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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A INFORMATION

 

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.     )

 

Filed by the Registrant  x

 

Filed by a Party other than the Registrant  o

 

Check the appropriate box:

ox

Preliminary Proxy Statement

o

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

xo

Definitive Proxy Statement

o

Definitive Additional Materials

o

Soliciting Material Pursuant to § 240.14a-11(c) or §240.14a-12

 

Primoris Services CorporationPRIMORIS SERVICES CORPORATION

(Name of Registrant as Specified In Its Charter)

 

 

(Name(s)(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

x

No fee requiredrequired.

o

Fee computed on table below per Exchange Act Rules 14a-6(i)(4)(1) and 0-11.

 

1)(1)

Title of each class of securities to which transaction applies:

 

 

 

 

2)(2)

Aggregate number of securities to which transaction applies:

 

 

 

 

3)(3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

 

 

 

4)(4)

Proposed maximum aggregate value of transaction:

 

 

 

 

5)(5)

Total fee paid:

 

 

 

o

Fee paid previously by writtenwith preliminary materials.

o

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

1)(1)

Amount Previously Paid:

 

 

 

 

2)(2)

Form, Schedule or Registration Statement No.:

 

 

 

 

3)(3)

Filing Party:

 

 

 

 

4)(4)

Date Filed:

 

 

 

 



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PRIMORIS SERVICES CORPORATIONGRAPHIC

26000 Commercentre Drive

Lake Forest, California 92630

www.primoriscorp.com

 

March 9, 20102100 McKinney Avenue, Suite 1500
Dallas, Texas 75201

www.prim.com

 

Dear Stockholder:

 

On December 18, 2009,behalf of the Board of Directors, I am pleased to invite you to attend the 2011 Annual Meeting of Stockholders of Primoris Services Corporation, a Delaware corporation (“we,” “us,” “our,” “Primoris” or(NASDAQ:PRIM), to be held on Friday, May 6, 2011, at 9:30 a.m., Central Time, at the “Company”), completedRitz-Carlton Dallas, located at 2121 McKinney Avenue, Dallas, Texas 75201.

During the acquisition (the “Acquisition”)Annual Meeting, we will discuss each item of James Construction Group, LLC, a Florida limited liability company (“JCG”).  Pursuant tobusiness described in the terms and conditions of that certain Membership Interest Purchase Agreement (the “Purchase Agreement”), dated November 18, 2009 and as amended on December 18, 2009 and January 14, 2010, by and among us, JCG, allaccompanying Notice of the limited liability company members2011 Annual Meeting of JCG (collectively,Stockholders and Proxy Statement. We encourage you to carefully read these materials and the “Members”) and Michael D. Killgore, as representative of the Members, we acquired 100% of the issued and outstanding limited liability company membership interests of JCG.  As a result of the Acquisition, JCG became our wholly-owned subsidiary.

At the closing of the Acquisition, we paid the Members initial Acquisition consideration consisting of the following:

·                  $7 million in cash;

·                  81,852.78 shares (the “Closing Shares”) of our Series A Non-Voting Contingent Convertible Preferred Stock (“Series A Preferred Stock”); and

·                  a promissory note in the principal amount of $53.5 million.

PursuantAnnual Report to the terms and conditions of that certain Certificate of Designations, Powers, Preferences and Rights of the Series A Preferred Stock (the “Certificate of Designations”), as filed with the Delaware Secretary of StateStockholders on December 14, 2009, each Closing Share is convertible into 100 shares of our common stock.  Pursuant to the Certificate of Designations, however, the Closing Shares may only be converted into shares of common stock upon the approval of such conversion by our stockholders.

In addition, if JCG’s income before interest, taxes, depreciation and amortization (“EBITDA”), as defined in the Purchase Agreement,SEC Form 10-K for the fiscal year endingended December 31, 2010, which is equal to or greater than $35 million, we have agreed to payincluded with this Notice and the Members, as earnout consideration, a number of shares (the “Earnout Shares”) of common stock equal to $10 million, divided by the average closing price of our common stock, as reported on NASDAQ, for the 20 business days prior to December 31, 2010.  We cannot currently determine the number of Earnout Shares, if any, that we may be required to issue at the end of the earnout period because we do not know if JCG will attain the specified EBITDA milestone or, if JCG attains the specified EBITDA milestone, we do not know what the average closing price of our common stock for the 20 business days prior to December 31, 2010 will be.  Under no circumstances, however, can the number of Earnout Shares exceed 19.9% of the number of shares of our common stock outstanding on the closing date of the Acquisition.  Prior to the closing of the Acquisition, we had 32,704,903 shares of common stock outstanding.  As a result, the maximum number of Earnout Shares that we may be required to issue would be 6,508,276 shares, which, according to the formula above, would reflect a 20-day average closing price of $1.54 per common share.Proxy Statement.

 

PursuantPlease participate in our Annual Meeting of Stockholders by signing, dating and promptly mailing your enclosed proxy card to NASDAQ Listing Rule 5635, stockholder approvalensure the presence of a quorum. Your vote is requiredimportant, whether or not you plan to attend. I hope you will ensure that your shares are represented and voted by completing and returning the enclosed proxy card. If you plan attend the Annual Meeting of Stockholders, you will have the right to revoke your proxy and vote in person if you so desire. If you hold your shares through an account with a broker, nominee, fiduciary or other custodian, please follow the instructions you receive from them to vote your shares.

Thank you for the issuanceyour ongoing support of all shares of common stock potentially issuableand continued interest in the Acquisition if the total number of shares of common stock potentially issuable in the Acquisition (including shares of common stock potentially issuable as earnout consideration) exceeds 20% of the number of shares of common stock outstanding prior to the closing of the Acquisition.  As noted above, prior to the closing of the Acquisition, we had 32,704,903 shares of common stock outstanding.  If our stockholders approve the conversion of the Closing Shares, the Closing Shares will automatically convert into an aggregate of 8,185,278 shares of common stock, which would represent an approximately 25% increase in the number of shares of our common stock outstanding prior to the Acquisition.  As a result, pursuant to NASDAQ Listing Rule 5635, we are required to obtain stockholder approval for the issuance of all shares of common stock potentially issuable inPrimoris Services Corporation.

Sincerely,

/s/ Brian Pratt

Brian Pratt
Chairman of the Board, Chief Executive Officer and President

 



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connection with the Acquisition, including both the 8,185,278 shares of common stock potentially issuable upon the conversion of the Closing Shares and the Earnout Shares.

If our stockholders do not approve the conversion of the Closing Shares, we may purchase or otherwise acquire the Closing Shares by mutual agreement with any holder or holders thereof.  Certain of our stockholders who represent, in the aggregate, in excess of 50% of our issued and outstanding shares of common stock have entered into a voting agreement to vote their shares of common stock in favor of the conversion of the Closing Shares.  We expect that such stockholders will also vote in favor of the issuance of 8,185,278 shares of common stock issuable upon the conversion of the Closing Shares and the Earnout Shares.GRAPHIC

 

On behalf of the board of directors, you are cordially invited to attend a special meeting of our stockholders to be held on April 12, 2010, at 10:00 A.M., Pacific Standard Time, at our offices located at 26000 Commercentre Drive, Lake Forest, California 92630.  At the special meeting, we will ask you to consider and vote to approve the:2100 McKinney Avenue, Suite 1500
Dallas, Texas 75201

·                  issuance of (a) 8,185,278 shares of common stock issuable upon the conversion of the Closing Shares and (b) up to 6,508,276 Earnout Shares; and

·                  conversion of the Closing Shares into 8,185,278 shares of common stock.

Further details of the business to be conducted at the special meeting are given in the attached Notice of Special Meeting of Stockholders and the accompanying proxy statement.  We urge all of our stockholders to read the proxy statement in its entirety, including the section entitled “
Risk Factorswww.prim.com” beginning on page 8.

Whether or not you plan to attend the special meeting, please complete, sign, date and return the enclosed proxy card in the enclosed postage-paid reply envelope.  Returning the proxy does NOT deprive you of your right to attend the special meeting and to vote your shares of common stock in person for the matters acted upon at the special meeting.

Sincerely,

/s/ Brian Pratt

Brian Pratt

Chairman of the Board, Chief Executive Officer and President

First mailed to stockholders on or about March 15, 2010

PLEASE REMEMBER TO PROMPTLY RETURN YOUR PROXY



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ADDITIONAL INFORMATIONPROXY STATEMENT

This proxy statement incorporates important business and financial information about us from other documents.  For a listing of the documents incorporated by reference into and accompanying this proxy statement, see “Where You Can Find More Information; Incorporation by Reference” beginning on page 66 of this proxy statement.  You can obtain these documents through the Securities and Exchange Commission’s website at www.sec.gov.  Copies of these documents can also be sent to you without charge, within one business day of receipt of your written or oral request.  Requests can be made by telephone or in writing at the address below:

By mail:

Primoris Services Corporation

26000 Commercentre Drive

Lake Forest, California 92630

Attention: Investor Relations

By telephone:

(949) 598-9242

Please note that copies of the documents requested by you will not include exhibits, unless the exhibits are specifically incorporated by reference into the documents or this proxy statement.  You should rely only on the information contained in this proxy statement.  We have not authorized any other person to provide you with different information.  If anyone provides you with different or inconsistent information, you should not rely on it.  You should disregard anything included in an earlier document that is inconsistent with what is in, or incorporated by reference into, this proxy statement.  You should assume that the information in this proxy statement is accurate only as of the date indicated on the front cover of this proxy statement.  The business, financial condition, results of operations and prospects described in this proxy statement may have changed since that date and may change again.



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PRIMORIS SERVICES CORPORATION

26000 Commercentre Drive

Lake Forest, California 92630

www.primoriscorp.com


NOTICE OF THE SPECIAL MEETING OF

STOCKHOLDERS OF PRIMORIS SERVICES CORPORATION

TO BE HELD ON APRIL 12, 2010


To the Stockholders of Primoris Services Corporation:

A special meeting of the stockholders of Primoris Services Corporation, a Delaware corporation (“our,” the “Company” or “Primoris”), will be held on April 12, 2010, at 10:00 A.M., Pacific Standard Time, at our offices located at 26000 Commercentre Drive, Lake Forest, California 92630, for the following purposes:

1.To approve of the issuance of (a) 8,185,278 shares of common stock issuable upon the conversion of the shares of Series A Non-Voting Contingent Convertible Preferred Stock issued in connection with the acquisition of James Construction Group, LLC, and (b) up to 6,508,276 shares of common stock, which shares of common stock may be issued as earnout consideration in connection with the acquisition of James Construction Group, LLC;

2.To approve of the conversion of 81,852.78 shares of our Series A Non-Voting Contingent Convertible Preferred Stock into 8,185,278 shares of common stock, which shares of Series A Non-Voting Contingent Convertible Preferred Stock were issued in connection with the acquisition of James Construction Group, LLC; and

3.To transact such other business that may properly come before the special meeting or any adjournment or postponement thereof.

The board of directors has fixed the close of business on March 9, 2010 as the record date for the determination of the stockholders entitled to notice of, and to vote at, the special meeting and any adjournment or postponement thereof.   Only stockholders who owned shares of our common stock at the close of business on the record date are entitled to notice of, and to vote at, the special meeting and any adjournment or postponement thereof.  Each share of our common stock is entitled to one vote on all matters presented at the special meeting.

Please vote.  Whether or not you expect to attend the special meeting in person, please vote by completing, signing and dating the enclosed proxy card and returning it promptly in the postage-paid reply envelope provided.  The proxy is revocable by you in accordance with the procedures set forth in this proxy statement.  If you are a stockholder of record, you may also cast your vote in person at the special meeting.  If you receive more than one proxy card because your shares of common stock are registered in different names or addresses, each proxy card should be signed and returned to ensure that all your shares of common stock will be voted at the special meeting.  If your shares of common stock are held at a brokerage firm or a bank, you must provide them with instructions on how to vote your shares of common stock.

By Order of the Board of Directors,

/s/ John M. Perisich

John M. Perisich

Senior Vice President, General Counsel and Secretary

March 9, 2010



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TABLE OF CONTENTS

 

 

Page

QUESTIONS AND ANSWERS ABOUTNOTICE OF THE SPECIAL2011 ANNUAL MEETING OF STOCKHOLDERS

 

i

SUMMARY TERM SHEETPROXY STATEMENT

1

CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS

 

5

SUMMARY UNAUDITED HISTORICAL AND PRO FORMA FINANCIAL DATAPROPOSAL 1—ELECTION OF DIRECTORS

6

Summary Historical Financial Information of JCG

 

6PROPOSAL 2—ADVISORY NON-BINDING VOTE APPROVING THE COMPANY’S EXECUTIVE COMPENSATION PROGRAM

11

Summary Unaudited Pro Forma Condensed Combined Financial Data of Primoris

 

7

RISK FACTORSPROPOSAL 3—ADVISORY NON-BINDING VOTE ON THE FREQUENCY OF ADVISORY VOTES ON EXECUTIVE COMPENSATION

8

Risks Relating to the Acquisition

8

Risks Relating to the Combined Company

12

Risks Relating to the Construction Industry

 

PROPOSAL 4—RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTING FIRM

13

SPECIAL MEETING OF PRIMORIS STOCKHOLDERS

 

STOCK OWNERSHIP

14

Date, TimeSecurity Ownership of 5% or Greater Stockholders, Directors, Director Nominees and Place of Special MeetingExecutive Officers

14

Purpose of Special MeetingSection 16(a) Beneficial Ownership Reporting Compliance

14

Record Date; Voting Information

14

Quorum

14

Required Votes

14

Abstentions and Broker Non-Votes

14

Adjournment or Postponement

15

Recommendation of Primoris’ Board of DirectorsAdditional Stockholder Information

15

Solicitation and Voting Procedures

15

Revocability of Proxies

16

Important Notice Regarding the Availability of Proxy Materials

 

CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS

16

THE ACQUISITIONBoard Independence

16

Board Structure and Committee Composition

16

Audit Committee

17

The Parties to the AcquisitionAudit Committee Report

1719

Background of the AcquisitionCompensation Committee

1819

Factors Considered by our Board of Directors in Approving the AcquisitionCompensation Committee Interlocks and Insider Participation

20

Changes to Primoris’ Board of Directors as a Result of the AcquisitionCompensation Committee Report

20

Nominating and Corporate Governance Committee

21

Selection of Board Nominees

21

Stockholder Nominations

21

Board Role in Risk Oversight

22

CreationCode of Class of Series A Preferred StockEthics

22

Policy Regarding Director Attendance at Annual Meetings of Stockholders

23

Interests of Our Officers and Directors in the Acquisition

 

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

23

EXECUTIVE COMPENSATION

24

Interests of JCG’s OfficersCompensation Discussion and Managers in the AcquisitionAnalysis

24

Senior Management of JCG After the Closing of the AcquisitionOverview

2624

Piggyback Registration RightsCompensation Methodology

2625

No Appraisal or Dissenters’ RightsBenchmarking of Cash and Equity Compensation

26

Federal Income Tax Consequences of the Acquisition

26

Accounting Treatment of the Acquisition

26

Federal Securities Law Consequences and Resale Restrictions

27

THE PURCHASE AGREEMENT

29

Summary

29

Acquisition Consideration

29

Covenant to Hold the Special Meeting

30

Cash Distributions Made by JCG to the Members

31

Transaction Expenses

31

Representations and Warranties

31

Covenants

31

Closing Conditions

32

Indemnification

32

Employment Agreements with Officer-Members

32

Changes to Primoris’ Board of Directors

32

Piggyback Registration Rights

32

SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF JCG

33

SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF PRIMORIS

34

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

35

HISTORICAL COMMON STOCK MARKET PRICE AND DIVIDENDS

42

Historical Common Stock Market Price

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Dividends

42

JCG’s BUSINESS

44

Overview

44

Corporate History

44

Operating Divisions

44

Customers

46

Geographic Service Area

46

Subsidiaries and Joint Ventures

46

Backlog

46

Selective Bidding

46

Property, Plant and Equipment

46

Credit Facility

47

Insurance and Bonding

48

Competition

48

Employees

48

Facilities

49

Legal Proceedings

49

JCG MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

50

BENEFICIAL OWNERSHIP OF PRIMORIS COMMON STOCK

61

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

64

FUTURE STOCKHOLDER PROPOSALS

65

WHERE YOU CAN FIND MORE INFORMATION; INCORPORATION BY REFERENCE

66



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QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING

The following are some of the questions you may have regarding the special meeting and answers to those questions.  These questions and answers only highlight some of the information contained in this proxy statement.  You should carefully read the entire proxy statement to fully understand the matters to be voted on at the special meeting and the voting procedures for the special meeting.

Q:Why am I receiving this proxy statement?

A:           On December 18, 2009, Primoris Services Corporation, a Delaware corporation (“we,” “us,” “our,” “Primoris” or the “Company”), completed the acquisition (the “Acquisition”) of James Construction Group, LLC, a Florida limited liability company (“JCG”).  As part of the Acquisition purchase price, we agreed to issue 81,852.78 shares of our Series A Non-Voting Contingent Convertible Preferred Stock (“Series A Preferred Stock”), with each share convertible into 100 shares of our common stock.  The conversion to common stock requires the approval of our stockholders.

Pursuant to the terms and conditions of that certain Membership Interest Purchase Agreement (the “Purchase Agreement”), dated November 18, 2009 and as amended on December 18, 2009 and January 14, 2010, by and among us, JCG, all of the limited liability company members of JCG (collectively, the “Members”) and Michael D. Killgore, as representative of the Members, we acquired 100% of the issued and outstanding limited liability company membership interests of JCG.  As a result of the Acquisition, JCG became our wholly-owned subsidiary.

At the closing of the Acquisition, we paid the Members initial Acquisition consideration consisting of $7 million in cash, 81,852.78 shares of Series A Preferred Stock (the “Closing Shares”) and a promissory note in the principal amount of $53.5 million (the “Promissory Note”).

Under the terms of that certain Certificate of Designations, Powers, Preferences and Rights of the Series A Preferred Stock (the “Certificate of Designations”), as filed with the Delaware Secretary of State on December 14, 2009, each Closing Share is convertible into 100 shares of our common stock only upon the approval of such conversion by our stockholders.

In addition, if JCG’s income before interest, taxes, depreciation and amortization (“EBITDA”), as defined in the Purchase Agreement, for the fiscal year ending December 31, 2010 is equal to or greater than $35 million, we have agreed to pay the Members, as earnout consideration, a number of shares (the “Earnout Shares”) of common stock equal to $10 million, divided by the average closing price of our common stock, as reported on NASDAQ, for the 20 business days prior to December 31, 2010.  We cannot currently determine the number of Earnout Shares, if any, that we may be required to issue at the end of the earnout period because we do not know if JCG will attain the specified EBITDA milestone or, if JCG attains the specified EBITDA milestone, we do not know what the average closing price of our common stock for the 20 business days prior to December 31, 2010 will be.  Under no circumstances, however, can the number of Earnout Shares exceed 19.9% (the “Share Cap”) of the number of shares of our common stock outstanding on the closing date of the Acquisition.  Prior to the closing of the Acquisition, we had 32,704,903 shares of common stock outstanding.  As a result, the maximum number of Earnout Shares that we may be required to issue would be 6,508,276 shares, which, according to the formula above, would reflect a 20-day average closing price of $1.54 per common share.

Pursuant to NASDAQ Listing Rule 5635, stockholder approval is required for the issuance of all shares of common stock potentially issuable in the Acquisition if the total number of shares of common stock potentially issuable in the Acquisition (including shares of common stock potentially issuable as earnout consideration) exceeds 20% of the number of shares of common stock outstanding prior to the closing of the Acquisition.  As noted above, prior to the closing of the Acquisition, we had 32,704,903 shares of common stock outstanding.  If our stockholders approve the conversion of the Closing Shares, the Closing Shares will automatically convert into an aggregate of 8,185,278 shares of common stock, which would represent an approximately 25% increase in the number of shares of common stock outstanding prior to the Acquisition.  As a result, pursuant to NASDAQ Listing Rule 5635, we are required to obtain stockholder approval for the issuance of all shares of common stock potentially issuable in connection with the Acquisition, including both the 8,185,278 shares of common stock potentially issuable upon the conversion of the Closing Shares and the Earnout Shares.

 

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Therefore, we are seeking the approval of our stockholders for the:

·                  issuance of (a) 8,185,278 shares of common stock issuable upon the conversion of the Closing Shares and (b) up to 6,508,276 Earnout Shares; and

·                  conversion of the Closing Shares into 8,185,278 shares of common stock.

Under the Purchase Agreement, we agreed to call and hold a special meeting of our stockholders for the purpose of approving the issuance of the shares of our common stock to the Members pursuant to the conversion of the Closing Shares.  We also agreed to prepare, file with the Securities and Exchange Commission (the “Commission”) and distribute this proxy statement for the purpose of soliciting proxies from our stockholders to vote at the special meeting.

Q:          What is the purpose of the special meeting?

A.           You will be voting on two proposals at the special meeting:

·                  to approve of the issuance of (a) 8,185,278 shares of common stock issuable upon the conversion of the Closing Shares and (b) up to 6,508,276 Earnout Shares; and

·                  to approve of the conversion of the Closing Shares into 8,185,278 shares of our common stock.

We will also consider any other business that may properly come before the special meeting.

Q.           What is the board of directors’ recommendation?

A.           Our board of directors recommends a vote:

·FOR

the approval of the issuance of (a) 8,185,278 shares of common stock issuable upon the conversion of the Closing Shares and (b) up to 6,508,276 Earnout Shares; and

·FOR the approval of the conversion of the Closing Shares into 8,185,278 shares of our common stock.

Q.           What is JCG?

A.           JCG is one of the largest general contractors based in the Gulf Coast states, and is engaged in highway, industrial and environmental construction, primarily in Louisiana, Texas and Florida.  JCG is the successor company to T. L. James and Company, Inc., a well-known Louisiana company that has been in business for over 80 years. Headquartered in Baton Rouge, Louisiana, JCG serves government and private clients in a broad geographical region that includes the entire Gulf Coast region of the United States.  JCG’s heavy civil division provides services in heavy civil construction projects, including highway and bridge construction, concrete paving, levee construction, airport runway and taxiway construction and marine facility construction.  JCG’s infrastructure and maintenance division provides large earthwork and site development, landfill construction, site remediation and mining support services.  JCG’s industrial division, with a client base comprised primarily of private industrial companies, provides all phases of civil and structural construction, mechanical equipment erection, process pipe installation and boiler, furnace and heater installation and repair.

Q:          Why did we acquire JCG?

A:           JCG is a growing and profitable company with a skilled and experienced management team and workforce.  Among other benefits, we believe that the Acquisition helps fortify and broaden our geographic reach in the southern United States, adds to our revenue and profitability, gives us the opportunity to develop economies of scale, allows us to expand our portfolio of services to include heavy civil construction and gives us the opportunity to extend our infrastructure operations in Louisiana.  In addition, the Acquisition provided additional backlog to the combined companies. As of September 30, 2009, JCG had approximately $571.6 million of backlog.

Page

Key Elements of Executive Officer Compensation

25

Employment Agreements

28

Compensation Tables

29

Summary Compensation Table

29

Grants of Plan-Based Awards

30

Outstanding Equity Awards at Fiscal Year-End

31

Options Exercised and Stock Vested

31

Equity Compensation Plan Information

31

Potential Payments upon Termination

31

Retirement Plans

32

2008 Long-Term Incentive Equity Plan

32

Additional Equity Compensation Plan Information

33

OTHER MATTERS

34

PERFORMANCE GRAPH

35

 

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Q:When was the Acquisition completed?

A:The closing of the Acquisition was subject to various closing conditions, including, among others, the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”), receipt of consent from the lenders of JCG’s main credit facility, the exchange of various closing deliverables between the parties and our payment of the initial Acquisition consideration to the Members.  All such conditions were met and the Acquisition closed on December 18, 2009.

Q:Why was I not asked to approve of the Acquisition?

A:Pursuant to applicable provisions of the Delaware General Corporation Law (the “DGCL”), the approval of our stockholders was not required in order for the Acquisition to be consummated.  Nor was the approval of our stockholders required pursuant to the terms and conditions of the Purchase Agreement.  As a result, your vote on the matters discussed in this proxy statement will not affect whether or not the Acquisition is consummated.

Q.What did we pay the Members as consideration?

A:At the closing of the Acquisition, we paid the Members initial Acquisition consideration consisting of the following:

·$7 million in cash;

·81,852.78 Closing Shares; and

·the Promissory Note, in the principal amount of $53.5 million.

In addition, if JCG’s EBITDA, as defined in the Purchase Agreement, for the fiscal year ending December 31, 2010 is equal to or greater than $35 million, we have agreed to pay the Members, as earnout consideration, a number of shares of common stock equal to $10 million, divided by the average closing price of our common stock, as reported on NASDAQ, for the 20 business days prior to December 31, 2010.

Q:Why was I not asked to approve of the creation of the class of Series A Preferred Stock?

A:Pursuant to applicable provisions of the DGCL and our Fourth Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”), our board of directors is authorized to create one or more classes or series of preferred stock and to determine the voting powers, designations, powers, preferences and relative, participating, optional or other special rights, and the qualifications, limitations and restrictions thereof, of any such classes and series.  As a result, the approval of our stockholders was not required for the creation of the Series A Preferred Stock.

Q:How was the number of Closing Shares determined?

A:Pursuant to the Purchase Agreement, we agreed to issue the Members a number of shares of Series A Preferred Stock equal to $64.5 million divided by the average closing price of our common stock, as reported on NASDAQ, for the 20 business days prior to the closing date, divided by 100.  The average closing price of our common stock for the 20 business days prior to December 18, 2009 was $7.88.  As a result, we issued a total of 81,852.78 Closing Shares to the Members, calculated as follows: $64.5 million divided by $7.88 divided by 100.  The market price of our common stock on the date the Closing Shares are converted into shares of common stock may be significantly higher or lower than $7.88.  As a result, the market value of the shares of common stock underlying the Closing Shares on the conversion date, assuming the conversion of the Closing Shares into shares of common stock on the conversion date, may be greater or less than the specified value of $64.5 million.

Q:Are there any restrictions on the Closing Shares?

A:Pursuant to the Purchase Agreement, 11,897.18 of the Closing Shares were placed in escrow (the “Escrow Shares”) for a period of three years to provide a source of indemnity for us against specified damages to us, as

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GRAPHIC

2100 McKinney Avenue, Suite 1500
Dallas, Texas 75201

www.prim.com


NOTICE OF THE
2011 ANNUAL MEETING OF STOCKHOLDERS

To Be Held On May 6, 2011


April       , 2011

To our Stockholders:

The 2011 Annual Meeting of Stockholders of Primoris Services Corporation, a Delaware corporation, will be held on Friday, May 6, 2011, at 9:30 a.m., Central Time, at the Ritz-Carlton Dallas, located at 2121 McKinney Avenue, Dallas, Texas 75201.

Only stockholders of record that owned shares of our common stock at the close of business on March 31, 2011 are entitled to vote at the Annual Meeting. A list of our stockholders will be made available at our principal executive offices at 2100 McKinney Avenue, Suite 1500, Dallas, Texas 75201 during ordinary business hours for ten days prior to the Annual Meeting and will also be available at the Annual Meeting.

At the Annual Meeting, we will consider the following proposals, which are described in this proxy statement.  The Escrow Shares may only be released todetail in the Members on two specified dates, provided there are Escrow Shares remaining in escrow:accompanying Proxy Statement:

 

·(1)                                  within five days after we receiveto elect three Class C Directors to hold office for a three-year term expiring at the Annual Meeting of Stockholders to be held in 2014 or until their respective successors are elected and qualified. The Board of Directors has nominated the following persons for election as Class C Directors at the meeting: Michael D. Killgore, Robert A. Tinstman and Eric S. Rosenfeld;

(2)to provide a non-binding advisory vote approving the Company’s executive compensation program;

(3)to provide a non-binding advisory vote on the proposed timeline for seeking executive compensation advisory votes in the future;

(4)to ratify the appointment of Moss Adams, LLP as our audited financial statementsindependent registered public accounting firm for the fiscal year ending December 31, 2010, but in no event later than April 15, 2011; and

 

·(5)                                  on December 18, 2012.to transact such other business as may properly come before the Annual Meeting and all adjournments or postponements thereof.

 

PLEASE VOTE PROMPTLY — YOUR PROXY IS REVOCABLE AND YOU MAY VOTE IN PERSON AT THE MEETING IF YOU WISH.

References to “Primoris”, the “Company”, “we”, “us” or “our” in this Notice and the accompanying Proxy Statement refer to Primoris Services Corporation and its subsidiaries and affiliates, unless otherwise indicated.

By Order of the Board of Directors,

/s/ John M. Perisich

John M. Perisich
Senior Vice President, General Counsel and Secretary



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GRAPHIC

2100 McKinney Avenue, Suite 1500
Dallas, Texas 75201

www.prim.com

PROXY STATEMENT

FOR THE
2011 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 6, 2011.

SOLICITATION

This Proxy Statement, being mailed and made available electronically (on our Company website atwww.prim.com) to stockholders on or about April [      ], 2011, is being sent to you by the Board of Directors (the “Board”) of Primoris Services Corporation in connection with our 2011 Annual Meeting of Stockholders (the “Annual Meeting”). The Purchase Agreement sets forth different formulas for determiningAnnual Meeting will take place at 9:30 a.m. Central Time, on Friday, May 6, 2011, at the numberRitz-Carlton Dallas, located at 2121 McKinney Avenue, Dallas, Texas 75201.  You are cordially invited to attend the Annual Meeting and are requested to vote on the proposals described in this Proxy Statement.

Purpose of Escrow Shares that may be released onthe Annual Meeting

At the Annual Meeting, our stockholders will vote to elect each of three Class C Directors, will vote, on an advisory, non-binding basis, on the foregoing dates.  Both formulas provideCompany’s executive compensation program and the proposed timeline for a certain number of Escrow Shares to remain in escrow for any indemnity claims that have not been resolved as of each date.

Q:How many Earnout Shares may we be required to issue to the Members?

A:If JCG’s EBITDA, as definedseeking executive compensation non-binding advisory votes in the Purchase Agreement,future and will vote to ratify the appointment of Moss Adams, LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2010 is less than $35 million, we2011. In addition, management will not be required to issue any Earnout Shares toreport on our performance over the Members.  If JCG’s EBITDA, as defined in the Purchase Agreement, for thelast fiscal year ending December 31, 2010 is equaland, following the Annual Meeting, respond to or greater than $35 million, we have agreed to pay the Members, as earnout consideration, a number of shares of common stock equal to $10 million, divided by the average closing price of our common stock, as reported on NASDAQ, for the 20 business days prior to December 31, 2010.  We cannot currently determine the number of Earnout Shares, if any, that we may be required to issue at the end of the earnout period because we do not know if JCG will attain the specified EBITDA milestone or, if JCG attains the specified EBITDA milestone, we do not know what the average closing price of our common stock for the 20 business days prior to December 31, 2010 will be.  Under no circumstances, however, can the number of Earnout Shares exceed 19.9% of the number of shares of our common stock outstanding on the closing date of the Acquisition.  Prior to the closing of the Acquisition, we had 32,704,903 shares of common stock outstanding.  As a result, the maximum number of Earnout Shares that we may be required to issue would be 6,508,276 shares, which, according to the formula above, would reflect a 20-day average closing price of $1.54 per common share.  If we were required to issue any Earnout Shares, we would only be required to issue a number of Earnout Shares up to the Share Cap, and then to pay the Members, in cash, the dollar amount equivalent of any Earnout Shares that would exceed the Share Cap.questions from stockholders.

 

Q:Materials providedWas there any change

The Board sent you this Proxy Statement and the enclosed proxy card in order to our boardsolicit your proxy to vote your shares at the Annual Meeting. As a stockholder, you are invited to attend the meeting and are entitled to vote on the items of directorsbusiness described in connection with the Acquisition?

A:Yes.  Pursuant to the Purchase Agreement, we created two new “Class C” directorships with terms expiring at our 2011 annual meeting of stockholders.  Immediately following the closing of the Acquisition, our board of directors unanimously appointed Michael D. Killgore, one of the selling Members of JCG and JCG’s chief executive officer prior to the Acquisition, and Robert A. Tinstman, who was formerly the executive chairman of JCG, to these newly created “Class C” directorships.  As of the date of this proxy statement, it is not known whether Mr. Killgore or Mr. Tinstman will be named to any committees of the board of directors or, if they are to be named to a committee, to which committee they will be named.Proxy Statement.

 

Q:Annual Meeting attendanceWhy was I not asked

All stockholders of record as of March 31, 2011 (the “Record Date”), or their duly appointed proxies, may attend the Annual Meeting. You will need to vote for the appointment of Mr. Killgore and Mr. Tinstmanbring personal identification. Admission to the board of directors?

A:Pursuant to applicable provisions ofAnnual Meeting depends on how your stock ownership is recorded by our transfer agent, Continental Stock Transfer & Trust Company (the “Transfer Agent”). If your stock is held in the DGCL and our Amended and Restated Bylaws (the “Bylaws”), our board of directors is authorized to increase the number of directors and create new directorships.  Further, pursuant to applicable provisions of the DGCL, our Bylaws and our Certificate of Incorporation, any newly created directorships may be filled by the votename of a majoritybank, broker or other holder of record and you plan to attend the remaining directors.  AsAnnual Meeting, please obtain proof of ownership, such as a result, the approvalcurrent brokerage account statement or certification from your broker. If your stock is registered with our Transfer Agent, all you need is proof of our stockholders was not required in order for Mr. Killgore and Mr. Tinstman to be appointed to the boardidentity; no proof of directors.ownership is needed.

 

Q:What will happen to my shares of common stock as a result ofVoting at the Acquisition?Annual Meeting

A.Each share of our common stock was unaffected by the Acquisition and will remain outstanding. 

Holders of our common stock (“Common Stock”) as of the close of business on the Record Date will continuebe entitled to holdvote at the Annual Meeting. On the Record Date, there were [51,044,520] shares of common stock that they currently hold.  However,Common Stock outstanding, each of which is entitled to one vote with respect to each matter to be voted on at the conversion of the Closing Shares and the issuance of the shares of common stock issuable upon the conversion of the Closing Shares would represent an increase of approximately 25% in the number of shares of commonAnnual Meeting.

 

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stock outstanding prior toQuorum requirement

The presence at the Acquisition and would resultAnnual Meeting, in a dilutionperson or by proxy, of the existing ownership interestsholders of our common stockholders.  In addition, the issuance of any Earnout Shares would result in further dilutiona majority of the existing ownership interestsvoting power of our common stockholders.all outstanding shares of Common Stock entitled to vote shall constitute a quorum for the transaction of business. Proxies marked as abstaining (including proxies containing broker non-votes) on any matter to be acted upon by stockholders will be treated as present at the meeting for purposes of determining a quorum but will not be counted as votes cast on such matters.

 

Q:Stockholder of record & beneficial ownerDo I have appraisal or dissenters’ rights with respect to the Acquisition?

A:Our stockholders do not have appraisal or dissenters’ rights with respect to the Acquisition.

 

Q:Are there risks associated with the Acquisition?

A:Yes.  The material risks associated with the Acquisition that are known to us are discussed in the section entitled “Risk Factors” beginning on page 8.  Please read the risk factors in this proxy statement carefully.  Those risks include, among others, the possibility that we may fail to realize the expected benefits of the Acquisition and we may not be successful in assimilating and retaining JCG’s employees and otherwise integrating its business with our own.

Q:Who is soliciting my vote?

A:The board of directors of Primoris is soliciting your vote for the special meeting.

Q:Who is entitled to vote at the special meeting?

A:The board of directors has set March 9, 2010 as the record date for the special meeting.  All stockholders who owned our common stock at the close of business on the record date may attend and vote at the special meeting.  As of the record date, there were 33,121,567 shares of common stock issued and outstanding.  The shares of Series A Preferred Stock issued to the Members in connection with the Acquisition do not have voting rights and therefore the holders of the Series A Preferred Stock are not entitled to vote at the special meeting.

Q:How many votes do I have?

A:You will have one vote for each share of common stock you owned at the close of business on the record date, provided those shares of common stock are either held directly in your name as the stockholder of record or were held for you as the beneficial owner through a broker, bank or other nominee.

Q:What is the difference between holding shares as a stockholder of record versus as a beneficial owner?

A:SomeMost of our stockholders hold their shares of common stockthrough a stockbroker, bank or other nominee rather than directly in their own name, while others hold their shares of common stock in a brokerage account or by a bank or other nominee.name. As summarized below, there are some differencesdistinctions between holding your shares in these two fashions:held of record and those owned beneficially.

 

Stockholder of Record.  

If your shares of common stock are registered directly in your name with our transfer agent, Continental Stockthe Transfer & Trust Company,Agent, you are considered the “stockholderstockholder of record” with respect to those shares of common stock,record, and wethese proxy materials are sending this proxy statementbeing sent directly to you.you by us. As the stockholder of record, you have the right to grant your voting proxy directly to us or to vote in person at the special meeting.Annual Meeting. We have enclosed a proxy card for you to use.

 

Beneficial Owner of Shares Held in Street Name

.  If your shares of common stock are held in a stock brokerage account or by a bank or other nominee, you are not considered to be the stockholder of record.  Instead, the broker, bank or other nominee is considered the stockholderbeneficial owner of record and you are considered to be the “beneficial owner” of the shares of common stock, which are being held in “street name.”  If your shares of common stockname” and these proxy materials are being held in street name, this proxy statement is being forwarded to you by your broker, bank or nominee.nominee who is considered, with respect to those shares, the stockholder of record. As the beneficial owner, you have the right to direct your broker bank or nominee on how to vote your shares and are also invited to attend the special meeting.  However, sinceAnnual Meeting. Because you are not the stockholder of record, you may not vote theseyour shares of common stock in person at the special meeting unlessAnnual Meeting except as noted below under “How do I vote my shares in person at the Annual Meeting?” If you request, complete and deliver a proxy fromhold shares in street name, your broker, bank or nominee giving you the right to vote the shares of common stock in person.  Your broker, bank

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or nominee has enclosed a voting instruction card for you to use in directing the broker bank or nominee regarding how to vote your shares of common stock.shares.

 

Q:Voting in person at the Annual MeetingHow do I vote?

A:You

Shares held directly in your name as the stockholder of record may vote by mail or by attendingbe voted in person at the special meeting and voting by ballot.Annual Meeting. If you choose to vote by mail, simply mark yourdo so, please bring the enclosed proxy card dateor proof of identification. Even if you plan to attend the Annual Meeting, we recommend that you vote your shares in advance as described below so that your vote will be counted if you later decide not to attend the Annual Meeting. Shares held beneficially in street name may be voted in person at the meeting if you obtain a signed “legal proxy” from the record holder (e.g., your broker, bank or nominee) giving you the right to vote the shares in person.

Voting without attending the Annual Meeting

If you complete and properly sign itthe accompanying proxy card and return it to our transfer agent, Continental Stockthe Transfer & Trust Company, in the postage-paid envelope provided.

Submitting your completed proxy card will not limit your right to vote at the special meeting if you attend the special meeting and vote in person.  However, ifAgent, your shares will be voted as you direct on the proxy card. If you are a stockholder of common stock are heldrecord, follow the instructions included with your proxy card. If you hold shares beneficially in thestreet name, of broker, bank or nominee, you must obtain a proxy, executed in your favor, frommay vote by submitting voting instructions to your broker, bank or nominee to be ablenominee. For instructions on how to vote, at the special meeting.  You should allow yourself enough time priorplease refer to the special meeting to obtain thisinstructions included on your proxy fromcard or, for shares held beneficially in street name, the voting instruction card provided by your broker, bank or nominee.

 

The sharesStockholders of common stock representedrecord may submit proxies by thecompleting, signing and dating their proxy cards received, properly marked, dated, signed and not revoked, will be voted at the special meeting.  If you sign and return your proxy card but do not give voting instructions, the shares of common stock represented by that proxy card will be voted as recommended by the board of directors.

Q:How many shares must be present to hold the special meeting?

A:A majority of the issued and outstanding shares of our common stock as of the record date must be present at the special meeting in order to hold the special meeting and conduct business.  This is called a “quorum.”  Shares are counted as present at the special meeting if you are present and vote in person at the special meeting or a proxy card has been properly submitted by you or on your behalf.  As discussed below, both abstentions and “broker non-votes” are counted as present for the purpose of determining the presence of a quorum.  As of the record date, there were 33,121,567 shares of our common stock issued and outstanding.  As a result, the presence in person or by proxy of 16,560,785 shares of our common stock will constitute a quorum for the transaction of business at the special meeting.

Q.What are the voting requirements with respect to the proposals to be voted upon at the special meeting?

A.To be approved by the stockholders, each proposal must receive the affirmative FOR vote of a majority of the shares present in person or represented by proxy at the special meeting.

Certain of our stockholders who represent,mailing them in the aggregate, in excess of 50% of our issued and outstanding shares of common stock have entered into a voting agreement to vote their shares of common stock in favor of the conversion of the Closing Shares.  We expect that suchaccompanying pre-addressed envelopes. Our stockholders will also vote in favor of the issuance of 8,185,278 shares of common stock issuable upon the conversion of the Closing Shares and the Earnout Shares.

Q:What happens if I sign and return my proxy card, but otherwise leave my proxy card blank?

A:Stockholders of Record.  If you are a stockholder of record and you submit an executed proxy, but you do not provide voting instructions, your shares of common stock will be voted as follows:

·FOR the issuance of (a) 8,185,278 shares of common stock issuable upon the conversion of the Closing Shares and (b) up to 6,508,276 Earnout Shares;

·FOR the conversion of the Closing Shares into 8,185,278 shares of common stock; and

·in the discretion of the named proxies regarding any other matters properly presented for a vote at the special meeting.

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Beneficial Owners.  If you do not provide voting instructions to your broker, bank or nominee, your broker, bank or nominee cannot vote your shares of common stock on either of the proposals set forth in this proxy statement and your shares of common stock will be considered “broker non-votes.”

In tabulating the voting result for any particular proposal, shares of common stock that constitute broker non-votes are not considered entitled to vote on that proposal.  Thus, although broker non-votes are counted for purposes of determining a quorum, broker non-votes will not otherwise affect the outcome of any matter being voted on at the special meeting.

A:What will happen if I sign and return my proxy card, but abstain from voting?

Q:Abstentions will be considered present at the special meeting for the purpose of determining a quorum and will count as votes cast on the proposals.  An abstention on either proposal will have the same effect as a vote AGAINST each such proposal.

Q:What will happen if I do not vote my shares, either in person or by proxy?

Stockholders of Record.  If you are the stockholder of record of your shares of common stock, and you do not vote in person or by proxy, your shares will not be voted at the special meeting.

Beneficial Owners.  If you are the beneficial owner of your shares of common stock, your broker, bank or nominee may vote your shares of common stock only on those proposals on which it has discretion to vote.  Under applicable rules, your broker, bank or nominee has discretion to vote your shares of common stock on “routine” matters.  Neither of the proposals being voted on at the special meeting, however, are considered routine.  As a result, your broker, bank or nominee does not have discretion to vote your shares of common stock at the special meeting.  Therefore, if you do not vote by proxy, your broker, bank or other nominee cannot vote your shares of common stock on either of the proposals set forth in this proxy statement and your shares of common stock will be considered broker non-votes.

Q.Can I change or revoke my vote after I return my proxy card?

A.Yes.  Even if you sign the proxy card in the form accompanying this proxy statement, you retain the power to revoke your proxy.  You can revoke your proxy at any time before it is exercised by giving written notice to our corporate secretary specifying such revocation.  The last vote received chronologically will supersede any prior vote.  You may also revoke your proxy by voting in person at the special meeting.  However, attendance at the special meeting, without voting at the special meeting, will not in and of itself serve as a revocation of your proxy.

Q:What does it mean if I receive more than one proxy?

A:It generally means your shares of common stock are registered differently or are in more than one account.  Please provide voting instructions for all proxy cards you receive.

Q:What do I need to bring to the special meeting and when should I arrive?

A:In order to be admitted to the special meeting, a stockholder must present proof of ownership of our common stock on the record date.  If your shares of common stock are held in the name of a broker, bank or other holder of record, a brokerage statement or letter from a broker or bank is an example of proof of ownership.  Any holder of a proxy from a stockholder must present the proxy card, properly executed, to be admitted.  Stockholders and proxy holders must also present a form of photo identification such as a driver’s license.

The special meeting will be held on April 12, 2010 at 10:00 A.M., Pacific Standard Time, at our offices located at 26000 Commercentre Drive, Lake Forest, California 92630.  In order to ensure that you are seated by the commencement of the special meeting we recommend you arrive early.

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Q:Who pays for the proxy solicitation and how will our board of directors solicit votes?

A.We will bear the expense of printing and mailing proxy materials.  In addition to this solicitation of proxies by mail, our directors, officers and other employees may solicit proxies by personal interview, telephone, facsimile or email.  They will not be paid any additional compensation for such solicitation.  We will request brokers and nominees who hold shares of our common stockbeneficially in street name may vote by mail by completing, signing and dating the voting instruction cards provided by their names to furnish proxy material to beneficial owners of the shares.  We may reimburse such brokers, banks or nominees and nominees for their reasonable expenses incurred in forwarding solicitation materialsmailing them to such beneficial owners.

Q:How do I find out the voting results?

A:Preliminary voting results will be announced at the special meeting, and the final voting results will be provided in a Current Report on Form 8-K and filed with the Commission when available.  The results will also be published in our Annual Report on Form 10-K for the year ended December 31, 2009, which we will file with the Commission.

Q:Where can I find additional information about the special meeting and the Acquisition?

A:This proxy statement includes important information about the special meeting and the Acquisition.  Our stockholders should read this information carefully and in its entirety.

Q:What should I do now?

A:After carefully reading and considering the information contained in this proxy statement, please fill out and sign the proxy card, and then mail your completed and signed proxy cardentities in the enclosed postage-paid reply envelope as soon as possible so that your shares of common stock may be voted at the special meeting.  Your proxy card will instruct the persons identified as your proxy to vote your shares of common stock at the special meeting as directed by you.  If you hold your shares of common stock through a broker, bank or other nominee, you should follow the instructions provided by your broker, bank or other nominee when instructing them on how to vote your shares of common stockaccompanying pre-addressed envelopes.

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SUMMARY TERM SHEET

The following summary highlights selected information from this proxy statement regarding the Acquisition and the proposals to be considered and voted upon by our stockholders, and may not contain all of the information that is important to you.  We encourage you to carefully read this proxy statement and the documents referred to or incorporated by reference into this proxy statement.  Each item in this summary term sheet includes a page reference directing you to a more complete description of that item.

·

Acquiring Company (Pg. 17):

Primoris Services Corporation, a Delaware corporation, is a holding company of various subsidiaries which form a diversified engineering and construction company.

·

Acquired Company (Pg. 17 and 44):

James Construction Group, LLC, a Florida limited liability company, is a general contractor that specializes in highway, industrial and environmental projects in the Gulf Coast region of the United States, primarily in Louisiana, Texas and Florida.

·

Structure of Acquisition (Pg. 29):

We purchased from the Members, and the Members sold to us, 100% of the issued and outstanding limited liability company membership interests of JCG in exchange for consideration consisting of a combination of cash, shares of our Series A Preferred Stock, a Promissory Note and, potentially, shares of our common stock.

·

Creation of Class of Series A Preferred Stock (Pg. 23):

On December 14, 2009, we filed that certain Certificate of Designations with the Delaware Secretary of State, pursuant to which our board of directors designated 95,000 shares of our authorized but

1



unissued blank check preferred stock as “Series A Non-Voting Contingent Convertible Preferred Stock,” par value $0.0001 per share.

The Series A Preferred Stock has no voting rights. Each share of Series A Preferred Stock is convertible into 100 shares of our common stock, but may only be converted upon the approval of such conversion by our stockholders. If, at any time that any shares of Series A Preferred Stock are outstanding, we declare a dividend or distribution of cash, securities, properties or assets, we have agreed to simultaneously declare a dividend or distribution on shares of Series A Preferred Stock as if such shares were converted into shares of common stock on the record date for such dividend or distribution. The Series A Preferred Stock has a liquidation preference of $100 per share.

·

Closing (Pg. 29):

The closing of the Acquisition was subject to various closing conditions, including, among others, the expiration of the waiting period under the HSR Act, receipt of consent from the lenders of JCG’s main credit facility, the exchange of various closing deliverables between the parties and our payment of the initial Acquisition consideration to the Members. All such conditions were met and the Acquisition closed on December 18, 2009. As a result, JCG became our wholly-owned subsidiary.

·

Consideration Paid to Members at

·

$7 million in cash;

Closing (Pg. 29):

·

81,852.78 shares of our Series A Preferred Stock; and

·

a Promissory Note in the principal amount of $53.5 million.

·

Earnout Consideration (Pg. 30):

If JCG’s EBITDA, as defined in the Purchase Agreement, for the fiscal year ending December 31, 2010 is equal to or greater than $35 million, we have agreed to pay the Members, as earnout consideration, a number of shares of common stock equal to $10 million, divided by the average closing price of our common stock, as reported on NASDAQ, for the 20 business days prior to December 31, 2010. We cannot currently determine the number of Earnout Shares, if any, that we may be required to issue at the end of the earnout period because we do not know if JCG will attain the specified EBITDA milestone or, if JCG attains the specified EBITDA milestone, we do not know what the average closing price of our common stock for the 20 business days prior to December 31, 2010 will be.

Under no circumstances, however, can the number of Earnout Shares exceed 19.9% of the number of shares of our common stock outstanding on the closing date of the Acquisition. Prior to the closing of the Acquisition, we had 32,704,903 shares of common stock outstanding. As a result, the maximum number of Earnout Shares that we may be required to issue would be 6,508,276 shares, which, according to the formula above, would reflect a 20-day average closing price of $1.54 per common share. If we were required to issue any Earnout Shares, we would only be required to issue a number of Earnout Shares up to the Share Cap, and then to pay the Members, in cash, the dollar amount equivalent of any Earnout Shares that would exceed the Share Cap.

·

Escrow Shares (Pg. 30):

11,897.18 of the Closing Shares were placed in escrow for a period of three years to provide a source of indemnity for us against specified damages to us, as described in this proxy statement. The Purchase Agreement provides for us and our related parties to have full recourse against the Escrow Shares for losses or damages arising out of inaccuracies in JCG’s or the Members’ representations, JCG’s or the Members’ breach of their pre-closing covenants and certain other matters, once the aggregate amount of damages exceeds a specified dollar

 

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Changing your vote after returning your proxy card

 

If you are a stockholder of record, you can revoke your proxy before it is exercised by:

·delivering written notice of revocation of the proxy to our Secretary prior to the Annual Meeting;

·executing and delivering a later dated proxy card to our Secretary; or

·attending and voting by ballot in person at the Annual Meeting.

If you are the beneficial owner of your shares held in street name, you may submit new voting instructions by contacting your broker, bank or other nominee. You may also vote in person at the Annual Meeting if you obtain a legal proxy as described above in “In person voting at the Annual Meeting” All shares that have been properly voted and not revoked will be voted at the Annual Meeting.

Required votes to approve each item

Each outstanding share of Common Stock is entitled to one vote on each proposal at the Annual Meeting. All matters require the existence of a quorum at the Annual Meeting.  All proposals require an affirmative vote of the majority of shares represented in person or by proxy.  Election of Directors is determined by plurality voting.  The three individuals receiving the largest number of votes will be elected.

In the election of Directors, you may vote “FOR” any of the nominee(s) or your vote may be “WITHHELD” with respect to any of the nominee(s). A properly executed proxy marked “ABSTAIN” with respect to any other matter will not be voted, although it will be counted for purposes of determining whether there is a quorum. Accordingly, an abstention on any matter other than election of Directors will have the effect of a negative vote on that matter. If you hold your shares in street name through a broker, bank or other nominee, shares represented by broker non-votes (when the broker indicates they do not have their customer’s direction on how to vote, nor has discretionary authority on how to vote) will be counted in determining whether there is a quorum but will not be counted as votes cast on any matter.

Inspector of elections

Our Senior Vice President, General Counsel and Secretary, John M. Perisich, will act as Inspector of Elections and oversee the voting results. The Inspector of Elections will also determine the presence of a quorum.

Voting results of the Annual Meeting

We will announce preliminary voting results at the Annual Meeting and will publish final results in a Current Report on Form 8-K to be filed with the Securities and Exchange Commission (“SEC”) within four business days of the Annual Meeting.

Board recommendations

The Board recommends a vote:

·FOR Proposal No. 1 to elect each of the three Class C Directors.

·FOR Proposal No. 2, the advisory, non-binding vote approving the Company’s executive compensation program.

·On Proposal No. 3, the advisory, non-binding vote on the proposed timeline for seeking executive compensation advisory votes in the future, the Board recommends a 3-year timeline.

·FOR Proposal No. 4 to ratify the appointment of Moss Adams, LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2011.

Unless you give other instructions on your proxy card, the individual named as proxy holder on the proxy card will vote in accordance with the recommendations of the Board.

amount.

The Escrow Shares may only be released to the Members on two specified dates, provided there are Escrow Shares remaining in escrow:

·

within five days after we receive our audited financial statements for the fiscal year ending December 31, 2010, but in no event later than April 15, 2011; and

·

on December 18, 2012.

The Purchase Agreement sets forth different formulas for determining the number of Escrow Shares that may be released on each of the foregoing dates.  Both formulas provide for a certain number of Escrow Shares to remain in escrow for any indemnity claims that have not been resolved as of each date.

·

Appointment of New “Class C” Directors (Pg. 22):

We created two new “Class C” directorships with terms expiring at the 2011 annual meeting of stockholders. Immediately following the closing of the Acquisition, Michael D. Killgore, one of the selling Members of JCG and JCG’s chief executive officer prior to the Acquisition, and Robert A. Tinstman, who was formerly the executive chairman of JCG, were appointed to these newly created “Class C” directorships.

·

Stockholder Approval (Pg. 30):

Pursuant to the Certificate of Designations, the Closing Shares may only be converted into shares of common stock upon the approval of such conversion by our stockholders.

Further, pursuant to NASDAQ Listing Rule 5635, stockholder approval is required for the issuance of all shares of common stock potentially issuable in the Acquisition if the total number of shares of common stock potentially issuable in the Acquisition (including shares of common stock potentially issuable as earnout consideration) exceeds 20% of the number of shares of common stock outstanding prior to the closing of the Acquisition.

Prior to the closing of the Acquisition, we had 32,704,903 shares of common stock outstanding. If our stockholders approve the conversion of the Closing Shares, the Closing Shares will automatically convert into an aggregate of 8,185,278 shares of common stock, which would represent an approximately 25% increase in the number of shares of common stock outstanding prior to the Acquisition. As a result, pursuant to NASDAQ Listing Rule 5635, we are required to obtain stockholder approval for the issuance of all shares of common stock potentially issuable in connection with the Acquisition, including both the 8,185,278 shares of common stock potentially issuable upon the conversion of the Closing Shares and the Earnout Shares.

·

Voting Agreement (Pg. 31):

Certain of our stockholders who represent, in the aggregate, in excess of 50% of our issued and outstanding shares of common stock, have entered into a voting agreement to vote their shares of common stock in favor of the conversion of the Closing Shares. We expect that such stockholders will vote in favor of the issuance of 8,185,278 shares of common stock issuable upon the conversion of the Closing Shares and the Earnout Shares.

·

Special Meeting of Stockholders

Pursuant to the terms and conditions of the Purchase Agreement, we agreed to call and hold a special meeting of our stockholders for the purpose of approving

 

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(Pg. 30):

the issuance of the shares of our common stock to the Members pursuant to the conversion of the Closing Shares. We also agreed to prepare, file with the Commission and distribute this proxy statement for the purpose of soliciting proxies from our stockholders to vote at the special meeting.

·

Purpose of the Special Meeting (Pg. 30):

You will be voting on two proposals at the special meeting:

·

to approve of the issuance of (a) 8,185,278 shares of common stock issuable upon the conversion of the Closing Shares and (b) up to 6,508,276 Earnout Shares; and

·

to approve of the conversion of the Closing Shares into 8,185,278 shares of our common stock.

·

Recommendation of our Board of

The board of directors recommends that you vote:

Directors (Pg. 15):

·

FOR the issuance of (a) 8,185,278 shares of common stock issuable upon the conversion of the Closing Shares and (b) up to 6,508,276 Earnout Shares; and

·

FOR the approval of the conversion of the Closing Shares into 8,185,278 shares of our common stock.

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CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS

Certain statements in this proxy statement that are not historical facts may constitute “forward-looking statements” that involve risks and uncertainties.  These forward-looking statements address, among other things, the anticipated effects of the Acquisition.  Forward-looking statements are based on certain assumptions and expectations of future events that are subject to risks and uncertainties.  Such statements are made in reliance upon the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  Actual results and trends may differ materially from historical results or those projected in any such forward-looking statements depending on a variety of factors.  These factors include, but are not limited to, the following:

·the possibility that the parties may be unable to realize the expected benefits of the Acquisition;

·integration of the operations of JCG with ours may be more difficult, time-consuming or costly than expected and may not be as successful as the parties anticipate;

·revenues of the combined business following the Acquisition may be lower than expected;

·operating costs, customer loss and business disruption (including, without limitation, difficulties in maintaining relationships with employees, customers, clients or suppliers) of the combined business may be greater than expected following the Acquisition;

·the ability to retain our and JCG’s key employees following the Acquisition;

·we and JCG are subject to intense competition;

·in the future third parties may assert claims that could materially adversely affect the operating results of the combined company; and

·other factors described in this proxy statement under “Risk Factors.” (Page 8)

All forward-looking statements in this proxy statement are qualified in their entirety by this cautionary statement, and no person undertakes any obligation to update publicly any forward-looking statement for any reason, except as required by law, even as new information becomes available or other events occur in the future.  Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof.

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SUMMARY UNAUDITED HISTORICAL AND PRO FORMA FINANCIAL DATA

The following summary historical financial data of JCG and summary pro forma condensed combined financial data are being provided to help you in your analysis of the financial aspects of the Acquisition.  You should read this information in conjunction with the financial information included elsewhere and incorporated by reference in this proxy statement.  See “Where You Can Find More Information; Incorporation by Referenceon page 66, “Selected Historical Consolidated Financial Information of JCG” on page 33, “Unaudited Pro Forma Condensed Combined Financial Statements” on page 35 and “JCG’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” on page 50.

Summary Historical Financial Information of JCG

The following table sets forth certain of JCG’s consolidated financial data as of the nine months ended September 30, 2009 and 2008, and for the years ended December 31, 2008, 2007 and 2006.  The financial information as of and for the years ended December 31, 2008, 2007 and 2006 is derived from JCG’s audited consolidated financial statements, which are included with our Current Report on Form 8-K/A (Amendment No. 1), as filed with the Commission on January 22, 2010, and which are incorporated herein by reference.  The financial information as of and for the nine month periods ended September 30, 2009 and 2008 is derived from JCG’s unaudited consolidated financial statements, which are also included with our Current Report on Form 8-K/A (Amendment No. 1), as filed with the Commission on January 22, 2010, and which are incorporated herein by reference.  These statements, in JCG’s opinion, include all adjustments (consisting of normal recurring adjustments) necessary for a fair statement of JCG’s financial position and results of operations for such periods.  Interim results for the nine months ended September 30, 2009 are not necessarily indicative of results for the remainder of the fiscal year or for any future period.  The summary historical financial data below should be read in conjunction with the consolidated financial statements and related notes, incorporated herein by reference as discussed above, and in conjunction with the “JCG Management’s Discussion and Analysis of Financial Condition and Results of Operations” on page 50 of this proxy statement.

 

 

Nine Months Ended September 30,

 

Year Ended December 31,

 

 

 

2009

 

2008

 

2008

 

2007

 

2006

 

 

 

Unaudited
(in thousands)

 

(in thousands)

 

(in thousands)

 

(in thousands)

 

Statements of Operations Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

285,457

 

$

295,249

 

$

410,645

 

$

304,561

 

$

320,099

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

30,079

 

33,159

 

46,499

 

30,366

 

28,571

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before taxes

 

$

20,967

 

$

23,724

 

$

32,846

 

$

18,757

 

$

16,591

 

 

 

September 30,

 

December 31,

 

 

 

2009

 

2008

 

2007

 

2006

 

 

 

Unaudited
(in thousands)

 

(in thousands)

 

(in thousands)

 

(in thousands)

 

Balance Sheet Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

62,627

 

$

45,389

 

$

20,191

 

$

22,290

 

 

 

 

 

 

 

 

 

 

 

Working capital

 

26,487

 

31,215

 

18,272

 

21,921

 

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

41,407

 

40,271

 

33,714

 

20,798

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

185,171

 

162,311

 

126,997

 

110,295

 

 

 

 

 

 

 

 

 

 

 

Long-term debt, net

 

7,746

 

10,325

 

15,438

 

15,104

 

 

 

 

 

 

 

 

 

 

 

Members’ equity

 

$

60,341

 

$

58,308

 

$

36,099

 

$

27,274

 

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Summary Unaudited Pro Forma Condensed Combined Financial Data of Primoris

The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2008 and the nine months ended September 30, 2009 give pro forma effect to the Acquisition as if it had occurred on January 1, 2008.  The pro forma statements of operations are based on the historical results of our and JCG’s operations for the respective periods.  The unaudited pro forma combined condensed balance sheet as of September 30, 2009 gives pro forma effect to the Acquisition as if it had occurred on that date.

The adjustments presented in the unaudited pro forma condensed combined financial information have been identified and presented in “Unaudited Pro Forma Condensed Combined Financial Statements” on page 35 to provide relevant information necessary for an understanding of the combined company in connection with the consummation of the Acquisition.

This summary of pro forma data is being provided for illustrative purposes only.  We and JCG may have performed differently had the Acquisition occurred prior to the periods presented.  In addition, since the unaudited pro forma condensed combined financial statements have been prepared based on fair values of assets acquired and liabilities assumed, the actual amounts recorded may differ materially from the information presented.  Certain of these adjustments are based on preliminary estimates and assumptions, which could change during the purchase price measurement period, provided under generally accepted accounting principles (approximately one year), as we finalize the valuations for the net tangible assets and intangible assets.  You should not rely on the pro forma per share data presented as being indicative of the results that would have been achieved had we and JCG been combined during the periods presented or of the future results of us following the Acquisition.

 

 

Pro Forma Combined

 

 

 

Nine Months Ended

 

Year Ended

 

 

 

September 30, 2009

 

December 31, 2008

 

 

 

Unaudited — (in thousands)

 

Unaudited — (in thousands)

 

Statements of Operations Data:

 

 

 

 

 

Revenue

 

$

652,586

 

$

1,019,717

 

Gross profit

 

80,393

 

111,059

 

Income before taxes

 

 

47,767

 

 

62,355

 

Net income — pro forma

 

$

29,386

 

$

37,539

 

Earnings per share:

 

 

 

 

 

Basic

 

$

0.76

 

$

1.13

 

Diluted

 

$

0.71

 

$

1.03

 

Shares used in calculation:

 

 

 

 

 

Basic

 

38,695

 

33,254

 

Diluted

 

41,313

 

36,341

 

 

 

Pro Forma Combined

 

 

 

September 30, 2009

 

 

 

Unaudited — (in thousands)

 

Balance Sheet Data:

 

 

 

Cash and cash equivalents

 

$

103,107

 

Working capital

 

29,594

 

Property and equipment, net

 

92,208

 

Total assets

 

496,687

 

Long-term debt, net

 

30,224

 

Long-term purchase note payable

 

42,800

 

Stockholders’ equity

 

$

138,430

 

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RISK FACTORS

Before you make your decision regarding how to vote on the proposals set forth in this proxy statement, you should carefully consider each of the following risk factors and all of the other information contained in this proxy statement.  The risk factors described below relate primarily to the Acquisition, the consideration paid or to be paid to the Members and the business of the combined company.  We and JCG are also subject to certain additional risks and uncertainties inherent to the construction industry.  A description of these construction industry-specific risk factors is contained in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2008, which we filed with the Commission on March 24, 2009, and in our subsequently filed quarterly reports on Form 10-Q, which are incorporated herein by reference.   The risk factors described below are not the only risks that we will face following the Acquisition.  Additional risks and uncertainties not currently known to us may also materially and adversely affect our business operations and financial condition or the price of our common stock.

Risks Relating to the Acquisition

Cash expenditures and potential capital expenditures associated with the Acquisition may create significant liquidity and cash flow risks for us, and we may incur substantial debt in order to satisfy our obligations.Expense of soliciting proxies

Our principal sources of liquidity are our cash and cash equivalents and our credit facilities.  We currently have a revolving line of credit in the total aggregate amount of $35 million, comprised of two revolving loans in the amounts of $15 million and $20 million, with maturity dates of October 27, 2010 and October 28, 2012, respectively, and a $10 million (Canadian dollars) facility for commercial letters of credit in Canada with an expiration date of December 31, 2012.  At September 30, 2009, we had no amounts outstanding on the revolving line of credit and we had outstanding $700,000 (Canadian dollars) in letters of credit.  At September 30, 2009, our adjusted cash and cash equivalent balance totaled $80.3 million.  The cash expenditures required in connection with the Acquisition were substantial.  On the closing date, we paid certain of the Members a cash payment of $7 million and issued a Promissory Note in favor of all of the Members in the principal amount of $53.5 million.  In addition, we also incurred significant transaction expenses in connection with the Acquisition.

The line of credit facilities contain various restrictive covenants, including, among other things, restrictions on investments, capital expenditures, minimum working capital and tangible net worth requirements.  Violation of those covenants would place us in default, so we must manage our financial condition carefully.  Although in recent years we have generated sufficient net cash from our operations to meet our capital requirements, we will be substantially larger with greater operating cash needs as a result of the Acquisition.  If actual results fail to meet our expectations regarding the revenues and expenses of the acquired business, our historical cash flows may not be sufficient to meet our capital requirements.  If additional funding is required for operations, to cure loan defaults or for other purposes, we may attempt to seek funds from time to time through public or private equity or debt financing, although additional funds may not be available on terms acceptable to us or at all.  We may also decide to raise additional capital at such times and upon such terms as management considers favorable and in our interests.  Under the terms of the Purchase Agreement, however, until such time as the Closing Shares have been converted into shares of common stock, we have agreed not to issue any shares of our common stock, preferred stock or other securities convertible into shares of common stock or preferred stock except:

·to the Members;

·pursuant to transfers of shares of common stock issued and outstanding as of November 18, 2009; and

·pursuant to existing common stock purchase warrants and stock options.

The failure of our stockholders to approve the conversion of the Closing Shares could adversely affect our ability to raise additional capital, if needed, which, in turn, could have a material adverse effect on our operations and financial condition.

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If our stockholders approve the conversion of the Closing Shares and the issuance of the shares of common stock issuable upon the conversion of the Closing Shares, our stockholders will be diluted.  In addition, if our stockholders approve the issuance of the Earnout Shares, and we are ultimately required to issue such shares, our stockholders will experience further dilution.

Prior to the closing of the Acquisition, we had 32,704,903 shares of common stock outstanding.  If our stockholders approve the conversion of the Closing Shares, the Closing Shares will automatically convert into 8,185,278 shares of common stock, which would represent an increase of approximately 25% in the number of shares of common stock outstanding prior to the Acquisition and result in a dilution of the existing ownership interests of our common stockholders.

In addition, if JCG’s EBITDA, as defined in the Purchase Agreement, for the fiscal year ending December 31, 2010 is equal to or greater than $35 million, we have agreed to pay the Members, as earnout consideration, a number of shares of common stock equal to $10 million, divided by the average closing price of our common stock, as reported on NASDAQ, for the 20 business days prior to December 31, 2010.  Although we cannot currently determine the number of Earnout Shares, if any, that we may be required to issue at the end of the earnout period, the issuance of any Earnout Shares would result in further dilution of the existing ownership interests of our common stockholders.  By way of illustration, if we were required to issue the maximum number of Earnout Shares, we would be required to issue an additional 6,508,276 shares of common stock, which would represent a 19.9% increase in the number of shares of common stock outstanding prior to the Acquisition and, according to the formula above, would reflect a 20-day average closing price of $1.54 per common share.

If our stockholders approve both proposals set forth in this proxy statement and the maximum number of Earnout Shares become issuable, the total number of shares of common stock issued in connection with the Acquisition would represent an approximately 45% increase in the number of shares of common stock outstanding prior to the Acquisition, resulting in substantial dilution of the existing ownership interests of our common stockholders.

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The actual value of the consideration potentially payable to the Members pursuant to the Purchase Agreement may exceed the nominal value specified in the Purchase Agreement.

Under the Purchase Agreement, as part of the consideration for the Acquisition, we agreed to issue additional contingent shares, or Earnout Shares, for a value of $10 million should certain financial milestones be achieved.  The Purchase Agreement provides that the value of the Earnout Shares would be based on the average closing price of our common stock, as reported on NASDAQ, for the 20 business days prior to December 31, 2010.  Because we will calculate an average share price, rather than establish the value as of the closing share price on December 31, 2010, there may be a difference to the value between the two amounts.  This could result in providing a value for the Acquisition consideration greater than the indicated value of $10 million.

As shares of our common stock issued in connection with the Acquisition become eligible for public resale, the sale of those shares could adversely impact our stock price.

Subject to certain specified exceptions and limitations, we granted the Members “piggyback” registration rights, pursuant to which we have agreed to use our reasonable best efforts to include the shares of common stock issuable upon the conversion of the Closing Shares and the Earnout Shares in any registration statement (other than pursuant to a registration statement on Forms S-4 or S-8 or any successor or similar forms, or a registration on any form that does not permit secondary sales) that we file after the closing date.  If we file a registration statement including such shares and the registration statement is declared effective, a substantial number of shares of our common stock would become eligible for public resale.  Even if we did not file a registration statement, certain of such shares may become eligible for public resale at the end of the applicable holding period under Rule 144 of the Securities Act.  Our stock price may suffer a significant decline as a result of the sudden increase in the number of shares of common stock sold in the public market or market perception that the increased number of shares of common stock available for sale will exceed the demand for our common stock.

Our integration with JCG may not be completed successfully, cost-effectively or on a timely basis.

We have significantly more assets and employees to manage than we did prior to the Acquisition.  The integration process will require us to significantly expand the scope of our operations and financial systems.  Our management will be required to devote a significant amount of time and attention to the process of integrating us with JCG.  There is a significant degree of difficulty and management involvement inherent in that process.  These difficulties include, among others:

·the diversion of management’s attention from the day-to-day operations of the combined company;

·the management of a significantly larger company than before completion of the Acquisition;

·the assimilation of JCG employees and the integration of two business cultures;

·retaining key personnel;

·the integration of information, accounting, finance, sales, billing, payroll and regulatory compliance systems;

·challenges in keeping existing customers and obtaining new customers; and

·challenges in combining service offerings and sales and marketing activities.

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There can be no assurance that we will successfully or cost-effectively integrate JCG’s operations with our own and the costs of achieving systems integration may substantially exceed our current estimates.  For example, because JCG was formerly a privately-held company, JCG has not had to comply with the requirements of the Sarbanes-Oxley Act of 2002 for internal controls and other procedures.  Bringing its systems into compliance with those requirements may cause us to incur substantial additional expense.  In addition, the integration process may cause an interruption of or loss of momentum in the activities of our business after the Acquisition.  If our management is not able to effectively manage the integration process or if any significant business activities are interrupted as a result of the integration process, our business could suffer and our results of operations and financial condition may be negatively affected.

We may not be able to realize the benefits we expect to achieve from the Acquisition.

Strategic transactions like the Acquisition create numerous uncertainties and risks.  The combined company may not be able to realize the expected revenue growth and other benefits that we seek to achieve from the Acquisition.  We believe that our businesses are complementary in a number of respects and that the combined company can take advantage of economies of scale and other benefits in the following areas, among others:

·market expansion;

·increased sales to existing customers;

·service and technology synergies;

·operational synergies;

·materials and suppliers;

·     ��            geographic synergies; and

·cultural synergies.

However, these anticipated benefits are based on projections and assumptions, not actual experience, and actual results may deviate from our expectations for a variety of reasons, including those discussed in these risk factors and elsewhere in this proxy statement.

The addition of two new directors to our board of directors may have an anti-takeover effect.

Pursuant to the Purchase Agreement, we created two new “Class C” directorships with terms expiring at the 2011 annual meeting of our stockholders.  The size of our board of directors increased from eight to ten members.  The increase in size of our board of directors could, under certain circumstances, have an anti-takeover effect.  The expansion of the board of directors may discourage a potential acquirer from seeking to acquire shares of our common stock (whether by making a tender offer or otherwise) or otherwise attempting to obtain control of us, or make such process more difficult.

If our stockholders approve of the conversion of the Closing Shares, we will no longer be deemed to be a “controlled company” pursuant to the NASDAQ listing requirements and will no longer be exempt from certain corporate governance requirements.

Currently, Brian Pratt, our chief executive officer, president and chairman, holds in excess of 50% of our voting power for the election of directors.  As a result, we are currently considered a “controlled company” pursuant to NASDAQ Listing Rule 5615(c).  A controlled company is a company of which more than 50% of the voting power for the election of directors is held by an individual, a group or another company.  As a controlled company, we are currently exempt from certain NASDAQ corporate governance requirements, including:

·NASDAQ Listing Rule 5605(b), which requires that a majority of our board of directors be comprised of independent directors;

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·NASDAQ Listing Rule 5605(d), which requires that compensation of our chief executive officer and all other executive officers must be determined or recommended to the board of directors for determination by (a) independent directors constituting a majority of the board of directors’ independent directors in a vote in which only independent directors participate or (b) a compensation committee comprised solely of independent directors; and

·NASDAQ Listing Rule 5605(e), which requires that director nominees must either be selected or recommended for the board of directors’ selection by (a) independent directors constituting a majority of the board of directors’ independent directors in a vote in which only independent directors participate or (b) a nominations committee comprised solely of independent directors.

Currently, we voluntarily comply with NASDAQ Listing Rule 5605(b) because our board of directors is comprised of a majority of independent directors.  However, in reliance on the controlled company exemption, we do not currently comply with NASDAQ Listing Rules 5605(d) and (e). If our stockholders approve the conversion of the Closing Shares, Mr. Pratt will no longer beneficially hold greater than 50% of our voting power for the election of directors and we will no longer be considered a controlled company.  As a result, we will be required to comply with NASDAQ Listing Rules 5605(d) and (e).

Risks Relating to the Combined Company

Uncertainties associated with the Acquisition or the combined company may cause delays in customer orders or even loss of customers, which could offset any benefits we may realize from the diversification of our customer base.

In response to the closing of the Acquisition, or due to the diversion of management’s attention, current and potential customers may delay or defer decisions concerning their use of our services.  In particular, prospective customers could be reluctant to purchase the combined company’s services due to uncertainty about the direction of the combined company.  To the extent that the Acquisition creates uncertainty among those persons and organizations contemplating purchases such that one large customer, or a significant group of smaller customers, delays, defers or changes purchases in connection with the Acquisition, our results of operations would be adversely affected.

There is no assurance that we will be able to continue or expand upon JCG’s past success in securing bids for new contracts.

JCG has maintained successful relationships with a wide range of customers.  There is no assurance that we will be able to replicate or improve upon JCG’s success in bidding on and securing projects for these and other customers following the Acquisition.  If we are unsuccessful at maintaining JCG’s relationships, 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 the combined company’s financial condition, results of operations and cash flows.

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A decrease in government funding of infrastructure and other public projects could reduce the revenues of the combined company.

Civil construction markets are dependent on the amount of infrastructure work funded by various governmental agencies which, in turn, depends on the condition of the existing infrastructure, the need for new or expanded infrastructure and federal, state or local government spending levels.  A slowdown in economic activity in any of the markets that the combined company will serve may result in less spending on public works projects.  In addition, a decrease or delay in government funding of infrastructure projects or delays in the implementation of voter-approved bond measures could decrease the number of civil construction projects available and limit our ability to obtain new contracts, which could reduce revenues within the combined company’s civil construction segments.

Risks Relating to the Construction Industry

We and JCG are also subject to certain additional risks and uncertainties inherent to the construction industry.  A description of these construction industry-specific risks is contained in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2008, which we filed with the Commission on March 24, 2009, and in our subsequently filed quarterly reports on Form 10-Q, which are incorporated herein by reference.   You should carefully read and review these risk factors before you make your decision regarding how to vote on the proposals set forth in this proxy statement.

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SPECIAL MEETING OF PRIMORIS STOCKHOLDERS

Date, Time and Place of Special Meeting

This proxy statement is being furnished in connection with the solicitation of proxies on behalf of our board of directors for use at a special meeting of our stockholders to be held on April 12, 2010, at 10:00 A.M., Pacific Standard Time at our offices located at 26000 Commercentre Drive, Lake Forest, California 92630, or at any adjournments or postponements thereof.  If you need directions to the location of the special meeting in order to attend the meeting and vote in person, please contact us at (949) 598-9242.

Purpose of Special Meeting

The special meeting is being held to request that stockholders consider and vote upon two proposals:

·approval of the issuance of (a) 8,185,278 shares of common stock issuable upon the conversion of the Closing Shares and (b) up to 6,508,276 Earnout Shares; and

·approval of the conversion of the Closing Shares into 8,185,278 shares of common stock.

We do not expect a vote to be taken on any other matters at the special meeting.  If any other matters are properly presented at the special meeting for consideration, however, the holders of the proxies, if properly authorized, will have discretion to vote on these matters in accordance with their best judgment.

Record Date; Voting Information

The record date for the special meeting is March 9, 2010.  If you were a common stockholder of record at the close of business on the record date, you are entitled to notice of, and to vote at, the special meeting and any adjournments thereof.  At the close of business on the record date, 33,121,567 shares of our common stock were outstanding and entitled to vote.  Stockholders are entitled to one vote on each matter submitted to the stockholders for each share of our common stock held as of the record date.  The shares of Series A Preferred Stock issued to the Members in connection with the Acquisition do not have voting rights and therefore the holders of the Series A Preferred Stock are not entitled to vote at the special meeting.

Quorum

Shares entitled to vote at the special meeting may take action on a matter at the special meeting only if a quorum of those shares exists with respect to that matter.  The presence at the meeting, in person or when authorized, by means of remote communication or represented by proxy, of the holders a majority of the issued and outstanding shares of our common stock entitled to vote at the special meeting will constitute a quorum for the transaction of business at the special meeting.  As noted above, on the record date, there were 33,121,567 shares of our common stock issued and outstanding.  As a result, the presence in person or by proxy of 16,560,785 shares of our common stock will constitute a quorum for the transaction of business at the special meeting.

Required Votes

The proposal to approve of the issuance of (a) 8,185,278 shares of common stock issuable upon the conversion of the Closing Shares and (b) up to 6,508,276 Earnout Shares, must be approved by the affirmative vote of the majority of the shares present in person or represented by proxy and voting on the proposal.

The proposal to approve of the conversion of the Closing Shares into 8,185,278 shares of common stock must be approved by the affirmative vote of the majority of the shares present in person or represented by proxy and voting on the proposal.

Abstentions and Broker Non-Votes

Brokers, banks or other nominees who hold shares of our common stock for a beneficial owner have the discretion to vote on routine proposals when they have not received voting instructions from the beneficial owner of

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the shares prior to the special meeting.  A “broker non-vote” occurs when a broker, bank or other nominee does not receive voting instructions from the beneficial owner and does not have the discretion to direct the voting of the shares.  Broker non-votes will be counted for purposes of calculating whether a quorum is present at the special meeting, but will not be counted for purposes of determining the number of votes present in person or represented by proxy and entitled to vote with respect to a particular proposal.  Thus, a broker non-vote will make a quorum more readily obtainable, but will not otherwise affect the outcome of the vote on a proposal that requires the approval of a majority of the votes present in person or represented by proxy and entitled to vote.  With respect to a proposal that requires the approval of a majority of the outstanding shares, a broker non-vote has the same effect as a vote AGAINST the proposal.  However, no such proposals are being voted on at the special meeting.  Abstentions will be considered present at the special meeting for the purpose of determining a quorum and will count as votes cast on the proposals.  An abstention on either proposal will have the same effect as a vote AGAINST the proposal.

Adjournment or Postponement

If a quorum is not present or represented at the special meeting, then either the chairperson of the special meeting or the stockholders holding a majority of the shares represented at the special meeting in person or by proxy have the power to cause the meeting to be adjourned, from time to time, without notice other than announcement at the meeting, until a quorum is present or represented by proxy.  At an adjourned meeting at which a quorum is present or represented by proxy, any business may be transacted which might have been transacted at the original special 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 will be given to each stockholder of record entitled to vote at the adjourned meeting.

Recommendation of Primoris’ Board of Directors

Our board of directors unanimously recommends that you vote:

·FOR the approval of the issuance of (a) 8,185,278 shares of common stock issuable upon the conversion of the Closing Shares and (b) up to 6,508,276 Earnout Shares; and

·FOR the approval of the conversion of the Closing Shares into 8,185,278 shares of common stock.

Solicitation and Voting Procedures

You may vote by mail or by attending the special meeting in person and voting by ballot.  If you choose to vote by mail, simply mark your proxy card, date and sign it and return it to our transfer agent, Continental Stock Transfer & Trust Company, in the postage-paid envelope provided.

Submitting your completed proxy card will not limit your right to vote at the special meeting if you attend the special meeting and vote in person.  However, if your shares of common stock are held in the name of a broker, bank or other nominee, you must obtain a proxy, executed in your favor, from the holder of record to be able to vote at the special meeting.  You should allow yourself enough time prior to the special meeting to obtain this proxy from the holder of record.

The shares of common stock represented by the proxy cards received, properly marked, dated, signed and not revoked, will be voted at the special meeting.  If you sign and return your proxy card but do not give voting instructions, the shares of common stock represented by that proxy card will be voted as recommended by the board of directors.

 

We will pay the costs for the solicitation of proxies, including the cost of preparing and mailing this proxy statement.Proxy Statement. Proxies are being solicited primarily by mail, but the solicitation by mail may be followed-up by solicitation in person, or by telephone or facsimile, by our regular employees without additional compensation for such proxy solicitation activity. We will reimburse brokers, banks and other custodians and nominees for their reasonable out-of-pocket expenses incurred in sending proxy materials to our stockholders.

 

Stockholder proposal deadline for the 2012 Annual Meeting

The rules of the SEC establish the eligibility requirements and the procedures that must be followed for a stockholder’s proposal to be included in a public company’s proxy materials. Under those rules, proposals submitted for inclusion in our 2012 proxy materials must be received on or before the close of business on the day that is 120 days prior to [April 8, 2012].  Proposals for inclusion in our 2012 proxy materials must comply with the procedures set forth in Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

In addition to the requirements of the SEC, our Amended and Restated Bylaws (“Bylaws”) provide that in order for a proposal to be properly brought before an Annual Meeting of Stockholders, it must be either (1) specified in the notice of the meeting given by us, (2) otherwise brought before the meeting by or at the direction of our Board, or (3) properly brought before the meeting by a stockholder entitled to vote at the meeting and who complies with the following notice procedures: (i) the stockholder must give timely notice thereof in writing of the business to be brought before such meeting to our Secretary, and (ii) such business must be a proper matter for stockholder action under the Delaware General Corporation Law. Our Bylaws provide that to be timely, a stockholder’s notice must be delivered to our Secretary at our principal executive offices not less than 45 days prior to the first anniversary of the date on which we first mailed our proxy materials for the preceding year’s Annual Meeting. If the date of the subsequent year’s Annual Meeting of Stockholders is changed by more than 30 days from the date of the prior year’s meeting, notice by the stockholder for the subsequent year’s Annual Meeting must be delivered to our Secretary within a “reasonable time” prior to our mailing of the proxy materials for the subsequent year’s Annual Meeting of Stockholders. We expect to announce the date of the 2012 Annual Meeting of Stockholders in early 2012.

If a stockholder proposes to nominate for election or reelection a director, the stockholder’s notice must include all information relating to such director nominee that is required to be disclosed in solicitation of proxies for election of directors in an election contest, or otherwise required, in each case, pursuant to Regulation 14A and Rule 14a-11 under the Exchange Act.

For any business that a stockholder desires to bring before an annual meeting, the stockholder’s notice must comply with all applicable requirements of the Exchange Act and the rules and regulations promulgated thereunder, and must include the following:

·

a brief description of the proposal and the reasons for the proposal;

·

the name and address of such stockholder, and of such beneficial owner, as they appear on our books;

·

the class and number of shares of Common Stock which are owned beneficially and of record by such stockholder or such beneficial owner;

·

a representation that the stockholder is a holder of record of Common Stock 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

·

a representation whether the stockholder or the beneficial owner intends or is part of a group which intends (a) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of our outstanding capital stock required to approve or adopt the proposal or elect the nominee and/or (b) otherwise to solicit proxies from stockholders in support of such proposal or nomination.

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Any stockholder who intends to present a proposal at the 2012 Annual Meeting of Stockholders must send the proposal via standard mail, overnight delivery or other courier service, to Primoris Services Corporation, 2100 McKinney Avenue, Suite 1500, Dallas, Texas 75201, Attention: Secretary.

Information about Primoris Services Corporation

We maintain a corporate website at www.prim.com. Visitors to the Investor Relations section of our website can view and print copies of our SEC filings, including this Proxy Statement and Forms 10-K, 10-Q and 8-K. Copies of the charters for our Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee and our Code of Ethics, are also available through our website. Alternatively, stockholders may obtain, without charge, copies of all of these documents by writing to Investor Relations at the Company’s headquarters. Please note that the information contained on our website is not incorporated by reference in, or considered to be a part of, this Proxy Statement.

Documents not incorporated by reference into this Proxy Statement

The Audit Committee Report and the Compensation Committee Report are not deemed filed with the SEC and shall not be deemed incorporated by reference into any prior or future filings made by us under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except to the extent that we specifically, and in writing, incorporate such information by reference.

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MATTERS TO COME BEFORE THE MEETING

PROPOSAL 1—ELECTION OF DIRECTORS

(Item 1 on Proxy Card)

General Information

We currently have a classified Board consisting of ten members.  Six of our Directors are non-employee independent Directors under the NASDAQ rules.  Our Directors are divided into three classes (Class A, Class B and Class C). Directors in each class are elected to serve for three-year terms that expire in successive years. The terms of Class C Directors Michael D. Killgore, Robert A. Tinstman, Eric S. Rosenfeld and David D. Sgro expire at the upcoming 2011 Annual Meeting.  In March 2011, the Board of Directors’ Nominating and Governance Committee recommended to the Board a reduction in the number of Board positions, from 10 to 9 Board positions.  The Board of Directors adopted that recommendation.

The Nominating and Governance Committee also recommended the nomination of Michael D. Killgore, Robert A. Tinstman and Eric S. Rosenfeld for re-election as Class C Directors for three-year terms expiring at the 2014 Annual Meeting, or until their successors are elected and qualified or their earlier death, resignation or removal.  If the nominees decline to serve or become unavailable for any reason, or if any vacancy occurs before the election at the 2011 Annual Meeting (although we know of no reason to anticipate that this will occur), the proxies may be voted for such substitute nominees as the Board may designate.

Each nominee has consented to being named in this Proxy Statement and has agreed to serve if elected. If a quorum is present and voting, the three nominees receiving the highest number of votes will be elected as Class C Directors. Abstentions and broker non-votes have no effect on the result of the vote; however, abstentions and broker non-votes will be counted as shares present for purposes of determining the presence of a quorum.

Information Regarding Directors and Director Nominees

The following table sets forth information regarding our current Directors, including the Class C Director nominees for election at the Annual Meeting. The term of David D. Sgro expires at the 2011 Annual Meeting, and he is not standing for re-election. There are no family relationships among any Directors, nominees or named executive officers of the Company.

Name

 

Position with our Company

 

Age

 

Director
Since

 

 

 

 

 

 

 

 

 

Class C Directors whose terms will expire in 2011 and are re-nominated for terms ending at the 2014 Annual Meeting:

 

 

 

 

 

 

 

 

 

Eric S. Rosenfeld

 

Director

 

53

 

2006

 

Michael D. Killgore

 

Director, Executive Vice President and Director of Construction Services

 

54

 

2010

 

Robert A. Tinstman

 

Director

 

64

 

2010

 

 

 

 

 

 

 

 

 

Class A Directors whose terms will expire at the 2012 Annual Meeting:

 

 

 

 

 

 

 

 

 

Brian Pratt

 

Director, Chairman of the Board, Chief Executive Officer and President

 

59

 

2008

 

Thomas E. Tucker

 

Director

 

68

 

2008

 

Peter C. Brown

 

Director

 

67

 

2009

 

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Class B Directors whose terms will expire at the 2013 Annual Meeting:

 

 

 

 

 

 

 

 

 

John P. Schauerman

 

Director, Executive Vice President, Corporate Development

 

54

 

2008

 

Stephen C. Cook

 

Director

 

61

 

2008

 

Peter J. Moerbeek

 

Director, Executive Vice President, Chief Financial Officer

 

63

 

2008

 

The person(s) named in the enclosed proxy will vote to elect nominated Michael D. Killgore, Robert A. Tinstman and Eric S. Rosenfeld as Class C Directors, unless you withhold the authority of these persons to vote for the election of any or all of the nominees by marking the proxy to that effect.

OUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR MICHAEL D. KILLGORE, ROBERT A. TINSTMAN AND ERIC S. ROSENFELD AS CLASS C DIRECTORS TO HOLD OFFICE UNTIL OUR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD IN 2014 OR UNTIL THEIR RESPECTIVE SUCCESSORS ARE DULY ELECTED AND QUALIFIED OR UPON THEIR EARLIER DEATH, RESIGNATION OR REMOVAL.

Director Biographies and Special Skills

Nominees for Reelection at the 2011 Annual Meeting (Class C)

MICHAEL D. KILLGORE was appointed a Director on December 18, 2009 at the time we purchased James Construction Group, LLC.  He was named as our Executive Vice President, Director of Construction Services in March 2010.  He is responsible for overall operations management for our “East Construction Services” and “West Construction Services” business segments.  He has been employed by James Construction Group and its predecessor companies since 1977 and was Chief Executive Officer of James Construction Group from 2007 to 2010. Mr. Killgore received a B.S. Civil Engineering degree from Louisiana Tech University in 1978.  He is a registered Civil and Environmental Engineer in the state of Louisiana.

We believe that Mr. Killgore’s knowledge and experience as a senior executive of a major construction firm and his knowledge and understanding of the construction industry qualify him to serve on our Board.

ROBERT A. TINSTMAN was appointed a Director on December 18, 2009 at the time we purchased James Construction Group, LLC.  Mr. Tinstman is currently the President of Tinstman and Associates, LLC. From 1974-1999, he was employed by Morrison Knudsen and served as its President/Chief Executive Officer for the period 1995-1999.  Mr. Tinstman was the Executive Chairman of James Construction Group from 2003-2007. Mr. Tinstman is a registered Professional Engineer in the state of Idaho. He graduated from University of Wisconsin, Platteville, with a B.S., Mining Engineering in 1968.

Mr. Tinstman is also a director on the following public company boards:  IDA CORP, Inc., where he is chairman of the compensation committee; Home Federal Bancorp, where he is a member of the audit and compensation committees; and CNA Surety, where he is a member of the audit committee and chairman of the compensation committee.

We believe that Mr. Tinstman’s qualifications to serve on our Board include his experience as President and Chief Executive Officer of one of the largest construction companies in the United States as well as his wealth of knowledge of business systems and construction operations. The Board determined that Mr. Tinstman meets the NASDAQ rules for independence and is therefore an independent director.

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ERIC S. ROSENFELD has served as one of our Directors since 2006. He was Chairman of the Board, Chief Executive Officer and President of Rhapsody Acquisition Corp. from its founding in 2006 through its merger with Primoris in July 2008. Mr. Rosenfeld has been the President and Chief Executive Officer of Crescendo Partners, L.P., an investment firm, since its formation in November 1998. From 1985 to 1998, Mr. Rosenfeld was a managing director at CIBC Oppenheimer and its predecessor company Oppenheimer & Co., Inc. Mr. Rosenfeld has also served as chairman and/or director on the boards of various companies. Mr. Rosenfeld received an A.B. in Economics from Brown University and an M.B.A. from Harvard Business School.

We believe that Mr. Rosenfeld’s business and investment banking expertise and his directorships on both private and public companies qualify him to serve on our Board. The Board determined that Mr. Rosenfeld meets the NASDAQ rules for independence and is therefore an independent director.

Directors with Terms Expiring at the 2012 Annual Meeting (Class A)

BRIAN PRATT has been a Director and our Chairman as well as our President and Chief Executive Officer since July 2008. Mr. Pratt directs strategy, establishes goals and oversees our operations. Since 1983, he served as the President, Chief Executive Officer and Chairman of the Board of Primoris and its predecessor, ARB, Inc., a California corporation. Prior to July 2008, Mr. Pratt was the majority owner of Primoris. Mr. Pratt has over 30 years of hands-on operations and management experience in the construction industry.  Mr. Pratt completed four years of courses in Civil Engineering at California Polytechnic College in Pomona.

Mr. Pratt has developed an intimate knowledge of our business, employees, culture, competitors and the effect on our business of various government policies.  We believe that his long history and experience with Primoris, and his in-depth knowledge of the construction industry demonstrate that Mr. Pratt is well qualified to serve on our Board.

THOMAS E. TUCKER has served as one of our Directors since July 2008. He is currently Chairman of Pennhill Land Company, a real estate development and investment company, where he has worked since he founded the company in 1983. He served as a Board Member of RSI Holding Corporation, a privately held national manufacturer of cabinets for homes, from 2002 to November 2008. Prior to that, he served as an Advisory Board Member of ORCO Block Company, a Southern California manufacturer of block products, and Gemini Investors, a Boston based Investment Capital firm. Mr. Tucker also serves as a board member of the Segerstrom Center for the Arts in Orange County, California. Mr. Tucker received a B.S. in Business from the University of Southern California.

We believe that Mr. Tucker’s experience as a founder and executive officer of a large real estate development company, his expertise in the real estate development business and his directorships of both private and public companies qualify him to serve on our Board.  The Board determined that Mr. Tucker meets the NASDAQ rules for independence and is therefore an independent director.

PETER C. BROWN joined our Board on February 6, 2009. He has served since 1974 as President and Senior Principal Stockholder of Brown Armstrong Accountancy Corporation, a regional provider of tax, audit, consulting and business services headquartered in Bakersfield, California.  Mr. Brown received a B.S. in Accounting from the University of Arizona.  He is a member of the American Institute of Certified Public Accountants, the California Society of Certified Public Accountants and the Colorado Society of Certified Public Accountants.

We believe that Mr. Brown’s qualifications to serve on our Board include his in-depth knowledge and understanding of generally accepted accounting principles, his background of taxation regulations, experience in preparing, auditing and analyzing financials statements and understanding the responsibilities and functions of audit committees.  The Board determined that Mr. Brown meets the NASDAQ rules for independence and is therefore an independent director.

Directors with Terms Expiring at the 2013 Annual Meeting (Class B)

JOHN P. SCHAUERMAN was named as our Executive Vice President, Corporate Development effective February 6, 2009, and has served as a Director since July 2008. He previously served as our Chief Financial Officer, and served as the Chief Financial Officer of Primoris from February 2008 to February 2009.  He also served as a Director of Primoris and its predecessor entity from 1993 to July 2008. He joined our wholly-owned subsidiary, ARB, Inc., in 1993, as Senior Vice President. In his current role, he is responsible for developing and integrating our overall strategic plan, including the evaluation and structuring of new business opportunities and acquisitions. Prior to joining ARB, Inc., he was Senior Vice President of Wedbush Morgan Securities.  Mr. Schauerman received a B.S. in Electrical Engineering from UCLA and an M.B.A. from Columbia Business School.

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We believe that Mr. Schauerman’s qualifications to serve on our Board include his knowledge of our business, employees, culture, competitors and the effect on our business of various government policies.

STEPHEN C. COOK has served as one of our Directors since July 2008 and in May 2010 was appointed by the Board as Lead Director of the Company. He has served as President and principal stockholder of Fieldstone Partners, a Houston, Texas-based investment banking firm, focused primarily on corporate merger and acquisition advisory services, since 1990. He has over 30 years of experience in the investment banking business, including 10 years with Rotan Mosle, Inc., a Texas-based regional investment firm and underwriter where he served as co-head of the corporate finance department and as a Director of the firm. Mr. Cook received an A.B. in Economics from Princeton University and an M.B.A. from Harvard Business School.

We believe that Mr. Cook’s qualifications to serve on our Board include his business and investment banking experience and his wealth of knowledge of mergers and acquisitions. The Board has determined that Mr. Cook meets the NASDAQ rules for independence and is therefore an independent director.

PETER J. MOERBEEK was named our Executive Vice President, Chief Financial Officer effective February 6, 2009. He has served as one of our Directors since July 2008 and was Chairman of the Audit Committee until February 2009. From 2006 through February 2009, he was the Chief Executive Officer and a founder of a private equity-funded company engaged in the acquisition and operation of water and wastewater utilities. From August 1995 to June 2006, Mr. Moerbeek held several positions with publicly traded Southwest Water Company, a California based company which provides water and wastewater services, including Director from 2001 to 2006; President and Chief Operating Officer from 2004 to 2006; President of the Services Group from 1997 to 2006; Secretary from 1995 to 2004; and Chief Financial Officer from 1995 to 2002. From 1989 to 1995, Mr. Moerbeek was the Vice President of Finance and Operations for publicly traded Pico Products, Inc., a manufacturer and distributor of cable television equipment.  Mr. Moerbeek received a B.S.E.E. and an M.B.A. from the University of Washington and is a licensed certified public accountant.

We believe that Mr. Moerbeek’s qualifications to serve on our Board include his experience as the chief operating officer and the chief financial officer of a NASDAQ listed company, as well as his in-depth knowledge and understanding of generally accepted accounting principles, experience in analyzing financial statements, understanding of internal control over financial reporting and his understanding of audit committee functions.

Board Compensation

The Board approved the following compensation program for non-employee Directors. We do not pay employee Directors for Board service in addition to their regular employee compensation, and therefore, compensation information for Mr. Pratt, Mr. Moerbeek, Mr. Killgore and Mr. Schauerman are reported in the Summary Compensation Table under “Executive Compensation”.

Currently, compensation for non-employee Directors is paid in cash.  Board compensation is reviewed by the Compensation Committee, which recommends proposed changes to the Board.  No changes have been made to the Board’s compensation levels since July 2008.

For 2011, compensation includes the following components:

·$86,000 annually to each member of the Board;

·$15,000 annually to the Chairman of the Audit Committee; and

·$10,000 annually to the Chairman of the Compensation Committee.

In addition, Directors are reimbursed for expenses incurred in connection with Board and Board Committee meetings and assignments.

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The table below details the compensation earned by our non-employee Directors in 2010.

Non-Employee Director

 

Fees
Earned
or Paid in
Cash

 

Non-Equity
Incentive Plan
Compensation

 

All Other
Compensation
(1)

 

Total

 

Peter C. Brown

 

$

101,000

 

$

 

$

 

$

101,000

 

Stephen C. Cook

 

$

96,000

 

$

 

$

 

$

96,000

 

David D. Sgro

 

$

86,000

 

$

 

$

 

$

86,000

 

Eric S. Rosenfeld

 

$

86,000

 

$

 

$

 

$

86,000

 

Thomas E. Tucker

 

$

86,000

 

$

 

$

 

$

86,000

 

Robert A. Tinstman

 

$

86,000

 

$

 

$

 

$

86,000

 


(1)Stock Awards and Option Awards: During the year 2010, no stock awards or stock option grants were issued to our non-employee Directors. As of December 31, 2010, there were no stock awards or stock option grants outstanding.

Stockholder Communications with the Board of Directors

Stockholders may communicate with any of our Directors, including our Chairman, or the Chairman of any of the Committees of the Board, or the non-management Directors, as a group, by writing to them at Primoris Services Corporation, c/o Secretary, 2100 McKinney Avenue, Suite 1500, Dallas, Texas 75201. Please specify to whom your correspondence should be directed. The Secretary will promptly forward all correspondence to the Board or any specific committee member, as indicated in the correspondence, except for mass mailings, job inquiries, surveys, business solicitations or advertisements, or patently offensive or otherwise inappropriate material. Our Secretary may forward certain correspondence, such as product-related or service-related inquiries, elsewhere within the Company for review and possible response.

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PROPOSAL 2

TO PROVIDE A NON-BINDING ADVISORY VOTE

APPROVING THE COMPANY’S EXECUTIVE COMPENSATION PROGRAM

(Item 2 on Proxy Card)

At the meeting, the stockholders will vote on a non-binding, advisory resolution regarding the compensation of the Company’s named executive officers.

We believe that our compensation policies and procedures are competitive and strongly aligned with the long-term interest of our stockholders.  This advisory stockholder vote, commonly known as “Say-on-Pay”, gives you as a stockholder the opportunity to express approval or withhold approval of the compensation we pay our named executive officers through voting for or against the following resolution:

“Resolved, that the stockholders approve the compensation of the Company’s named executive officers as disclosed in the Company’s 2011 proxy statement pursuant to the disclosure rules of the Securities and Exchange Commission (which disclosure includes the Compensation Discussion and Analysis, the Summary Compensation Table and the other executive compensation tables and related discussions).”

The Company and the Compensation Committee remain committed to the compensation philosophy, policies and objectives outlined under the heading “Compensation Discussion and Analysis” in this proxy statement.  The Compensation Committee will continue to review all elements of the executive compensation program and take any steps it deems necessary to continue to fulfill the objectives of the program.

Stockholders are encouraged to carefully review the “EXECUTIVE COMPENSATION” section of this proxy statement for a detailed discussion of the Company’s executive compensation program.

Because your vote is advisory, it will not be binding upon the Company or the Board of Directors.  However, the Compensation Committee will take into account the outcome of the vote when considering future executive compensation arrangements.

OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE RATIFICATION OF THE ADVISORY (NON-BINDING) PROPOSAL ON THE COMPENSATION OF THE COMPANY’S NAMED EXECUTIVE OFFICERS.

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PROPOSAL 3

TO PROVIDE A NON-BINDING ADVISORY VOTE ON THE PROPOSED

 TIMELINE FOR SEEKING EXECUTIVE COMPENSATION ADVISORY VOTES IN THE FUTURE

(Item 3 on Proxy Card)

At the meeting, the stockholders will vote on a non-binding, advisory proposal regarding the frequency of the advisory stockholder vote on executive compensation discussed in Proposal 2 above in this proxy statement.  Stockholders will have the opportunity to cast an advisory vote on whether the stockholder vote on executive compensation should occur every three years, two years or one year.  Stockholders may also abstain from voting on the matter.

Because your vote is advisory, it will not be binding upon the Company or the Board of Directors.  However, the board of directors will take into account the outcome of the vote when considering the frequency of the advisory stockholder vote on executive compensation.

We believe this approach provides the most efficient form of communication and lends itself to the long-term nature of the compensation plans for our management.  The vote corresponds to the information presented in the accompanying proxy statement for the annual stockholders meeting.  We emphasize that you are not voting to approve or disapprove the Board of Directors’ recommendation.  Instead, your proxy card provides you with four options regarding this advisory, non-binding proposal.  You may cast an advisory vote for the stockholder vote on executive compensation to occur every third year, every other year, or every year, or you may abstain from voting on the matter.

OUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR AN ADVISORY STOCKHOLDER VOTE ON EXECUTIVE COMPENSATION EVERY THIRD YEAR.

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PROPOSAL 4—RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

(Item 4 on Proxy Card)

General

We are asking the stockholders to ratify the Audit Committee’s appointment of Moss Adams, LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2011. The firm is a registered public accounting firm with the Public Company Accounting Oversight Board (“PCAOB”), as required by the Sarbanes-Oxley Act of 2002 and the rules of the PCAOB. In the event the stockholders fail to ratify the appointment, the Audit Committee will reconsider this appointment. Even if the appointment is ratified, the Audit Committee, in its discretion, may direct the appointment of a different independent registered public accounting firm at any time during the year if the Audit Committee determines that such a change would be in the best interests of the Company and our stockholders.

Moss Adams, LLP representatives are expected to attend the 2011 Annual Meeting of the Stockholders. They will have an opportunity to make a statement if they desire to do so and will be available to respond to appropriate stockholder questions.

The affirmative vote of a majority of the shares of Common Stock present, in person or by proxy, entitled to vote at the Annual Meeting is required to approve the ratification of the appointment of Moss Adams, LLP as our independent registered public accounting firm for 2011.

THE BOARD RECOMMENDS A VOTE FOR THE RATIFICATION OF THE APPOINTMENT OF MOSS ADAMS, LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2011.

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STOCK OWNERSHIP

Security Ownership of 5% or Greater Stockholders, Directors, Director Nominees and Executive Officers

The following table sets forth information with respect to beneficial ownership of Common Stock for (i) those persons known by management of the Company to beneficially own 5% or more of our Common Stock (other than executives and Directors), (ii) each Director and Director nominee, (iii) the Named Executive Officers (as defined below) from the Summary Compensation Table under “Executive Compensation”, and (iv) all of our executive officers and Directors as a group. The information for the officers and Directors is provided as of [March 25, 2011] and the information for 5% or more stockholders is as of the most recent filings with the SEC.

Beneficial ownership is determined under the rules of the SEC and generally includes voting or investment power with respect to securities. To our knowledge, the persons named in the table below have sole voting and investment power and shared voting and investment power, as indicated below, with respect to all shares of Common Stock beneficially owned, subject to community property laws where applicable. In connection with the July 2008 acquisition of Primoris by Rhapsody Acquisition Corp., the Primoris stockholders obtained the right to receive up to an additional 5,000,000 shares of Common Stock if we attained certain performance targets for the years ended December 31, 2008 and 2009.  Both of the performance targets were met and on March 27, 2009, a total of 2,500,025 shares were issued and an additional 2,499,975 shares were issued on March 25, 2010.  There are no other shares that may be obtained upon the exercise of options or warrants.

For each individual and group included in the table below, percentage ownership is calculated by dividing the number of shares beneficially owned by such person or group by the sum of the [51,044,520] shares of Common Stock outstanding on March 25, 2011, plus the number of shares of Common Stock that such person or group had the right to acquire on or within 60 days after March 25, 2011. The Company is not aware of any arrangement or pledge of Common Stock that could result in a change of control of the Company.

 

 

Amount and Nature of Beneficial Ownership (1)

 

Name

 

Shared
Investment
Power

 

Sole
Investment
Power

 

Shared
Voting Power

 

Sole
Voting Power

 

Shared and
Sole Voting
Power—Total

 

Percentage of
Common Stock
Outstanding (2)

 

5% or Greater Stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

Arline Pratt (3)

 

 

3,038,587

 

 

3,038,587

 

3,038,587

 

6.0

%

Wells Fargo and Company (4)

 

 

2,665,650

 

 

2,665,650

 

2,665,650

 

5.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Named Executive Officers and Directors:

 

 

 

 

 

 

 

 

 

 

 

 

 

Brian Pratt (5)

 

97,810

 

16,955,123

 

3,601,314

 

16,955,123

 

20,556,437

 

40.3

%

Scott E. Summers (6)

 

17,805

 

1,469,709

 

1,487,514

 

 

1,487,514

 

2.9

%

John P. Schauerman (7)

 

 

1,406,819

 

1,406,819

 

 

1,406,819

 

2.8

%

John M. Perisich (8)

 

 

135,919

 

 

135,919

 

135,919

 

*

 

Eric S. Rosenfeld (9)

 

106,840

 

1,628,636

 

106,840

 

1,628,636

 

1,735,476

 

3.4

%

Peter J. Moerbeek (10)

 

 

22,342

 

 

22,342

 

22,342

 

*

 

Stephen C. Cook

 

 

9,400

 

 

9,400

 

9,400

 

*

 

David D. Sgro

 

 

21,000

 

 

21,000

 

21,000

 

*

 

Thomas E. Tucker (11)

 

8,136

 

24,000

 

8,136

 

24,000

 

32,136

 

*

 

Peter C. Brown

 

 

 

 

 

 

*

 

Michael D. Killgore

 

 

777,102

 

 

777,102

 

777,102

 

1.5

%

Robert A. Tinstman

 

 

 

 

 

 

*

 

Danny L. Hester

 

 

777,102

 

 

777,102

 

777,102

 

1.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

All Directors, nominees and executive officers as a group (16 individuals)

 

 

 

 

 

 

 

 

 

24,363,655

 

47.7

%


*Indicates beneficial ownership of less than one percent of total outstanding Common Stock.

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(1)

This table lists voting securities, including shares held of record, shares held by a bank, broker or nominee for the person’s interest and shares held through family trust arrangements.

(2)

Beneficial shares with both sole and shared voting power as a percentage of Common Stock outstanding as of March 25, 2011, or [51,044,520] shares.

(3)

Represents 2,666,916 shares of Common Stock held by the Pratt Family Trust, of which Ms. Pratt is the sole trustee and 371,671 shares of Common Stock held by the Pratt Family Bypass Trust, of which Ms. Pratt is the sole trustee. The principal business address of Ms. Pratt is 402 Fairway Drive, Bakersfield, California, 93309.

(4)

Based on information set forth in the Schedule 13G filed with the Commission on January 25, 2011. The principal business address of Wells Fargo and Company is 420 Montgomery St., San Francisco, CA 94104.

(5)

Includes 16,955,123 shares of Common Stock held directly by Brian Pratt and indirectly by Barbara Pratt, as the spouse of Mr. Pratt, and 97,810 shares of Common Stock owned directly by Ms. Pratt and indirectly by Mr. Pratt. Based on information set forth in Amendment No. 2 to the Schedule 13D filed with the Commission under the Exchange Act on March 24, 2009, Mr. Pratt also has the power to vote an additional 3,503,504 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. The following proxies expire on July 31, 2011: Scott E. Summers, trustee of the Summers Family Trust, John P. Schauerman and Timothy R. Healy. The proxy for Mark Thurman expires on March 25, 2012.

(6)

Represents 7,342 shares of Common Stock owned directly by Scott E. Summers and 1,462,367 shares of Common Stock owned directly by the Summers Family Trust, and indirectly by Scott E. Summers, as trustee of the trust. Additionally, 17,805 shares of stock are held by Scott Summer’s children’s trusts with Patrick Summers, the brother of Scott E. Summers, as trustee of the children’s trusts. A revocable proxy for 1,469,709 shares was provided to Mr. Pratt and such proxy expires on July 31, 2011.

(7)

Represents 22,310 shares of Common stock owned directly by John P. Schauerman and 1,384,509 owned directly by the Schauerman Family Trust and indirectly by John P. Schauerman and Claudia H. Schauerman as trustees. A revocable proxy for 1,406,819 shares was provided to Mr. Pratt, and such proxy expires on July 31, 2011.

(8)

Represents 135,919 shares of Common Stock owned directly by the Perisich Family Trust dated July 11, 2007 and indirectly by John M. Perisich, as trustee of the trust.

(9)

Includes 1,628,636 shares of Common Stock held directly by Eric Rosenfeld, 106,840 shares of Common Stock held by the Rosenfeld 1991 Children’s Trust, of which Mr. Rosenfeld’s wife is the sole trustee

(10)

Represents 22,342 shares of Common Stock held by the Moerbeek Family Trust U/A dated 03/03/1999, a revocable trust, of which Peter Moerbeek is trustee and beneficiary.

(11)

Includes 24,000 shares of Common Stock held by the Tucker Family Trust U/A dated 12/21/1998, a revocable trust, of which Thomas E. Tucker is a trustee and beneficiary, 3,303 shares of Common Stock held by SaraJen Capital, LLC. a California Limited Liability Company, of which Mr. Tucker is a one-third member and sole manager with full dispositive power over such shares, and 4,833 shares of Common Stock held by Josephine Tucker-Arenson TTEE U/A DTD 4-30-1996, of which Mr. Tucker holds power of attorney.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our officers, Directors and persons who own more than ten percent (10%) of a registered class of our equity securities to file reports of securities ownership and changes in ownership with the SEC.

As of the date of this Proxy Statement, and based solely on our review of the copies of such reports furnished to us and written representations from our executive officers and Directors, we believe that all reports needed to be filed by current Section 16 reporting persons have been timely filed for the year ended December 31, 2010, with the exception of the following:

·      Forms 4 reporting two transactions during 2010 for Scott E. Summers, a member of a Section 13(d) group owning more than 10%, were not filed timely.

·      A Form 3 reporting initial ownership for Robert A. Tinstman, one of our Directors, was not filed on a timely basis;

·      A Form 3 reporting initial ownership for Michael D. Killgore, one of our Directors and our Executive Vice President, Director of Construction Services, was not filed on a timely basis.  Additionally, one transaction during 2010 on Form 4 was also not filed on a timely basis.

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Table of Contents

 

RevocabilityCORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS

We believe that effective corporate governance is an important element of Proxies

You can revoke your proxy at any time before the voting at the special meeting by delivering written notice of revocationour long-term success and ability to create value for our stockholders. Our Board reviewed our existing corporate governance policies and practices, as well as related provisions of the proxySarbanes-Oxley Act of 2002, current and proposed rules of the SEC, and the corporate governance requirements of NASDAQ. Based on its review, the Board has approved charters, policies, procedures and controls that we believe promote and enhance our corporate governance, accountability and responsibility and promote a culture of honesty and integrity.

Our Code of Ethics and the charters for each of our Board committees are available on the Investor Relations section of our website at www.prim.com, and copies are available free of charge upon request to our secretary prior to the special meeting, by executing and delivering a later dated proxy card to our secretary, or attending and voting by ballot in personSecretary at the special meeting.  Attendance at the special meeting will not itself revoke an earlier submitted proxy.  If you are a beneficial owner of shares of common stock, you may submit new voting instructions by contacting your broker, bank or other nominee. You may also vote in person at the special meeting if you obtain a legal proxy as described above in “How do I vote?” on page vi. All shares of common stock that have been properly voted and not revoked will be voted at the special meeting.  You should direct any written notices of revocation and related correspondence to Primoris Services Corporation, 26000 Commercentre Drive, Lake Forest, California 92630, Attention: Secretary.2100 McKinney Avenue, Suite 1500, Dallas, Texas  75201.

 

Additional InformationBoard Independence

The listing standards of NASDAQ require its listed companies to have a board of directors with at least a majority of independent directors. For a Director to qualify as independent, the Board must affirmatively determine that the Director has no material relationship with us, either directly or as a partner, stockholder or officer of an organization that has a relationship with us which, in the opinion of the Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a Director. To assist it in making independence determinations, the Board has adopted independence standards based on NASDAQ rules. Under these standards, a Director is not independent if:

 

This proxy statement incorporates important business and financial information about·The Director is, or has been within the last three years, one of our or our subsidiaries’ employees, or the Director has an immediate family member who is, or has been within the last three years, one of our executive officers;

·The Director has received, or has an immediate family member who has received, during any twelve-month period within the last three years, more than $120,000 in compensation from us (other than compensation for Board or Committee service, compensation to a family member who is an employee but not an executive officer, or benefits under a tax-qualified retirement plan or non-discretionary compensation);

·The Director is, or has a family member that is, a partner in, or a controlling stockholder or an executive officer of, any organization to which we made, or from other documents.  These documents have been furnished to you with this proxy statement.  For a listingwhich we received, payments for property or services in the current year or any of the documents incorporated by reference intolast three years that exceed 5% of the recipient’s consolidated gross revenues for that year or $200,000, whichever is greater, other than payments arising solely from investments in our securities or payments under non-discretionary charitable contribution matching programs;

·The Director or an immediate family member is currently employed, or has been employed within the last three years, as an executive officer of another company where any of our present executive officers serves or has served on that company’s compensation committee; or

·The Director is, or has a family member that is a current partner of our outside auditor, or was a partner or employee of our outside auditor who worked on our audit at any time during any of the past three years.

On the basis of the Board Independence Standards identified above, the Board has determined that Messrs. Brown, Cook, Rosenfeld, Sgro, Tinstman and accompanying this proxy statement, see “Where You Can Find More Information; Incorporation by Reference” on page 66Tucker are independent under the NASDAQ listing standards. The Board has also determined that each member of this proxy statement.  Copiesour Audit Committee qualifies as independent under Rule 10A-3 of these documents may be obtained by any stockholder, without charge, within one business day of your written or oral request.  Requests can be made by telephone at (949) 598-9242 or in writing at the following address: Primoris Services Corporation, 26000 Commercentre Drive, Lake Forest, California 92630, Attention: Investor Relations.Exchange Act.

 

Important Notice RegardingBoard Structure and Committee Composition

The Board has (i) an Audit Committee, (ii) a Compensation Committee, and (iii) a Nominating and Corporate Governance Committee. The Board and its Committees meet throughout the Availabilityyear on a set schedule and also hold special meetings and act by written consent from time to time, as appropriate. The Board held a total of Proxy Materials

This proxy statementnine meetings, the Audit Committee held six meetings, the Compensation Committee held five meetings and the proxy card are available on our website underNominating and Corporate Governance Committee held two meetings.  There were a total of 22 Board and Committee Meetings during 2010. The independent Directors meet in executive session at meetings of the Investor Relations tab.Board and Committees as necessary. The web site address is www.primoriscorp.com.Independent Directors met in executive session once during 2010.

 

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Table of Contents

 

THE ACQUISITION

AtMr. Pratt, our Chief Executive Officer also serves as the special meeting, our stockholders will be asked to consider and vote upon two proposals: (i) to approveChairman of the issuanceBoard.  The Board believes that as a result of (a) 8,185,278 shareshis significant ownership of commonPrimoris stock issuable uponand his knowledge as Chief Executive Officer since 1983, there is no benefit to be derived by separating the conversionpositions of Chairman and Chief Executive Officer. As the Company continues to grow, the Board will review the advisability of separating the two positions.  In May 2010, Mr. Cook was appointed by the Board as the Lead Director, responsible for chairing the Board meetings in the absence of the Closing SharesChairman, chairing executive sessions, acting as the principal liaison between the Chairman and (b) upthe independent Directors and serving as the contact Director for shareholders.

The Board and the Compensation Committee do not make decisions regarding an executive officer’s compensation in the presence of such executive officer.  The compensation of our Chief Executive Officer and all other executive officers are determined or recommended to 6,508,276 Earnout Shares; and (ii) to approvethe Board of Directors for determination by independent directors constituting a majority of the conversionboard of directors’ independent directors in a vote in which only independent directors participate.

Director nominees are selected or recommended for the Board of Directors’ selection by independent directors constituting a majority of the Closing Shares into 8,185,278 sharesBoard of common stock.  Set forth belowDirectors’ independent directors in this section, anda vote in which only independent directors participate.

In 2010, each Director attended all Board meetings held during the section entitled “The Purchase Agreement” beginning on page 29, isperiod for which such person served as a discussionDirector.  In addition, in 2010, each Director attended at least 75% of the Acquisition, including a descriptionaggregate of the terms and conditionstotal number of meetings held by all Board committees on which such person served (during the Purchase Agreement.  You should review these sections carefully in connection with your consideration of the proposals.

The Parties to the Acquisition

Primoris Services Corporation

26000 Commercentre Drive

Lake Forest, California 92630

Telephone: (949) 598-9242

Primoris Services Corporation, a Delaware corporation formed in October 2006, is a holding company of various subsidiaries which form a diversified engineering and construction company providing a wide range of construction, fabrication, maintenance, replacement and engineering services to major public utilities, petrochemical companies, energy companies, municipalities and other customers.  Since 1946, our primary subsidiary, ARB, Inc., (“ARB”), and its predecessor, has been engaged in the construction industry.  We install, replace, repair and rehabilitate natural gas, refined product, water and wastewater pipeline systems, and also constructs mechanical facilities, and other structures, including power plants, petrochemical facilities, refineries and parking structures.  In addition, we provide maintenance services, including inspection, overhaul and emergency repair services, for cogeneration plants, refineries and similar mechanical facilities.  ARB is engaged primarily in the infrastructure, underground pipeline, directional drilling, and other structure construction and maintenance services.  Through our subsidiary, Onquest, Inc., we provide engineering design services for fired heaters and furnaces primarily used in refinery applications.  Through our subsidiary, Cardinal Contractors, Inc., we construct water and wastewater facilities in the southeast United States.  A substantial portion of our activities are performed in the western United States, primarily in California.  In addition, we have strategic presences in Florida, Texas, Latin America and Canada.

James Construction Group, LLC

11200 Industriplex Boulevard, Suite 150

Baton Rouge, Louisiana 70809

Telephone: (225) 295-4830periods that such person served).

 

JCG is oneEach of the largest general contractors basedBoard committees operates under a written charter adopted by the Board. The Board committee charters are available on our website at www.prim.com.

The members of the Board committees are identified in the Gulf Coast states, following table:

Director (1)

 

Audit
Committee

 

Compensation
Committee

 

Nominating and
Corporate
Governance
Committee

 

Brian Pratt

 

 

 

 

 

Chair

 

John P. Schauerman

 

 

 

 

 

 

 

Eric S. Rosenfeld

 

 

 

 

 

X

 

David D. Sgro

 

X

 

 

 

 

 

Peter J. Moerbeek

 

 

 

 

 

 

 

Stephen C. Cook

 

X

 

Chair

 

 

 

Thomas E. Tucker

 

X

 

 

 

X

 

Peter C. Brown

 

Chair

 

X

 

 

 

Michael D. Killgore

 

 

 

 

 

 

 

Robert A. Tinstman

 

 

 

X

 

 

 

Number of Meetings held in 2010

 

6

 

5

 

2

 


(1)Messrs. Brown, Cook, Rosenfeld, Sgro, Tinstman and is engagedTucker are independent Directors.

Audit Committee

The Audit Committee consists of four persons, all of whom are independent under the NASDAQ listing standards. Members of the Audit Committee must also satisfy additional SEC independence requirements, which provide that they may not accept directly or indirectly any consulting, advisory or other compensatory fee from the Company other than compensation in highway, industrialtheir capacity as Director, or otherwise be an “affiliated person” of us.  The Board has determined that Audit Committee members Messrs. Brown, Cook, Sgro and environmental construction, primarily in Louisiana, TexasTucker all satisfy the applicable SEC independence requirements.

The Audit Committee oversees our accounting and Florida.  James isfinancial reporting processes, internal control systems, independent auditor relationships and the successor company to T.L. Jamesaudits of our financial statements. Among other matters, the Audit Committee’s responsibilities include the following:

·selecting and Company, Inc., a well-known Louisiana company that has been in business for over 80 years.  JCG serves private and local, state and federal government clients and has three primary operating divisions: heavy civil; infrastructure and maintenance; and industrial.  The heavy civil division provides services in heavy civil construction projects, including highway and bridge construction, concrete paving, levee construction, airport runway and taxiway construction and marine facility construction.  The infrastructure and maintenance division provides services including large earthwork and site development, landfill construction, site remediation and mining support services.  The industrial division, with a client base comprised primarily of private industrial companies, provides services including all phases of civil and structural construction, mechanical equipment erection, process pipe installation and boiler, furnace and heater installation and repair.  JCG is headquartered in Baton Rogue, Louisiana and has local offices in Louisiana, Florida and Texas.hiring our independent registered public accounting firm;

 

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Table of Contents

·evaluating the qualifications, independence and performance of our independent registered public accounting firm;

·reviewing and approving the audit and non-audit services to be performed by our independent registered public accounting firm;

·overseeing the administration of management’s process for the design, review of adequacy, implementation and effectiveness of our internal controls established for finance, accounting, legal compliance and ethics;

·reviewing management’s assessment of internal control and steps taken to monitor and control our exposure to financial risk;

·overseeing the administration of management’s process of reviewing the design, adequacy, implementation and effectiveness of our critical accounting and financial policies;

·overseeing and monitoring the integrity of our financial statements and our compliance with legal and regulatory requirements as they relate to our financial statements of accounting matters;

·reviewing with management and our independent registered public accounting firm the results of our annual and quarterly financial statements; and

·reviewing and approving any related party transactions.

Audit Committee Financial Expert.     The Board has also determined that Mr. Brown is the Audit Committee “financial expert” as defined under SEC rules and regulations.

 

BackgroundIndependent Registered Public Accounting Firm Fees and Services

All fees billed by Moss Adams, LLP, have been approved in advance by the Audit Committee of the Acquisition

The termsBoard of the Purchase Agreement and related documents were the result of arm’s-length negotiations between our representatives and those of JCG.Directors.  The following is a brief discussionsummary of the background of these negotiationsfees billed for professional services for the fiscal years ended December 31, 2010 and the Acquisition.2009:

 

Fee Category

 

Calendar Year
2010 Fees

 

Calendar Year
2009 Fees

 

Audit Fees (1)

 

$

553,000

 

$

473,000

 

Audit Related Fees (2)

 

115,000

 

361,918

 

Tax Fees (3)

 

275,000

 

275,535

 

 

 

 

 

 

 

Total Fees

 

$

943,000

 

$

1,110,453

 

On June 12,


(1)Fees for audit services consist of the fees associated with the annual audit for both 2010 and 2009, representatives of Houlihan Lokey Howardfees in 2010 and Zukin Capital, Inc. (“Houlihan Lokey”), an investment banking firm that had previously been engaged by JCG, arranged an introductory telephone call between John P. Schauerman, our executive vice president of corporate development2009 for quarterly SAS 100 reviews and a memberreviews of our board of directors,Quarterly Reports on Form 10-Q for 2010 and Michael D. Killgore, then a Member and chief executive officer of JCG.  After a brief discussion, Mr. Schauerman and Mr. Killgore agreed to meet in person later in the month. On June 29, 2009, Mr. Schauerman and Mr. Killgore met in Houston, Texas and had a general discussion about the two companies, each company’s history, markets, opportunities and goals.  They also exchanged financial and operational information about the two companies.  Mr. Killgore and Mr. Schauerman decided that there was a potential opportunity that could benefit both parties and agreed that the next step would be a visit to JCG by our executives.  On July 27, 2009, we and JCG entered into a confidentiality agreement.2009.

 

During the period from August 3,(2)Audit related fees in 2010 and 2009 to August 5,include proxy filings and standalone audits for Primoris subsidiaries.  Audit related fees in 2009 Brian Pratt, our president, chief executive officer and chairman of our board of directors, Peter J. Moerbeek, our executive vice president, chief financial officer and a member of our board of directors and Mr. Schauerman met with Dominic A. Iafrate and Angelo E. Iafrate, Members and the holders of the greatest percentage of JCG’s LLC Interests, Robert A. Tinstman, who was formerly the executive chairman of JCG, Mr. Killgore, Donald B. Bonaventure, JCG’s chief financial officer and Danny L. Hester, JCG’s chief operating officer, at JCG’s corporate headquarters in Baton Rouge, Louisiana.  JCG’s  representatives provided us with a presentation regarding JCG’s corporate structure, operations and management team.   The parties engaged in discussions regarding corporate culture, opportunities and prospects, visited job sites and discussed JCG’s historical financial performance. also included acquisition due diligence work.

 

During the period from August 18, 2009 to August 20, 2009, Mr. Dominic Iafrate, Mr. Angelo Iafrate(3)Tax fees include professional services rendered for tax compliance (preparation and Mr. Tinstman met with membersreview of our senior management team at our headquarters in Lake Forest, California.  We discussed our business, history, culturetax returns), tax advice and operations and visited job sites. The parties also discussed potential valuation parameters and structure alternatives for a potential business combination.  The parties agreed that we would develop a term sheet outlining key terms of a possible transaction.  During the period from August 21, 2009 through September 1, 2009, Mr. Schauerman led our internal efforts to develop the key elements for a potential transaction.tax planning.

 

On September 1, 2009, as partPolicy on Audit Committee Pre-Approval of a meetingAudit and Permissible Non-Audit Services of our board of directors, Mr. Pratt, Mr. Moerbeek and Mr. Schauerman discussed JCG and a potential acquisition with our board for the first time.  Among other things, the board was provided with information concerning JCG’s business, ownership, management team and personnel, operations, financial statements and backlog.  The board discussed a range of potential valuations.Independent Registered Public Accounting Firm

 

On September 2, 2009, Mr. Schauerman sent Mr. KillgoreThe Audit Committee has, by resolution adopted policies and Houlihan Lokey an outline of terms for a potential acquisition of JCG by us.  Duringprocedures regarding the period from September 2, 2009 to September 18, 2009, we and JCG negotiated the basic termspre-approval of the proposed acquisition.  On September 18, 2009, we and JCG signed a non-binding letter of intent outlining the basic terms and structure of the proposed acquisition of JCGperformance by us.

During the period from September 21, 2009 to September 30, 2009, we developed a due diligence plan for a proposed acquisition of JCG.

On October 1, 2009, we held a board meeting at which we discussed the terms of the proposed acquisition, the financial results for JCG for the years 2006-2008 and six months ending June 30, 2009 and the due diligence plan.  The board discussions included JCG’s operations and backlog, the proposed timeline for closing the transaction, the various associated transaction costs, including legal and accounting fees and the cost of obtaining a fairness opinion with respect to the acquisition.  The board also discussed certain terms of the proposed acquisition, including piggyback registration rights and the addition of new directors.  At the meeting, the board authorized the retention of an investment banker for the purpose of rendering a fairness opinion and implementation of the due diligence plan in order to pursue the proposed acquisition.  In addition, our Audit Committee authorized the retention of our independent auditors, Moss Adams, LLP of certain audit and non-audit services. Moss Adams, LLP may not perform any service unless the approval of the Audit Committee is obtained prior to assist us in the performance of our due diligence procedures.the services, except as may otherwise be provided by law or regulation. All services described above were approved by the Audit Committee.

 

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Table of Contents

 

During the period from October 1, 2009 through November 18, 2009, the parties exchanged multiple draftsAudit Committee Report

The following report of the Purchase AgreementAudit Committee does not constitute soliciting material and shall not be deemed filed orincorporated by reference into any other filing by us under the Securities Act or the Securities Exchange Act, except to the extent we specifically incorporate this report by reference.

The primary purposes of the Audit Committee are to assist the Board in fulfilling its responsibility to oversee (i) the integrity of our financial statements, (ii) the independent registered public accounting firm’s qualifications, independence and performance, (iii) our accounting and financial reporting processes, (iv)our compliance with financial legal and regulatory requirements, and (v) the audits of our financial statements. The Audit Committee is directly responsible for the appointment, compensation and oversight of the work of the independent registered public accounting firm. The independent registered public accounting firm reports directly to the Audit Committee.

Management has the primary responsibility for the preparation of the financial statements and the reporting process. Our management has represented to the Audit Committee that the consolidated financial statements for the fiscal year ended December 31, 2010 were prepared in accordance with generally accepted accounting principles. Our independent registered public accounting firm is responsible for auditing these consolidated financial statements. In the performance of its oversight function, the Audit Committee reviewed and discussed the audited consolidated financial statements with management and the independent registered public accounting firm. The Audit Committee discussed with management the critical accounting policies that were applied by us in the preparation of our consolidated financial statements. The Audit Committee also discussed with management the process for certifications by our Chief Executive Officer and our Executive Vice President, Chief Financial Officer. The Audit Committee discussed with the independent registered public accounting firm the matters required to be discussed by Statement on Auditing Standards No. 61 (Communication with Audit Committees), as amended by Statement on Auditing Standards No. 90 (Audit Committee Communications).

In addition, the Audit Committee received from the independent registered public accounting firm the written disclosures required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence, and discussed with them their independence from the Company and its management. The Audit Committee also evaluated whether the independent registered public accounting firm’s provision of non-audit services to us was compatible with the auditor’s independence and determined it was compatible.

The Board determined that the Audit Committee members meet the independence requirements of Rule 10A-3 of the Exchange Act and applicable NASDAQ independence rules.

In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board, and the Board approved the inclusion of the audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2010 for filing with the Securities and Exchange Commission.

March 14, 2011

Peter C. Brown (Chairman)
Stephen C. Cook

David D. Sgro
Thomas E. Tucker

Compensation Committee

The members of the Compensation Committee of the Board are Messrs. Cook (Chairman), Brown and Tinstman. All three of the members of the Compensation Committee meet the independence requirements of NASDAQ listing standards. The Chairman of the Compensation Committee is Mr. Cook.

The Compensation Committee monitors and assists the Board in determining compensation for our senior management and Directors. The Board and the Compensation Committee do not make decisions regarding an executive officer’s compensation in the presence of such executive officer.  After the Compensation Committee analyzes compensation issues related to our Chief Executive Officer and other transaction documentation, conducted various due diligence reviewsexecutive officers, it makes a recommendation to the Board’s independent Directors.  The compensation of our Chief Executive Officer and negotiatedall other executive officers is then determined or recommended to the final terms and conditionsBoard for determination by independent directors constituting a majority of the transaction.

On October 28, 2009Board’s independent directors in a vote in which only independent directors participate.  The Compensation Committee has the following authority and again on October 31, 2009,  Mr. Moerbeek provided the board with written updates on the status of the proposed acquisition and the progress of the due diligence efforts.  On November 3, 2009 and again on November 11, 2009, we held telephonic board meetings at which the board discussed,responsibilities, among other subjects, the proposed structure of the transaction and various terms and conditions.

On November 13, 2009, Mr. Moerbeek provided the board with various due diligence items, including pro forma financial information and internal financial forecasts for the combined companies and drafts of the various transaction documents, including the Purchase Agreement, Promissory Note, Certificate of Designations and Voting Agreement.

On November 18, 2009, KeyBanc Capital Markets Inc. (“KeyBanc”) issued a fairness opinionothers, with respect to the consideration to be paid by us to the Members of JCG pursuant to the Purchase Agreement.  KeyBanc provides corporateour Director and investment banking products and services.  We approached KeyBanc based on KeyBanc’s presence and experience with respect to mergers and acquisitions in construction, engineering and infrastructure industries.  Prior to our engagement of KeyBanc for purposes of preparing the fairness opinion, no material relationship existed between KeyBanc and either of us or JCG, nor was such a relationship contemplated as of the date of the issuance of the fairness opinion.  The consideration specified in the Purchase Agreement was negotiated and agreed upon by us and JCG, and KeyBanc did not recommend the amount of consideration to be paid.  In the course of preparing its fairness opinion, KeyBanc reviewed drafts of the Purchase Agreement, the Certificate of Designations, certain other internal information, primarily financial in nature, concerning the business and operations of JCG furnished to KeyBanc by JCG, certain financial projections for JCG supplied by JCG, certain publicly available information and the financial statements of both us and JCG.  KeyBanc also interviewed certain of our and of JCG’s officers and employees regarding financial and operating performance.

In order to reach a conclusion regarding the fairness, from a financial point of view, of the consideration to be paid by us in connection with the Acquisition, KeyBanc analyzed the historical and projected financial results of JCG and established a fair value range by applying a variety of commonly accepted valuation techniques, including:

·comparable public company analysis, in which KeyBanc reviewed certain financial data and trading prices for public companies comparable to JCG;

·precedent mergers and acquisitions transaction analysis, in which KeyBanc reviewed certain financial data and the purchase prices paid in other comparable merger and acquisition transactions for which relevant information was available; and

·discounted cash flow analysis, in which KeyBanc analyzed the present value of JCG’s future cash flows and an estimated terminal value discounted to the present using a calculated discount rate.

Based on the results of these valuation techniques, KeyBanc determined that the consideration to be paid by us pursuant to the Purchase Agreement was fair, from a financial point of view, to us.  KeyBanc presented its opinion to the board of directors on November 18, 2009.  The opinion will be made available for inspection and copying at our headquarters during regular business hours by any interested equity security holder who has been so designated in writing.

On November 18, 2009, we held a board meeting to discuss approval of the proposed acquisition. After KeyBanc’s fairness presentation and discussion and deliberation on the proposed acquisition, our board of directors unanimously approved the Acquisition and authorized our officers to enter into the Purchase Agreement.  On November 18, 2009, we, JCG, the Members and Mr. Killgore, as representative of the Members executed the Purchase Agreement.

On November 19, 2009, we issued a press release announcing the execution of the Purchase Agreement in connection with the Acquisition.executive compensation plans:

 

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From November 18, 2009 until December 18, 2009, we·Reviewing the goals and JCG exchanged various deliverables, disclosure schedulesobjectives of our executive compensation programs and recommending to the Board any changes to these goals and objectives;

·Reviewing our executive compensation plans and recommending to the Board the adoption of new or amendments to existing plans;

·Evaluating annually the performance of the Chief Executive Officer and recommending to the independent members of the Board his or her compensation level based on this evaluation;

·Evaluating annually the performance of the other executive officers of the Company and its subsidiaries and recommending to the independent members of the Board the compensation level of each based on this evaluation;

·Reviewing and recommending to the independent members of the Board, concurrently with the Board’s Audit Committee, any employment, severance or termination arrangements made with any executive officer of the Company or its subsidiaries; and

·Evaluating the appropriate level and types of compensation for Board and Committee service by non-employee Directors and recommending any changes to the Board.

The Compensation Committee has the power to form subcommittees for any purpose that it deems appropriate and may delegate to such subcommittee such power and authority as the Compensation Committee may deem appropriate, provided it does not delegate to a subcommittee any power or authority required by any law, regulation or listing standard to be exercised by the Compensation Committee as a whole. The Compensation Committee may consider the recommendations of our Chief Executive Officer in determining the level of compensation of the executive officers of the Company and subsidiaries. The Compensation Committee has the authority to retain such independent consultants or advisers as it deems necessary and appropriate, including compensation consultants, to advise it with respect to amounts or forms of executive or director compensation, and may rely on the integrity and advice of any such advisers. The Compensation Committee also has the sole authority to retain a compensation consultant to assist it in carrying out its responsibilities, including the sole authority to approve the consultant’s fees and other items required for closing.  On December 1, 2009, we received notification of early termination of the waiting period under the HSR Act from the Federal Trade Commission.retention terms, such fees to be borne by us, and to terminate any such consultant.

 

On December 18, 2009,In 2010, the parties entered into a First Amendment to Membership Interest Purchase Agreement (the “First Amendment”Committee engaged Cogent Compensation Partners (“Cogent”).  Pursuant as an independent consultant to the First Amendment,Committee.  Prior to its engagement, Cogent had not performed any services for the parties agreed to certain amendments regardingCompany.  Cogent assists the payment of the cash distribution by JCG to the Members prior to the closing date, the powers, duties and obligations of the Representative and certain items of JCG’s disclosure schedule.

On December 18, 2009, the parties closed on the Purchase Agreement.  As a result, JCG became our wholly-owned subsidiary.  On December 21, 2009, we issued a press release announcing the closing of the Acquisition.

On January 14, 2010, the parties entered into a Second Amendment (the “Second Amendment”) to the Purchase Agreement to clarify that under no circumstances can the number of Earnout Shares, as definedCommittee in the Purchase Agreement, exceed 19.9% of the number of shares of our common stock outstanding on the closing date of the Acquisition.meeting its responsibilities.

 

Factors Considered byCompensation Committee Interlocks and Insider Participation

No interlocking relationship exists between any member of our Board and any member of the board of directors or compensation committee of any other companies, nor has such interlocking relationships existed in the past.

Compensation Committee Report

The Compensation Committee of the Board of Directors has reviewed and discussed with management the Compensation Discussion and Analysis contained elsewhere in Approvingthis Proxy Statement.  Based on this review and discussion, the Acquisition

We believeCompensation Committee recommended to the Acquisition presents opportunities to grow our businessBoard of Directors that the Compensation Discussion and address substantially larger markets, while taking advantage of a number of operationalAnalysis be included herein and development benefits.incorporated by reference into the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

 

Geographic Expansion

JCG has a substantial presence throughout the Gulf Region of the southern United States, particularly in Louisiana, Texas and Florida.  A substantial portion of our current activities are performed in the western United States, primarily in California.  We have strategic positions in Texas and Florida, and through our subsidiary Cardinal Contractors, Inc., we construct water and wastewater facilities in the southeast United States.  The Acquisition presents us with the opportunity to expand our geographic footprint and strengthen our already existing service capabilities in the Gulf Region.  We believe that acquiring JCG matches with our strategic growth objectives and will provide us with the resources and geographic presence necessary to further expand our services in the Gulf Region.March 28, 2011

 

Addition of Heavy Civil Construction CapabilitiesStephen C. Cook (Chairman)
Peter C. Brown

One of JCG’s primary operating divisions, and the division that generates the majority of JCG’s revenue, is its heavy civil construction division.  The heavy civil division provides services in heavy civil construction projects, including highway and bridge construction, concrete paving, levee construction, airport runway and taxiway construction and marine facility construction.  Currently, our portfolio of services does not include heavy civil construction services of the type or kind, or on the scale, as performed by JCG’s heavy civil division.  As a result, the Acquisition presents us with the opportunity to expand, diversify and strengthen our service capabilities.  As part of our strategic growth strategy, we are continually searching for opportunities to diversify our service portfolio.  We believe that the addition of JCG’s heavy civil division, which has a demonstrated track record of success in the Gulf Region, matches with our objectives in this respect.

Opportunity to Extend our Infrastructure Operations

Another of JCG’s primary operating divisions is its infrastructure and maintenance division.  The infrastructure and maintenance division provides services including large earthwork and site development, landfill construction, site remediation and mining support services, primarily in Louisiana.  Currently, we provide infrastructure construction services in Texas and Florida through our primary subsidiary, ARB.  Further, in October 2009, we formed Cravens Partners, LLC (“Cravens”) and purchased the assets of Cravens Services, Inc., a Texas-based provider of civil and utility infrastructure construction services.  Cravens’ services include excavation, underground utilities, drainage channels, facility upgrades, detention ponds and telecommunications infrastructureRobert A. Tinstman

 

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projects.  We believeNominating and Corporate Governance Committee

The members of the Nominating and Corporate Governance Committee are Messrs. Pratt (Chairman), Rosenfeld and Tucker. The Board has determined that JCG’s service capabilitiestwo of the three members (Messrs. Rosenfeld and Tucker) meet the criteria required under applicable SEC and NASDAQ listing standards for independence. The Chairman of the Nominating and Corporate Governance Committee is our Chairman of the Board, Chief Executive Officer and President, Brian Pratt.

The Nominating and Corporate Governance Committee assists the Board by identifying individuals qualified to become Directors consistent with criteria established by the Board.  After the Nominating and Corporate Governance Committee identifies qualified individuals, it makes a recommendation to the Board’s independent Directors.  Director nominees are complementaryselected by a majority of the Board’s independent directors in a vote in which only independent directors participate. Among other matters, the Committee’s responsibilities include the following:

·evaluating the composition, size and governance of the Board and its committees and making recommendations regarding future planning and the appointment of Directors to committees of our Board;

·administering a policy for evaluating and considering nominees for election to the Board;

·overseeing the evaluation of our Board as a whole;

·reviewing our corporate governance principles and providing recommendations to the Board regarding possible changes; and

·developing and reviewing our Code of Ethics and assuring it is appropriate for us.

Selection of Board Nominees

In identifying Board nominees, we have reviewed individuals who are known to our service capabilities.  In addition, we believe that there are growth opportunitiesofficers or Directors, or individuals with significant industry or other relevant experience. Following the establishment of our Nominating and Corporate Governance Committee, the Nominating and Corporate Governance Committee has reviewed the qualifications of potential Director candidates in Louisiana, where JCG’s infrastructureaccordance with its Charter.

The Nominating and maintenance division is particularly strong.  AsCorporate Governance Committee’s consideration of a result, the Acquisition presents us with the opportunity to grow and expand our infrastructure operations into other areascandidate as a Director includes assessment of the Gulf Region, primarily Louisiana.individual’s understanding of our business, the individual’s professional and educational background, skills, expertise, potential time commitment, and other criteria established by the Nominating and Corporate Governance Committee from time to time. To provide such a contribution to us, a Director must generally possess one or more of the following, in addition to personal and professional integrity:

 

Increased Capabilities for Existing Customers·experience in the Gulf Regioncorporate management;

We believe that the Acquisition will allow us to offer·experience in our industry;

·experience as a broader mixboard member or officer of servicesa publicly held company;

·diversity of expertise and experience in substantive matters related to our existing customers in the Gulf Region.  As noted above, we believe that JCG’s infrastructurebusiness; and maintenance division will complement the infrastructure construction services we currently provide.  In addition, to the extent that our existing Gulf Region customers require heavy civil or industrial services, the Acquisition will allow us to bid for and complete such projects.

 

Equipment Synergies·practical and mature business judgment.

Construction projectsThe Nominating and Corporate Governance Committee adopted its own procedures for evaluating the suitability of potential Director nominees, including qualifications for a “financial expert” and financially literate members for the Audit Committee.

Stockholder Nominations

The rules of the type, kindSEC establish the eligibility requirements and nature performed by us and JCG are equipment intensive and requirethe procedures that must be followed for inclusion of a large and varied fleetstockholder’s proposal in a public company’s proxy materials. Under those rules, proposals submitted for inclusion in our proxy materials must be received on or before the close of construction equipment.  JCG owns or leases a variety of equipment, including types and kinds of equipmentbusiness on the day that we did not ownis 120 days prior to the Acquisition, but are complementarydate on which we released to stockholders our current fleet.  As a result,proxy statement for the Acquisition presents usprior year’s Annual Meeting of Stockholders. Proposals for inclusion in our proxy materials must comply with the opportunity to expand our equipment capabilities, which,procedures set forth in turn, offers usRule 14a-8 under the opportunity to further increase our service capabilities for our key customers.

Advantages of Scale

Currently, we share several equipment and materials suppliers with JCG.  If, following the Acquisition, we come to share additional suppliers, we may increase our combined purchasing leverage.  As a result, we believe that we may be able to lower our equipment and materials costs, thereby reducing our overall cost structure and achieving certain benefits of scale.

Addition of Significant Amount of Backlog

As of September 30, 2009, JCG had a backlog of approximately $571.6 million.  The Acquisition allowed us to add a significant amount of backlog and, potentially, future revenue to our own.

Skill, Experience and Expertise of Senior Management Team and Workforce

JCG’s management team has extensive experience in the engineering and construction businesses and possesses a great degree of skill and expertise in managing and successfully completing projects that are technically complex and large in scale.  Further, JCG’s workforce, comprised of many highly skilled professionals, craftsmen and laborers, has a demonstrated ability to safely carry out project specifications in a timely and efficient manner.  The Acquisition presents us with the opportunity to draw upon the skill, experience and expertise of JCG’s senior management team and workforce in completing new and more complex projects.  We believe that JCG’s senior management team is capable of building upon JCG’s successes and continuing to lead JCG in a positive direction.

Cultural Similarities

We believe that we and JCG share common corporate cultures and values that are driven by strong technical prowess and a firm belief in timely, efficient execution.  These cultural traits have resulted in both our and JCG’s developing successful track records of delivering quality services to our respective customers.  We believe that these cultural similarities may yield additional benefits after the Acquisition.Exchange Act.

 

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Potentially Negative Factors

There are, however,In addition to the requirements of the SEC, our Bylaws provide that in order for a numberproposal to be properly brought before an annual meeting of factorsstockholders, it must be either (1) specified in the notice of the meeting given by us, (2) otherwise brought before the meeting by or at the direction of our Board or (3) properly brought before the meeting by a stockholder entitled to vote at the meeting and who complies with the following notice procedures: (i) the stockholder must give timely notice in writing of the business to be brought before such meeting to our Secretary, and (ii) such business must be a proper matter for stockholder action under the Delaware General Corporation Law. Our Bylaws provide that could negatively affect whetherto be timely, a stockholder’s notice must be delivered to our Secretary at our principal executive offices not less than 45 days prior to the first anniversary of the date on which we receivefirst mailed our proxy materials for the benefits we expectpreceding year’s Annual Meeting. If the date of the subsequent year’s Annual Meeting of Stockholders is changed by more than 30 days from the Acquisition,date of the prior year’s meeting, notice by the stockholder for the subsequent year’s Annual Meeting must be delivered to our Secretary within a “reasonable time” prior to our mailing of the proxy materials for the subsequent year’s Annual Meeting of Stockholders. We expect to announce the date of the 2011 Annual Meeting of Stockholders in early 2011.

If a stockholder proposes to nominate for election or reelection a Director, such stockholder’s notice shall set forth all information relating to such Director nominee that is required to be disclosed in solicitation of proxies for election of Directors in an election contest, or otherwise required, in each case pursuant to Regulation 14A and Rule 14a-11 under the Exchange Act.

The Nominating and Corporate Governance Committee will consider all stockholder recommendations for candidates for the Board, which should be sent to the Nominating and Corporate Governance Committee, c/o Secretary, Primoris Services Corporation, 2100 McKinney Avenue, Suite 1500, Dallas, Texas 75201.

The Nominating and Corporate Governance Committee will evaluate recommendations for Director nominees submitted by Directors, management or qualifying stockholders in the same manner, using the criteria stated above. All Directors and Director nominees will be required to submit a completed directors’ and officers’ questionnaire as part of the nominating process. The process may also include interviews and additional background and reference checks for non-incumbent nominees, at the discretion of the Nominating and Corporate Governance Committee.

Board Role in Risk Oversight

As with all companies, we face a variety of risks in our business.  Unlike some publicly traded companies, our Board and executive officers maintain a significant ownership interest; consequently, concerns about risk, risk management and risk oversight affect many levels of the company. Our Board is responsible for oversight of our company’s risks.  The Board believes that having a system in place for risk management and implementing strategies responsive to our risk profile and exposures will adequately identify in a timely manner our material risks.  In order to more efficiently provide oversight of these material risks, the Board has designated certain risk oversight responsibilities to relevant Board committees.  The Audit Committee has the direct responsibility for risk oversight relating to accounting matters, financial reporting, enterprise, legal and compliance risks.  To assist in this risk oversight, the Audit Committee obtains assistance from the following:  (1) our Chief Financial Officer, who is responsible for managing our risk management function, (2) our General Counsel and (3) our independent registered public accounting firm.  The Audit Committee meets periodically with management and the independent auditors to review financial exposures.  The Board is responsible for working with executive management, especially the Chief Executive Officer and Chief Financial Officer, to assess risks related to the decision to bid on large projects and monitor ongoing risks and contingencies related to those projects.  The Compensation Committee is responsible for risks related to employment policies and our compensation and benefits systems.  The Nominating and Corporate Governance Committee oversees risks associated with our Code of Conduct, including but not limited to:compliance with listing standards for independent directors and committee assignments.  The committee chairmen report any risk-related matters to the full Board at the next Board meeting and special meetings of the Board, if necessary.  While the Board is responsible for risk oversight, the day-to-day risk management is the responsibility of the operating management and executive officers.

Code of Ethics

 

·the significant liquidity and cash flow risks we might face asThe Company has a resultCode of the cash expenditures and capital commitments associatedEthics that complies with the Acquisition;rules and regulations adopted by the SEC and NASDAQ listing standards and are applicable to all of our Directors, officers and employees. The Code of Ethics is available in the Investor Relations section of our website at www.prim.com. We intend to post amendments to, or waivers, if any, from our Code of Ethics (to the extent applicable to our Directors or its Chief Executive Officer, Principal Financial Officer, or Principal Accounting Officer) at this location on our website. Among other matters, this Code of Ethics is designed to promote:

 

·     the possibility that, as shares of our common stock issued in the Acquisition become eligible for public resale, the sale of those shares in the public market could adversely impact our stock price;honest and ethical conduct;

 

·     the possibility that we may not be able to integrate JCG as quickly or as cost-effectively as we had expected, or that we might be unsuccessful in integrating the two companies altogether;

·the possibility that management’s attention will be diverted from the day-to-day operationsavoidance of the combined company during the integrationconflicts of the two companies;

·the challenges inherent in assimilating two business cultures;

·the challenges involved in retaining key personnel, particularly in light of uncertainty regarding the Acquisition;

·the difficulties in keeping existing customers and obtaining new customers that sometimes arise in light of uncertainty regarding the Acquisition;

·the challenges involved in combining services and sales and marketing activities; and

·the possibility that we may be unsuccessful in expanding into the markets currently served by JCG and in addressing the new opportunities we expect to arise out of the combination.

After careful consideration of both the positive and negative factors, our board of directors determined that the Acquisition was in the best interests of the Company and the stockholders.

Changes to Our Board of Directors as a Result of the Acquisition

Pursuant to the Purchase Agreement, we created two new “Class C” directorships with terms expiring at the 2011 annual meeting of stockholders.  Immediately following the closing of the Acquisition, our board of directors appointed Michael D. Killgore, one of the selling Members of JCG and JCG’s chief executive officer prior to the Acquisition, and Robert A. Tinstman, who was formerly the executive chairman of JCG, to these newly created “Class C” directorships.  As of the date of this proxy statement, it is not known whether Mr. Killgore or Mr. Tinstman will be named to any committees of the board of directors or, if they are to be named to a committee, which committee they will be named to.

The following sets forth certain biographical information with respect to Mr. Killgore and Mr. Tinstman:

Michael D. Killgore, age 53, has served as chief executive officer of JCG since 2007.  From 2003 to 2006, Mr. Killgore served as president of JCG’s industrial division.  From 1998 to 2002, Mr. Killgore served as the president of James Industrial Contractors, LLC.  From 1992 to 1998, Mr. Killgore served first as executive vice president and then as president and chief executive officer of T.L. James Industrial Constructors, Inc.  From 1977 to 1998, Mr. Killgore worked for prior iterations of T.L. James Industrial Constructors, Inc. as an engineer.  Mr. Killgore earned a degree in civil engineering from Louisiana Tech University and is a registered professional civil and environmental engineer in the State of Louisiana.interest;

 

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In connection with the Acquisition, Mr. Killgore entered into an employment agreement with JCG, pursuant to which he will serve as president of JCG for an initial term of five years.  As a result, our board of directors has determined that Mr. Killgore will not be an independent director pursuant to applicable NASDAQ rules·full, fair, accurate, timely and regulations.

Robert A. Tinstman, age 62, is the president of Tinstmanunderstandable disclosure in reports and Associates, LLC, a construction consulting firm.  From 2003 to 2007, Mr. Tinstman was the executive chairman of JCG.  From 2004 to 2006, Mr. Tinstman was the chairman and chief executive officer of JCG.  From 2000 to 2001, Mr. Tinstman served as the chairman of contractorhub.com, an e-marketplace for contractors, subcontractors and suppliers.  From 1974 to 1999, Mr. Tinstman was employed by Morrison Knudsen Corporation, a general contractor providing global mining, engineering and construction services.  From 1995 to 1999, Mr. Tinstman served as president, chief executive officer and a director of Morrison Knudsen.  Mr. Tinstman has also served as a director of the Home Federal Bancorp, Inc., since 1999, a director of CNA Surety Corporation, since 2004 and a director of both IDACORP and Idaho Power Company (a subsidiary of IDACORP) since 1999.  Mr. Tinstman graduated from the University of Wisconsin, Platteville in 1968 with a B.S. in mining engineering and is a registered professional engineer in the State of Idaho.

Mr. Tinstman will not be an employee of Primoris.  Further, our board of directors has determined that Mr. Tinstman will join the board of directors as an independent director pursuant to applicable NASDAQ rules and regulations.  As a non-employee director, Mr. Tinstman will be eligible to participate in and receive compensation for his services a director pursuant to our non-employee director compensation program, which was adopted by our board of directors on November 10, 2008.  A more detailed discussion of our non-employee director compensation program is provided in our definitive proxy statement on Schedule 14A as filed with the Commission on April 24, 2009.  Pursuant to the program, Mr. Tinstman will be paid a combination of cash and equity-based compensation for his services as a director.  Other than compensation received pursuant to the program, Mr. Tinstman will not receive any other compensation from us.

Creation of Class of Series A Preferred Stock

On December 14, 2009, we filed the Certificate of Designations with the Delaware Secretary of State, pursuant to which our board of directors designated 95,000 shares of our authorized but previously unissued blank check preferred stock as “Series A Non-Voting Contingent Convertible Preferred Stock” with an assigned par value of $0.0001 per share.  The following discussion of the terms and conditions of the Series A Preferred Stock is subject to and is qualified in its entirety by reference to the Certificate of Designations, which was included with our Current Report on Form 8-K, as filed with the Commission on December 17, 2009, which is incorporated herein by reference.

The Series A Preferred Stock has no voting rights.  As a result, the Members are not entitled to vote at the special meeting.  Further, the Series A Preferred Stock is not be redeemable by either us or the holders of the Series A Preferred Stock.  Each share of Series A Preferred Stock is convertible into 100 shares of our common stock, subject to certain specified adjustments, including, without limitation, adjustments based on common stock dividends, stock splits, stock reclassifications or the consummation of a merger, reorganization or sale of all or substantially all of our assets.  However, the Series A Preferred Stock may only be converted into shares of common stock upon the approval of such conversion by our stockholders.

If our stockholders approve the conversion of the Series A Preferred Stock, the Series A Preferred Stock will automatically convert into shares of common stock.  If our stockholders do not approve the conversion of the Closing Shares, we may purchase or otherwise acquire the Closing Shares by mutual agreement with any holder or holders thereof.  Any shares of Series A Preferred Stock that are converted into shares of common stock or repurchased by us will have the status of authorized but unissued shares of preferred stock, undesignated as to series.

If, at any time that any shares of Series A Preferred Stock are outstanding, we declare a dividend or distribution of cash, securities, properties or assets, we have agreed to simultaneously declare a dividend or distribution on shares of Series A Preferred Stock as if such shares were converted into shares of common stock on the record date for such dividend or distribution.  No dividends or distributions will be payable to holders of shares of common stock unless the full dividends or distributions are paid to the holders of the Series A Preferred Stock at the same time.  Dividends on the Series A Preferred Stock will be non-cumulative.

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Upon any liquidation, dissolution or winding up of us, whether voluntary or involuntary, the holders of the Series A Preferred Stock then outstanding will be entitled to receive out of our available assets, whether such assets are stated capital or surplus of any nature, an amount on such date equal to $100 per share of Series A Preferred Stock, plus the amount of any declared but unpaid dividends thereon to and including the date of such liquidation, before any distribution of assets is made to our common stockholders.  After payment to the holders of the Series A Preferred Stock of such amounts, our entire remaining assets and funds legally available for distribution, if any, will be distributed among the holders of the common stock and the Series A Preferred Stock in proportion to the shares of common stock then held by them and the shares of common stock which they then have the right to acquire upon conversion of the shares of Series A Preferred Stock then held by them, regardless of whether or not actual conversion at such time would be permissible.  In the event our assets available for distribution to stockholders upon any liquidation, dissolution or winding-up of our affairs, whether voluntary or involuntary, are insufficient to pay in full the amounts payable with respect to all outstanding shares of the Series A Preferred Stock, holders of the Series A Preferred Stock will share ratably in any distribution of our assets in proportion to the full respective liquidating distributions to which they would otherwise be respectively entitled.

Interests of Our Officers and Directors in the Acquisition

As noted above, Michael D. Killgore, a former Member of JCG and JCG’s chief executive officer prior to the Acquisition, was appointed to our board of directors as a “Class C” director immediately following the closing of the Acquisition.  By virtue of the fact that Mr. Killgore was one of the selling Members of JCG, he received a portion of the initial Acquisition consideration paid at the closing, as set forth in the table in the immediately following section.  In addition, Mr. Killgore will be entitled to receive a number of Earnout Shares if such shares become due and payable in accordance with the terms and conditions of the Purchase Agreement.

In connection with the Acquisition, Mr. Killgore entered into an employment agreement with JCG, pursuant to which he will serve as president of JCG for an initial term of five years.  The agreement may be extended beyond the initial term upon the mutual consent of JCG and Mr. Killgore.  Mr. Killgore will receive an annual base salary of $253,000 and, in addition, will be eligible to receive an annual cash bonus at the discretion of our board of directors.  The agreement may be terminated at any time upon the mutual consent of JCG and Mr. Killgore, or by JCG at any time with or without “cause,” as such term is defined in the agreement.  If JCG terminates the agreement without “cause,” Mr. Killgore will be entitled to a lump sum equal to one-half of his annual base salary in effect upon the termination date, payable within fifteen days following the termination date, a pro rata amount of a bonus, if any, which would have been payable to Mr. Killgore for the calendar year in which the termination date occurs, and the payment of certain COBRA benefits, if applicable.  For a period of two years after the termination of the agreement, Mr. Killgore has agreed not to solicit any employee of JCG, make any disparaging public statement concerning JCG or use any of JCG’s confidential information to induce or attempt to induce any customer of JCG away from JCG.

Mr. Killgore also entered into a noncompetition agreement with us, dated December 18, 2009, pursuant to which Mr. Killgore agreed not to engage in, provide consulting services to, be employed by or have any interest in a business that competes with JCG or us for a period of two years after he voluntarily terminates his employment with JCG or is terminated for “cause.”  The geographic scope of the noncompetition agreement is limited to the States of Texas, Florida, Mississippi, Arkansas, Alabama, Georgia and certain specified parishes in the State of Louisiana.

Other than Mr. Killgore, no person who has been a director or officer of Primoris since the beginning of our last fiscal year, or any of their associates, has received any extra or special benefit in connection with the Acquisition.

Interests of JCG’s Officers and Managers in the Acquisition

Prior to the Acquisition, JCG had 17 Members.  Ten of the Members were officers of JCG.  These officer-Members included Michael D. Killgore, Donald B. Bonaventure, Danny L. Hester, Rodney James, Charles Poole, Bruce J. Hix, Conrad Bourg, Thomas J. Lasseigne, Jr., Ken Janke and Thomas L. Love, Jr.  Two of the Members were Managers of JCG.  These Manager-Members included Dominic Iafrate and Angelo E. Iafrate.  The remaining five Members were trusts of which either Dominic Iafrate or Angelo E. Iafrate was the trustee.  The specific interests

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of each of the Members and the initial consideration paid to the Members at the closing of the Acquisition are set forth in the following table:

 

 

 

 

Acquisition Consideration (1)

 

Name of Member

 

Percentage
Interest in JCG
Prior to the
Acquisition

 

Cash (2)

 

Closing
Shares (3)

 

No. of
Closing
Shares
placed in
Escrow (4)

 

Principal Amount of
Promissory Note (5)

 

Officer-Members

 

 

 

 

 

 

 

 

 

 

 

Michael D. Killgore

 

6.67

%

$

1,333,333.34

 

7,070.34

 

793.15

 

$

1,428,571.43

 

Donald B. Bonaventure

 

6.67

%

 

1,333,333.34

 

7,070.34

 

793.15

 

 

1,428,571.43

 

Danny L. Hester

 

6.67

%

 

1,333,333.34

 

7,070.34

 

793.15

 

 

1,428,571.43

 

Rodney James

 

3.0

%

 

600,000.00

 

3,181.65

 

356.91

 

 

642,857.14

 

Charles Poole

 

3.0

%

 

600,000.00

 

3,181.65

 

356.91

 

 

642,857.14

 

Bruce J. Hix

 

2.5

%

 

500,000.00

 

2,651.38

 

297.43

 

 

535,714.29

 

Conrad Bourg

 

2.0

%

 

400,000.00

 

2,121.10

 

237.94

 

 

428,571.43

 

Thomas J. Lasseigne, Jr.

 

1.5

%

 

300,000.00

 

1,590.83

 

178.46

 

 

321,428.57

 

Ken Janke

 

1.5

%

 

300,000.00

 

1,590.83

 

178.46

 

 

321,428.57

 

Thomas L. Love, Jr.

 

1.5

%

 

300,000.00

 

1,590.83

 

178.46

 

 

321,428.57

 

Total Officer-Members

 

35.0

%

$

7,000,000.00

 

37,119.29

 

4,164.02

 

$

7,500,000.00

 

 

 

 

 

 

 

 

 

 

 

 

 

Manager-Members

 

 

 

 

 

 

 

 

 

 

 

Dominic Iafrate

 

12.0

%

$

-0-

 

8,258.49

 

1,427.66

 

$

8,492,307.70

 

Angelo E. Iafrate

 

12.0

%

$

-0-

 

8,258.49

 

1,427.66

 

$

8,492,307.69

 

Total Manager-Members

 

24.0

%

$

-0-

 

16,516.98

 

2,855.32

 

$

16,984,615.39

 

 

 

 

 

 

 

 

 

 

 

 

 

Trust-Members

 

 

 

 

 

 

 

 

 

 

 

Stephen M. Iafrate Trust U/A/D 11/7/95 (6)

 

10.0

%

$

-0-

 

6,882.08

 

1,189.72

 

$

7,076,923.08

 

Dominic A. Iafrate Trust U/A/D 11/7/95 (6)

 

10.0

%

 

-0-

 

6,882.08

 

1,189.72

 

 

7,076,923.08

 

Jaclyn N. Iafrate Trust U/A/D 8/22/05 (7)

 

7.0

%

 

-0-

 

4,817.45

 

832.80

 

 

4,953,846.15

 

Danielle M. Iafrate Trust U/A/D 11/7/95 (7)

 

7.0

%

 

-0-

 

4,817.45

 

832.80

 

 

4,953,846.15

 

Anthony C. Iafrate Trust U/A/D 11/7/95 (7)

 

7.0

%

 

-0-

 

4,817.45

 

832.80

 

 

4,953,846.15

 

Total Trust-Members

 

41.0

%

$

-0-

 

28,216.51

 

4,877.84

 

$

29,015,384.61

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

100.0

%

$

7,000,000.00

 

81,852.78

 

11,897.18

 

$

53,500,000.00

 


(1)This table does not list the Earnout Shares that may be issued to the Members.  The Earnout Shares, if earned, will be allocated among all of the Members based on their relative LLC Interests prior to the closing date.

(2)The $7 million cash payment was paid to the officer-Members only.  The cash payment was allocated to the  officer-Members according to their relative LLC Interests prior to the closing date.

(3)The Closing Shares were issued to all of the Members, but were not allocated among the Members based on their relative LLC Interests prior to the closing date.

(4)Each Member had a number of their Closing Shares placed in escrow according to their relative LLC Interests prior to the closing date.

(5)The principal amount of the Promissory Note was allocated among all of the Members, but was not allocated among the Members based on their relative LLC Interests prior to the closing date.

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(6)Dominic Iafrate is the trustee of the Stephen M. Iafrate Trust U/A/D 11/7/95 and the Dominic A. Iafrate Trust U/A/D 11/7/95 and has voting and dispositive control over the shares.

(7)Angelo E. Iafrate is the trustee of the Jaclyn N. Iafrate Trust U/A/D 8/22/05, the Danielle M. Iafrate Trust U/A/D 11/7/95 and the Anthony C. Iafrate Trust U/A/D 11/7/95 and has voting and dispositive control over the shares.

Senior Management of JCG After the Closing of the Acquisition

We believe that JCG’s senior management team is capable of building upon JCG’s successes and continuing to lead JCG in a positive direction.  For this reason, we caused JCG to enter into employment agreements with each of the former officer-Members specified in the table in the immediately preceding section, effective as of December 18, 2009.  All of the agreements are for a term of five years.  The agreements provide for compensation to the former officer-Members ranging from $130,000 to $214,000, not including Mr. Killgore’s agreement, which is discussed above.  The agreements also contain provisions restricting the former officer-Members from soliciting any employee of JCG, making any disparaging public statement concerning JCG or using any of JCG’s confidential information to induce or attempt to induce any customer of JCG away from JCG for a period of two years after termination of the agreement.

Piggyback Registration Rights

Subject to certain specified exceptions and limitations, we granted the Members “piggyback” registration rights, pursuant to which we have agreed to use our reasonable best efforts to include the shares of common stock issuable upon the conversion of the Closing Shares and the Earnout Shares in any registration statement (other than pursuant to a registration statement on Forms S-4 or S-8 or any successor or similar forms, or a registration on any form that does not permit secondary sales)documents that we file after the closing date.

No Appraisalwith, or Dissenters’ Rights

No stockholder of Primoris will be entitled to exercise appraisal rights or to demand payment for their shares in connection with the Acquisition.

Federal Income Tax Consequences of the Acquisition

With respectsubmit to, the purchase of the LLC Interests under the Purchase Agreement, weSEC and the Members agreed to jointly make timely and irrevocable elections under Section 338(h)(10) of the Internal Revenue Code of 1986, as amended (the “Code”).  In any event, becausein our stockholders are not participating in the Acquisition, our stockholders will not recognize any gain or loss in connection with the Acquisition.  The Section 338(h)(10) election provides that the transaction be treated as an asset purchase for tax purposes.  The tax basis of the assets is adjusted to reflect the purchase price amount.

Accounting Treatment of the Acquisition

The transaction will be accounted for under the acquisition method of accounting in accordance with the Financial Accounting Standard Board (“FASB”), Accounting Standard Codification or ASC 805-10 topic for “Business Combinations” (formerly referred to as FASB Statement of Financial Accounting Standards No. 141R). Management has made a preliminary allocation of the estimated purchase price to the tangible and intangible assets acquired and liabilities assumed based on various preliminary estimates and assumptions. These preliminary estimates and assumptions could change significantly during the purchase price measurement period  (typically one year) as we finalize the valuations of the net tangible assets and intangible assets. Any change could result in material variances between our future financial results and the amounts presented in these unaudited condensed combined financial statements, including variances in fair values recorded, as well as expenses associated with these items.

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Federal Securities Law Consequences and Resale Restrictions

The Closing Shares were issued in transactions that are exempt from the registration requirements under Section 5 of the Securities Act pursuant to Section 4(2) and Rule 506 under Regulation D.  The shares of common stock to be issued upon the conversion of the Closing Shares and the Earnout Shares, if earned and issued, will be issued in similar exempt transactions.  The Closing Shares, the shares of common stock to be issued upon the conversion of the Closing Shares and the Earnout Shares, if earned and issued, will be “restricted securities” and will not be registered under the Securities Act upon issuance and will not be freely transferable.  The Members may not sell their shares of our common stock acquired in connection with the Acquisition except pursuant to an effective registration statement under the Securities Act covering the resale of those shares or an exemption under the Securities Act.

Rule 144 under the Securities Act permits theother public resale of restricted securities if certain specified conditions are met, including the expiration of an applicable holding period and requirements with respect to the manner of sale, sales volume restrictions, filing requirements and the availability of current public information regarding the issuer.  Rule 144 imposes a general prohibition against reliance on Rule 144 for the resale of securities of “shell companies.”  A shell company is a company that has no or nominal assets or operations, assets consisting solely of cash and cash equivalents, or assets consisting of any amount of cash and cash equivalents and nominal other assets.

Stockholders of shell companies are ineligible to rely on Rule 144 as a resale exemption for securities, unless:

·the issuer has ceased to be a shell company;communications;

 

·     the issuer is subject to the reporting requirements of Section 13(a) or 15(d) of the Exchange Act;compliance with applicable governmental laws and regulations and stock exchange rules;

 

·     the issuer has filed all reports and materials (other than Form 8-K reports) required to have filed all under Section 13 or 15(d)prompt internal reporting of violations of the Exchange Act, as applicable, forCode of Ethics to an appropriate person or persons identified in the preceding 12 months (or for such shorter period that the issuer was required to file such reports and materials);Code of Ethics; and

 

·     at least one year has elapsed from the time that the issuer filed with the Commission certain information (the “Form 10 Information”) which the company would be required to file if such company was to register a class of its securities under the Exchange Act reflecting its status as an entity that is not a shell company.

We were formerly a shell company.  However, we:

·are no longer a shell company;

·are subjectaccountability for adherence to the reporting requirementsCode of the Exchange Act;

·have filed all reports and materials required to have been filed under the Exchange Act for the preceding 12 months; and

·filed our Form 10 Information with the Commission more than one year prior to the date of this proxy statement.

As a result, the Members may currently rely on Rule 144.  However, due to the fact that we were formerly a shell company, in order for the Members to be able to rely on Rule 144 at the time of any future proposed sale of their restricted securities, we will need to be subject to the reporting requirements of the Exchange Act and will need to have filed all reports and materials required to have been filed under the Exchange Act for the 12 months preceding the date of the proposed sale.  At the time that the Members wish to resell their shares under Rule 144, there can be no assurance that we will be subject to the reporting requirements of the Exchange Act or, if so, current in our reporting requirements under the Exchange Act, in order for the Members to be eligible to rely on Rule 144 at such time.

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Under Rule 144, Members who are not affiliates of ours at the time of a proposed sale (and have not been affiliates for the prior 90 days) will be permitted to sell their restricted securities without registration if they sell for their own account after holding the securities for at least six months, provided that all of the conditions specified in Rule 144 have been satisfied.  If they have held their securities for a full year, they will be permitted to sell their shares of common stock for their own account without restriction.  Members who are affiliates of ours (or who have been affiliates within 90 days prior to a proposed resale of their shares) will be permitted to sell their securities if they satisfy certain requirements of Rule 144, including with respect to volume limitations, manner of sale and the filing of a Form 144 with the Commission, and further provided that we have made available adequate current public information concerning us.

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THE PURCHASE AGREEMENTPolicy Regarding Director Attendance at Annual Meetings of Stockholders

The following discussionDirectors are strongly encouraged to attend our Annual Meetings of the termsStockholders, and conditions of the Purchase Agreement is subject to and is qualified in its entirety by reference to the Purchase Agreement, as amended, which was included with our Current Reports on Form 8-K, as filed with the Commission on November 23, 2009 and December 23, 2009, and our Current Report on Form 8-K/A (Amendment No. 1), as filed with the Commission on January 22, 2010. All such reports and the Purchase Agreement, includingwe currently expect all amendments thereto, are incorporated herein by reference.

Summary

On November 18, 2009, we entered into the Purchase Agreement with JCG, the Members and the Representative, pursuant to which we agreed to purchase from the Members, and the Members agreed to sell to us, 100% of the LLC Interests of JCG.  Pursuant to the Purchase Agreement, we agreed to pay the Members, as consideration for their LLC Interests, a combination of cash, shares of our Series A Preferred Stock, a Promissory Note and, potentially, shares of our common stock as earnout consideration.  On December 18, 2009, the parties entered into a First AmendmentDirectors to the Purchase Agreement.  Pursuant to the First Amendment, we agreed to certain amendments regarding the payment of cash distributions by JCG to the Members prior to the closing date, the powers, duties and obligations of the Representative and certain items of JCG’s disclosure schedule.  On January 14, 2010, the parties entered into a Second Amendment to the Purchase Agreement.  Pursuant to the Second Amendment, the parties amended the Purchase Agreement to clarify that under no circumstances can the number of Earnout Shares exceed 19.9% of the number of shares of our common stock outstanding on the closing date of the Acquisition.

The closing of the Acquisition was subject to various closing conditions, including, among others, the expiration of the waiting period under the HSR Act, receipt of consent from the lenders of JCG’s main credit facility, the exchange of various closing deliverables between the parties and our payment of the initial Acquisition consideration to the Members.  All such conditions were met and the Acquisition closed on December 18, 2009.  As a result of the Acquisition, JCG became our wholly-owned subsidiary.

Acquisition Consideration

Consideration Paid to the Members at Closing

Cash.  On the closing date, we paid the officer-Members $7 millionbe in cash.

Closing Shares.  Pursuant to the Purchase Agreement, we agreed to issue the Members a number of shares of Series A Preferred Stock equal to $64.5 million divided by the average closing price of our common stock, as reported on NASDAQ, for the 20 business days prior to the closing date, divided by 100.  We issued a total of 81,852.78 Closing Shares to the Members based on an average closing price of $7.88 per share.

Promissory Note.  On the closing date, we executed a Promissory Note in favor of the Members in the aggregate principal amount of $53.5 million.  The Promissory Note is due and payable on December 15, 2014 and bears interest at different rates until maturity.  For the first 9 months of the term of the Promissory Note, the Promissory Note bears interest at an annual rate equal to 5%.  For months 10 through 18, the Promissory Note will bear interest at an annual rate equal to 7%.  For months 19 until the maturity date, the Promissory Note will bear interest at an annual rate equal to 8%.  Payments of principal and interest will be payable in cash on an amortizing basis over 60 monthly payments.  The Promissory Note is subordinated to amounts owed to our senior lender and bonding agencies.

The Promissory Note may be prepaid in whole or in part at any time.  If we complete an equity financing while the Promissory Note is outstanding, we have agreed to use the first $10 million of the net proceeds of any such equity financing, plus 75% of the net proceeds in excess of $10 million, to prepay a portion or all of the Promissory Note.  In addition, we have agreed to use 33% of any cash proceeds raised in connection with incurrence of any indebtedness (other than under a bank line of credit or to finance operating expenses, equipment and capital expenditures), to prepay a portion or all of the Promissory Note.  While any amount above $10 milliion is outstanding under the Promissory Note, we have agreed not taken certain actions without the prior written consent

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of Michael D. Killgore, the Promissory Note holders’ representative, including, among others, purchase, acquire, redeem or retire any shares of our common stock.

Closing Shares Placed in Escrow

11,897.18 of the Closing Shares were placed in escrow for a period of three years to provide a source of funding to satisfy our rights to indemnification.  The Purchase Agreement provides for us and our related parties to have full recourse against these Escrow Shares for losses or damages arising out of inaccuracies in JCG’s or the Members’ representations, JCG’s or the Members’ breach of their pre-closing covenants and certain other matters, once the aggregate amount of damages exceeds a specified dollar amount.  The Escrow Shares may be released to the Members according to specific formulas on the following two dates, provided there are Escrow Shares remaining in escrow on each such date:

·within five days after we receive our audited financial statements for the fiscal year ending December 31, 2010, but in no event later than April 15, 2011; and

·December 18, 2012.

Earnout Consideration

Subject to certain specified adjustments, if JCG’s EBITDA, as defined in the Purchase Agreement, for the fiscal year ending December 31, 2010 is equal to or greater than $35 million, we have agreed to pay the Members, as earnout consideration, a number of shares of common stock equal to $10 million, divided by the average closing price of our common stock, as reported on NASDAQ, for the 20 business days prior to December 31, 2010.  We cannot currently determine the number of Earnout Shares, if any, that we may be required to issueattendance at the end ofAnnual Meeting on May 6, 2011.  All the earnout period because we do not know if JCG will attain the specified EBITDA milestone nor do we know what the average closing price of our common stock for the 20 business days prior to December 31, 2010 will be.

Under no circumstances, however, can the number of Earnout Shares exceed 19.9% of the number of shares of our common stock outstanding on the closing date of the Acquisition.  Prior to the closing of the Acquisition, we had 32,704,903 shares of common stock outstanding.  As a result, the maximum number of Earnout Shares that we may be required to issue would be 6,508,276 shares, which, according to the formula above, would reflect a 20-day average closing price of $1.54 per common share.  If weDirectors were required to issue any Earnout Shares, we would only be required to issue a number of Earnout Shares up to the Share Cap, and then to pay the Members, in cash, the dollar amount equivalent of any Earnout Shares that would exceed the Share Cap.

Covenant to Hold the Special Meeting

Pursuant to NASDAQ Listing Rule 5635, stockholder approval is required for the issuance of all shares of common stock potentially issuable in the Acquisition if the total number of shares of common stock issuable in the Acquisition (including shares of common stock potentially issuable as earnout consideration) exceeds 20% of the number of shares of common stock outstanding prior to the closing of the Acquisition.  Prior to the closing of the Acquisition, we had 32,704,903 shares of common stock outstanding.  If our stockholders were to approve of the conversion of the Closing Shares, the Closing Shares will automatically convert into an aggregate of 8,185,278 shares of common stock, which would represent an approximately 25% increase in the number of shares of common stock outstanding prior to the Acquisition.

Therefore, we are seeking the approval of our stockholders for the:

·issuance of (a) 8,185,278 shares of common stock issuable upon the conversion of the Closing Shares and (b) up to 6,508,276 Earnout Shares; and

·conversion of the Closing Shares into 8,185,278 shares of common stock.

Pursuant to the terms and conditions of the Purchase Agreement, we agreed to call and hold a special meeting of our stockholders for the purpose of approving the issuance of the shares of our common stock to the

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Members pursuant to the conversion of the Closing Shares.  We also agreed to prepare, file with the Commission and distribute this proxy statement for the purpose of soliciting proxies from our stockholders to voteattendance at the special meeting.  If our stockholders do not approve the conversion of the Closing Shares, we may purchase or otherwise acquire the Closing Shares by mutual agreement with any holder or holders thereof.

Certain of our stockholders who represent, in the aggregate, in excess of 50% of our issued and outstanding shares of common stock, including, among others, Brian Pratt, our chairman, president and chief executive officer, and John P. Schauerman, a director and our executive vice president of corporate development, have agreed to enter into a voting agreement with JCG and the Representative to vote their respective shares in favor of the conversion of the Closing Shares into shares of common stock.  We expect that such stockholders will also vote in favor of the issuance of 8,185,278 shares of common stock issuable upon the conversion of the Closing Shares and the Earnout Shares.  Under the terms of the voting agreement, such stockholders agreed not to transfer in excess of 200,000 shares of common stock, in the aggregate, unless the transferee agrees to become bound by the terms of the voting agreement.

Cash Distributions Made by JCG to the Members

Prior to the closing of the Acquisition, JCG madea cash distribution of $35 million to the Members, in accordance with the Purchase Agreement.  In addition, to satisfy certain tax obligations of the Members, JCG issued to the Members an interest-free promissory note dated December 18, 2009 in the principal amount of $1,965,806, which was paid in January 2010.  An adjustment to the amount of the payment may be made between the parties on or about April 15, 2010, based on the final determination of JCG’s actual income for the period of July 1, 2009 to December 18, 2009.  If the amount that results from the re-calculation exceeds $1,965,806, we have agreed to cause JCG to pay the Members an amount equal to the excess.  However, if the amount that results from the re-calculation is less than the amount already distributed, the Members have agreed to refund to JCG, in cash, an amount equal to the shortfall.

Transaction Expenses

Each of the parties to the Purchase Agreement bore its own costs and expenses incurred in connection with the Purchase Agreement and the consummation of the Acquisition.  However, JCG agreed to pay, no later than 30 days following the closing date, any costs and expenses (including legal, accounting and audit fees and expenses and JCG’s share of the filing fees relating to the HSR Act) incurred by JCG or the Members in connection with seeking approval for the Acquisition under the HSR Act.  The parties agreed that such amounts would be charged as an expense in the calculation of JCG’s actual net income for the period of July 1, 2009 to December 18, 2009.

Representations and Warranties

We, JCG and the Members made certain representations and warranties to each other that are customary for transactions of this type, subject in some cases to exceptions and qualifications set forth in a disclosure schedule to the Purchase Agreement.   All of the representations and warranties made by the Members survived the closing and will continue in full force and effect until April 15, 2011 (even if we knew or had reason to know of any misrepresentation or breach of warranty or covenant at closing), except for certain specified representations and warranties, which will continue until April 15, 2013, at the earliest, or until forever, at the latest (subject to any applicable statute of limitations).  All of the representations and warranties made by us survived the closing, even if the Members knew or had reason to know of any misrepresentation or breach of warranty or covenant at the time of closing, and will continue in full force and effect until December 18, 2012.

Covenants

We, JCG and the Members agreed to certain covenants, including among others, our agreement to prepare and file this proxy statement with the Commission and to hold the special meeting.  The covenants survived the closing and will continue in full force and effect until April 15, 2013.

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Indemnification

Pursuant to the Purchase Agreement, we and the Members agreed to indemnify each other and each of our respective affiliates (including JCG and its subsidiaries), successors and assigns against and from all liability, losses and damages sustained by each of us and the Members to the extent such liability, losses and damages are a result of certain specified actions of us and the Members, including, but not limited to, any breach of, or inaccuracy in, any representation or warranty of us or the Members, as the case may be, as set forth in the Purchase Agreement.  Any claims for damages asserted by us prior to December 18, 2012 will be first satisfied by reduction of the Escrow Shares and any claims for damages that cannot be satisfied by the release of Escrow Shares will be satisfied by the Members’ payment of cash or other immediately available funds.  We have no right of offset against the Promissory Note or other indebtedness owed to the Members.  Any claims for damages asserted by the Members for which we owe the Members indemnity will be satisfied by our payment of cash or other immediately available funds.  Claims made by the Members under the Promissory Note are not subject to indemnification by us.  Subject to certain specified exceptions and limitations, the Members will not have any liability for indemnification unless and until the aggregate amount of all damages incurred by us exceeds $850,000 plus 60% of the gross revenue in excess of $500,000 received by JCG from JCG’s pending Picardy Avenue (Baton Rouge) project claim, and the Members will not have any liability for indemnification for any damages in an aggregate amount in excess of $9,375,000.

Employment Agreements with Officer-Members

Pursuant to the Purchase Agreement, we caused JCG to enter into employment agreements with each of JCG’s officer-Members, effective as of December 18, 2009.  For a discussion of these employment agreements, please refer to the sections above entitled “Interests of Our Officers and Directors in the Acquisition” on page 24 and “Senior Management of JCG After the Closing of the Acquisition” on page 26.

Changes to our Board of Directors

Pursuant to the Purchase Agreement, we created two new “Class C” directorships with terms expiring at the 2011 annual meeting of stockholders and appointed Michael D. Killgore and Robert A. Tinstman to these newly created “Class C” directorships.  Biographical information regarding Mr. Killgore and Mr. Tinstman is provided in the section above entitled “Changes to Our Board of Directors as a Result of the Acquisition” on page 22.

Piggyback Registration Rights

Subject to certain specified exceptions and limitations, we granted the Members “piggyback” registration rights, pursuant to which we have agreed to use our reasonable best efforts to include the shares of common stock issuable upon the conversion of the Closing Shares and the Earnout Shares in any registration statement (other than pursuant to a registration statement on Forms S-4 or S-8 or any successor or similar forms, or a registration on any form that does not permit secondary sales) that we file after the closing date.

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF JCG

The following table sets forth certain of JCG’s consolidated financial data.  The consolidated financial data as of and for the years ended December 31, 2008, 2007 and 2006 is derived from JCG’s audited consolidated financial statements, which are included with our Current Report on Form 8-K/A (Amendment No. 1), as filed with the Commission on January 22, 2010 and which are incorporated herein by reference.  The consolidated financial information as of and for the nine month periods ended September 30, 2009 and 2008 is derived from JCG’s unaudited consolidated financial statements, which are also included with our Current Report on Form 8-K/A (Amendment No. 1), as filed with the Commission on January 22, 2010, and which are incorporated herein by reference.  These statements, in JCG’s opinion, include all adjustments (consisting of normal recurring adjustments) necessary for a fair statement of JCG’s financial position and results of operations for such periods.  Interim results for the nine months ended September 30, 2009 are not necessarily indicative of results for the remainder of the fiscal year or for any future period.  The selected historical financial data below should be read in conjunction with the consolidated financial statements and related notes, incorporated herein by reference as discussed above, and in conjunction with the “JCG Management’s Discussion and Analysis of Financial Condition and Results of Operations” on page 50 of this proxy statement.

 

 

Nine Months Ended September 30,

 

Year Ended December 31,

 

 

 

2009

 

2008

 

2008

 

2007

 

2006

 

 

 

(in thousands)
Unaudited

 

(in thousands)

 

(in thousands)

 

(in thousands)

 

Statements of Operations Data:

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

285,457

 

$

295,249

 

$

410,645

 

$

304,561

 

$

320,099

 

Cost of revenue

 

255,378

 

262,090

 

364,146

 

274,195

 

291,528

 

Gross profit

 

30,079

 

33,159

 

46,499

 

30,366

 

28,571

 

Selling, general and administrative

 

11,153

 

10,943

 

13,361

 

13,346

 

12,432

 

Operating profit

 

18,926

 

22,216

 

33,138

 

17,020

 

16,139

 

Other income (expense)

 

551

 

499

 

561

 

592

 

(279

)

Gain on disposals of property and equipment

 

1,490

 

1,009

 

1,060

 

1,146

 

731

 

Goodwill impairment loss

 

 

 

(1,913

)

 

 

Income before taxes

 

$

20,967

 

$

23,724

 

$

32,846

 

$

18,757

 

$

16,591

 

 

 

September 30,

 

December 31,

 

 

 

2009

 

2008

 

2008

 

2007

 

2006

 

 

 

(in thousands)
Unaudited

 

(in thousands)

 

(in thousands)

 

(in thousands)

 

Balance Sheet Data:

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

62,627

 

$

21,642

 

$

45,389

 

$

20,191

 

$

22,290

 

Working capital

 

26,487

 

22,870

 

31,215

 

18,272

 

21,921

 

Property and equipment, net

 

41,407

 

34,609

 

40,271

 

33,714

 

20,798

 

Total assets

 

185,171

 

156,218

 

162,311

 

126,997

 

110,295

 

Long-term debt, net

 

7,746

 

6,804

 

10,325

 

15,438

 

15,104

 

Members’ equity

 

$

60,341

 

$

49,184

 

$

58,308

 

$

36,099

 

$

27,274

 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF PRIMORIS

The following table sets forth certain of our consolidated financial data.  The consolidated financial data as of and for the years ended December 31, 2008, 2007 and 2006 is derived from our audited consolidated financial statements, which are included in our Annual Report on Form 10-K for the year ended December 31, 2008, as filed with the Commission on March 24, 2009, and which are incorporated herein by reference.  The consolidated financial information as of and for the nine month periods ended September 30, 2009 and 2008 is derived from our unaudited consolidated financial statements, which are included in our Quarterly Report on Form 10-Q for the period ended September 30, 2009, as filed with the Commission on November 12, 2009, and which are incorporated herein by reference.  These statements, in our opinion, include all adjustments (consisting of normal recurring adjustments) necessary for a fair statement of our financial position and results of operations for such periods.  Interim results for the nine months ended September 30, 2009 are not necessarily indicative of results for the remainder of the fiscal year or for any future period.  The selected historical financial data below should be read in conjunction with the consolidated financial statements for those periods and their accompanying notes, incorporated herein by reference as discussed above.

 

 

Nine Months Ended September 30,

 

Year Ended December 31,

 

 

 

2009

 

2008

 

2008

 

2007

 

2006

 

 

 

Unaudited

 

 

 

 

 

 

 

 

 

(in thousands)

 

(in thousands)

 

(in thousands)

 

(in thousands)

 

Statements of Operations Data:

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

367,129

 

$

458,572

 

$

609,072

 

$

547,666

 

$

439,405

 

Cost of revenue

 

312,402

 

406,622

 

538,629

 

488,314

 

399,455

 

Gross profit

 

54,727

 

51,950

 

70,443

 

59,352

 

39,950

 

Selling, general and administrative

 

23,425

 

21,662

 

31,522

 

29,517

 

26,769

 

Operating profit

 

31,302

 

26,613

 

34,871

 

29,835

 

13,181

 

Other income (expense)

 

4,473

 

4,212

 

6,389

 

(1,853

)

1,244

 

Income before taxes

 

$

35,775

 

$

30,825

 

$

41,260

 

$

27,982

 

$

14,425

 

Provision for income taxes

 

(13,608

)

(2,188

)

(4,827

)

(848

)

(1,197

)

Net income

 

$

22,167

 

$

28,637

 

$

36,433

 

$

27,134

 

$

13,228

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.70

 

$

1.15

 

$

1.39

 

$

1.16

 

$

0.56

 

Diluted

 

$

0.67

 

$

1.10

 

$

1.29

 

$

1.16

 

$

0.56

 

Shares used in calculation:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

31,699

 

25,010

 

26,258

 

23,458

 

23,402

 

Diluted

 

33,128

 

26,093

 

28,156

 

23,458

 

23,402

 

 

 

 

 

 

 

 

 

 

 

 

 

Pro forma net income data — Note 1:

 

 

 

 

 

 

 

 

 

 

 

Income before taxes — from above

 

 

 

$

30,825

 

$

41,260

 

$

27,982

 

$

14,425

 

Adjustments for income taxes

 

 

 

(12,271

)

(16,421

)

(11,137

)

(5,741

)

Pro forma net income

 

 

 

18,554

 

24,839

 

16,845

 

8,684

 

Pro forma earnings per share:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 

$

0.74

 

$

0.95

 

$

0.72

 

$

0.37

 

Diluted

 

 

 

$

0.71

 

$

0.88

 

$

0.72

 

$

0.37

 

 

 

September 30,

 

December 31,

 

 

 

2009

 

2008

 

2008

 

2007

 

2006

 

 

 

Unaudited
(in thousands)

 

(in thousands)

 

(in thousands)

 

(in thousands)

 

Balance Sheet Data:

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

80,346

 

$

76,695

 

$

73,018

 

62,966

 

$

13,115

 

Working capital

 

61,619

 

42,127

 

54,063

 

51,470

 

46,828

 

Property and equipment, net

 

31,830

 

27,300

 

26,224

 

16,143

 

12,143

 

Total assets

 

243,984

 

235,279

 

252,212

 

220,973

 

162,309

 

Long-term debt, net

 

22,478

 

22,024

 

26,624

 

21,433

 

21,328

 

Stockholders’ equity

 

$

75,176

 

$

48,379

 

$

55,430

 

$

46,923

 

$

42,207

 


Note 1 – In order to improve our financial comparability between years, we included pro form net income and pro forma earnings per share information for the years ended December 31, 2008, 2007 and 2006. 

During the year ended December 31, 2008, we were taxed for seven months as an S-Corporation and for five months as a C-Corporation.  For the period prior to August 1, 2008, we had elected federal taxation in accordance with Subchapter S of the Internal Revenue Code.  For an S-Corporation, no federal income tax liability is generally recorded on the corporation’s books. 

On August 1, 2008, we became subject to Subchapter C of the Code and were subject to federal income taxation.  The pro forma amounts shown were calculated using a statutory corporate tax rate of 39.8 percent through the entire fiscal year ended December 31, 2008.  The same pro forma calculation was performed for the years ended prior to December 31, 2008.

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Table of Contents

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

The following unaudited pro forma condensed combined consolidated financial statements are based on our and JCG’s historical financial statements after giving effect to the agreement for our Acquisition of JCG, and the assumptions, reclassifications and adjustments described in the accompanying notes to the unaudited pro forma condensed combined financial statements.

The following unaudited pro forma condensed combined balance sheet as of September 30, 2009 is presented as if the Acquisition of JCG had occurred on September 30, 2009.  The unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2009, and year ended December 31, 2008, are presented as if our Acquisition of JCG had occurred on January 1, 2008 with recurring Acquisition-related adjustments reflected in each of these periods.  The pro forma adjustments to the unaudited pro forma condensed combined financial statements reflect events that are directly attributable to the Acquisition.

Determination of the JCG purchase price and allocations of the JCG purchase price used in the unaudited pro forma condensed combined financial statements are based upon preliminary estimates and assumptions.  These preliminary estimates and assumptions could change during the purchase price measurement period, provided under generally accepted accounting principles (approximately one year), as we finalize the valuations of the net tangible assets and intangible assets.  Any change could result in material variances between our future financial results and the amounts presented in these unaudited condensed combined financial statements, including variances in fair values recorded, as well as expenses associated with these items.

The following unaudited pro forma condensed combined financial statements are prepared for illustrative purposes only and are not necessarily indicative of or intended to represent the results that would have been achieved had the transaction been consummated as of the dates indicated or that may be achieved in the future.  The unaudited pro forma condensed combined financial statements do not reflect any operating efficiencies and associated cost savings that we may achieve with respect to the combined companies.

The unaudited pro forma condensed combined financial statements should be read in conjunction with our historical consolidated financial statements and accompanying notes included with our Annual Report on Form 10-K for the year ended December 31, 2008, as filed with the Commission on March 24, 2009, and in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2009, as filed with the Commission on November 12, 2009, and JCG’s historical consolidated financial statements and related notes included with our Current Report on Form 8-K/A (Amendment No. 1), as filed with the Commission on January 22, 2010, all of which are incorporated herein by reference.

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Table of Contents

Primoris Services Corporation

Pro Forma Condensed Combined Balance Sheet

As of September 30, 2009

(Unaudited)

(Amounts In Thousands)

 

 

(Note A)
Primoris
reported at
9/30/09

 

(Note A)
JCG
reported at
9/30/09

 

Pro Forma
Adjustments

 

Notes

 

Proforma
Combined

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

85,362

 

62,627

 

(44,882

)

C, D, K

 

$

103,107

 

Restricted cash

 

6,536

 

 

 

 

 

 

6,536

 

Accounts receivable

 

81,810

 

55,359

 

 

 

 

 

137,169

 

Costs and estimated earnings in excess of billings

 

22,369

 

3,905

 

 

 

 

 

26,274

 

Inventory

 

2,454

 

19,271

 

 

 

 

 

21,725

 

Deferred tax assets

 

6,182

 

 

 

 

 

 

6,182

 

Prepaid expenses and other current assets

 

1,802

 

2,408

 

 

 

 

 

4,210

 

Total current assets

 

206,515

 

143,570

 

(44,882

)

 

 

305,203

 

 

 

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

31,830

 

41,406

 

18,972

 

G

 

92,208

 

Other assets

 

24

 

28

 

 

 

 

 

52

 

Investment in non-consolidated entities

 

2,773

 

 

 

 

 

 

 

2,773

 

Investment in subsidiary

 

 

166

 

 

 

 

 

166

 

Goodwill

 

2,842

 

 

61,793

 

B, C, F, G, H

 

64,635

 

Intangible assets

 

 

 

 

 

31,650

 

H

 

31,650

 

Total assets

 

$

243,984

 

$

185,170

 

$

67,533

 

 

 

$

496,687

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

39,609

 

27,861

 

 

 

 

 

$

67,470

 

Billings in excess of costs and estimated earnings

 

73,037

 

59,201

 

 

 

 

 

132,238

 

Accrued expenses and other current liabilities

 

25,128

 

23,778

 

3,846

 

E

 

52,752

 

Deferred compensation payable

 

 

2,882

 

(2,882

)

L

 

 

Distributions and dividends payable

 

812

 

 

 

 

 

 

812

 

Current portion of long-term debt and capital leases

 

6,310

 

3,361

 

12,666

 

C, D

 

22,337

 

Total current liabilities

 

144,896

 

117,083

 

13,630

 

 

 

275,609

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term debt and capital leases, net of current portion

 

22,478

 

7,746

 

 

 

 

 

30,224

 

Deferred tax liabilities

 

1,434

 

 

 

 

 

 

1,434

 

Long-term purchase note payable

 

 

 

42,800

 

C

 

42,800

 

Contingent consideration - earnout liability

 

 

 

8,190

 

B

 

8,190

 

Total liabilities

 

168,808

 

124,829

 

64,620

 

 

 

358,257

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders equity:

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

3

 

 

 

 

 

 

3

 

Member equity and retained earnings - James

 

 

60,341

 

(60,341

)

F

 

 

Additional paid-in capital - Primoris

 

34,796

 

 

 

64,500

 

B

 

99,296

 

Retained earnings - Primoris

 

40,165

 

 

(1,246

)

E

 

38,919

 

Accumulated other comprehensive income

 

212

 

 

 

 

 

 

 

212

 

Total stockholder’s equity

 

75,176

 

60,341

 

2,913

 

 

 

138,430

 

Total liabilities and stockholders’ equity

 

$

243,984

 

$

185,170

 

$

67,533

 

 

 

$

496,687

 

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Table of Contents

PRIMORIS SERVICES CORPORATION

PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

For the nine months ended September 30, 2009

(Unaudited)

(Amounts in thousands, except per share amounts)

 

 

(Note A)
Primoris

 

(Note A)
JCG

 

Pro Forma
Adjustment

 

Notes

 

Pro Forma
Combined

 

Notes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

367,129

 

$

285,457

 

 

 

 

 

$

652,586

 

Cost of revenues

 

312,402

 

255,378

 

4,413

 

G, H

 

572,193

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

54,727

 

30,079

 

(4,413

)

 

 

80,393

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

23,425

 

11,153

 

921

 

H, K

 

35,499

 

Operating income

 

31,302

 

18,926

 

(5,334

)

 

 

44,894

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from non-consolidated entities

 

5,342

 

 

 

 

 

 

5,342

 

Foreign exchange gain (loss)

 

33

 

 

 

 

 

 

33

 

Other income (expense), net

 

 

551

 

 

 

 

 

551

 

Gain on sale of property and equipment

 

 

1,490

 

(1,490

)

K

 

 

Interest income (expense), net

 

(902

)

 

(2,151

)

C

 

(3,053

)

Total other income (expense)

 

4,473

 

2,041

 

(3,641

)

 

 

2,873

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

35,775

 

20,967

 

(8,975

)

 

 

47,767

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

(13,608

)

 

(4,773

)

I

 

(18,381

)

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

22,167

 

$

20,967

 

$

(13,748

)

 

 

$

29,386

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.70

 

 

 

 

 

M

 

$

0.76

 

Diluted

 

$

0.67

 

 

 

 

 

M

 

$

0.71

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding

 

 

 

 

 

 

 

 

 

 

 

Basic

 

31,699

 

 

 

6,996

 

M

 

38,695

 

Diluted

 

33,128

 

 

 

8,185

 

M

 

41,313

 

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Table of Contents

PRIMORIS SERVICES CORPORATION

PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

For the year ended December 31, 2008

(Unaudited)

Amounts in thousands, except per share amounts

 

 

(Note A)
Primoris

 

(Note A)
JCG

 

Pro Forma
Adjustment

 

Notes

 

Pro Forma
Combined

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

609,072

 

$

410,645

 

 

 

 

 

$

1,019,717

 

Cost of revenues

 

538,629

 

364,146

 

5,883

 

G, H

 

908,658

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

70,443

 

46,499

 

(5,883

)

 

 

111,059

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

31,522

 

13,361

 

2,155

 

H, K

 

47,038

 

Merger related stock expense

 

4,050

 

 

 

 

 

 

 

4,050

 

Operating income

 

34,871

 

33,138

 

(8,038

)

 

 

59,971

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from non-consolidated entities

 

6,065

 

 

 

 

 

 

6,065

 

Foreign exchange gain (loss)

 

855

 

 

 

 

 

 

855

 

Other income (expense), net

 

 

622

 

 

 

 

 

622

 

Gain on sale of property and equipment

 

 

1,060

 

(1,060

)

K

 

 

Goodwill impairment

 

 

 

(1,913

)

 

 

 

 

(1,913

)

Interest income (expense), net

 

(531

)

(61

)

(2,653

)

C

 

(3,245

)

Total other income (expense)

 

6,389

 

(292

)

(3,713

)

 

 

2,384

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

41,260

 

32,846

 

(11,751

)

 

 

62,355

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes - pro forma

 

(16,421

)

 

(8,395

)

I, J

 

(24,816

)

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) - pro forma

 

$

24,839

 

$

32,846

 

$

(20,147

)

 

 

$

37,539

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share - pro forma

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.95

 

 

 

 

 

M

 

$

1.13

 

Diluted

 

$

0.88

 

 

 

 

 

M

 

$

1.03

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding

 

 

 

 

 

 

 

 

 

 

 

Basic

 

26,258

 

 

6,996

 

M

 

33,254

 

Diluted

 

28,156

 

 

8,185

 

M

 

36,341

 

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Table of Contents

Notes to Pro Forma Condensed Combined Financial Statements (Unaudited)

The unaudited pro forma condensed combined balance sheet as of September 30, 2009 is presented as if our Acquisition of JCG had occurred on September 30, 2009.  The unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2009 and year ended December 31, 2008 are presented as if our Acquisition of JCG had occurred on January 1, 2008 with recurring Acquisition-related adjustments reflected in each of the periods.  The pro forma adjustments to the unaudited pro forma condensed combined financial statements give effect to events that are directly attributable to the Acquisition and factually supportable.

The purchase price for the acquisition was based on total consideration of:

Cash - $7.0 million

Promissory note - $53.5 million

Closing Shares (preferred stock) - $64.5 million

Earnout Shares - $10.0 million

The nominal consideration detailed above amounted to $135.0 million.  However, under generally accepted accounting principles, we are required to estimate the fair value of the consideration.  On a preliminary basis, the company established that the amount of consideration in cash, the promissory note and the Closing Shares approximates fair value.  The fair value of the Earnout Shares was estimated to be $8.19 million.  As a result, the fair value of the preliminary purchase price for the Acquisition was calculated to be $133.19 million.

The allocation of the preliminary purchase price of $133.19 million, based on the fair value of the acquired assets less liabilities assumed as of December 18, 2009, the closing date of the Acquisition, is as follows ($ in thousands):

Cash

 

$

35,899

 

Accounts receivable, net

 

52,187

 

Cost and earnings in excess of billings

 

727

 

Inventory

 

18,506

 

Prepaid expenses

 

1,738

 

Property, plant and equipment

 

62,135

 

Investment in non-consol joint ventures

 

300

 

Investment in subsidiary

 

167

 

Other assets

 

28

 

Goodwill

 

60,061

 

Intangible assets

 

31,650

 

Accounts payable

 

(26,321

)

Billing in excess of costs and earnings

 

(63,911

)

Accrued expenses

 

(25,669

)

Current portion of long term debt

 

(6,181

)

Contingent consideration — earnout liability for Earnout Shares

 

(8,190

)

Long term debt

 

(8,126

)

Total

 

$

133,190

 


(A)The columns for us and JCG represent the financial statements of each entity, as reported for the periods shown.  However, as described in Note (J) below, during the year ended December 31, 2008, we were taxed for seven months as an S-Corporation and for five months as a C-Corporation.  For the Pro Forma Condensed Combined Statement of Operations for the year ended December 31, 2008, the Primoris Provision for Income Taxes represents pro forma taxes as if the earnings were taxed the entire year at the corporate statutory rate of 39.8%.

(B)On December 18, 2009, we issued 81,852.78 shares of the Series A Preferred Stock to JCG’s Members.  Subject to approval of our stockholders, each share of the Series A Preferred Stock is convertible into 100 shares of our common stock.  Under the Purchase Agreement, the value of the shares of Series A Preferred Stock that were issued was to equal $64.5 million, calculated at $7.88 per share.

In addition to the Series A Preferred Stock, we provided for additional consideration to the Members in the form of the Earnout Shares.  If JCG’s EBITDA, as defined in the Purchase Agreement, for the fiscal year ending December 31, 2010 is equal to or greater than $35 million, we have agreed to pay the Members, as earnout consideration, a number of shares of common stock equal to $10 million, divided by the average closing price of our common stock, as reported on NASDAQ, for the 20 business days prior to December 31, 2010.  The $10 million amount is reflected as a liability on the Pro Forma Condensed Combined Balance Sheet, as required under generally accepted accounting principles, and has been adjusted to reflect the time value of money and a contingent probability factor, resulting in a liability for $8,190,000.

(C)On December 18, 2009, we paid the Members $7 million in cash and executed a promissory note payable to the Members for $53.5 million.  The promissory note is due and payable on December 15, 2014 and bears an annual rate of interest of 5% interest for months 1 through 9, 7% for months 10

39



Table of Contents

through eighteen and 8% for months nineteen until the maturity date.  The principal is to be paid ratably over the 60 months of the promissory note, plus interest.  There is no prepayment penalty.  The current portion of the note at closing was $10.7 million.

Interest expense for the note is approximately $2.15 million for the nine months ended September 30, 2009 and approximately $2.65 million for the year ended December 31, 2008.

(D)Prior to the closing of the Acquisition, JCG made a cash distribution of $35 million to the Members.  Additionally, to satisfy certain tax obligations of the Members, JCG issued the Members an interest-free promissory note dated December 18, 2009 for $1.9 million, which was repaid in January 2010.

(E)JCG incurred certain costs, including legal, accounting and tax consulting expenses relating to closing of the Acquisition, and $2.6 million in estimated costs were accrued prior to closing.

Additionally, our Acquisition related costs, consisting of legal, accounting, tax consulting and due diligence costs, amounted to $1.25 million.

(F)Reflects the elimination of JCG’s equity and represents the book value of net assets acquired by us.

(G)The transaction will be accounted for under the Acquisition method of accounting in accordance with the Financial Accounting Standard Board (“FASB”), Accounting Standard Codification or ASC 805-10 topic for “Business Combinations” (formerly referred to as FASB Statement of Financial Accounting Standards No. 141R).  Accordingly, the JCG assets and liabilities are measured at fair value at the closing date of the Acquisition.  We engaged a third party valuation specialist to assist management in estimating the fair value for fixed assets on the date of the Acquisition and increased the book value for the fixed assets, primarily machinery and equipment.

The resulting adjustment to depreciation expense was approximately $2.8 million for the nine months ended September 30, 2009 and approximately $3.8 million for the year ended December 31, 2008 and have been charged to cost of revenues.

(H)To determine the estimated fair value of intangibles acquired, we engaged an independent third party valuation specialist to assist management.  The valuation is preliminary and subject to change.  Based on the preliminary assessment, the acquired intangible asset categories, fair value and average amortization periods are as follows:

 

 

Amortization

 

Fair

 

 

 

Period

 

Value ($ in thousands)

 

Tradename

 

10 years

 

$

15,350

 

Non-compete agreements

 

5 years

 

$

5,200

 

Customer relationships

 

10 years

 

$

6,400

 

Backlog

 

2.25 years

 

$

4,700

 

Additional amortization expense resulting from the increase in fair value of acquired intangible assets was approximately $3.978 million for the nine months ended September 30, 2009 (with $1.567 million charged to cost of revenues and $2.411 million charged to selling, general and administrative expenses) and $5.304 million for the year ended December 31, 2008 (with $2.089 million charged to cost of revenues and $3.215 million charged to selling, general and administrative expenses).

(I)The tax effect of both the income before income taxes for JCG and the pro forma adjustments for the Acquisition is calculated using the statutory corporate tax rate of 39.8% for the periods presented.

(J)For the period prior to August 1, 2008, we had elected federal taxation in accordance with Subchapter S of the Code.  Similarly, for the period up through the closing of the Acquisition, JCG was taxed as an S-Corporation.  For an S-Corporation, no federal income tax liability is generally recorded on the corporation’s books.

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On August 1, 2008, we became subject to Subchapter C of the Code.  In order to improve our financial comparability between years, we included pro forma net income data in our Annual Report on Form 10-K for the year ended December 31, 2008, as filed with the Commission on March 24, 2009.  This pro forma calculation uses a statutory corporate tax rate of 39.8 percent through the entire fiscal year ended December 31, 2008 to present pro forma net income and pro forma earnings per share information.  The same pro forma calculation was performed in this Unaudited Pro Forma Condensed Combined Statement of Operations for the year ended December 31, 2008.

(K)This adjustment reclassifies the JCG presentation for “gain on sale of property, plant and equipment” to selling, general and administrative expenses in accordance with our practice.

(L)Prior to the closing of the Acquisition, JCG paid the amount for deferred compensation.

(M)The adjustment to earnings per share reflects the conversion of the Closing Shares (the shares of Series A Preferred Stock) as if such shares were converted into common stock, at a conversion rate of 100 common shares per share, in order to reflect the additional dilution.  The adjustment to earnings per share excludes the potential impact of the Earnout Shares that may be issued contingent upon meeting a certain financial target at the end of 2010.  The following identifies the number of shares included in pro forma weighted average shares outstanding for Basic and Diluted:

Basic:

Shares included in pro forma basic shares outstanding represent the 81,852.78 Closing Shares less 11,897.18 Closing Shares placed in escrow, totaling 69,955.60 preferred shares, which when converted to common stock, represent 6,995,560 pro forma shares of common stock.

Diluted:

Shares included in pro forma diluted shares outstanding represent the 81,852.78 Closing Shares, which when converted to common stock, represent 8,185,278 pro forma shares of common stock.

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HISTORICAL COMMON STOCK MARKET PRICE AND DIVIDENDS

Historical Common Stock Market Price

Primoris

Shares of our common stock are traded on the NASDAQ Global Market under the symbol “PRIM.”  The following table sets forth, for the periods indicated, the intra-day high and low per share sale prices of our common stock, as reported on the NASDAQ Global Market:

 

 

Price Range Per Share

 

 

 

High

 

Low

 

Year Ended December 31, 2009

 

 

 

 

 

Fourth quarter

 

$

8.40

 

$

7.00

 

Third quarter

 

$

8.00

 

$

6.87

 

Second quarter

 

$

7.63

 

$

3.93

 

First quarter

 

$

5.44

 

$

3.25

 

 

 

 

 

 

 

Year Ended December 31, 2008

 

 

 

 

 

Fourth quarter

 

$

7.70

 

$

3.28

 

Third quarter

 

$

8.64

 

$

3.44

 

Second quarter

 

$

8.49

 

$

7.80

 

First quarter

 

$

7.99

 

$

7.51

 

 

 

 

 

 

 

Year Ended December 31, 2007

 

 

 

 

 

Fourth quarter

 

$

7.54

 

$

7.40

 

Third quarter

 

$

7.50

 

$

7.37

 

Second quarter

 

$

7.58

 

$

7.27

 

First quarter

 

$

7.53

 

$

7.30

 

On March 8, 2010, the closing sale price of our common stock on the NASDAQ Global Market was $8.67 per share.

JCG

Historical market price data for JCG has not been presented as there is no established trading market in JCG’s limited liability company membership interests.

Dividends

Primoris

The following table shows cash dividends to our common stockholders declared by us during the two years ended December 31, 2009:

Declaration Date

Payable Date

Record Date

Type

August 8, 2008

October 10, 2008

September 23, 2008

$0.025 per share

November 10, 2008

January 15, 2009

December 23, 2008

$0.025 per share

March 16, 2009

April 15, 2009

March 31, 2009

$0.025 per share

May 19, 2009

July 15, 2009

June 30, 2009

$0.025 per share

August 7, 2009

October 15, 2009

September 30, 2009

$0.025 per share

November 11, 2009

January 15, 2010

December 31, 2009

$0.025 per share

Delaware law allows a corporation to pay dividends only out of surplus, as determined under Delaware law, or, if there is no surplus, out of net profits for the fiscal year in which the dividend was declared and for the preceding fiscal year.  Under Delaware law, however, we cannot pay dividends out of net profits if, after we pay the dividend, our capital would be less than the capital represented by the outstanding stock of all classes having a preference upon the distribution of assets.  During times of financial or market stress, which may adversely impact earnings or alternative methods of raising capital, we may be required or may deem it prudent to reduce dividends on our common stock in order to build or conserve capital.  In addition, there may be legislative or regulatory developments resulting in enhanced supervisory standards that could impact our dividend policies in the future.

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Further, if at any time that any shares of Series A Preferred Stock are outstanding we declare a dividend or distribution of cash, securities, properties or assets, we have agreed to simultaneously declare a dividend or distribution on shares of Series A Preferred Stock as if such shares were converted into shares of common stock on the record date for such dividend or distribution.  As a result, JCG’s Members received the most recent cash dividend, which was declared on November 11, 2009 and paid on or about January 15, 2010.  No dividends or distributions will be payable to holders of shares of common stock unless the full dividends or distributions are paid to the holders of the Series A Preferred Stock at the same time.  Dividends on the Series A Preferred Stock will be non-cumulative.

Pursuant to that certain Agreement and Plan of Merger, dated February 19, 2008 and amended on May 15, 2008, we agreed to declare and pay annual dividends on our common stock at a rate of not less than $0.10 per share, subject to the above requirements of Delaware law and certain additional contractual restrictions.  We anticipate that future quarterly dividends, if and when declared by the board pursuant to this policy, would likely be distributable on or about the fifteenth day of each of the months of October, January, April and July. There can be no guarantees that we will have the financial wherewithal to fund this dividend in perpetuity or to pay it at historic rates.  Further, the board may decide not to pay the dividend at some future time for financial or non-financial reasons.

JCG

In accordance with the Purchase Agreement, JCG madea cash distribution of $35.0 million to the Members prior to the closing date of December 18, 2009. In addition, to satisfy certain tax obligations of the Members, JCG issued an interest-free promissory note dated December 18, 2009, in the aggregate principal amount of $1.9 million, which was paid by the Company in January 2010.  Prior to the sale, JCG also paid the deferred compensation due an individual for $2.8 million.  See the section entitled, “Cash Distributions Made by JCG to the Members” on page 31 above for more information.

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JCG’s BUSINESS

Overview

JCG is one of the largest general contractors based in the Gulf Coast states, and is engaged in highway, industrial and environmental construction, primarily in Louisiana, Texas and Florida.  James is the successor company to T. L. James and Company, Inc., a well-known Louisiana company that has been in business for over 80 years.  Headquartered in Baton Rouge, Louisiana, JCG specializes in highway, industrial and environmental projects and serves government and private clients in a broad geographical region that includes the entire Gulf Coast region of the United States, from Texas to Florida.

JCG has three primary operating divisions: heavy civil; infrastructure and maintenance; and industrial.  JCG’s heavy civil division provides services in heavy civil construction projects, including highway and bridge construction, concrete paving, levee construction, airport runway and taxiway construction and marine facility construction.  JCG’s infrastructure and maintenance division provides services including large earthwork and site development, landfill construction, site remediation and mining support services.  JCG’s industrial division, with a client base comprised primarily of private industrial companies, provides services including all phases of civil and structural construction, mechanical equipment erection, process pipe installation and boiler, furnace and heater installation and repair.

Corporate History

T. L. James and Company, Inc., a privately held general contractor based in Ruston, Louisiana was formed over 80 years ago in 1926.  On July 31, 1998, two individuals, Dominic Iafrate and Angelo E. Iafrate, acquired the operating assets and business of several significant divisions of T. L. James.  As part of the transaction, two privately held Florida limited liability companies were formed:

·Angelo Iafrate Construction, LLC (“AIC”) was formed to combine T.L. James’ highway and heavy construction divisions with AICC’s highway construction division; and

·James Industrial Constructors, LLC (“JIC”), was formed as a wholly-owned subsidiary of AIC to hold the assets of T.L. James’ industrial division.

On January 1, 2003, JIC merged with and into AIC and AIC, as the surviving entity, changed its name to James Construction Group, LLC (“JCG”)

Angelo Iafrate Construction Company (“AICC”), a privately held general contractor based in Michigan, is a company also owned by the same two individuals, with which JCG had certain related party transactions over the years.

Operating Divisions

JCG has three primary operating divisions: heavy civil; infrastructure and maintenance; and industrial.

Heavy Civil

JCG’s heavy civil division specializes in the building, construction, repair and replacement of infrastructure, primarily in the public works sector.  JCG’s civil contracting services include highway and bridge construction, concrete paving, construction of levee improvements, construction of airport runways and taxiways and construction of marine docks, ports and wharf facilities.

JCG has decades of highway and bridge construction experience, and consistently achieves quality results and timely completion of projects.  JCG employs highly-skilled managers and field staff with the capabilities, work ethic and safety-conscious focus necessary to execute large-scale public infrastructure projects on budget and on time.  Most of this work is performed for state departments of transportation and often occurs in heavily traveled areas.  JCG also has extensive experience working for port commissions on projects that include pile driving and concrete foundation placement for dock facilities and chemical plants situated within the area of port complexes.  JCG has the expertise to handle the challenges and safety issues involved with the construction of infrastructure located near or on bodies of water.

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For the nine months ended September 30, 2009, the heavy civil division generated $168.3 million in revenue, accounting for approximately 59% of JCG’s total revenues during such period.  As of September 30, 2009, the heavy civil division had $496 million in backlog, accounting for approximately 86% of JCG’s total backlog as of such date.  For the years ended December 31, 2008, 2007 and 2006, the heavy civil division generated $168.5 million, $152.0 million and $164.8 million in revenue, respectively, accounting for approximately 41.0%, 50.0% and 51.5% of JCG’s total revenues, respectively, during such years.

Infrastructure and Maintenance

JCG’s infrastructure and maintenance division provides services in infrastructure construction and maintenance projects, including large earthwork and site development projects and landfill and remedial construction projects, including remedial services on several CERCLA “superfund” sites.

JCG’s infrastructure and maintenance division has extensive experience performing earthwork and site development projects for major clients including refineries, chemical processing plants, liquefied natural gas terminals, manufacturing facilities, and governmental entities.  JCG has crews specially trained to perform gypsum stack maintenance and closures.  This expertise has earned JCG long-term contracts with several major processing facilities.  JCG’s project teams maintain a daily onsite presence at these facilities, which require byproduct management and infrastructure upgrades.

JCG has performed many multimillion-dollar landfill construction projects, with work ranging from cell construction and expansions to remediation and closures.  JCG’s infrastructure and maintenance division serves municipalities and private clients such as paper mills, chemical plants, and solid waste disposal operations.  JCG’s mine support and float crew operations have the specialized skill and equipment to provide the assistance often need by companies in the phosphate and lignite mining industries.  JCG’s mining management team is experienced with these companies’ unique project needs, and its field staff is trained to perform land clearing, excavation, and site reclamation, as well as drainage and pipeline work.

For the nine months ended September 30, 2009, the infrastructure and maintenance division generated $54.9 million in revenue, accounting for approximately 19% of JCG’s total revenues during such period.  As of September 30, 2009, the infrastructure and maintenance division had $44 million in backlog, accounting for approximately 8% of JCG’s total backlog as of such date.  For the years ended December 31, 2008, 2007 and 2006, the infrastructure and maintenance division generated $121.6 million, $68.5 million and $45.1 million in revenue, respectively, accounting for approximately 29.6%, 22.5% and 14.1% of JCG’s total revenues, respectively, during such years.

Industrial

JCG’s industrial division provides services in industrial construction and maintenance projects, including all phases of civil and structural construction, mechanical equipment erection, process pipe installation and boiler, furnace and heater repair and installation.  Examples of JCG’s industrial civil construction services include pile driving, concrete foundation placement, underground pipe installation and concrete paving.  Project needs are supported by a vast equipment fleet that includes pile driving rigs and a portable concrete mix batch plant.  JCG employs highly experienced project management personnel and craftspeople to accommodate the most complex industrial civil projects.

JCG’s mechanical construction services also include installation of process piping, equipment setting, structural steel erection and final testing. JCG has been enlisted by industrial clients across the Gulf Region to perform the mechanical phase of work associated with greenfield plant construction and facility expansions. JCG’s management teams comply with each client’s specifications to provide innovative solutions to meet unique construction challenges.

For the nine months ended September 30, 2009, the industrial division generated $62.1 million in revenue, accounting for approximately 22% of JCG’s total revenues during such period.  As of September 30, 2009, the industrial division had $31.5 million in backlog, accounting for approximately 6% of JCG’s total backlog as of such date.  For the years ended December 31, 2008, 2007 and 2006, the industrial division generated $120.0 million,

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$84.5 million and $110.5 million in revenue, respectively, accounting for approximately 29.2%, 27.5% and 34.5% of JCG’s total revenues, respectively, during such years.

Customers

JCG’s customers include both private and local, state and federal governmental entities.  JCG receives a substantial portion of its revenues from a limited number of customers.  Approximately 49% of JCG’s revenue earned during the nine months ended September 30, 2009 was derived from two customers.   As of September 30, 2009, these two customers accounted for an aggregate of approximately, $21.6 million in accounts receivable.  During the years ended December 31, 2008 and 2007, the two largest customers of JCG by revenue accounted for  52.0% and 48.0% of JCG’s total revenues, respectively.  During the year ended December 31, 2006, the three largest customers accounted for 48.0% of JCG’s total revenues.

Geographic Service Area

JCG is licensed or qualified to perform work in Alabama, Arkansas, Florida, Louisiana, Mississippi, Oklahoma, South Carolina, Tennessee, Texas and Virginia.  A substantial portion of JCG’s business has been concentrated in several key geographic regions.  Historically, a substantial portion of the business for each of JCG’s operating divisions has been derived from projects in Louisiana and Texas, and to a lesser extent, Mississippi, Florida, Arkansas and Alabama.

Subsidiaries and Joint Ventures

JCG has one wholly-owned subsidiary: BTEX Materials, LLC, a Louisiana limited liability company (“BTEX”).  The primary business of BTEX is its 15% partnership interest in Miller American Ltd., a Texas limited partnership (“Miller American”).  Miller American is a supplier of crushed rock and similar materials and provides such materials to JCG.

JCG is currently involved in one joint venture project.  On April 21, 2009, JCG formed St. Bernard Levee Partners LLC, a Delaware limited liability company (“St. Bernard Partners”), as part of a joint venture with two construction firms.  St. Bernard Partners was formed for the purpose of submitting proposals, entering into, and performing contracts with the United States Army Corps of Engineers, for levee improvements to the Chalmette Loop Levee in St. Bernard Parish, Louisiana.  JCG owns 30% of the limited liability company membership interests of St. Bernard Partners.  Profits, losses, gains on sales of assets and tax credits are allocated to each member based on each member’s respective ownership percentage.  JCG was required to make an initial capital contribution of $300,000 to St. Bernard Partners.  Additional cash calls may only be made if approved by all of the members of St. Bernard Partners.  JCG has the right to appoint one member to St. Bernard Partners’ four-person board of managers.

Backlog

As of September 30, 2009, JCG’s “backlog,” or estimated revenue on uncompleted contracts, including the amount of revenue on contracts on which work has not begun, minus the revenue recognized under such contracts, was approximately $571.6 million.

Selective Bidding

JCG selectively bids on projects that it believes offer an opportunity to meet profitability objectives or that offer the opportunity to enter promising new markets.  In addition, JCG reviews bidding opportunities to attempt to minimize concentration of work with any one customer, in any one industry or in stressed labor markets.

Property, Plant and Equipment

JCG owns and maintains both construction and transportation equipment.  For the nine month period ended September 30, 2009, JCG spent $8.9 million in cash for the acquisition of property and equipment and did not incur any debt for the acquisition of property and equipment.  In the years ended December 31, 2008, 2007 and 2006, JCG

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spent approximately $4.3 million, $15.7 million and $4.2 million, respectively, in cash for property and equipment.  Additionally, in the years ended December 31, 2008, 2007 and 2006, JCG incurred debt for the acquisition of property and equipment in the amounts of approximately $9.2 million, $3.0 million and $3.1 million, respectively.  An estimated breakdown of capital equipment as of September 30, 2009 is as follows:

·heavy construction and specialized equipment: 583 units; and

·transportation equipment: 426 units.

JCG believes the ownership of equipment is preferable to leasing to ensure that equipment is available as needed.  In addition, such ownership has historically resulted in lower equipment costs.  JCG has attempted to obtain projects that will keep its equipment fully utilized in order to increase profit.  All equipment is subject to scheduled maintenance to insure reliability.  Maintenance facilities exist at each of JCG’s regional offices as well as on-site on major projects to properly service and repair equipment.  Major equipment not currently utilized is rented to third parties to supplement equipment income.

The following summarizes total property, plant and equipment, net of accumulated depreciation, as of September 30, 2009 and December 31, 2008, 2007 and 2006:

 

 

September 30,
2009

(in thousands

 

December 31,
2008

(in thousands)

 

December 31,
2007

(in thousands)

 

December 31,
2006

(in thousands

 

Useful Life

 

 

 

 

 

 

 

 

 

 

 

 

 

Buildings and land improvements

 

$

2,110

 

$

2,062

 

$

2,062

 

$

1,995

 

30/15 years

 

Machinery and equipment

 

61,779

 

58,418

 

47,697

 

31,438

 

7 years

 

Office furniture and equipment

 

528

 

627

 

704

 

685

 

5 years

 

Construction in progress

 

12

 

35

 

30

 

11

 

 

 

Land

 

1,707

 

1,717

 

1,724

 

1,729

 

 

 

Less: accumulated depreciation and amortization

 

(24,729

)

(22,588

)

(18,503

)

(15,060

)

 

 

Net property and equipment

 

$

41,407

 

$

40,271

 

$

33,714

 

$

20,798

 

 

 

For major materials and equipment, JCG has a designated relationship manager that coordinates the procurement effort and helps assure volume-pricing status.

Credit Facility

Pursuant to an Amended and Restated Credit Agreement, dated December 11, 2003, as amended (the “Credit Agreement”), JCG and AICC have a $31 million revolving credit facility with JPMorgan Chase Bank, N.A. (“JPMorgan”) and Iberia Bank (“Iberia Bank,” and together with JPMorgan collectively, the “Lenders”).  The Credit Agreement, as amended, expires on February 28, 2010.

During the term of the Credit Agreement, JCG and AICC may borrow up to $31 million in revolving credit advances and up to $3 million in “swingline” loans from the Lenders.  However, the aggregate principal amount of all revolving credit advances and swingline loans outstanding at any given time may not exceed $31 million.  In addition, during the term of the Credit Agreement, JCG and AICC may borrow up to $18 million through letters of credit issued by JPMorgan.  As of September 30, 2009, the outstanding balance of revolving credit advances and swingline loans for JCG and AICC was $-0- and $-0-, respectively.  As of September 30, 2009, letters of credit issued and outstanding were $11.8 million.

Advances and loans made pursuant to the Credit Agreement bear interest at: (i) JPMorgan’s prime rate; (ii) the rate published by the Federal Reserve Bank of New York; or (iii) LIBOR, in each case plus an applicable margin that is based on JCG’s and AICC’s fixed charge ratio, as defined in the Credit Agreement.  Amounts borrowed by JCG and AICC pursuant to the Credit Agreement are secured by substantially all of the assets of JCG and AICC.

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Further, pursuant to the Credit Agreement, JCG and AICC have certain net worth restrictions, restrictions on entering into loans or making certain advances, making any acquisitions and certain other financial covenants.

On December 18, 2009, the date of the closing of the Acquisition, the Credit Agreement was amended.  The amendment allowed Primoris to assume the existing JCG equipment leases, agreed that no funds could be drawn against the revolving credit advances and swingline loans, agreed to extend the $5.6 million letters of credit to February 28, 2010 and agreed the Credit Agreement is to expire on February 28, 2010.  At the date of the amendment, there were no amounts outstanding under the revolving credit advance line and swingline loans.

Insurance and Bonding

The nature of JCG’s business exposes JCG to a certain degree of risk of liability.  JCG manages this exposure through a combination of general liability and excess liability insurance in amounts consistent with industry practices, which insurance policies cover, among other things, JCG’s equipment.  JCG also maintains workers compensation and directors and officers insurance.  Management believes that JCG’s insurance programs are adequate.  JCG maintains a diligent safety and risk management program.  Through JCG’s safety director and the employment of a large staff of regional and site specific safety managers, JCG has been able to effectively assess and control potential losses and liabilities in both the pre-construction and performance phases of its projects.  JCG will continue to focus on safety in the workplace, although no assurance can be given that all accidents or injuries can or will be prevented in the workplace.

In connection with JCG’s business, JCG generally is required to provide various types of surety bonds guaranteeing its performance under certain public and private sector contracts.  JCG’s ability to obtain surety bonds depends upon its capitalization, working capital, backlog, past performance, management expertise and other factors.  Surety companies consider such factors in light of the amount of surety bonds then outstanding for JCG and their current underwriting standards, which may change from time to time.  Subsequent to the closing of the Acquisition, we increased our bonding capacity with certain surety companies for the combined companies, under which JCG now utilizes the new bonding arrangements.

Competition

JCG faces substantial competition on large construction projects from regional and national contractors.  Competitors on small construction projects range from a few large construction companies to a variety of smaller contractors.  JCG competes with many local and regional firms for construction services and with a number of large firms on select projects.  Each operating division faces varied competition depending on the type of project and services offered.  JCG believes that the primary factors of competition are price, reputation for quality, delivery and safety, relevant experience, availability of skilled labor, machinery and equipment, financial strength, knowledge of local markets and conditions and estimating abilities.  JCG believes that it competes favorably in all of the foregoing factors.

Employees

As of September 30, 2009, JCG employed 317 salaried employees and 1,458 hourly employees.  The total number of hourly personnel employed is subject to the volume of construction in progress.  The following is a summary of employees by function and geography at September 30, 2009:

 

 

Louisiana

 

Texas

 

Other US States

 

Total

 

Salaried

 

245

 

43

 

29

 

317

 

Hourly

 

1,057

 

269

 

132

 

1,458

 

Total

 

1,302

 

312

 

161

 

1,775

 

JCG offers its employees a variety of benefit plans, including, among others, medical, dental and life insurance and a 401(k) plan.  JCG has experienced no recent work stoppages and believes its employee relations are good.

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Facilities

JCG leases approximately 27,000 square feet of office space in Baton Rouge, Louisiana for its corporate headquarters pursuant to a lease that expires on December 31, 2012, at $27,674 per month.  JCG also has four local offices.  JCG leases approximately 2,500 square feet of office space in Lafayette, Louisiana pursuant to a lease that expires on March 31, 2010 and approximately 2,400 square feet of office space in Bartow, Florida pursuant to a lease that expires on September 30, 2010.  JCG owns the land and office building for the remaining two offices, one located in Belton, Texas and the other in Ruston, Louisiana.  In connection with JCG’s various projects, from time to time JCG may also enter into leases for office space located at a particular project site, which offices function as JCG’s operational headquarters for the specific project.  Typically, the rent is paid on a monthly basis and the lease terminates upon completion of the project.

Legal Proceedings

JCG is from time to time subject to claims and legal proceedings arising out of its business.  JCG has been named as one of many defendants in several lawsuits arising out of the levee failures during Hurricane Katrina.  Management believes that JCG has meritorious defenses to these claims.  Although we are unable to ascertain the ultimate outcome of such matters, after review and consultation with counsel and taking into consideration relevant insurance coverage and related deductibles, management believes that the outcome of these matters will not have a materially adverse effect on our financial condition or results of operations following the Acquisition.

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JCG MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

JCG is one of the largest general contractors based in the Gulf Coast states, and is engaged in highway, industrial and environmental construction, primarily in Louisiana, Texas and Florida.  JCG is the successor company to T. L. James and Company., Inc., a well-known Louisiana company that has been in business for over 80 years. JCG provides a wide range of construction, and maintenance services to major state transportation departments, local municipalities and companies in the petrochemical, energy, paper and pulp and agriculture industries.  Substantial portions of JCG’s activities are performed in the Gulf Coast (Texas through Florida).  On December 18, 2009, JCG was acquired by Primoris Services Corporation.

JCG has three primary operating divisions which include the following:

Heavy Civil Division:

The heavy civil division specializes in a range of services that include designing, the building, construction, repair and replacement of infrastructure, primarily in the public works sector.  JCG’s civil contracting services include highway and bridge construction, concrete paving, construction of levee improvements, construction of airport runways and taxiways and construction of marine docks, ports and wharf facilities.

JCG has decades of highway and bridge construction experience, and consistently achieves quality results and timely completion of projects.  JCG employs highly-skilled managers and field staff with the capabilities, work ethic and safety-conscious focus necessary to execute large-scale public infrastructure projects on budget and on time.  Most of this work is performed for state departments of transportation and often occurs in heavily traveled areas.  JCG also has extensive experience working for port commissions on projects that include pile driving and concrete foundation placement for dock facilities and chemical plants situated within the area of port complexes.  JCG has the expertise to handle the challenges and safety issues involved with the construction of infrastructure located near or on bodies of water.

Industrial Division:

The industrial division provides services in industrial construction and maintenance projects, including all phases of civil and structural construction, mechanical equipment erection, process pipe installation and boiler, furnace and heater repair and installation.  Examples of JCG’s industrial civil construction services include pile driving, concrete foundation placement, underground pipe installation and concrete paving.  Project needs are supported by a vast equipment fleet that includes pile driving rigs and a portable concrete mix batch plant.  JCG employs highly experienced project management personnel and craftspeople to accommodate the most complex industrial civil projects.

JCG’s mechanical construction services also include installation of process piping, equipment setting, structural steel erection and final testing. JCG has been enlisted by industrial clients across the Gulf Region to perform the mechanical phase of work associated with greenfield plant construction and facility expansions.

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Infrastructure and Maintenance Division:

The infrastructure and maintenance division provides services in infrastructure construction and maintenance projects, including large earthwork and site development projects and landfill and remedial construction projects, including remedial services on several CERCLA “superfund” sites.

The infrastructure and maintenance division has extensive experience performing earthwork and site development projects for major clients including refineries, chemical processing plants, liquefied natural gas terminals, manufacturing facilities, and governmental entities.  JCG has crews specially trained to perform gypsum stack maintenance and closures.  This expertise has earned JCG long-term contracts with several major processing facilities.  JCG’s project teams maintain a daily onsite presence at these facilities, which require byproduct management and infrastructure upgrades.

JCG has performed many multimillion-dollar landfill construction projects, with work ranging from cell construction and expansions to remediation and closures.  The infrastructure and maintenance division serves municipalities and private clients such as paper mills, chemical plants, and solid waste disposal operations.  JCG’s mine support and float crew operations have the specialized skill and equipment to provide the assistance often need by companies in the phosphate and lignite mining industries.  JCG’s mining management team is experienced with these companies’ unique project needs, and its field staff is trained to perform land clearing, excavation, and site reclamation, as well as drainage and pipeline work.

Material trends and uncertainties

JCG generates its revenue from both large and small construction projects. The award of these contracts is dependent on a number of factors, many of which are not within JCG’s control. Business in the construction industry is cyclical. JCG depends in part on spending by companies in the energy, and oil and gas industries, as well as state, municipal and federal customers. Over the past several years, JCG has benefited from demand for more efficient and more environmentally friendly energy and power facilities and from the strength of the oil and gas industry. Economic factors outside of JCG’s control may affect the amount and size of contracts in any particular period.

The current economic issues in the financial markets will likely continue to have some impact on JCG’s future results. While JCG currently has adequate backlog and projects to bid, JCG is uncertain as to how the current global financial turmoil will impact its clients who provide its future work.

Seasonality and cyclicality

JCG’s operating results can be subject to seasonal and cyclical variations. Weather, particularly rain, can impact JCG’s ability to perform construction work. JCG’s clients’ budget cycles have an impact on the timing of project awards. Accordingly, JCG’s financial condition and operating results may vary from quarter-to-quarter.

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Results of operations

The following tables set forth JCG’s operating results for the specified periods by amount and as a percentage of its total revenues for those periods:

 

 

Three months ended
September 30,

 

Nine months ended
September 30,

 

Years ended December 31,

 

Statement of Operations Data:

 

2009

 

2008

 

2009

 

2008

 

2008

 

2007

 

2006

 

(Amounts in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contract revenues earned

 

$

101,107

 

$

99,273

 

$

285,457

 

$

295,249

 

$

410,645

 

$

304,561

 

$

320,099

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

9,887

 

11,180

 

30,079

 

33,159

 

46,499

 

30,366

 

28,571

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative expenses

 

3,168

 

4,021

 

11,153

 

10,943

 

13,361

 

13,346

 

12,432

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating profit

 

6,719

 

7,159

 

18,926

 

22,216

 

33,138

 

17,020

 

16,139

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill impairment loss

 

 

 

 

 

(1,913

)

 

 

Other income (expense)

 

(2

)

31

 

551

 

499

 

561

 

592

 

(279

)

Gain on disposals of property and equipment

 

106

 

209

 

1,490

 

1,009

 

1,060

 

1,146

 

731

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

$

6,823

 

$

7,399

 

$

20,967

 

$

23,724

 

$

32,846

 

$

18,757

 

$

16,591

 

 

 

Three months ended
September 30,

 

Nine months ended
September 30,

 

Years ended December 31,

 

Statement of Operations Data:

 

2009

 

2008

 

2009

 

2008

 

2008

 

2007

 

2006

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contract revenues earned

 

100.0

%

100.0

%

100.0

%

100.0

%

100.0

%

100.0

%

100.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

9.8

%

11.3

%

10.5

%

11.2

%

11.3

%

10.0

%

8.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative expenses

 

3.1

%

4.1

%

3.9

%

3.7

%

3.2

%

4.4

%

3.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating profit

 

6.7

%

7.2

%

6.6

%

7.5

%

8.1

%

5.6

%

5.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill impairment loss

 

 

 

 

 

(0.5

)%

 

 

Other income (expense)

 

 

 

0.2

%

0.2

%

0.1

%

0.2

%

(0.1

)%

Gain on disposals of property and equipment

 

0.1

%

0.2

%

0.6

%

0.3

%

0.3

%

0.4

%

0.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

6.8

%

7.4

%

7.4

%

8.0

%

8.0

%

6.2

%

5.1

%

Comparison of three months ended September 30, 2009 and 2008

Revenue for the three months ended September 30, 2009 increased by $1.8 million, or 1.8%, from the same period in the prior year to $101.1 million.  This increase in revenue was primarily as a result of increased revenues for certain projects, primarily state and local highway, bridge and levy projects.

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Gross profit decreased by $1.3 million, or 11.6%, for the three months ended September 30, 2009, as compared to the same period in 2008, reflecting a shift of work from higher margin industrial division work to heavy civil division projects, which typically contribute lower margins. For 2009, gross profit provided by the industrial division and the infrastructure and maintenance division represented 50.4% of the total gross profit compared to 67.3% of total gross profit in 2008.

General and administrative expenses decreased by $0.8 million, or 21.2%, for the three months ended September 30, 2009, as compared to the same period in 2008. The decrease was primarily due to a reduction in the incentive compensation for the period.

Gain on disposals of equipment decreased $0.1 million from the same period in the prior year to $0.1 million primarily due to the timing of the sale of certain equipment.

Comparison of Nine Months Ended September 30, 2009 and 2008

Revenue for the nine months ended September 30, 2009 decreased by $9.8 million, or 3.4%, from the same period in the prior year to $285.5 million.  This decrease in revenue was due primarily to revenue associated with the completion of a large infrastructure and maintenance contract during the same period in 2008.

Gross profit decreased by $3.1 million, or 9.3%, for the nine months ended September 30, 2009, as compared to the same period in 2008, reflecting lower margin work on heavy civil projects. Gross profit on heavy civil projects represented 49.6% of total gross profit for the nine months ended September 30, 2009 compared to 31.9% of total gross profit for the same period in 2008.  Gross profit for the nine month period ended September 30, 2009 generated by industrial projects represented 26.1% of total gross profit and infrastructure and maintenance projects provided 24.4% of total gross profit, compared to 34.2% and 32.1% for the same period in 2008, respectively.

General and administrative expenses increased by $0.2 million, or 1.9%, for the nine months ended September 30, 2009, as compared to 2008, primarily due to lower activity whereby project staff costs were charged to general and administrative expenses rather than to projects.

Gain on disposals of property and equipment increased $0.5 million for the nine months ended September 30, 2009 due to the sale of various pieces of heavy equipment as compared to the same period in the prior year.

Comparison of years ended December 31, 2008 and 2007

Revenue for the year ended December 31, 2008 increased by $106.1 million, or 34.8%, from the same period in the prior year to $410.6 million.  This increase in revenue was primarily as a result of work performed on a large infrastructure and maintenance project.

Gross profit increased by $16.1 million, or 53.1%, for the year ended December 31, 2008, as compared to the same period in 2007 reflecting higher margin work in the infrastructure and maintenance division.   For 2008, gross profit provided by the heavy civil division represented 31.4% of the total gross profit compared to 43.0% of total gross profit in 2007. Gross profit provided by the industrial division represented 32.4% of total gross profit and the infrastructure and maintenance division provided 34.8% of total gross profit compared to 36.2% and 21.8% for the same period in 2007, respectively.

In 1999, in an effort to strengthen JCG’s presence in the pulp and paper industry, JCG acquired two entities specializing in this market.  These acquisitions resulted in JCG recording goodwill.  Prior to 2008, there was no impairment of the goodwill recognized.  In 2008, due in large part to the economic downturn in the pulp and paper industry and its impact on JCG’s strategic objectives in this industrial market, JCG recognized a full impairment of this goodwill.  The goodwill impairment loss recognized during the year ended December 31, 2008 totaled $1.9 million.

Comparison of Years Ended December 31, 2007 and 2006

Revenue for the year ended December 31, 2007 decreased by $15.5 million, or 4.8%, from the same period in the prior year to $304.5 million.  This decreased revenue was primarily as a result of one-time increase in repair projects performed in 2006 on levees in New Orleans following Hurricane Katrina.

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Gross profit increased by $1.8 million, or 6.3%, for the year ended December 31, 2007, as compared to the same period in 2006 reflecting a higher margin as a result of completion of certain lower margin projects performed in 2006.  For 2007, gross profit provided by the heavy civil division represented 43.0% of the total gross profit compared to 46.9% of total gross profit in 2006.  Gross profit provided by the industrial division represented 36.5% of total gross profit in 2007 compared to 38.7% in 2006, and the infrastructure and maintenance division provided 21.9% of total gross profit in 2007 compared to 19.9% in 2006.

General and administrative expenses increased by $0.9 million, or 7.3%, for the year ended December 31, 2007, as compared to 2006. The increase was primarily due to an increase in incentive compensation for the period.

Other income increased $0.9 for the year ended December��31, 2007 compared to the same period in the prior year due to interest earned on larger bank balances held during the year.

Gain on disposals of property and equipment increased $0.4 for the year ended December 31, 2007 due to the sale of various pieces of heavy equipment as compared to the same period in the prior year.

Provision for Income Taxes

For United States federal income tax purposes, JCG has been taxed as an S-Corporation and, accordingly, any United States federal income tax obligation was the personal liability of its members.

Critical Accounting Policies and Estimates

General—The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires JCG to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, and also affect the amounts of revenues and expenses reported for each period. These estimates and assumptions must be made because certain information that is used in the preparation of JCG’s 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, these estimates are particularly difficult to determine and JCG must exercise significant judgment. Estimates may be used in JCG’s assessments of revenue recognition under percentage-of-completion accounting, useful lives of property and equipment, fair value assumptions in analyzing goodwill and long-lived asset impairments and self-insured claims liabilities. Actual results could differ from those that result from using the estimates under different assumptions or conditions.

An accounting policy is deemed to be critical if it requires an accounting estimate to be based on assumptions about matters that are highly uncertain at the time the estimate is made, and different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact JCG’s consolidated financial statements.

The following accounting policies are based on, among other things, judgments and assumptions made by management that include inherent risks and uncertainties. Management’s estimates are based on the relevant information available at the end of each period.

Fixed-price contracts—Fixed-price contracts carry certain inherent risks, including underestimation of costs, problems with new technologies and economic and other changes that may occur over the contract period. JCG recognizes revenues using the percentage-of-completion method for fixed-price contracts, which may result in uneven and irregular results. Unforeseen events and circumstances can alter the estimate of the costs and potential profit associated with a particular contract. To the extent that original cost estimates are modified, estimated costs to complete increase, delivery schedules are delayed, or progress under a contract is otherwise impeded, cash flow, revenue recognition and profitability from a particular contract may be overstated or understated.

Revenue recognition—JCG typically structures contracts as unit-price, time and material, fixed-price or cost plus fixed fee. JCG believes that its operating results should be evaluated over a time horizon during which major contracts in progress are completed and change orders, extra work, variations in the scope of work and cost recoveries and other claims are negotiated and realized.

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JCG recognizes revenue on the percentage-of-completion method for all of the types of contracts described in the paragraph above. Under the percentage-of-completion method, estimated contract income and resulting revenue is generally accrued based on costs incurred to date as a percentage of total estimated costs. Total estimated costs, and thus contract income, are impacted by changes in productivity, scheduling, and the unit cost of labor, subcontracts, materials and equipment. Additionally, external factors such as weather, client needs, client delays in providing permits and approvals, labor availability, governmental regulation and politics may affect the progress of a project’s completion and thus the timing of revenue recognition. If a current estimate of total contract cost indicates a loss on a contract, the projected loss is recognized in full when determined.

JCG considers unapproved change orders to be contract variations on which JCG has customer approval for scope change, but not for price change associated with such scope change. Costs associated with unapproved change orders are included in the estimated cost to complete the contracts and are expensed as incurred. JCG recognizes revenue equal to costs incurred on unapproved change orders when realization of price approval is probable and the estimated amount is equal to or greater than costs related to the unapproved change order. Revenue recognized on unapproved change orders is included in “costs and estimated earnings in excess of billings” on the consolidated balance sheets.

Unapproved change orders involve the use of estimates, and it is reasonably possible that revisions to the estimated costs and recoverable amounts may be required in future reporting periods to reflect changes in estimates or final agreements with customers.

JCG considers claims to be amounts it seeks to collect from customers or others for customer-caused changes in contract specifications or design, or other customer-related causes of unanticipated additional contract costs on which there is no agreement with customers on both scope and price changes. Revenue from claims is recognized when agreement is reached with customers as to the value of the claims, which in some instances may not occur until after completion of work under the contract. Costs associated with claims are included in the estimated costs to complete the contracts and are expensed when incurred.

Income taxes— For United States federal income tax purposes, JCG has been taxed as an S-Corporation and, accordingly, any United States federal income tax obligation was the personal liability of its members.

As of September 30, 2009, JCG distributed $14.9 million to its members for their estimated tax liability attributable to the taxable income of JCG.  In January 2010, JCG paid a $1.9 million distribution for the remaining balance of estimated tax liabilities attributable to the taxable income.

Goodwill— In 1999, in an effort to strengthen JCG’s presence in the pulp and paper industry, it acquired two entities specializing in this market.  These acquisitions resulted in JCG recording goodwill of approximately $1.9 million. Prior to 2008, there was no impairment of the goodwill recognized.  In 2008, due in large part to the economic downturn in the pulp and paper industry and its impact on JCG’s strategic objectives in this industrial market, JCG recognized a full impairment of this goodwill. The goodwill impairment loss recognized during the year ended December 31, 2008 totaled $1.9 million.

There was no balance for goodwill as of September 30, 2009 or December 31, 2008.  As of December 31, 2007 and 2006, the balance for goodwill was approximately $1.9 million.

Uninstalled Contract Materials—Uninstalled contract materials consist of various contract material cost incurred on uncompleted construction projects that have not been installed as of the balance sheet date.  Uninstalled contract materials are carried at the lower of cost or market using the first-in, first-out method.

Long-Lived Assets—Assets held and used by JCG, primarily property, plant and equipment, are reviewed for impairment whenever events or changes in business circumstances indicate that the carrying amount of the asset may not be fully recoverable. JCG performs undiscounted operation cash flow analyses to determine if impairment exists. For purposes of recognition and measurement of an impairment for assets held for use, JCG groups assets and liabilities at the lowest level for which cash flows are separately identified. If an impairment is determined to exist, any related impairment loss is calculated based on fair value. The calculation of the fair value of long-lived assets is based on assumptions concerning the amount and timing of estimated future cash flows and assumed discount rates, reflecting varying degrees of perceived risk. Since judgment is involved in determining the

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fair value and useful lives of long-lived assets, there is a risk that the carrying value of our long-lived assets may be overstated or understated.

Reserve for uninsured risks—Estimates are inherent in the assessment of JCG’s exposure to material uninsured risks. Significant judgments by JCG and reliance on third-party experts are utilized in determining probable and/or reasonably estimable amounts to be recorded or disclosed in the financial statements. The results of any changes in accounting estimates are reflected in the financial statements of the period in which the changes are determined.

JCG is self-insured for general liability and has large deductible plans for workers’ compensation and automobile liability claims. JCG accrued the estimated liability for claims through September 30, 2009, including provisions for claims incurred but not reported.

JCG, and other companies related through common ownership, have obtained automobile liability, general liability and workers’ compensation insurance for the policy year April 1, 2009 through March 31, 2010 as follows:

·      The large deductible program insures JCG, and related companies, for losses exceeding $500,000 for workers’ compensation and losses exceeding $250,000 for general liability and automobile liability.

·      Umbrella insurance for all three lines to a limit of $20 million over primary.

Maximum aggregate exposure for JCG’s losses, as well as the related companies, for workers’ compensation, general liability and automobile liability is approximately $8.7 million per contract arrangement with the insurance company for the policy year. JCG’s accruals are based on judgment, the probability of losses, and where applicable, the consideration of opinions of internal and/or external legal counsel. The amount is included in “accrued liabilities” on JCG’s balance sheets. Actual payments that may be made in the future could materially differ from such reserves.

Liquidity and Capital Resources

Recent global market and economic conditions have been, and continue to be, disrupted and volatile having an adverse impact on financial markets in general. The volatility has reached unprecedented levels. As a result of concern about the stability of the markets and the strength of counterparties, many lenders and institutional investors have reduced and, in some cases, ceased to provide funding to borrowers resulting in severely diminished liquidity and credit availability. At this time, the extent to which these conditions will persist is unclear. To date, JCG’s cost and availability of funding has not been adversely affected by illiquid credit markets, and JCG does not expect it to be materially impacted in the near future.

We believe that we will be able to support our ongoing working capital needs through cash on hand, operating cash flows and the availability under the existing Primoris credit facilities throughout the year 2010.

At September 30, 2009, JCG’s net cash balance was $62.6 million. JCG believes that its cash position, amounts available under its credit facilities and cash provided by operating activities will be adequate to cover its operational and business needs at least through the remainder of 2010.

Cash Flows

Cash flows during the specified periods are summarized as follows:

 

 

Nine months ended
September 30,

 

Years ended December 31,

 

Change in cash

 

2009

 

2008

 

2008

 

2007

 

2006

 

(Amounts in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash provided in operating activities

 

$

44,766

 

$

24,434

 

$

51,036

 

$

24,061

 

$

27,447

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash used in investing activities

 

(5,495

)

(4,350

)

(2,332

)

(13,477

)

(2,866

)

 

 

 

 

 

 

 

 

 

 

 

 

Net cash used by financing activities

 

(22,033

)

(18,633

)

(23,506

)

(12,684

)

(10,814

)

Net change in cash - increase/(decrease)

 

$

17,238

 

$

1,451

 

$

25,199

 

$

(2,099

)

$

13,767

 

Operating Activities

The source of cash flow from operating activities and the use of a portion of that cash in operations for the specified periods were as follows:

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Table of Contents

 

 

Nine months
ended September
30,

 

Years ended December 31,

 

Operating activities

 

2009

 

2008

 

2008

 

2007

 

2006

 

(Amounts in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

$

20,967

 

$

23,724

 

$

32,846

 

$

18,757

 

$

16,591

 

Depreciation and amortization

 

5,684

 

4,466

 

6,053

 

4,669

 

3,773

 

Gain on sale of property and equipment

 

(1,490

)

(1,009

)

(1,060

)

(1,146

)

(731

)

Goodwill impairment loss

 

 

 

1,913

 

 

 

Changes in assets and liabilities

 

19,606

 

(2,747

)

11,284

 

1,781

 

7,814

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash (used in) provided by operating activities

 

$

44,766

 

$

24,434

 

$

51,036

 

$

24,061

 

$

27,447

 

Nine months ended September 30, 2009:

For the nine months ended September 30, 2009, the changes in assets and liabilities increased operating cash flow by $19.6 million.  The components of this change are included in the consolidated statements of cash flow.  The significant changes included a $2.1 million increase in accounts receivable, $1.7 million decrease in uninstalled contract materials, $2.4 million increase in other assets and a $6.3 million increase in accounts payable. In addition, the billings in excess of costs and estimated earnings increased by $14.3 million while costs and estimated earnings in excess of billings increased $2.4 million.

The increases in billings in excess of costs and estimated earnings were principally due to improved billing and collection procedures, the nature and type of projects, and the general market environment. The increase in costs and estimated earnings in excess of billings derived from timing of costs incurred versus contractual limitations on our ability to bill customers.

As of September 30, 2009, accounts receivable represented 26.1% of total assets. JCG has good collection history stemming from many factors, including performing work for recurring customers and substantial pre-acceptance review of the financial worthiness and credit history of new customers.

During the year ended September 30, 2009 JCG’s operations provided cash of $44.8 million. While this was a substantial cash inflow, $14.3 million represented billings in excess of costs and estimated earnings, meaning that JCG received cash prior to performing the required work. If there were a general reduction in the amount of work being performed by JCG, JCG may experience decreases in cash as it uses the cash paid in advance to complete the work to be performed.

Year ended December 31, 2008

For the year ended December 31, 2008, the changes in assets and liabilities increased operating cash flow by $11.3 million. The components of this change are included in the consolidated statements of cash flow. The significant changes include a $4.9 million decrease in accounts receivable, a $2.7 million decrease in accounts payable and a $7.2 million increase in accrued liabilities. In addition, billings in excess of costs and estimated earnings increased by $11.8 million while costs and estimated earnings in excess of billings decreased by $1.0 million and project inventory increased by $11.4 million.

The increases in billings in excess of costs and estimated earnings were principally due to improved billing and collection procedures, the nature and type of projects and the general market environment. The increase in costs and estimated earnings in excess of billings derived from timing of costs incurred versus contractual limitations on

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Table of Contents

our ability to bill customers.  The increase in project inventory was due to the purchase of precast material for a large state project in Port Fourchon, LA.

As of December 31, 2008, accounts receivable represented 35.6% of total assets. JCG has good collection history stemming from many factors, including performing work for recurring customers and substantial pre-acceptance review of the financial worthiness and credit history of new customers. JCG bills customers on an ongoing basis as projects are being constructed. As a contractor, JCG has certain lien rights that can provide additional security on the accounts receivable that are generated, which may give priority to it over lenders or certain other creditors of the project.

During the year ended December 31, 2008 JCG’s operations provided cash of $51.0 million. While this was a substantial cash inflow, $11.8 million represented billings in excess of costs and estimated earnings, meaning that JCG received cash prior to performing the required work, and if there were a general reduction in the amount of work being performed by it, JCG may experience decreases in cash as it uses the cash paid in advance to complete the work to be performed.

Investing activities

 

 

Nine months ended
September 30,

 

Years ended December 31,

 

Investing activities

 

2009

 

2008

 

2008

 

2007

 

2006

 

(Amounts in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures – cash

 

$

(8,942

)

$

(6,288

)

$

(4,341

)

$

(15,660

)

$

(4,217

)

Capital expenditures – financed

 

$

 

$

(4,093

)

$

(9,218

)

$

(2,962

)

$

(3,126

)

JCG purchased property and equipment for $8.9 million for the nine months ended September 30, 2009 and  $13.6 million, $18.6 million and $7.3 million during the years ended December 31, 2008, 2007 and 2006, respectively, principally for our construction activities. For the nine months ended September 30, 2009, JCG paid $8.9 million in cash. For 2008 purchases, JCG paid $4.4 million in cash and incurred $9.2 million in additional loan obligations. The loans were secured by the underlying equipment. JCG believes the ownership of equipment is generally preferable to renting equipment on a project-by-project basis, as ownership helps to ensure the equipment is available for JCG’s workloads when needed. In addition, ownership has historically resulted in lower overall equipment costs.

JCG’s 2007 and 2008 purchases were at a higher level than previous years as it began to upgrade its fleet and procured project specific equipment.

JCG periodically sells and acquire equipment, typically to update its fleet. JCG received proceeds from the sale of used equipment of $3.6 million for the nine months ended September 30, 2009 and $2.0 million for the year ended December 31, 2008.

Financing activities

Nine months ended September 30, 2009:

Financing activities required the use of $22.0 million of cash during the nine months ended September 30, 2009. Significant transactions using cash flows from financing activities included:

·                   Cash distributions of $18.9 million were paid to the Members during the first nine months of 2009. JCG provided distributions to the Members during the period which JCG was taxed as an S-Corporation, principally to allow them to pay their personal income tax liability stemming from the profits of JCG; and

·                   Net payments of $3.1 million on long-term debt.

Year ended December 31, 2008

Financing activities required the use of $23.5 million of cash during the year ended December 31, 2008. Significant transactions using cash flows from financing activities included:

·                  Cash distributions of $13.9 million were paid to the Members during 2008. JCG provided distributions to the Members during the period which JCG was taxed as an S-Corporation, principally to allow them to pay their personal income tax liability stemming from the profits of JCG.

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·                  Net payments of $10.0 million on long-term debt; and

·                  $2.9 million in repayment of long-term debt during the years ended December 31, 2008, based on scheduled maturities of such debt.

Common Stock

As of December 18, 2009, JCG became a wholly owned subsidiary of Primoris Services Corporation.

Credit agreements

JCG and AICC, a related party, had a revolving credit agreement with a bank that allowed for borrowings as follows:

Revolving credit advances

 

$

31,000,000

 

Swingline loans

 

$

3,000,000

 

Letters of credit

 

$

15,000,000

 

Aggregate limit on above

 

$

31,000,000

 

The credit agreement is collateralized by substantially all of the assets of JCG and AICC, guaranteed by certain companies related though common ownership, and provides for restrictions on dividends and distributions and the maintenance of certain financial ratios.  Letters of credit issued and outstanding under the revolving credit agreement for JCG and AICC totaled $11.8 million as of September 30, 2009 and $7.4 million as of December 31, 2008. As of September 30, 2009 and as of December 31, 2008 there was no outstanding balance under the revolving credit agreement for both JCG and for AICC.

On the date of the closing of the Acquisition, December 18, 2009, the Credit Agreement was amended.  The amendment extended the outstanding letters of credit of $5.6 million, to February 28, 2010.  The amendment also provided that Primoris assumed the existing equipment leases.  Additionally, there were no amounts outstanding for the revolving credit advances and swingline loans as of December 18, 2009, and JCG could not draw any funds on the Credit Agreement subsequent to December 18, 2009.  The Credit Agreement, as amended on December 18, 2009, expires February 28, 2010

Related Party Transactions:

During the nine months ended September 30, 2009, JCG received payments of approximately $113,000 for administrative services provided by JCG to AICC.  During the year ended December 31, 2008, JCG paid AICC approximately $30,000 for the rental of construction equipment.  During 2008, JCG received payments of approximately $143,000 for administrative services provided by JCG to AICC.

Contractual Obligations and Commitments:

A summary of contractual obligations as of September 30, 2009 were as follows:

 

 

Total

 

1 Year

 

2 - 3 Years

 

4 - 5 Years

 

After 5 Years

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(In Thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

Equipment operating leases

 

$

11,107

 

$

5.331

 

$

3,992

 

$

1,784

 

$

 

Interest on long-term debt

 

1,322

 

540

 

626

 

156

 

 

Real property leases

 

1,128

 

378

 

750

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

13,557

 

$

6,249

 

$

5,368

 

$

1,940

 

$

 

Stand-by letters of credit

 

$

5,565

 

$

5,565

 

$

 

$

 

$

 

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The interest amount represents interest payments for our fixed rate debt assuming that principal payments are made as originally scheduled.

Off Balance Sheet Transactions

The following represent transactions, obligations or relationships that could be considered material off-balance sheet arrangements.

·                  Letters of credit issued under our lines of credit. At September 30, 2009, JCG had letters of credit outstanding of $11.8 million.

·                  Equipment operating leases totaling $8.3 million at September 30, 2009.

Backlog

In the industries in which JCG operates, backlog can be considered an indicator of potential future performance because it represents a portion of the future revenue stream. Different companies in JCG’s industry define backlog differently. JCG considers backlog as the anticipated revenue from the uncompleted portions of existing contracts. JCG calculates backlog differently for different types of contracts. For JCG’s fixed price and fixed unit price contracts, JCG includes the full remaining portion of the contract in its calculation. Since ultimate revenue amount is difficult to determine, JCG does not include unit-price, time-and-equipment, time-and-materials and cost-plus contracts in the calculation of backlog.

Most fixed price contracts may be terminated by JCG’s customers on relatively short notice. In the event of a project cancellation, JCG may be reimbursed for certain costs, but typically, JCG has no contractual right to the total revenues reflected in backlog. Projects may remain in backlog for extended periods of time.

As of September 30, 2009, our total backlog of $571.6 million increased $82.5 million, or 16.9%, from $489.1 million as of September 30, 2008.

Backlog as of the indicated periods was as follows, in thousands:

As of September 30,

 

As of December 31,

 

2009

 

2008

 

2008

 

2007

 

2006

 

 

 

 

 

 

 

 

 

 

 

$

571.6

 

$

489.1

 

$

540.0

 

$

395.5

 

$

255.5

 

JCG’s backlog at any point in time may not accurately represent the revenue that it expects to realize during any period.

Effects of Inflation and Changing Prices

JCG’s operations are affected by increases in prices, whether caused by inflation or other economic factors. JCG attempts to recover anticipated increases in the cost of labor, equipment, fuel and materials through price escalation provisions in certain major contracts or by considering the estimated effect of such increases when bidding or pricing new work or by entering into back-to-back contracts with suppliers and subcontractors.

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BENEFICIAL OWNERSHIP OF PRIMORIS COMMON STOCK

The following table and footnotes set forth as of March 9, 2010 the beneficial ownership of our common stock held by (i) each person or group of persons known to us to own beneficially more than 5% of the outstanding shares of our common stock, (ii) each director and executive officer of Primoris, and (iii) all current directors and executive officers of Primoris as a group.

Beneficial ownership is determined in accordance with Rule 13d-3 of the Securities Exchange Act of 1934 and includes all shares over which the beneficial owner exercises voting or investment power.  Options and warrants to purchase our common stock that are presently exercisable or exercisable within 60 days of the date of this proxy statement are included in the total number of shares beneficially owned for the person holding these options or warrants and are considered outstanding for the purpose of calculating percentage ownership of the particular holder.  All information is taken from or based upon ownership filings made by such persons with the Commission or upon information provided by such person.  Except as otherwise indicated, and subject to community property laws where applicable, we believe, based on information provided by these persons, that the persons named in the table have sole voting and investment power with respect to all shares of our common stock shown as beneficially owned by them.  Unless otherwise stated, the business address of each of our executive officers and directors is 26000 Commercentre Drive, Lake Forest, California 92630:

Name and Address of Beneficial Owner (1)

 

No. of
Shares
Currently
Beneficially
Owned

 

Current
Percent
of Class (2)

 

No. of
Shares
Beneficially
Owned
Assuming
Conversion
of Series A
Preferred
Stock (3)

 

Percent
of Class
Assuming
Conversion
of Series A
Preferred
Stock (4)

 

5% or Greater Stockholders:

 

 

 

 

 

 

 

 

 

Arline Pratt (5)

 

2,777,495

 

8.39

%

2,777,495

 

6.72

%

Dominic Iafrate (6)

 

 

%

2,202,265

 

5.33

%

Angelo E. Iafrate (7)

 

 

%

2,271,084

 

5.50

%

 

 

 

 

 

 

 

 

 

 

Named Executive Officers and directors:

 

 

 

 

 

 

 

 

 

Brian Pratt (8)

 

19,028,549

 

57.5

%

19,028,549

 

46.07

%

Scott E. Summers (8)(9)

 

1,352,986

 

4.08

%

1,352,986

 

3.28

%

John P. Schauerman (8)(10)

 

1,281,462

 

3.87

%

1,281,462

 

3.10

%

John M. Perisich (11)

 

119,206

 

*

%

119,206

 

*

%

Alfons Theeuwes (12)

 

236,219

 

*

%

236,219

 

*

%

Eric S. Rosenfeld (13)

 

1,985,476

 

5.99

%

1,985,476

 

4.81

%

Peter J. Moerbeek (14)

 

5,000

 

*

%

5,000

 

*

%

Stephen C. Cook (15)

 

9,400

 

*

%

9,400

 

*

%

David D. Sgro (16)

 

21,000

 

*

%

21,000

 

*

%

Thomas E. Tucker (17)

 

32,136

 

*

%

32,136

 

*

%

Peter C. Brown (18)

 

 

%

 

%

Michael D. Killgore (19)

 

 

%

786,349

 

*

%

Robert A. Tinstman (20)

 

 

%

 

%

All directors and executive officers as a group (13 individuals)

 

21,436,986

 

64.72

%

22,223,335

 

53.80

%


*Represents holdings of less than one percent.

(1)This table lists voting securities, including shares held of record, shares held by a bank, broker or nominee for the person’s interest and shares held through family trust arrangements.

(2)Based on 33,121,567 shares of common stock outstanding as of March 9, 2010.

(3)Pursuant to the terms and conditions of the Certificate of Designations, each share of Series A Preferred Stock is convertible into 100 shares of our common stock.  However, pursuant to the Certificate of Designations, the Series A Preferred Stock may only be converted into shares of common stock upon the approval of such conversion by our stockholders.  We have excluded from this calculation the shares that may be issued to the

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JCG Members after the closing of the Acquisition in connection with the Earnout payment because they have not been earned yet.

(4)Based on 41,306,845 shares of common stock, which assumes the conversion of the 81,852.78 shares of Series A Preferred Stock outstanding as of March 9, 2010 into 8,185,278 shares of common stock.  The table reflects the percentages based upon the expectation that our stockholders will approve of the conversion of the Series A Preferred Stock and the issuance of the underlying shares of common stock.

(5)Represents 2,437,758 shares of common stock held by the Pratt Family Trust, of which Ms. Pratt is the sole trustee and 339,737 shares of common stock held by the Pratt Family Bypass Trust, of which Ms. Pratt is the sole trustee. The principal business address of Ms. Pratt is 402 Fairway Drive, Bakersfield, California, 93309.

(6)Includes 825,849 shares of common stock issuable upon the conversion of 8,258.49 shares of Series A Preferred Stock held directly by Dominic Iafrate, 688,208 shares of common stock issuable upon the conversion of 6,882.08 shares of Series A Preferred Stock held by the Stephen M. Iafrate Trust U/A/D 11/7/95 and 688,208 shares of common stock issuable upon the conversion of 6,882.08 shares of Series A Preferred Stock held by the Dominic A. Iafrate Trust U/A/D 11/7/95.  Mr. Iafrate is the trustee of both trusts and has voting and dispositive control over the shares.

(7)Includes 825,849 shares of common stock issuable upon the conversion of 8,258.49 shares of Series A Preferred Stock held directly by Angelo E. Iafrate, 481,745 shares of common stock issuable upon the conversion of 4,817.45 shares of Series A Preferred Stock held by the Jaclyn N. Iafrate Trust U/A/D 8/22/05, 481,745 shares of common stock issuable upon the conversion of 4,817.45 shares of Series A Preferred Stock held by the Danielle M. Iafrate Trust U/A/D 11/7/95 and 481,745 shares of common stock issuable upon the conversion of 4,817.45 shares of Series A Preferred Stock held by the Anthony C. Iafrate Trust U/A/D 11/7/95.  Mr. Iafrate is the trustee of all three trusts and has voting and dispositive control over the shares.

(8)Includes 15,732,508 shares of common stock held directly by Brian Pratt and indirectly by Barbara Pratt, as the spouse of Mr. Pratt, and 89,405 shares of common stock owned directly by Mrs. Pratt and indirectly by Mr. Pratt.  Based on information set forth in Amendment No. 2 to the Schedule 13D filed with the Commission under the Exchange Act on March 24, 2009, Mr. Pratt also has the power to vote an additional 3,206,636 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 for Scott E. Summers, trustee of the Summers Family Trust; John P. Schauerman and Timothy R. Healy and expires on March 25, 2012 for Mark Thurman.  Mr.  Pratt is the chairman, chief executive officer and president.

(9)Represents 1,352,986 shares of common stock owned directly by the Summers Family Trust, and indirectly by Scott E. Summers, as trustee of the trust.  Mr. Summers is a highly compensated officer of a Primoris subsidiary.

(10)John P. Schauerman is the executive vice president of corporate development and a director.

(11)Represents 119,206 shares of common stock owned directly by the Perisich Family Trust dated July 11, 2007 and indirectly by John M. Perisich, as trustee of the trust. Mr. Perisich is senior vice president and general counsel.

(12)Represents shares of common stock owned directly by the Alfons Theeuwes Family Trust dated October 8, 2009 and indirectly by Alfons Theeuwes, as trustee of the trust.  The number of shares held by the trust are after settlement of a divorce decree relating to the transfer of 151,200 shares.  Mr. Theeuwes is the senior vice president of finance and accounting.

(13)Includes 1,015,000 shares of common stock held directly by Eric Rosenfeld, 106,840 shares of common stock held by the Rosenfeld 1991 Children’s Trust, of which Mr. Rosenfeld’s wife is the sole trustee.  Also includes 863,636 shares of common stock issuable upon exercise of warrants that were exercisable at the close of the July 31, 2008 merger.  Eric Rosenfeld is currently a director and our formerly our chairman of the Board, chief executive officer and president.

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(14)Represents 5,000 shares of common stock held by the Moerbeek Family Trust U/A dated 03/03/1999, a revocable trust, of which Peter Moerbeek is trustee and beneficiary.  Mr. Moerbeek is the executive vice president, chief financial officer and a director.

(15)Includes 4,000 shares of our common stock held by Stephen C. Cook and 5,400 shares of our common stock issuable upon the exercise of warrants. Mr. Cook is a director.

(16)David Sgro is currently a director, and was formerly our chief financial officer.

(17)Includes 24,000 shares of common stock held by the Tucker Family Trust U/A dated 12/21/1998, a revocable trust, of which Thomas Tucker is a trustee and beneficiary, 3,303 shares of common stock held by SaraJen Capital, LLC. a California Limited Liability Company, of which Mr. Tucker is a one-third member and sole manager with full dispositive power over such shares, and 4,833 shares of common stock held by Josephine Tucker-Arenson TTEE U/A DTD 4-30-1996, of which Mr. Tucker holds power of attorney.  Mr. Tucker is a director.

(18)Peter Brown is a director.

(19)Michael D. Killgore is a director and the president of JCG, our wholly owned subsidiary.

(20)Robert A. Tinstman is a director.

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Table of ContentsMeetings.

 

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Primoris

We currently have a written policy, adopted by our Board, regarding the review, approval and ratification of any related party transaction. Under this policy, our Audit Committee will review the relevant facts and circumstances of each related party transaction, and either approve or disapprove the related party transaction. Any related party transaction may be consummated and continue only if the Audit Committee has approved or ratified such transaction.

The following is a description of related party transactions in the year ended December 31, 2010 to which we have been a party, in which the amount involved exceeded $120,000, other than compensation and employment arrangements described elsewhere in this Proxy Statement. We believe the terms obtained or consideration that we paid or received, as applicable, in connection with the transactions below were comparable to terms available or the amounts that would be paid or received, as applicable, in arm’s length transactions with independent third parties.

In 2010, the Company entered into a $6.0 million agreement to construct a wastewater facility for Pluris, LLC, a private company in which Brian Pratt holds the majority interest.  The transaction was reviewed and approved by the Audit Committee of the Board of Directors.

In prior years, we entered into various transactions with Stockdale Investment Group, Inc. (“SIGI”). Our majority stockholder, Chief Executive Officer, President and Chairman of the Board, Brian Pratt, our largest stockholder and our chief executive officer, president and chairman of the board of directors,also holds a majority interest in SIGI and also serves as SIGI’s chairman.  In addition,is the chairman and a director of SIGI. John M. Perisich, our senior vice president, general counselSenior Vice President, General Counsel and Secretary, is secretary is SIGI’s secretary.  John P. Schauerman, a directorof SIGI.

During 2010, we continued with the following related party transactions:

We lease some of our facilities from SIGI. All of these leases are at market rates and our executive vice president of corporate development, formerly servedare on similar terms as a director of SIGI and as SIGI’s president, and Scott Summers, co-president of ARB, also formerly served as a director of SIGI and as SIGI’s vice president.negotiated with an independent third party.

 

We lease properties from SIGI located in Bakersfield, Pittsburg and San Dimas, California, as well as a propertyand in Pasadena, Texas. During the nine monthsyears ended September 30,December 31, 2010 and 2009, we paid $613,$892,000 and $834,000, respectively, in lease payments to SIGI for the use of these properties.

Prior to our July 31, 2008, merger, we also leased certain construction and transportation equipment from SIGI. ThisDuring the year ended December 31, 2008, we paid $175,000 in lease payments to SIGI for the use of this equipment. We purchased the equipment was purchased from SIGI on the closing datein July 2008 for a purchase price of the merger and the equipment leases were terminated.$1,135,000. The purchase price was determined using a fair market value appraisal by an independent third party.

 

We leased an airplane from SIGI for business use. During the nine monthsyears ended September 30,December 31, 2009 and 2008, we paid $70$70,000 and $239,000, respectively, in lease payments to SIGI for the use of the airplane. This lease commenced on May 1, 2004 and was terminated on March 31, 2009, when SIGI sold the airplane.

 

We lease certaina property from Roger Newnham, a shareholder of the Company’s common stock and a manager ofat our subsidiary Born Heaters Canada. The property is located in Calgary, Canada. This lease was entered into on similar terms as negotiated with an independent third party.  During the nine-month periodyears ended September 30,December 31, 2010 and 2009, we paid $256,$252,000 and $282,000, respectively, in lease payments to Mr. Newnham for the use of this property. The three-yearterm of the lease for the Calgary property commenced in October 2005 and was renewed and extended until September 2010.

JCG

During the nine months ended September 30, 2009, JCG received payments of approximately $113,000 for administrative services provided by JCG to AICC.

During the year endedis through December 31, 2008, JCG paid AICC approximately $30,000 for the rental of construction equipment.  During the same period, JCG received payments of approximately $143,000 for administrative services provided by JCG to AICC.

During the year ended December 31, 2007, JCG paid AICC $375,000 for advances it had received in previous periods and approximately $82,000 for the rental of construction equipment.  During the same period, JCG received payments of approximately $160,000 for administrative services provided by JCG to AICC.

During the year ended December 31, 2006, JCG paid back net advances from AICC totaling $6,000,000.  During the same period, JCG paid AICC interest of $141,987.  The total long-term related party payable at December 31, 2006 was $375,000.

In addition, several of the entities that, prior to the closing of the Acquisition, were related to JCG through common ownership, are named as additional insureds on certain of JCG’s insurance policies.2014.

 

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FUTURE STOCKHOLDER PROPOSALSEXECUTIVE COMPENSATION

Compensation Discussion and Analysis

To be considered for inclusion in our proxy statement relating to the 2010 annual meeting of stockholders pursuant to Rule 14a-8 of Regulation 14A under the Exchange Act, stockholder proposals must have been received no later than December 26, 2009.

Overview

 

In addition, pursuantthis section we discuss the compensation paid to the following executive officers who are listed in the “Summary Compensation Table”.

·Brian Pratt, 59, Chairman of the Board, Chief Executive Officer and President

·Peter J. Moerbeek, 63,  Executive Vice President, Chief Financial Officer

·Michael D. Killgore, 54, Executive Vice President, Director of Construction Services

·John P. Schauerman, 54, Executive Vice President, Corporate Development

·John M. Perisich, 46, Senior Vice President, General Counsel and Secretary

·Scott E. Summers, 52, Co-President, ARB, Inc, and

·Danny L. Hester, 61, President, James Construction Group.

The compensation programs apply broadly to all officers and management persons at the Company with modifications to reflect the different management levels and types of responsibilities.  The Company’s goal is to align compensation so that all management levels are committed to the Company’s corporate objectives.

We use traditional compensation elements such as base salary, annual incentives and employee benefits to deliver compensation that will attract and retain qualified employees.  We are a company that is still in transition from a privately held enterprise to a publicly traded company.  In July 2008, we entered into employment agreements with nine executives, and since that date, we have entered into substantially similar agreements with executives of acquired companies or newly hired executives.  These agreements continued the practices in place in July 2008, including the use of annual, discretionary bonus amounts, which are not tied to attaining specific financial results.  The significant stock ownership held by the executive management team has helped ensure a focus on both short and long term goals.  For 2009 and 2010, we have generally  maintained these compensation practices.

In 2010, the Compensation Committee recognized that while the current practices work effectively and there has been virtually no turn-over at the senior and executive management levels of the Company, we may need to consider changes that align our practices more closely to other publicly traded companies.  In order to have the ability to attract executives who may have compensation expectations more in line with the general market, the Compensation Committee has engaged an independent consulting firm.  As part of this process, the goal of the Compensation Committee is to establish compensation practices that will be aligned with the market without changing the parts of the culture that have led to the Company’s success.

2010 Highlights

In considering compensation, the 2010 results include the following:

·In a very challenging and competitive market environment, revenues more than doubled from 2009 and net income increased by 30 percent.

·We continued our emphasis on maintaining liquidity.  Cash and short-term investments increased from $120 million at December 31, 2009 to $141 million at December 31, 2010.

·With the acquisition of Rockford Corporation in November 2010, we completed our second major acquisition in a two-year period.  Our efforts to integrate the 2009 James Construction Group (“JCG”) acquisition have made good progress, and JCG exceeded its 2010 financial earn-out target.

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Table of Contents

Compensation Methodology

Our goal is to create an executive compensation program that will adequately reward our executives for their roles in creating value for our stockholders. Our Compensation Committee is charged with performing an annual review of our executive officers’ cash compensation and equity holdings to determine whether they provide adequate incentives and motivation to executive officers and whether they adequately compensate the executive officers relative to comparable officers in other companies within our industry. We intend to be competitive with other similarly situated companies in our industry.

The executives’ compensation has three primary components: salary, cash incentive bonus and stock-based awards. We view the three components of executive compensation as related, but distinct. Although our Compensation Committee reviews total compensation, we do not believe that significant compensation derived from one component of compensation should negate or reduce compensation from other components. We anticipate determining the appropriate level for each compensation component based in part, but not exclusively, on our view of internal equity and consistency, individual performance and other information deemed relevant and timely.

Benchmarking

We believe it is important when making compensation-related decisions to be informed as to current practices of similarly situated publicly held companies in the engineering, construction and related industries. The Compensation Committee, with assistance from its independent consultant, has begun the process of developing a “Reference Group” to use in designing and setting compensation levels. We do not view benchmarking as a stand-alone tool for setting compensation due to the aspects of our business and objectives that may be unique to us, but we believe that gathering and reviewing this information should be a part of our compensation-related decision-making process.  In using its collective judgment in setting executive pay, the Compensation Committee will use benchmarking along with recommendations from our Chief Executive Officer, the Compensation Committee’s evaluation of the executive’s performance, the overall Company performance and our overall compensation strategy.

Key Elements of Executive Officer Compensation

The primary elements of our executive officer compensation program include:

·Base salary;

·Annual short-term bonuses;

·Long-term retention deferred compensation;

·Long-term equity awards;

·Severance benefits; and

·Other compensation benefits.

Base Salary. Generally, the Board, working with the Compensation Committee, anticipates setting executive base salaries at levels comparable with those of executives in similar positions and with similar responsibilities at comparable companies. We will seek to maintain base salary amounts at or near industry norms, while avoiding paying amounts in excess of what we believe is necessary to motivate executives to meet corporate goals.

Base salaries are reviewed annually, subject to terms of employment agreements. The Compensation Committee and Board will seek to adjust base salary amounts after taking into account individual responsibilities, performance and experience.

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2011 Base Salary amounts:  Based on recommendations made by our Chief Executive Officer and approved by our Board, the following are the 2011 base salary amounts for (i) our current Chief Executive Officer, (ii) our current Chief Financial Officer, (iii) our three most highly compensated executive officers and (iv) our two most highly compensated employees who are not executive officers.

·Brian Pratt, Chief Executive Officer, $500,000, no change since July 2008,

·Peter J. Moerbeek, Chief Financial Officer, $350,000, no change since hire in February 2009,

·Michael D. Killgore, Director Construction Services, $350,000, no change since assuming current position in March 2010,

·John P. Schauerman, Corporate Development, $275,000, no change since July 2008,

·John M. Perisich, Corporate Counsel and Secretary, $275,000, changed in 2010 to reflect change in responsibilities,

·Scott E. Summers, Co-President, ARB, Inc, $300,000, no change since July 2008, and

·Danny L. Hester, President, James Construction Group, $300,000, changed in 2010 after promotion to current position.

Annual Short-Term Bonuses.  We use cash incentive bonuses for executives to focus them on achieving key operational and financial objectives within a yearly time horizon. In early 2011 after preliminary completion of the audited financial results, our Chief Executive Officer made recommendations for bonus amounts for 2010 for the executive officers and discussed these amounts and the reasons for his recommendations with the Compensation Committee.  The Compensation Committee and its independent compensation consultant discussed the Chief Executive Officer’s recommendations in an executive session.  The Compensation Committee recognized that historically there have been no specific targets against which to calculate annual bonus amounts.  Therefore, the Compensation Committee relied on its professional judgment and experience and a comparison to prior performance and annual awards.  As discussed below, during 2010 we fully implemented the Primoris Long-Term Retention Plan (“Retention Plan”).  The Compensation Committee members determined that the same plan should apply to executive officers.  The Compensation Committee members reported their recommendations for annual short-term bonus amounts to the Board which approved the Compensation Committee recommendations by a vote of independent directors meeting in executive session.

Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to public companies for compensation over $1 million.  Certain performance-based compensation, however, is specifically exempt from the deduction limit.  At this time, the Committee has not taken steps to qualify compensation for deductibility primarily because of the low incremental value given the low probability of an executive exceeding the $1 million limit in a given year.

In 2009, we adopted a bonus plan with an elective deferral alternative, the Retention Plan.  During 2010 we made minor modifications to the Retention Plan which now is intended to pay annual bonus amounts over a two-year period with one-half of the amount payable immediately and one-half deferred for one year.  The deferred amount is a general obligation of the Company, but provides no interest or other income to the participants.  Except in the case of death, disability or involuntary separation from service, the deferred compensation is vested to the participant only if employed by the Company on the payment date of bonus amounts the following year.  The amount of compensation deferred under this plan is calculated each year based on the current year bonus amount.  The purpose of the plan is to provide an incentive for continuing employment.  In 2010, this Retention Plan did not apply to the employee’s of James Construction Group, which remained under a separate plan adopted prior to the December 2009 acquisition.  For 2010, Mr. Killgore and Mr. Hester were part of the James Construction Group plan.

Membership in the Retention Plan is based on the recommendation of a senior manager and approval of the Chief Executive Officer and is elective to each participant.  Participants have the ability to voluntarily resign from the plan effective at the end of each calendar year.  In order to transition fully to a deferral plan, the Company in 2009 reserved an amount equal to 60 percent of each participant’s 2009 bonus amount as a transition bonus.  With the changes in the Retention Plan during 2010, this transition amount was reduced to 50% of each participant’s 2009 bonus.  The amounts shown in the “Summary Compensation Table” have been reduced for 2009 to reflect this change.

The Company has had a long tradition of encouraging management ownership of Company stock, but to do so by requiring financial contributions from its managers.  Our Chief Executive Officer recommended that the Company continue that tradition as a public company.  After deliberation, the Compensation Committee approved a stock purchase portion of the Retention Plan that will allow the Company to issue shares available in the 2008 Long-Term Incentive Equity Plan (the “2008 Equity Plan”), discussed below.  The stock purchase option of the Retention Plan will allow participants the opportunity to participate, on an elective basis, in a stock purchase arrangement.  In 2011, participants were given the opportunity to use up to 1/6 of their 2010 earned

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bonus amount to purchase Company common stock at a 25% discount to the market price.  For shares issued in 2011, the market price was determined as the average closing price of the Company common stock during January 2011, or $6.81 per share.  Shares purchased under the Retention Plan cannot be sold for a 6-month period.  For 2011, a total of 108 executives and managers were eligible to participate in stock purchases.  A total of 94 employees paid $648,468 of 2010 bonus amounts to purchase 95,223 shares of Company stock.

Long-Term Equity Awards.  As discussed in the previous paragraph, the Company has adopted a Long-Term Retention Plan which allows participants to voluntarily purchase Company shares at a discount to the market price.  These shares have been issued under the provisions of our 2008 Equity Plan, which was adopted by the Board and was approved by the stockholders in July 2008. All of our employees, Directors, officers and consultants are eligible to participate under the 2008 Equity Plan. No other awards have been made under the 2008 Equity Plan as of the date of this Proxy Statement. Any options that may be granted under the 2008 Equity Plan would have an exercise price at least equal to the fair market value of our Common Stock on the date of grant.

Severance Benefits.  We currently have no Company-wide severance benefit plans. The employment agreements entered into by our executive officers provide for certain rights and obligations in the event of termination of employment, as more fully described in the following section entitled “Employment Agreements.”

Other Compensation Benefits.  We have established and maintain various employee benefit plans, including medical, dental, life insurance and 401(k) plans. These plans are available to all salaried employees and do not discriminate in favor of executive officers. We may extend other perquisites to our Bylaws,executives that are not available to our employees generally.

Processes and Procedures for business to be properly brought beforeDetermining Executive Compensation

The Compensation Committee approves the 2010 annual meeting it must be: (i) specifiedstructure of the executive compensation program and administers the programs for our executive officers, including matters where approval by our Compensation Committee members is appropriate for tax or regulatory reasons. The following describes the roles of key participants in the noticeprocess.

The Role of meeting (or any supplement thereto) given by orExecutives

Our Chief Executive Officer is responsible for reviewing the compensation and performance of the executive officers.  He makes recommendations to the Compensation Committee regarding adjustments in compensation for the executive officers.  The Chief Executive Officer also makes recommendations for discretionary annual short-term bonus amounts.  The Compensation Committee relies on the Chief Executive Officer’s recommendations and on its evaluation of current individual and business performance and historical individual and business performance.

Our Executive Vice President, Chief Financial Officer facilitates the flow of information between the Company, the compensation consultant and the Compensation Committee.  In this role, he communicates with the compensation consultant at the direction of the boardCompensation Committee.

The Role of directors; (ii) otherwise properly brought beforeExternal Advisors

The Compensation Committee engaged Cogent Compensation Partners (“Cogent”), as an independent consultant to the meeting by orCommittee, to help it with its responsibilities.  Cogent is assisting the Compensation Committee in assessing market practices and trends relating to compensation and will assist the Compensation Committee in changing certain compensation practices to be more closely aligned with the competitive market.  Cogent will also assist the Compensation Committee in using market information to make recommendations to the Board for director compensation.

The Role of the Compensation Committee

The Compensation Committee consists of three non-employee independent directors.  The Committee administers executive compensation programs as outlined in its charter which can be viewed at the directionCompany’s website at www.prim.com.  Included in its responsibilities is a determination of the board of directors; or (iii) otherwise properly brought before the meeting by a stockholder.  For business to be properly brought before a meeting by a stockholder, the stockholder must have given timely notice thereof in writing to our secretaryChief Executive Officer’s salary and such notice must contain certain required information.

To be considered “timely,” a stockholder’s notice must be delivered to our secretary not later than the close of business on March 15, 2010; provided, however, that if the date of the meeting has changed more than 30 days from the date of the 2009 annual meeting of stockholders, then in order for the stockholder’s notice to be timely it must be delivered to our secretary a reasonable time before we mail our proxy materials for the 2010 annual meeting of stockholders; 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 us pursuant to Rule 14a-5(f) or otherwise.  We expect to announce the date of the 2010 annual meeting of stockholders in March 2010.

If a stockholder proposes to nominate a person for election or reelection as a director, the stockholder’s notice must set forth 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 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.

For any other business, the stockholder’s notice must set forth 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 and 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, the language of the proposed amendment.

In addition, the stockholder’s notice must set forth asincentive awards.  The Compensation Committee makes recommendations to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made the name and addressBoard for a final determination of such stockholder, as they appear on our books, and of such beneficial owner, the class and number of shares that are owned beneficially and of record by such stockholder and such beneficial owner, a representation that the stockholder is a holder of record 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 a representation whether the stockholder or the beneficial owner, if any, intends or is part of a group that intends to deliver a proxy statement and/or form of proxy to holders of at least the percentage of our outstanding capital stock required to approve or adopt the proposal or elect the nominee and/or otherwise to solicit proxies from stockholders in support of such proposal or nomination.

Any stockholder who intends to present a proposal at the 2010 annual meeting of stockholders must send the proposal via standard mail, overnight delivery or other courier service, to Primoris Services Corporation, 26000 Commercentre Drive, Lake Forest, CA 92630, Attention: Secretary.executive compensation.

 

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WHERE YOU CAN FIND MORE INFORMATION; INCORPORATION BY REFERENCEOther Compensation Items

Clawback Policy

To the extent permitted by law, if the Board, with the recommendation of the Compensation Committee, determines that any bonus, equity award, equity equivalent award or other incentive compensation has been awarded or received by a Named Executive Officer, and that such compensation was based on the achievement of any financial results that were subsequently the subject of any material restatement of our financial statements filed with the SEC, the executive officer engaged in grossly negligent or intentional misconduct that caused or substantially caused the material restatement and the amount of the compensation would have been less had the financial statements been correct, we will seek to recover from the executive officer such compensation (in whole or in part) as we deem appropriate under the circumstances. The Board has sole discretion in determining whether an officer’s conduct has or has not met any particular standard of conduct under law or Company policy.

Risk Assessment

The Commission allowsCompensation Committee considered the risks associated with the Company’s compensation policies and practices for executive officers and determined that they did not identify any risks that are reasonably likely to have a material adverse effect on the Company. This determination was based on the following considerations:

·     Extensive stock ownership by the executive management team

·     Conservative amount of the discretionary annual incentive compensation

·     Balanced approach to viewing Company performance and determining bonuses

·     Long-term nature of the executive team evidenced by negligible turn-over in executive management over time.

Executive Ownership Guidelines

We encourage our executives to own Company common stock because we believe that stock ownership provides a strong alignment of interests between executives and stockholders.  Because most of our executives were significant owners in predecessor companies or acquired significant stock ownership at the time of an acquisition, the Compensation Committee does not believe that a specific stock ownership goal would be meaningful at this time.  As shown in the table under “Stock Ownership”, our named executive officers own 46.0 percent of our total shares outstanding.

Employment Agreements

In connection with the July 2008 reverse merger of Primoris and Rhapsody Acquisition Corp, Brian Pratt, our Chairman of the Board, Chief Executive Officer and President, and the other officers (including John P. Schauerman, John M. Perisich and Scott E. Summers) entered into employment agreements with either us or one of our subsidiaries. Each employment agreement is for a five-year term, subject to “incorporateearlier termination in certain circumstances, and may be extended by reference” certain information into this proxy statement, which meansmutual agreement of the executive and the employing company.

The employment agreements provide for a base salary, as well as for discretionary bonuses, in accordance with policies established by the Compensation Committee, and the provision of additional (“fringe”) benefits to the covered employee, including personal use of the employer owned or leased automobiles, limited use of company aircraft and other perquisites.

The employment agreements also require that we can disclose importantcontinue providing health benefits for one year if the employee’s employment is terminated by us without cause (as defined in the employment agreement), except where comparable health insurance is available from a subsequent employer. The employment agreements also provide that, in the event of the termination of an employee’s employment by us without cause, we will pay a lump sum equal to one-half of one year’s base salary of such employee. See “Potential Payments Upon Termination”, below.

The employment agreements contain certain restrictive covenants that prohibit the executives from disclosing information that is confidential to us and our subsidiaries and generally prohibit them, during the employment term and for two years thereafter, from soliciting or hiring our employees or our subsidiary employees and from using our confidential information to divert any customer business or income from us, or to otherwise alter the manner in which a customer does business with us.

Since July 2008, the Company has entered into similar employment agreements with Peter J. Moerbeek, our stockholdersChief Financial Officer, in February 2009 and with Michael D. Killgore and Danny L. Hester in December 2009, as part of our acquisition of James Construction Group.

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Compensation Tables

Summary Compensation Table.     The following table and accompanying notes provide summary information with respect to total compensation earned or paid by referringus or our stockholderssubsidiaries to (i) our current Chief Executive Officer, (ii) our current Chief Financial Officer, (iii) our three most highly compensated executive officers and (iv) our two most highly compensated employees who are not executive officers (collectively, the “Named Executive Officers”).

Name and Principal
Position

Year

Salary
($)(1)

Bonus
($)(2)

Deferred
Award
($)(3)

Stock
or
Option
Awards
($)(4)

Non-Equity
Incentive
Plan
Compensation

(5)

All Other
Compensation

(6)

Total
($)

Brian Pratt
Chairman of the
Board, Chief
Executive Officer
and President

2010
2009
2008

500,000
500,000
500,000

125,000
200,000
100,000

125,000
100,000



11,563

17,990
42,981
40,848

779,553
842,981
640,848

Peter J. Moerbeek,
Executive Vice
President, Chief
Financial Officer (7)

2010
2009
2008

350,000
314,327

150,000
325,000

150,000
125,000



13,876

18,545
10,704

682,421
775,031

Michael D. Killgore
Executive Vice President,
Director of Construction Services (8)

2010
2009
2008

331,352
12,162

315,000







13,630
225

659,982
12,387

John P. Schauerman
Executive Vice
President, Corporate
Development

2010
2009
2008

275,000
275,000
245,833

100,000
200,000
100,000

100,000
62,500



9,252

23,913
17,750
19,500

508,165
555,250
365,333

John M. Perisich
Senior Vice
President and
General Counsel

2010
2009
2008

260,417
250,000
250,000

112,500
225,000
100,000

112,500
75,000



10,408

11,514
12,528
16,663

507,339
562,528
366,663

Scott E. Summers
Co-President,
ARB Inc.


2010
2009
2008


300,000
300,000
300,000


150,000
250,000
200,000


150,000
125,000





13,876


21,160
11,866
21,675


635,036
686,866
521,675

Danny L. Hester
President,
James Construction
Group, LLC (8)

2010
2009
2008

263,288
10,288

285,000







9,800
206

558,088
10,494


(1)

Salary includes all regular wages paid to the Named Executive Officer and any amount that was voluntarily deferred by the Named Executive Officer pursuant to our 401(k) Plan.

(2)

Bonus includes cash compensation earned for services during each fiscal year.

(3)

Deferred award includes deferred bonus compensation awarded for services during the fiscal year. Certain executives may, on an elective basis, be a participant in our Retention Plan. Under the Plan, 50% of the annual cash award is deferred. Except in case of death, disability or involuntary separation from service, the deferred compensation is vested to the participant only if actively employed by the Company on the payment date of bonus amounts the following year. Beginning in 2010, participants in the deferred compensation plan can also participate, on an elective basis, in a stock purchase plan, which in 2011 provided a 25% discount to the market price for up to one sixth of the participant’s 2010 earned bonus amount. In 2010, Mr. Killgore and Mr. Hester were not eligible for Retention Plan participation.

(4)

During the years ended December 31, 2010, 2009 and 2008, our Named Executive Officers had no stock awards or stock option grants issued to them. As of December 31, 2010, we had no stock awards or stock option grants outstanding.

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(5)

The Retention Plan allows for the purchase of Common Shares at a discount from the market price. For 2011 purchases, the discounted price was $6.81 per share based on the average closing price of the shares in January 2011.The amounts shown in this column represent the difference between the purchase price and the market price on the date that the executive received constructive receipt of the shares.

(6)

All other compensation for the Named Executive Officers includes the following:

Year

Personal
Use
of
Company
Auto ($)

Personal
Use
of Company
Airplane
($) (a)

Company
paid
contributions
to
Employee
401(k) savings
account ($)

Relocation
Reimbursement

Total Other
Compensation
($)

Brian Pratt

2010
2009
2008

670
2,201
7,148

7,520
30,980
24,500

9,800
9,800
9,200



17,990
42,981
40,848

Peter J.
Moerbeek

2010
2009
2008

11,445
10,704





7,100

18,545
10,704

Michael D.
Killgore

2010
2009
2008

3,830



9,800
225



13,630
225

John P.
Schauerman

2010
2009
2008

7,950
7,950
6,675

6,163

3,625

9,800
9,800
9,200



23,913
17,750
19,500

John M. Perisich

2010
2009
2008

1,714
2,728
3,338



4,125

9,800
9,800
9,200



11,514

12,528
16,663

Scott E.
Summers

2010
2009
2008

1,373
2,066
5,475

9,988

7,000

9,800
9,800
9,200


21,160
11,866
21,675

Danny L. Hester

2010
2009
2008





9,800
206



9,800
206


(a)          The amount charged to the executive as compensation for use of the Company airplane is based on equivalent aircraft charter rates in the southern United States geographic areas.  Compensation is based on non-business-related airborne hours.

(7)Mr. Moerbeek was named Executive Vice President, Chief Financial Officer on February 5, 2009.

(8)Mr. Killgore and Mr. Hester became employees of the Company on December 18, 2009 at the time we purchased James Construction Group.

Grants of Plan-Based Awards

There were no grants of plan-based awards to the Named Executive Officers during the calendar year 2010.

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Outstanding Equity Awards at Fiscal Year-End

There were no outstanding equity awards held by the Named Executive Officers at December 31, 2010.

Options Exercised and Stock Vested

There were no grants of plan-based awards made in prior years; hence, there have been no stock option exercises and no stock option vesting, nor vesting of restricted stock by the Named Executive Officers during the calendar year 2010.

Equity Compensation Plan Information

During the fiscal year 2010, the Company adopted the Retention Plan for certain managers and its senior executives.  The plan provided for both the deferral of one-half of the participant’s annual earned bonus for one year and also allowed the participant the opportunity to purchase Company common stock at a 25% discount to the market price for up to one-sixth of the participants 2010 earned bonus amount.  Total shares purchased by the participants, including the senior executives, amounted to 95,223 shares of Common Stock.  These shares were issued as part of  the 2008 Equity Plan.  There were no other documentsgrants of plan-based awards made in the current fiscal year, nor in prior years.

The following table lists the number of shares of common stock purchased by the Named Executive Officers under the 2010 long-term incentive plan:

No. of Shares

Brian Pratt

6,118

Peter J. Moerbeek

7,342

Michael D. Killgore

John P. Schauerman

4,895

John M. Perisich

5,507

Scott E. Summers

7,342

Danny L. Hester

Potential Payments Upon Termination

The terms of the employment agreements with each of our Named Executive Officers provide that we filed separatelymust pay certain severance benefits in the event such Named Executive Officer is terminated by us other than for “cause”.

The following table shows amounts payable to each of our Named Executive Officers under the scenario that the executive is terminated without cause or leaves due to death or disability. The table assumes that the terminating event occurred on June 30, 2011.

 

 

Base
Salary (1)

 

Bonus (2)

 

Health
Care
Benefits (4)

 

Accrued
Vacation (5)

 

Total (3)

 

Brian Pratt

 

$

250,000

 

$

250,000

 

$

9,563

 

$

28,846

 

$

538,409

 

Peter J. Moerbeek

 

$

175,000

 

$

237,500

 

$

9,563

 

$

20,192

 

$

442,256

 

Michael D. Killgore

 

$

175,000

 

$

87,500

 

$

14,137

 

$

20,192

 

$

296,830

 

John P. Schauerman

 

$

137,500

 

$

168,750

 

$

14,137

 

$

15,865

 

$

336,253

 

John M. Perisich

 

$

137,500

 

$

181,250

 

$

14,137

 

$

15,865

 

$

348,753

 

Scott E. Summers

 

$

150,000

 

$

225,000

 

$

14,137

 

$

17,308

 

$

406,445

 

Danny L. Hester

 

$

150,000

 

$

75,000

 

$

14,137

 

$

17,308

 

$

256,445

 


(1)           Calculated as a lump sum payment equal to one-half of one year’s base salary.

(2)           In the event of termination without cause, or by death or disability, calculated as a lump sum payment equal to the bonus amount that would have been paid for the calendar year in which the termination occurs, determined after the end of the calendar year, pro rata to the date of termination. For purposes of this table, it was assumed that 25% of base salary would be paid. In addition, for participants in the Company’s Retention Plan, includes any deferred amounts in accordance with the Commission.  Our stockholders should considerterms of that plan.

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(3)           There have been no stock options or other stock compensation granted to any Named Executive Officers.  Additionally, each Named Executive Officer participates in the incorporated information as if we reproducedCompany life insurance program, and in the event of death, the employee’s beneficiary would also receive a lump sum $50,000 payment.  The lump sum payment for Mr. Killgore and Mr. Hester would amount to $10,000.

(4)           In the event of the executive’s termination without cause, or by death or disability, he is entitled to one year of healthcare benefits. The amount reflects both the employee and employer portion of health care premium costs.

(5)           Each executive is allowed an accrual of up to three weeks of vacation. For purposes of this table, it in this proxy statement, except for any information directly superseded by information contained in this proxy statement.was assumed that the full three weeks would be paid upon termination.

Retirement Plans

 

We incorporatecontributed to two plans that provide benefits to management.

Our 401(k) Plan is qualified as an employee retirement plan under Section 401(a) and 401(k) of the Code. Participation is optional for employees once they are eligible to participate.

We also provide for a “Registered Retirement Saving Plan—Deferred Profit Sharing Plan” for certain Canadian employees. We make contributions based on a percentage of the amount of income deferred by reference into this proxy statement the following financial statementsemployee.

2008 Long-Term Incentive Equity Plan

Background.     The principal purpose of our 2008 Equity Plan is to provide incentives for our officers, employees and consultants, as well as the officers, employees and consultants of any of our subsidiaries. We believe that grants of options, restricted stock and other information (Commission File No. 001-34145), which contain important information about usawards will stimulate their personal and active interest in our businessdevelopment and financial results:success, and induce them to remain in our employ or continue to provide services to us. In addition to awards made to officers, employees or consultants, the 2008 Equity Plan permits us to grant options or other equity securities to our Directors.

Under the 2008 Equity Plan, 1,520,000 shares of our Common Stock were initially reserved for issuance. As of December 31, 2010, there were no options issued to purchase our shares, no other stock based awards granted and there were no shares of restricted stock granted under the 2008 Equity Plan.  A total of 1,424,777 shares remain available under the 2008 Equity Plan as of December 31, 2010.

Shares of Common Stock that are forfeited or terminated will be available for future award grants under the 2008 Equity Plan. Any surrendered shares of previously owned stock by a participant used to cover the option exercise price or their withholding tax liability associated with an option exercise, may be added to the number of reserved shares available under the 2008 Equity Plan, subject to approval by the Board or the Compensation Committee, and relevant provisions in the 2008 Equity Plan.

Award Limitation.     No individual may be granted awards under the 2008 Equity Plan representing more than 40,000 shares of our Common Stock in any calendar year.

Administration.     The 2008 Equity Plan is administered by our Board or our Compensation Committee. To administer the 2008 Equity Plan, the Compensation Committee recommends to the Board, among other things:

·     the persons to whom awards may be granted;

·     the specific type of awards to be granted;

·     the number of shares subject to each award;

·     option or share prices;

·     any restrictions or limitations on the awards; and

 

·                  any vesting, exchange, deferral, surrender, cancellation, acceleration, termination, exercise or forfeiture provisions related to the financial statements, selected financial data, selected quarterly financial data, management’s discussionawards.

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In the case of awards intended to qualify as “performance-based compensation” within the meaning of Section 162(m) of the Code, the Compensation Committee must consist of at least two members of our Board, each of whom is an “outside independent director” within the meaning of that section. Upon the recommendation of the Compensation Committee, our entire Board will administer the 2008 Equity Plan with respect to awards to non-employee Directors.

Eligibility.     We may grant awards under the 2008 Equity Plan to employees, officers, Directors, and analysisconsultants who are deemed to have rendered, or to be able to render, significant services to us and who are deemed to have contributed, or to have the potential to contribute, to our success.

Awards.     The 2008 Equity Plan provides that we may grant awards of financial conditionthe following types of securities, among others:

·“incentive” stock options, as defined in Section 422 of the Code, and resultsoptions that are not qualifying incentive options;

·stock appreciation rights to participants who have been, or are being, granted stock options under the 2008 Equity Plan;

·     restricted stock; and

·other stock-based awards, subject to limitations under applicable law, that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, shares of operationscommon stock.

Accelerated Vesting and Exercisability.     The following events will cause acceleration in the vesting with respect to awards granted under the 2008 Equity Plan:

·If any one person, or more than one person acting as a group, acquires the ownership of our common stock that, together with the common stock held by such person or group, constitutes more than 50% of our total fair market risk disclosuresvalue or of our combined voting power and risk factorsour Board does not authorize or otherwise approve such acquisition; and/or

·The Compensation Committee may accelerate such vesting if there is an acquisition by any one person or more than one person acting as a group, together with the acquisition during the 12-month period ending on the date of the most recent acquisition by such person or persons, of our assets that have a total gross fair market value equal to more than 50% of the total gross fair market value of all of our assets immediately before such acquisition or acquisitions, or if any one person or more than one person acting as a group, acquires the ownership of our common stock that, together with the common stock held by such person or group, constitutes more than 50% of the total fair market value or combined voting power of our common stock, which has been approved by our Board.

Notwithstanding any provisions of the 2008 Equity Plan or any award granted to the contrary, no acceleration will occur with respect to any award to the extent such acceleration would cause the 2008 Equity Plan or an award granted under such plan to fail to comply with Section 409A of the Code.

Additional Equity Compensation Plan Information

The following table gives information about our Common Stock that may be issued upon the exercise of options, warrants, and rights, or purchased as part of the Company’s 2008 Equity Plan and the Retention Plan as of December 31, 2010.

Plan category

 

Number of securities to be
issued upon exercise of
outstanding options,
warrants, rights or
purchased under equity
plan

 

Weighted-average
exercise price of
outstanding options,
warrants and rights

 

Number of securities
remaining available
for future issuance
under
equity compensation
plans
(excluding securities
reflected in
column (a))

 

 

 

(a)

 

(b)

 

(c)

 

Equity compensation plans approved by security holders

 

95,223

 

 

1,424,777

 

Equity compensation plans not approved by security holders

 

 

 

 

Total

 

95,223

 

 

1,424,777

 

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OTHER MATTERS

We are not aware of any matters other than those discussed in the foregoing materials contemplated for action at the 2011 Annual Meeting. The persons named in your proxy will vote in accordance with the recommendation of the Board on any other matters incidental to the conduct of, or otherwise properly brought before, the Annual Meeting. Discretionary authority for them to do so is contained in the proxy.

SEC rules permit companies, brokers, banks or other intermediaries to deliver a single copy of this Proxy Statement and Annual Report to households at which two or more stockholders reside. This practice, known as “householding,” is designed to reduce duplicate mailings and save significant printing and postage costs as well as natural resources. Stockholders sharing an address who have been previously notified by their broker, bank or other intermediary and have consented to householding will receive only one copy of our Proxy Statement and Annual Report. If you would like to opt out of this practice for future mailings and receive separate Proxy Statements and Annual Reports for each stockholder sharing the same address, please contact your broker, bank or other intermediary. You may also obtain a separate Proxy Statement or Annual Report without charge by sending a written request to Primoris Services Corporation, 2100 McKinney Avenue, Suite 1500, Dallas, Texas 75201, Attention: Investor Relations, or by contacting us at (214) 740-5600. We will promptly send additional copies of the Proxy Statement or Annual Report upon receipt of such request. Stockholders sharing an address that are receiving multiple copies of the Proxy Statement or Annual Report can request delivery of a single copy of the Proxy Statement or Annual Report by contacting their broker, bank or other intermediary or sending a written request to the Company at the address above.

Our Annual Report on Form 10-K for the fiscal year ended December 31, 2010 is being mailed to all stockholders of record with this Proxy Statement. The Annual Report on Form 10-K does not constitute, and should not be considered, a part of this proxy solicitation material.

A copy of our Annual Report on Form 10-K for the fiscal year ended December 31, 2008,2010, filed with the Commission on March 24, 2009, and our Quarterly Reports on Form 10-Q for the period ended March 31, 2009, filed with the Commission on May 13, 2009, for the period ended June 30, 2009, filed with the Commission on August 12, 2009, and for the period ended September 30, 2009, filed with the Commission on November 12, 2009;SEC is available without charge upon written request to:

 

·Primoris Services Corporation
2100 McKinney Avenue, Suite 1500
Dallas, Texas  75201
Attention: Investor Relations

Any stockholder or stockholder’s representative, who, because of a disability, may need special assistance or accommodation to allow him or her to participate at the Current Reports on Form 8-KAnnual Meeting, may request reasonable assistance or Form 8-K/A filedaccommodation from us by contacting Primoris Services Corporation, 2100 McKinney Avenue, Suite 1500, Dallas, Texas  75201, or at (214) 740-5600. To provide us with the Commission on February 12, 2009, March 17, 2009, March 31, 2009, May 26, 2009, July 10, 2009, November 4, 2009, November 23, 2009, December 17, 2009, December 23, 2009 and January 22, 2010; andsufficient time to arrange for reasonable assistance or accommodation, please submit all requests by April 29, 2011.

 

·the description of our common stock contained in our registration statement on Form S-3/A filed with the Commission on October 5, 2009.

We may file additional documents with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act on or after the date of this proxy statement and before the special meeting.  The Commission allows us to incorporate by reference into this proxy statement such documents.  Our stockholders should consider any statement contained in this proxy statement (or in a document incorporated into this proxy statement)Whether you intend to be modified or superseded to the extent that a statement in a subsequently filed document modifies or supersedes such statement.  You can obtain these documents through the Commission’s website at www.sec.gov.  Copies of these documents can also be sent to you without charge, within one business day of receipt of your written or oral request.  Requests can be made by telephone or in writingpresent at the address below:Annual Meeting or not, we urge you to return your signed proxy promptly.

 

By mail:

Primoris Services Corporation

26000 Commercentre Drive

Lake Forest, California 92630

Attention: Investor RelationsOrder of the Board of Directors,

 

 

 

/s/John M. Perisich

 

By telephone:John M. Perisich

(949) 598-9242

Senior Vice President, General Counsel and Secretary

 

 

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Table of Contents

 

PROXYPERFORMANCE GRAPH

The following Performance Graph and related information shall not be deemed to be filed with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or Securities Exchange Act of 1934, each as amended, except to the extent that we specifically incorporate it by reference into such filing.

The following graph compares the cumulative total return to holders of the Company’s common stock during the period from August 6, 2008, the first day of trading in the Company’s common stock, and in each quarter up to December 31, 2010.    The return is compared to the cumulative total return during the same period achieved on the Standard & Poor’s 500 Stock Index (the “S&P 500”) and a peer group index selected by our management that includes five public companies within our industry (the “Peer Group”).  The Peer Group is composed of MasTec, Inc., Matrix Service Company, Quanta Services, Inc., Sterling Construction Company, Inc. and Willbros Group, Inc.  The companies in the Peer Group were selected because they comprise a broad group of publicly held corporations, each of which has some operations similar to ours.  When taken as a whole, management believes the Peer Group more closely resembles our total business than any individual company in the group.

The returns are calculated assuming that an investment with a value of $100 was made in the Company’s common stock and in each stock as of August 6, 2008, the first day of trading after the July 31, 2008 Merger.  All dividends were reinvested in additional shares of common stock, although the comparable companies did not pay dividends during the periods shown.  The Peer Group investment is calculated based on a numerical average of the five company share prices. The graph lines merely connect the measuring dates and do not reflect fluctuations between those dates. The stock performance shown on the graph is not intended to be indicative of future stock performance.

COMPARISON OF AUGUST 6, 2008 THROUGH DECEMBER 31, 2010

CUMULATIVE TOTAL RETURN

Among Primoris Services Corporation (“PRIM”), the S&P 500 and the Peer Group

GRAPHIC

35



 

PRIMORIS SERVICES CORPORATION

 

SPECIALPROXY FOR ANNUAL MEETING

FOR APRIL 12, 2010

OF STOCKHOLDERS, MAY 6, 2011
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

 

The undersigned hereby appoints Brian Pratt and Peter J. Moerbeek, and each or either or them, as proxy holders of the undersigned,Proxy holder, with the full power to appoint theirhis substitute, and hereby authorizes themhim to represent and vote, as designated on the reverse side, hereof, all of theeligible shares of the common stockCommon Stock of Primoris Services Corporation, held of record by the undersigned as of March 31, 2011, which the undersigned may be entitled to vote on the close of business on March 9, 2010, at the Special2011 Annual Meeting of Stockholders of Primoris Services Corporation to be held at 9:30 a.m., Central Time, on April 12, 2010, at 10:00 A.M., Pacific Standard Time,May 6, 2011, at the Primoris Services Corporation officesRitz-Carlton Dallas, located at 26000 Commercentre Drive, Lake Forest, California 92630,2121 McKinney Avenue, Dallas, Texas 75201, and any continuation(s), postponement(s) or adjournment(s)adjournment thereof.

 

IMPORTANT—PLEASE SIGN AND DATE ON THE REVERSE SIDE AND RETURN PROMPTLY

(Continued and to be marked, dated and signed, on the other side.)side)

Address Change/Comments (mark the corresponding box on the reverse side)

 



 

THIS PROXY, WHEN PROPERLY EXECUTEDFOLD AND DATED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER(S).  IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2, AND AT THE DISCRETION OF THE PROXIES WITH RESPECT TO ANY OTHER MATTERS THAT PROPERLY COME BEFORE THE SPECIAL MEETING.DETACH HERE

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTEThe Board of Directors recommends a vote “FOR” PROPOSALS 1 AND 2.all proposals.

 

Please Mark Here for Address Change or Comments SEE REVERSE SIDE

o

TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK, AS FOLLOWS:Proposal 1— Election of Class C Directors—The Board recommends a vote “FOR” each listed nominee as a Director for a three-year term expiring in 2014:

(1)To approve of the issuance of (a) 8,185,278 shares of common stock issuable upon the conversion of the shares of Series A Non-Voting Contingent Convertible Preferred Stock issued in connection with the acquisition of James Construction Group, LLC, and (b) up to 6,508,276 shares of common stock, which shares of common stock may be issued as earnout consideration in connection with the acquisition of James Construction Group, LLC.

Nominees:

01—Michael D. Killgore

FOR

WITHHOLD

o

o

02—Robert A. Tinstman

FOR

WITHHOLD

o

o

03—Eric S. Rosenfeld

FOR

WITHHOLD

o

o

 

 

o

FOR

AGAINST

ABSTAIN

Proposal 2— To provide a non-binding advisory vote approving the Company’s executive compensation.

o

AGAINST

o

o

THREE
YEARS

TWO
YEARS

ONE
YEAR

ABSTAIN

Proposal 3— To provide a non-binding advisory vote on the proposed timeline for seeking executive compensation advisory votes in the future.

o

o

o

o

FOR

AGAINST

ABSTAIN

Proposal 4— Ratification of Appointment of Moss Adams, LLP as the Company’s Independent Registered Public Accounting Firm— The Board recommends a vote “FOR” ratification of Moss Adams, LLC as the Company’s Independent Registered Public Accountant.

o

o

o

 

 

(2)To approve ofThis Proxy, when properly executed, will be voted according to your instructions. If no instructions are given but the conversion of 81,852.78 shares of our Series A Non-Voting Contingent Convertible Preferred Stock into 8,185,278 shares of common stock, which shares of Series A Non-Voting Contingent Convertible Preferred Stock were issuedproxy is signed, this Proxy will be voted for ALL the nominees listed in connection withProposal 1, FOR on Proposal 2, for THREE YEARS for Proposal 3 and FOR on Proposal 4.  In his discretion, the acquisition of James Construction Group, LLC.Proxy holder is authorized to vote upon such other business as may properly come before the meeting or any adjournment or postponement thereof.

 

Signature:

o

FOR

o

AGAINST

o

ABSTAINDate:

 

 

PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED, PRE-PAID ENVELOPE.

Please date and execute this Proxy and sign it exactly as your name appears hereon.or names appear above. When shares are held by joint tenants, both should sign. When signing as an attorney, executor, administrator, trustee or guardian, please give full title as such. If shares are held by a corporation, please sign in full corporate name by the president or other authorized officer. If shares are held by a partnership, please sign in full partnership name by an authorized person.

 

Dated:



FOLD AND DETACH HERE AND READ THE REVERSE SIDE

PROXY

PRIMORIS SERVICES CORPORATION

PROXY FOR ANNUAL MEETING OF STOCKHOLDERS, MAY 6, 2011
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby appoints Brian Pratt as Proxy holder, with the power to appoint his substitute, and hereby authorizes him to represent and vote, as designated on the reverse side, all eligible shares of Common Stock of Primoris Services Corporation, held of record by the undersigned as of March 31, 2011, which the undersigned may be entitled to vote at the 2011 Annual Meeting of Stockholders to be held at 9:30 a.m., Central Time, on May 6, 2011, at the Ritz-Carlton Dallas, located at 2121 McKinney Avenue, Dallas, Texas 75201, and any continuation(s), postponement(s) or adjournment thereof.

IMPORTANT—PLEASE SIGN AND DATE ON THE REVERSE SIDE AND RETURN PROMPTLY

(Continued and to be marked, dated and signed, on the other side)

Address Change/Comments (mark the corresponding box on the reverse side)

, 2010

Signature

Signature, if held jointly