to this Section 19, be ineffective to the extent of such invalidity,
illegality or unenforceability, without affecting in any way the remaining
provisions thereof in such jurisdiction or rendering such provision or any
other
provision of this Agreement invalid, illegal, or unenforceable in any other
jurisdiction. If any covenant should be deemed invalid, illegal or unenforceable
because its scope is considered excessive, such covenant shall be modified
so
that the scope of the covenant is reduced only to the minimum extent necessary
to render the modified covenant valid, legal and enforceable. No waiver of
any
provision or violation of this Agreement by the Employer shall be implied by
the
Employer's forbearance or failure to take action. The expiration or termination
of the Employment Period and this Agreement shall not impair the rights or
obligations of any party hereto which shall have accrued hereunder prior to
such
expiration or termination.
20.
Successor/Assigns
.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective heirs, representatives, executors, administrators, successors,
and assigns, provided, however, that the Employee may not assign any or all
of
his rights or duties hereunder except following the prior written consent of
the
Employer. The Employee shall be entitled, to the extent permitted under
applicable law, to select and change a beneficiary or beneficiaries to receive
any compensation or benefit hereunder following the Employee's death by giving
written notice thereof. In the event of the Employee's death or a judicial
determination of his incompetence, references in this Agreement to the Employee
shall be deemed, where appropriate, to refer to his beneficiary, estate or
other
legal representative.
21.
Voluntary
and Knowledgeable Act
.
The
Employee represents and warrants that the Employee has read and understands
each
and every provision of this Agreement and has freely and voluntarily entered
into this Agreement.
22.
Choice
of Law
.
This
Agreement shall be governed as to its validity and effect by the laws of the
state of California without regard to principles of conflict of
laws.
23.
Counterparts
.
This
Agreement may be executed in counterparts, each of which shall be deemed to
be
an original, but both of which together shall constitute one and the same
instrument.
24.
Notices
.
All
notices and other communications necessary or contemplated under this Agreement
shall be in writing and shall be delivered in the manner specified herein or,
in
the absence of such specification, shall be deemed delivered when delivered
in
person or sent by first-class mail (certified or registered mail, return receipt
requested, postage prepaid), facsimile or overnight air courier guaranteeing
next day delivery, addressed as follows:
|
(a)
|
if
to the Employee, to him at his most recent address in Employer's
records,
|
|
|
|
|
|
(b)
|
if
to the Employer, to:
|
John
M. Perisich
|
|
|
|
Primoris
Corporation
|
|
|
|
26000
Commercentre Dr.
|
|
|
|
Lake
Forest, CA 97630
|
|
|
|
Facsimile:
(949) 595-5544
|
|
|
|
|
|
|
with
a copy to:
|
Rutan
& Tucker
|
|
|
|
611
Anton Boulevard, Fourteenth Floor
|
|
|
|
Costa
Mesa, California 92626-1931
|
|
|
|
Facsimile:
(714) 546-9035
|
|
|
|
Attention:
George J. Wall, Esq.
|
|
|
|
|
|
|
and:
|
|
or
to
such other address as the recipient party to whom notice is to be given may
have
furnished to the other party in writing in accordance herewith.
25.
Attorneys'
Fees
.
In
the
event that any dispute between the parties should result in litigation or
arbitration, the prevailing party in such dispute shall be entitled to recover
from the other party all reasonable fees, costs and expenses of enforcing any
right of the prevailing party, including without limitation, reasonable
attorneys' fees and expenses, all of which shall be deemed to have accrued
upon
the commencement of such action and shall be paid whether or not such action
is
prosecuted to judgment. Any judgment or order entered in such action shall
contain a specific provision providing for the recovery of attorneys' fees
and
costs incurred in enforcing such judgment and an award of prejudgment interest
from the date of the breach at the maximum rate of interest allowed by law.
For
the purposes of this Section 25: (a) attorneys’ fees shall include, without
limitation, fees incurred in the following: (i) postjudgment motions; (ii)
contempt proceedings; (iii) garnishment, levy, and debtor and third party
examinations; (iv) discovery and (v) bankruptcy litigation and (b) "
prevailing
party
"
shall
mean the party who is determined in the proceeding to have prevailed or who
prevails by dismissal, default or otherwise.
26.
Descriptive
Headings; Nouns and Pronouns
.
Descriptive
headings are for convenience only and shall not control or affect the meaning
or
construction of any provision of this Agreement. Whenever the context may
require, any pronouns used herein shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns and pronouns shall
include the plural and vice-versa.
27.
Non-Qualified
Deferred Compensation
.
The
parties acknowledge and agree that, to the extent applicable, this Agreement
shall be interpreted in accordance with Section 409A of the Internal Revenue
Code of 1986, as amended (the "
Code
")
and
Department of Treasury regulations and other interpretive guidance issued
thereunder, including without limitation any such regulations or other guidance
that may be issued after the date hereof. Notwithstanding any provision of
this
Agreement to the contrary, in the event that the Employer determines that any
amounts payable hereunder will be immediately taxable to the Employee under
Section 409A of the Code and related Department of Treasury guidance, the
Employer may (a) adopt such amendments to this Agreement and appropriate
policies and procedures, including amendments and policies with retroactive
effect, that the Employer determines necessary or appropriate to preserve the
intended tax treatment of the benefits provided by this Agreement and/or (b)
take such other actions as the Employer determines necessary or appropriate
to
comply with the requirements of Section 409A of the Code and related Department
of Treasury guidance, including such Department of Treasury guidance, and other
interpretive materials as may be issued after the date hereof.
28.
Waiver
of Jury Trial
.
EACH
OF
THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN
ANY
ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS
AGREEMENT.
[signature
page follows]
IN
WITNESS WHEREOF, the parties hereto have executed this Employment Agreement
as
of the date first written above.
|
|
Primoris
Corporation
|
|
|
|
|
|
|
By:
|
/s/
John P. Schauerman
|
|
|
|
|
|
|
Name:
|
John
P. Schauerman
|
|
|
|
|
|
|
Title:
|
Chief
Financial Officer
|
|
|
|
|
|
|
Brian
Pratt
|
|
|
|
|
|
|
|
/s/
Brian Pratt
|
,
individually
|
EXHIBIT
A
[Form
of Release]
1.
[Severance
Benefits]
2.
Release
of Claims
.
Except
as explicitly provided below, you agree that the foregoing consideration
represents settlement in full of all outstanding obligations owed to you by
the
Company, and its respective officers, directors, partners, members, agents
and
employees, including, without limitation, any and all obligations under the
Employment Agreement, and is satisfactory consideration for the waiver and
release of all claims set forth herein. On behalf of yourself, and your
respective heirs, family members, executors and assigns, you hereby fully and
forever release the Company and its past, present and future officers, agents,
directors, employees, investors, stockholders, partners, members,
administrators, affiliates, divisions, subsidiaries, parents, predecessor and
successor corporations and assigns (the "
Releasees
"),
from,
and agree not to sue concerning, or in any manner to institute, prosecute or
pursue, or cause to be instituted, prosecuted, or pursued, any claim, duty,
obligation or cause of action relating to any matters of any kind, whether
presently known or unknown, suspected or unsuspected, that you may possess
against any of the Releasees arising from any omissions, acts or facts that
have
occurred up until and including the Effective Date of this Release including,
without limitation:
(a)
any
and
all claims relating to or arising from your employment relationship with the
Company and the termination of that relationship;
(b)
any
and
all claims relating to, or arising from, your right to purchase, or actual
purchase of shares of stock or other securities of the Company or any of its
affiliates or subsidiaries, including, without limitation, any claims for fraud,
misrepresentation, breach of fiduciary duty, breach of duty under applicable
state corporate law, and securities fraud under any state or federal
law;
(c)
any
and
all claims for wrongful discharge of employment; termination in violation of
public policy; discrimination; harassment; retaliation; breach of contract,
both
express and implied, including, without limitation, any and all claims arising
under or in connection with the Employment Agreement; breach of a covenant
of
good faith and fair dealing, both express and implied; promissory estoppel;
negligent or intentional infliction of emotional distress; negligent or
intentional misrepresentation; negligent or intentional interference with
contract or prospective economic advantage; unfair business practices;
defamation; libel; slander; negligence; personal injury; assault; battery;
invasion of privacy; false imprisonment; and conversion;
(d)
any
and
all claims for violation of any federal, state or municipal statute, including,
but not limited to, Title VII of the Civil Rights Act of 1964; the Civil Rights
Act of 1991; the Age Discrimination in Employment Act of 1967; the Americans
with Disabilities Act of 1990; the Fair Labor Standards Act; the Employee
Retirement Income Security Act of 1974; The Worker Adjustment and Retraining
Notification Act; the Family and Medical Leave Act; the California Fair
Employment and Housing Act; the California Family Rights Act; and the California
Labor Code, including, but not limited to Section 201, et seq., Section 970,
et
seq., Sections 1400-1408; and all amendments to each such Act as well as the
regulations issued thereunder;
(e)
any
and
all claims for violation of the federal, or any state,
constitution;
(f)
any
and
all claims arising out of any other laws and regulations relating to employment
or employment discrimination; and
(g)
any
and
all claims for attorneys’ fees and costs;
provided,
however
,
that
the parties hereto agree and acknowledge that you have not, by virtue of this
Release or otherwise, waived any claim, duty, obligation or cause of action
relating to any of the following:
(i)
any
matter that arises after the Effective Date of this Release;
(ii)
vested
benefits under any employee benefit plan within the meaning of section 3(3)
of
the Employee Retirement Income Security Act of 1974, as amended;
(iii)
any
claim
relating to indemnification in accordance with applicable laws or the Company's
certificate of incorporation or by-laws or any applicable insurance policy,
with
respect to any liability as a director, officer or employee of the Company
(including as a trustee, director or officer of any employee benefit
plan);
(iv)
any
right
to obtain contribution as permitted by law in the event of entry of judgment
against you as a result of any act or failure to act for which the Company
and
you are held jointly liable; and
(v)
any
of
your rights as a Limited Partner of Partnership under the Partnership
Agreement.
You
agree
that the release set forth in this Paragraph shall be and remain in effect
in
all respects as a complete general release as to the matters released. This
release does not extend to any obligations incurred under this Release. In
the
event that any of the parties brings an action to enforce or effect their rights
under this Release, the prevailing party shall be entitled to recover their
reasonable attorneys' fees and expenses incurred in connection with such an
action.
3.
Acknowledgment
of Waiver of Claims under ADEA
.
You
acknowledge that you are waiving and releasing any rights you may have under
the
Age Discrimination in Employment Act of 1967 ("
ADEA
")
and
that this waiver and release is knowing and voluntary. You and the Company
agree
that this Release does not apply to any rights or claims that may arise under
ADEA after the Effective Date of this Release. You acknowledge that the
consideration given for this Release is in addition to anything of value to
which you were already entitled. You further acknowledge that you have been
advised by this writing that:
(a)
you
should consult with an attorney
prior
to
executing this Release;
(b)
you
have
up to [___] days within which to consider this Release;
(c)
you
have
seven days following your execution of this Release to revoke this Release;
and
this Release shall not be effective until the eighth day after you execute
and
do not revoke this Release; nothing in this Release prevents or precludes you
from challenging or seeking a determination in good faith of the validity of
this waiver under the ADEA, nor does it impose any condition precedent,
penalties or costs from doing so, unless specifically authorized by federal
law.
Any
revocation must be in writing and delivered to the Company as follows:
[____________________] by close of business on or before the seventh day from
the date that you sign this Release.
4.
Civil
Code Section 1542/Unknown Claims
.
You
represent that you are not aware of any claims against the Company other than
the claims that are released by this Release. You acknowledge that you have
had
the opportunity to be advised by legal counsel and are familiar with the
provisions of California Civil Code 1542, below, which provides as
follows:
A
GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW
OR
SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE,
WHICH
IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT
WITH
THE DEBTOR.
Being
aware of said code section, you agree to expressly waive any rights you may
have
thereunder, as well as under any statute or common law principles of similar
effect.
5.
No
Pending or Future Lawsuits
.
You
represent that you have no lawsuits, claims, or actions pending in your name,
or
on behalf of any other person or entity, against the Company or any of the
Releasees. You also represent that you do not intend to bring any claims on
your
own behalf or on behalf of any other person or entity against the Company or
any
of the Releasees.
6.
Confidentiality
of Release
.
You
agree to keep the terms of this Release in the strictest confidence and, except
as required by law, not reveal the terms of this Release to any persons except
your immediate family, your attorney, and your financial advisors (and to them
only provided that they also agree to keep the information completely
confidential), and the court in any proceedings to enforce the terms of this
Release.
7.
Non-Disparagement
.
You
agree not to make any public oral or written statement, or take any other public
action, that disparages or criticizes the Company's management, employees,
products or services, in any case that damages the Company's reputation or
impairs its normal operations.
8.
Entire
Agreement
.
The
terms of which are specifically incorporated herein, this Release constitutes
the entire agreement between you and the Company concerning your employment
with
and separation from the Company and all the events leading thereto and
associated therewith, and supersedes and replaces any and all prior agreements
and understandings, both written and oral, concerning your relationship with
the
Company.
9.
Successors
and Assigns
.
This
Release shall be binding upon each of the parties and upon their respective
heirs, administrators, representatives, executors, successors and assigns,
and
shall inure to the benefit of each party and to their heirs, administrators,
representatives, executors, successors, and assigns.
10.
No
Admission of Liability
.
You
understand and acknowledge that this Release constitutes a compromise and
settlement of any and all potential disputed claims. No action taken by the
Company hereto, either previously or in connection with this Release, shall
be
deemed or construed to be: (a) an admission of the truth or falsity of any
potential claims; or (b) an acknowledgment or admission by the Company of any
fault or liability whatsoever to you or to any third party.
11.
Authority
.
The
Company represents and warrants that the undersigned has the authority to act
on
behalf of the Company and to bind the Company and all who may claim through
it
to the terms and conditions of this Release. Similarly, you represent and
warrant that you have the capacity to act on your own behalf and on behalf
of
all who might claim through you to bind them to the terms and conditions of
this
Release. The Company and you each warrant and represent that there are no liens
or claims of lien or assignments in law or equity or otherwise of or against
any
of the claims or causes of action released herein.
12.
Effective
Date
.
This
Release is effective after it has been signed by both parties and after seven
days have passed since you have signed this Release (such date, the
"
Effective
Date
").
13.
Voluntary
Execution of Release
.
This
Release is executed voluntarily and without any duress or undue influence on
the
part or behalf of the parties hereto, with the full intent of releasing all
claims except claims specifically excluded under Paragraph 4 hereof. The parties
acknowledge that:
(a)
They
have
read this Release;
(b)
They
have
been represented in the preparation, negotiation, and execution of this Release
by legal counsel of their own choice or that they have voluntarily declined
to
seek such counsel;
(c)
They
understand the terms and consequences of this Release and of the releases it
contains; and
(d)
They
are fully aware of the legal and binding effect of this Release. The laws of
the
State of California govern this Release, regardless of the laws that might
otherwise govern under applicable principles of conflict of law thereof. In
the
event that any portion of this Release or the application thereof becomes or
is
declared by a court of' competent jurisdiction to be illegal, void or
unenforceable, the remainder of this Release will continue in full force and
effect and the application of such portion to other persons or circumstances
will be interpreted so as reasonable to effect the intent of the parties hereto.
This Release may not be modified, amended, altered or supplemented except by
the
execution and delivery of a written agreement executed by you and an authorized
representative of the Company or by a court of competent
jurisdiction.
Exhibit
10.16
EMPLOYMENT
AGREEMENT
BETWEEN
Primoris
Corporation
AND
John
P. Schauerman
February
18, 2008
EMPLOYMENT
AGREEMENT
THIS
EMPLOYMENT AGREEMENT is made and entered into as of February 18, 2006, and
effective as of the Closing Date (as hereinafter defined), by and among Primoris
Corporation, a Nevada corporation (the “
Employer
”),
and
John P. Schauerman (the “
Employee
”).
WHEREAS,
pursuant to that certain Agreement And Plan of Merger By And Among Rhapsody
Acquisition Corp., Primoris Corporation and the Shareholders of Primoris
Corporation dated on or about February 19, 2008 (“the Merger Agreement”), a
closing date for the consummation of a prospective merger is defined therein
(“the Closing Date”);
WHEREAS,
the Employer desires to employ the Employee, and the Employee desires to accept
such employment, on the terms and subject to the conditions hereinafter set
forth;
NOW,
THEREFORE, in consideration of the covenants contained herein and other good
and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows.
Generally,
defined terms used in this Agreement are defined in the first instance in which
they appear herein. In addition, the following terms and phrases shall have
the
following meanings:
“
Board
”
shall
mean the board of directors of Employer.
“
Business
Day
”
shall
mean any day that is not a Saturday, Sunday, or a day on which banking
institutions in California are not required to be open.
“
Cause
”
shall
mean the Employee’s:
(i)
failure
to devote substantially all his working time to the business of Employer and
its
Affiliates and Subsidiaries;
(ii)
willful
disregard of his duties, or his intentional failure to act where the taking
of
such action would be in the ordinary course of the Employee’s duties
hereunder;
(iii)
gross
negligence or willful misconduct in the performance of his duties
hereunder;
(iv)
commission
of any act of fraud, theft or financial dishonesty, or any felony or criminal
act involving moral turpitude; or
(v)
unlawful
use (including being under the influence) of alcohol or drugs or possession
of
illegal drugs while on the premises of the Employer or any of its Affiliates
or
while performing duties and responsibilities to the Employer and its
Affiliates.
“
Confidential
Information
”
shall
mean all proprietary and other information relating to the business and
operations of Employer, which has not been specifically designated for release
to the public by an authorized representative of Employer, including, but not
limited to the following: (i) information, observations, procedures and data
concerning the business or affairs of Employer; (ii) products or services;
(iii)
costs and pricing structures; (iv) analyses; (v) drawings, photographs and
reports; (vi) computer software, including operating systems, applications
and
program listings; (vii) flow charts, manuals and documentation; (viii) data
bases; (ix) accounting and business methods; (x) inventions, devices, new
developments, methods and processes, whether patentable or unpatentable and
whether or not reduced to practice; (xi) customers, vendors, suppliers and
customer, vendor and supplier lists; (xii) other copyrightable works; (xiii)
all
production methods, processes, technology and trade secrets and (xiv) all
similar and related information in whatever form. Confidential Information
will
not include any information that has been published in a form generally
available to the public prior to the date the Employee proposes to disclose
or
use such information. Confidential Information will not be deemed to have been
published merely because individual portions of the information have been
separately published, but only if all material features comprising such
information have been published in combination.
“
Disability
”
shall
mean the Employee’s inability, due to physical or mental illness or disability,
to perform the essential functions of his employment with the Employer, even
with reasonable accommodation that does not impose an undue hardship on the
Employer, for more than sixty (60) consecutive days, or for any ninety (90)
days
within any one year period, unless a longer period is required by federal or
state law, in which case such longer period will be applicable. The Employer
reserves the right, in good faith, to make the determination of Disability
under
this Agreement based on information supplied by the Employee and/or his medical
personnel, as well as information from medical personnel selected by the
Employer or its insurers.
“
Employer
”
shall
mean Primoris Corporation and any of its Subsidiaries.
“
Person
”
shall
be construed broadly and shall include, without limitation, an individual,
a
partnership, an investment fund, a limited liability company, a corporation,
an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization and a governmental entity or any department, agency or political
subdivision thereof.
“
Subsidiary
”
or
“
Subsidiaries
”
shall
have the meaning as defined in the Merger Agreement.
“
Termination
Date
”
shall
mean the effective date of the termination of the Employee’s employment
hereunder, which (i) in the case of termination by resignation, shall mean
the
date that is ninety (90) days following the date of the Employee’s written
notice to the Employer of his resignation; provided, however, that the Employer
may accelerate the Termination Date; (ii) in the case of termination by reason
of death shall mean the date of death; (iii) in the case of termination by
reason of Disability, shall mean the date specified in the notice of such
termination delivered to the Employee by the Employer; (iv) in the case of
a
Termination for Cause or a Termination without Cause, shall mean the date
specified in the written notice of such termination delivered to the Employee
by
the Employer; (iv) in the case of termination by mutual agreement shall mean
the
date mutually agreed to by the parties hereto and (v) in the case of nonrenewal,
shall mean the expiration of the Employment Period.
a.
Initial
Term.
The
Employer shall employ the Employee, and the Employee accepts employment with
the
Employer, upon the terms and conditions set forth in this Agreement. The initial
term of this Agreement (the “
Initial
Term
”)
shall
be for a period of five (5) years commencing on the date hereof, unless
terminated earlier pursuant to Article 5 hereof; provided, however, that
Employee’s obligations in Article 11 and Article 12 hereof shall continue in
effect after such termination.
b.
Additional
Terms.
This
Agreement may be extended beyond the Initial Term upon the mutual consent and
agreement of Employee and Employer. The Initial Term and additional terms,
if
any, shall collectively be referred to herein as the “Employment
Period”.
During
the Employment Period, the Employee shall serve as the Chief Financial Officer,
reporting to the Chief Executive Officer of Employer, and shall have the usual
and customary duties, responsibilities and authority of such position. During
the Employment Period the Employee shall also serve as a member of the Board
of
Directors of Employer. In addition, during the Employment Period, if elected
or
appointed thereto, shall serve as an officer and/or member of the board of
any
Subsidiary of Employer as reasonably requested by the Employer and its
Subsidiaries, in each case, without additional compensation hereunder. The
Employee hereby accepts such employment and positions and agrees to diligently
and conscientiously devote his full and exclusive business time, attention,
and
best efforts in discharging and fulfilling his duties and responsibilities
hereunder. The Employee shall comply with the Employer’s policies and procedures
and the direction and instruction of the Board and the Employee shall not engage
in any business activity which, in the reasonable judgment of the Board,
conflicts with the duties of the Employee hereunder, whether or not such
activity is pursued for gain, profit or other pecuniary advantage.
(a)
Salary
.
During
the Employment Period, the Employer shall pay the Employee base salary (the
“
Base
Salary
”)
at the
rate of Two Hundred Seventy Five Thousand Dollars ($275,000) per annum, payable
in equal installments twice monthly on Employer’s regular payroll dates, less
applicable deductions and withholdings.
(b)
Performance
Bonus
.
In
addition to the Base Salary, during the Employment Period the Employee shall
be
eligible to receive a cash bonus (the “
Bonus
”)
with
respect to each calendar year as of the last day of which the Employee is
employed by the Employer. The amount of the Bonus, if any, payable in respect
of
any calendar year will be determined at the sole discretion of Employer by
the
Board or compensation committee of the Board (the “
Compensation
Committee
”).
The
Bonus, if any, payable with respect to a calendar year shall be paid within
thirty (30) days following the rendering of Employer’s audited financial
statements for the relevant calendar year.
(c)
Benefits
and Perquisites
.
In
addition to the Base Salary, Employee shall be entitled to all other benefits
of
employment provided to other employees of Employer; provided, however, that
during the term of this Agreement Employee shall be entitled to three (3) weeks
of vacation per annum. Additional benefits and perquisites will be provided
subject to Employer’s policies and practices in effect and then in place at the
Closing Date, and the terms of applicable benefit plans and arrangements as
in
effect from time to time.
(d)
Reimbursements
.
The
Employer shall reimburse the Employee for all reasonable and necessary
business-related expenses incurred by him in the course of performing his duties
under this Agreement which are consistent with Employer’s policies and practices
in effect and then in place at the Closing Date, including travel, entertainment
and other business expenses, subject to the Employer’s requirements with respect
to reporting and documentation of such expenses.
(e)
Deductions
and Withholding
.
The
Employer shall deduct from any payments to be made by it to or on behalf of
the
Employee under this Agreement any amounts required to be withheld in respect
of
any federal, state or local income or other taxes.
(f)
Annual
Review of Base Salary
.
The
Board (or the Compensation Committee) shall undertake a review of the Base
Salary not less frequently than annually during the Employment Period and may
increase, but not decrease, the rate of Base Salary from the rate then in
effect.
(g)
Use
of Employer Aircraft
.
In
addition to all business related uses of any aircraft owned or leased by
Employer during the Employment Period, Employee shall be entitled to use of
said
aircraft up to twenty (20) hours during each calendar year hereunder.
|
5.
|
Termination
of Employment
.
|
The
Employee’s employment under this Agreement shall be terminated upon the earliest
to occur of the following events:
(a)
Termination
for Cause
.
The
Employer may in its sole discretion terminate this Agreement and the Employee’s
employment hereunder for Cause at any time and with or without advance notice
to
the Employee.
(b)
Termination
without Cause
.
The
Employer may terminate this Agreement and the Employee’s employment hereunder
without Cause at any time, with or without notice, for any reason or no reason
(and no reason need be given).
(c)
Mutual
Agreement
.
This
Agreement and the Employee’s employment hereunder may be terminated by the
mutual written agreement of the Employer and the Employee.
(d)
Termination
by Death or Disability
.
This
Agreement and the Employee’s employment hereunder shall automatically terminate
upon the Employee’s death or Disability.
(e)
Resignation
.
The
Employee may terminate this Agreement and his employment hereunder upon ninety
(90) days advance written notice to the Employer.
(f)
Nonrenewal
.
In the
event either party does not elect to renew the term of this Agreement, this
Agreement and the Employee’s employment hereunder shall automatically terminate
as of the expiration of the current term in effect.
|
6.
|
Compensation
upon Termination
|
(a)
General
.
In the
event of the Employee’s termination of employment for any reason, the Employee
or his estate or beneficiaries shall have the right to receive the
following:
(i)
the
unpaid portion of the Base Salary and paid time off accrued and payable through
the Termination Date;
(ii)
reimbursement
for any expenses for which the Employee shall not have been previously
reimbursed, as provided in Section 4(d); and
(iii)
continuation
of health insurance coverage rights, if any, as required under applicable
law.
(b)
Termination
for Cause, Resignation, Mutual Agreement or Nonrenewal
.
In the
event of the Employee’s termination of employment by reason of (i) Termination
for Cause, (ii) Resignation, (iii) Mutual Agreement or (iv) Nonrenewal, the
Employer shall have no current or further obligations (including Base Salary)
to
the Employee under this Agreement other than as set forth in Section 6(a).
(c)
Termination
without Cause or by Death or Disability
.
Subject
to Section 6(d), in the event of the Employee’s termination of employment
hereunder by reason of (i) Termination without Cause or (ii) death or
Disability, the Employee shall be entitled to the following (the “
Severance
Benefits
”):
(i)
a
lump
sum equal to one-half of the annual Base Salary in effect upon the Termination
Date, payable within fifteen (15) days following the Termination
Date;
(ii)
a
pro
rata amount of a Bonus, if any, which would have been payable to the Employee
for the calendar year in which the Termination Date occurs, determined after
the
end of the calendar year in which such
Termination
Date occurs and equal to the amount which would have been payable to the
Employee if his employment had not been terminated during such calendar year
multiplied by the fraction, the numerator of which is the number of whole months
the Employee was employed by the Employer during such calendar year and the
denominator of which is 12. Any pro rata bonus payable under this Section
6(c)(ii) shall be paid in a lump sum at the time bonuses for such calendar
year
are otherwise payable to senior executives of the Employer; and
(iii)
in
the
event that the Employee elects COBRA benefits, the Employer shall pay the
Employee’s share of the premium for such COBRA benefits until the earlier of (i)
one year after the Termination Date; or (ii) the date that Employee obtains
comparable health benefits through new employment.
(d)
General
Release
.
Notwithstanding any provision to the contrary in this Agreement, the foregoing
Severance Benefits under Section 6(c) shall not apply and the Employer shall
have no obligations to pay or provide any Severance Benefits (other than upon
the Employee’s termination of employment by reason of death), unless the
Employee signs, delivers and does not rescind or revoke a general release,
substantially in the form attached hereto as Exhibit A, of all known and unknown
claims of the Employee (and his affiliates, successors, heirs and assigns and
the like) against Employer and the Board.
(e)
The
rights of the Employee set forth in this Section 6 are intended to be the
Employee’s exclusive remedy for termination and, to the greatest extent
permitted by applicable law, the Employee waives all other remedies.
Employer
may, for its own benefit, maintain “key man” life and disability insurance
policies covering the Employee. The Employee will cooperate with Employer and
provide such information or other assistance as they may reasonably request
in
connection with obtaining and maintaining such policies.
During
the term of this Agreement, the Employee will not accept or perform any work,
consulting, or other services for any other business entity or for remuneration
of any kind, without written approval by the Board.
|
9.
|
The
Employee’s Termination Obligations
.
|
The
Employee hereby acknowledges and agrees that all personal property and equipment
furnished to or prepared by the Employee in the course of or incident to his
employment hereunder belongs to Employer and shall be promptly returned to
Employer upon termination of the Employee’s employment. The term “
personal
property
”
includes, without limitation, all office equipment, laptop computers, cell
phones, books, manuals, records, reports, notes, contracts, requests for
proposals, bids, lists, blueprints, and other documents, or materials, or copies
thereof (including computer files), and all other proprietary and
non-proprietary information relating to the business of Employer. Following
termination of his employment hereunder, the Employee will not retain any
written or other tangible material containing any proprietary or non-proprietary
information of Employer.
|
10.
|
Acknowledgment
of Protectable Interests
.
|
The
Employee acknowledges and agrees that his employment with Employer involves
building and maintaining business relationships and good will on behalf of
the
Employer with customers, and other professional contractors, subcontractors,
employees and staff, and various providers and users of services related to
Employer’s business; that he is entrusted with proprietary, strategic and other
confidential information which is of special value to Employer; and that the
foregoing matters are significant interests which the Employer is entitled
to
protect.
|
11.
|
Confidential
Information
.
|
The
Employee agrees that all Confidential Information that comes or has come into
his possession by reason of his employment hereunder is the property of the
Employer and shall not be used except in the course of employment by Employer
and for Employer’s exclusive benefit. Further, the Employee shall not, during
his employment or thereafter, disclose or acknowledge the content of any
Confidential Information to any person who is not an employee of Employer
authorized to possess such Confidential Information. Upon termination of
employment, the Employee shall deliver to Employer all documents, writings,
electronic storage devices, and other tangible things containing any
Confidential Information and the Employee shall not make or retain copies,
excerpts, or notes of such information.
|
12.
|
Nonsolicitation/Nondisparagement
.
|
In
the
event of the termination of this Agreement for any reason, the Employee shall
not, for a period of two (2) years thereafter, directly or indirectly:
(a)
solicit,
induce or encourage any employee of Employer to terminate his or her employment
with Employer;
(b)
make
any
disparaging public statement concerning Employer; or
(c)
use
Employer’s Confidential Information to induce, attempt to induce or knowingly
encourage any Customer (as defined below) of Employer to divert any business
or
income from Employer, or to stop or alter the manner in which they are then
doing business with Employer. The term “
Customer
”
with
respect to Employer shall mean any individual or business firm that is, or
within the prior twenty-four (24) months was, a customer or client of Employer,
or whose business was actively solicited by Employer at any time, regardless
of
whether such customer was generated, in whole or in part, by the Employee’s
efforts.
|
13.
|
Damages
For Improper Termination With Cause
.
|
In
the
event that the Employer terminates this Agreement and the Employee’s employment
hereunder for “Cause,” but it subsequently is determined by an arbitrator or a
court of competent jurisdiction, as the case may be, that the Employer did
not
have Cause for the termination, then for purposes of this Agreement, the
Employer’s decision to terminate shall be deemed to have been a termination
without Cause, and the Employer shall be obligated to pay the Severance Benefits
specified under Section 6(c), and only that amount.
Any
controversy or dispute arising out of, based upon, or relating to this
Agreement, its enforcement or interpretation, or because of an alleged breach,
default, or misrepresentation in connection with any of its provisions, or
arising out of, based upon, or relating in any way to the Employee’s employment
or association with Employer, or termination of the same, including, without
limiting the generality of the foregoing, any questions regarding whether a
particular dispute is arbitrable, and any alleged violation of statute, common
law or public policy, including, but not limited to, any state or federal
statutory claims, shall be submitted to final and binding arbitration in Orange
County, California, in accordance with the JAMS Employment Arbitration Rules
and
Procedures, before a single neutral arbitrator selected from the JAMS panel,
or
if JAMS is no longer able to supply the arbitrator, such arbitrator shall be
selected from the American Arbitration Association, in accordance with its
National Rules for the Resolution of Employment Disputes (the arbitrator
selected hereunder, the “
Arbitrator
”).
Provisional injunctive relief may, but need not, be sought by either party
to
this Agreement in a court of law while arbitration proceedings are pending,
pursuant to California Code of Civil Procedure section 1281.8, and any
provisional injunctive relief granted by such court shall remain effective
until
the matter is finally determined by the Arbitrator. Final resolution of any
dispute through arbitration may include any remedy or relief which the
Arbitrator deems just and equitable, including any and all remedies provided
by
applicable state or federal statutes. At the conclusion of the arbitration,
the
Arbitrator shall issue a written decision that sets forth the essential findings
and conclusions upon which the Arbitrator’s award or decision is based. Any
award or relief granted by the Arbitrator hereunder shall be final and binding
on the parties hereto and may be enforced by any court of competent
jurisdiction. The parties acknowledge and agree that they are hereby waiving
any
rights to trial by jury in any action, proceeding or counterclaim brought by
either of the parties against the other in connection with any matter whatsoever
arising out of or in any way connected with this Agreement or the provision
of
services under this Agreement. The Employer will pay the arbitrator’s fees and
arbitration expenses and any other costs associated with the arbitration or
arbitration hearing that are unique to arbitration. Subject to the provisions
of
Section 25, the parties shall each pay their own deposition, witness, expert
and
attorneys’ fees and other expenses as and to the same extent as if the matter
were being heard in court.
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15.
|
Representations/Warranties
.
|
The
Employee represents and warrants that he is under no contractual or other
obligation that would prevent him from accepting the Employer’s offer of
employment as set forth herein.
This
Agreement is intended by the parties to be the final expression of their
agreement with respect to the employment of the Employee by Employer and may
not
be contradicted by evidence of any prior or contemporaneous agreement
(including, without limitation any term sheet or similar agreement entered
into
between Employer and the Employee). The parties further intend that this
Agreement shall constitute the complete and exclusive statement of its terms
and
that no extrinsic evidence whatsoever may be introduced in any judicial,
administrative, or other legal proceeding to vary the terms of this Agreement.
No
person
or entity has made or has the authority to make any representations or promises
on behalf of any of the parties which are inconsistent with the representations
or promises contained in this Agreement, and this Agreement has not been
executed in reliance on any representations or promises not set forth herein.
Specifically, no promises, warranties or representations have been made by
anyone on any topic or subject matter related to the Employee’s relationship
with the Employer or any of their executives or employees, including but not
limited to any promises, warranties or representations regarding future
employment, compensation, benefits, any entitlement to equity interests in
Employer or regarding the termination of the Employee’s employment. In this
regard, the Employee agrees that no promises, warranties or representations
shall be deemed to be made in the future unless they are set forth in writing
and signed by an authorized representative of the Employer.
This
Agreement may be modified only by agreement of the parties by a written
instrument executed by the parties that is designated as an amendment to this
Agreement.
|
19.
|
Severability
and Non-Waiver/Survival
.
|
Any
provision of this Agreement (or portion thereof) which is deemed invalid,
illegal or unenforceable in any jurisdiction shall, as to that jurisdiction
and
subject to this Section 19, be ineffective to the extent of such invalidity,
illegality or unenforceability, without affecting in any way the remaining
provisions thereof in such jurisdiction or rendering such provision or any
other
provision of this Agreement invalid, illegal, or unenforceable in any other
jurisdiction. If any covenant should be deemed invalid, illegal or unenforceable
because its scope is considered excessive, such covenant shall be modified
so
that the scope of the covenant is reduced only to the minimum extent necessary
to render the modified covenant valid, legal and enforceable. No waiver of
any
provision or violation of this Agreement by the Employer shall be implied by
the
Employer’s forbearance or failure to take action. The expiration or termination
of the Employment Period and this Agreement shall not impair the rights or
obligations of any party hereto which shall have accrued hereunder prior to
such
expiration or termination.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective heirs, representatives, executors, administrators, successors,
and assigns, provided, however, that the Employee may not assign any or all
of
his rights or duties hereunder except following the prior written consent of
the
Employer. The Employee shall be entitled, to the extent permitted under
applicable law, to select and change a beneficiary or beneficiaries to receive
any compensation or benefit hereunder following the Employee’s death by giving
written notice thereof. In the event of the Employee’s death or a judicial
determination of his incompetence, references in this Agreement to the Employee
shall be deemed, where appropriate, to refer to his beneficiary, estate or
other
legal representative.
|
21.
|
Voluntary
and Knowledgeable Act
.
|
The
Employee represents and warrants that the Employee has read and understands
each
and every provision of this Agreement and has freely and voluntarily entered
into this Agreement.
This
Agreement shall be governed as to its validity and effect by the laws of the
state of California without regard to principles of conflict of laws.
This
Agreement may be executed in counterparts, each of which shall be deemed to
be
an original, but both of which together shall constitute one and the same
instrument.
All
notices and other communications necessary or contemplated under this Agreement
shall be in writing and shall be delivered in the manner specified herein or,
in
the absence of such specification, shall be deemed delivered when delivered
in
person or sent by first-class mail (certified or registered mail, return receipt
requested, postage prepaid), facsimile or overnight air courier guaranteeing
next day delivery, addressed as follows:
|
(a)
|
if
to the
Employee, to him at his most recent address in Employer’s
records,
|
|
|
|
|
|
(b)
|
if
to the Employer, to:
|
John
M. Perisich
|
|
|
Primoris
Corporation
|
|
|
26000
Commercentre Dr.
|
|
|
Lake
Forest, CA 92630
|
|
|
Facsimile:
(949) 595-5544
|
|
|
|
|
with
a copy to:
|
Rutan
& Tucker
|
|
|
611
Anton Boulevard, Fourteenth Floor
|
|
|
Costa
Mesa, California 92626-1931
|
|
|
Facsimile:
(714) 546-9035
|
|
|
Attention:
George J. Wall, Esq.
|
and:
or
to
such other address as the recipient party to whom notice is to be given may
have
furnished to the other party in writing in accordance herewith.
In
the
event that any dispute between the parties should result in litigation or
arbitration, the prevailing party in such dispute shall be entitled to recover
from the other party all reasonable fees, costs and expenses of enforcing any
right of the prevailing party, including without limitation, reasonable
attorneys’ fees and expenses, all of which shall be deemed to have accrued upon
the commencement of such action and shall be paid whether or not such action
is
prosecuted to judgment. Any judgment or order entered in such action shall
contain a specific provision providing for the recovery of attorneys’ fees and
costs incurred in enforcing such judgment and an award of prejudgment interest
from the date of the breach at the maximum rate of interest allowed by law.
For
the purposes of this Section 25: (a) attorneys’ fees shall include, without
limitation, fees incurred in the following: (i) postjudgment motions; (ii)
contempt proceedings; (iii) garnishment, levy, and debtor and third party
examinations; (iv) discovery and (v) bankruptcy litigation and (b) “
prevailing
party
”
shall
mean the party who is determined in the proceeding to have prevailed or who
prevails by dismissal, default or otherwise.
|
26.
|
Descriptive
Headings; Nouns and Pronouns
.
|
Descriptive
headings are for convenience only and shall not control or affect the meaning
or
construction of any provision of this Agreement. Whenever the context may
require, any pronouns used herein shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns and pronouns shall
include the plural and vice-versa.
|
27.
|
Non-Qualified
Deferred Compensation
.
|
The
parties acknowledge and agree that, to the extent applicable, this Agreement
shall be interpreted in accordance with Section 409A of the Internal Revenue
Code of 1986, as amended (the “
Code
”)
and
Department of Treasury regulations and other interpretive guidance issued
thereunder, including without limitation any such regulations or other guidance
that may be issued after the date hereof. Notwithstanding any provision of
this
Agreement to the contrary, in the event that the Employer determines that any
amounts payable hereunder will be immediately taxable to the Employee under
Section 409A of the Code and related Department of Treasury guidance, the
Employer may (a) adopt such amendments to this Agreement and appropriate
policies and procedures, including amendments and policies with retroactive
effect, that the Employer determines necessary or appropriate to preserve the
intended tax treatment of the benefits provided by this Agreement and/or (b)
take such other actions as the Employer determines necessary or appropriate
to
comply with the requirements of Section 409A of the Code and related Department
of Treasury guidance, including such Department of Treasury guidance and other
interpretive materials as may be issued after the date hereof.
|
28.
|
Waiver
of Jury Trial
.
|
EACH
OF
THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN
ANY
ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS
AGREEMENT.
[signature
page follows]
IN
WITNESS WHEREOF, the parties hereto have executed this Employment Agreement
as
of the date first written above.
|
|
|
Primoris
Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ John
M.
Perisich
|
|
|
|
Name:
|
John
M. Perisich
|
|
|
|
Title:
|
Secretary
|
|
|
|
|
|
|
|
|
John
P. Schauerman
|
|
|
|
|
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|
|
/s/ John P. Schauerman
,
individually
|
|
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EXHIBIT
A
[Form
of Release]
1.
[Severance
Benefits]
2.
Release
of Claims
.
Except
as explicitly provided below, you agree that the foregoing consideration
represents settlement in full of all outstanding obligations owed to you by
the
Company, and its respective officers, directors, partners, members, agents
and
employees, including, without limitation, any and all obligations under the
Employment Agreement, and is satisfactory consideration for the waiver and
release of all claims set forth herein. On behalf of yourself, and your
respective heirs, family members, executors and assigns, you hereby fully and
forever release the Company and its past, present and future officers, agents,
directors, employees, investors, stockholders, partners, members,
administrators, affiliates, divisions, subsidiaries, parents, predecessor and
successor corporations and assigns (the “
Releasees
”),
from,
and agree not to sue concerning, or in any manner to institute, prosecute or
pursue, or cause to be instituted, prosecuted, or pursued, any claim, duty,
obligation or cause of action relating to any matters of any kind, whether
presently
known
or unknown, suspected or unsuspected
,
that
you may possess against any of the Releasees arising from any omissions, acts
or
facts that have occurred up until and including the Effective Date of this
Release including, without limitation:
(a)
any
and
all claims relating to or arising from your employment relationship with the
Company and the termination of that relationship;
(b)
any
and
all claims relating to, or arising from, your right to purchase, or actual
purchase of shares of stock or other securities of the Company or any of its
affiliates or subsidiaries, including, without limitation, any claims for fraud,
misrepresentation, breach of fiduciary duty, breach of duty under applicable
state corporate law, and securities fraud under any state or federal law;
(c)
any
and
all claims for wrongful discharge of employment; termination in violation of
public policy; discrimination; harassment; retaliation; breach of contract,
both
express and implied, including, without limitation, any and all claims arising
under or in connection with the Employment Agreement; breach of a covenant
of
good faith and fair dealing, both express and implied; promissory estoppel;
negligent or intentional infliction of emotional distress; negligent or
intentional misrepresentation; negligent or intentional interference with
contract or prospective economic advantage; unfair business practices;
defamation; libel; slander; negligence; personal injury; assault; battery;
invasion of privacy; false imprisonment; and conversion;
(d)
any
and
all claims for violation of any federal, state or municipal statute, including,
but not limited to, Title VII of the Civil Rights Act of 1964; the Civil Rights
Act of 1991; the Age Discrimination in Employment Act of 1967; the Americans
with Disabilities Act of 1990; the Fair Labor Standards Act; the Employee
Retirement Income Security Act of 1974; The Worker Adjustment and Retraining
Notification Act; the Family and Medical Leave Act; the California Fair
Employment and Housing Act; the California Family Rights Act; and the California
Labor Code, including, but not limited to Section 201, et seq,. Section 970,
et
seq., Sections 1400-1408; and all amendments to each such Act as well as the
regulations issued thereunder;
(e)
any
and
all claims for violation of the federal, or any state, constitution;
(f)
any
and
all claims arising out of any other laws and regulations relating to employment
or employment discrimination; and
(g)
any
and
all claims for attorneys’ fees and costs;
provided,
however
,
that
the parties hereto agree and acknowledge that you have not, by virtue of this
Release or otherwise, waived any claim, duty, obligation or cause of action
relating to any of the following:
(i)
any
matter that arises after the Effective Date of this Release;
(ii)
vested
benefits under any employee benefit plan within the meaning of section 3(3)
of
the Employee Retirement Income Security Act of 1974, as amended;
(iii)
any
claim
relating to indemnification in accordance with applicable laws or the Company’s
certificate of incorporation or by-laws or any applicable insurance policy,
with
respect to any liability as a director, officer or employee of the Company
(including as a trustee, director or officer of any employee benefit plan);
(iv)
any
right
to obtain contribution as permitted by law in the event of entry of judgment
against you as a result of any act or failure to act for which the Company
and
you are held jointly liable; and
(v)
any
of
your rights as a Limited Partner of Partnership under the Partnership
Agreement.
You
agree
that the release set forth in this Paragraph shall be and remain in effect
in
all respects as a complete general release as to the matters released. This
release does not extend to any obligations incurred under this Release. In
the
event that any of the parties brings an action to enforce or effect their rights
under this Release, the prevailing party shall be entitled to recover their
reasonable attorneys’ fees and expenses incurred in connection with such an
action.
3.
Acknowledgment
of Waiver of Claims under ADEA
.
You
acknowledge that you are waiving and releasing any rights you may have under
the
Age Discrimination in Employment Act of 1967 (“
ADEA
”)
and
that this waiver and release is knowing and voluntary. You and the Company
agree
that this Release does not apply to any rights or claims that may arise under
ADEA after the Effective Date of this Release. You acknowledge that the
consideration given for this Release is in addition to anything of value to
which you were already entitled. You further acknowledge that you have been
advised by this writing that:
(a)
you
should consult with an attorney
prior
to
executing this Release;
(b)
you
have
up to [____] days within which to consider this Release;
(c)
you
have
seven days following your execution of this Release to revoke this Release;
and
this Release shall not be effective until the eighth day after you execute
and
do not revoke this Release; nothing in this Release prevents or precludes you
from challenging or seeking a determination in good faith of the validity of
this waiver under the ADEA, nor does it impose any condition precedent,
penalties or costs from doing so, unless specifically authorized by federal
law.
Any
revocation must be in writing and delivered to the Company as follows:
[______________________________] by close of business on or before the seventh
day from the date that you sign this Release.
4.
Civil
Code Section 1542/Unknown Claims
.
You
represent that you are not aware of any claims against the Company other than
the claims that are released by this Release. You acknowledge that you have
had
the opportunity to be advised by legal counsel and are familiar with the
provisions of California Civil Code 1542, below, which provides as
follows:
A
GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW
OR
SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE,
WHICH
IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT
WITH
THE DEBTOR.
Being
aware of said code section, you agree to expressly waive any rights you may
have
thereunder, as well as under any statute or common law principles of similar
effect.
5.
No
Pending or Future Lawsuits
.
You
represent that you have no lawsuits, claims, or actions pending in your name,
or
on behalf of any other person or entity, against the Company or any of the
Releasees. You also represent that you do not intend to bring any claims on
your
own behalf or on behalf of any other person or entity against the Company or
any
of the Releasees.
6.
Confidentiality
of Release
.
You
agree to keep the terms of this Release in the strictest confidence and, except
as required by law, not reveal the terms of this Release to any persons except
your immediate family, your attorney, and your financial advisors (and to them
only provided that they also agree to keep the information completely
confidential), and the court in any proceedings to enforce the terms of this
Release.
7.
Non-Disparagement
.
You
agree not to make any public oral or written statement, or take any other public
action, that disparages or criticizes the Company’s management, employees,
products or services, in any case that damages the Company’s reputation or
impairs its normal operations.
8.
Entire
Agreement
.
The
terms of which are specifically incorporated herein, this Release constitutes
the entire agreement between you and the Company concerning your employment
with
and separation from the Company and all the events leading thereto and
associated therewith, and supercedes and replaces any and all prior agreements
and understandings, both written and oral, concerning your relationship with
the
Company.
9.
Successors
and Assigns
.
This
Release shall be binding upon each of the parties and upon their respective
heirs, administrators, representatives, executors, successors and assigns,
and
shall inure to the benefit of each party and to their heirs, administrators,
representatives, executors, successors, and assigns.
10.
No
Admission of Liability
.
You
understand and acknowledge that this Release constitutes a compromise and
settlement of any and all potential disputed claims. No action taken by the
Company hereto, either previously or in connection with this Release, shall
be
deemed or construed to be: (a) an admission of the truth or falsity of any
potential claims; or (b) an acknowledgment or admission by the Company of any
fault or liability whatsoever to you or to any third party.
11.
Authority
.
The
Company represents and warrants that the undersigned has the authority to act
on
behalf of the Company and to bind the Company and all who may claim through
it
to the terms and conditions of this Release. Similarly, you represent and
warrant that you have the capacity to act on your own behalf and on behalf
of
all who might claim through you to bind them to the terms and conditions of
this
Release. The Company and you each warrant and represent that there are no liens
or claims of lien or assignments in law or equity or otherwise of or against
any
of the claims or causes of action released herein.
12.
Effective
Date
.
This
Release is effective after it has been signed by both parties and after seven
days have passed since you have signed this Release (such date, the
“
Effective
Date
”).
13.
Voluntary
Execution of Release
.
This
Release is executed voluntarily and without any duress or undue influence on
the
part or behalf of the parties hereto, with the full intent of releasing all
claims except claims specifically excluded under Paragraph 4 hereof. The parties
acknowledge that:
(a)
They
have
read this Release;
(b)
They
have
been represented in the preparation, negotiation, and execution of this Release
by legal counsel of their own choice or that they have voluntarily declined
to
seek such counsel;
(c)
They
understand the terms and consequences of this Release and of the releases it
contains; and
(d)
They
are
fully aware of the legal and binding effect of this Release. The laws of the
State of California govern this Release, regardless of the laws that might
otherwise govern under applicable principles of conflict of law thereof. In
the
event that any portion of this Release or the application thereof, becomes
or is
declared by a court of competent jurisdiction to be illegal, void or
unenforceable, the remainder of this Release will continue in full force and
effect and the application of such portion to other persons or circumstances
will be interpreted so as reasonable to effect the intent of the parties hereto.
This Release may not be modified, amended, altered or supplemented except by
the
execution and delivery of a written agreement executed by you and an authorized
representative of the Company or by a court of competent
jurisdiction.
Exhibit
10.17
EMPLOYMENT
AGREEMENT
BETWEEN
Primoris
Corporation
AND
John
M. Perisich
February
18, 2008
EMPLOYMENT
AGREEMENT
THIS
EMPLOYMENT AGREEMENT is made and entered into as of February 18, 2006, and
effective as of the Closing Date (as hereinafter defined), by and among Primoris
Corporation, a Nevada corporation (the “
Employer
”),
and
John M. Perisich (the “
Employee
”).
WHEREAS,
pursuant to that certain Agreement And Plan of Merger By And Among Rhapsody
Acquisition Corp., Primoris Corporation and the Shareholders of Primoris
Corporation dated on or about February 19, 2008 (“the Merger Agreement”), a
closing date for the consummation of a prospective merger is defined therein
(“the Closing Date”);
WHEREAS,
the Employer desires to employ the Employee, and the Employee desires to accept
such employment, on the terms and subject to the conditions hereinafter set
forth;
NOW,
THEREFORE, in consideration of the covenants contained herein and other good
and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows.
Generally,
defined terms used in this Agreement are defined in the first instance in which
they appear herein. In addition, the following terms and phrases shall have
the
following meanings:
“
Board
”
shall
mean the board of directors of Employer.
“
Business
Day
”
shall
mean any day that is not a Saturday, Sunday, or a day on which banking
institutions in California are not required to be open.
“
Cause
”
shall
mean the Employee’s:
(i)
failure
to devote substantially all his working time to the business of Employer and
its
Affiliates and Subsidiaries;
(ii)
willful
disregard of his duties, or his intentional failure to act where the taking
of
such action would be in the ordinary course of the Employee’s duties
hereunder;
(iii)
gross
negligence or willful misconduct in the performance of his duties
hereunder;
(iv)
commission
of any act of fraud, theft or financial dishonesty, or any felony or criminal
act involving moral turpitude; or
(v)
unlawful
use (including being under the influence) of alcohol or drugs or possession
of
illegal drugs while on the premises of the Employer or any of its Affiliates
or
while performing duties and responsibilities to the Employer and its
Affiliates.
“
Confidential
Information
”
shall
mean all proprietary and other information relating to the business and
operations of Employer, which has not been specifically designated for release
to the public by an authorized representative of Employer, including, but not
limited to the following: (i) information, observations, procedures and data
concerning the business or affairs of Employer; (ii) products or services;
(iii)
costs and pricing structures; (iv) analyses; (v) drawings, photographs and
reports; (vi) computer software, including operating systems, applications
and
program listings; (vii) flow charts, manuals and documentation; (viii) data
bases; (ix) accounting and business methods; (x) inventions, devices, new
developments, methods and processes, whether patentable or unpatentable and
whether or not reduced to practice; (xi) customers, vendors, suppliers and
customer, vendor and supplier lists; (xii) other copyrightable works; (xiii)
all
production methods, processes, technology and trade secrets and (xiv) all
similar and related information in whatever form. Confidential Information
will
not include any information that has been published in a form generally
available to the public prior to the date the Employee proposes to disclose
or
use such information. Confidential Information will not be deemed to have been
published merely because individual portions of the information have been
separately published, but only if all material features comprising such
information have been published in combination.
“
Disability
”
shall
mean the Employee’s inability, due to physical or mental illness or disability,
to perform the essential functions of his employment with the Employer, even
with reasonable accommodation that does not impose an undue hardship on the
Employer, for more than sixty (60) consecutive days, or for any ninety (90)
days
within any one year period, unless a longer period is required by federal or
state law, in which case such longer period will be applicable. The Employer
reserves the right, in good faith, to make the determination of Disability
under
this Agreement based on information supplied by the Employee and/or his medical
personnel, as well as information from medical personnel selected by the
Employer or its insurers.
“
Employer
”
shall
mean Primoris Corporation and any of its Subsidiaries.
“
Person
”
shall
be construed broadly and shall include, without limitation, an individual,
a
partnership, an investment fund, a limited liability company, a corporation,
an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization and a governmental entity or any department, agency or political
subdivision thereof.
“
Subsidiary
”
or
“
Subsidiaries
”
shall
have the meaning as defined in the Merger Agreement.
“
Termination
Date
”
shall
mean the effective date of the termination of the Employee’s employment
hereunder, which (i) in the case of termination by resignation, shall mean
the
date that is ninety (90) days following the date of the Employee’s written
notice to the Employer of his resignation; provided, however, that the Employer
may accelerate the Termination Date; (ii) in the case of termination by reason
of death shall mean the date of death; (iii) in the case of termination by
reason of Disability, shall mean the date specified in the notice of such
termination delivered to the Employee by the Employer; (iv) in the case of
a
Termination for Cause or a Termination without Cause, shall mean the date
specified in the written notice of such termination delivered to the Employee
by
the Employer; (iv) in the case of termination by mutual agreement shall mean
the
date mutually agreed to by the parties hereto and (v) in the case of nonrenewal,
shall mean the expiration of the Employment Period.
a.
Initial
Term.
The
Employer shall employ the Employee, and the Employee accepts employment with
the
Employer, upon the terms and conditions set forth in this Agreement. The initial
term of this Agreement (the “
Initial
Term
”)
shall
be for a period of five (5) years commencing on the date hereof, unless
terminated earlier pursuant to Article 5 hereof; provided, however, that
Employee’s obligations in Article 11 and Article 12 hereof shall continue in
effect after such termination.
b.
Additional
Terms.
This
Agreement may be extended beyond the Initial Term upon the mutual consent and
agreement of Employee and Employer. The Initial Term and additional terms,
if
any, shall collectively be referred to herein as the “Employment
Period”.
During
the Employment Period, the Employee shall serve as the Sr. Vice President and
General Counsel, reporting to the Board, and shall have the usual and customary
duties, responsibilities and authority of such position. In addition, during
the
Employment Period, if elected or appointed thereto, shall serve as an officer
and/or member of the board of any Subsidiary of Employer as reasonably requested
by the Employer and its Subsidiaries, in each case, without additional
compensation hereunder. The Employee hereby accepts such employment and
positions and agrees to diligently and conscientiously devote his full and
exclusive business time, attention, and best efforts in discharging and
fulfilling his duties and responsibilities hereunder. The Employee shall comply
with the Employer’s policies and procedures and the direction and instruction of
the Board and the Employee shall not engage in any business activity which,
in
the reasonable judgment of the Board, conflicts with the duties of the Employee
hereunder, whether or not such activity is pursued for gain, profit or other
pecuniary advantage.
(a)
Salary
.
During
the Employment Period, the Employer shall pay the Employee base salary (the
“
Base
Salary
”)
at the
rate of Two Hundred Fifty Thousand Dollars ($250,000) per annum, payable in
equal installments twice monthly on Employer’s regular payroll dates, less
applicable deductions and withholdings.
(b)
Performance
Bonus
.
In
addition to the Base Salary, during the Employment Period the Employee shall
be
eligible to receive a cash bonus (the “
Bonus
”)
with
respect to each calendar year as of the last day of which the Employee is
employed by the Employer. The amount of the Bonus, if any, payable in respect
of
any calendar year will be determined at the sole discretion of Employer by
the
Board or compensation committee of the Board (the “
Compensation
Committee
”).
The
Bonus, if any, payable with respect to a calendar year shall be paid within
thirty (30) days following the rendering of Employer’s audited financial
statements for the relevant calendar year.
(c)
Benefits
and Perquisites
.
In
addition to the Base Salary, Employee shall be entitled to all other benefits
of
employment provided to other employees of Employer; provided, however, that
during the term of this Agreement Employee shall be entitled to three (3) weeks
of vacation per annum. Additional benefits and perquisites will be provided
subject to Employer’s policies and practices in effect and then in place at the
Closing Date, and the terms of applicable benefit plans and arrangements as
in
effect from time to time.
(d)
Reimbursements
.
The
Employer shall reimburse the Employee for all reasonable and necessary
business-related expenses incurred by him in the course of performing his duties
under this Agreement which are consistent with Employer’s policies and practices
in effect and then in place at the Closing Date, including travel, entertainment
and other business expenses, subject to the Employer’s requirements with respect
to reporting and documentation of such expenses.
(e)
Deductions
and Withholding
.
The
Employer shall deduct from any payments to be made by it to or on behalf of
the
Employee under this Agreement any amounts required to be withheld in respect
of
any federal, state or local income or other taxes.
(f)
Annual
Review of Base Salary
.
The
Board (or the Compensation Committee) shall undertake a review of the Base
Salary not less frequently than annually during the Employment Period and may
increase, but not decrease, the rate of Base Salary from the rate then in
effect.
(g)
Use
of Employer Aircraft
.
In
addition to all business related uses of any aircraft owned or leased by
Employer during the Employment Period, Employee shall be entitled to use of
said
aircraft up to twenty (20) hours during each calendar year hereunder.
|
5.
|
Termination
of Employment
.
|
The
Employee’s employment under this Agreement shall be terminated upon the earliest
to occur of the following events:
(a)
Termination
for Cause
.
The
Employer may in its sole discretion terminate this Agreement and the Employee’s
employment hereunder for Cause at any time and with or without advance notice
to
the Employee.
(b)
Termination
without Cause
.
The
Employer may terminate this Agreement and the Employee’s employment hereunder
without Cause at any time, with or without notice, for any reason or no reason
(and no reason need be given).
(c)
Mutual
Agreement
.
This
Agreement and the Employee’s employment hereunder may be terminated by the
mutual written agreement of the Employer and the Employee.
(d)
Termination
by Death or Disability
.
This
Agreement and the Employee’s employment hereunder shall automatically terminate
upon the Employee’s death or Disability.
(e)
Resignation
.
The
Employee may terminate this Agreement and his employment hereunder upon ninety
(90) days advance written notice to the Employer.
(f)
Nonrenewal
.
In the
event either party does not elect to renew the term of this Agreement, this
Agreement and the Employee’s employment hereunder shall automatically terminate
as of the expiration of the current term in effect.
|
6.
|
Compensation
upon Termination
|
(a)
General
.
In the
event of the Employee’s termination of employment for any reason, the Employee
or his estate or beneficiaries shall have the right to receive the
following:
(i)
the
unpaid portion of the Base Salary and paid time off accrued and payable through
the Termination Date;
(ii)
reimbursement
for any expenses for which the Employee shall not have been previously
reimbursed, as provided in Section 4(d); and
(iii)
continuation
of health insurance coverage rights, if any, as required under applicable
law.
(b)
Termination
for Cause, Resignation, Mutual Agreement or Nonrenewal
.
In the
event of the Employee’s termination of employment by reason of (i) Termination
for Cause, (ii) Resignation, (iii) Mutual Agreement or (iv) Nonrenewal, the
Employer shall have no current or further obligations (including Base Salary)
to
the Employee under this Agreement other than as set forth in Section 6(a).
(c)
Termination
without Cause or by Death or Disability
.
Subject
to Section 6(d), in the event of the Employee’s termination of employment
hereunder by reason of (i) Termination without Cause or (ii) death or
Disability, the Employee shall be entitled to the following (the “
Severance
Benefits
”):
(i)
a
lump
sum equal to one-half of the annual Base Salary in effect upon the Termination
Date, payable within fifteen (15) days following the Termination
Date;
(ii)
a
pro
rata amount of a Bonus, if any, which would have been payable to the Employee
for the calendar year in which the Termination Date occurs, determined after
the
end of the calendar year in which such Termination Date occurs and equal to
the
amount which would have been payable to the Employee if his employment had
not
been terminated during such calendar year multiplied by the fraction, the
numerator of which is the number of whole months the Employee was employed
by
the Employer during such calendar year and the denominator of which is 12.
Any
pro rata bonus payable under this Section 6(c)(ii) shall be paid in a lump
sum
at the time bonuses for such calendar year are otherwise payable to senior
executives of the Employer; and
(iii)
in
the
event that the Employee elects COBRA benefits, the Employer shall pay the
Employee’s share of the premium for such COBRA benefits until the earlier of (i)
one year after the Termination Date; or (ii) the date that Employee obtains
comparable health benefits through new employment.
(d)
General
Release
.
Notwithstanding any provision to the contrary in this Agreement, the foregoing
Severance Benefits under Section 6(c) shall not apply and the Employer shall
have no obligations to pay or provide any Severance Benefits (other than upon
the Employee’s termination of employment by reason of death), unless the
Employee signs, delivers and does not rescind or revoke a general release,
substantially in the form attached hereto as Exhibit A, of all known and unknown
claims of the Employee (and his affiliates, successors, heirs and assigns and
the like) against Employer and the Board.
(e)
The
rights of the Employee set forth in this Section 6 are intended to be the
Employee’s exclusive remedy for termination and, to the greatest extent
permitted by applicable law, the Employee waives all other remedies.
Employer
may, for its own benefit, maintain “key man” life and disability insurance
policies covering the Employee. The Employee will cooperate with Employer and
provide such information or other assistance as they may reasonably request
in
connection with obtaining and maintaining such policies.
During
the term of this Agreement, the Employee will not accept or perform any work,
consulting, or other services for any other business entity or for remuneration
of any kind, without written approval by the Board.
|
9.
|
The
Employee’s Termination Obligations
.
|
The
Employee hereby acknowledges and agrees that all personal property and equipment
furnished to or prepared by the Employee in the course of or incident to his
employment hereunder belongs to Employer and shall be promptly returned to
Employer upon termination of the Employee’s employment. The term “
personal
property
”
includes, without limitation, all office equipment, laptop computers, cell
phones, books, manuals, records, reports, notes, contracts, requests for
proposals, bids, lists, blueprints, and other documents, or materials, or copies
thereof (including computer files), and all other proprietary and
non-proprietary information relating to the business of Employer. Following
termination of his employment hereunder, the Employee will not retain any
written or other tangible material containing any proprietary or non-proprietary
information of Employer.
|
10.
|
Acknowledgment
of Protectable Interests
.
|
The
Employee acknowledges and agrees that his employment with Employer involves
building and maintaining business relationships and good will on behalf of
the
Employer with customers, and other professional contractors, subcontractors,
employees and staff, and various providers and users of services related to
Employer’s business; that he is entrusted with proprietary, strategic and other
confidential information which is of special value to Employer; and that the
foregoing matters are significant interests which the Employer is entitled
to
protect.
|
11.
|
Confidential
Information
.
|
The
Employee agrees that all Confidential Information that comes or has come into
his possession by reason of his employment hereunder is the property of the
Employer and shall not be used except in the course of employment by Employer
and for Employer’s exclusive benefit. Further, the Employee shall not, during
his employment or thereafter, disclose or acknowledge the content of any
Confidential Information to any person who is not an employee of Employer
authorized to possess such Confidential Information. Upon termination of
employment, the Employee shall deliver to Employer all documents, writings,
electronic storage devices, and other tangible things containing any
Confidential Information and the Employee shall not make or retain copies,
excerpts, or notes of such information.
|
12.
|
Nonsolicitation/Nondisparagement
.
|
In
the
event of the termination of this Agreement for any reason, the Employee shall
not, for a period of two (2) years thereafter, directly or indirectly:
(a)
solicit,
induce or encourage any employee of Employer to terminate his or her employment
with Employer;
(b)
make
any
disparaging public statement concerning Employer; or
(c)
use
Employer’s Confidential Information to induce, attempt to induce or knowingly
encourage any Customer (as defined below) of Employer to divert any business
or
income from Employer, or to stop or alter the manner in which they are then
doing business with Employer. The term “
Customer
”
with
respect to Employer shall mean any individual or business firm that is, or
within the prior twenty-four (24) months was, a customer or client of Employer,
or whose business was actively solicited by Employer at any time, regardless
of
whether such customer was generated, in whole or in part, by the Employee’s
efforts.
|
13.
|
Damages
For Improper Termination With Cause
.
|
In
the
event that the Employer terminates this Agreement and the Employee’s employment
hereunder for “Cause,” but it subsequently is determined by an arbitrator or a
court of competent jurisdiction, as the case may be, that the Employer did
not
have Cause for the termination, then for purposes of this Agreement, the
Employer’s decision to terminate shall be deemed to have been a termination
without Cause, and the Employer shall be obligated to pay the Severance Benefits
specified under Section 6(c), and only that amount.
Any
controversy or dispute arising out of, based upon, or relating to this
Agreement, its enforcement or interpretation, or because of an alleged breach,
default, or misrepresentation in connection with any of its provisions, or
arising out of, based upon, or relating in any way to the Employee’s employment
or association with Employer, or termination of the same, including, without
limiting the generality of the foregoing, any questions regarding whether a
particular dispute is arbitrable, and any alleged violation of statute, common
law or public policy, including, but not limited to, any state or federal
statutory claims, shall be submitted to final and binding arbitration in Orange
County, California, in accordance with the JAMS Employment Arbitration Rules
and
Procedures, before a single neutral arbitrator selected from the JAMS panel,
or
if JAMS is no longer able to supply the arbitrator, such arbitrator shall be
selected from the American Arbitration Association, in accordance with its
National Rules for the Resolution of Employment Disputes (the arbitrator
selected hereunder, the “
Arbitrator
”).
Provisional injunctive relief may, but need not, be sought by either party
to
this Agreement in a court of law while arbitration proceedings are pending,
pursuant to California Code of Civil Procedure section 1281.8, and any
provisional injunctive relief granted by such court shall remain effective
until
the matter is finally determined by the Arbitrator. Final resolution of any
dispute through arbitration may include any remedy or relief which the
Arbitrator deems just and equitable, including any and all remedies provided
by
applicable state or federal statutes. At the conclusion of the arbitration,
the
Arbitrator shall issue a written decision that sets forth the essential findings
and conclusions upon which the Arbitrator’s award or decision is based. Any
award or relief granted by the Arbitrator hereunder shall be final and binding
on the parties hereto and may be enforced by any court of competent
jurisdiction. The parties acknowledge and agree that they are hereby waiving
any
rights to trial by jury in any action, proceeding or counterclaim brought by
either of the parties against the other in connection with any matter whatsoever
arising out of or in any way connected with this Agreement or the provision
of
services under this Agreement. The Employer will pay the arbitrator’s fees and
arbitration expenses and any other costs associated with the arbitration or
arbitration hearing that are unique to arbitration. Subject to the provisions
of
Section 25, the parties shall each pay their own deposition, witness, expert
and
attorneys’ fees and other expenses as and to the same extent as if the matter
were being heard in court.
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15.
|
Representations/Warranties
.
|
The
Employee represents and warrants that he is under no contractual or other
obligation that would prevent him from accepting the Employer’s offer of
employment as set forth herein.
This
Agreement is intended by the parties to be the final expression of their
agreement with respect to the employment of the Employee by Employer and may
not
be contradicted by evidence of any prior or contemporaneous agreement
(including, without limitation any term sheet or similar agreement entered
into
between Employer and the Employee). The parties further intend that this
Agreement shall constitute the complete and exclusive statement of its terms
and
that no extrinsic evidence whatsoever may be introduced in any judicial,
administrative, or other legal proceeding to vary the terms of this Agreement.
No
person
or entity has made or has the authority to make any representations or promises
on behalf of any of the parties which are inconsistent with the representations
or promises contained in this Agreement, and this Agreement has not been
executed in reliance on any representations or promises not set forth herein.
Specifically, no promises, warranties or representations have been made by
anyone on any topic or subject matter related to the Employee’s relationship
with the Employer or any of their executives or employees, including but not
limited to any promises, warranties or representations regarding future
employment, compensation, benefits, any entitlement to equity interests in
Employer or regarding the termination of the Employee’s employment. In this
regard, the Employee agrees that no promises, warranties or representations
shall be deemed to be made in the future unless they are set forth in writing
and signed by an authorized representative of the Employer.
This
Agreement may be modified only by agreement of the parties by a written
instrument executed by the parties that is designated as an amendment to this
Agreement.
|
19.
|
Severability
and Non-Waiver/Survival
.
|
Any
provision of this Agreement (or portion thereof) which is deemed invalid,
illegal or unenforceable in any jurisdiction shall, as to that jurisdiction
and
subject to this Section 19, be ineffective to the extent of such invalidity,
illegality or unenforceability, without affecting in any way the remaining
provisions thereof in such jurisdiction or rendering such provision or any
other
provision of this Agreement invalid, illegal, or unenforceable in any other
jurisdiction. If any covenant should be deemed invalid, illegal or unenforceable
because its scope is considered excessive, such covenant shall be modified
so
that the scope of the covenant is reduced only to the minimum extent necessary
to render the modified covenant valid, legal and enforceable. No waiver of
any
provision or violation of this Agreement by the Employer shall be implied by
the
Employer’s forbearance or failure to take action. The expiration or termination
of the Employment Period and this Agreement shall not impair the rights or
obligations of any party hereto which shall have accrued hereunder prior to
such
expiration or termination.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective heirs, representatives, executors, administrators, successors,
and assigns, provided, however, that the Employee may not assign any or all
of
his rights or duties hereunder except following the prior written consent of
the
Employer. The Employee shall be entitled, to the extent permitted under
applicable law, to select and change a beneficiary or beneficiaries to receive
any compensation or benefit hereunder following the Employee’s death by giving
written notice thereof. In the event of the Employee’s death or a judicial
determination of his incompetence, references in this Agreement to the Employee
shall be deemed, where appropriate, to refer to his beneficiary, estate or
other
legal representative.
|
21.
|
Voluntary
and Knowledgeable Act
.
|
The
Employee represents and warrants that the Employee has read and understands
each
and every provision of this Agreement and has freely and voluntarily entered
into this Agreement.
This
Agreement shall be governed as to its validity and effect by the laws of the
state of California without regard to principles of conflict of laws.
This
Agreement may be executed in counterparts, each of which shall be deemed to
be
an original, but both of which together shall constitute one and the same
instrument.
All
notices and other communications necessary or contemplated under this Agreement
shall be in writing and shall be delivered in the manner specified herein or,
in
the absence of such specification, shall be deemed delivered when delivered
in
person or sent by first-class mail (certified or registered mail, return receipt
requested, postage prepaid), facsimile or overnight air courier guaranteeing
next day delivery, addressed as follows:
|
(a)
|
if
to the
Employee, to him at his most recent address in Employer’s
records,
|
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(b)
|
if
to the Employer, to:
|
John
M. Perisich
|
|
|
Primoris
Corporation
|
|
|
26000
Commercentre Dr.
|
|
|
Lake
Forest, CA 92630
|
|
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Facsimile:
(949) 595-5544
|
|
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with
a copy to:
|
Rutan
& Tucker
|
|
|
611
Anton Boulevard, Fourteenth Floor
|
|
|
Costa
Mesa, California 92626-1931
|
|
|
Facsimile:
(714) 546-9035
|
|
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Attention:
George J. Wall, Esq.
|
and:
or
to
such other address as the recipient party to whom notice is to be given may
have
furnished to the other party in writing in accordance herewith.
In
the
event that any dispute between the parties should result in litigation or
arbitration, the prevailing party in such dispute shall be entitled to recover
from the other party all reasonable fees, costs and expenses of enforcing any
right of the prevailing party, including without limitation, reasonable
attorneys’ fees and expenses, all of which shall be deemed to have accrued upon
the commencement of such action and shall be paid whether or not such action
is
prosecuted to judgment. Any judgment or order entered in such action shall
contain a specific provision providing for the recovery of attorneys’ fees and
costs incurred in enforcing such judgment and an award of prejudgment interest
from the date of the breach at the maximum rate of interest allowed by law.
For
the purposes of this Section 25: (a) attorneys’ fees shall include, without
limitation, fees incurred in the following: (i) postjudgment motions; (ii)
contempt proceedings; (iii) garnishment, levy, and debtor and third party
examinations; (iv) discovery and (v) bankruptcy litigation and (b) “
prevailing
party
”
shall
mean the party who is determined in the proceeding to have prevailed or who
prevails by dismissal, default or otherwise.
|
26.
|
Descriptive
Headings; Nouns and Pronouns
.
|
Descriptive
headings are for convenience only and shall not control or affect the meaning
or
construction of any provision of this Agreement. Whenever the context may
require, any pronouns used herein shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns and pronouns shall
include the plural and vice-versa.
|
27.
|
Non-Qualified
Deferred Compensation
.
|
The
parties acknowledge and agree that, to the extent applicable, this Agreement
shall be interpreted in accordance with Section 409A of the Internal Revenue
Code of 1986, as amended (the “
Code
”)
and
Department of Treasury regulations and other interpretive guidance issued
thereunder, including without limitation any such regulations or other guidance
that may be issued after the date hereof. Notwithstanding any provision of
this
Agreement to the contrary, in the event that the Employer determines that any
amounts payable hereunder will be immediately taxable to the Employee under
Section 409A of the Code and related Department of Treasury guidance, the
Employer may (a) adopt such amendments to this Agreement and appropriate
policies and procedures, including amendments and policies with retroactive
effect, that the Employer determines necessary or appropriate to preserve the
intended tax treatment of the benefits provided by this Agreement and/or (b)
take such other actions as the Employer determines necessary or appropriate
to
comply with the requirements of Section 409A of the Code and related Department
of Treasury guidance, including such Department of Treasury guidance and other
interpretive materials as may be issued after the date hereof.
|
28.
|
Waiver
of Jury Trial
.
|
EACH
OF
THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN
ANY
ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS
AGREEMENT.
[signature
page follows]
IN
WITNESS WHEREOF, the parties hereto have executed this Employment Agreement
as
of the date first written above.
|
|
|
Primoris
Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ Alfons
Theeuwes
|
|
|
|
Name:
|
Alfons
Theeuwes
|
|
|
|
Title:
|
VP
of Finance and
Accounting
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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/s/
John
M. Perisich
,
individually
|
|
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EXHIBIT
A
[Form
of Release]
1.
[Severance
Benefits]
2.
Release
of Claims
.
Except
as explicitly provided below, you agree that the foregoing consideration
represents settlement in full of all outstanding obligations owed to you by
the
Company, and its respective officers, directors, partners, members, agents
and
employees, including, without limitation, any and all obligations under the
Employment Agreement, and is satisfactory consideration for the waiver and
release of all claims set forth herein. On behalf of yourself, and your
respective heirs, family members, executors and assigns, you hereby fully and
forever release the Company and its past, present and future officers, agents,
directors, employees, investors, stockholders, partners, members,
administrators, affiliates, divisions, subsidiaries, parents, predecessor and
successor corporations and assigns (the “
Releasees
”),
from,
and agree not to sue concerning, or in any manner to institute, prosecute or
pursue, or cause to be instituted, prosecuted, or pursued, any claim, duty,
obligation or cause of action relating to any matters of any kind, whether
presently
known
or unknown, suspected or unsuspected
,
that
you may possess against any of the Releasees arising from any omissions, acts
or
facts that have occurred up until and including the Effective Date of this
Release including, without limitation:
(a)
any
and
all claims relating to or arising from your employment relationship with the
Company and the termination of that relationship;
(b)
any
and
all claims relating to, or arising from, your right to purchase, or actual
purchase of shares of stock or other securities of the Company or any of its
affiliates or subsidiaries, including, without limitation, any claims for fraud,
misrepresentation, breach of fiduciary duty, breach of duty under applicable
state corporate law, and securities fraud under any state or federal law;
(c)
any
and
all claims for wrongful discharge of employment; termination in violation of
public policy; discrimination; harassment; retaliation; breach of contract,
both
express and implied, including, without limitation, any and all claims arising
under or in connection with the Employment Agreement; breach of a covenant
of
good faith and fair dealing, both express and implied; promissory estoppel;
negligent or intentional infliction of emotional distress; negligent or
intentional misrepresentation; negligent or intentional interference with
contract or prospective economic advantage; unfair business practices;
defamation; libel; slander; negligence; personal injury; assault; battery;
invasion of privacy; false imprisonment; and conversion;
(d)
any
and
all claims for violation of any federal, state or municipal statute, including,
but not limited to, Title VII of the Civil Rights Act of 1964; the Civil Rights
Act of 1991; the Age Discrimination in Employment Act of 1967; the Americans
with Disabilities Act of 1990; the Fair Labor Standards Act; the Employee
Retirement Income Security Act of 1974; The Worker Adjustment and Retraining
Notification Act; the Family and Medical Leave Act; the California Fair
Employment and Housing Act; the California Family Rights Act; and the California
Labor Code, including, but not limited to Section 201, et seq,. Section 970,
et
seq., Sections 1400-1408; and all amendments to each such Act as well as the
regulations issued thereunder;
(e)
any
and
all claims for violation of the federal, or any state, constitution;
(f)
any
and
all claims arising out of any other laws and regulations relating to employment
or employment discrimination; and
(g)
any
and
all claims for attorneys’ fees and costs;
provided,
however
,
that
the parties hereto agree and acknowledge that you have not, by virtue of this
Release or otherwise, waived any claim, duty, obligation or cause of action
relating to any of the following:
(i)
any
matter that arises after the Effective Date of this Release;
(ii)
vested
benefits under any employee benefit plan within the meaning of section 3(3)
of
the Employee Retirement Income Security Act of 1974, as amended;
(iii)
any
claim
relating to indemnification in accordance with applicable laws or the Company’s
certificate of incorporation or by-laws or any applicable insurance policy,
with
respect to any liability as a director, officer or employee of the Company
(including as a trustee, director or officer of any employee benefit plan);
(iv)
any
right
to obtain contribution as permitted by law in the event of entry of judgment
against you as a result of any act or failure to act for which the Company
and
you are held jointly liable; and
(v)
any
of
your rights as a Limited Partner of Partnership under the Partnership
Agreement.
You
agree
that the release set forth in this Paragraph shall be and remain in effect
in
all respects as a complete general release as to the matters released. This
release does not extend to any obligations incurred under this Release. In
the
event that any of the parties brings an action to enforce or effect their rights
under this Release, the prevailing party shall be entitled to recover their
reasonable attorneys’ fees and expenses incurred in connection with such an
action.
3.
Acknowledgment
of Waiver of Claims under ADEA
.
You
acknowledge that you are waiving and releasing any rights you may have under
the
Age Discrimination in Employment Act of 1967 (“
ADEA
”)
and
that this waiver and release is knowing and voluntary. You and the Company
agree
that this Release does not apply to any rights or claims that may arise under
ADEA after the Effective Date of this Release. You acknowledge that the
consideration given for this Release is in addition to anything of value to
which you were already entitled. You further acknowledge that you have been
advised by this writing that:
(a)
you
should consult with an attorney
prior
to
executing this Release;
(b)
you
have
up to [____] days within which to consider this Release;
(c)
you
have
seven days following your execution of this Release to revoke this Release;
and
this Release shall not be effective until the eighth day after you execute
and
do not revoke this Release; nothing in this Release prevents or precludes you
from challenging or seeking a determination in good faith of the validity of
this waiver under the ADEA, nor does it impose any condition precedent,
penalties or costs from doing so, unless specifically authorized by federal
law.
Any
revocation must be in writing and delivered to the Company as follows:
[______________________________] by close of business on or before the seventh
day from the date that you sign this Release.
4.
Civil
Code Section 1542/Unknown Claims
.
You
represent that you are not aware of any claims against the Company other than
the claims that are released by this Release. You acknowledge that you have
had
the opportunity to be advised by legal counsel and are familiar with the
provisions of California Civil Code 1542, below, which provides as
follows:
A
GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW
OR
SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE,
WHICH
IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT
WITH
THE DEBTOR.
Being
aware of said code section, you agree to expressly waive any rights you may
have
thereunder, as well as under any statute or common law principles of similar
effect.
5.
No
Pending or Future Lawsuits
.
You
represent that you have no lawsuits, claims, or actions pending in your name,
or
on behalf of any other person or entity, against the Company or any of the
Releasees. You also represent that you do not intend to bring any claims on
your
own behalf or on behalf of any other person or entity against the Company or
any
of the Releasees.
6.
Confidentiality
of Release
.
You
agree to keep the terms of this Release in the strictest confidence and, except
as required by law, not reveal the terms of this Release to any persons except
your immediate family, your attorney, and your financial advisors (and to them
only provided that they also agree to keep the information completely
confidential), and the court in any proceedings to enforce the terms of this
Release.
7.
Non-Disparagement
.
You
agree not to make any public oral or written statement, or take any other public
action, that disparages or criticizes the Company’s management, employees,
products or services, in any case that damages the Company’s reputation or
impairs its normal operations.
8.
Entire
Agreement
.
The
terms of which are specifically incorporated herein, this Release constitutes
the entire agreement between you and the Company concerning your employment
with
and separation from the Company and all the events leading thereto and
associated therewith, and supercedes and replaces any and all prior agreements
and understandings, both written and oral, concerning your relationship with
the
Company.
9.
Successors
and Assigns
.
This
Release shall be binding upon each of the parties and upon their respective
heirs, administrators, representatives, executors, successors and assigns,
and
shall inure to the benefit of each party and to their heirs, administrators,
representatives, executors, successors, and assigns.
10.
No
Admission of Liability
.
You
understand and acknowledge that this Release constitutes a compromise and
settlement of any and all potential disputed claims. No action taken by the
Company hereto, either previously or in connection with this Release, shall
be
deemed or construed to be: (a) an admission of the truth or falsity of any
potential claims; or (b) an acknowledgment or admission by the Company of any
fault or liability whatsoever to you or to any third party.
11.
Authority
.
The
Company represents and warrants that the undersigned has the authority to act
on
behalf of the Company and to bind the Company and all who may claim through
it
to the terms and conditions of this Release. Similarly, you represent and
warrant that you have the capacity to act on your own behalf and on behalf
of
all who might claim through you to bind them to the terms and conditions of
this
Release. The Company and you each warrant and represent that there are no liens
or claims of lien or assignments in law or equity or otherwise of or against
any
of the claims or causes of action released herein.
12.
Effective
Date
.
This
Release is effective after it has been signed by both parties and after seven
days have passed since you have signed this Release (such date, the
“
Effective
Date
”).
13.
Voluntary
Execution of Release
.
This
Release is executed voluntarily and without any duress or undue influence on
the
part or behalf of the parties hereto, with the full intent of releasing all
claims except claims specifically excluded under Paragraph 4 hereof. The parties
acknowledge that:
(a)
They
have
read this Release;
(b)
They
have
been represented in the preparation, negotiation, and execution of this Release
by legal counsel of their own choice or that they have voluntarily declined
to
seek such counsel;
(c)
They
understand the terms and consequences of this Release and of the releases it
contains; and
(d)
They
are
fully aware of the legal and binding effect of this Release. The laws of the
State of California govern this Release, regardless of the laws that might
otherwise govern under applicable principles of conflict of law thereof. In
the
event that any portion of this Release or the application thereof, becomes
or is
declared by a court of competent jurisdiction to be illegal, void or
unenforceable, the remainder of this Release will continue in full force and
effect and the application of such portion to other persons or circumstances
will be interpreted so as reasonable to effect the intent of the parties hereto.
This Release may not be modified, amended, altered or supplemented except by
the
execution and delivery of a written agreement executed by you and an authorized
representative of the Company or by a court of competent
jurisdiction.
Exhibit
10.18
EMPLOYMENT
AGREEMENT
BETWEEN
Primoris
Corporation
AND
Alfons
Theeuwes
February
18, 2008
EMPLOYMENT
AGREEMENT
THIS
EMPLOYMENT AGREEMENT is made and entered into as of February 18, 2006, and
effective as of the Closing Date (as hereinafter defined), by and among Primoris
Corporation, a Nevada corporation (the “
Employer
”),
and
Alfons Theeuwes (the “
Employee
”).
WHEREAS,
pursuant to that certain Agreement And Plan of Merger By And Among Rhapsody
Acquisition Corp., Primoris Corporation and the Shareholders of Primoris
Corporation dated on or about February 19, 2008 (“the Merger Agreement”), a
closing date for the consummation of a prospective merger is defined therein
(“the Closing Date”);
WHEREAS,
the Employer desires to employ the Employee, and the Employee desires to accept
such employment, on the terms and subject to the conditions hereinafter set
forth;
NOW,
THEREFORE, in consideration of the covenants contained herein and other good
and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows.
Generally,
defined terms used in this Agreement are defined in the first instance in which
they appear herein. In addition, the following terms and phrases shall have
the
following meanings:
“
Board
”
shall
mean the board of directors of Employer.
“
Business
Day
”
shall
mean any day that is not a Saturday, Sunday, or a day on which banking
institutions in California are not required to be open.
“
Cause
”
shall
mean the Employee’s:
(i)
failure
to devote substantially all his working time to the business of Employer and
its
Affiliates and Subsidiaries;
(ii)
willful
disregard of his duties, or his intentional failure to act where the taking
of
such action would be in the ordinary course of the Employee’s duties
hereunder;
(iii)
gross
negligence or willful misconduct in the performance of his duties
hereunder;
(iv)
commission
of any act of fraud, theft or financial dishonesty, or any felony or criminal
act involving moral turpitude; or
(v)
unlawful
use (including being under the influence) of alcohol or drugs or possession
of
illegal drugs while on the premises of the Employer or any of its Affiliates
or
while performing duties and responsibilities to the Employer and its
Affiliates.
“
Confidential
Information
”
shall
mean all proprietary and other information relating to the business and
operations of Employer, which has not been specifically designated for release
to the public by an authorized representative of Employer, including, but not
limited to the following: (i) information, observations, procedures and data
concerning the business or affairs of Employer; (ii) products or services;
(iii)
costs and pricing structures; (iv) analyses; (v) drawings, photographs and
reports; (vi) computer software, including operating systems, applications
and
program listings; (vii) flow charts, manuals and documentation; (viii) data
bases; (ix) accounting and business methods; (x) inventions, devices, new
developments, methods and processes, whether patentable or unpatentable and
whether or not reduced to practice; (xi) customers, vendors, suppliers and
customer, vendor and supplier lists; (xii) other copyrightable works; (xiii)
all
production methods, processes, technology and trade secrets and (xiv) all
similar and related information in whatever form. Confidential Information
will
not include any information that has been published in a form generally
available to the public prior to the date the Employee proposes to disclose
or
use such information. Confidential Information will not be deemed to have been
published merely because individual portions of the information have been
separately published, but only if all material features comprising such
information have been published in combination.
“
Disability
”
shall
mean the Employee’s inability, due to physical or mental illness or disability,
to perform the essential functions of his employment with the Employer, even
with reasonable accommodation that does not impose an undue hardship on the
Employer, for more than sixty (60) consecutive days, or for any ninety (90)
days
within any one year period, unless a longer period is required by federal or
state law, in which case such longer period will be applicable. The Employer
reserves the right, in good faith, to make the determination of Disability
under
this Agreement based on information supplied by the Employee and/or his medical
personnel, as well as information from medical personnel selected by the
Employer or its insurers.
“
Employer
”
shall
mean Primoris Corporation and any of its Subsidiaries.
“
Person
”
shall
be construed broadly and shall include, without limitation, an individual,
a
partnership, an investment fund, a limited liability company, a corporation,
an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization and a governmental entity or any department, agency or political
subdivision thereof.
“
Subsidiary
”
or
“
Subsidiaries
”
shall
have the meaning as defined in the Merger Agreement.
“
Termination
Date
”
shall
mean the effective date of the termination of the Employee’s employment
hereunder, which (i) in the case of termination by resignation, shall mean
the
date that is ninety (90) days following the date of the Employee’s written
notice to the Employer of his resignation; provided, however, that the Employer
may accelerate the Termination Date; (ii) in the case of termination by reason
of death shall mean the date of death; (iii) in the case of termination by
reason of Disability, shall mean the date specified in the notice of such
termination delivered to the Employee by the Employer; (iv) in the case of
a
Termination for Cause or a Termination without Cause, shall mean the date
specified in the written notice of such termination delivered to the Employee
by
the Employer; (iv) in the case of termination by mutual agreement shall mean
the
date mutually agreed to by the parties hereto and (v) in the case of nonrenewal,
shall mean the expiration of the Employment Period.
a.
Initial
Term.
The
Employer shall employ the Employee, and the Employee accepts employment with
the
Employer, upon the terms and conditions set forth in this Agreement. The initial
term of this Agreement (the “
Initial
Term
”)
shall
be for a period of five (5) years commencing on the date hereof, unless
terminated earlier pursuant to Article 5 hereof; provided, however, that
Employee’s obligations in Article 11 and Article 12 hereof shall continue in
effect after such termination.
b.
Additional
Terms.
This
Agreement may be extended beyond the Initial Term upon the mutual consent and
agreement of Employee and Employer. The Initial Term and additional terms,
if
any, shall collectively be referred to herein as the “Employment
Period”.
During
the Employment Period, the Employee shall serve as the Vice President of
Accounting and Finance, reporting to the Board, and shall have the usual and
customary duties, responsibilities and authority of such position. In addition,
during the Employment Period, if elected or appointed thereto, shall serve
as an
officer and/or member of the board of any Subsidiary of Employer as reasonably
requested by the Employer and its Subsidiaries, in each case, without additional
compensation hereunder. The Employee hereby accepts such employment and
positions and agrees to diligently and conscientiously devote his full and
exclusive business time, attention, and best efforts in discharging and
fulfilling his duties and responsibilities hereunder. The Employee shall comply
with the Employer’s policies and procedures and the direction and instruction of
the Board and the Employee shall not engage in any business activity which,
in
the reasonable judgment of the Board, conflicts with the duties of the Employee
hereunder, whether or not such activity is pursued for gain, profit or other
pecuniary advantage.
(a)
Salary
.
During
the Employment Period, the Employer shall pay the Employee base salary (the
“
Base
Salary
”)
at the
rate of Two Hundred Seventy Five Thousand Dollars ($275,000) per annum, payable
in equal installments twice monthly on Employer’s regular payroll dates, less
applicable deductions and withholdings.
(b)
Performance
Bonus
.
In
addition to the Base Salary, during the Employment Period the Employee shall
be
eligible to receive a cash bonus (the “
Bonus
”)
with
respect to each calendar year as of the last day of which the Employee is
employed by the Employer. The amount of the Bonus, if any, payable in respect
of
any calendar year will be determined at the sole discretion of Employer by
the
Board or compensation committee of the Board (the “
Compensation
Committee
”).
The
Bonus, if any, payable with respect to a calendar year shall be paid within
thirty (30) days following the rendering of Employer’s audited financial
statements for the relevant calendar year.
(c)
Benefits
and Perquisites
.
In
addition to the Base Salary, Employee shall be entitled to all other benefits
of
employment provided to other employees of Employer; provided, however, that
during the term of this Agreement Employee shall be entitled to three (3) weeks
of vacation per annum. Additional benefits and perquisites will be provided
subject to Employer’s policies and practices in effect and then in place at the
Closing Date, and the terms of applicable benefit plans and arrangements as
in
effect from time to time.
(d)
Reimbursements
.
The
Employer shall reimburse the Employee for all reasonable and necessary
business-related expenses incurred by him in the course of performing his duties
under this Agreement which are consistent with Employer’s policies and practices
in effect and then in place at the Closing Date, including travel, entertainment
and other business expenses, subject to the Employer’s requirements with respect
to reporting and documentation of such expenses.
(e)
Deductions
and Withholding
.
The
Employer shall deduct from any payments to be made by it to or on behalf of
the
Employee under this Agreement any amounts required to be withheld in respect
of
any federal, state or local income or other taxes.
(f)
Annual
Review of Base Salary
.
The
Board (or the Compensation Committee) shall undertake a review of the Base
Salary not less frequently than annually during the Employment Period and may
increase, but not decrease, the rate of Base Salary from the rate then in
effect.
(g)
Use
of Employer Aircraft
.
In
addition to all business related uses of any aircraft owned or leased by
Employer during the Employment Period, Employee shall be entitled to use of
said
aircraft up to twenty (20) hours during each calendar year hereunder.
|
5.
|
Termination
of Employment
.
|
The
Employee’s employment under this Agreement shall be terminated upon the earliest
to occur of the following events:
(a)
Termination
for Cause
.
The
Employer may in its sole discretion terminate this Agreement and the Employee’s
employment hereunder for Cause at any time and with or without advance notice
to
the Employee.
(b)
Termination
without Cause
.
The
Employer may terminate this Agreement and the Employee’s employment hereunder
without Cause at any time, with or without notice, for any reason or no reason
(and no reason need be given).
(c)
Mutual
Agreement
.
This
Agreement and the Employee’s employment hereunder may be terminated by the
mutual written agreement of the Employer and the Employee.
(d)
Termination
by Death or Disability
.
This
Agreement and the Employee’s employment hereunder shall automatically terminate
upon the Employee’s death or Disability.
(e)
Resignation
.
The
Employee may terminate this Agreement and his employment hereunder upon ninety
(90) days advance written notice to the Employer.
(f)
Nonrenewal
.
In the
event either party does not elect to renew the term of this Agreement, this
Agreement and the Employee’s employment hereunder shall automatically terminate
as of the expiration of the current term in effect.
|
6.
|
Compensation
upon Termination
|
(a)
General
.
In the
event of the Employee’s termination of employment for any reason, the Employee
or his estate or beneficiaries shall have the right to receive the
following:
(i)
the
unpaid portion of the Base Salary and paid time off accrued and payable through
the Termination Date;
(ii)
reimbursement
for any expenses for which the Employee shall not have been previously
reimbursed, as provided in Section 4(d); and
(iii)
continuation
of health insurance coverage rights, if any, as required under applicable
law.
(b)
Termination
for Cause, Resignation, Mutual Agreement or Nonrenewal
.
In the
event of the Employee’s termination of employment by reason of (i) Termination
for Cause, (ii) Resignation, (iii) Mutual Agreement or (iv) Nonrenewal, the
Employer shall have no current or further obligations (including Base Salary)
to
the Employee under this Agreement other than as set forth in Section 6(a).
(c)
Termination
without Cause or by Death or Disability
.
Subject
to Section 6(d), in the event of the Employee’s termination of employment
hereunder by reason of (i) Termination without Cause or (ii) death or
Disability, the Employee shall be entitled to the following (the “
Severance
Benefits
”):
(i)
a
lump
sum equal to one-half of the annual Base Salary in effect upon the Termination
Date, payable within fifteen (15) days following the Termination
Date;
(ii)
a
pro
rata amount of a Bonus, if any, which would have been payable to the Employee
for the calendar year in which the Termination Date occurs, determined after
the
end of the calendar year in which such Termination Date occurs and equal to
the
amount which would have been payable to the Employee if his employment had
not
been terminated during such calendar year multiplied by the fraction, the
numerator of which is the number of whole months the Employee was employed
by
the Employer during such calendar year and the denominator of which is 12.
Any
pro rata bonus payable under this Section 6(c)(ii) shall be paid in a lump
sum
at the time bonuses for such calendar year are otherwise payable to senior
executives of the Employer; and
(iii)
in
the
event that the Employee elects COBRA benefits, the Employer shall pay the
Employee’s share of the premium for such COBRA benefits until the earlier of (i)
one year after the Termination Date; or (ii) the date that Employee obtains
comparable health benefits through new employment.
(d)
General
Release
.
Notwithstanding any provision to the contrary in this Agreement, the foregoing
Severance Benefits under Section 6(c) shall not apply and the Employer shall
have no obligations to pay or provide any Severance Benefits (other than upon
the Employee’s termination of employment by reason of death), unless the
Employee signs, delivers and does not rescind or revoke a general release,
substantially in the form attached hereto as Exhibit A, of all known and unknown
claims of the Employee (and his affiliates, successors, heirs and assigns and
the like) against Employer and the Board.
(e)
The
rights of the Employee set forth in this Section 6 are intended to be the
Employee’s exclusive remedy for termination and, to the greatest extent
permitted by applicable law, the Employee waives all other remedies.
Employer
may, for its own benefit, maintain “key man” life and disability insurance
policies covering the Employee. The Employee will cooperate with Employer and
provide such information or other assistance as they may reasonably request
in
connection with obtaining and maintaining such policies.
During
the term of this Agreement, the Employee will not accept or perform any work,
consulting, or other services for any other business entity or for remuneration
of any kind, without written approval by the Board.
|
9.
|
The
Employee’s Termination Obligations
.
|
The
Employee hereby acknowledges and agrees that all personal property and equipment
furnished to or prepared by the Employee in the course of or incident to his
employment hereunder belongs to Employer and shall be promptly returned to
Employer upon termination of the Employee’s employment. The term “
personal
property
”
includes, without limitation, all office equipment, laptop computers, cell
phones, books, manuals, records, reports, notes, contracts, requests for
proposals, bids, lists, blueprints, and other documents, or materials, or copies
thereof (including computer files), and all other proprietary and
non-proprietary information relating to the business of Employer. Following
termination of his employment hereunder, the Employee will not retain any
written or other tangible material containing any proprietary or non-proprietary
information of Employer.
|
10.
|
Acknowledgment
of Protectable Interests
.
|
The
Employee acknowledges and agrees that his employment with Employer involves
building and maintaining business relationships and good will on behalf of
the
Employer with customers, and other professional contractors, subcontractors,
employees and staff, and various providers and users of services related to
Employer’s business; that he is entrusted with proprietary, strategic and other
confidential information which is of special value to Employer; and that the
foregoing matters are significant interests which the Employer is entitled
to
protect.
|
11.
|
Confidential
Information
.
|
The
Employee agrees that all Confidential Information that comes or has come into
his possession by reason of his employment hereunder is the property of the
Employer and shall not be used except in the course of employment by Employer
and for Employer’s exclusive benefit. Further, the Employee shall not, during
his employment or thereafter, disclose or acknowledge the content of any
Confidential Information to any person who is not an employee of Employer
authorized to possess such Confidential Information. Upon termination of
employment, the Employee shall deliver to Employer all documents, writings,
electronic storage devices, and other tangible things containing any
Confidential Information and the Employee shall not make or retain copies,
excerpts, or notes of such information.
|
12.
|
Nonsolicitation/Nondisparagement
.
|
In
the
event of the termination of this Agreement for any reason, the Employee shall
not, for a period of two (2) years thereafter, directly or indirectly:
(a)
solicit,
induce or encourage any employee of Employer to terminate his or her employment
with Employer;
(b)
make
any
disparaging public statement concerning Employer; or
(c)
use
Employer’s Confidential Information to induce, attempt to induce or knowingly
encourage any Customer (as defined below) of Employer to divert any business
or
income from Employer, or to stop or alter the manner in which they are then
doing business with Employer. The term “
Customer
”
with
respect to Employer shall mean any individual or business firm that is, or
within the prior twenty-four (24) months was, a customer or client of Employer,
or whose business was actively solicited by Employer at any time, regardless
of
whether such customer was generated, in whole or in part, by the Employee’s
efforts.
|
13.
|
Damages
For Improper Termination With Cause
.
|
In
the
event that the Employer terminates this Agreement and the Employee’s employment
hereunder for “Cause,” but it subsequently is determined by an arbitrator or a
court of competent jurisdiction, as the case may be, that the Employer did
not
have Cause for the termination, then for purposes of this Agreement, the
Employer’s decision to terminate shall be deemed to have been a termination
without Cause, and the Employer shall be obligated to pay the Severance Benefits
specified under Section 6(c), and only that amount.
Any
controversy or dispute arising out of, based upon, or relating to this
Agreement, its enforcement or interpretation, or because of an alleged breach,
default, or misrepresentation in connection with any of its provisions, or
arising out of, based upon, or relating in any way to the Employee’s employment
or association with Employer, or termination of the same, including, without
limiting the generality of the foregoing, any questions regarding whether a
particular dispute is arbitrable, and any alleged violation of statute, common
law or public policy, including, but not limited to, any state or federal
statutory claims, shall be submitted to final and binding arbitration in Orange
County, California, in accordance with the JAMS Employment Arbitration Rules
and
Procedures, before a single neutral arbitrator selected from the JAMS panel,
or
if JAMS is no longer able to supply the arbitrator, such arbitrator shall be
selected from the American Arbitration Association, in accordance with its
National Rules for the Resolution of Employment Disputes (the arbitrator
selected hereunder, the “
Arbitrator
”).
Provisional injunctive relief may, but need not, be sought by either party
to
this Agreement in a court of law while arbitration proceedings are pending,
pursuant to California Code of Civil Procedure section 1281.8, and any
provisional injunctive relief granted by such court shall remain effective
until
the matter is finally determined by the Arbitrator. Final resolution of any
dispute through arbitration may include any remedy or relief which the
Arbitrator deems just and equitable, including any and all remedies provided
by
applicable state or federal statutes. At the conclusion of the arbitration,
the
Arbitrator shall issue a written decision that sets forth the essential findings
and conclusions upon which the Arbitrator’s award or decision is based. Any
award or relief granted by the Arbitrator hereunder shall be final and binding
on the parties hereto and may be enforced by any court of competent
jurisdiction. The parties acknowledge and agree that they are hereby waiving
any
rights to trial by jury in any action, proceeding or counterclaim brought by
either of the parties against the other in connection with any matter whatsoever
arising out of or in any way connected with this Agreement or the provision
of
services under this Agreement. The Employer will pay the arbitrator’s fees and
arbitration expenses and any other costs associated with the arbitration or
arbitration hearing that are unique to arbitration. Subject to the provisions
of
Section 25, the parties shall each pay their own deposition, witness, expert
and
attorneys’ fees and other expenses as and to the same extent as if the matter
were being heard in court.
|
15.
|
Representations/Warranties
.
|
The
Employee represents and warrants that he is under no contractual or other
obligation that would prevent him from accepting the Employer’s offer of
employment as set forth herein.
This
Agreement is intended by the parties to be the final expression of their
agreement with respect to the employment of the Employee by Employer and may
not
be contradicted by evidence of any prior or contemporaneous agreement
(including, without limitation any term sheet or similar agreement entered
into
between Employer and the Employee). The parties further intend that this
Agreement shall constitute the complete and exclusive statement of its terms
and
that no extrinsic evidence whatsoever may be introduced in any judicial,
administrative, or other legal proceeding to vary the terms of this Agreement.
No
person
or entity has made or has the authority to make any representations or promises
on behalf of any of the parties which are inconsistent with the representations
or promises contained in this Agreement, and this Agreement has not been
executed in reliance on any representations or promises not set forth herein.
Specifically, no promises, warranties or representations have been made by
anyone on any topic or subject matter related to the Employee’s relationship
with the Employer or any of their executives or employees, including but not
limited to any promises, warranties or representations regarding future
employment, compensation, benefits, any entitlement to equity interests in
Employer or regarding the termination of the Employee’s employment. In this
regard, the Employee agrees that no promises, warranties or representations
shall be deemed to be made in the future unless they are set forth in writing
and signed by an authorized representative of the Employer.
This
Agreement may be modified only by agreement of the parties by a written
instrument executed by the parties that is designated as an amendment to this
Agreement.
|
19.
|
Severability
and Non-Waiver/Survival
.
|
Any
provision of this Agreement (or portion thereof) which is deemed invalid,
illegal or unenforceable in any jurisdiction shall, as to that jurisdiction
and
subject to this Section 19, be ineffective to the extent of such invalidity,
illegality or unenforceability, without affecting in any way the remaining
provisions thereof in such jurisdiction or rendering such provision or any
other
provision of this Agreement invalid, illegal, or unenforceable in any other
jurisdiction. If any covenant should be deemed invalid, illegal or unenforceable
because its scope is considered excessive, such covenant shall be modified
so
that the scope of the covenant is reduced only to the minimum extent necessary
to render the modified covenant valid, legal and enforceable. No waiver of
any
provision or violation of this Agreement by the Employer shall be implied by
the
Employer’s forbearance or failure to take action. The expiration or termination
of the Employment Period and this Agreement shall not impair the rights or
obligations of any party hereto which shall have accrued hereunder prior to
such
expiration or termination.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective heirs, representatives, executors, administrators, successors,
and assigns, provided, however, that the Employee may not assign any or all
of
his rights or duties hereunder except following the prior written consent of
the
Employer. The Employee shall be entitled, to the extent permitted under
applicable law, to select and change a beneficiary or beneficiaries to receive
any compensation or benefit hereunder following the Employee’s death by giving
written notice thereof. In the event of the Employee’s death or a judicial
determination of his incompetence, references in this Agreement to the Employee
shall be deemed, where appropriate, to refer to his beneficiary, estate or
other
legal representative.
|
21.
|
Voluntary
and Knowledgeable Act
.
|
The
Employee represents and warrants that the Employee has read and understands
each
and every provision of this Agreement and has freely and voluntarily entered
into this Agreement.
This
Agreement shall be governed as to its validity and effect by the laws of the
state of California without regard to principles of conflict of laws.
This
Agreement may be executed in counterparts, each of which shall be deemed to
be
an original, but both of which together shall constitute one and the same
instrument.
All
notices and other communications necessary or contemplated under this Agreement
shall be in writing and shall be delivered in the manner specified herein or,
in
the absence of such specification, shall be deemed delivered when delivered
in
person or sent by first-class mail (certified or registered mail, return receipt
requested, postage prepaid), facsimile or overnight air courier guaranteeing
next day delivery, addressed as follows:
|
(a)
|
if
to the
Employee, to him at his most recent address in Employer’s
records,
|
|
|
|
|
|
(b)
|
if
to the Employer, to:
|
John
M. Perisich
|
|
|
Primoris
Corporation
|
|
|
26000
Commercentre Dr.
|
|
|
Lake
Forest, CA 92630
|
|
|
Facsimile:
(949) 595-5544
|
|
|
|
|
with
a copy to:
|
Rutan
& Tucker
|
|
|
611
Anton Boulevard, Fourteenth Floor
|
|
|
Costa
Mesa, California 92626-1931
|
|
|
Facsimile:
(714) 546-9035
|
|
|
Attention:
George J. Wall,
Esq.
|
and:
or
to
such other address as the recipient party to whom notice is to be given may
have
furnished to the other party in writing in accordance herewith.
In
the
event that any dispute between the parties should result in litigation or
arbitration, the prevailing party in such dispute shall be entitled to recover
from the other party all reasonable fees, costs and expenses of enforcing any
right of the prevailing party, including without limitation, reasonable
attorneys’ fees and expenses, all of which shall be deemed to have accrued upon
the commencement of such action and shall be paid whether or not such action
is
prosecuted to judgment. Any judgment or order entered in such action shall
contain a specific provision providing for the recovery of attorneys’ fees and
costs incurred in enforcing such judgment and an award of prejudgment interest
from the date of the breach at the maximum rate of interest allowed by law.
For
the purposes of this Section 25: (a) attorneys’ fees shall include, without
limitation, fees incurred in the following: (i) postjudgment motions; (ii)
contempt proceedings; (iii) garnishment, levy, and debtor and third party
examinations; (iv) discovery and (v) bankruptcy litigation and (b) “
prevailing
party
”
shall
mean the party who is determined in the proceeding to have prevailed or who
prevails by dismissal, default or otherwise.
|
26.
|
Descriptive
Headings; Nouns and Pronouns
.
|
Descriptive
headings are for convenience only and shall not control or affect the meaning
or
construction of any provision of this Agreement. Whenever the context may
require, any pronouns used herein shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns and pronouns shall
include the plural and vice-versa.
|
27.
|
Non-Qualified
Deferred Compensation
.
|
The
parties acknowledge and agree that, to the extent applicable, this Agreement
shall be interpreted in accordance with Section 409A of the Internal Revenue
Code of 1986, as amended (the “
Code
”)
and
Department of Treasury regulations and other interpretive guidance issued
thereunder, including without limitation any such regulations or other guidance
that may be issued after the date hereof. Notwithstanding any provision of
this
Agreement to the contrary, in the event that the Employer determines that any
amounts payable hereunder will be immediately taxable to the Employee under
Section 409A of the Code and related Department of Treasury guidance, the
Employer may (a) adopt such amendments to this Agreement and appropriate
policies and procedures, including amendments and policies with retroactive
effect, that the Employer determines necessary or appropriate to preserve the
intended tax treatment of the benefits provided by this Agreement and/or (b)
take such other actions as the Employer determines necessary or appropriate
to
comply with the requirements of Section 409A of the Code and related Department
of Treasury guidance, including such Department of Treasury guidance and other
interpretive materials as may be issued after the date hereof.
|
28.
|
Waiver
of Jury Trial
.
|
EACH
OF
THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN
ANY
ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS
AGREEMENT.
[signature
page follows]
IN
WITNESS WHEREOF, the parties hereto have executed this Employment Agreement
as
of the date first written above.
|
|
|
Primoris
Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ John
M.
Perisich
|
|
|
|
Name:
|
John
M. Perisich
|
|
|
|
Title:
|
Secretary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
/s/
Alfons
Theeuwes
,
individually
|
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EXHIBIT
A
[Form
of Release]
1.
[Severance
Benefits]
2.
Release
of Claims
.
Except
as explicitly provided below, you agree that the foregoing consideration
represents settlement in full of all outstanding obligations owed to you by
the
Company, and its respective officers, directors, partners, members, agents
and
employees, including, without limitation, any and all obligations under the
Employment Agreement, and is satisfactory consideration for the waiver and
release of all claims set forth herein. On behalf of yourself, and your
respective heirs, family members, executors and assigns, you hereby fully and
forever release the Company and its past, present and future officers, agents,
directors, employees, investors, stockholders, partners, members,
administrators, affiliates, divisions, subsidiaries, parents, predecessor and
successor corporations and assigns (the “
Releasees
”),
from,
and agree not to sue concerning, or in any manner to institute, prosecute or
pursue, or cause to be instituted, prosecuted, or pursued, any claim, duty,
obligation or cause of action relating to any matters of any kind, whether
presently
known
or unknown, suspected or unsuspected
,
that
you may possess against any of the Releasees arising from any omissions, acts
or
facts that have occurred up until and including the Effective Date of this
Release including, without limitation:
(a)
any
and
all claims relating to or arising from your employment relationship with the
Company and the termination of that relationship;
(b)
any
and
all claims relating to, or arising from, your right to purchase, or actual
purchase of shares of stock or other securities of the Company or any of its
affiliates or subsidiaries, including, without limitation, any claims for fraud,
misrepresentation, breach of fiduciary duty, breach of duty under applicable
state corporate law, and securities fraud under any state or federal law;
(c)
any
and
all claims for wrongful discharge of employment; termination in violation of
public policy; discrimination; harassment; retaliation; breach of contract,
both
express and implied, including, without limitation, any and all claims arising
under or in connection with the Employment Agreement; breach of a covenant
of
good faith and fair dealing, both express and implied; promissory estoppel;
negligent or intentional infliction of emotional distress; negligent or
intentional misrepresentation; negligent or intentional interference with
contract or prospective economic advantage; unfair business practices;
defamation; libel; slander; negligence; personal injury; assault; battery;
invasion of privacy; false imprisonment; and conversion;
(d)
any
and
all claims for violation of any federal, state or municipal statute, including,
but not limited to, Title VII of the Civil Rights Act of 1964; the Civil Rights
Act of 1991; the Age Discrimination in Employment Act of 1967; the Americans
with Disabilities Act of 1990; the Fair Labor Standards Act; the Employee
Retirement Income Security Act of 1974; The Worker Adjustment and Retraining
Notification Act; the Family and Medical Leave Act; the California Fair
Employment and Housing Act; the California Family Rights Act; and the California
Labor Code, including, but not limited to Section 201, et seq,. Section 970,
et
seq., Sections 1400-1408; and all amendments to each such Act as well as the
regulations issued thereunder;
(e)
any
and
all claims for violation of the federal, or any state, constitution;
(f)
any
and
all claims arising out of any other laws and regulations relating to employment
or employment discrimination; and
(g)
any
and
all claims for attorneys’ fees and costs;
provided,
however
,
that
the parties hereto agree and acknowledge that you have not, by virtue of this
Release or otherwise, waived any claim, duty, obligation or cause of action
relating to any of the following:
(i)
any
matter that arises after the Effective Date of this Release;
(ii)
vested
benefits under any employee benefit plan within the meaning of section 3(3)
of
the Employee Retirement Income Security Act of 1974, as amended;
(iii)
any
claim
relating to indemnification in accordance with applicable laws or the Company’s
certificate of incorporation or by-laws or any applicable insurance policy,
with
respect to any liability as a director, officer or employee of the Company
(including as a trustee, director or officer of any employee benefit plan);
(iv)
any
right
to obtain contribution as permitted by law in the event of entry of judgment
against you as a result of any act or failure to act for which the Company
and
you are held jointly liable; and
(v)
any
of
your rights as a Limited Partner of Partnership under the Partnership
Agreement.
You
agree
that the release set forth in this Paragraph shall be and remain in effect
in
all respects as a complete general release as to the matters released. This
release does not extend to any obligations incurred under this Release. In
the
event that any of the parties brings an action to enforce or effect their rights
under this Release, the prevailing party shall be entitled to recover their
reasonable attorneys’ fees and expenses incurred in connection with such an
action.
3.
Acknowledgment
of Waiver of Claims under ADEA
.
You
acknowledge that you are waiving and releasing any rights you may have under
the
Age Discrimination in Employment Act of 1967 (“
ADEA
”)
and
that this waiver and release is knowing and voluntary. You and the Company
agree
that this Release does not apply to any rights or claims that may arise under
ADEA after the Effective Date of this Release. You acknowledge that the
consideration given for this Release is in addition to anything of value to
which you were already entitled. You further acknowledge that you have been
advised by this writing that:
(a)
you
should consult with an attorney
prior
to
executing this Release;
(b)
you
have
up to [____] days within which to consider this Release;
(c)
you
have
seven days following your execution of this Release to revoke this Release;
and
this Release shall not be effective until the eighth day after you execute
and
do not revoke this Release; nothing in this Release prevents or precludes you
from challenging or seeking a determination in good faith of the validity of
this waiver under the ADEA, nor does it impose any condition precedent,
penalties or costs from doing so, unless specifically authorized by federal
law.
Any
revocation must be in writing and delivered to the Company as follows:
[______________________________] by close of business on or before the seventh
day from the date that you sign this Release.
4.
Civil
Code Section 1542/Unknown Claims
.
You
represent that you are not aware of any claims against the Company other than
the claims that are released by this Release. You acknowledge that you have
had
the opportunity to be advised by legal counsel and are familiar with the
provisions of California Civil Code 1542, below, which provides as
follows:
A
GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW
OR
SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE,
WHICH
IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT
WITH
THE DEBTOR.
Being
aware of said code section, you agree to expressly waive any rights you may
have
thereunder, as well as under any statute or common law principles of similar
effect.
5.
No
Pending or Future Lawsuits
.
You
represent that you have no lawsuits, claims, or actions pending in your name,
or
on behalf of any other person or entity, against the Company or any of the
Releasees. You also represent that you do not intend to bring any claims on
your
own behalf or on behalf of any other person or entity against the Company or
any
of the Releasees.
6.
Confidentiality
of Release
.
You
agree to keep the terms of this Release in the strictest confidence and, except
as required by law, not reveal the terms of this Release to any persons except
your immediate family, your attorney, and your financial advisors (and to them
only provided that they also agree to keep the information completely
confidential), and the court in any proceedings to enforce the terms of this
Release.
7.
Non-Disparagement
.
You
agree not to make any public oral or written statement, or take any other public
action, that disparages or criticizes the Company’s management, employees,
products or services, in any case that damages the Company’s reputation or
impairs its normal operations.
8.
Entire
Agreement
.
The
terms of which are specifically incorporated herein, this Release constitutes
the entire agreement between you and the Company concerning your employment
with
and separation from the Company and all the events leading thereto and
associated therewith, and supercedes and replaces any and all prior agreements
and understandings, both written and oral, concerning your relationship with
the
Company.
9.
Successors
and Assigns
.
This
Release shall be binding upon each of the parties and upon their respective
heirs, administrators, representatives, executors, successors and assigns,
and
shall inure to the benefit of each party and to their heirs, administrators,
representatives, executors, successors, and assigns.
10.
No
Admission of Liability
.
You
understand and acknowledge that this Release constitutes a compromise and
settlement of any and all potential disputed claims. No action taken by the
Company hereto, either previously or in connection with this Release, shall
be
deemed or construed to be: (a) an admission of the truth or falsity of any
potential claims; or (b) an acknowledgment or admission by the Company of any
fault or liability whatsoever to you or to any third party.
11.
Authority
.
The
Company represents and warrants that the undersigned has the authority to act
on
behalf of the Company and to bind the Company and all who may claim through
it
to the terms and conditions of this Release. Similarly, you represent and
warrant that you have the capacity to act on your own behalf and on behalf
of
all who might claim through you to bind them to the terms and conditions of
this
Release. The Company and you each warrant and represent that there are no liens
or claims of lien or assignments in law or equity or otherwise of or against
any
of the claims or causes of action released herein.
12.
Effective
Date
.
This
Release is effective after it has been signed by both parties and after seven
days have passed since you have signed this Release (such date, the
“
Effective
Date
”).
13.
Voluntary
Execution of Release
.
This
Release is executed voluntarily and without any duress or undue influence on
the
part or behalf of the parties hereto, with the full intent of releasing all
claims except claims specifically excluded under Paragraph 4 hereof. The parties
acknowledge that:
(a)
They
have
read this Release;
(b)
They
have
been represented in the preparation, negotiation, and execution of this Release
by legal counsel of their own choice or that they have voluntarily declined
to
seek such counsel;
(c)
They
understand the terms and consequences of this Release and of the releases it
contains; and
(d)
They
are
fully aware of the legal and binding effect of this Release. The laws of the
State of California govern this Release, regardless of the laws that might
otherwise govern under applicable principles of conflict of law thereof. In
the
event that any portion of this Release or the application thereof, becomes
or is
declared by a court of competent jurisdiction to be illegal, void or
unenforceable, the remainder of this Release will continue in full force and
effect and the application of such portion to other persons or circumstances
will be interpreted so as reasonable to effect the intent of the parties hereto.
This Release may not be modified, amended, altered or supplemented except by
the
execution and delivery of a written agreement executed by you and an authorized
representative of the Company or by a court of competent
jurisdiction.
VOTING
AGREEMENT
VOTING
AGREEMENT, dated as of this July 31, 2008 (“Agreement”), among each of the
persons listed under the caption “Target Group” on Exhibit A attached hereto
(the “Target Group”), each of the persons listed under the caption “Founders
Group” on Exhibit A attached hereto (the “Founders Group”) and Rhapsody
Acquisition Corp., a Delaware corporation (“Delcorp”). Each of the Target Group
and the Founders Group is sometimes referred to herein as a “Group.” For
purposes of this Agreement, each person who is a member of either the Target
Group or the Founders Group is referred to herein individually as a
“Stockholder” and collectively as the “Stockholders.” Capitalized terms used but
not defined in this Agreement shall have the meanings ascribed to them in the
Merger Agreement;
WHEREAS,
as of February 19, 2008, each of Delcorp, Primoris Corporation (the “Company”),
a Nevada corporation, and the Signing Shareholders have entered into an
Agreement and Plan of Merger (the “Merger Agreement”) that provides,
inter
alia
,
upon
the terms and subject to the conditions thereof, for the
merger
of
the Company into Delcorp (the “Merger”)
;
WHEREAS,
as of the date hereof, each Stockholder who is a member of the Founders Group
owns beneficially and of record shares of common stock of Delcorp, par value
$0.0001 per share (“Delcorp Common Stock”), as set forth opposite such
Stockholder’s name on
Exhibit A
hereto
(all such shares and any shares of which ownership of record or the power to
vote is hereafter acquired by any of the Stockholders, whether by purchase,
conversion or exercise, prior to the termination of this Agreement being
referred to herein as the “Shares”);
WHEREAS,
at the Effective Time, all shares of Company Common Stock beneficially owned
by
each Stockholder who is a member of the Target Group shall be converted into
the
right to receive and shall be exchanged for his, her or its pro rata portion
of
the shares of Delcorp Common Stock to be issued to the Company’s security
holders as consideration in the Merger; and
WHEREAS,
as a condition to the consummation of the Merger Agreement, the Stockholders
have agreed, severally, to enter into this Agreement;
NOW,
THEREFORE, in consideration of the premises and of the mutual agreements and
covenants set forth herein and in the Merger Agreement, and intending to be
legally bound hereby, the parties hereto hereby agree as follows:
ARTICLE
I
VOTING
OF SHARES FOR DIRECTORS
SECTION
1.01
Vote
in Favor of the Directors
.
During
the term of this Agreement, each Stockholder agrees to vote the Shares of
Delcorp Common Stock he, she or it now owns, or will hereafter acquire prior
to
the termination of this Agreement, for the election and re-election of the
following persons as directors of Delcorp:
(a)
Five
(5)
persons, (i) three (3) of whom shall at all times be “independent directors,”
within the meaning of the NASDAQ rules, and (ii) all of whom shall be designees
of the Company; with two (2) of such designees to stand for election or
re-election in 2009 (“Class A Directors”), who shall initially be Brian Pratt
and Thomas E. Tucker, who will be an “independent director;” three (3) of such
designees to stand for election or re-election in 2010 (“Class B Directors”),
who shall initially be John P. Schauerman, Stephen C. Cook and Peter J.
Moerbeek, with Messrs. Cook and Moerbeek who will each be an “independent
director” (collectively, the “Target Directors”);
(b)
Two
(2)
persons all of whom shall be designees of the Founders Group to stand for
election in 2011 (“Class C Directors”), which shall initially be Eric S.
Rosenfeld and David S. Sgro, (the “Founders Directors,” and together with the
Target Directors, the “Director Designees”); and
(c)
Brian
Pratt is to be elected and serve as Chairman of the Board of
Directors.
(d)
The
Founders Group may also designate a person to serve as an observer at all
meetings of the Board of Directors and committees thereof, who shall be given
all documents and other information furnished to the members of the Board of
Directors at the time such information is so furnished (the “
Observer
”).
At
the election of the Founders Group, the person then acting as Observer shall
be
designated to serve all or a part of any unexpired term of the person designated
by the Founders Group to serve as a Class C Director, in which event the person
designated by the Founders Group to serve as a Class C Director shall serve
as
the Observer.
Neither
the Stockholders, nor any of the officers, directors, stockholders, members,
managers, partners, employees or agents of any Stockholder, makes any
representation or warranty as to the fitness or competence of any Director
Designee to serve on the Board of Directors by virtue of such party’s execution
of this Agreement or by the act of such party in designating or voting for
such
Director Designee pursuant to this Agreement.
Any
Director Designee may be removed from the Board of Directors in the manner
allowed by law and Delcorp’s governing documents except that each Stockholder
agrees that he, she or it will not, as a stockholder, vote for the removal
of
any director who is a member of a Group of which such Stockholder is not a
member. If a director is removed or resigns from office, the remaining directors
of the Group of which the vacating director is a member shall be entitled to
appoint the successor.
SECTION
1.02
Vote
in Favor of Stock Option Plan
.
During
the term of this Agreement, each Stockholder agrees to vote the Shares of
Delcorp Common Stock he, she or it now owns, or hereafter acquires prior to
the
termination of this Agreement, in favor of the adoption of the Delcorp Plan
(as
defined in the Merger Agreement).
SECTION
1.03
Obligations
of Delcorp
.
Delcorp
shall take all necessary and desirable actions within its control during the
term of this Agreement to provide for the Delcorp Board of Directors to be
comprised of seven (7) members and to enable the election to the Board of
Directors of the Director Designees.
SECTION
1.04
Term
of Agreement
.
The
rights and obligations of the Stockholders pursuant to this Agreement shall
terminate immediately prior to the election or re-election of directors at
the
annual meeting of Delcorp that will be held in 2011.
SECTION
1.05
Obligations
as Director and/or Officer
.
Nothing
in this Agreement shall be deemed to limit or restrict any director or officer
of Delcorp from acting in his or her capacity as such director or officer or
from exercising his or her fiduciary duties and responsibilities, it being
agreed and understood that this Agreement shall apply to each Stockholder solely
in his or her capacity as a stockholder of Delcorp and shall not apply to his
or
her actions, judgments or decisions as a director or officer of Delcorp if
he or
she is such a director or officer.
SECTION
1.06
Transfer
of Shares
.
If
a
member of the Target Group desires to transfer his, her or its Shares to a
permitted transferee pursuant to the Lock-Up Agreement of even date herewith
executed by such member, or if a member of the Founders Group desires to
transfer his or its shares to a permitted transferee pursuant to the Stock
Escrow Agreement dated as of October [3], 2006, it shall be a condition to
such
transfer that the transferee agree to be bound by the provisions of this
Agreement. This Agreement shall in no way restrict the transfer on the public
market of Shares that are not subject to the Lock-Up Agreement or the Stock
Escrow Agreement, and any such transfers on the public market of Shares not
subject to the provisions of the Lock-Up Agreement or the Stock Escrow
Agreement, as applicable, shall be free and clear of the restrictions in this
Agreement.
ARTICLE
II
REPRESENTATIONS
AND WARRANTIES;
COVENANTS
OF THE STOCKHOLDERS
Each
Stockholder hereby severally represents warrants and covenants as
follows:
SECTION
2.01
Authorization
.
Such
Stockholder has full legal capacity and authority to enter into this Agreement
and to carry out such Stockholder’s obligations hereunder. This Agreement has
been duly executed and delivered by such Stockholder, and (assuming due
authorization, execution and delivery by Delcorp and the other Stockholders)
this Agreement constitutes a legal, valid and binding obligation of such
Stockholder, enforceable against such Stockholder in accordance with its
terms.
SECTION
2.02
No
Conflict; Required Filings and Consents
.
(a)
The
execution and delivery of this Agreement by such Stockholder does not, and
the
performance of this Agreement by such Stockholder will not, (i) conflict
with or violate any Legal Requirement applicable to such Stockholder or by
which
any property or asset of such Stockholder is bound or affected, or
(ii) result in any breach of or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give
to
others any right of termination, amendment, acceleration or cancellation of,
or
result in the creation of any encumbrance on any property or asset of such
Stockholder, including, without limitation, the Shares, pursuant to, any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation.
(b)
The
execution and delivery of this Agreement by such Stockholder does not, and
the
performance of this Agreement by such Stockholder will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
governmental or regulatory authority, domestic or foreign, except (i) for
applicable requirements, if any, of the Exchange Act, and (ii) where the
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not prevent or materially delay the
performance by such Stockholder of such Stockholder’s obligations under this
Agreement.
SECTION
2.03
Title
to Shares
.
Such
Stockholder is the legal and beneficial owner of its Shares, or will be the
legal beneficial owner of the Shares that such Stockholder will receive as
a
result of the Merger, free and clear of all liens and other encumbrances except
certain restrictions upon the transfer of such Shares.
ARTICLE
III
GENERAL
PROVISIONS
SECTION
3.01
Notices
.
All
notices and other communications given or made pursuant hereto shall be in
writing and shall be given (and shall be deemed to have been duly given upon
receipt) by delivery in person, by overnight courier service, by telecopy,
or by
registered or certified mail (postage prepaid, return receipt requested) to
the
respective parties at the following addresses (or at such other addresses as
shall be specified by notice given in accordance with this
Section 3.01):
Rhapsody
Acquisition Corp.
825
Third
Avenue, 40
th
Floor
New
York,
N.Y. 10022
Attention:
Eric Rosenfeld
Telecopy
No.: 212-319-0760
with
a
mandatory copy to
Graubard
Miller
The
Chrysler Building
405
Lexington Avenue
New
York,
N.Y. 10174-1901
Attention:
David Alan Miller, Esq.
Telecopy
No.: 212-818-8881
(b)
If
to any
Stockholder, to the address set forth opposite his, her or its name on Exhibit
A.
With
a
mandatory copy to
Rutan
& Tucker, LLP
611
Anton
Boulevard, Suite 1400
Costa
Mesa, CA 92626-5100
Attention:
George J. Wall, Esq.
Telecopier
No.: 714-546-9035
SECTION
3.02
Headings
.
The
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this
Agreement.
SECTION
3.03
Severability
.
If any
term or other provision of this Agreement is invalid, illegal or incapable
of
being enforced by any rule of law or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any party. Upon
such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely
as
possible to the fullest extent permitted by applicable law in an acceptable
manner to the end that the transactions contemplated hereby are fulfilled to
the
extent possible.
SECTION
3.04
Entire
Agreement
.
This
Agreement constitutes the entire agreement of the parties and supersedes all
prior agreements and undertakings, both written and oral, between the parties,
or any of them, with respect to the subject matter hereof. This Agreement may
not be amended or modified except in an instrument in writing signed by, or
on
behalf of, the parties hereto.
SECTION
3.05
Specific
Performance
.
The
parties hereto agree that irreparable damage would occur in the event that
any
provision of this Agreement was not performed in accordance with the terms
hereof and that the parties shall be entitled to specific performance of the
terms hereof, in addition to any other remedy at law or in equity.
SECTION
3.06
Governing
Law
.
This
Agreement shall be governed by, and construed in accordance with, the laws
of
the State of Delaware applicable to contracts executed in and to be performed
in
that State.
SECTION
3.07
Arbitration
.
Except
as otherwise provided in this Agreement, any controversy or claim arising out
of
or relating to this Agreement or the breach thereof shall be settled by
arbitration in Orange County, California.
(a)
Judicial
Arbitration and Mediation Services
.
The
arbitration shall be administered by Judicial Arbitration and Mediation Services
(“JAMS”) in its Orange County office.
(b)
Arbitrator
.
The
arbitrator shall be a retired superior or appellate court judge of the State
of
Delaware affiliated with JAMS.
(c)
Provisional
Remedies and Appeals
.
Each of
the parties reserves the right to file with a court of competent jurisdiction
an
application for temporary or preliminary injunctive relief, writ of attachment,
writ of possession, temporary protective order and/or appointment of a receiver
on the grounds that the arbitration award to which the applicant may be entitled
may be rendered ineffectual in the absence of such relief. The award of the
arbitrator shall be binding, final, and nonappealable.
(d)
Enforcement
of Judgment
.
Judgment upon the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof. The award of the arbitrator shall be binding,
final, and nonappealable.
(e)
Discovery
.
The
parties may obtain discovery in aid of the arbitration to the fullest extent
permitted under law, including California Code of Civil Procedure Section
1283.05. All discovery disputes shall be resolved by the
arbitrator.
(f)
Consolidation
.
Any
arbitration hereunder may be consolidated by JAMS with the arbitration of any
other dispute arising out of or relating to the same subject matter when the
arbitrator determines that there is a common issue of law or fact creating
the
possibility of conflicting rulings by more than one arbitrator. Any disputes
over which arbitrator shall hear any consolidated matter shall be resolved
by
JAMS.
(g)
Power
and Authority of Arbitrator
.
The
arbitrator shall not have any power to alter, amend, modify or change any of
the
terms of this Agreement nor to grant any remedy which is either prohibited
by
the terms of this Agreement, or not available in a court of law.
(h)
Governing
Law
.
All
questions in respect of procedure to be followed in conducting the arbitration
as well as the enforceability of this Agreement to arbitrate which may be
resolved by state law shall be resolved according to the law of the state of
California. Any action brought to enforce the provisions of this Section shall
be brought in the Orange County Superior Court. All other questions in respect
to this Agreement, including but not limited to the interpretation, enforcement
of this Agreement (other than the right to arbitrate), and the rights, duties
and liabilities of the parties to this Agreement shall be governed by Delaware
law.
(i)
Costs
.
The
costs of the arbitration, including any JAMS administration fee, and
arbitrator’s fee, and costs of the use of facilities during the hearings, shall
be borne equally by the parties. Costs shall be awarded to the prevailing
party.
(j)
Attorneys’
Fees
.
If a
party to this Agreement shall bring any action, suit, counterclaim, appeal,
arbitration, or mediation for any relief against the other parties, declaratory
or otherwise, to enforce the terms hereof or to declare rights hereunder
(referred to herein as an “
Action
”),
the
non-prevailing party in such Action shall pay to the prevailing party in such
Action a reasonable sum for the prevailing party’s attorneys’ fees and expenses
(at the prevailing party’s attorneys’ then-current rates, as increased from time
to time by the giving of advance written notice by such counsel to such party)
incurred in prosecuting or defending such Action and/or enforcing any judgment,
order, ruling or award (referred to herein as a “Decision”), granted therein,
all of which shall be deemed to have accrued from the commencement of such
Action, and shall be paid whether or not such Action is prosecuted to a
Decision. Any Decision entered into in such Action shall contain a specific
provision providing for the recovery of attorneys’ fees and expenses incurred in
enforcing such Decision. The court or arbitrator may fix the amount of
reasonable attorneys’ fees and expenses upon the request of any party. For
purposes of this Section, attorneys’ fees shall include, without limitation,
fees incurred in connection with (1) postjudgment motions and collection
actions, (2) contempt proceedings, (3) garnishment, levy and debtor
and third party examination, (4) discovery and (5) bankruptcy
litigation.
SECTION
3.08
No
Waiver
.
No
failure or delay by any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by
law.
SECTION
3.09
Counterparts
.
This
Agreement may be executed in one or more counterparts, and by the different
parties hereto in separate counterparts, each of which when executed shall
be
deemed to be an original but all of which taken together shall constitute one
and the same agreement.
SECTION
3.10
Merger
Agreement
.
All
references to the Merger Agreement herein shall be to such agreement as may
be
amended by the parties thereto from time to time.
[Signature
Page Follows]
IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date first
written above.
RHAPSODY
ACQUISITION CORP.
By:
/s/
ERIC ROSENFELD
Name:
Eric Rosenfeld
Title:
President and Chief Executive Officer
STOCKHOLDERS:
The
Founders Group:
/s/
ERIC ROSENFELD
Eric
Rosenfeld
The
Target Group:
/s/
BRIAN PRATT
Brian
Pratt
/s/
JOHN P. SCHAUERMAN
John
P.
Schauerman
Summers
Trust
By:
/s/
SCOTT E. SUMMERS
Scott
E.
Summers, Trustee
/s/
TIMOTHY R. HEALY
Timothy
R. Healy
EXHIBIT A
STOCKHOLDERS
|
Name
and Address
|
Number
of Shares
|
|
|
|
|
|
|
|
The
Founders Group:
|
|
|
|
|
|
Eric
S. Rosenfeld
|
1,985,476
|
|
c/o
Rhapsody Acquisition Corp.
|
|
|
825
Third Avenue, 40th Floor
|
|
|
New
York, N.Y. 10022
|
|
|
Telecopy
No.: 212-319-0760
|
|
|
|
|
|
|
|
|
The
Target Group:
|
|
|
|
|
|
Brian
Pratt
|
14,072,400
|
|
|
|
|
John
P. Schauerman
|
1,161,000
|
|
|
|
|
Summers
Trust
|
1,225,800
|
|
|
|
|
Timothy
R. Healy
|
469,800
|
[Insert
name address and fax number for each person.]
Exhibit
10.22
[Liberty
Bond Services Logo]
General
Agreement of Indemnity
This
General Agreement of Indemnity (hereinafter the “Agreement”) is made and entered
into by the following individuals, partnerships, corporations, and/or other
business entities, as applicable,
Primoris
Corporation; ARB, Inc.; ARB Structures. Inc; Onquest, Inc.; Cardinal
Contractors, Inc.
(individually and collectively hereinafter called the “Indemnitor(s)”) jointly
and severally, in favor of Liberty Mutual Insurance Company, Employers Insurance
Company of Wausau (formerly “EMPLOYERS INSURANCE OF WAUSAU A Mutual Company”),
Peerless Insurance Company, and any other company that is part of or added
to
the Liberty Mutual Group, severally not jointly, and for which Liberty Bond
Services underwrites surety business (individually and collectively hereinafter
called the “Surety”) with respect to any surety bond, undertaking, recognizance,
instrument of guarantee or other surety obligations (hereinafter called the
“Bond(s)”) requested from and/or issued by the Surety before or after the date
of this Agreement, for i)
Primoris
Corporation; ARB, Inc.; ARB Structures, Inc.; Onquest, Inc.; Cardinal
Contractors Inc.
;
ii) any
of the Indemnitors or Principals’ subsidiaries or affiliates, whether present or
future, and whether directly or indirectly held; and iii) any other entity
or
person in response to a request from any Indemnitor or Principal named herein,
and, as to all of the foregoing, whether they act alone or in joint venture
with
others whether or not said others are named herein (individually and
collectively hereinafter called the “Principal(s)”).
WITNESSETH
WHEREAS,
the Indemnitors and Principals, in the performance of contracts and the
fulfillment of obligations generally, whether in their own names solely or
as
co-adventurers with others, may desire, request, or be required to give or
procure certain Bonds, and/or to renew, continue, extend or substitute, from
time to time, the same or new Bonds with the same or different penalties, and/or
conditions, as may be desired, requested or required, in the renewal,
continuation, extension and/or substitution thereof; or the Indemnitors or
Principals may request the Surety to refrain from canceling the Bonds;
and
WHEREAS,
at the request of the Indemnitors and with both the express understanding that
this Agreement be given and in reliance upon this Agreement, the Surety has
heretofore or has presently been requested to and/or has executed or has
procured to be executed, and, from time to time hereafter, may be requested
to
and/or may execute or may procure to be executed, the Bonds, on behalf of the
Principals; and
WHEREAS,
the Indemnitors have a substantial, material and beneficial interest in the
obtaining of the Bonds or in the Surety’s refraining from canceling any or all
Bonds.
NOW,
THEREFORE, in consideration of the premises, and intending to be legally bound
hereby, the Indemnitors and Principals for themselves, their heirs, executors,
administrators, successors and assigns, jointly and severally, hereby covenant
and agree with the Surety, its successors and assigns, as follows:
FIRST:
PREMIUMS - The lndemnitors and Principals will pay to the Surety, promptly
upon
demand, all premiums, costs and charges of the Surety for any Bonds requested
from and/or issued by the Surety in accordance with its rate filings, its manual
of rates as determined by the Surety, or as otherwise determined by the Surety,
and where such premium, costs and charges are annual, continue to pay the same
until the Indemnitors or Principals shall deliver evidence satisfactory to
the
Surety of its discharge or release from the Bonds and all liability by reason
thereof.
SECOND:
INDEMNITY - The Indemnitors shall exonerate, hold harmless, indemnify, and
keep
indemnified the Surety from and against any and all liability for losses, fees,
costs and expenses of whatsoever kind or nature including, but not limited
to
pre- and post-judgment interest at the maximum rate permitted by law accruing
from the date of a breach of this Agreement or a breach of any other written
agreements between or for the benefit of the Surety and the Indemnitor(s) and/or
Principal(s) (hereinafter referred to as “Other Agreements”), court costs,
counsel fees, accounting, engineering and any other outside consulting fees
and
from and against any and all such losses, fees, costs and expenses which the
Surety may sustain or incur: (1) by reason of being requested to execute or
procure the execution of any Bond; or (2) by having executed or procured the
execution of any Bond; or (3) by reason of the failure of the Indemnitors or
Principals to perform or comply with any of the covenants and conditions of
this
Agreement or Other Agreements; or (4) in enforcing any of the covenants and
conditions of this Agreement or Other Agreements. Payment by reason of the
aforesaid causes shall be made to the Surety by the Indemnitors and/or
Principals promptly, upon demand by the Surety, whether or not the Surety shall
have made any payment therefor and, at the Surety’s sole option, irrespective of
any deposit of collateral. If the Surety determines, in its sole judgment,
that
potential liability exists for losses and/or fees, costs and expenses for which
the Indemnitors and Principals will be obliged to indemnify the Surety under
the
terms of this Agreement or Other Agreements, the Indemnitors and/or Principals
shall deposit with the Surety, promptly upon demand, a sum of money equal to
an
amount determined by the Surety or collateral security of a type and value
satisfactory to the Surety, to cover that liability, whether or not the Surety
has: (a) established or increased any reserve; (b) made any payments; or (c)
received any notice of any claims therefor. At the Surety’s sole option, such
collateral shall be in addition to and not in lieu of any other collateral
that
has been previously provided to the Surety. The Surety shall have the right
to
use any collateral, or any part thereof, in payment or settlement of any such
liabilities for which the Indemnitors and Principals would be obliged to
indemnify the Surety under the terms of this Agreement or Other Agreements.
In
the event of any payment by the Surety, the Indemnitors and Principals further
agree that in any accounting between the Surety and the Principals, or between
the Surety and the Indemnitors, or either or both of them, the Surety shall
be
entitled to charge for any and all disbursements made by it in good faith in
and
about the matters herein contemplated by this Agreement or Other Agreements
under the belief that it is, or was, or might be liable for the sums and amounts
so disbursed or that it was necessary or expedient to make such disbursements,
whether or not such liability, necessity or expediency existed; and that the
vouchers or other evidence of any such payments made by the Surety shall be
prima facie evidence of the fact and amount of the liability to the Surety.
Surety shall have no obligation to invest or provide a return on any collateral
provided to it under this Agreement.
THIRD:
ASSIGNMENT - The Indemnitors hereby consenting do assign, transfer, pledge
and
convey to the Surety and agree to use their best efforts to cause the Principals
to assign, transfer, pledge and convey to the Surety as collateral security
for
the full performance of the covenants and agreements herein contained, contained
in Other Agreements and for the payment of any other indebtedness or liability
of the Indemnitors and/or Principals to the Surety, whether heretofore or
hereafter incurred, the assignment in the case of each contract being effective
as of the date of the Bond covering such contract, the following: (a) all the
right, title and interest of the Indemnitors and/or Principals in, and growing
in any manner out of, all contracts referred to in the Bonds, or in, or growing
in any manner out of the Bonds; (b) all the right, title and interest of the
Indemnitors and/or Principals in and to all machinery, supplies, equipment,
plant, tools and materials which are now, or may hereafter be, about or upon
the
site or sites of any and all contractual work referred to in the Bonds or
elsewhere, including materials purchased for or chargeable to any and all
contracts referred to in the Bonds, materials which may be in the process of
construction, in storage at the site or elsewhere, or in transportation to
any
and all sites; (c) all the right, title and interest of the Indemnitors and/or
Principals in and to all subcontracts let or to be let in connection with any
and all contracts referred to in the Bonds, and in and to all surety bonds
supporting such subcontracts; (d) all actions, causes of actions, claims and
demands whatsoever which the Indemnitors and/or Principals may have or acquire
against any subcontractor, laborer or materialman, or any person furnishing
or
agreeing to furnish or supply labor, material, supplies, machinery, tools,
or
other equipment in connection with or on account of any and all contracts
referred to in the Bonds; and against any surety or sureties of any
subcontractor, laborer or materialman; and (e) any and all percentages retained
and any and all sums that may be due or hereafter become due on account of
any
and all contracts referred to in the Bonds and all other contracts whether
bonded or not in which the Indemnitors or Principals have an interest; (f)
all
licenses, patents, copyrights and trade secrets; (g) all warehouse receipts,
bills of lading and general intangibles; (h) all tax refunds and claims for
tax
refunds; and (i) all limited partnership and general partnership interests;
but
only in the event of: (1) any abandonment, forfeiture or breach of any contract
referred to in the Bonds or of any breach of any Bond; or (2) a default in
discharging any other Indebtedness or liabilities incurred in connection
therewith, when due; or (3) any breach of the covenants and conditions of this
Agreement or Other Agreements, including but not limited to the failure to
obtain from the Surety written approval of a Change in Control; or (4) an
assignment by any Indemnitor or Principal for the benefit of creditors, or
of
the appointment or any application for the appointment, of a receiver or trustee
for any Indemnitor or Principal whether insolvent or not; or (5) any proceeding
which deprives the Indemnitor or Principal of the use of any of the machinery,
supplies, equipment, plant, tools or material referred to in section (b) of
this
paragraph; or (6) any Indemnitor or Principal’s death, absconding,
disappearance, incompetence, insolvency, conviction of a felony, or
imprisonment, if the Indemnitor or Principal be an individual. Principal(s)
shall further obtain, maintain and assign all proceeds from insurance coverage
as may be required by the Surety from insurance companies acceptable to Surety,
including, as may be applicable, coverage for acts of terrorism. Failure to
obtain or maintain insurance coverages so required by Surety shall be a breach
of this agreement and shall permit Surety to demand cash collateral from
Principal(s) in an amount up to and including the full penal sum of any
outstanding Bond(s).
FOURTH:
UNIFORM COMMERCIAL CODE - This Agreement shall constitute a Security Agreement
to the Surety and also a Financing Statement, both in accordance with the
provisions of the Uniform Commercial Code of every jurisdiction wherein such
Code is in effect and may be so used by the Surety without in any way
abrogating, restricting or limiting the rights of the Surety under this
Agreement or under law, or in equity. A carbon, photographic or other
reproduction of this Agreement may be filed as a Financing
Statement.
FIFTH:
TAKEOVER - In the event of any of the following: breach, default, or termination
asserted by the obligee in any Bond; any Principal’s abandonment of the work or
forfeiture of any contract covered by any Bond, any Principal’s failure to pay
obligations incurred in connection therewith; or if the Principal is an
individual, in the event of the Principal’s death, absconding, disappearance,
incompetence, insolvency, conviction of a felony, or imprisonment; the
bankruptcy of any Principal; the appointment of a receiver or trustee for any
Principal or for the property of any Principal; an assignment for the benefit
of
creditors of any Principal; if any action is taken by or against any Principal
under or by virtue of the Federal Bankruptcy Code; should reorganization or
arrangement proceedings be filed by or against any Principal under said Code;
and/or if any action is taken by or against any Principal under the insolvency
laws of any state, possession or territory of the United States, then the Surety
shall have the right, at its option and in its sole discretion and is hereby
authorized, with or without exercising any other right or option conferred
upon
it by law or under the terms of this Agreement, to take possession of any part
or all of the work under any contract or contracts covered by the Bonds, and
the
Indemnitors hereby agree to use their best efforts to cause the Principal to
permit the Surety to take possession of any part or all of the work under any
contract or contracts covered by the Bonds, at the expense of the Indemnitors
and Principals, to complete or arrange for the completion of the same, and
the
Indemnitors and Principals shall promptly, upon demand, pay to the Surety all
losses, fees, costs and expenses so incurred.
SIXTH:
CHANGES - The Surety is authorized and empowered, without notice to or knowledge
of the Indemnitors or Principals, to assent to any change whatsoever in the
Bonds, and/or any contracts referred to in the Bonds, and/or in the general
conditions, plans and/or specifications accompanying said contracts, including,
but not limited to, any change in the time for the completion of said contracts
and to payments or advances thereunder before the same may be due, and to assent
to or take any assignment or assignments, to execute or consent to the execution
of any continuations, extensions or renewals of the Bonds and to execute any
substitute or substitutes therefor, with the same or different conditions,
provisions and obligees and with the same or larger or smaller penalties, it
being expressly understood and agreed that the Indemnitors shall remain bound
under the terms of this Agreement even though any such assent by the Surety
does
or might substantially increase the liability of said Indemnitors. Indemnitors
further represent and warrant to surety that they are currently informed and
remain informed and apprised of Principal’s or Principals’ business activities,
ventures and financial affairs, including but not limited to the type, size
(single job and/or aggregate program), location and status of projects and
contracts performed by Principal(s) and secured by Bond(s) executed, provided
or
procured by Surety. Surety has no obligation to inform the Indemnitors of any
change in any aspect of Principal(s)’ business activities or financial
affairs.
SEVENTH:
ADVANCES - The Surety is authorized and empowered, in its sole discretion and
without any obligation to do so, to guarantee loans, to advance, or lend to
an
Indemnitor or Principal any money, which the Surety may see fit, for the purpose
of any contracts referred to in, or guaranteed by the Bonds, or pursuant to
any
Other Agreements, and all money so expended, lent, advanced, or loans guaranteed
from time to time to or on behalf of any such Indemnitor or Principal in
connection therewith, including costs of investigation, administration, and/or
in the completion of any contract by the Surety, and any and all other costs
and
expenses incurred by the Surety in relation thereto, unless repaid with interest
at the maximum rate permitted by law by any Indemnitor or Principal to the
Surety when due, shall be presumed to be a loss by the Surety for which the
Indemnitors and Principals shall be responsible notwithstanding that said money
or any part thereof should not be so used by any such Indemnitor or
Principal.
EIGHTH:
BOOKS AND RECORDS - Principal(s) and Indemnitor(s) shall provide to Surety
within 120 days of their fiscal year end, financial statements prepared in
accordance with Generally Accepted Accounting Principles, and reports prepared
by reputable accounting firms prepared in accordance with the AICPA’s Statements
on Standards for Accounting and Review Services (“SARS”). If principal(s) and/or
Indemnitor(s) have reports prepared by reputable accounting firms in accordance
with the AICPA’s Statements on Auditing Standards in the ordinary course of
their financial reporting, then such reports shall be supplied instead of the
reports in accordance with SARS. Principal(s) and Indemnitor(s) shall also
provide any management letters received from their accountants within 30 days
of
receipt. In addition to the foregoing, at any time, and until such time as
the
liability of the Surety under any and all Bonds is terminated, or the Surety
is
fully reimbursed all amounts due to it under this Agreement or Other Agreements,
the Surety shall have the right of reasonable access to the books, records
and/or accounts of the Indemnitors and Principals for the purpose of inspection,
copying or reproduction; and any financial institution, depository, materialman,
supply house or other person, firm or corporation is hereby specifically
authorized by each Indemnitor and Principal to furnish the Surety, at the
Surety’s request, any information requested including but not limited to,
financial and credit reports relating to the financial condition of the
Indemnitors and/or Principals, and as to any bonded or non-bonded contract
performed, in progress or awarded, the status of the work, the condition of
the
performance of such contracts and payments of accounts. The Indemnitors and
Principals agree to provide any additional releases, requests, waivers or any
other documents required in order to allow the Surety access to the requested
information. Failure to provide the information required in this paragraph
shall
be a breach of this Agreement, and shall entitle Surety to demand in its sole
discretion cash collateral up to the penal sum of any outstanding
Bond(s).
NINTH:
DECLINE EXECUTION - The Surety, at its sole discretion, may decline to execute,
renew or extend any Bond, including final bonds, and may cancel any Bond unless
the Bond states otherwise, and the Indemnitors and Principals agree to make
no
claim to the contrary. If the Surety shall execute a Bid or Proposal Bond,
it
shall have the right to decline to execute any other Bonds that may be required
in connection with any award that may be made under the proposal for which
the
Bid or Proposal Bond is given, and such declination shall not diminish or alter
the liability that may arise by reason of having executed the Bid or Proposal
Bond. The Indemnitors and Principals acknowledge that the Surety makes no
representation as to the validity or acceptability of any Bond to any person,
firm or entity of whatever sort or kind under any contract, and agree that
they
shall have no claim against the Surety arising out of or in any manner relating
to the failure or refusal of any person, firm or entity of whatever sort or
kind
to award any contract to the Principals, or to accept any Bond executed and
delivered by the Surety, or that the Surety has been requested to execute and
delivery.
TENTH:
NOTICE OF EXECUTION - The Indemnitors and Principals hereby waive notice of
the
execution of any Bond, the acceptance of this Agreement or Other Agreements,
and
of any change in surety credit or other fact that might materially alter the
Indemnitors and Principals’ obligations hereunder, and the Indemnitors and
Principals hereby waive all notice of any default, or any other act or acts
giving rise to any claim under any Bond, as well as notice of any and all
liability of the Surety under any Bond, and any and all liability on their
part
hereunder, to the end and effect that, the Indemnitors and Principals shall
be
and continue to be liable hereunder, notwithstanding any notice of any kind
to
which they might have been or be entitled, and notwithstanding any defenses
they
might otherwise have been entitled to make as a result of lack of notice.
ELEVENTH:
TRUST FUND - The Indemnitors and Principals covenant and agree that all of
their
interest, title and rights in any contract or undertaking referred to in any
Bond, or in, or growing in any manner out of any Bond, including but not limited
to payments for or on account of any contract, shall be held as a trust fund
and/or as a constructive or equitable trust in which the Surety has an interest,
and shall inure to the benefit of the Surety for any liability or loss it may
have or sustain under any Bond including but not limited to the payment of
obligations incurred in the performance of any contract and for labor,
materials, and services furnished in the prosecution of the work provided in
any
contract or any authorized extension or modification thereof, and, further,
it
is expressly understood and declared that all monies due and to become due
under
any contract covered by any Bond are trust funds, whether in the possession
of
the Indemnitors or Principals or otherwise, for the benefit of and for payment
of all such obligations in connection with any such contract for which the
Surety would be liable under any Bond, said trust also inures to the benefit
of
the Surety for any liability or loss it may have or sustain under any Bond,
under this Agreement, or under any Other Agreements, and this Agreement
constitutes notice of such trust.
TWELFTH:
HOMESTEAD - To the extent permitted by applicable law, the Indemnitors and
Principals hereby waive, so far as their respective obligations under this
Agreement are concerned, all rights to claim any of their property including
their respective homesteads, as exempt from levy, execution, sale or other
legal
process under the laws of any state, territory or possession.
THIRTEENTH:
SETTLEMENTS - The Surety shall have the right, at its option and sole
discretion, to adjust, settle or compromise any claim, demand, suit or judgment
upon any Bond, unless any Indemnitor or Principal, providing a reasonable legal
basis therefor, shall request the Surety to litigate such claim or demand,
or to
defend such suit, or to appeal from such judgment, and shall deposit with the
Surety, at the time of such request, cash or collateral satisfactory to the
Surety in kind and amount to be used in paying any judgment or judgments
rendered or that may be rendered, with interest, costs, expenses and attorneys’
fees, including those of the Surety.
FOURTEENTH:
SURETIES - In the event the Surety procures the execution of any Bond by other
sureties, or executes any Bond with co-sureties, or reinsures any portion of
any
Bond with reinsuring sureties, then all the terms and conditions of this
Agreement shall inure also to the benefit of such other sureties, co-sureties
and reinsuring sureties, their successors and assigns, as their interests may
appear.
FIFTEENTH:
SUITS - Separate suits may be brought hereunder as causes of action accrue,
and
the bringing of suit or the recovery of judgment upon any cause of action shall
not prejudice or bar the bringing of other suits upon other causes of action,
whether theretofore or thereafter arising.
SIXTEENTH:
OTHER INDEMNITY - The addition to this Agreement of any Indemnitor, including
any entities acquired after the date of execution of this Agreement, may be
effected by written amendment executed by such Indemnitor only, notwithstanding
any language herein to the contrary. The Indemnitors and Principals shall
continue to remain bound under the terms of the Agreement, Other Agreements,
and
any other agreements containing indemnity obligations, even though the Surety
may from time to time heretofore or hereafter, with or without notice to or
knowledge of the Indemnitors and Principals, accept, release, or reduce any
indemnity obligations or collateral of current or future Indemnitors and
Principals for any reason, The Indemnitors and Principals expressly waive notice
from the Surety of any such action and, furthermore, it is explicitly understood
and agreed by the Indemnitors and Principals that any and all other rights
which
the Surety may have or acquire against the Indemnitors and Principals and/or
others under any such agreements or additional agreements or collateral shall
be
in addition to, and not in lieu of, the rights afforded the Surety under this
Agreement. No Indemnitor shall make any defense to the enforcement of this
Agreement based on the execution of Other Agreements or related to the addition
or the release of any Indemnitor, and each Indemnitor explicitly confirms its
joint and several liability for Bonds issued by the Surety as provided in this
Agreement. Principals and Indemnitors also waive and subordinate all rights
of
indemnity, subrogation and contribution against each other until all obligations
to the Surety under the agreement, at law or in equity, have been satisfied
in
full.
SEVENTEENTH:
INVALIDITY - Invalidity of any provision of this Agreement by reason of the
laws
of any jurisdiction shall not render the other provisions hereof invalid. In
case any of the parties set forth in this Agreement fail to execute the same,
or
in case the execution hereof by any of the parties be defective or invalid
for
any reason, including lack of authority to bind any party, such failure, defect
or invalidity shall not in any manner affect the validity of this Agreement
or
the liability hereunder of any of the parties executing the same, but each
and
every party so executing shall be and remain fully bound and liable hereunder
to
the same extent as if such failure, defect or invalidity had not existed. Each
party agrees to execute promptly any documentation necessary to cure any such
failure, defect or invalidity. It is understood and agreed by the Indemnitors
and Principals that the rights, powers, and remedies given the Surety under
this
Agreement shall be and are in addition to, and not in lieu of, any and all
other
rights, powers, and remedies which the Surety may have or acquire against the
Indemnitors and Principals or others whether by the terms of any other agreement
or by operation of law or otherwise.
EIGHTEENTH:
ATTORNEY-IN-FACT - The Indemnitors and Principals hereby irrevocably nominate,
constitute, appoint and designate the Surety as their attorney-in-fact with
the
full right and authority, but not the obligation, to exercise all the rights
of
the Indemnitors and Principals assigned, transferred and set over to the Surety
in this Agreement, with full power and authority to execute on behalf of and
sign the name of any Indemnitor and/or Principal to any voucher, financing
statement, release, satisfaction, check, bill of sale of all or any property
by
this Agreement assigned to the Surety, or other documents or papers deemed
necessary and proper by the Surety in order to give full effect not only to
the
intent and meaning of the within assignments, but also to the full protection
intended to be herein given to the Surety under all other provisions of this
Agreement. The Indemnitors and Principals hereby ratify and confirm all acts
and
actions taken and done by the Surety as such attorney-in-fact and agree to
protect and hold harmless the Surety for acts herein granted as
attorney-in-fact.
NINETEENTH:
TERMINATION - Any Indemnitor may terminate its liability under this Agreement
upon twenty days’ written notice sent by registered and certified mail or
courier requiring proof of delivery signature to the Surety, in care of Liberty
Bond Services, Interchange Corporate Center, 450 Plymouth Road, Suite 400,
Plymouth Meeting, PA 19462-1644, but any such notice of termination shall not
operate to modify, bar, or discharge Indemnitors or Principals as to any Bonds
(a) that may have been executed or authorized prior to the expiration of the
notice period; (b) which may be executed after the expiration of the notice
period in fulfillment of any commitment given by the Surety prior to the
expiration of such notice period; (c) executed in connection with any project
as
to which any bid bond was executed or authorized prior to the expiration of
such
notice period; and/or (d) which are renewed, extended, substituted or modified
after the expiration of such notice period. Such termination of liability as
to
any Indemnitor or Principal in no way affects the obligation of any other
Indemnitor or Principal who has not given notice as herein
provided.
TWENTIETH:
AMENDMENTS - This Agreement may not be changed or modified orally. No change
or
modification shall be effective unless made by written amendment executed to
form a part hereof.
TWENTY-FIRST:
JURISDICTION - As to any legal action or proceeding related to this Agreement,
the Indemnitors and Principals consent to the general jurisdiction of any local,
state or Federal court of the United States or its territories having proper
subject matter jurisdiction or in any court of the United States or its
territories in which any claim may be brought against the Surety under any
Bonds, and waive any claim or defense in any such action or proceeding based
on
any alleged lack of personal jurisdiction, improper venue, forum non conveniens
or any similar basis, Indemnitors and Principals further waive personal service
or any and all process.
TWENTY-SECOND:
CURRENCY EXCHANGE - Should the Surety, when making any payment or incurring
any
expense directly or indirectly related to Bonds expend funds in currencies
other
than U.S. Dollars, then Indemnitors shall either reimburse the Surety in U.S.
Dollars equal to the amount expended by the Surety at the time the foreign
currency was purchased or shall defray the cost of any exchange variation,
thereby indemnifying the Surety for any decrease in the valuation of the
currency purchased.
TWENTY-THIRD:
CHANGE IN CONTROL - The Indemnitors agree to provide the Surety with, at least,
forty five (45) days prior written notice of a Change in Control (defined below)
and to designate the name and address of the Indemnitor with whom the Surety
should correspond with respect to this paragraph, which Indemnitor, all
Indemnitors agree is designated to act on behalf of them pursuant to this
paragraph. Upon receipt of such notice, the Surety shall advise the Indemnitor
designated above, in writing, of its election to (i) approve such Change in
Control or (ii) demand that the Indemnitors’ procure the discharge of the Surety
from any Bonds and all liability by reason thereof. If the Indemnitors fail
to
give the Surety timely notice of a Change in Control or if the Surety does
not
approve the Change in Control and if such discharge is not procured to the
sole
satisfaction of the Surety then, immediately, upon the Surety’s written demand,
the Indemnitors shall deposit a sum of money or collateral, of a type and value
satisfactory to the Surety, equal to the aggregate penal sum of the then
outstanding Bonds, as determined by the Surety in its sole discretion. The
Surety shall send its written demand to the Indemnitor designated above by
overnight courier or by registered or certified mail. The Indemnitors hereby
acknowledge that if they or any one of them breaches the obligations set forth
in this paragraph, the Surety will not have an adequate remedy at law, will
suffer irreparable harm and shall be entitled to injunctive relief, enforcing
the terms of this paragraph, as well as a final decree, order or judgment
granting Surety specific performance of the terms of this
Agreement.
“Change
in Control” shall mean: (a) the transfer, merger or consolidation (in one
transaction or a series of transactions) of all or substantially all of the
assets of any non-individual Principal or Indemnitor; (b) the acquisition (in
one transaction or a series of transactions) by any person or group, directly
or
indirectly, of fifty (50%) percent or more of the beneficial ownership or
control of any Principal or Indemnitor; or (c) the acquisition by any Principal
or Indemnitor, directly or indirectly, of fifty (50%) percent or more of the
beneficial ownership or control in any joint venture, subsidiary, division,
affiliate, limited partnership, limited liability partnership, limited liability
company or other entity through the issuance of ten (10%) percent or more of
the
voting power of the total outstanding voting stock of any Principal or
Indemnitor.
TWENTY-FOURTH:
DOMESTIC PRINCIPAL DOING FOREIGN CONTRACTS/ GOVERNING LAW - The Indemnitors
and
Principals hereby agree that as to any legal action or proceeding related to
any
Bond(s) issued in connection with contracts to be performed outside the United
States and its territories, this Agreement shall be governed by and construed
in
accordance with the laws of the State of New York (without giving effect to
the
conflict of laws principles thereof), except to the extent superseded by Federal
law.
DATED
as
of this ____ day of __________, 2004
By
affixing their signatures hereto, each Indemnitor signing on behalf of a
business entity warrants that each is duly authorized by Indemnitor to bind
Indemnitor to this Agreement:
|
Witness/Attest:
/s/ John
P. Schauerman
John
P. Schauerman
SVP,
Secretary, Treasurer
|
Primoris
Corporation
Tax
ID 83-037-7797
26000
Commercentre Drive
Lake
Forest, CA 92630
By:
/s/
John B. Sandman
(Seal)
John
B. Sandman
President
|
|
|
|
|
Witness/Attest:
/s/ John
P. Schauerman
John
P. Schauerman
SVP,
Secretary, Treasurer
|
ARB,
Inc.
Tax
ID 95-215-9777
26000
Commercentre Drive
Lake
Forest, CA 92630
By:
/s/
John B. Sandman
(Seal)
John
B. Sandman
President
|
|
|
|
|
Witness/Attest:
/s/ Alfons
Theeuwes
Alfons
Theeuwes
CFO,
Secretary, Treasurer
|
ARB,
Inc.
Tax
ID 83-037-7796
26000
Commercentre Drive
Lake
Forest, CA 92630
By:
/s/
John B. Sandman
(Seal)
John
B. Sandman
President
|
|
|
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|
Witness/Attest:
/s/ Stacy
Walters
Stacy
Walters
Secretary
|
Onquest,
Inc.
Tax
ID 30-004-3099
26000
Commercentre Drive
Lake
Forest, CA 92630
By:
/s/
Dave Baker
(Seal)
Dave
Baker
President
& CEO
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Witness/Attest:
/s/ Keith
Pickle
Keith
Pickle
Secretary,
Treasurer
|
Cardinal
Contractors, Inc.
Tax
ID
26000
Commercentre Drive
Lake
Forest, CA 92630
By:
/s/
William J. McDevitt
(Seal)
William
J. McDevitt
President
& CEO
|
LOAN
AND SECURITY AGREEMENT
This
LOAN
AND SECURITY AGREEMENT dated as of March 22, 2007 (the “Agreement”), is executed
by and between Primoris Corporation, a
Nevada
corporation
(the
“Borrower”), which has its chief executive office located at 26000 Commercentre
Drive, Lake Forest, California 92630, and LASALLE BANK NATIONAL ASSOCIATION,
a
national banking association (the “Bank”), whose address is 135 South LaSalle
Street, Chicago, Illinois 60603.
RECITALS
:
A.
The
Borrower desires to borrow funds and obtain other financial accommodations
from
the Bank.
B.
Pursuant
to the Borrower’s request, the Bank is willing to extend such financial
accommodations to the Borrower under the terms and conditions set forth
herein.
C.
It
is the
parties’ intent that the Borrower and its Affiliates and the Guarantors and
their Affiliates shall provide security for the Loans and any other borrowings
by the Borrower and its Affiliates from the Bank and its
Affiliates.
NOW
THEREFORE, in consideration of the premises, and the mutual covenants and
agreements set forth herein, the Borrower agrees to borrow from the Bank, and
the Bank agrees to lend to the Borrower, subject to and upon the following
terms
and conditions:
AGREEMENTS
:
Section
1.
DEFINITIONS
.
1.1.
Defined
Terms
.
For the
purposes of this Agreement, the following capitalized words and phrases shall
have the meanings set forth below.
“
Account
or Accounts
”
shall
have the meaning set forth in the UCC.
“
Affiliate
”
of
any
Person shall mean (a) any other Person which, directly or indirectly, controls
or is controlled by or is under common control with such Person, (b) any officer
or director of such Person, and (c) with respect to the Bank, the foregoing
and
also any entity administered or managed by the Bank, or an Affiliate or
investment advisor thereof and which is engaged in making, purchasing, holding
or otherwise investing in commercial loans. A Person shall be deemed to be
“controlled by” any other Person if such Person possesses, directly or
indirectly, power to direct or cause the direction of the management and
policies of such Person whether by contract, ownership of voting securities,
membership interests or otherwise.
“
Applicable
Margin
”
shall
mean the rate per annum added to the Base Rate and/or LIBOR to determine the
Revolving Interest Rate
as
determined by the ratio of Total Debt to Tangible Net Worth of the Borrower
as
of the last day of the prior fiscal quarter, as set forth below:
|
Total
Debt to Tangible Net Worth
|
LIBOR
Spread
|
Base
Rate Spread
|
Commitment
Fee
|
Non-Utilization
Fee
|
Letter
of Credit Fee
|
|
Greater
than 1.50 to 1:00
|
225
bps
|
25
bps
|
50
bps
|
50
bps
|
225
bps
|
|
Greater
than 1.00 to 1.00; less than or equal to
1.50
to 1.00
|
200
bps
|
25
bps
|
50
bps
|
50
bps
|
200
bps
|
|
Greater
than 0.50 to 1:00; less than or equal to
1.00:
1.00
|
175
bps
|
0
bps
|
37.5
bps
|
37.5
bps
|
175
bps
|
|
Less
than or equal to
0.50
to 1.00
|
150
bps
|
0
bps
|
37.5
bps
|
37.5
bps
|
150
bps
|
The
Applicable Margin as of the date hereof is Base Rate plus 0 bps or LIBOR plus
175 bps and shall be adjusted, upon receipt and verification of a compliance
certificate, on the first day of each quarter based on the Total Debt to
Tangible Net Worth of the Borrower as of the last day of the preceding
quarter.
“
ARB
ARENDAL
”
shall
mean ARB ARENDAL S. de R.L. de C.V.
“
ARB
ECUADOR
”
shall
mean ARB ECUADOR Cia Ltda.
“
Bank
Product Agreements
”
shall
mean those certain agreements entered into from time to time by the Borrower
or
any Subsidiary with the Bank or any Affiliate of the Bank concerning Bank
Products.
“
Bank
Product Obligations
”
shall
mean (i) all obligations, liabilities, contingent reimbursement obligations,
fees, and expenses owing by the Borrower or any Subsidiary to the Bank or any
Affiliate of the Bank, or (ii) all guarantees, fees and expenses owing by the
Borrower to the Bank with regard to foreign subordinated debt made available
to
the Borrower by any Affiliate of the Bank, pursuant to or evidenced by the
Bank
Product Agreements and irrespective of whether for the payment of money, whether
direct or indirect, absolute or contingent, due or to become due, now existing
or hereafter arising.
“
Bank
Products
”
shall
mean any service or facility extended to the Borrower or any Subsidiary by
the
Bank or any Affiliate of the Bank, including: (a) credit cards, (b) credit
card
processing services, (c) debit cards, (d) purchase cards, (e) ACH transactions,
(f) cash management, including controlled disbursement, accounts or services,
or
(g) Hedging Agreements.
“
Bankruptcy
Code
”
shall
mean the United States Bankruptcy Code, as now existing or hereafter
amended.
“
Base
Rate
”
shall
mean a per annum rate of interest as announced by the Bank from time to time
which shall remain fixed during any Interest Period.
“
Base
Rate Loan
”
means
any Loan which bears interest at or by reference to the Base Rate.
“
Born
Heaters Canada
”
means
Born Heaters Canada, Ltd., an Alberta Unlimited Liability Company.
“
Business
Day
”
shall
mean any day other than a Saturday, Sunday or a legal holiday on which banks
are
authorized or required to be closed for the conduct of commercial banking
business in Chicago, Illinois.
“
Capital
Expenditures
”
shall
mean all expenditures (including Capitalized Lease Obligations) which, in
accordance with GAAP, would be required to be capitalized and shown on the
consolidated balance sheet of the Borrower, but excluding expenditures made
in
connection with the replacement, substitution or restoration of assets to the
extent financed (i) from insurance proceeds (or other similar recoveries) paid
on account of the loss of or damage to the assets being replaced or restored
or
(ii) with awards of compensation arising from the taking by eminent domain
or
condemnation of the assets being replaced.
“
Capital
Lease
”
shall
mean, as to any Person, a
lease
of
any interest in any kind of property or asset, whether real, personal or mixed,
or tangible or intangible, by such Person, as lessee, that is, or should be,
in
accordance with Financial Accounting Standards Board Statement No. 13, as
amended from time to time, or, if such statement is not then in effect, such
statement of GAAP as may be applicable, recorded as a “capital lease” on the
financial statements of such Person prepared in accordance with
GAAP.
“
Capital
Securities
”
shall
mean, with respect to any Person, all shares, interests, participations or
other
equivalents (however designated, whether voting or non-voting) of such Person’s
capital, whether now outstanding or issued or acquired after the date hereof,
including common shares, preferred shares, membership interests in a limited
liability company, limited or general partnership interests in a partnership
or
any other equivalent of such ownership interest.
“
Capitalized
Lease Obligations
”
shall
mean, as to any Person, all rental obligations of such Person, as lessee under
a
Capital Lease which are or will be required to be capitalized on the books
of
such Person.
“
Cash
Equivalent Investment
”
shall
mean, at any time, (a) any evidence of Debt, maturing not more than one year
after such time, issued or guaranteed by the United States government or any
agency thereof, (b) commercial paper, maturing not more than one year from
the
date of issue, or corporate demand notes, in each case (unless issued by the
Bank or its holding company) rated at least A-l by Standard & Poor’s Ratings
Services, a division of The McGraw-Hill Companies, Inc. or P-l by Moody’s
Investors Service, Inc., (c) any certificate of deposit, time deposit or
banker’s acceptance, maturing not more than one year after such time, or any
overnight Federal Funds transaction that is issued or sold by the Bank or its
holding company (or by a commercial banking institution that is a member of
the
Federal Reserve System and has a combined capital and surplus and undivided
profits of not less than Five Hundred Thousand and 00/100 Dollars
($500,000,000)), (d) any repurchase agreement entered into with the Bank, or
other commercial banking institution of the nature referred to in
clause
(c)
,
which
(i) is secured by a fully perfected security interest in any obligation of
the
type described in any of
clauses
(a)
through
(c)
above,
and (ii) has a market value at the time such repurchase agreement is entered
into of not less than 100% of the repurchase obligation of the Bank, or other
commercial banking institution, thereunder, (e) money market accounts or mutual
funds which invest exclusively in assets satisfying the foregoing requirements,
(f) other short term liquid investments approved in writing by the Bank, (g)
cash held outside the United States to be deposited in a bank rated at least
A-l
by Standard & Poor’s Ratings Services, a division of The McGraw-Hill
Companies, Inc. or P-l by Moody’s Investors Service, Inc., or any other bank
acceptable to the Bank; and (h) cash held within the United States to be
invested in short term instruments for periods of less than 270 days and rated
at least A-l by Standard & Poor’s Ratings Services, a division of The
McGraw-Hill Companies, Inc. or P-l by Moody’s Investors Service, Inc., to be
held in an institution acceptable to the Bank.
“
Cash
Proceeds
”
shall
have the meaning set forth in the UCC.
“
Change
in Control
”
shall
mean if Brian Pratt
shall
cease to own and control, directly or indirectly, at least 50% of the
outstanding Capital Securities of the Borrower. For the purpose hereof, the
terms “control” or “controlling” shall mean the possession of the power to
direct, or cause the direction of, the management and policies of the Borrower
by contract or voting of securities or ownership interests.
“
Chattel
Paper
”
shall
have the meaning set forth in the UCC.
“
Closing
Fee
”
shall
have the meaning set forth in
Section
3.6
hereof.
“
Collateral
”
shall
have the meaning set forth in
Section
6.1
hereof.
“
Collateral
Access Agreement
”
shall
mean an agreement in form and substance reasonably satisfactory to the Bank
pursuant to which a mortgagee or lessor of real property where the chief
executive office of the Borrower is located or where the chief executive office
of any Subsidiary is located acknowledges the Liens of the Bank and waives
any
Liens held by such Person on such property, and, in the case of any such
agreement with a mortgagee or lessor, permits the Bank reasonable access to
and
use of such real property following the occurrence and during the continuance
of
an Event of Default to assemble, complete and sell any collateral stored or
otherwise located thereon.
“
Commercial
Tort Claims
”
shall
have the meaning set forth in the UCC.
“
Control
Agreements
”
shall
mean those agreements in form and substance acceptable to the Bank executed
by
the Borrower and any other banking institution(s) in favor of the Bank or any
Subsidiary and any other banking institution(s) which grants the Bank a security
interest in the Account(s) held by the Borrower at such other banking
institution(s) and any Subsidiary at such other banking
institution(s).
“
Debt
”
shall
mean, as to any Person, without duplication, (a) all borrowed money of such
Person (including principal, interest, fees and charges), whether or not
evidenced by bonds, debentures, notes or similar instruments; and (b) all
obligations, contingent or otherwise, with respect to the maximum face amount
of
all letters of credit (whether or not drawn), bankers’ acceptances and similar
obligations issued for the account of such Person (including the Letters of
Credit), and all unpaid drawings in respect of such letters of credit, bankers’
acceptances and similar obligations. Notwithstanding the foregoing, Debt shall
not include trade payables and accrued expenses incurred by such Person in
accordance with customary practices and in the ordinary course of business
of
such Person.
“
Default
Rate
”
shall
mean a per annum rate of interest equal to the Base Rate
plus
two
percent (2%).
“
Deposit
Accounts
”
shall
have the meaning set forth in the UCC.
“
Depreciation
”
shall
mean the total amounts added to depreciation, amortization, obsolescence,
valuation and other proper reserves, as reflected on the Borrower’s financial
statements and determined in accordance with GAAP.
“
Documents
”
shall
have the meaning set forth in the UCC.
“
Electronic
Chattel Paper
”
shall
have the meaning set forth in the UCC.
“
Employee
Plan
”
includes any pension, stock bonus, employee stock ownership plan, retirement,
profit sharing, deferred compensation, stock option, bonus or other incentive
plan, whether qualified or nonqualified, or any disability, medical, dental
or
other health plan, life insurance or other death benefit plan, vacation benefit
plan, severance plan or other employee benefit plan or arrangement, including
those pension, profit-sharing and retirement plans of the Borrower described
from time to time in the financial statements of the Borrower and any pension
plan, welfare plan, Defined Benefit Pension Plans (as defined in ERISA) or
any
multi-employer plan, maintained or administered by the Borrower or to which
the
Borrower is a party or may have any liability or by which the Borrower is
bound.
“
Environmental
Laws
”
shall
mean all present or future federal, state or local laws, statutes, common law
duties, rules, regulations, ordinances and codes, together with all
administrative or judicial orders, consent agreements, directed duties,
requests, licenses, authorizations and permits of, and agreements with, any
governmental authority, in each case relating to any matter arising out of
or
relating to public health and safety, or pollution or protection of the
environment or workplace, including any of the foregoing relating to the
presence, use, production, generation, handling, transport, treatment, storage,
disposal, distribution, discharge, emission, release, threatened release,
control or cleanup of any Hazardous Substance.
“
Equipment
”
shall
have the meaning set forth in the UCC.
“
ERISA
”
shall
mean the Employee Retirement Income Security Act of 1974, as amended from time
to time.
“
Event
of Default
”
shall
mean any of the events or conditions which are set forth in
Section
11
hereof.
“
Excess
Cash
”
shall
mean Cash Equivalent Investments in excess of Five Million and 00/100 Dollars
($5,000,000.00).
“
Federal
Funds Rate
”
shall
mean, for any day, a fluctuating interest rate equal for each day during such
period to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published for such day (or, if such day is not a Business
Day,
for the next preceding Business Day) by the Federal Reserve Bank of New York,
or, if such rate is not so published for any day which is a Business Day, the
average of the quotations for such day on such transactions received by the
Bank
from three Federal funds brokers of recognized standing selected by the Bank.
The Bank’s determination of such rate shall be binding and conclusive absent
manifest error.
“
Financial
Assets
”
shall
have the meaning set forth in the UCC.
“
Fiscal
Year
”
means
the fiscal year of the Borrower and its Subsidiaries, which period shall be
the
12-month period ending on Borrower’s Fiscal Year End of each year.
“
GAAP
”
shall
mean generally accepted accounting principles set forth from time to time in
the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements
of
the Financial Accounting Standards Board (or agencies with similar functions
of
comparable stature and authority within the U.S. accounting profession), which
are applicable to the circumstances as of the date of determination, provided,
however, that interim financial statements or reports shall be deemed in
compliance with GAAP despite the absence of footnotes and fiscal year-end
adjustments as required by GAAP.
“
General
Intangibles
”
shall
have the meaning set forth in the UCC.
“
Goods
”
shall
have the meaning set forth in the UCC.
“
Guarantor
”
and
“
Guarantors
”
shall
mean, respectively, each of and collectively, the following Persons: ARB, Inc.;
ARB Structures, Inc.; Cardinal Contractors, Inc.; Cardinal Mechanical, L.P.;
Onquest, Inc.; Pipeline Trenching, LLC; and any other Person signing a
Guaranty.
“
Guaranties
”
shall
have the meaning set forth in
Section
3.1
hereof.
“
Hazardous
Substances
”
shall
mean (a) any petroleum or petroleum products, radioactive materials,
asbestos in any form that is or could become friable, urea formaldehyde foam
insulation, dielectric fluid containing levels of polychlorinated biphenyls,
radon gas and mold; (b) any chemicals, materials, pollutant or substances
defined as or included in the definition of “hazardous substances”, “hazardous
waste”, “hazardous materials”, “extremely hazardous substances”, “restricted
hazardous waste”, “toxic substances”, “toxic pollutants”, “contaminants”,
“pollutants” or words of similar import, under any applicable Environmental Law;
and (c) any other chemical, material or substance, the exposure to, or
release of which is prohibited, limited or regulated by any governmental
authority or for which any duty or standard of care is imposed pursuant to,
any
Environmental Law.
“
Hedging
Agreement
”
shall
mean any interest rate, currency or commodity swap agreement, cap agreement
or
collar agreement, and any other agreement or arrangement designed to protect
a
Person against fluctuations in interest rates, currency exchange rates or
commodity prices.
“
Hedging
Obligation
”
shall
mean, with respect to any Person, any liability of such Person under any Hedging
Agreement.
“
Indemnified
Party
”
and
“
Indemnified
Parties
”
shall
mean, respectively, each of the Bank and any parent corporation, Affiliate
or
Subsidiary of the Bank, and each of their respective officers, directors,
employees, attorneys and agents, and all of such parties and
entities.
“
Instruments
”
shall
have the meaning set forth in the UCC.
“
Intellectual
Property
”
shall
mean the collective reference to all rights, priorities and privileges relating
to intellectual property, whether arising under United States, multinational
or
foreign laws or otherwise, including copyrights, patents, service marks and
trademarks, and all registrations and applications for registration therefor
and
all licensees thereof, trade names, domain names, technology, know-how and
processes, and all rights to sue at law or in equity for any infringement or
other impairment thereof, including the right to receive all proceeds and
damages therefrom.
“
Interest
Charges
”
shall
mean, for any period, the sum of: (a) all interest, charges and related expenses
payable with respect to that fiscal period to a lender in connection with
borrowed money or the deferred purchase price of assets that are treated as
interest in accordance with GAAP,
plus
(b) the
portion of Capitalized Lease Obligations with respect to that fiscal period
that
should be treated as interest in accordance with GAAP,
plus
(c) all
charges paid or payable (without duplication) during that period with respect
to
any Hedging Agreements.
“
Interest
Period
”
shall
mean successive one week, two week, one month, two month, three month or six
month periods, beginning and ending as provided in this Agreement.
“
Inventory
”
shall
have the meaning set forth in the UCC.
“
Investment
”
shall
mean, with respect to any Person, any investment in another Person, whether
by
acquisition of any debt or equity security, by making any loan or advance,
by
becoming obligated with respect to a Contingent Liability in respect of
obligations of such other Person (other than travel and similar advances to
employees in the ordinary course of business).
“
Investment
Property
”
shall
have the meaning set forth in the UCC.
“
Letter
of Credit
”
and
“
Letters
of Credit
”
shall
mean, respectively, a letter of credit and all such letters of credit issued
by
the Bank, in its sole discretion, upon the execution and delivery by the
Borrower and the acceptance by the Bank of a Master Letter of Credit Agreement
and a Letter of Credit Application, as set forth in
Section
2.7
of this
Agreement.
“
Letter
of Credit Application
”
shall
mean, with respect to any request for the issuance of a Letter of Credit, a
letter of credit application in the form being used by the Bank at the time
of
such request for the type of Letter of Credit requested.
“
Letter
of Credit Commitment
”
shall
mean, at any time, an amount equal to Ten Million and 00/100 Dollars
($10,000,000.00).
“
Letter
of Credit Fee
”
shall
have the meaning set forth in
Section
2.6
hereof.
“
Letter
of Credit Maturity Date
”
shall
mean one year after the Revolving Loan Maturity Date.
“
Letter
of Credit Obligations
”
shall
mean, at any time, an amount equal to the aggregate of the original face amounts
of all Letters of Credit minus the sum of (i) the amount of any reductions
in
the original face amount of any Letter of Credit which did not result from
a
draw thereunder, (ii) the amount of any payments made by the Bank with respect
to any draws made under a Letter of Credit for which the Borrower has reimbursed
the Bank, (iii) the amount of any payments made by the Bank with respect to
any
draws made under a Letter of Credit which have been converted to a Revolving
Loan as set forth in
Section
2.7
,
and
(iv) the portion of any issued but expired Letter of Credit which has not been
drawn by the beneficiary thereunder. For purposes of determining the outstanding
Letter of Credit Obligations at any time, the Bank’s acceptance of a draft drawn
on the Bank pursuant to a Letter of Credit shall constitute a draw on the
applicable Letter of Credit at the time of such acceptance.
“
Letter
of Credit Rights
”
shall
have the meaning set forth in the UCC.
“
Liabilities
”
shall
mean at all times all liabilities of the Borrower that would be shown as such
on
a balance sheet of the Borrower prepared in accordance with GAAP.
“
LIBOR
”
shall
mean a rate of interest equal to (a) the per annum rate of interest at which
United States dollar deposits for a period equal to the relevant Interest Period
are offered in the London Interbank Eurodollar market at 11:00 a.m. (London
time) two Business Days prior to the commencement of such Interest Period (or
three Business Days prior to the commencement of such Interest Period if banks
in London, England were not open and dealing in offshore United States dollars
on such second preceding Business Day), as displayed in the
Bloomberg
Financial Markets
system
(or other authoritative source selected by the Bank in its sole discretion),
divided by (b) a number determined by subtracting from 1.00 the then stated
maximum reserve percentage for determining reserves to be maintained by member
banks of the Federal Reserve System for Eurocurrency funding or liabilities
as
defined in Regulation D (or any successor category of liabilities under
Regulation D), or as LIBOR is otherwise determined by the Bank in its sole
and
absolute discretion. The Bank’s determination of LIBOR shall be conclusive,
absent manifest error.
“
LIBOR
Loan
”
or
“
LIBOR
Loans
”
shall
mean that portion, and collectively those portions, of the aggregate outstanding
principal balance of the Loans that bear interest at the LIBOR
Rate.
“
LIBOR
Rate
”
shall
mean a per annum rate of interest equal to LIBOR for the relevant Interest
Period,
plus
175
basis points, which LIBOR Rate shall remain fixed during such Interest
Period.
“
Lien
”
shall
mean, with respect to any Person, any interest granted by such Person in any
real or personal property, asset or other right owned or being purchased or
acquired by such Person (including an interest in respect of a Capital Lease)
which secures payment or performance of any obligation and shall include any
mortgage, lien, encumbrance, title retention lien, charge or other security
interest of any kind, whether arising by contract, as a matter of law, by
judicial process or otherwise.
“
Loans
”
shall
mean the Revolving Loans
made
by
the Bank to the Borrower and all Letter of Credit Obligations, under and
pursuant to this Agreement.
“
Loan
Documents
”
shall
mean each of the agreements, documents, instruments and certificates set forth
in
Section
3.1
hereof,
and any and all such other instruments, documents, certificates and agreements
from time to time executed and delivered by the Borrower, the Guarantors or
any
of their
Subsidiaries
for the benefit of the Bank pursuant to any of the foregoing, and all
amendments, restatements, supplements and other modifications
thereto.
“
Master
Letter of Credit Agreement
”
shall
mean, at any time, with respect to the issuance of Letters of Credit, a Master
Letter of Credit Agreement in the form being used by the Bank at such
time.
“
Material
”
shall
mean the description of any claim which could, if determined adversely, result
in a Material Adverse Effect.
“
Material
Adverse Effect
”
shall
mean (a) a material adverse change in, or a material adverse effect upon, the
assets, business, properties, prospects, condition (financial or otherwise)
or
results of operations of the Borrower and its Subsidiaries taken as a whole,
(b)
a material impairment of the ability of the Borrower and its Subsidiaries to
perform any of the Obligations under any of the Loan Documents, or (c) a
material adverse effect on (i) any substantial portion of the Collateral, (ii)
the legality, validity, binding effect or enforceability against the Borrower
and its Subsidiaries of any of the Loan Documents, (iii) the perfection or
priority of any Lien granted to the Bank under any Loan Document, or (iv) the
rights or remedies of the Bank under any Loan Document.
“
Net
Income
”
shall
mean, with respect to the Borrower and its Subsidiaries for any period, the
net
income (or loss) of the Borrower and its Subsidiaries for such period as
determined in accordance with GAAP excluding property, plant and equipment,
any
extraordinary gains outside the ordinary course and any gains from discontinued
operations.
“
Noncash
Proceeds
”
shall
have the meaning set forth in the UCC.
“
Non-Excluded
Taxes
”
shall
have the meaning set forth in
Section
2.7(a)
hereof.
“
Non-Utilization
Fee
”
shall
have the meaning set forth in
Section
2.4
hereof.
“
Note
”
shall
mean
the
Revolving Note.
“
Obligations
”
shall
mean the Loans, as evidenced by any Note, all interest accrued thereon
(including interest which would be payable as post-petition in connection with
any bankruptcy or similar proceeding, whether or not permitted as a claim
thereunder), any fees due the Bank hereunder, any expenses incurred by the
Bank
hereunder, including without limitation, all liabilities and obligations under
this Agreement, under any other Loan Document, any reimbursement obligations of
the Borrower or any Subsidiary of the Borrower in respect of Letters of Credit,
all Hedging Obligations of the Borrower or any Subsidiary of the Borrower which
are owed to the Bank or any Affiliate of the Bank, and all Bank Product
Obligations of the Borrower or any Subsidiary of the Borrower, and any and
all
other liabilities and obligations owed by the Borrower or any Subsidiary of
the
Borrower to the Bank or any Affiliate of the Bank from time to time, howsoever
created, arising or evidenced, whether direct or indirect, joint or several,
absolute or contingent, now or hereafter existing, or due or to become due,
together with any and all renewals, extensions, restatements or replacements
of
any of the foregoing.
“
Obligor
”
shall
mean the Borrower, any Subsidiary of the Borrower, any Guarantor, accommodation
endorser, third party pledgor, or any other party liable with respect to the
Obligations.
“
Organizational
Identification Number
”
means,
with respect to Borrower, the organizational identification number assigned
to
Borrower by the applicable governmental unit or agency of the jurisdiction
of
organization of the Borrower.
“
Other
Taxes
”
shall
mean any present or future stamp or documentary taxes or any other excise or
property taxes, charges or similar levies which arise from the execution,
delivery, enforcement or registration of, or otherwise with respect to, this
Agreement or any of the other Loan Documents.
“
Payment
Intangibles
”
shall
have the meaning set forth in the UCC.
“
Permitted
Liens
”
shall
mean (a)
Liens
for
Taxes, assessments or other governmental charges not at the time delinquent
or
thereafter payable without penalty or being contested in good faith by
appropriate proceedings and, in each case, for which it maintains adequate
reserves in accordance with GAAP and in respect of which no Lien has been filed;
(b) Liens arising in the ordinary course of business (such as (i) Liens of
carriers, warehousemen, mechanics and materialmen and other similar Liens
imposed by law, and (ii) Liens in the form of deposits or pledges incurred
in
connection with worker’s compensation, unemployment compensation and other types
of social security (excluding Liens arising under ERISA) or in connection with
surety bonds, bids, performance bonds and similar obligations) for sums not
overdue or being contested in good faith by appropriate proceedings and not
involving any advances or borrowed money or the deferred purchase price of
property or services, which do not in the aggregate materially detract from
the
value of the property or assets of the Borrower or materially impair the use
thereof in the operation of the Borrower’s business and, in each case, for which
it maintains adequate reserves in accordance with GAAP and in respect of which
no Lien has been filed; (c) Liens described on
Schedule
9.2
as of
the Closing Date; (d) attachments, appeal bonds, judgments and other similar
Liens, for sums not exceeding Five Hundred Thousand and 00/100 Dollars
($500,000.00) arising in connection with court proceedings,
provided
the
execution or other enforcement of such Liens is effectively stayed and the
claims secured thereby are being actively contested in good faith and by
appropriate proceedings and to the extent such judgments or awards do not
constitute an Event of Default under Section 11.8 hereof; (e) easements, rights
of way, restrictions, minor defects or irregularities in title and other similar
Liens not interfering in any material respect with the ordinary conduct of
the
business of the Borrower or any of its Subsidiaries; (f) Liens arising in
connection with Capitalized Lease Obligations (and attaching only to the
property being leased); (g) subject to the limitation set forth in
Section
9.1(h)
,
Liens
that constitute purchase money security interests on any property securing
Debt
incurred for the purpose of financing all or any part of the cost of acquiring
such property,
provided
that any
such Lien attaches to such property within twenty (20) days of the acquisition
thereof and attaches solely to the property so acquired; (h)
Liens
granted to the Bank hereunder and under the Loan Documents; (i) subject to
the
limitations set forth in
Section
10.4
,
Liens
arising in connection with the incurrence of Capital Expenditures; and (j)
Liens
for certain Equipment as approved by the Bank.
“
Person
”
shall
mean any natural person, partnership, limited liability company, corporation,
trust, joint venture, joint stock company, association, unincorporated
organization, government or agency or political subdivision thereof, or other
entity, whether acting in an individual, fiduciary or other
capacity.
“
Pledge
Agreements
”
shall
have the meaning set forth in
Section
3.2
hereof.
“
Proceeds
”
shall
have the meaning set forth in the UCC.
“
Regulatory
Change
”
shall
mean the introduction of, or any change in any applicable law, treaty, rule,
regulation or guideline or in the interpretation or administration thereof
by
any governmental authority or any central bank or other fiscal, monetary or
other authority having jurisdiction over the Bank or its lending
office.
“
Revolving
Interest Rate
”
shall
mean the Interest Rate plus the Applicable Margin.
“
Revolving
Loan
”
and
“
Revolving
Loans
”
shall
mean, respectively, each loan and all outstanding loans made by the Bank to
the
Borrower under and pursuant to this Agreement, as set forth in
Section
2.1
of this
Agreement.
“
Revolving
Loan Availability
”
shall
mean, at any time, an amount equal to the Revolving Loan Commitment
minus
the
Letter of Credit Obligations
minus
outstanding Revolving Loans.
“
Revolving
Loan Commitment
”
shall
mean Thirty Million and 00/100 Dollars ($30,000,000.00).
“
Revolving
Loan Maturity Date
”
shall
mean
March
20,
2010, unless extended by the Bank pursuant to any modification, extension or
renewal note executed by the Borrower and accepted by the Bank in its sole
and
absolute discretion in substitution for the Revolving Note.
“
Revolving
Note
”
shall
mean a revolving note in the form prepared by and acceptable to the Bank, dated
as of the date hereof, in the amount of the Revolving Loan Commitment and
maturing on the Revolving Loan Maturity Date, duly executed by the Borrower
and
payable to the order of the Bank, together with any and all renewal, extension,
modification or replacement notes executed by the Borrower and delivered to
the
Bank and given in substitution therefor.
“
Securities
”
shall
have the meaning set forth in the UCC.
“
Senior
Debt
”
shall
mean all Debt of the Borrower and its Subsidiaries other than Subordinated
Debt.
“
Software
”
shall
have the meaning set forth in the UCC.
“
Subordinated
Debt
”
shall
mean that portion of the Debt of the Borrower which is subordinated to the
Obligations in a manner satisfactory to the Bank, including right and time
of
payment of principal and interest.
“
Subsidiary
”
and
“
Subsidiaries
”
shall
mean, respectively, with respect to any Person, each and all such corporations,
partnerships, limited partnerships, limited liability companies, limited
liability partnerships, joint ventures or other entities of which or in which
such Person owns, directly or indirectly, such number of outstanding Capital
Securities as have more than fifty percent (50.00%) of the ordinary voting
power
for the election of directors or other managers of such corporation,
partnership, limited liability company or other entity. Unless the context
otherwise requires, each reference to Subsidiaries herein shall be a reference
to Subsidiaries of the Borrower.
“
Supporting
Obligations
”
shall
have the meaning set forth in the UCC.
“
Tangible
Assets
”
shall
mean the total of all assets appearing on a balance sheet of the Borrower
prepared in accordance with GAAP (with Inventory being valued at the lower
of
cost or market), after deducting all proper reserves (including reserves for
Depreciation) minus the sum of (i) goodwill, patents, trademarks, prepaid
expenses, deposits, deferred charges and other personal property which is
classified as intangible property in accordance with GAAP, and (ii) any amounts
due from shareholders, officers or employees of the Borrower.
“
Tangible
Net Worth
”
shall
mean at any time the total of Tangible Assets
minus
Liabilities
plus
Subordinated Debt.
“
Taxes
”
shall
mean any and all present and future taxes, duties, levies, imposts, deductions,
assessments, charges or withholdings, and any and all liabilities (including
interest and penalties and other additions to taxes) with respect to the
foregoing.
“
Total
Debt
”
shall
mean all Debt of the Borrower and its Subsidiaries, determined on a consolidated
basis, excluding Debt of the Borrower to Subsidiaries and Debt of Subsidiaries
to the Borrower or to other Subsidiaries
.
“
UCC
”
shall
mean the Uniform Commercial Code in effect in the state of Illinois from time
to
time.
“
Unmatured
Event of Default
”
shall
mean any event which, with the giving of notice, the passage of time or both,
would constitute an Event of Default.
“
Voidable
Transfer
”
shall
have the meaning set forth in Section 13.21 hereof.
“
Wholly-Owned
Subsidiary
”
shall
mean any Subsidiary of which or in which the Borrower owns, directly or
indirectly, one hundred percent (100%) of the Capital Securities of such
Subsidiary.
1.2.
Accounting
Terms
.
Any
accounting terms used in this Agreement which are not specifically defined
herein shall have the meanings customarily given them in accordance with GAAP.
Calculations and determinations of financial and accounting terms used and
not
otherwise specifically defined hereunder and the preparation of financial
statements to be furnished to the Bank pursuant hereto shall be made and
prepared, both as to classification of items and as to amount, in accordance
with sound accounting practices and GAAP as used in the preparation of the
financial statements of the Borrower on the date of this Agreement. If any
changes in accounting principles or practices from those used in the preparation
of the financial statements are hereafter occasioned by the promulgation of
rules, regulations, pronouncements and opinions by or required by the Financial
Accounting Standards Board or the American Institute of Certified Public
Accountants (or any successor thereto or agencies with similar functions),
which
results in a material change in the method of accounting in the financial
statements required to be furnished to the Bank hereunder or in the calculation
of financial covenants, standards or terms contained in this Agreement, the
parties hereto agree to enter into good faith negotiations to amend such
provisions so as equitably to reflect such changes to the end that the criteria
for evaluating the financial condition and performance of the Borrower will
be
the same after such changes as they were before such changes; and if the parties
fail to agree on the amendment of such provisions, the Borrower will furnish
financial statements in accordance with such changes, but shall provide
calculations for all financial covenants, perform all financial covenants and
otherwise observe all financial standards and terms in accordance with
applicable accounting principles and practices in effect immediately prior
to
such changes. Calculations with respect to financial covenants required to
be
stated in accordance with applicable accounting principles and practices in
effect immediately prior to such changes shall be reviewed and certified by
the
Borrower’s accountants.
1.3.
Other
Terms Defined in UCC
.
All
other capitalized words and phrases used herein and not otherwise specifically
defined herein shall have the respective meanings assigned to such terms in
the
UCC, to the extent the same are used or defined therein.
1.4.
Other
Interpretive Provisions
.
(a)
The
meanings of defined terms are equally applicable to the singular and plural
forms of the defined terms. Whenever the context so requires, the neuter gender
includes the masculine and feminine, the single number includes the plural,
and
vice versa, and in particular the word “Borrower” shall be so
construed.
(b)
Section
and Schedule references are to this Agreement unless otherwise specified. The
words “hereof”, “herein” and “hereunder” and words of similar import when used
in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement.
(c)
The
term
“including” is not limiting, and means “including, without
limitation”.
(d)
In
the
computation of periods of time from a specified date to a later specified date,
the word “from” means “from and including”; the words “to” and “until” each mean
“to but excluding”, and the word “through” means “to and
including”.
(e)
Unless
otherwise expressly provided herein, (i) references to agreements
(including this Agreement and the other Loan Documents) and other contractual
instruments shall be deemed to include all subsequent amendments, restatements,
supplements and other modifications thereto, but only to the extent such
amendments, restatements, supplements and other modifications are not prohibited
by the terms of any Loan Document, and (ii) references to any statute or
regulation shall be construed as including all statutory and regulatory
provisions amending, replacing, supplementing or interpreting such statute
or
regulation.
(f)
To
the
extent any of the provisions of the other Loan Documents are inconsistent with
the terms of this Agreement, the provisions of this Agreement shall
govern.
(g)
This
Agreement and the other Loan Documents may use several different limitations,
tests or measurements to regulate the same or similar matters. All such
limitations, tests and measurements are cumulative and each shall be performed
in accordance with its terms.
Section
2.
COMMITMENT
OF THE BANK
.
2.1.
Revolving
Loans
.
(a)
Revolving
Loan Commitment
.
Subject
to the terms and conditions of this Agreement and the other Loan Documents,
and
in reliance upon the representations and warranties of the Borrower set forth
herein and in the other Loan Documents, the Bank agrees to make such Revolving
Loans at such times as the Borrower may from time to time request until, but
not
including, the Revolving Loan Maturity Date, and in such amounts as the Borrower
may from time to time request, provided, however, that the aggregate principal
balance of all Revolving Loans outstanding at any time shall not exceed the
Revolving Loan Availability. Revolving Loans made by the Bank may be repaid
and,
subject to the terms and conditions hereof, borrowed again up to, but not
including the Revolving Loan Maturity Date unless the Revolving Loans are
otherwise accelerated, terminated or extended as provided in this Agreement.
The
Revolving Loans shall be used by the Borrower for the purpose of working capital
and general corporate purposes.
(b)
Revolving
Loan Interest and Payments
.
Except
as otherwise provided in this
Section
2.1(b)
,
the
principal amount of the Revolving Loans outstanding from time to time shall
bear
interest at the applicable Revolving Interest Rate. Accrued and unpaid interest
on the unpaid principal balance of all Revolving Loans outstanding from time
to
time which are Base Rate Loans, shall be due and payable on the last Business
Day of each month. Accrued and unpaid interest on the unpaid principal balance
of all Revolving Loans outstanding from time to time which are LIBOR Loans
shall
be payable on the last Business Day of each Interest Period, commencing on
the
first such date to occur after the date hereof, on the date of any principal
repayment of a LIBOR Loan and on the Revolving Loan Maturity Date. From and
after maturity, or after the occurrence and during the continuation of an Event
of Default, interest on the outstanding principal balance of the Revolving
Loans, at the option of the Bank, may accrue at the Default Rate and shall
be
payable upon demand from the Bank.
(c)
Revolving
Loan Principal Payments
.
(i)
Revolving
Loan Mandatory Payments
.
All
Revolving Loans hereunder shall be repaid by the Borrower on the Revolving
Loan
Maturity Date, unless payable sooner pursuant to the provisions of this
Agreement. In the event the aggregate outstanding principal balance of all
Revolving Loans and Letter of Credit Obligations hereunder exceeds the Revolving
Loan Availability, the Borrower shall, without notice or demand of any kind,
immediately make such repayments of the Revolving Loans or take such other
actions as are satisfactory to the Bank as shall be necessary to eliminate
such
excess.
(ii)
Optional
Prepayments
.
The
Borrower may from time to time prepay the Revolving Loans which are Base Rate
Loans, in whole or in part, without any prepayment penalty whatsoever, provided
that any prepayment of the entire principal balance of the Base Rate Loans
shall
include accrued interest on such Base Rate Loans to the date of such
prepayment.
2.2.
Additional
LIBOR Loan Provisions
.
(a)
LIBOR
Loan Prepayments
.
Notwithstanding anything to the contrary contained herein, the principal balance
of any LIBOR Loan may not be prepaid in whole or in part at any time. If, for
any reason, a LIBOR Loan is paid prior to the last Business Day of any Interest
Period, whether voluntary, involuntary, by reason of acceleration or otherwise,
each such prepayment of a LIBOR Loan will be accompanied by the amount of
accrued interest on the amount prepaid and any and all costs, expenses,
penalties and charges incurred by the Bank as a result of the early termination
or breakage of a LIBOR Loan, plus the amount, if any, by which (i) the
additional interest which would have been payable during the Interest Period
on
the LIBOR Loan prepaid had it not been prepaid, exceeds (ii) the interest which
would have been recoverable by the Bank by placing the amount prepaid on deposit
in the domestic certificate of deposit market, the eurodollar deposit market,
or
other appropriate money market selected by the Bank, for a period starting
on
the date on which it was prepaid and ending on the last day of the Interest
Period for such LIBOR Loan. The amount of any such loss or expense payable
by
the Borrower to the Bank under this section shall be determined in the Bank’s
sole discretion based upon the assumption that the Bank funded its loan
commitment for LIBOR Loans in the London Interbank Eurodollar market and using
any reasonable attribution or averaging methods which the Bank deems appropriate
and practical, provided, however, that the Bank is not obligated to accept
a
deposit in the London Interbank Eurodollar market in order to charge interest
on
a LIBOR Loan at the LIBOR Rate.
(b)
LIBOR
Unavailability
.
If the
Bank determines in good faith (which determination shall be conclusive, absent
manifest error) prior to the commencement of any Interest Period that (i) the
making or maintenance of any LIBOR Loan would violate any applicable law, rule,
regulation or directive, whether or not having the force of law, (ii) United
States dollar deposits in the principal amount, and for periods equal to the
Interest Period for funding any LIBOR Loan are not available in the London
Interbank Eurodollar market in the ordinary course of business, (iii) by reason
of circumstances affecting the London Interbank Eurodollar market, adequate
and
fair means do not exist for ascertaining the LIBOR Rate to be applicable to
the
relevant LIBOR Loan, or (iv) the LIBOR Rate does not accurately reflect the
cost
to the Bank of a LIBOR Loan, the Bank shall promptly notify the Borrower thereof
and, so long as the foregoing conditions continue, none of the Loans may be
advanced as a LIBOR Loan thereafter. In addition, at the Borrower’s option, each
existing LIBOR Loan shall be immediately (i) converted to a Base Rate Loan
on
the last Business Day of the then existing Interest Period, or (ii) due and
payable on the last Business Day of the then existing Interest Period, without
further demand, presentment, protest or notice of any kind, all of which are
hereby waived by the Borrower.
(c)
Regulatory
Change
.
In
addition, if, after the date hereof, a Regulatory Change shall, in the
reasonable determination of the Bank, make it unlawful for the Bank to make
or
maintain the LIBOR Loans, then the Bank shall promptly notify the Borrower
and
none of the Loans may be advanced as a LIBOR Loan thereafter. In addition,
at
the Borrower’s option, each existing LIBOR Loan shall be immediately (i)
converted to a Base Rate Loan on the last Business Day of the then existing
Interest Period or on such earlier date as required by law, or (ii) due and
payable on the last Business Day of the then existing Interest Period or on
such
earlier date as required by law, all without further demand, presentment,
protest or notice of any kind, all of which are hereby waived by the
Borrower.
(d)
LIBOR
Indemnity
.
If any
Regulatory Change, or compliance by the Bank or any Person controlling the
Bank
with any request or directive of any governmental authority, central bank or
comparable agency (whether or not having the force of law) shall (a) impose,
modify or deem applicable any assessment, reserve, special deposit or similar
requirement against assets held by, or deposits in or for the account of or
loans by, or any other acquisition of funds or disbursements by, the Bank;
(b)
subject the Bank or any LIBOR Loan to any tax, duty, charge, stamp tax or fee
or
change the basis of taxation of payments to the Bank of principal or interest
due from the Borrower to the Bank hereunder (other than a change in the taxation
of the overall net income of the Bank); or (c) impose on the Bank any other
condition regarding such LIBOR Loan or the Bank’s funding thereof, and the Bank
shall determine (which determination shall be conclusive, absent manifest error)
that the result of the foregoing is to increase the cost to, or to impose a
cost
on, the Bank or such controlling Person of making or maintaining such LIBOR
Loan
or to reduce the amount of principal or interest received by the Bank hereunder,
then the Borrower shall pay to the Bank or such controlling Person, on demand,
such additional amounts as the Bank shall, from time to time, determine are
sufficient to compensate and indemnify the Bank for such increased cost or
reduced amount.
2.4
Interest
and Fee Computation; Collection of Funds
.
Except
as otherwise set forth herein, all interest and fees shall be calculated on
the
basis of a year consisting of 360 days and shall be paid for the actual number
of days elapsed. Principal payments submitted in funds not immediately available
shall continue to bear interest until collected. If any payment to be made
by
the Borrower hereunder or under any Note shall become due on a day other than
a
Business Day, such payment shall be made on the next succeeding Business Day
and
such extension of time shall be included in computing any interest in respect
of
such payment. Notwithstanding anything to the contrary contained herein, the
final payment due under any of the Loans must be made by wire transfer or other
immediately available funds. All payments made by the Borrower hereunder or
under any of the Loan Documents shall be made without setoff, counterclaim,
or
other defense. To the extent permitted by applicable law, all payments hereunder
or under any of the Loan Documents (including any payment of principal,
interest, or fees) to, or for the benefit, of any Person shall be made by the
Borrower free and clear of, and without deduction or withholding for, or account
of, any taxes now or hereinafter imposed by any taxing authority.
The
Borrower pay the Bank
a
Non-
Utilization
Fee
as
per the Applicable Margin, which Non-U
tilization
Fee
shall
be (A) calculated
on
the
basis of a year consisting of 360 days, (B) paid for the actual number of days
elapsed, and (C)
payable
quarterly in arrears on the last day of each March, June, September and
December, commencing on March 31, 2007, and on the Revolving Loan Maturity
Date.
Issued but undrawn Letters of Credit will count as utilization for the purposes
of calculating the Non-Utilization Fee.
2.5.
Letters
of Credit
.
Subject
to the terms and conditions of this Agreement and upon (i) the execution by
the
Borrower and the Bank of a Master Letter of Credit Agreement in form and
substance acceptable to the Bank (together with all amendments, modifications
and restatements thereof, the “Master Letter of Credit Agreement”), and (ii) the
execution and delivery by the Borrower, and the acceptance by the Bank, in
its
sole and absolute discretion, of a Letter of Credit Application, the Bank agrees
to issue for the account of the Borrower such Letters of Credit in the standard
form of the Bank and otherwise in form and substance acceptable to the Bank,
from time to time during the term of this Agreement, provided that the Letter
of
Credit Obligations may not at any time exceed the Letter of Credit Commitment
and provided further, that no Letter of Credit shall have an expiration date
later than the Letter of Credit Maturity Date. The amount of any payments made
by the Bank with respect to draws made by a beneficiary under a Letter of Credit
for which the Borrower has failed to reimburse the Bank upon the earlier of
(i)
the Bank’s demand for repayment, or (ii) five (5) days from the date of such
payment to such beneficiary by the Bank, shall be deemed to have been converted
to a Revolving Loan as of the date such payment was made by the Bank to such
beneficiary. Upon the occurrence of an Event of a Default and at the option
of
the Bank, all Letter of Credit Obligations shall be converted to Revolving
Loans
consisting of Base Rate Loans, all without demand, presentment, protest or
notice of any kind, all of which are hereby waived by the Borrower. To the
extent the provisions of the Master Letter of Credit Agreement differ from,
or
are inconsistent with, the terms of this Agreement, the provisions of this
Agreement shall govern. The Borrower shall pay the Bank a Letter of Credit
Fee
as per the Applicable Margin.
2.6.
Taxes
.
(a)
All
payments made by the Borrower under this Agreement shall be made free and clear
of, and without deduction or withholding for or on account of, any present
or
future income, stamp or other taxes, levies, imposts, duties, charges, fees,
deductions or withholdings, now or hereafter imposed, levied, collected,
withheld or assessed by any governmental authority, excluding net income taxes
and franchise taxes (imposed in lieu of net income taxes) imposed on the Bank
as
a result of a present or former connection between the Bank and the jurisdiction
of the governmental authority imposing such tax or any political subdivision
or
taxing authority thereof or therein (other than any such connection arising
solely from the Bank having executed, delivered or performed its obligations
or
received a payment under, or enforced, this Agreement or any other Loan
Document). If any such non-excluded taxes, levies, imposts, duties, charges,
fees, deductions or withholdings (collectively, “Non-Excluded Taxes”) or Other
Taxes are required to be withheld from any amounts payable to the Bank
hereunder, the amounts so payable to the Bank shall be increased to the extent
necessary to yield to the Bank (after payment of all Non-Excluded Taxes and
Other Taxes) interest or any such other amounts payable hereunder at the rates
or in the amounts specified in this Agreement, provided, however, that the
Borrower shall not be required to increase any such amounts payable to the
Bank
with respect to any Non-Excluded Taxes that are attributable to the Bank’s
failure to comply with the requirements of subsection 2.7(c).
(b)
The
Borrower shall pay any Other Taxes to the relevant governmental authority in
accordance with applicable law.
(c)
At
the
request of the Borrower and at the Borrower’s sole cost, the Bank shall take
reasonable steps to (i) contest its liability for any Non-Excluded Taxes or
Other Taxes that have not been paid, or (ii) seek a refund of any Non-Excluded
Taxes or Other Taxes that have been paid.
(d)
Whenever
any Non-Excluded Taxes or Other Taxes are payable by the Borrower, as promptly
as possible thereafter the Borrower shall send to the Bank a certified copy
of
an original official receipt received by the Borrower showing payment thereof.
If the Borrower fails to pay any Non-Excluded Taxes or Other Taxes when due
to
the appropriate taxing authority or fails to remit to the Bank the required
receipts or other required documentary evidence or if any governmental authority
seeks to collect a Non-Excluded Tax or Other Tax directly from the Bank for
any
other reason, the Borrower shall indemnify the Bank on an after-tax basis for
any incremental taxes, interest or penalties that may become payable by the
Bank.
(e)
The
agreements in this Section shall survive the satisfaction and payment of the
Obligations and the termination of this Agreement.
2.7.
All
Loans to Constitute Single Obligation
.
The
Loans shall constitute one general obligation of the Borrower, and shall be
secured by Bank’s priority security interest in and Lien upon all of the
Collateral and by all other security interests, Liens, claims and encumbrances
heretofore, now or at any time or times hereafter granted by the Borrower and/or
any Subsidiary to Bank.
Section
3.
CONDITIONS
OF BORROWING
.
Notwithstanding
any other provision of this Agreement, the Bank shall not be required to
disburse, make or continue all or any portion of the Loans, if any of the
following conditions shall have occurred.
3.1.
Loan
Documents
.
The
Borrower shall have failed to execute and deliver to the Bank any of the
following Loan Documents, all of which must be satisfactory to the Bank and
the
Bank’s counsel in form, substance and execution:
(a)
Loan
Agreement
.
Two
copies of this Agreement duly executed by the Borrower.
(b)
Revolving
Note
.
A
Revolving Note duly executed by the Borrower, in the form prepared by and
acceptable to the Bank.
(c)
Master
Letter of Credit Agreement
.
A
Master Letter of Credit Agreement prepared by and acceptable to the Bank, duly
executed by the Borrower in favor of the Bank.
(d)
Guaranties
.
Separate continuing unconditional joint and several Guaranties executed by
each
of the Guarantors to and for the benefit of the Bank.
(e)
Security
Agreements
.
Security Agreements executed by each of the Guarantors to and for the benefit
of
the Bank.
(f)
Collateral
Access Agreements
.
Collateral Access Agreements with respect to all properties with Stockdale
Investment Group, Inc. as the landlord and commercially reasonable efforts
to
deliver by Closing a Collateral Access Agreement with respect to the Borrower’s
chief executive offices.
(g)
UCC
Financing Statements
.
UCC
Financing Statements which grant to Bank, upon filing in the appropriate
locations, a first perfected security interest in the Collateral and UCC
Financing Statements which grant to Bank, upon filing in the appropriate
locations, a first perfected security interest in certain collateral, as
determined by the Bank, of the Guarantors.
(h)
Search
Results; Lien Terminations
.
Copies
of UCC search reports dated such a date as is reasonably acceptable to the
Bank,
listing all effective financing statements which name the Borrower and any
of
its Subsidiaries
under
their present names and any previous names, as debtors, together with (i) copies
of such financing statements, (ii) payoff letters evidencing repayment in full
of all existing Debt to be repaid with the Loans, the termination of all
agreements relating thereto and the release of all Liens granted in connection
therewith, with UCC or other appropriate termination statements and documents
effective to evidence the foregoing (other than Permitted Liens), (iii) such
other UCC termination statements as the Bank may reasonably request and (iv)
copies of tax lien and pending suit and judgment search
reports.
(i)
Organizational
and Authorization Document
.
Copies
of (i) the Articles of Incorporation and Bylaws
of
the
Borrower and each of its Subsidiaries; (ii) resolutions of the board of
directors
of
the
Borrower and each of its Subsidiaries approving and authorizing such Person’s
execution, delivery and performance of the Loan Documents to which it is party
and the transactions contemplated thereby; (iii) signature and incumbency
certificates of the officers of the Borrower and each of its Subsidiaries,
executing any of the Loan Documents, each of which the Borrower hereby certifies
to be true and complete, and in full force and effect without modification,
it
being understood that the Bank may conclusively rely on each such document
and
certificate until formally advised by the Borrower of any changes therein;
and
(iv) good standing certificates in the state of incorporation of the Borrower
and each of its Subsidiaries and in each other state requested by the
Bank.
(j)
Closing
Fee
.
The
Borrower shall have failed to pay to the Bank the Closing Fee in the amount
of
Seventy-Five Thousand
and
00/100 Dollars ($75,000.00) payable at Closing.
(k)
Insurance
.
Evidence satisfactory to the Bank of the existence of insurance required to
be
maintained pursuant to
Section
8.6
,
together with evidence that the Bank has been named as a lender’s loss payee on
all related insurance policies.
(l)
Opinion
of Counsel to the Borrower
.
An
opinion of counsel to the Borrower in form and substance acceptable to the
Bank.
(m)
Payoff
Letters
.
Payoff
letters to other lenders of Borrower in form and substance acceptable to the
Bank.
(n)
Additional
Documents
.
Such
other certificates, financial statements, schedules, resolutions, opinions
of
counsel, notes and other documents which are provided for hereunder or which
the
Bank shall require.
3.2.
Conditions
Subsequent
.
(a)
Pledge
Agreements
.
(i)
Born
Heaters Canada
.
Borrower shall use its best efforts to deliver as early as possible and in
no
event shall deliver no later than four months after the Closing, a Pledge
Agreement executed by Born Heaters Canada in form and substance acceptable
to
the Bank wherein Born Heaters Canada pledges its assets to the
Bank.
(ii)
Foreign
Subsidiaries
.
Borrower shall use its best efforts to deliver as early as possible and in
no
event shall deliver later than nine months after the Closing, Pledge Agreements
executed by the Borrower in form and substance acceptable to the Bank pledging
Sixty-Five Percent (65%) of its interest in its foreign Subsidiaries (excluding
ARB ARENDAL) to and for the benefit of the Bank.
(b)
Local
Counsel Opinion
.
Borrower shall use its best efforts to deliver as early as possible and in
no
event shall deliver no later than four months after the Closing, an opinion
of
local counsel to Born Heaters Canada in form and substance acceptable to the
Bank.
(c)
UCC
Termination Statements
.
Borrower shall deliver UCC Termination Statements in form and substance
acceptable to the Bank terminating security interests not permitted hereunder
in
the Collateral of the Borrower and in collateral of the Guarantors shall be
filed within four weeks of the execution of this Agreement.
(d)
Control
Agreements
.
Should
the Borrower fail to utilize the Bank as its primary bank of account and
depository as per
Section
8.20
hereof,
then the Borrower shall provide the Bank with Control Agreements with respect
to
accounts held at other financial institutions as soon as possible.
3.3.
Event
of Default
.
Any
Event of Default, or Unmatured Event of Default shall have occurred and be
continuing.
3.4.
Material
Adverse Effect
.
The
occurrence of any event having a Material Adverse Effect upon the
Borrower.
3.5.
Litigation
.
Any
litigation or governmental proceeding shall have been instituted against the
Borrower or any of its officers or shareholders having a Materially Adverse
Effect upon the Borrower.
3.6.
Representations
and Warranties
.
Any
representation or warranty of the Borrower contained herein or in any Loan
Document shall be untrue or incorrect as of the date of any Loan as though
made
on such date, except to the extent such representation or warranty expressly
relates to an earlier date.
Section
4.
NOTES
EVIDENCING LOANS
.
4.1
Revolving
Note
.
The
Revolving Loans shall be evidenced by the Revolving Note. At the time of the
initial disbursement of a Revolving Loan and at each time any additional
Revolving Loan shall be requested hereunder or a repayment made in whole or
in
part thereon, a notation thereof shall be made on the books and records of
the
Bank. All amounts recorded shall be, absent manifest error, conclusive and
binding evidence of (i) the principal amount of the Revolving Loans advanced
hereunder and the amount of all Letter of Credit Obligations, (ii) any accrued
and unpaid interest owing on the Revolving Loans, and (iii) all amounts repaid
on the Revolving Loans or the Letter of Credit Obligations. The failure to
record any such amount or any error in recording such amounts shall not,
however, limit or otherwise affect the obligations of the Borrower under the
Revolving Note to repay the principal amount of the Revolving Loans, together
with all interest accruing thereon.
Section
5.
MANNER
OF BORROWING
.
5.1.
Borrowing
Procedures
.
Each
Revolving Loan
may
be
advanced either as a Base Rate Loan or a LIBOR Loan. Each Loan shall be made
available to the Borrower upon any written, verbal, electronic, telephonic
or
telecopy loan request which the Bank in good faith believes to emanate from
a
properly authorized representative of the Borrower, whether or not that is
in
fact the case. Each such request shall be effective upon receipt by the Bank,
shall be irrevocable, and shall specify the date, amount and type of borrowing
and, in the case of a LIBOR Loan, the initial Interest Period therefor. The
Borrower shall select Interest Periods so as not to require a payment or
prepayment of any LIBOR Loan during an Interest Period for such LIBOR Loan.
The
final Interest Period must be such that its expiration occurs on or before
the
Revolving Loan Maturity Date
.
A
request for a Base Rate Loan must be received by the Bank no later than 12:00
p.m. Chicago, Illinois
time,
on
the day it is to be funded. A request for a LIBOR Loan must be (i) received
by
the Bank no later than 12:00 p.m. Chicago, Illinois time, three days before
the
day it is to be funded, and (ii) in an amount equal to One Hundred Thousand
and
00/100 Dollars ($100,000.00) or a higher integral multiple of One Hundred
Thousand and 00/100 Dollars ($100,000.00). The proceeds of each Loan shall
be
made available at the office of the Bank by credit to the account of the
Borrower or by other means requested by the Borrower and acceptable to the
Bank.
The Borrower does hereby irrevocably confirm, ratify and approve all such
advances by the Bank and does hereby indemnify the Bank against losses and
expenses (including court costs, attorneys’ and paralegals’ fees) and shall hold
the Bank harmless with respect thereto.
5.2.
LIBOR
Conversion and Continuation Procedures
.
Each
LIBOR Loan shall automatically renew for the Interest Period specified in the
initial request received by the Bank pursuant to Section 5.1, at the then
current LIBOR Rate unless the Borrower, pursuant to a subsequent written notice
received by the Bank, shall elect a different Interest Period or the conversion
of all or a portion of such LIBOR Loan to a Base Rate Loan
.
Each
Interest Period occurring after the initial Interest Period with respect to
any
LIBOR Loan shall commence on the same day of each applicable month as the first
day of the initial Interest Period. Whenever the last day of any Interest Period
with respect to any LIBOR Loan would otherwise occur on a day other than a
Business Day, the last day of such Interest Period shall be extended to occur
on
the next succeeding Business Day. Whenever an Interest Period with respect
to
any LIBOR Loan would otherwise end on a day of a month for which there is no
numerically corresponding day in the calendar month, such Interest Period shall
end on the last day of such calendar month, unless such day is not a Business
Day, in which event such Interest Period shall be extended to end on the next
Business Day.
Upon
receipt by the Bank of such subsequent notice, the Borrower may, subject to
the
terms and conditions of this Agreement, elect, as of the last day of the
applicable Interest Period, to continue any LIBOR Loan having an Interest Period
expiring on such day for a different Interest Period, or to convert any such
LIBOR Loan to a Base Rate Loan. Such notice shall, in the case of a conversion
to a Base Rate Loan, be given before 12:00 p.m., Chicago time, on the proposed
date of such conversion, and in the case of conversion to a LIBOR Loan having
a
different Interest Period, be given before 12:00 p.m., Chicago time, at least
three Business Days prior to the proposed date of such conversion, specifying:
(i) the proposed date of conversion; (ii) the aggregate amount of Loans to
be
converted; (iii) the type of Loans resulting from the proposed conversion;
and
(iv) the duration of the requested Interest Period. The Borrower may not elect
a
LIBOR Rate, and an Interest Period for a LIBOR Loan shall not automatically
renew, with respect to any principal amount which is scheduled to be repaid
before the last day of the applicable Interest Period, and any such amounts
shall bear interest at the Base Rate Rate
plus
Applicable Margin.
5.3.
Letters
of Credit
.
All
Letters of Credit shall bear such application, issuance, renewal, negotiation
and other fees and charges, and bear such interest as charged by the Bank or
otherwise payable pursuant to the Master Letter of Credit Agreement. In addition
to the foregoing, each standby Letters of Credit issued under and pursuant
to
this Agreement shall bear an annual issuance fee equal to the LIBOR spread
of
the Applicable Margin based on
the
face
amount of such standby Letter of Credit, payable by the Borrower prior to the
issuance by the Bank of such Letter of Credit and annually thereafter, until
(i)
such Letter of Credit has expired or has been returned to the Bank, or (ii)
the
Bank has paid the beneficiary thereunder the full face amount of such Letter
of
Credit.
5.4.
Automatic
Debit
.
In
order to effectuate the timely payment of any of the Obligations when due,
the
Borrower hereby authorizes and directs the Bank, at the Bank’s option, to (a)
debit the amount of the Obligations to any ordinary deposit account of the
Borrower, or (b) make a Revolving Loan hereunder to pay the amount of the
Obligations.
5.5.
Discretionary
Disbursements
.
The
Bank, in its sole and absolute discretion, may immediately upon notice to the
Borrower, disburse any or all proceeds of the Loans made or available to the
Borrower pursuant to this Agreement to pay any fees, costs, expenses or other
amounts required to be paid by the Borrower hereunder and not so paid. All
monies so disbursed shall be a part of the Obligations, payable by the Borrower
on demand from the Bank.
Section
6.
SECURITY
FOR THE OBLIGATIONS
.
6.1.
Security
for Obligations
.
As
security for the payment and performance of the Obligations, the Borrower does
hereby pledge, assign, transfer, deliver and grant to the Bank, for its own
benefit and as agent for its Affiliates, a continuing and unconditional first
priority security interest in and to any and all property of the Borrower,
of
any kind or description, tangible or intangible, wheresoever located and whether
now existing or hereafter arising or acquired, including the following (all
of
which property, along with the products and proceeds therefrom, are individually
and collectively referred to as the “Collateral”):
(a)
all
property of, or for the account of, the Borrower now or hereafter coming into
the possession, control or custody of, or in transit to, the Bank or any agent
or bailee for the Bank or any parent, Affiliate or Subsidiary of the Bank or
any
participant with the Bank in the Loans (whether for safekeeping, deposit,
collection, custody, pledge, transmission or otherwise), including all earnings,
dividends, interest, or other rights in connection therewith and the products
and proceeds therefrom, including the proceeds of insurance thereon;
and
(b)
the
additional property of the Borrower, whether now existing or hereafter arising
or acquired, and wherever now or hereafter located, together with all additions
and accessions thereto, substitutions, betterments and replacements therefor,
products and Proceeds therefrom, and all of the Borrower’s books and records and
recorded data relating thereto (regardless of the medium of recording or
storage), together with all of the Borrower’s right, title and interest in and
to all computer software required to utilize, create, maintain and process
any
such records or data on electronic media, identified and set forth as
follows:
|
|
(i)
|
All
Accounts and all Goods whose sale, lease or other disposition by
the
Borrower has given rise to Accounts and have been returned to, or
repossessed or stopped in transit by, the Borrower, or rejected or
refused
by an Account Debtor;
|
|
|
(ii)
|
All
Inventory, including raw materials, work-in-process and finished
goods;
|
|
|
(iii)
|
All
Goods (other than Inventory), including embedded software, Equipment
(excluding any Equipment subject to a Permitted Lien), and
furniture;
|
|
|
(v)
|
All
Software and computer programs;
|
|
|
(vi)
|
All
Securities, Investment Property, Financial Assets and Deposit
Accounts;
|
|
|
(vii)
|
All
Chattel Paper, Electronic Chattel Paper, Instruments, Documents,
Letter of
Credit Rights, all proceeds of letters of credit, Supporting Obligations,
notes secured by real estate, Commercial Tort Claims and General
Intangibles, including Payment Intangibles;
|
|
|
(viii)
|
All
Hedging Obligations;
|
|
|
(ix)
|
All
Proceeds (whether Cash Proceeds or Noncash Proceeds) of the foregoing
property, including all insurance policies and proceeds of insurance
payable by reason of loss or damage to the foregoing property, including
unearned premiums, and of eminent domain or condemnation awards;
and
|
provided,
however, that notwithstanding any of the other provisions set forth in this
Section 6,
this
Agreement shall not constitute a grant of a security interest in any property
to
the extent that such grant of a security interest is prohibited by an
requirements of any law, rule or regulation of a governmental authority;
provided, further, that in no event shall the Collateral include equity
securities in excess of shares or membership interest representing One Hundred
Percent (100%) of the nonvoting stock or membership interests and Sixty-Five
Percent (65%) of the total combined voting power of all classes of stock or
membership interests entitled to vote of any foreign Subsidiary (excluding
ARB
ARENDAL), if such action would result in adverse, incremental tax liabilities
under Section 956 of the Internal Revenue Code; provided, further, that the
Collateral shall not include (i) any rights or interest in any contract, lease,
permit, license, charter or license agreement entered into by Borrower prior
to
the date of this Agreement and covering personal property of the Borrower if
under the terms of such contract, lease, permit, license, charter or license
agreement, or applicable law with respect thereto, the valid grant of a security
interest or lien therein to the Bank is prohibited as a matter of law or under
the terms of such contract, lease, permit, license, charter or license agreement
and such prohibition has not been or is not waived or the consent of the other
party to such contract, lease, permit, license, charter or license agreement
has
not been or is not otherwise obtained, or (ii) any intent-to-use trademark
or
service mark application contained in General Intangibles if granting a security
interest would result in an assignment of such applications to the Bank upon
an
Event of Default that would be deemed to invalidate, void, cancel or abandon
such applications, provided that, the foregoing exclusion shall in no way be
construed (a) to apply if any described prohibition is unenforceable under
Section 9-406, 9-407 or 9-408 of the UCC or other applicable law, or (b) so
as
to limit, impair or otherwise affect the Bank’s continuing security interests in
and liens upon any rights or interests of Borrower in or to monies due or to
become due under any described contract, lease, permit, license, charter or
license agreement (including any Accounts), or (c) to limit, impair or otherwise
affect the Bank’s continuing security interests in and liens upon any rights or
interest of the Borrower in and to any proceeds from the sale, license, lease
or
other dispositions of any such contract, lease, permit, license, charter or
license agreement, or stock, or (d) to include any intent-to-use trademark
or
service mark applications at such time as the same include an amendment or
allege use or statement of use.
(c)
Sixty-Five Percent (65%) of the Borrower’s interest in its foreign Subsidiaries
(excluding ARB ARENDAL) and up to Sixty-Five Percent (65%) of its interest,
at
the Bank’s discretion, in each foreign Subsidiary which Borrower acquires after
the date of this Agreement.
6.2.
Other
Collateral
.
In
addition, the Obligations are also secured by the Pledge Agreements and, to
the
extent required by the Bank per
Section
8.20
and
Section
12.5(j)
hereof,
the Control Agreements.
6.3.
Possession
and Transfer of Collateral
.
Unless
an Event of Default exists hereunder, the Borrower shall be entitled to
possession or use of the Collateral (other than Instruments or Documents,
Tangible Chattel Paper, Investment Property consisting of certificated
securities and other Collateral required to be delivered to the Bank pursuant
to
this Section 6). The cancellation or surrender of any Note, upon payment or
otherwise, shall not affect the right of the Bank to retain the Collateral
for
any other of the Obligations. The Borrower shall not sell, assign (by operation
of law or otherwise), license, lease or otherwise dispose of, or grant any
option with respect to any of the Collateral, except that the Borrower may
sell
Inventory in the ordinary course of business and may sell property, plant and
Equipment in the ordinary course of business.
6.4.
Financing
Statements
.
The
Borrower shall, at the Bank’s request, at any time and from time to time,
execute and deliver to the Bank such financing statements, amendments and other
documents and do such acts as the Bank deems necessary in order to establish
and
maintain valid, attached and perfected first priority security interests in
the
Collateral in favor of the Bank, free and clear of all Liens and claims and
rights of third parties whatsoever, except Permitted Liens. The Borrower hereby
irrevocably authorizes the Bank at any time, and from time to time, to file
in
any jurisdiction any initial financing statements and amendments thereto without
the signature of the Borrower that (a) indicate the Collateral (i) is comprised
of all assets of the Borrower or words of similar effect, regardless of whether
any particular asset comprising a part of the Collateral falls within the scope
of Article 9 of the Uniform Commercial Code of the jurisdiction wherein such
financing statement or amendment is filed, or (ii) as being of an equal or
lesser scope or within greater detail as the grant of the security interest
set
forth herein, and (b) contain any other information required by Section 5 of
Article 9 of the Uniform Commercial Code of the jurisdiction wherein such
financing statement or amendment is filed regarding the sufficiency or filing
office acceptance of any financing statement or amendment, including (i) whether
the Borrower is an organization, the type of organization and any Organizational
Identification Number issued to the Borrower, and (ii) in the case of a
financing statement filed as a fixture filing or indicating Collateral as
as-extracted collateral or timber to be cut, a sufficient description of the
real property to which the Collateral relates. The Borrower hereby agrees that
a
photocopy or other reproduction of this Agreement is sufficient for filing
as a
financing statement and the Borrower authorizes the Bank to file this Agreement
as a financing statement in any jurisdiction. The Borrower agrees to furnish
any
such information to the Bank promptly upon request. The Borrower further
ratifies and affirms its authorization for any financing statements and/or
amendments thereto, executed and filed by the Bank in any jurisdiction prior
to
the date of this Agreement. In addition, the Borrower shall make appropriate
entries on its books and records disclosing the Bank’s security interests in the
Collateral.
6.5.
Additional
Collateral
.
The
Borrower shall deliver to the Bank immediately upon its demand, such other
collateral as the Bank may from time to time request, should the value of the
Collateral, in the Bank’s sole and absolute discretion, decline, deteriorate,
depreciate or become impaired, and does hereby grant to the Bank a continuing
security interest in such other collateral, which, when pledged, assigned and
transferred to the Bank shall be and become part of the Collateral. The Bank’s
security interests in all of the foregoing Collateral shall be valid, complete
and perfected whether or not covered by a specific assignment.
6.6.
Preservation
of the Collateral
.
The
Bank may, but is not required, to take such actions from time to time as the
Bank deems appropriate to maintain or protect the Collateral. The Bank shall
have exercised reasonable care in the custody and preservation of the Collateral
if the Bank takes such action as the Borrower shall reasonably request in
writing which is not inconsistent with the Bank’s status as a secured party, but
the failure of the Bank to comply with any such request shall not be deemed
a
failure to exercise reasonable care; provided, however, the Bank’s
responsibility for the safekeeping of the Collateral shall (i) be deemed
reasonable if such Collateral is accorded treatment substantially equal to
that
which the Bank accords its own property, and (ii) not extend to matters beyond
the control of the Bank, including acts of God, war, insurrection, riot or
governmental actions. In addition, any failure of the Bank to preserve or
protect any rights with respect to the Collateral against prior or third
parties, or to do any act with respect to preservation of the Collateral, not
so
requested by the Borrower, shall not be deemed a failure to exercise reasonable
care in the custody or preservation of the Collateral. The Borrower shall have
the sole responsibility for taking such action as may be necessary, from time
to
time, to preserve all rights of the Borrower and the Bank in the Collateral
against prior or third parties. Without limiting the generality of the
foregoing, where Collateral consists in whole or in part of securities, the
Borrower represents to, and covenants with, the Bank that the Borrower has
made
arrangements for keeping informed of changes or potential changes affecting
the
securities (including rights to convert or subscribe, payment of dividends,
reorganization or other exchanges, tender offers and voting rights), and the
Borrower agrees that the Bank shall have no responsibility or liability for
informing the Borrower of any such or other changes or potential changes or
for
taking any action or omitting to take any action with respect
thereto.
6.7.
Other
Actions as to any and all Collateral
.
The
Borrower further agrees to take any other action reasonably requested by the
Bank to ensure the attachment, perfection and first priority of, and the ability
of the Bank to enforce, the Bank’s security interest in any and all of the
Collateral, including (a) causing the Bank’s name to be noted as secured party
on any certificate of title for a titled good if such notation is a condition
to
attachment, perfection or priority of, or ability of the bank to enforce, the
Bank’s security interest in such Collateral, (b) complying with any provision of
any statute, regulation or treaty of the United States as to any Collateral
if
compliance with such provision is a condition to attachment, perfection or
priority of, or ability of the Bank to enforce, the Bank’s security interest in
such Collateral, (c) obtaining governmental and other third party consents
and
approvals, including any consent of any licensor, lessor or other Person
obligated on Collateral, (d) obtaining waivers from mortgagees and landlords
in
form and substance acceptable to the Bank, and (e) taking all actions required
by the UCC in effect from time to time or by other law, as applicable in any
relevant UCC jurisdiction, or by other law as applicable in any foreign
jurisdiction. The Borrower further agrees to indemnify and hold the Bank
harmless against claims of any Persons not a party to this Agreement concerning
disputes arising over the Collateral.
6.8.
Commercial
Tort Claims
.
If the
Borrower shall at any time hold or acquire a Commercial Tort Claim, the Borrower
shall immediately notify the Bank in writing signed by the Borrower of the
details thereof and grant to the Bank in such writing a security interest
therein and in the proceeds thereof, all upon the terms of this Agreement,
in
each case in form and substance acceptable to the Bank, and shall execute any
amendments hereto deemed reasonably necessary by the Bank to perfect its
security interest in such Commercial Tort Claim.
6.9.
Electronic
Chattel Paper and Transferable Records
.
If the
Borrower at any time holds or acquires an interest in any electronic chattel
paper or any “transferable record”, as that term is defined in Section 201 of
the federal Electronic Signatures in Global and National Commerce Act, or in
Section 16 of the Uniform Electronic Transactions Act as in effect in any
relevant jurisdiction, the Borrower shall promptly notify the Bank thereof
and,
at the request of the Bank, shall take such action as the Bank may reasonably
request to vest in the Bank control under Section 9-105 of the UCC of such
electronic chattel paper or control under Section 201 of the federal Electronic
Signatures in Global and National Commerce Act or, as the case may be, Section
16 of the Uniform Electronic Transactions Act, as so in effect in such
jurisdiction, of such transferable record. The Bank agrees with the Borrower
that the Bank will arrange, pursuant to procedures satisfactory to the Bank
and
so long as such procedures will not result in the Bank’s loss of control, for
the Borrower to make alterations to the electronic chattel paper or transferable
record permitted under Section 9-105 of the UCC or, as the case may be, Section
201 of the federal Electronic Signatures in Global and National Commerce Act
or
Section 16 of the Uniform Electronic Transactions Act for a party in control
to
make without loss of control.
Section
7.
REPRESENTATIONS
AND WARRANTIES
.
To
induce
the Bank to make the Loans, the Borrower makes the following representations
and
warranties to the Bank, each of which shall survive the execution and delivery
of this Agreement:
7.1.
Borrower
Organization and Name
.
The
Borrower is a corporation
duly
organized, existing and in good standing under the laws of the State of Nevada,
with full and adequate power to carry on and conduct its business as presently
conducted
and
each
Subsidiary is validly existing and in good standing under the laws of the
jurisdiction of its organization. The Borrower and each Subsidiary is duly
licensed or qualified in all foreign jurisdictions wherein the nature of its
activities require such qualification or licensing, except for such
jurisdictions where the failure to so qualify would not have a Material Adverse
Effect. The Borrower’s Organizational Identification Number is C28746-2003. The
exact legal name of the Borrower is as set forth in the first paragraph of
this
Agreement, and the Borrower currently does not conduct, nor has it during the
last five (5) years conducted, business under any other name or trade name
other
than ARB, Inc.
7.2.
Authorization
.
The
Borrower has full right, power and authority to enter into this Agreement,
to
make the borrowings and execute and deliver the Loan Documents as provided
herein and to perform all of its duties and obligations under this Agreement
and
the other Loan Documents. The execution and delivery of this Agreement and
the
other Loan Documents will not, nor will the observance or performance of any
of
the matters and things herein or therein set forth, violate or contravene any
provision of law or of the articles of incorporation or bylaws
of
the
Borrower. All necessary and appropriate action has been taken on the part of
the
Borrower to authorize the execution and delivery of this Agreement and the
Loan
Documents.
7.3.
Validity
and Binding Nature
.
This
Agreement and the other Loan Documents are the legal, valid and binding
obligations of the Borrower, enforceable against the Borrower in accordance
with
their terms, subject to bankruptcy, insolvency and similar laws affecting the
enforceability of creditors’ rights generally and to general principles of
equity.
7.4.
Consent;
Absence of Breach
.
The
execution, delivery and performance of this Agreement, the other Loan Documents
and any other documents or instruments to be executed and delivered by the
Borrower in connection with the Loans, and the borrowings by the Borrower
hereunder, do not and will not (a) require any consent, approval, authorization
of, or filings with, notice to or other act by or in respect of, any
governmental authority or any other Person (other than any consent or approval
which has been obtained and is in full force and effect); (b) conflict with
(i)
any provision of law or any applicable regulation, order, writ, injunction
or
decree of any court or governmental authority, (ii) the articles of
incorporation or bylaws
of
the
Borrower
or
any of
its Subsidiaries
,
or (iii)
any material agreement, indenture, instrument or other document, or any
judgment, order or decree, which is binding upon the Borrower or any of its
Subsidiaries or any of their respective properties or assets; or (c) require,
or
result in, the creation or imposition of any Lien on any asset of
Borrower
or
any of
its Subsidiaries, other than Liens in favor of the Bank created pursuant to
this
Agreement.
7.5.
Ownership
of Properties; Liens
.
The
Borrower is the sole owner of
all
of
its properties and assets, real and personal, tangible and intangible, of any
nature whatsoever (including patents, trademarks, trade names, service marks
and
copyrights), free and clear of all Liens, charges and claims (including
infringement claims with respect to patents, trademarks, service marks,
copyrights and the like), other than Permitted Liens.
7.6.
Equity
Ownership
.
All
issued and outstanding
Capital
Securities
of
the
Borrower and each of its Subsidiaries are duly authorized and validly issued,
fully paid, non-assessable, and free and clear of all Liens other than those
in
favor of the Bank, if any, and such securities were issued in compliance with
all applicable state and federal laws concerning the issuance of securities.
As
of the date hereof, except as set forth on
Schedule
7.6
hereto,
there are no pre-emptive or other outstanding rights, options, warrants,
conversion rights or other similar agreements or understandings for the purchase
or acquisition of any
Capital
Securities
of
the
Borrower and each of its Subsidiaries.
7.7.
Intellectual
Property
.
The
Borrower owns and possesses or has a license or other right to use all
Intellectual Property, as are necessary for the conduct of the businesses of
the
Borrower, without any infringement upon rights of others which could reasonably
be expected to have a Material Adverse Effect upon the Borrower, and no material
claim has been asserted and is pending by any Person challenging or questioning
the use of any Intellectual Property or the validity or effectiveness of any
Intellectual Property nor does the Borrower know of any valid basis for any
such
claim.
7.8.
Financial
Statements
.
All
financial statements submitted to the Bank have been prepared in accordance
with
sound accounting practices and GAAP on a basis, except as otherwise noted
therein, consistent with the previous fiscal year and present fairly the
financial condition of the Borrower and the results of the operations for the
Borrower as of such date and for the periods indicated. Since the date of the
most recent financial statement submitted by the Borrower to the Bank, there
has
been no change in the financial condition or in the assets or liabilities of
the
Borrower having a Material Adverse Effect on the Borrower.
7.9.
Litigation
and Other Liabilities
.
There
is no litigation, arbitration proceeding, demand, charge, claim, petition or
governmental investigation or proceeding pending, or threatened, against the
Borrower, which, if adversely determined, which might reasonably be expected
to
have a Material Adverse Effect upon the Borrower, except as set forth in
Schedule
7.9
.
Other
than any liability incident to such litigation or proceedings, the Borrower
has
no Material guarantee obligations, contingent liabilities, liabilities for
taxes, or any long-term leases or unusual forward or long-term commitments,
including any interest rate or foreign currency swap or exchange transaction
or
other obligation in respect of derivatives, that are not fully-reflected or
fully reserved for in the most recent audited financial statements delivered
pursuant to subsection 8.8(a) or fully-reflected or fully reserved for in the
most recent quarterly financial statements delivered pursuant to subsection
8.8(b) and not permitted by
Section
9.1
.
7.10.
Event
of Default
.
No
Event of Default or Unmatured Event of Default exists or would result from
the
incurrence by the Borrower of any of the Obligations hereunder or under any
of
the other Loan Document, and the Borrower is not in default (without regard
to
grace or cure periods) under any other contract or agreement to which it is
a
party
.
7.11.
Adverse
Circumstances
.
No
condition, circumstance, event, agreement, document, instrument, restriction,
litigation or proceeding (or threatened litigation or proceeding or basis
therefor) exists which (a) would have a Material Adverse Effect upon the
Borrower, or (b) would constitute an Event of Default or an Unmatured Event
of
Default.
7.12.
Environmental
Laws and Hazardous Substances
.
The
Borrower has not generated, used, stored, treated, transported, manufactured,
handled, produced or disposed of any Hazardous Substances, on or off any of
the
premises of the Borrower (whether or not owned by it) in any manner which at
any
time violates in any Material respect any Environmental Law or any license,
permit, certificate, approval or similar authorization thereunder. The Borrower
will comply in all Material respects with all Environmental Laws and will obtain
all Material licenses, permits certificates, approvals and similar
authorizations thereunder. To Borrower’s knowledge, there has been no
investigation, proceeding, complaint, order, directive, claim, citation or
notice by any governmental authority or any other Person, nor is any pending
or,
to the best of the Borrower’s knowledge, threatened, and the Borrower shall
immediately notify the Bank upon becoming aware of any such investigation,
proceeding, complaint, order, directive, claim, citation or notice, and shall
take prompt and appropriate actions to respond thereto, with respect to any
Material non-compliance with, or violation of, the requirements of any
Environmental Law by the Borrower or the release, spill or discharge, threatened
or actual, of any Hazardous Material or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Material or any other environmental, health or safety matter against the
Borrower or its business, operations or assets or, to the Borrower’s knowledge,
any properties at which the Borrower has transported, stored or disposed of
any
Hazardous Substances. The Borrower has no Material liability, contingent or
otherwise, in connection with a release, spill or discharge, threatened or
actual, of any Hazardous Substances or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Material. Upon reasonable prior notice from the Bank, the Borrower further
agrees to allow the Bank or its agent access to the properties of the Borrower
and its Subsidiaries to confirm compliance with all Environmental Laws, and
the
Borrower shall, following determination by the Bank that there is Material
non-compliance, or any condition which requires any action by or on behalf
of
the Borrower in order to avoid any Material non-compliance, with any
Environmental Law, at the Borrower’s sole expense, cause an independent
environmental engineer acceptable to the Bank to conduct such tests of the
relevant site as are appropriate, and prepare and deliver a report setting
forth
the result of such tests, a proposed plan for remediation and an estimate of
the
costs thereof.
7.13.
Solvency,
etc
.
As of
the date hereof, and immediately prior to and after giving effect to the
issuance of each Letter of Credit and each Loan hereunder and the use of the
proceeds thereof, (a) the fair value of the Borrower’s assets is greater than
the amount of its liabilities (including disputed, contingent and unliquidated
liabilities) as such value is established and liabilities evaluated as required
under the Section 548 of the Bankruptcy Code, (b) the present fair saleable
value of the Borrower’s assets is not less than the amount that will be required
to pay the probable liability on its debts as they become absolute and matured,
(c) the Borrower is able to realize upon its assets and pay its debts and other
liabilities (including disputed, contingent and unliquidated liabilities) as
they mature in the normal course of business, (d) the Borrower does not intend
to, and does not believe that it will, incur debts or liabilities beyond its
ability to pay as such debts and liabilities mature, and (e) the Borrower is
not
engaged in business or a transaction, and is not about to engage in business
or
a transaction, for which its property would constitute unreasonably small
capital.
7.14.
ERISA
Obligations
.
All
Employee Plans of the Borrower meet the minimum funding standards of Section
302
of ERISA and 412 of the Internal Revenue Code where applicable, and each such
Employee Plan that is intended to be qualified within the meaning of Section
401
of the Internal Revenue Code of 1986 is qualified. No withdrawal liability
has
been incurred under any such Employee Plans and no “Reportable Event” or
“Prohibited Transaction” (as such terms are defined in ERISA), has occurred with
respect to any such Employee Plans, unless approved by the appropriate
governmental agencies. The Borrower has promptly paid and discharged all
obligations and liabilities arising under the Employee Retirement Income
Security Act of 1974 (“ERISA”) of a character which if unpaid or unperformed
might result in the imposition of a Lien against any of its properties or
assets.
7.15.
Labor
Relations
.
Except
as could not reasonably be expected to have a Material Adverse Effect, (i)
there
are no strikes, lockouts or other labor disputes against the Borrower
or
threatened,
(ii) hours worked by and payment made to employees of the Borrower have not
been
in violation of the Fair Labor Standards Act or any other applicable law, and
(ii) no unfair labor practice complaint is pending against the Borrower or
threatened before any governmental authority.
7.16.
Security
Interest
.
This
Agreement creates a valid security interest in favor of the Bank in the
Collateral and, when properly perfected by filing in the appropriate
jurisdictions, or by possession or Control of such Collateral by the Bank or
delivery of such Collateral to the Bank, shall constitute a valid, perfected,
first-priority security interest in such Collateral.
7.17.
Lending
Relationship
.
The
relationship hereby created between the Borrower and the Bank is and has been
conducted on an open and arm’s length basis in which no fiduciary relationship
exists, and the Borrower has not relied and is not relying on any such fiduciary
relationship in executing this Agreement and in consummating the Loans. The
Bank
represents that it will receive any Note payable to its order as evidence of
a
bank loan.
7.18.
Business
Loan
.
The
Loans, including interest rate, fees and charges as contemplated hereby, (i)
are
business loans within the purview of 815 ILCS 205/4(1)(c), as amended from
time
to time, (ii) are an exempted transaction under the Truth In Lending Act, 12
U.S.C. 1601
et
seq
.,
as
amended from time to time, and (iii) do not, and when disbursed shall not,
violate the provisions of the Illinois usury laws, any consumer credit laws
or
the usury laws of any state which may have jurisdiction over this transaction,
the Borrower or any property securing the Loans.
7.19.
Taxes
.
The
Borrower has timely filed all Material tax returns and reports required by
law
to have been filed by it and has paid all Material taxes, governmental charges
and assessments due and payable with respect to such returns, except any such
taxes or charges which are being diligently contested in good faith by
appropriate proceedings and for which adequate reserves in accordance with
GAAP
shall have been set aside on its books, are insured against or bonded over
to
the satisfaction of the Bank and the contesting of such payment does not create
a Lien on the Collateral which is not a Permitted Lien. There is no controversy
or objection pending, or, threatened in respect of any tax returns of the
Borrower. The Borrower has made adequate reserves on its books and records
in
accordance with GAAP for all taxes that have accrued but which are not yet
due
and payable.
7.20.
Compliance
with Regulation U
.
No
portion of the proceeds of the Loans shall be used by the Borrower, or any
Affiliate of the Borrower, either directly or indirectly, for the purpose of
purchasing or carrying any margin stock, within the meaning of Regulation U
as
adopted by the Board of Governors of the Federal Reserve System or any successor
thereto.
7.21.
Governmental
Regulation
.
The
Borrower
,
its
Subsidiaries and any of the Guarantors are
not,
or
after giving effect to any loan, will not be, subject to regulation under the
Public Utility Holding Company Act of 1935, the Federal Power Act, the ICC
Termination Act of 1995 or the Investment Company Act of 1940 or to any federal
or state statute or regulation limiting its ability to incur indebtedness for
borrowed money.
7.22.
Bank
Accounts
.
Other
than as allowed pursuant to
Section
9.3(d)
hereof
and
Section
9.3(h)
hereof
and except for the bank accounts held at Union Bank for a period not longer
than
four months after the Closing, all Deposit Accounts and operating bank accounts
of the Borrower and its Subsidiaries are located at the Bank.
7.23.
Place
of Business
.
The
principal place of business and books and records of the Borrower is set forth
in the preamble to this Agreement and the other permanently occupied locations
where the Borrower and its Subsidiaries conduct business, other than at such
principal place of business, is as set forth on
Schedule
7.23
attached
hereto and made a part hereof, and the Borrower shall promptly notify the Bank
of any change in such locations. Upon reasonable request by the Bank, the
Borrower shall provide the Bank with a list of locations of
Collateral.
7.24.
Complete
Information
.
This
Agreement and all financial statements, schedules, certificates, confirmations,
agreements, contracts, and other materials and information heretofore or
contemporaneously herewith furnished in writing by the Borrower to the Bank
for
purposes of, or in connection with, this Agreement and the transactions
contemplated hereby is, and all written information hereafter furnished by
or on
behalf of the Borrower to the Bank pursuant hereto or in connection herewith
will be, true and accurate in every material respect on the date as of which
such information is dated or certified, and none of such information is or
will
be incomplete by omitting to state any material fact necessary to make such
information not misleading in light of the circumstances under which made (it
being recognized by the Bank that any projections and forecasts provided by
the
Borrower are based on good faith estimates and assumptions believed by the
Borrower to be reasonable as of the date of the applicable projections or
assumptions and that actual results during the period or periods covered by
any
such projections and forecasts may differ from projected or forecasted
results).
7.25.
Subordinated
Debt
.
The
subordination provisions of the Subordinated Debt are enforceable against the
holders of the Subordinated Debt by the Bank. The Obligations constitute Senior
Debt entitled to the benefits of the subordination provisions contained in
the
Subordinated Debt. The Borrower acknowledges that the Bank is entering into
this
Agreement and is making the Loans in reliance upon the subordination provisions
of the Subordinated Debt and this
Section
7.25
.
7.26.
Guarantors
.
Every
domestic Subsidiary of the Borrower is a Guarantor and has executed a Guaranty
in favor of the Bank.
7.27.
Ownership
of Foreign Subsidiaries
.
Subject
to
Section
7.28
hereof,
the Borrower is the holder of at least Sixty-Five Percent (65%) of the issued
and outstanding equity interests of its foreign Subsidiaries.
7.28.
Ownership
of ARB ARENDAL
.
The
Borrower is the holder of Forty-Nine Percent (49%) of the issued and outstanding
equity interests of ARB ARENDAL.
Section
8.
AFFIRMATIVE
COVENANTS
.
8.1.
Compliance
with Bank Regulatory Requirements; Increased Costs
.
If the
Bank shall reasonably determine that any Regulatory Change, or compliance by
the
Bank or any Person controlling the Bank with any request or directive (whether
or not having the force of law) of any governmental authority, central bank
or
comparable agency has or would have the effect of reducing the rate of return
on
the Bank’s or such controlling Person’s capital as a consequence of the Bank’s
obligations hereunder or under any Letter of Credit to a level below that which
the Bank or such controlling Person could have achieved but for such Regulatory
Change or compliance (taking into consideration the Bank’s or such controlling
Person’s policies with respect to capital adequacy) by an amount deemed by the
Bank or such controlling Person to be material or would otherwise reduce the
amount of any sum received or receivable by the Bank under this Agreement or
under any Note with respect thereto, then from time to time, upon demand by
the
Bank (which demand shall be accompanied by a statement setting forth the basis
for such demand and a calculation of the amount thereof in reasonable detail),
the Borrower shall pay directly to the Bank or such controlling Person such
additional amount as will compensate the Bank for such increased cost or such
reduction, so long as such amounts have accrued on or after the day which is
one
hundred eighty days (180) days prior to the date on which the Bank first made
demand therefor.
8.2.
Borrower
Existence
.
The
Borrower shall and shall cause each of its Subsidiaries to at all times (a)
preserve and maintain its existence and good standing in the jurisdiction of
its
organization, (b) preserve and maintain its qualification to do business and
good standing in each jurisdiction where the nature of its business makes such
qualification necessary (other than such jurisdictions in which the failure
to
be qualified or in good standing could not reasonably be expected to have a
Material Adverse Effect), and (c) continue as a going concern in the business
which the Borrower is presently conducting. If the Borrower does not have an
Organizational Identification Number and later obtains one, the Borrower shall
promptly notify the Bank of such Organizational Identification
Number.
8.3.
Compliance
With Laws
.
The
Borrower shall use the proceeds of the Loans for working capital and other
general corporate or business purposes not in contravention of any requirements
of law and not in violation of this Agreement, and shall comply, and cause
each
Subsidiary to comply, in all respects, including the conduct of its business
and
operations and the use of its properties and assets, with all applicable laws,
rules, regulations, decrees, orders, judgments, licenses and permits, except
where failure to comply could not reasonably be expected to have a Material
Adverse Effect. In addition, and without limiting the foregoing sentence, the
Borrower shall (a) ensure, and cause each Subsidiary to ensure, that no person
who owns a controlling interest in or otherwise controls the Borrower or any
Subsidiary is or shall be listed on the Specially Designated Nationals and
Blocked Person List or other similar lists maintained by the Office of Foreign
Assets Control (“OFAC”), the Department of the Treasury or included in any
Executive Orders, (b) not use or permit the use of the proceeds of the Loans
to
violate any of the foreign asset control regulations of OFAC or any enabling
statute or Executive Order relating thereto, and (c) comply, and cause each
Subsidiary to comply, with all applicable Bank Secrecy Act (“BSA”) laws and
regulations, as amended.
8.4.
Payment
of Taxes and Liabilities
.
The
Borrower shall pay, and cause each Subsidiary to pay, and discharge, prior
to
delinquency and before penalties accrue thereon, all Material property and
other
taxes, and all Material governmental charges or levies against it or any of
the
Collateral, as well as claims of any kind which, if unpaid, could become a
Lien
on any of its property; provided that the foregoing shall not require the
Borrower or any Subsidiary to pay any such tax or charge so long as it shall
contest the validity thereof in good faith by appropriate proceedings and shall
set aside on its books adequate reserves with respect thereto in accordance
with
GAAP and, in the case of a claim which could become a Lien on any of the
Collateral, such contest proceedings stay the foreclosure of such Lien or the
sale of any portion of the Collateral to satisfy such claim.
8.5.
Maintain
Property
.
The
Borrower shall and shall cause each of its Subsidiaries to at all times
maintain, preserve and keep its plant, properties and Equipment, including
any
Collateral, in good repair, working order and condition, normal wear and tear
excepted, and shall from time to time make all needful and proper repairs,
renewals, replacements, and additions thereto so that at all times the
efficiency thereof shall be fully preserved and maintained. The Borrower shall
permit the Bank to examine and inspect such plant, properties and Equipment,
including any Collateral, at all reasonable times subject to
Section
8.12
hereof.
8.6.
Maintain
Insurance
.
The
Borrower shall at all times maintain
,
and
cause
each Subsidiary to maintain
,
with
insurance companies reasonably acceptable to the Bank, such insurance coverage
as may be required by any law or governmental regulation or court decree or
order applicable to it and such other insurance as is customarily maintained
by
companies similarly situated. The Borrower shall furnish to the Bank a
certificate setting forth in reasonable detail the nature and extent of all
insurance maintained by the Borrower, which shall be reasonably acceptable
in
all respects to the Bank. The Borrower shall cause each issuer of an insurance
policy to provide the Bank with an endorsement (i) showing the Bank as lender’s
loss payee with respect to each policy of property or casualty insurance; and
(ii) providing that thirty (30) days notice will be given to the Bank prior
to
any cancellation of, material reduction or change in coverage provided by or
other material modification to such policy. The Borrower shall provide the
Bank
with an endorsement showing the Bank as lender’s loss payee on any business
interruption insurance policy maintained by the Borrower.
In
the
event the Borrower either fails to provide the Bank with evidence of the
insurance coverage required by this Section or at any time hereafter shall
fail
to obtain or maintain any of the policies of insurance required above, or to
pay
any premium in whole or in part relating thereto, then the Bank, without waiving
or releasing any obligation or default by the Borrower hereunder, may at any
time (but shall be under no obligation to so act), obtain and maintain such
policies of insurance and pay such premiums and take any other action with
respect thereto, which the Bank deems advisable. This insurance coverage (a)
may, but need not, protect the Borrower’s interests in such property, including
the Collateral, and (b) may not pay any claim made by, or against, the Borrower
in connection with such property, including the Collateral. The Borrower may
later cancel any such insurance purchased by the Bank, but only after providing
the Bank with evidence that the Borrower has obtained the insurance coverage
required by this Section. If the Bank purchases insurance for the Collateral,
the Borrower will be responsible for the costs of that insurance, including
interest and any other charges that may be imposed with the placement of the
insurance, until the effective date of the cancellation or expiration of the
insurance. The costs of the insurance may be added to the principal amount
of
the Loans owing hereunder. The costs of the insurance may be more than the
cost
of the insurance the Borrower may be able to obtain on its own.
8.7.
ERISA
Liabilities; Employee Plans
.
The
Borrower shall (i) keep in full force and effect any and all Employee Plans
which are presently in existence or may, from time to time, come into existence
under ERISA, and not withdraw from any such Employee Plans, unless such
withdrawal can be effected or such Employee Plans can be terminated without
liability to the Borrower; (ii) make contributions to all of such Employee
Plans
in a timely manner and in a sufficient amount to comply with the standards
of
ERISA; including the minimum funding standards of ERISA; (iii) comply with
all
material requirements of ERISA which relate to such Employee Plans; (iv) notify
the Bank immediately upon receipt by the Borrower of any notice concerning
the
imposition of any withdrawal liability or of the institution of any proceeding
or other action which may result in the termination of any such Employee Plans
or the appointment of a trustee to administer such Employee Plans; (v) promptly
advise the Bank of the occurrence of any “Reportable Event” or “Prohibited
Transaction” (as such terms are defined in ERISA), with respect to any such
Employee Plans; and (vi) amend any Employee Plan that is intended to be
qualified within the meaning of Section 401 of the Internal Revenue Code of
1986
to the extent necessary to keep the Employee Plan qualified, and to cause the
Employee Plan to be administered and operated in a manner that does not cause
the Employee Plan to lose its qualified status.
8.8.
Financial
Statements
.
The
Borrower shall at all times maintain a standard and modern system of accounting,
on the accrual basis of accounting and in all respects in accordance with GAAP,
and shall furnish to the Bank or its authorized representatives such information
regarding the business affairs, operations and financial condition of the
Borrower, including:
(a)
promptly
when available, and in any event, within one hundred twenty (120) days after
the
close of each of its fiscal years, a copy of (i) the annual audited consolidated
and consolidating financial statements of the Borrower and its Subsidiaries,
including balance sheet, statement of income and retained earnings, statement
of
cash flows for the fiscal year then ended, work in process reports, accounts
receivable agings, accounts payable agings (if available), summary of litigation
and claims, financial forecast and budget and updates thereto and such other
information (including nonfinancial information) as the Bank may request, in
reasonable detail, prepared and certified without adverse reference to going
concern value and without qualification by an independent auditor of recognized
standing, selected by the Borrower and reasonably acceptable to the
Bank
;
(b)
promptly
when available, and in any event, within forty-five (45) days following the
end
of each fiscal quarter, a copy of the management prepared consolidated and
consolidating financial statements of the Borrower and its Subsidiaries
regarding such fiscal quarter, including balance sheet, statement of income
and
retained earnings, statement of cash flows for the fiscal quarter then ended,
work in process reports, accounts receivable aging reports, summary of
litigation and claims and such other information (including nonfinancial
information) as the Bank may request, in reasonable detail, prepared and
certified as true and correct by the Borrower’s treasurer or chief financial
officer.
(c)
within
ten (10) days after the filing due date (as such date may be extended in
accordance with properly granted extensions) each year, a signed copy of the
complete income tax returns filed with the Internal Revenue Service by the
Borrower.
No
change
with respect to such accounting principles shall be made by the Borrower without
giving prior notification to the Bank. The Borrower represents and warrants
to
the Bank that the financial statements delivered to the Bank at or prior to
the
execution and delivery of this Agreement and to be delivered at all times
thereafter accurately reflect and will accurately reflect the financial
condition of the Borrower. The Bank shall have the right at all times during
business hours to inspect the books and records of the Borrower and make
extracts therefrom.
8.9.
Guarantor
Financial Statements
.
The
Borrower shall furnish, or cause to be furnished, to the Bank or its authorized
representatives such information regarding the business affairs, operations
and
financial condition of each Guarantor, including within ten (10) days after
the
filing due date (as such date may be extended in accordance with properly
granted extensions) each year, a signed copy of the complete income tax returns
filed with the Internal Revenue Service by the Borrower.
The
Borrower represents and warrants to the Bank that (i) each Guarantor shall
at
all times maintain a standard and modern system of accounting, on the accrual
basis of accounting and in all respects in accordance with GAAP, (ii) no change
with respect to such accounting principles shall be made by each Guarantor
without giving prior notification to the Bank, (iii) the financial statements
of
each Guarantor delivered to the Bank at or prior to the execution and delivery
of this Agreement and to be delivered at all times thereafter accurately reflect
and will fairly and accurately reflect the financial condition of each
Guarantor, (iv) the Bank shall have the right at all times during business
hours
to inspect the books and records of each Guarantor and make extracts therefrom,
and (v) the Borrower agrees to advise the Bank immediately of any development,
condition or event that may have a Material Adverse Effect on each
Guarantor.
8.10.
Supplemental
Financial Statements
.
The
Borrower shall immediately upon receipt thereof, provide to the Bank copies
of
interim and supplemental reports if any, submitted to the Borrower by
independent accountants in connection with any interim audit or review of the
books of the Borrower.
8.11.
Covenant
Compliance Certificate
.
The
Borrower shall, contemporaneously with the furnishing of the quarterly financial
statements pursuant to
Section
8.8(b)
,
deliver
to the Bank a duly completed compliance certificate, dated the date of such
financial statements and certified as true and correct by an appropriate officer
of the Borrower, containing a computation of each of the financial covenants
set
forth in
Section
10
and
stating that the Borrower has not become aware of any Event of Default or
Unmatured Event of Default that has occurred and is continuing or, if there
is
any such Event of Default or Unmatured Event of Default describing it and the
steps, if any, being taken to cure it.
8.12.
Field
Audits
.
The
Borrower shall permit the Bank to inspect the Inventory, other Tangible Assets
and/or other business operations of the Borrower and each Subsidiary, to perform
appraisals of the Equipment of the Borrower and each Subsidiary, and to inspect,
audit, check and make copies of, and extracts from, the books, records, computer
data, computer programs, journals, orders, receipts, correspondence and other
data relating to Inventory, Accounts and any other Collateral, the results
of
which must be satisfactory to the Bank in the Bank’s sole and absolute
discretion. All such inspections or audits by the Bank shall be at the
Borrower’s sole expense
,
provided,
however, that so long as no Event of Default or Unmatured Event of Default
exists, the Borrower shall not be required
to
reimburse the Bank for inspections or audits more frequently than once each
fiscal year.
8.13.
Other
Reports
.
The
Borrower shall, within such period of time as the Bank may specify, deliver
to
the Bank such other schedules and reports as the Bank may require.
8.14.
Collateral
Records
.
The
Borrower shall keep full and accurate books and records relating to the
Collateral and shall mark such books and records to indicate the Bank’s Lien in
the Collateral, including placing a legend, in form and content acceptable
to
the Bank, on all Chattel Paper created by the Borrower indicating that the
Bank
has a Lien in such Chattel Paper.
8.15.
Intellectual
Property
.
The
Borrower shall maintain, preserve and renew all Intellectual Property necessary
for the conduct of its business as and where the same is currently located
as
heretofore or as hereafter conducted by it.
8.16.
Notice
of Proceedings
.
The
Borrower, promptly upon becoming aware, shall give written notice to the Bank
of
any litigation, arbitration or governmental investigation or proceeding not
previously disclosed by the Borrower to the Bank which has been instituted
or,
to the knowledge of the Borrower, is threatened against the Borrower or any
of
its Subsidiaries or to which any of
their
respective properties is subject which might reasonably be expected to have
a
Material Adverse Effect.
8.17.
Notice
of Event of Default or Material Adverse Effect
.
The
Borrower shall, immediately after the commencement thereof, give notice to
the
Bank in writing of the occurrence of any Event of Default or any Unmatured
Event
of Default, or the occurrence of any condition or event having a Material
Adverse Effect.
8.18.
Environmental
Matters
.
If any
Material release or threatened release or other disposal of Hazardous Substances
shall occur or shall have occurred on any real property or any other assets
of
the Borrower or any of its Subsidiaries, the Borrower shall
,
or
shall
cause the applicable Subsidiary to
,
cause
the prompt containment and removal of such Hazardous Substances and the
remediation of such real property or other assets as necessary to comply in
all
Material respects with all Environmental Laws and to preserve the value of
such
real property or other assets. Without limiting the generality of the foregoing,
the Borrower shall
,
and
shall
cause each Subsidiary to
,
comply
in all Material respects with any Federal or state judicial or administrative
order requiring the performance at any real property of the Borrower or any
Subsidiary
of
activities in response to the release or threatened release of a Hazardous
Substance. To the extent that the transportation of Hazardous Substances is
permitted by this Agreement, the Borrower shall, and shall cause its
Subsidiaries to, dispose of such Hazardous Substances, or of any other wastes,
only at licensed disposal facilities operating in Material compliance with
Environmental Laws.
8.19.
Further
Assurances
.
The
Borrower shall take, and cause each Subsidiary to take, such actions as are
necessary or as the Bank may reasonably request from time to time to ensure
that
the Obligations under the Loan Documents are secured by substantially all of
the
assets of the Borrower
and
its
Subsidiaries, in each case as the Bank may determine, including (a) the
execution and delivery of security agreements, pledge agreements, mortgages,
deeds of trust, financing statements and other documents, and the filing or
recording of any of the foregoing, and (b) the delivery of certificated
securities and other collateral with respect to which perfection is obtained
by
possession.
8.20.
Banking
Relationship
.
Except
for payroll accounts, Cash Equivalent Investments permitted by
Section
9.3
hereof
and certain other accounts held at other banking institutions not to exceed
an
aggregate amount of Two Hundred Thousand and 00/100 Dollars ($200,000.00),
the
Borrower covenants and agrees that as of four months after the Closing it shall
utilize the Bank as its primary bank of account and depository for all financial
services, including all receipts, disbursements, cash management and related
services.
8.21.
Payroll
Accounts
.
The
Borrower covenants and agrees that it shall not keep funds on deposit in its
payroll account beyond what is necessary to fund one payroll period at a
time.
8.22.
Cash
Equivalent Investments
.
The
Borrower covenants and agrees that the first Five Million and 00/100 Dollars
($5,000,000.00) of Cash Equivalent Investments Borrower has shall be held at
the
Bank.
8.23.
Proceeds
of Asset Sales
.
Subject
to the restrictions for Permitted Liens, any proceeds from the sale of assets
must be paid to the Bank to reduce the outstanding Revolving Credit
Loan.
8.24.
Domestic
Subsidiaries
.
The
Borrower covenants and agrees that it shall cause any and each domestic
Subsidiary it acquires after the date of this Agreement to execute a Guaranty.
8.25.
Foreign
Subsidiaries
.
Subject
to
Section
3.2
hereof,
the Borrower covenants and agrees that it shall execute Pledge Agreements in
form and substance acceptable to the Bank pledging up to Sixty-Five Percent
(65%) of its interest to the Bank in its foreign subsidiaries (excluding ARB
ARENDAL) and further covenants and agrees that it shall execute a Pledge
Agreement in form and substance acceptable to the Bank, at the Bank’s
discretion, pledging up to Sixty-Five Percent (65%) of its interest to the
Bank
in each foreign Subsidiary it acquires after the date of this Agreement. Subject
to
Section
3.2
hereof,
Borrower further covenants and agrees that it shall cause Born Heaters Canada
to
execute a Pledge Agreement in form and substance acceptable to the Bank wherein
Born Heaters Canada pledges its assets to the Bank.
Section
9.
NEGATIVE
COVENANTS
.
9.1.
Debt
.
Except
as permitted by
Section
9.3
hereof,
the Borrower shall not, either directly or indirectly, create, assume, incur
or
have outstanding any Debt (including purchase money indebtedness), or become
liable, whether as endorser, guarantor, surety or otherwise, for any debt or
obligation of any other Person, except:
(a)
the
Obligations under this Agreement and the other Loan Documents;
(b)
obligations
pursuant to Permitted Liens;
(c)
obligations
of the Borrower for Taxes, assessments, municipal or other governmental
charges;
(d)
obligations
of the Borrower for accounts payable, other than for money borrowed, incurred
in
the ordinary course of business;
(e)
Hedging
Obligations incurred in favor of the Bank or an Affiliate thereof for bona
fide
hedging purposes and not for speculation;
(f)
Debt
described on
Schedule
9.1
and any
extension, renewal or refinancing thereof subject to the prior written approval
of the Bank;
(g)
other
unsecured Debt, in addition to the Debt listed above, in an aggregate amount
outstanding at any time not to exceed One Million and 00/100 Dollars
($1,000,000.00);
(h)
Debt
for
Capital Expenditures subject to the limitations set forth in
Section
10.4
hereof;
and
(i)
Subordinated
Debt in an amount outstanding at any time not to exceed Five Million and 00/100
Dollars ($5,000,000.00) on terms acceptable to the Bank.
9.2.
Encumbrances
.
Except
as set forth on
Schedule
9.2
hereof,
the Borrower shall not, either directly or indirectly, create, assume, incur
or
suffer or permit to exist any Lien or charge of any kind or character upon
any
asset of the Borrower, whether owned at the date hereof or hereafter acquired,
except for Permitted Liens.
9.3.
Investments
.
The
Borrower shall not, either directly or indirectly, make or have outstanding
any
Investment, except:
(a)
contributions
by the Borrower to the capital of any Subsidiary or Guarantor which has granted
a first perfected security interest in all of its assets in favor of the Bank,
or by any Subsidiary to the capital of any other domestic Wholly-Owned
Subsidiary;
(b)
Investments
constituting Debt permitted by
Section
9.1
;
(c)
Cash
Equivalent Investments with the first Five Million and 00/100 Dollars
($5,000,000.00) Borrower has to be held at the Bank;
(d)
Payroll
accounts and certain other accounts held at other banking institutions not
to
exceed an aggregate amount of Two Hundred Thousand and 00/100 Dollars
($200,000.00);
(e)
Investments
in securities of Account Debtors received pursuant to any plan of reorganization
or similar arrangement upon the bankruptcy or insolvency of such account
debtors;
(f)
Investments
in any Subsidiary, Affiliate or third party entity, which is not either (a)
Born
Heaters Canada or (b) a Guarantor, shall be limited to an aggregate amount
of
Twelve Million and 00/100 Dollars ($12,000,000.00) as reported on the balance
sheet of the Borrower. For purposes of this
Section
9.3(f)
,
Section
9.3(g
)
and
Section 9.3(h)
hereof,
investments shall include accounts receivable, loans, guarantees, letters of
credit or any contingent liability used to support obligations, equity
investments or advances;
(g)
Using
the
definition of investments set forth in
Section
9.3(f)
hereof,
investments in Born Heaters Canada (subject to the pledge of the assets of
Born
Heaters Canada to the Bank per
Section
3.2(a)(i)
hereof)
or any Guarantor.
(h)
Subject
to the aggregate limitations set forth in
Section
9.3(f)
hereof
and using the definition of investments set forth in
Section
9.3(f)
hereof,
investments in ARB ECUADOR shall be limited to Six Million and 00/100 Dollars
($6,000,000.00); investments, in ARB ARENDAL shall be limited to Eight Million
and 00/100 Dollars ($8,000,000.00); and investments in any new foreign entity
created after the Closing shall be limited to Five Million and 00/100 Dollars
($5,000,000.00);
(i)
Excess
Cash to be invested in instruments rated at least A-l by Standard & Poor’s
Ratings Services, a division of The McGraw-Hill Companies, Inc. or P-l by
Moody’s Investors Service, Inc.; and
(j)
Advances
and/or loans to employees or shareholders up to Five Hundred Thousand and 00/100
Dollars ($500,000.00).
provided,
however, that (i) any Investment which when made complies with the requirements
of the definition of the term “Cash Equivalent Investment” may continue to be
held notwithstanding that such Investment if made thereafter would not comply
with such requirements; and (ii) no Investment otherwise permitted by
subsections (b) or (c) shall be permitted to be made if, immediately before
or
after giving effect thereto, any Event of Default or Unmatured Event of Default
exists. If any Event of Default or Unmatured Event of Default exists, then
the
Borrower must return Excess Cash invested pursuant to
Section
9.3(i)
to the
Bank at the request of the Bank.
9.4.
Transfer;
Merger; Sales
.
Excluding the pledge of assets of Born Heaters Canada to the Bank of Montreal
for a period of no longer than four months after the Closing and excluding
the
pledge of certain assets to secure certain letters of credit issued on behalf
of
Born Heaters Canada to other banks, the Borrower shall not and not permit any
Subsidiary to without the prior written consent of the Bank, whether in one
transaction or a series of related transactions, (a) be a party to any merger
or
consolidation, or purchase or otherwise acquire all or substantially all of
the
assets or any Capital Securities of any class of, or any partnership or joint
venture interest in, any other Person, except for (i) any such merger,
consolidation, sale, transfer, conveyance, lease or assignment of or by any
Wholly-Owned Subsidiary into the Borrower or into any other domestic
Wholly-Owned Subsidiary; (ii) any such purchase or other acquisition by the
Borrower or any domestic Wholly-Owned Subsidiary of the assets or equity
interests of any Wholly-Owned Subsidiary, (b) except as permitted by
Section
6.3
hereof,
sell, transfer, convey or lease all or any substantial part of its assets or
Capital Securities (including the sale of Capital Securities of any Subsidiary),
except for sales of Inventory in the ordinary course of business, or (c) sell
or
assign, with or without recourse, any receivables.
9.5.
Issuance
of Capital Securities
.
The
Borrower shall not and shall not permit any Subsidiary to issue any Capital
Securities other than, so long as a Change of Control has not occurred, (a)
any
issuance of shares in the ordinary course of business, or (b) any issuance
of
shares of the Borrower’s common Capital Securities pursuant to any employee or
director option program, benefit plan or compensation program, or (c) any
issuance of Capital Securities by a Subsidiary to the Borrower or another
Subsidiary in accordance with
Section
9.6
.
9.6.
Distributions
.
So long
as no Event of Default or Unmatured Event of Default exists or would result
therefrom, the Borrower and any of its Subsidiaries may (a) make distributions
of dividends including stock dividends, whether in cash or otherwise, to any
of
its equityholders, (b) purchase or redeem any of its equity interests or any
warrants, options or other rights in respect thereof, (c) pay any management
fees or similar fees to any of its equityholders or any Affiliate thereof,
(d)
pay or prepay interest on, principal of, premium, if any, redemption,
conversion, exchange, purchase, retirement, defeasance, sinking fund or any
other payment in respect of any Subordinated Debt, or (e) set aside funds for
any of the foregoing.
9.7.
Transactions
with Affiliates
.
The
Borrower shall not, directly or indirectly, enter into or permit to exist any
transaction with any of its Affiliates or with any director, officer or employee
of the Borrower other than transactions in the ordinary course of, and pursuant
to the reasonable requirements of, the business of the Borrower and upon fair
and reasonable terms which are fully disclosed to the Bank and are no less
favorable to the Borrower than would be obtained in a comparable arm’s length
transaction with a Person that is not an Affiliate of the Borrower.
9.8.
Unconditional
Purchase Obligations
.
The
Borrower shall not and shall not permit any Subsidiary
to
enter
into or be a party to any contract for the purchase of materials, supplies
or
other property or services if such contract requires that payment be made by
it
regardless of whether delivery is ever made of such materials, supplies or
other
property or services.
9.9.
Cancellation
of Debt
.
The
Borrower shall not
,
and
not
permit any Subsidiary to, cancel any claim or debt owing to it, except for
reasonable consideration or in the ordinary course of business.
9.10.
Inconsistent
Agreements
.
The
Borrower shall not and shall not permit any Subsidiary to enter into any
agreement containing any provision which would (a) be violated or breached
by
any borrowing by the Borrower hereunder or by the performance by the Borrower
or
any Subsidiary of any of its Obligations hereunder or under any other Loan
Document, (b) prohibit the Borrower or any Subsidiary from granting to the
Bank
a Lien on any of its assets or (c) create or permit to exist or become effective
any encumbrance or restriction on the ability of any Subsidiary to (i) pay
dividends or make other distributions to the Borrower or any other Subsidiary,
or pay any Debt owed to the Borrower or any other Subsidiary, (ii) make loans
or
advances to the Borrower or any other Subsidiary, or (iii) transfer any of
its
assets or properties to the Borrower or any other Subsidiary, other than (A)
customary restrictions and conditions contained in agreements relating to the
sale of all or a substantial part of the assets of any Subsidiary pending such
sale, provided that such restrictions and conditions apply only to the
Subsidiary to be sold and such sale is permitted hereunder,
(B) restrictions or conditions imposed by any agreement relating to
purchase money Debt, Capital Leases and other secured Debt permitted by this
Agreement if such restrictions or conditions apply only to the property or
assets securing such Debt, and (C) customary provisions in leases and other
contracts restricting the assignment thereof.
9.11.
Use
of
Proceeds
.
Neither
the Borrower nor any of its Subsidiaries or Affiliates shall use any portion
of
the proceeds of the Loans, either directly or indirectly, for the purpose of
purchasing any securities underwritten by ABN AMRO Incorporated, LaSalle Bank
Financial Services, Inc., or any other Affiliate of the Bank.
9.12.
Business
Activities; Change of Legal Status and Organizational Documents
.
The
Borrower shall not and shall not permit any Subsidiary to (a) engage in any
line
of business other than the businesses engaged in on the date hereof and
businesses reasonably related thereto, (b) change its name, its Organizational
Identification Number, if it has one, its type of organization, its jurisdiction
of organization or other legal structure, or (b) permit its charter, bylaws
or
other organizational documents to be amended or modified in any way which could
reasonably be expected to materially adversely affect the interests of the
Bank.
9.13.
Domestic
Subsidiaries
.
Except
as permitted pursuant to Section 9.4, the Borrower shall not sell, liquidate
or
dissolve any domestic Subsidiary without the prior written consent of the
Bank.
9.14.
Foreign
Subsidiaries
.
Except
as
permitted pursuant to Section 9.4, the Borrower shall not sell, liquidate or
dissolve any foreign Subsidiary without the prior written consent of the Bank.
The Borrower shall not pledge any of its interest in its foreign Subsidiaries
to
any Person other than the Bank.
9.15.
Permitted
Liens
.
The
Borrower shall not incur any second lien against any Permitted
Lien.
Section
10.
FINANCIAL
COVENANTS
.
10.1.
Tangible
Net Worth
.
As of
the end of each of its fiscal quarters
,
the
Borrower shall maintain Tangible Net Worth in an amount not less than Thirty
Million and 00/100 Dollars ($30,000,000.00). The Tangible Net Worth shall be
reset annually commencing with the Fiscal Year ending December 31, 2007 to
increase by Twenty-Five Percent (25%) of the prior Fiscal Year’s Net Income.
Investments in any Subsidiary, Affiliate and third party entity, which is not
either (a) Born Heaters Canada or (b) a Guarantor, in excess of Ten Million
Dollars and 00/100 ($10,000,000.00) shall be deducted from Tangible Net
Worth.
10.2.
Total
Debt
to
Tangible Net Worth
.
As of
the end of each of its fiscal quarters, the Borrower shall maintain a ratio
of
Total Debt to
Tangible
Net Worth of not greater than 1.75 to 1.00.
10.3.
Debt
Service Coverage
.
On a
rolling four quarter basis, the Borrower shall maintain a ratio of (a) pre-tax
income from the Borrower’s operations for such period plus Interest Charges for
such period, plus the amount of noncash charges for Depreciation for such
period, to (b) Interest Charges for such period
plus
the
aggregate amount of principal payments on Debt for such period, of not less
than
1.25 to 1.00.
10.4.
Capital
Expenditure Limitations
.
The
Borrower shall not incur Capital Expenditures in an amount greater than Five
Million and 00/100 Dollars ($5,000,000.00) in the aggregate in any one Fiscal
Year. The Borrower shall be allowed to rollover up to One Million Five Hundred
Thousand and 00/100 Dollars ($1,500,000.00) of unused Capital Expenditure
limitations from the prior Fiscal Year into the following Fiscal Year provided
that Borrower shall not incur Capital Expenditures in excess of Six Million
Five
Hundred Thousand and 00/100 ($6,500,000.00) in any one Fiscal Year.
Notwithstanding the foregoing, the Borrower shall be permitted to incur
additional Capital Expenditures in excess of the permitted amount as set forth
herein for Fiscal Years 2007 and 2008 in the total amount of Three Million
and
00/100 Dollars ($3,000,000.00) for the purchase of specialized pipeline
equipment.
Section
11.
EVENTS
OF DEFAULT
.
The
Borrower, without notice or demand of any kind, shall be in default under this
Agreement upon the occurrence of any of the following events (each an “Event of
Default”).
11.1.
Nonpayment
of Obligations
.
Any
principal amount due and owing on any Note or any of the Obligations, whether
by
its terms or as otherwise provided herein, is not paid when due and any interest
due and owing on any Note is not paid within five days after it is
due.
11.2.
Misrepresentation
.
Any
oral or written warranty, representation, certificate or statement of any
Obligor in this Agreement, the other Loan Documents or any other agreement
with
the Bank shall be false when made or at any time thereafter, or if any financial
data or any other information now or hereafter furnished to the Bank by or
on
behalf of any Obligor shall prove to be false, inaccurate or misleading in
any
material respect.
11.3.
Nonperformance
.
Other
than default for nonpayment of Obligations as set forth in
Section
11.1
hereof,
any failure to perform or default in the performance of any covenant, condition
or agreement contained in this Agreement, or in the other Loan Documents or
any
other agreement with the Bank and such failure to perform or default in the
performance continues for 15 days.
11.4.
Default
under Loan Documents
.
Other
than default for nonpayment of Obligations as set forth in
Section
11.1
hereof,
a default under any of the other Loan Documents, all of which covenants,
conditions and agreements contained therein are hereby incorporated in this
Agreement by express reference, shall be and constitute an Event of Default
under this Agreement and any other of the Obligations and such default under
any
of the Loan Documents continues for 15 days.
11.5.
Default
under Other Debt
.
Any
default by any Obligor in the payment of any Debt in excess of Two Hundred
Fifty
Thousand and 00/100 Dollars ($250,000.00) for any other obligation beyond any
period of grace provided with respect thereto or in the performance of any
other
term, condition or covenant contained in any agreement (including any capital
or
operating lease or any agreement in connection with the deferred purchase price
of property) under which any such obligation is created, the effect of which
default is to cause or permit the holder of such obligation (or the other party
to such other agreement) to cause such obligation to become due prior to its
stated maturity or terminate such other agreement.
11.6.
Other
Material Obligations
.
Any
default in the payment when due, or in the performance or observance of, any
material obligation of, or condition agreed to by, any Obligor with respect
to
any material purchase or lease of goods or services where such default, singly
or in the aggregate with all other such defaults, might reasonably be expected
to have a Material Adverse Effect.
11.7.
Bankruptcy,
Insolvency, etc.
Any
Obligor becomes insolvent or generally fails to pay, or admits in writing its
inability or refusal to pay, debts as they become due; or any Obligor applies
for, consents to, or acquiesces in the appointment of a trustee, receiver or
other custodian for such Obligor or any property thereof, or makes a general
assignment for the benefit of creditors; or, in the absence of such application,
consent or acquiescence, a trustee, receiver or other custodian is appointed
for
any Obligor or for a substantial part of the property of any thereof and is
not
discharged within sixty (60) days; or any bankruptcy, reorganization, debt
arrangement, or other case or proceeding under any bankruptcy or insolvency
law,
or any dissolution or liquidation proceeding, is commenced in respect of any
Obligor, and if such case or proceeding is not commenced by such Obligor, it
is
consented to or acquiesced in by such Obligor, or remains undismissed for sixty
(60) days; or any Obligor takes any action to authorize, or in furtherance
of,
any of the foregoing.
11.8.
Judgments
.
The
entry of any final judgment, decree, levy, attachment, garnishment or other
process in excess of Two Hundred Fifty Thousand and 00/100 Dollars
($250,000.00), or the filing of any Lien in excess of Two Hundred Fifty Thousand
and 00/100 Dollars ($250,000.00) against any Obligor which is not fully covered
by insurance, and such judgment or other process shall not have been, within
thirty (30) days from the entry thereof, (i) bonded over to the satisfaction
of
the Bank and appealed, (ii) vacated, or (iii) discharged.
11.9.
Change
in Control
.
The
occurrence of any Change in Control.
11.10.
Collateral
Impairment
.
The
entry of any judgment, decree, levy, attachment, garnishment or other process,
or the filing of any Lien against, any Material portion of the Collateral or
any
Material portion of any other collateral under a separate security agreement
securing any of the Obligations and such judgment or other process shall not
have been, within thirty (30) days from the entry thereof, (i) bonded over
to
the satisfaction of the Bank and appealed, (ii) vacated, or (iii) discharged,
or
the loss, theft, destruction, seizure or forfeiture, or the occurrence of any
Material deterioration or impairment of any of the Collateral or any of the
collateral under any security agreement securing any of the Obligations, or
any
Material decline or depreciation in the value or market price thereof (whether
actual or reasonably anticipated), which causes the Collateral, in the sole
opinion of the Bank acting in good faith, to become unsatisfactory as to value
or character, or which causes the Bank to reasonably believe that it is insecure
and that the likelihood for repayment of the Obligations is or will soon be
impaired, time being of the essence. The cause of such deterioration,
impairment, decline or depreciation shall include, but is not limited to, the
failure by the Borrower to do any act deemed necessary by the Bank to preserve
and maintain the value and collectability of the Collateral.
11.11.
Material
Adverse Effect
.
The
occurrence of any development, condition or event which has a Material Adverse
Effect on the Borrower.
11.12.
Guaranty
.
There
is a discontinuance by any of the Guarantors of any of the Guaranties, or any
of
the Guarantors shall contest the validity of such Guaranty.
11.13.
Subordinated
Debt
.
The
subordination provisions of any Subordinated Debt shall for any reason be
revoked or invalid or otherwise cease to be in full force and effect. The
Borrower shall contest in any manner, or any other holder thereof shall contest
in any judicial proceeding, the validity or enforceability of the Subordinated
Debt or deny that it has any further liability or obligation thereunder, or
the
Obligations shall for any reason not have the priority contemplated by the
subordination provisions of the Subordinated Debt.
Section
12.
REMEDIES
.
Upon
the
occurrence of an Event of Default, the Bank shall have all rights, powers and
remedies set forth in the Loan Documents, in any written agreement or instrument
(other than this Agreement or the Loan Documents) relating to any of the
Obligations or any security therefor, as a secured party under the UCC or as
otherwise provided at law or in equity. Without limiting the generality of
the
foregoing, the Bank may, at its option upon the occurrence of an Event of
Default, declare its commitments to the Borrower to be terminated and all
Obligations to be immediately due and payable, provided, however, that upon
the
occurrence of an Event of Default under
Section
11.7
,
all
commitments of the Bank to the Borrower shall immediately terminate and all
Obligations shall be automatically due and payable, all without demand, notice
or further action of any kind required on the part of the Bank. The Borrower
hereby waives any and all presentment, demand, notice of dishonor, protest,
and
all other notices and demands in connection with the enforcement of Bank’s
rights under the Loan Documents, and hereby consents to, and waives notice
of
release, with or without consideration, of any of the Borrower or any of the
Guarantors or of any Collateral, notwithstanding anything contained herein
or in
the Loan Documents to the contrary. In addition to the foregoing:
12.1.
Possession
and Assembly of Collateral
.
The
Bank may, without notice, demand or legal process of any kind, take possession
of any or all of the Collateral (in addition to Collateral of which the Bank
already has possession), wherever it may be found, and for that purpose may
pursue the same wherever it may be found, and may at any time enter into any
of
the Borrower’s premises where any of the Collateral may be or is supposed to be,
and search for, take possession of, remove, keep and store any of the Collateral
until the same shall be sold or otherwise disposed of and the Bank shall have
the right to store and conduct a sale of the same in any of the Borrower’s
premises without cost to the Bank. At the Bank’s request, the Borrower will, at
the Borrower’s sole expense, assemble the Collateral and make it available to
the Bank at a place or places to be designated by the Bank which is reasonably
convenient to the Bank and the Borrower.
12.2.
Sale
of Collateral
.
The
Bank may sell any or all of the Collateral at public or private sale, upon
such
terms and conditions as the Bank may deem proper, and the Bank may purchase
any
or all of the Collateral at any such sale. The Borrower acknowledges that the
Bank may be unable to effect a public sale of all or any portion of the
Collateral because of certain legal and/or practical restrictions and provisions
which may be applicable to the Collateral and, therefore, may be compelled
to
resort to one or more private sales to a restricted group of offerees and
purchasers. The Borrower consents to any such private sale so made even though
at places and upon terms less favorable than if the Collateral were sold at
public sale. The Bank shall have no obligation to clean-up or otherwise prepare
the Collateral for sale. The Bank may apply the net proceeds, after deducting
all costs, expenses, attorneys’ and paralegals’ fees incurred or paid at any
time in the collection, protection and sale of the Collateral and the
Obligations, to the payment of any Note and/or any of the other Obligations,
returning the excess proceeds, if any, to the Borrower. The Borrower shall
remain liable for any amount remaining unpaid after such application, with
interest at the Default Rate. Any notification of intended disposition of the
Collateral required by law shall be conclusively deemed reasonably and properly
given if given by the Bank at least ten (10) calendar days before the date
of
such disposition. The Borrower hereby confirms, approves and ratifies all acts
and deeds of the Bank relating to the foregoing, and each part thereof, and
expressly waives any and all claims of any nature, kind or description which
it
has or may hereafter have against the Bank or its representatives, by reason
of
taking, selling or collecting any portion of the Collateral. The Borrower
consents to releases of the Collateral at any time (including prior to default)
and to sales of the Collateral in groups, parcels or portions, or as an
entirety, as the Bank shall deem appropriate. The Borrower expressly absolves
the Bank from any loss or decline in market value of any Collateral by reason
of
delay in the enforcement or assertion or nonenforcement of any rights or
remedies under this Agreement.
12.3.
Standards
for Exercising Remedies
.
To
the
extent that applicable law imposes duties on the Bank to exercise remedies
in a
commercially reasonable manner, the Borrower acknowledges and agrees that it
is
not commercially unreasonable for the Bank (a) to fail to incur expenses
reasonably deemed significant by the Bank to prepare Collateral for disposition
or otherwise to complete raw material or work-in-process into finished goods
or
other finished products for disposition, (b) to fail to obtain third party
consents for access to Collateral to be disposed of, or to obtain or, if not
required by other law, to fail to obtain governmental or third party consents
for the collection or disposition of Collateral to be collected or disposed
of,
(c) to fail to exercise collection remedies against Account Debtors or other
Persons obligated on Collateral or to remove liens or encumbrances on or any
adverse claims against Collateral, (d) to exercise collection remedies against
Account Debtors and other Persons obligated on Collateral directly or through
the use of collection agencies and other collection specialists, (e) to
advertise dispositions of Collateral through publications or media of general
circulation, whether or not the Collateral is of a specialized nature, (f)
to
contact other Persons, whether or not in the same business as the Borrower,
for
expressions of interest in acquiring all or any portion of the Collateral,
(g)
to hire one or more professional auctioneers to assist in the disposition of
Collateral, whether or not the collateral is of a specialized nature, (h) to
dispose of Collateral by utilizing internet sites that provide for the auction
of assets of the types included in the Collateral or that have the reasonable
capability of doing so, or that match buyers and sellers of assets, (i) to
dispose of assets in wholesale rather than retail markets, (j) to disclaim
disposition warranties, including any warranties of title, (k) to purchase
insurance or credit enhancements to insure the Bank against risks of loss,
collection or disposition of Collateral or to provide to the Bank a guaranteed
return from the collection or disposition of Collateral, or (l) to the extent
deemed appropriate by the Bank, to obtain the services of other brokers,
investment bankers, consultants and other professionals to assist the Bank
in
the collection or disposition of any of the Collateral. The Borrower
acknowledges that the purpose of this section is to provide non-exhaustive
indications of what actions or omissions by the Bank would not be commercially
unreasonable in the Bank’s exercise of remedies against the Collateral and that
other actions or omissions by the Bank shall not be deemed commercially
unreasonable solely on account of not being indicated in this section. Without
limitation upon the foregoing, nothing contained in this section shall be
construed to grant any rights to the Borrower or to impose any duties on the
Bank that would not have been granted or imposed by this Agreement or by
applicable law in the absence of this section.
12.4.
UCC
and Offset Rights
.
The
Bank may exercise, from time to time, any and all rights and remedies available
to it under the UCC or under any other applicable law in addition to, and not
in
lieu of, any rights and remedies expressly granted in this Agreement or in
any
other agreements between any Obligor and the Bank, and may, without demand
or
notice of any kind, appropriate and apply toward the payment of such of the
Obligations, whether matured or unmatured, including costs of collection and
attorneys’ and paralegals’ fees, and in such order of application as the Bank
may, from time to time, elect, any indebtedness of the Bank to any Obligor,
however created or arising, including balances, credits, deposits, accounts
or
moneys of such Obligor in the possession, control or custody of, or in transit
to the Bank. The Borrower, on behalf of itself and each Obligor, hereby waives
the benefit of any law that would otherwise restrict or limit the Bank in the
exercise of its right, which is hereby acknowledged, to appropriate at any
time
hereafter any such indebtedness owing from the Bank to any
Obligor.
12.5.
Additional
Remedies
.
The
Bank shall have the right and power to:
(a)
instruct
the Borrower, at its own expense, to notify any parties obligated on any of
the
Collateral, including any Account Debtors, to make payment directly to the
Bank
of any amounts due or to become due thereunder, or the Bank may directly notify
such obligors of the security interest of the Bank, and/or of the assignment
to
the Bank of the Collateral and direct such obligors to make payment to the
Bank
of any amounts due or to become due with respect thereto, and thereafter,
collect any such amounts due on the Collateral directly from such Persons
obligated thereon;
(b)
enforce
collection of any of the Collateral, including any Accounts, by suit or
otherwise, or make any compromise or settlement with respect to any of the
Collateral, or surrender, release or exchange all or any part thereof, or
compromise, extend or renew for any period (whether or not longer than the
original period) any indebtedness thereunder;
(c)
take
possession or control of any proceeds and products of any of the Collateral,
including the proceeds of insurance thereon;
(d)
extend,
renew or modify for one or more periods (whether or not longer than the original
period) any Note, any other of the Obligations, any obligation of any nature
of
any other obligor with respect to any Note or any of the
Obligations;
(e)
grant
releases, compromises or indulgences with respect to any Note, any of the
Obligations, any extension or renewal of any of the Obligations, any security
therefor, or to any other obligor with respect to any Note or any of the
Obligations;
(f)
transfer
the whole or any part of securities which may constitute Collateral into the
name of the Bank or the Bank’s nominee without disclosing, if the Bank so
desires, that such securities so transferred are subject to the security
interest of the Bank, and any corporation, association, or any of the managers
or trustees of any trust issuing any of such securities, or any transfer agent,
shall not be bound to inquire, in the event that the Bank or such nominee makes
any further transfer of such securities, or any portion thereof, as to whether
the Bank or such nominee has the right to make such further transfer, and shall
not be liable for transferring the same;
(g)
vote
the
Collateral;
(h)
make
an
election with respect to the Collateral under Section 1111 of the Bankruptcy
Code or take action under Section 364 or any other section of the Bankruptcy
Code; provided, however, that any such action of the Bank as set forth herein
shall not, in any manner whatsoever, impair or affect the liability of the
Borrower hereunder, nor prejudice, waive, nor be construed to impair, affect,
prejudice or waive the Bank’s rights and remedies at law, in equity or by
statute, nor release, discharge, nor be construed to release or discharge,
the
Borrower, any guarantor or other Person liable to the Bank for the Obligations;
(i)
at
any
time, and from time to time, accept additions to, releases, reductions,
exchanges or substitution of the Collateral, without in any way altering,
impairing, diminishing or affecting the provisions of this Agreement, the Loan
Documents, or any of the other Obligations, or the Bank’s rights hereunder,
under any Note or under any of the other Obligations; and
(j)
advise
the Borrower whether to deposit cash as necessary into the Borrower’s account at
the Bank or whether to execute, within ten business days of such Event of
Default or Unmatured Event of Default, Control Agreements(s) with respect to
Cash Equivalent Investments.
The
Borrower hereby ratifies and confirms whatever the Bank may do with respect
to
the Collateral and agrees that the Bank shall not be liable for any error of
judgment or mistakes of fact or law with respect to actions taken in connection
with the Collateral.
12.6.
Attorney-in-Fact
.
Upon
the occurrence and during the continuation of an Event of Default, the Borrower
hereby irrevocably makes, constitutes and appoints the Bank (and any officer
of
the Bank or any Person designated by the Bank for that purpose) as the
Borrower’s true and lawful proxy and attorney-in-fact (and agent-in-fact) in the
Borrower’s name, place and stead, with full power of substitution, to (i) take
such actions as are permitted in this Agreement, (ii) execute such financing
statements and other documents and to do such other acts as the Bank may require
to perfect and preserve the Bank’s security interest in, and to enforce such
interests in the Collateral, and (iii) carry out any remedy provided for in
this
Agreement, including endorsing the Borrower’s name to checks, drafts,
instruments and other items of payment, and proceeds of the Collateral,
executing change of address forms with the postmaster of the United States
Post
Office serving the address of the Borrower, changing the address of the Borrower
to that of the Bank, opening all envelopes addressed to the Borrower and
applying any payments contained therein to the Obligations. The Borrower hereby
acknowledges that the constitution and appointment of such proxy and
attorney-in-fact are coupled with an interest and are irrevocable. The Borrower
hereby ratifies and confirms all that such attorney-in-fact may do or cause
to
be done by virtue of any provision of this Agreement.
12.7.
No
Marshaling
.
The
Bank shall not be required to marshal any present or future collateral security
(including this Agreement and the Collateral) for, or other assurances of
payment of, the Obligations or any of them or to resort to such collateral
security or other assurances of payment in any particular order. To the extent
that it lawfully may, the Borrower hereby agrees that it will not invoke any
law
relating to the marshaling of collateral which might cause delay in or impede
the enforcement of the Bank’s rights under this Agreement or under any other
instrument creating or evidencing any of the Obligations or under which any
of
the Obligations is outstanding or by which any of the Obligations is secured
or
payment thereof is otherwise assured, and, to the extent that it lawfully may,
the Borrower hereby irrevocably waives the benefits of all such
laws.
12.8.
Application
of Proceeds
.
The
Bank will within three (3) Business Days after receipt of cash or solvent
credits from collection of items of payment, proceeds of Collateral or any
other
source, apply the whole or any part thereof against the Obligations secured
hereby. The Bank shall further have the exclusive right to determine how, when
and what application of such payments and such credits shall be made on the
Obligations, and such determination shall be conclusive upon the Borrower.
Any
proceeds of any disposition by the Bank of all or any part of the Collateral
may
be first applied by the Bank to the payment of expenses incurred by the Bank
in
connection with the Collateral, including attorneys’ fees and legal expenses as
provided for in
Section
13
hereof.
12.9.
No
Waiver
.
No
Event of Default shall be waived by the Bank except in writing. No failure
or
delay on the part of the Bank in exercising any right, power or remedy hereunder
shall operate as a waiver of the exercise of the same or any other right at
any
other time; nor shall any single or partial exercise of any such right, power
or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy hereunder. There shall be no obligation on the
part
of the Bank to exercise any remedy available to the Bank in any order. The
remedies provided for herein are cumulative and not exclusive of any remedies
provided at law or in equity. The Borrower agrees that in the event that the
Borrower fails to perform, observe or discharge any of its Obligations or
liabilities under this Agreement or any other agreements with the Bank, no
remedy of law will provide adequate relief to the Bank, and further agrees
that
the Bank shall be entitled to temporary and permanent injunctive relief in
any
such case without the necessity of proving actual damages.
12.10.
Letters
of Credit
.
With
respect to all Letters of Credit for which presentment for honor shall not
have
occurred at the time of an acceleration pursuant to this Section 12, the
Borrower shall at such time deposit in a cash collateral account opened by
the
Bank an amount equal to the Letter of Credit Obligations then outstanding.
Amounts held in such cash collateral account shall be applied by the Bank to
the
payment of drafts drawn under such Letters of Credit, and the unused portion
thereof after all such Letters of Credit shall have expired or been fully drawn
upon, if any, shall be applied to repay the Obligations, in such order of
application as the Bank may, in its sole discretion, from time to time elect.
After all such Letters of Credit shall have expired or been fully drawn upon,
all commitments to make Loans hereunder have terminated and all other
Obligations have been indefeasibly satisfied and paid in full in cash, the
balance, if any, in such cash collateral account shall be returned to the
Borrower or such other Person as may be lawfully entitled
thereto.
Section
13.
MISCELLANEOUS
.
13.1.
Obligations
Absolute
.
None of
the following shall affect the Obligations of the Borrower to the Bank under
this Agreement or the Bank’s rights with respect to the Collateral:
(a)
acceptance
or retention by the Bank of other property or any interest in property as
security for the Obligations;
(b)
release
by the Bank of any of the Borrower or the Guarantors or of all or any part
of
the Collateral or of any party liable with respect to the
Obligations;
(c)
release,
extension, renewal, modification or substitution by the Bank of any Note, or
any
note evidencing any of the Obligations, or the compromise of the liability
of
any of the Guarantors of the Obligations; or
(d)
failure
of the Bank to resort to any other security or to pursue the Borrower or any
other obligor liable for any of the Obligations before resorting to remedies
against the Collateral.
13.2.
Entire
Agreement
.
This
Agreement and the other Loan Documents (i) are valid, binding and enforceable
against the Borrower and the Bank in accordance with their respective provisions
and no conditions exist as to their legal effectiveness; (ii) constitute the
entire agreement between the parties with respect to the subject matter hereof
and thereof; and (iii) are the final expression of the intentions of the
Borrower and the Bank. No promises, either expressed or implied, exist between
the Borrower and the Bank, unless contained herein or therein. This Agreement,
together with the other Loan Documents, supersedes all negotiations,
representations, warranties, commitments, term sheets, discussions,
negotiations, offers or contracts (of any kind or nature, whether oral or
written) prior to or contemporaneous with the execution hereof with respect
to
any matter, directly or indirectly related to the terms of this Agreement and
the other Loan Documents. This Agreement and the other Loan Documents are the
result of negotiations among the Bank, the Borrower and the other parties
thereto, and have been reviewed (or have had the opportunity to be reviewed)
by
counsel to all such parties, and are the products of all parties. Accordingly,
this Agreement and the other Loan Documents shall not be construed more strictly
against the Bank merely because of the Bank’s involvement in their
preparation.
13.3.
Amendments;
Waivers
.
No
delay on the part of the Bank in the exercise of any right, power or remedy
shall operate as a waiver thereof, nor shall any single or partial exercise
by
the Bank of any right, power or remedy preclude other or further exercise
thereof, or the exercise of any other right, power or remedy. No amendment,
modification or waiver of, or consent with respect to, any provision of this
Agreement or the other Loan Documents shall in any event be effective unless
the
same shall be in writing and acknowledged by the Bank, and then any such
amendment, modification, waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
13.4.
WAIVER
OF DEFENSES
.
THE
BORROWER, ON BEHALF OF ITSELF AND ANY GUARANTOR OF ANY OF THE OBLIGATIONS,
WAIVES EVERY PRESENT AND FUTURE DEFENSE, CAUSE OF ACTION, COUNTERCLAIM OR SETOFF
WHICH THE BORROWER MAY NOW HAVE OR HEREAFTER MAY HAVE TO ANY ACTION BY THE
BANK
IN ENFORCING THIS AGREEMENT. PROVIDED THE BANK ACTS IN GOOD FAITH, THE BORROWER
RATIFIES AND CONFIRMS WHATEVER THE BANK MAY DO PURSUANT TO THE TERMS OF THIS
AGREEMENT. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE BANK GRANTING ANY
FINANCIAL ACCOMMODATION TO THE BORROWER.
13.5.
FORUM
SELECTION AND CONSENT TO JURISDICTION
.
ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT, SHALL BE BROUGHT AND MAINTAINED
EXCLUSIVELY IN THE COURTS OF THE STATE OF ILLINOIS OR IN THE UNITED STATES
DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS; PROVIDED THAT NOTHING
IN
THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE THE BANK FROM BRINGING
SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION. THE BORROWER HEREBY
EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE
STATE
OF ILLINOIS AND OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT
OF
ILLINOIS FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE. THE BORROWER
FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL,
POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF ILLINOIS.
THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE
AND
ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM.
13.6.
WAIVER
OF JURY TRIAL
.
THE
BANK AND THE BORROWER, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT
WITH COUNSEL, EACH KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE IRREVOCABLY,
ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND
ANY RIGHTS UNDER THIS AGREEMENT, ANY NOTE, ANY OTHER LOAN DOCUMENT, ANY OF
THE
OTHER OBLIGATIONS, THE COLLATERAL, OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR
AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION
HEREWITH OR THEREWITH OR ARISING FROM ANY LENDING RELATIONSHIP EXISTING IN
CONNECTION WITH ANY OF THE FOREGOING, OR ANY COURSE OF CONDUCT OR COURSE OF
DEALING IN WHICH THE BANK AND THE BORROWER ARE ADVERSE PARTIES, AND EACH AGREES
THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE
A JURY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE BANK GRANTING ANY
FINANCIAL ACCOMMODATION TO THE BORROWER.
13.7.
Assignability
.
The
Bank may at any time assign the Bank’s rights in this Agreement, the other Loan
Documents, the Obligations, or any part thereof and transfer the Bank’s rights
in any or all of the Collateral, and the Bank thereafter shall be relieved
from
all liability with respect to such Collateral; provided, however, that if an
Event of Default does not exist, the Bank shall not make such assignment without
the prior written consent of the Borrower. In addition, the Bank may at any
time
sell one or more participations in the Loans. The Borrower may not sell or
assign this Agreement, or any other agreement with the Bank or any portion
thereof, either voluntarily or by operation of law, without the prior written
consent of the Bank. This Agreement shall be binding upon the Bank and the
Borrower and their respective legal representatives and successors. All
references herein to the Borrower shall be deemed to include any successors,
whether immediate or remote. In the case of a joint venture or partnership,
the
term “Borrower” shall be deemed to include all joint venturers or partners
thereof, who shall be jointly and severally liable hereunder.
13.8.
Confirmations
.
The
Borrower and the Bank agree from time to time, upon written request received
by
it from the other, to confirm to the other in writing the aggregate unpaid
principal amount of the Loans then outstanding under such Note.
13.9.
Confidentiality
.
The
Bank agrees to use commercially reasonable efforts (equivalent to the efforts
the Bank applies to maintain the confidentiality of its own confidential
information) to maintain as confidential all information provided to it by
the
Borrower, including all information designated as confidential, except that
the
Bank may disclose such information (a) to Persons employed or engaged by the
Bank in evaluating, approving, structuring or administering the Loans; (b)
to
any assignee or participant or potential assignee or participant that has agreed
to comply with the covenant contained in this
Section
13.9
(and any
such assignee or participant or potential assignee or participant may disclose
such information to Persons employed or engaged by them as described in clause
(a) above); (c) as required or requested by any federal or state regulatory
authority or examiner, or any insurance industry association, or as reasonably
believed by the Bank to be compelled by any court decree, subpoena or legal
or
administrative order or process; (d) as, on the advice of the Bank’s counsel, is
required by law; (e) in connection with the exercise of any right or remedy
under the Loan Documents or in connection with any litigation to which the
Bank
is a party; (f) to any nationally recognized rating agency that requires access
to information about the Bank’s investment portfolio in connection with ratings
issued with respect to the Bank; (g) to any Affiliate of the Bank who may
provide Bank Products to the Borrower or any Subsidiary, or (h) that ceases
to
be confidential through no fault of the Bank.
13.10.
Binding
Effect
.
This
Agreement shall become effective upon execution by the Borrower and the Bank.
If
this Agreement is not dated or contains any blanks when executed by the
Borrower, the Bank is hereby authorized, without notice to the Borrower, to
date
this Agreement as of the date when it was executed by the Borrower, and to
complete any such blanks according to the terms upon which this Agreement is
executed.
13.11.
Governing
Law
.
This
Agreement, the Loan Documents and any Note shall be delivered and accepted
in
and shall be deemed to be contracts made under and governed by the internal
laws
of the State of Illinois (but giving effect to federal laws applicable to
national banks) applicable to contracts made and to be performed entirely within
such state, without regard to conflict of laws principles.
13.12.
Enforceability
.
Wherever possible, each provision of this Agreement shall be interpreted in
such
manner as to be effective and valid under applicable law, but if any provision
of this Agreement shall be prohibited by, unenforceable or invalid under any
jurisdiction, such provision shall as to such jurisdiction, be severable and
be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other
jurisdiction.
13.13.
Survival
of Borrower Representations
.
All
covenants, agreements, representations and warranties made by the Borrower
herein shall, notwithstanding any investigation by the Bank, be deemed material
and relied upon by the Bank and shall survive the making and execution of this
Agreement and the Loan Documents and the issuance of any Note, and shall be
deemed to be continuing representations and warranties until such time as the
Borrower has fulfilled all of its Obligations to the Bank, and the Bank has
been
indefeasibly paid in full in cash. The Bank, in extending financial
accommodations to the Borrower, is expressly acting and relying on the aforesaid
representations and warranties.
13.14.
Extensions
of Bank’s Commitment
.
This
Agreement shall secure and govern the terms of (i) any extensions or renewals
of
the Bank’s commitment hereunder, and (ii) any replacement note executed by the
Borrower and accepted by the Bank in its sole and absolute discretion in
substitution for any Note.
13.15.
Time
of Essence
.
Time is
of the essence in making payments of all amounts due the Bank under this
Agreement and in the performance and observance by the Borrower of each
covenant, agreement, provision and term of this Agreement.
13.16.
Counterparts;
Facsimile Signatures
.
This
Agreement may be executed in any number of counterparts and by the different
parties hereto on separate counterparts and each such counterpart shall be
deemed to be an original, but all such counterparts shall together constitute
but one and the same Agreement. Receipt of an executed signature page to this
Agreement by facsimile or other electronic transmission shall constitute
effective delivery thereof. Electronic records of executed Loan Documents
maintained by the Bank shall deemed to be originals thereof.
13.17.
Notices
.
Except
as otherwise provided herein, the Borrower waives all notices and demands in
connection with the enforcement of the Bank’s rights hereunder. All notices,
requests, demands and other communications provided for hereunder shall be
in
writing and addressed as follows:
|
To
the Borrower:
|
Primoris
Corporation
26000
Commercentre Drive
Lake
Forest, California 92630
Attention:
John P. Schauerman
John
M. Perisich, Esq.
|
|
|
|
|
With
a copy to:
|
Paul,
Hastings, Janofsky & Walker LLP
695
Town Center Drive
Seventeenth
Floor
Costa
Mesa, California 92626
Attention:
Douglas A. Schaaf, Esq.
|
|
|
|
|
To
the Bank:
|
LaSalle
Bank National Association
135
South LaSalle Street
Chicago,
Illinois 60603
Attention:
Steve Trepiccione
Construction
and Engineering Division
|
|
|
|
|
With
copy to:
|
O’Keefe
Lyons & Hynes, LLC
30
North LaSalle Street, Suite 4100
Chicago,
Illinois 60602
Attention:
James E. Carroll
,
Esq.
|
or,
as to
each party, at such other address as shall be designated by such party in a
written notice to each other party complying as to delivery with the terms
of
this subsection. All notices addressed as above shall be deemed to have been
properly given (i) if served in person, upon acceptance or refusal of delivery;
(ii) if mailed by certified or registered mail, return receipt requested,
postage prepaid, on the third (3rd) day following the day such notice is
deposited in any post office station or letter box; or (iii) if sent by
recognized overnight courier, on the first (1st) day following the day such
notice is delivered to such carrier. No notice to or demand on the Borrower
in
any case shall entitle the Borrower to any other or further notice or demand
in
similar or other circumstances.
13.18.
Release
of Claims Against Bank
.
In
consideration of the Bank making the Loans, the Borrower and all other Obligors
do each hereby release and discharge the Bank of and from any and all claims,
harm, injury, and damage of any and every kind, known or unknown, legal or
equitable, which any Obligor may have against the Bank from the date of their
respective first contact with the Bank until the date of this Loan Agreement,
including any claim arising from any reports (environmental reports, surveys,
appraisals, etc.) prepared by any parties hired or recommended by the Bank.
The
Borrower and all other Obligors confirm to Bank that they have reviewed the
effect of this release with competent legal counsel of their choice, or have
been afforded the opportunity to do so, prior to execution of this Agreement
and
the Loan Documents and do each acknowledge and agree that the Bank is relying
upon this release in extending the Loans to the Borrower.
13.19.
Costs,
Fees and Expenses
.
The
Borrower shall pay or reimburse the Bank for all reasonable costs, fees and
expenses incurred by the Bank or for which the Bank becomes obligated in
connection with the negotiation, preparation, consummation, collection of the
Obligations or enforcement of this Agreement, the other Loan Documents and
all
other documents provided for herein or delivered or to be delivered hereunder
or
in connection herewith (including any amendment, supplement or waiver to any
Loan Document),
or
during
any workout, restructuring or negotiations in respect thereof, including
reasonable consultants’ fees and attorneys’ fees and time charges of counsel to
the Bank, which shall also include attorneys’ fees and time charges of attorneys
who may be employees of the Bank or any Affiliate of the Bank, plus costs and
expenses of such attorneys or of the Bank; search fees, costs and expenses;
and
all taxes payable in connection with this Agreement or the other Loan Documents,
whether or not the transaction contemplated hereby shall be consummated. In
furtherance of the foregoing, the Borrower shall pay any and all stamp and
other
taxes, UCC search fees, filing fees and other costs and expenses in connection
with the execution and delivery of this Agreement, any Note and the other Loan
Documents to be delivered hereunder, and agrees to save and hold the Bank
harmless from and against any and all liabilities with respect to or resulting
from any delay in paying or omission to pay such costs and expenses. That
portion of the Obligations consisting of costs, expenses or advances to be
reimbursed by the Borrower to the Bank pursuant to this Agreement or the other
Loan Documents which are not paid on or prior to the date hereof shall be
payable by the Borrower to the Bank on demand. If at any time or times hereafter
the Bank: (a) employs counsel for advice or other representation
(i) with respect to this Agreement or the other Loan Documents,
(ii) to represent the Bank in any litigation, contest, dispute, suit or
proceeding or to commence, defend, or intervene or to take any other action
in
or with respect to any litigation, contest, dispute, suit, or proceeding
(whether instituted by the Bank, the Borrower, or any other Person) in any
way
or respect relating to this Agreement, the other Loan Documents or the
Borrower’s business or affairs, or (iii) to enforce any rights of the Bank
against the Borrower or any other Person that may be obligated to the Bank
by
virtue of this Agreement or the other Loan Documents; (b) takes any action
to protect, collect, sell, liquidate, or otherwise dispose of any of the
Collateral; and/or (c) attempts to or enforces any of the Bank’s rights or
remedies under the Agreement or the other Loan Documents, the costs and expenses
incurred by the Bank in any manner or way with respect to the foregoing, shall
be part of the Obligations, payable by the Borrower to the Bank on
demand.
13.20.
Indemnification
.
The
Borrower agrees to defend (with counsel satisfactory to the Bank), protect,
indemnify, exonerate and hold harmless each Indemnified Party from and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, expenses and distributions of any kind or
nature (including the disbursements and the reasonable fees of counsel for
each
Indemnified Party thereto, which shall also include, without limitation,
reasonable attorneys’ fees and time charges of attorneys who may be employees of
any Indemnified Party), which may be imposed on, incurred by, or asserted
against, any Indemnified Party (whether direct, indirect or consequential and
whether based on any federal, state or local laws or regulations, including
securities laws, Environmental Laws, commercial laws and regulations, under
common law or in equity, or based on contract or otherwise) in any manner
relating to or arising out of this Agreement or any of the Loan Documents,
or
any act, event or transaction related or attendant thereto, the preparation,
execution and delivery of this Agreement and the Loan Documents, including
the
making or issuance and management of the Loans, the use or intended use of
the
proceeds of the Loans, the enforcement of the Bank’s rights and remedies under
this Agreement, the Loan Documents, any Note, any other instruments and
documents delivered hereunder, or under any other agreement between the Borrower
and the Bank; provided, however, that the Borrower shall not have any
obligations hereunder to any Indemnified Party with respect to matters
determined by a court of competent jurisdiction by final and nonappealable
judgment to have been
caused
by
or resulting from the willful misconduct or gross negligence of such Indemnified
Party. To the extent that the undertaking to indemnify set forth in the
preceding sentence may be unenforceable because it violates any law or public
policy, the Borrower shall satisfy such undertaking to the maximum extent
permitted by applicable law. Any liability, obligation, loss, damage, penalty,
cost or expense covered by this indemnity shall be paid to each Indemnified
Party on demand, and failing prompt payment, together with interest thereon
at
the Default Rate from the date incurred by each Indemnified Party until paid
by
the Borrower, shall be added to the Obligations of the Borrower and be secured
by the Collateral. The provisions of this Section shall survive the satisfaction
and payment of the other Obligations and the termination of this
Agreement.
13.21.
Revival
and Reinstatement of Obligations
.
If the
incurrence or payment of the Obligations by any Obligor or the transfer to
the
Bank of any property should for any reason subsequently be declared to be void
or voidable under any state or federal law relating to creditors’ rights,
including provisions of the Bankruptcy Code relating to fraudulent conveyances,
preferences, or other voidable or recoverable payments of money or transfers
of
property (collectively, a “Voidable Transfer”), and if the Bank is required to
repay or restore, in whole or in part, any such Voidable Transfer, or elects
to
do so upon the reasonable advice of its counsel, then, as to any such Voidable
Transfer, or the amount thereof that the Bank is required or elects to repay
or
restore, and as to all reasonable costs, expenses, and attorneys fees of the
Bank, the Obligations shall automatically shall be revived, reinstated, and
restored and shall exist as though such Voidable Transfer had never been
made.
13.22.
Customer
Identification - USA Patriot Act Notice
.
The
Bank hereby notifies the Borrower that pursuant to the requirements of the
USA
Patriot Act (Title III of Pub. L. 107-56, signed into law October 26, 2001)
(the
“Act”), and the Bank’s policies and practices, the Bank is required to obtain,
verify and record certain information and documentation that identifies the
Borrower, which information includes the name and address of the Borrower and
such other information that will allow the Bank to identify the Borrower in
accordance with the Act.
IN
WITNESS WHEREOF, the Borrower and the Bank have executed this Loan and Security
Agreement as of the date first above written.
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PRIMORIS
CORPORATION
,
a
Nevada corporation
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By:
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/s/ John
Schauerman
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Name:
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John
Schauerman
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Title:
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SVP
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Agreed
and accepted:
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LASALLE
BANK NATIONAL ASSOCIATION
,
a
national banking association
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By:
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/s/ Steve
Trepiccione
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Name:
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Steve
Trepiccione
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Title:
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Senior
Vice President
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Exhibit
10.24
FIRST
AMENDMENT TO LOAN AND SECURITY AGREEMENT
Reference
is made to that certain Loan and Security Agreement dated as of March 22,
2007 (the “Loan and Security Agreement”) between the undersigned Primoris
Corporation (the “Borrower”) and LaSalle Bank National Association (the “Bank”).
All capitalized terms used herein without definition shall have the same
meanings herein as those terms have in the Loan and Security Agreement. The
Borrower and Bank hereby amend the Loan and Security Agreement as set forth
below.
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1.
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The
definition of “Pledge Agreements” in Section 1.1 of the Loan and Security
Agreement is hereby deleted in its
entirety.
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2.
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Section
3.2(a) of the Loan and Security Agreement is hereby deleted in its
entirety.
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3.
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Section
3.2(b) of the Loan and Security Agreement is hereby deleted in its
entirety.
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4.
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The
current Section 3.2(c) of the Loan and Security Agreement shall be
renumbered as Section 3.2(b) of the Loan and Security
Agreement.
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5.
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The
current Section 3.2(d) of the Loan and Security Agreement shall be
renumbered as Section 3.2(b) of the Loan and Security
Agreement.
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6.
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Section
6.1(c) of the Loan and Security Agreement is hereby deleted in its
entirety.
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7.
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Section
6.2 of the Loan and Security Agreement is hereby deleted and the following
is inserted therefore:
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6.2
Other
Collateral
.
In
addition, to the extent required by the Bank per Section 8.20 and Section
12.5(j) hereof, the Obligations are also secured by the Control
Agreements.
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8.
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Section
8.25 of the Loan and Security Agreement is hereby deleted in its
entirety.
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Except
as
specifically amended herein, the Loan and Security Agreement shall continue
in
full force and effect in accordance with its original terms. Reference to this
specific Amendment need not be made in the Loan and Security Agreement or in
any
other instrument or document executed in connection therewith, any reference
in
any such items to the Loan and Security Agreement being sufficient to refer
to
the Loan and Security Agreement as amended hereby.
This
Amendment may be executed in counterpart, and by facsimile and by the different
parties on different counterpart signature pages, which taken together shall
constitute one and the same Agreement. This Amendment shall be governed by
internal laws of the State of Illinois.
Dated
as
of this ____ day of ____________, 2007
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LA
SALLE BANK NATIONAL ASSOCIATION
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By:
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/s/
George Linhart
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George
Linhart
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Its:
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Senior
Vice President
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PRIMORIS
CORPORATION
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By:
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/s/
A. Theeuwes
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A.
Theeuwes
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Its:
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Chief
Financial Officer
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Exhibit
10.25
SECOND
AMENDMENT TO LOAN AND SECURITY AGREEMENT
Reference
is made to that certain Loan and Security Agreement dated as of March 22,
2007 (the “Loan and Security Agreement”) between the undersigned Primoris
Corporation (the “Borrower”) and LaSalle Bank National Association (the “Bank”).
All capitalized terms used herein without definition shall have the same
meanings herein as those terms have in the Loan and Security Agreement. The
Borrower and Bank hereby amend the Loan and Security Agreement as set forth
below.
1.
The
definition of “Change in Control” in Section 1.1 of the Loan and Security
Agreement is hereby deleted and the following is inserted
therefore:
“
Change
in Control
”
shall
mean if Brian Pratt shall cease to own and control, directly or indirectly,
at
least 25% of the outstanding Capital Securities of the Borrower. For the purpose
hereof, the terms “control” or “controlling” shall mean the possession of the
power to direct, or cause the direction of, the management and policies of
the
Borrower by contract or voting of securities or ownership
interests.
2.
Section
10.1 of the Loan and Security Agreement is hereby deleted in its entirety and
the following is inserted therefore:
Tangible
Net Worth
.
As of
the end of each of its fiscal quarters, the Borrower shall maintain Tangible
Net
Worth in an amount not less than Thirty-Five Million and 00/100 Dollars
($35,000,000.00). The Tangible Net Worth shall be reset annually commencing
with
the Fiscal Year ending December 31, 2009 to increase by Forty Percent (40%)
of
the prior Fiscal Year’s Net Income. Investments in any Subsidiary, Affiliate and
third party entity, which is not either (a) Born Heaters Canada, or (b) a
Guarantor, in excess of Ten Million and 00/100 Dollars ($10,000,000.00) shall
be
deducted from Tangible Net Worth.
3.
The
first
sentence only of Section 10.4 of the Loan and Security Agreement is hereby
deleted and the following is inserted therefore:
The
Borrower shall not incur Capital Expenditures in an amount greater than Twelve
Million and 00/100 Dollars ($12,000,000.00) for Fiscal Year 2008 and Eight
Million and 00/100 Dollars ($8,000,000.00) for Fiscal Year 2009.
4.
The
Bank
hereby waives Section 9.4(a) of the Loan and Security Agreement and consents
to
the merger (the “Merger”) between the Borrower and Rhapsody Acquisition Corp.
with the surviving entity to be called “Primoris Corporation.” The Bank’s waiver
of Section 9.4(a) of the Loan and Security Agreement applies to the Merger
only
and does not constitute a future waiver of any other merger or consolidation,
purchase or other acquisition as described in Section 9.4(a) of the Loan and
Security Agreement. The Bank further consents to the Borrower’s distribution
prior to the Merger of up to Fifty Million and 00/100 Dollars ($50,000,000.00)
of cash to existing shareholders of the Borrower.
Except
as
specifically amended herein, the Loan and Security Agreement shall continue
in
full force and effect in accordance with its original terms. Reference to this
specific Amendment need not be made in the Loan and Security Agreement or in
any
other instrument or document executed in connection therewith, any reference
in
any such items to the Loan and Security Agreement being sufficient to refer
to
the Loan and Security Agreement as amended hereby.
This
Amendment may be executed in counterpart, and by facsimile and by the different
parties on different counterpart signature pages, which taken together shall
constitute one and the same Agreement. This Amendment shall be governed by
internal laws of the State of Illinois.
Dated
as
of this 11
th
day of
July, 2008
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LA
SALLE BANK NATIONAL ASSOCIATION
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By:
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/s/
Brian Peterson
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Brian
Peterson
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Its:
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Senior
Vice President
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PRIMORIS
CORPORATION
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By:
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/s/
John P. Schauerman
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John
P. Schauerman
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Its:
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Senior
Vice President
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Exhibit
21.1
Subsidiaries
of the Registrant
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Subsidiary
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Jurisdiction
of Organization
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ARB,
Inc.
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California
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ARB
Structures, Inc.
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California
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Onquest,
Inc.
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California
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Cardinal
Contractors, Inc.
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Florida
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Cardinal
GP, Inc.
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Texas
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Cardinal
Mechanical, LP
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Texas
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Pipeline
Trenching, LP
|
Nevada
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ARB
International Ltd.
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Bermuda
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ARB
Ecuador Ltda
|
Ecuador
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ARB
Chile
|
Chile
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Onquest
Heaters, Inc.
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Delaware
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Born
Heaters Canada
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Alberta,
Canada
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Stellaris,
LLC
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Nevada
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The
subsidiaries do not conduct business under any names other than those set forth
above.