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PRIM > SEC Filings for PRIM > Form 8-K on 20-Nov-2012All Recent SEC Filings

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Form 8-K for PRIMORIS SERVICES CORP


20-Nov-2012

Completion of Acquisition or Disposition of Assets, Financial Statements a


Item 2.01 Completion of Acquisition or Disposition of Assets

Completion of Purchase of Q3 Contracting, Inc.

Summary

On November 19, 2012, Primoris Services Corporation, a Delaware corporation ("we," "us," "our," "Primoris" or the "Company"), completed the previously announced purchase of all of the issued and outstanding shares of stock of Q3 Contracting, Inc., a privately-held Minnesota corporation ("Q3C"). The material terms of the transaction were previously disclosed in our Current Report on Form 8-K filed with the Securities and Exchange Commission (the "Commission") on November 15, 2012.

Pursuant to the Stock Purchase Agreement dated November 8, 2012 (the "Purchase Agreement") with Q3C, all of the shareholders of Q3C (collectively the "Shareholders") and Jay P. Osborn, as representative of the Shareholders (the "Representative"), the issued and outstanding shares of Q3C were sold and transferred by the Shareholders to Primoris on November 19, 2012 and Primoris paid approximately $48.12 million in initial cash consideration (out of which $4 million was placed in an escrow or held back to secure certain obligations and agreements of the Shareholders under the Purchase Agreement). Additional cash will be provided subject to Q3C's attaining certain specified financial goals, with a maximum potential payout of $10 million. The incentive provisions are based on Q3C's achieving certain financial targets using income before interest, taxes, depreciation and amortization ("EBITDA"), as that term is defined in the Purchase Agreement. As a result, and assuming that the earnout consideration is earned, the total consideration payable to the Shareholders pursuant to the Purchase Agreement may be approximately $58.12 million.

The Purchase Agreement contains covenants, representations and warranties of the Company, Q3C and the Shareholders that are customary for transactions of this type. Prior to the closing of the transaction, and other than with respect to the Purchase Agreement, neither we nor any of our officers, directors, affiliates or any of their associates had any material relationship with Q3C, the Shareholders or the Representative.

The following description of the Purchase Agreement is not intended to be complete and is qualified in its entirety by the complete text of the Purchase Agreement, which was filed as Exhibit 2.1 to our Current Report on Form 8-K as filed with the Commission on November 15, 2012, and which is incorporated herein by reference.

Consideration

Cash

On November 19, 2012, we paid the Shareholders approximately $48.12 million in cash. Of that amount, we placed $3.0 million of the cash consideration in an escrow account and held back $1.0 million, as discussed below.

Earnout Consideration

First Earnout Period

Subject to certain specified adjustments, if Q3C's EBITDA for the period commencing November 18, 2012 and ending December 31, 2013 is equal to or greater than $17.7 million, we have agreed to pay the Shareholders $3.75 million in cash. An additional cash payment of $1.25 million will be paid if Q3C's EBITDA equals or exceeds $19.7 million for the same period.

Second Earnout Period

Subject to certain specified adjustments, if Q3C's EBITDA for the twelve month period commencing January 1, 2014 and ending December 31, 2014 is equal to or greater than $19.0 million, we have agreed to pay the Shareholders $3.75 million in cash. An additional cash payment of $1.25 million will be paid if Q3C's EBITDA equals or exceeds $22.0 million for the same period.


Potential Adjustment to Consideration

The Purchase Agreement provides that the cash consideration may be reduced dollar for dollar by the amount, if any, by which the stockholders equity, as indicated on Q3C's balance sheet as of the closing date, is less than approximately $18.86 million. A total of $1.0 million (the "Holdback Amount") of the cash consideration paid at closing was held back by us to provide a source for offsetting any such reduction in the Purchase Agreement consideration. If the Purchase Agreement consideration is reduced, then the amount of the reduction will be automatically retained by us from the Holdback Amount. If the amount of the reduction exceeds the Holdback Amount, the Shareholders have agreed to pay us such excess amount.

Escrow Account

An additional $3.0 million of the cash consideration was placed in an escrow account until the earlier of 18 months after the closing date or the date that the audit of our financial statements for the fiscal year ended December 31, 2013 is completed. This amount will be used to provide a source of indemnity against specified damages to us, as described in the Purchase Agreement.

Management

In connection with the Purchase Agreement, certain of Q3C's key employees entered into employment and noncompetition agreements with us, effective as of the closing date.




Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

Exh. No.                                 Description

2.1        Stock Purchase Agreement, dated November 8, 2012, by and among Primoris
           Services Corporation, a Delaware corporation and Q3 Contracting, Inc., a
           privately-held Minnesota corporation, all of the shareholders of Q3
           Contracting, Inc. and Jay P. Osborn as representative of the
           shareholders of Q3 Contracting, Inc. (1)



(1) Filed with the Commission as an exhibit to our Current Report on Form 8-K on November 15, 2012.


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