10-K

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)
ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2008
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                                    to

Commission file number: 0001-34145

Primoris Services Corporation
(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	20-4743916 (I.R.S. Employer Identification No.)
26000 Commercentre Drive Lake Forest, California (Address of principal executive offices)	92630 (Zip Code)

(949) 598-9242
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of exchange on which registered
Common Stock, $0.0001 par value	The NASDAQ Stock Market LLC
Units	The NASDAQ Stock Market LLC
Common Stock Purchase Warrants	The NASDAQ Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act:

None

          Indicate by check mark if the registrant is a well-know seasoned issued, as defined in Rule 405 of the Securities Act. Yes o    No ý

          Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o    No ý

          Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

          Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III in this Form 10-K or any amendment to this Form 10-K. ý

          Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act).

Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller Reporting Company ý

          Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o    No ý

          The aggregate market value of the voting common equity held by non-affiliates of the registrant was approximately $46.8 million based upon the average bid and asked price of such common equity as of June 30, 2008. On March 3, 2009, there were 29,977,339 shares of common stock, par value $0.0001, outstanding. For purposes of this Annual Report on Form 10-K, in addition to those stockholders which fall within the definition of "affiliates" under Rule 405 of the Securities Act of 1933, holders of ten percent or more of the Registrant's common stock are deemed to be affiliates.

Documents Incorporated by Reference

          Portions of the Proxy Statement to be delivered to stockholders in connection with the Registrant's 2009 Annual Meeting of Stockholders to be filed on or before 120 days after the end of the Registrant's fiscal year end are incorporated by reference into Part III of this Annual Report on Form 10-K. With the exception of those portions that are specifically incorporated in this Annual Report on Form 10-K, such Proxy Statement shall not be deemed filed as part of this Annual Report on Form 10-K or incorporated by reference herein.

TABLE OF CONTENTS

		Page
Part I
Item 1.	Business	4
Item 1A.	Risk Factors	10
Item 1B.	Unresolved Staff Comments	19
Item 2.	Properties	19
Item 3.	Legal Proceedings	21
Item 4.	Submission of Matters to a Vote of Security Holders	21
Part II
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	22
Item 6.	Selected Financial Data	24
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	26
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	43
Item 8.	Financial Statements and Supplementary Data	44
Item 9.	Changes In and Disagreements With Accountants on Accounting and Financial Disclosure	44
Item 9A(T).	Controls and Procedures	44
Item 9B.	Other Information	45
Part III
Item 10.	Directors, Executive Officers and Corporate Governance	46
Item 11.	Executive Compensation	47
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	47
Item 13.	Certain Relationships and Related Transactions, and Director Independence	47
Item 14.	Principal Accounting Fees and Services	47
Part IV
Item 15.	Exhibits and Financial Statement Schedules	48
Signatures		51
Index to Consolidated Financial Statements		F-1

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FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the "safe harbor" created by those sections. Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities, the effects of regulation and the economy, generally. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as "anticipates," "believes," "could," "estimates," "expects," "intends, "may," "plans," "potential," "predicts," "projects," "should," "will," "would" or similar expressions.

Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. We discuss many of these risks in detail in "Item 1A. Risk Factors". Also, forward-looking statements represent our management's beliefs and assumptions only as of the date of this Annual Report on Form 10-K. You should read this Annual Report on Form 10-K completely and with the understanding that our actual future results may be materially different from what we expect.

Given these uncertainties, you should not place undue reliance on these forward-looking statements. We assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, even if new information becomes available.

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PART I

ITEM 1.    BUSINESS

Business Overview

        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.

        Primoris installs, replaces, repairs and rehabilitates 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.

Company History and Merger

        On February 19, 2008, Rhapsody Acquisition Corp. ("Rhapsody") entered into an Agreement and Plan of Merger ("Merger Agreement") with Primoris Corporation, a privately held Nevada corporation ("Former Primoris"), and certain stockholders of Former Primoris. On July 31, 2008, with the consent of both the Rhapsody stockholders and the stockholders of Former Primoris, the merger was completed. While Rhapsody was the surviving legal entity in the merger, Former Primoris was treated as the acquiring entity for accounting purposes. From October 2006 until the merger, Rhapsody's common stock, warrants to purchase common stock ("Warrants") and Units (each unit consisting of one share of common stock and one Warrant) traded on the OTC Bulletin Board under the symbols "RPSD", "RPSDW" and "RPSDU", respectively. In connection with the merger, Rhapsody changed its name to "Primoris Services Corporation", whose common stock, Warrants and Units have traded since August 4, 2008 on the NASDAQ Global Market under the symbols "PRIM", "PRIMW" and "PRIMU", respectively.

        Unless specifically noted otherwise, as used throughout this Annual Report on Form 10-K, "Primoris", the "Company" or "we," "our," or "us" refers to the business, operations and financial results of Former Primoris prior to, and Primoris Services Corporation subsequent to, the closing of the merger on July 31, 2008, between us and Former Primoris as the context requires. "Rhapsody" refers to our operations or financial results prior to the closing of the merger.

        As part of the merger, holders of all of the issued and outstanding shares of common stock of Former Primoris and two foreign managers of Former Primoris (collectively, the "Former Primoris Holders") became entitled to receive an aggregate of (i) 24,094,800 shares of our common stock at the closing of the merger plus (ii) the right to receive 2,500,025 additional shares (allowing for rounding) of our common stock for each of the fiscal years ending December 31, 2008 and 2009 for a total of 5,000,050 additional shares, provided that we achieve specified EBITDA (as defined in the Merger Agreement) milestones. Of the 24,094,800 shares of common stock issued at the closing of the merger,

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1,807,110 were required to be placed into escrow to provide funds to satisfy Rhapsody's rights to indemnification under the Merger Agreement. As of December 31, 2008, the Company achieved the specified EBITDA milestone for 2008 and consequently, 2,500,025 shares are to be issued to the Former Primoris stockholders in March 2009.

        At the time of the merger in July 2008, Brian Pratt, the Chief Executive Officer and President of the Company, beneficially held more than 50% of the voting power of the Company, through his ownership of shares of our common stock and by the delivery of revocable proxies to Mr. Pratt from certain of our stockholders. As a result, the Company is considered a "controlled company" for purposes of the NASDAQ listing requirements (a corporation which more than 50% of the voting power is held by an individual, a group or another company). Therefore, the Company is not subject to the NASDAQ listing requirements that would otherwise require the board of directors to have a majority of independent directors and the compensation and nominating committees to be comprised entirely of independent directors. Accordingly, the Company's stockholders will not have the same protections afforded to stockholders of companies that are subject to all of such NASDAQ corporate governance requirements, and the ability of independent directors to influence the business policies and affairs will likely be substantially reduced. However, as of March 17, 2009 the Board of Directors determined that five of the eight directors were independent under the applicable NASDAQ listing requirements.

        The merger was accounted for as a reverse acquisition in accordance with accounting principles generally accepted in the United States ("GAAP"). Under this method of accounting, Rhapsody was treated as the "acquired" company for financial reporting purposes. This determination was primarily based on the operations and management of Former Primoris comprising the ongoing operations and management of the Company after the merger. In accordance with guidance applicable to these circumstances, the merger was considered to be a capital transaction in substance. Accordingly, for accounting purposes, the merger was treated as the equivalent of Former Primoris issuing stock for Rhapsody's net assets, accompanied by a recapitalization. Our pre-merger net assets are stated at historical cost, with no goodwill or other intangible assets recorded as part of the merger transaction. Operations prior to the merger are those of Former Primoris.

Services

        We provide services in two business segments, Construction Services and Engineering. Construction Services represented approximately 84.7% of revenues for 2008 and 85.9% in 2007. Engineering represented approximately 15.3% of revenues in 2008 and 14.1% in 2007. The segments include services as follows:

Construction Services:

        The Construction Services segment specializes in a range of services that include designing, building/installing, replacing, repairing/rehabilitating and providing management services for construction related projects. Our services include:

•

Providing installation of underground pipeline, cable and conduits for entities in the petroleum, petrochemical and water industries;

•

Providing installation and maintenance of industrial facilities for entities in the petroleum, petrochemical and water industries; and

•

Providing installation of complex commercial and industrial cast-in-place structures.

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Engineering:

        The Engineering segment specializes in designing, supplying and installing high-performance furnaces, heaters, burner management systems, and related combustion and process technologies for clients in the oil refining, petrochemical, and power generation industries. It also furnishes turnkey project management with the technical expertise and the ability to deliver custom engineering solutions worldwide.

Strategy

        Our strategy emphasizes the following key elements:

•

Diversification through Controlled Expansion.  We continue to emphasize both the expansion of services beyond our traditional focus and the addition of new customers. We intend to continue to evaluate acquisitions that offer growth opportunities and the ability to leverage our resources as a leading service provider to the oil and gas, power, refining and water industries. The current strategy also includes selective expansion to new geographic regions.

•

Emphasis on Retention of Existing Customers and Recurring Revenue.  In order to fully leverage our relationships with our existing customer base, we believe it is important to maintain strong customer relationships and to expand our base of recurring revenue sources and recurring customers.

•

Ownership of Equipment.  Many of our services are equipment intensive. The cost of construction equipment provides a significant barrier to entry into several of our businesses. We believe that our ownership of a large and varied construction fleet and our maintenance facilities enhances our access to reliable equipment at a favorable cost.

•

Stable Work Force.  We maintain a stable work force of skilled, experienced laborers, many of whom are cross-trained in projects such as pipeline and facility construction, refinery maintenance, and piping systems.

•

Selective Bidding.  We selectively bid on projects that we believe offer an opportunity to meet our profitability objectives, or that offer the opportunity to enter promising new markets. In addition, we review our bidding opportunities to attempt to minimize concentration of work with any one customer, in any one industry, or in stressed labor markets.

•

Focus on Private Sector Work.  We focus on private sector work, which we believe is generally more profitable than public sector work and which allows for the development of long-term customer relationships. Through the twelve months ended December 31, 2008, approximately $454 million or 74.6% of our revenue was derived from private sector projects. In 2007, revenue of approximately $346 million, or 75.3% of our revenue, was derived from private sector projects.

Backlog

        See Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Annual Report on Form 10-K for information relating to our backlog.

Customers

        We have longstanding relationships with major utility, refining, petrochemical, power and engineering companies. We have completed major underground and industrial projects for a number of large natural gas transmission and petrochemical companies in the Western United States, as well as significant projects through our engineering subsidiary. A large number of contracts are entered into each year, many of which are completed within three months from commencement, as well as other

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larger projects that may take 12 to 24 months to complete. Although we have not been dependent upon any one customer, a small number of customers may constitute a substantial portion of our total revenue in any given period.

        Our customers include many of the leading energy and utility companies in the United States, including, among others, Duke Energy, Conoco Phillips, British Petroleum, Pacific Gas & Electric, Sempra Energy, Williams, Valero, Chevron, Calpine, Kinder Morgan and Praxair.

        The following customers accounted for more than 5% of our revenues in the periods indicated:

Description of customer's business		2008			2007			2006
Public gas and electric utility			(*)			(*)			10.8	%
Public gas and electric utility			7.4	%		6.0	%		7.9	%
Engineering contractor			9.7	%		—			—
Engineering contractor			11.1	%		10.2	%		—
	Totals		28.2	%		16.2	%		18.7	%

(*)

Indicates a customer with less than 5% of revenues during such period.

        For the year ended December 31, 2008, approximately 58.6% of total revenues were generated from ten customers of the Company. Additionally, approximately 6.1% of the Company's accounts receivable were due from one customer. For the year ended December 31, 2008, the Company earned approximately 9.7% of its total revenue from this customer.

Ongoing Projects

        The following is a summary of our selected ongoing construction projects at December 31, 2008:

Segment	Project	Location	Contract Amount		Estimated Completion Date		Remaining Backlog at December 31, 2008
			(Millions)				(Millions)
Construction Services	138 kV Transmission Line	Las Vegas, NV	$	15		03/2010	$	15
Construction Services	230 kV Transmission Line	Las Vegas, NV	$	9		05/2009	$	7
Construction Services	Imperial Valley Loop Line	El Centro, CA	$	19		05/2009	$	15
Construction Services	260M std cu ft Hydrogen Reformer Plant	Richmond, CA	$	109		10/2009	$	88
Construction Services	Delevan Compressor Power Retrofit	Willows, CA	$	54		04/2011	$	40
Engineering	Coker Heater	Detroit, MI	$	15		06/2009	$	9
Engineering	Waste Heat Rec.	Thailand	$	27		06/2009	$	14
Engineering	Crude Heater	St. Charles, LA	$	10		06/2009	$	5
Engineering	MSAT Reboiler	Robinson, IL	$	9		05/2009	$	9
						Various	$	173
						Total	$	375

Competition

        We face 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. We compete with many local and regional firms for construction

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services and with a number of large firms on select projects. Each business segment faces varied competition depending on the type of project and services offered.

        We believe that our 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. We believe that we compete favorably in all of the foregoing factors.

Geographic Areas Financial Information

        The following table sets forth our revenues from external customers attributable to our operations in the countries identified below for the years ended December 31, 2008, 2007 and 2006, and the total assets located in those countries for the years ended December 31, 2008 and 2007. Our revenue from operations in the United States and Ecuador are related to projects primarily in those countries. Our revenue from operations in Canada are primarily derived from our office in Calgary, Canada, but may relate to specific projects in other countries.

	Year Ended December 31,												Total Assets at December 31,
	2008				2007				2006				2008		2007
Country	Revenue		%		Revenue		%		Revenue		%
	(Thousands)				(Thousands)				(Thousands)				(Thousands)		(Thousands)
United States	$	577,090		94.8	$	521,663		95.3	$	411,095		93.6	$	231,642	$	203,047
Canada		20,732		3.4		20,961		3.8		18,911		4.3		12,514		14,818
Ecuador		11,250		1.8		5,042		0.9		9,399		2.1		8,056		3,108
TOTAL	$	609,072		100.0	$	547,666		100.0	$	439,405		100.0	$	252,212	$	220,973

Risks Attendant to Foreign Operations

        International operations are subject to foreign economic and political uncertainties. Unexpected and adverse changes in the foreign countries in which we operate could result in project disruptions, increased costs and potential losses. Our business is subject to fluctuations in demand and to changing domestic and international economic and political conditions which are beyond our control. In 2008, as set forth in the table above, approximately 5.2% of our revenue was attributable to external customers in foreign countries. The current expectation is that a similar portion of revenue will continue to come from international projects for the foreseeable future.

        The lack of a well-developed legal system in some foreign countries may also make it difficult to enforce contractual rights. There are significant risks due to civil strife, acts of war, terrorism and insurrection. The level of exposure to these risks will vary with respect to each project, depending on the particular stage of each such project. For example, the risk exposure with respect to a project in an early development stage will generally be less than the risk exposure with respect to a project in the middle of construction. To the extent that our international business is affected by unexpected and adverse foreign economic and political conditions, we may experience project disruptions and losses, which can significantly reduce our overall revenue and profits. We are able to mitigate significant portions of these risks by focusing on U.S. and European based clients (although the projects may be located elsewhere) and U.S. dollar based or hedged contracts.

Contract Provisions and Subcontracting

        A substantial portion of our revenue is derived from contracts that are "fixed price" or "fixed unit price" contracts. Under a fixed price contract, we undertake to provide labor, equipment and services required by a project for a competitively bid or negotiated fixed price. The materials required under a

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fixed price contract, such as pipe, turbines, boilers and vessels are often supplied by the party retaining us. Under a fixed unit price contract, we are committed to providing materials or services required by a project at fixed unit prices. While the fixed unit price contract shifts the risk of estimating the quantity of units required for a particular project to the party retaining us, any increase in our unit cost over the unit price bid, whether due to inflation, inefficiency, faulty estimates or other factors, is borne by us.

        Construction contracts are primarily obtained through competitive bidding or through negotiations with long-standing customers. We are typically invited to bid on projects undertaken by recurring customers who maintain pre-qualified contractor lists. Contractors are selected for the pre-approved contractor lists by virtue of their prior performance for such customers, as well as their experience, reputation for quality, safety record, financial strength and bonding capacity.

        In evaluating bid opportunities, we consider such factors as the customer, the geographic location of the work, the availability of labor, our competitive advantage or disadvantage relative to other likely contractors, our current and projected workload, the likelihood of additional work, and the project's cost and profitability estimates. We use computer-based estimating systems and our estimating staff has significant experience in the construction industry. The project estimates form the basis of a project budget against which performance is tracked through a project cost system, enabling management to monitor a projects progress. Project costs are accumulated and monitored weekly against billings and payments to assure proper control of cash flow on the project.

        All government contracts and many other contracts provide for termination of the contract for the convenience of the party. In addition, many contracts are subject to certain completion schedule requirements with liquidated damages in the event schedules are not met. We have not been materially adversely affected by these provisions in the past.

        We act as prime contractor on a majority of the construction projects we undertake. In the construction industry, the prime contractor is normally responsible for the performance of the entire contract, including subcontract work. Thus, we are subject to increased costs associated with the failure of one or more subcontractors to perform as anticipated. In our capacity as prime contractor and, when acting as a subcontractor, we perform most of the work on our projects with our own resources and subcontract specialized activities such as blasting, hazardous waste removal and electrical work.

        Our gas distribution services are typically provided pursuant to renewable, one-year contracts, on a "cost-plus" basis. Fees on cost-plus contracts are negotiated and are earned based on the project cost expensed. Historically, substantially all of the gas distribution customers have renewed their annual maintenance contracts. Facilities maintenance services, such as regularly scheduled and emergency repair work, are provided on an ongoing basis.

Insurance and Bonding

        We maintain general liability and excess liability insurance, covering our construction equipment, and workers' compensation insurance, in amounts consistent with industry practices. In the State of California, we self-insure our workers' compensation claims in an amount of up to $250,000 per occurrence, and we maintain insurance covering larger claims. Management believes our insurance programs are adequate.

        We maintain a diligent safety and risk management program that has resulted in a favorable loss experience factor. Through our safety director and the employment of a large staff of regional and site specific safety managers, we have been able to effectively assess and control potential losses and liabilities in both the pre-construction and performance phases of our projects. Though we strongly focus on safety in the workplace, we cannot assure that we can prevent or reduce all injuries or claims in our workplace.

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        In connection with our business, we generally are required to provide various types of surety bonds guaranteeing our performance under certain public and private sector contracts. Our ability to obtain surety bonds depends upon our 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 us and their current underwriting standards, which may change from time to time.

Employees

        We believe our employees are our most valuable resource. Our ability to maintain sufficient continuous work for approximately 1,400 hourly employees instills in such employees loyalty to and understanding of our policies and contributes to our strong production, safety and quality record.

        As of December 31, 2008, we employed approximately 352 salaried employees and approximately 1,299 hourly employees. The total number of hourly personnel employed is subject to the volume of construction in progress. During 2008, the number of hourly employees ranged from approximately 1,300 to 1,700.

        The following is a summary of employees by function and geography at December 31, 2008:

		CA		FL		TX		Other US		Canada		Ecuador		Total
Salaried			241		18		26		13		32		22		352
Hourly			874		109		49		6		3		258		1,299
	Total		1,115		127		75		19		35		280		1,651

        Several of our subsidiaries have operations that are unionized through the negotiation and execution of collective bargaining agreements. These collective bargaining agreements have varying terms and are subject to renegotiation upon expiration. We have experienced no recent work stoppages and believe our employee and union relations are good.

ITEM 1A.    RISK FACTORS

Risks Related to Our Business and Operations

Our financial and operating results may vary significantly from quarter-to-quarter, which may adversely affect the value of our common stock.

        Our annual and quarterly results may be adversely affected by:

•

Changes in our mix of customers, projects, contracts and business;

•

Regional and/or general economic conditions;

•

Variations and changes in the margins of projects performed during any particular quarter;

•

Increases in the costs to perform services caused by changing weather conditions;

•

The termination of existing agreements or contracts;

•

The budgetary spending patterns of customers;

•

Increases in construction costs that we may be unable to pass through to our customers;

•

Cost or schedule overruns on fixed-price contracts;

•

Availability of qualified labor to execute specific projects;

•

Changes in bonding requirements and bonding availability applicable to existing and new agreements;

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•

Costs we incur to support growth internally or through acquisitions or otherwise;

•

The timing and volume of work under contract; and

•

Losses experienced in our operations not otherwise covered by insurance.

        Accordingly, our operating results in any particular quarter may not be indicative of the results that you may expect for any other quarter or for the entire year. Such quarterly fluctuations in our financial and operating results may affect the value of our common stock.

Our business is labor intensive. We also depend on key personnel and we may not be able to operate and grow our business effectively if we lose the services of any of our key personnel or are unable to attract qualified and skilled personnel in the future. This could lead to a decrease in our overall competitiveness, resulting in an adverse effect on our business, operating results, financial condition and value of our stock.

        We are dependent upon the efforts of our key personnel and our ability to retain them and hire other qualified employees. In particular, we are dependent upon the management and leadership of Brian Pratt, who is our Chief Executive Officer, as well as other members of senior management listed in Part III—Item 10 "Directors, Executive Officers and Corporate Governance" of this Annual Report on Form 10-K. The loss of any of the executive officers or other key personnel could affect our ability to run our business effectively.

        Competition for senior management personnel is intense and we may not be able to retain our personnel even though we have entered into employment agreements with certain of them. The loss of any key personnel requires the remaining key personnel to divert immediate and substantial attention to seeking a replacement. An inability to find a suitable replacement for any departing executive officer on a timely basis could adversely affect our ability to operate and grow our business.

        Our ability to maintain our productivity and profitability may also be limited by our ability to employ, train and retain skilled personnel necessary to meet our requirements. We may not be able to maintain an adequate skilled labor force necessary to operate efficiently and to support our growth strategy. We have from time-to time experienced shortages of certain types of qualified personnel. For example, there is a shortage of engineers, project managers, field supervisors, and other skilled workers capable of working on and supervising the construction of underground and industrial facilities, as well as providing engineering services. The supply of experienced engineers, project managers, field supervisors and other skilled workers may not be sufficient to meet current or expected demand. The commencement of new, large-scale infrastructure projects or increased demand for workers available to us, could affect our business, even if we are not awarded such projects. Labor shortages or increased labor costs could impair our ability to maintain our business or grow our revenues. If we are unable to hire employees with the requisite skills, we may also be forced to incur significant training expenses. The occurrence of any of the foregoing could have an adverse effect on our business, operating results, financial condition and value of our stock.

We may be unsuccessful at generating internal growth, which may affect our ability to expand our operations or grow our business, which may cause an adverse effect on our financial condition, results of operations and cash flows.

        Our ability to generate internal growth may be affected by, among other factors, our ability to:

•

Attract new customers;

•

Increase the number of projects performed for existing customers;

•

Hire and retain qualified personnel;

•

Successfully bid for new projects; and

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•

Adapt the range of services we offer to address our customers' evolving construction needs.

        In addition, our customers may reduce the number or size of projects available to us due to their inability to obtain capital. Many of the factors affecting our ability to generate internal growth may be beyond our control, and we cannot be certain that our strategies will be successful or that we will be able to generate cash flow sufficient to fund our operations and to support internal growth. If we are unsuccessful, we may not be able to achieve internal growth, expand our operations or grow our business and the failure to do so could have an adverse effect on our financial condition, results of operations and cash flow.

Demand for our services may decrease during an economic recession, and such lack of demand may adversely affect our business.

        The engineering and construction industries historically have experienced cyclical fluctuations in financial results due to economic recessions, downturns in business cycles of our customers, material shortages, price increases by subcontractors, interest rate fluctuations and other economic factors beyond our control. If the general level of economic activity deteriorates, our customers may delay or cancel upgrades, expansions, and/or maintenance and repairs to their systems. Many factors, including the financial condition of the industry, could adversely affect our customers and their willingness to fund capital expenditures in the future.

        We expect that the difficult credit conditions and the current downturn in the United States gross domestic product will cause some of our customers to delay or postpone construction projects. Forecasts are predicting 10% to 20% potential declines in construction activity in the United States during 2009.

        We are also dependent on the amount of work our customers outsource. In a slower economy, our customers may decide to outsource less infrastructure services, resulting in a lower demand for our services. In addition, consolidation, competition or capital constraints in the industries we serve may result in reduced spending by, or the loss of, one or more of our customers.

We derive a significant portion of our revenues from a few customers, and the loss of one or more of these customers could have significant effects on our revenues, resulting in adverse effects on our financial condition, results of operations and cash flows.

        Our customer base is highly concentrated, with our top ten customers accounting for 58.6% of our revenue in 2008, 45.1% of our revenue in 2007 and 42.2% in 2006. Our largest customer in 2008 was a multibillion-dollar U.S. based engineering and construction firm, which accounted for 11.1% of our revenue. This customer was also our largest customer in 2007, and accounted for 10.2% of our total revenue for the period. Our revenue could significantly decline if we lose one or more of our significant customers. In addition, revenues under our contracts with significant customers may vary from period-to-period depending on the timing and volume of work which such customers order in a given period and as a result of competition from the in-house service organizations of several of our customers. Reduced demand for our services or a loss of a significant customer could have an adverse effect on our financial condition, results of operations and cash flows.

Our actual cost may be greater than expected in performing our fixed-price and unit-price contracts, causing us to realize significantly lower profits on our projects, which would have an adverse effect on our financial condition, results of operations and cash flows.

        We currently generate, and expect to continue to generate, a portion of our revenue and profits under fixed-price and unit-price contracts. The portion of revenue generated from fixed-price and unit-price contracts for 2008, 2007 and 2006 was 66%, 64% and 79%, respectively. The portion of gross profit generated from fixed-price and unit-price contracts for 2008, 2007 and 2006 was 72%, 51% and

12

56%, respectively. We must estimate the costs of completing a particular project to bid these types of contracts. The actual cost of labor and materials, however, may vary from the costs we originally estimated and we may not be successful in recouping additional costs from our customers. These variations, along with other risks inherent in performing fixed-price and unit-price contracts, may cause gross profits for a project to differ from those we originally estimated and could result in reduced profitability or losses on projects due to changes in a variety of factors such as:

•

Failure to properly estimate costs of engineering, materials, equipment or labor;

•

Unanticipated technical problems with the structures, materials or services being supplied by us, which may require that we spend our own money to remedy the problem;

•

Project modifications creating unanticipated costs;

•

Changes in the costs of equipment, materials, labor or subcontractors;

•

Our suppliers' or subcontractors' failure to perform;

•

Difficulties by our customers to obtain required governmental permits or approvals;

•

Changes in local laws and regulations;

•

Delays caused by local weather conditions; and

•

Exacerbation of any one or more of these factors as projects grow in size and complexity.

        Depending upon the size of a particular project, variations from the estimated contracts costs could have an adverse effect on our financial condition, results of operations and cash flows.

We may lose business to competitors through the competitive bidding processes, which loss of business could have an adverse effect on our financial condition, results of operations and cash flows.

        We are engaged in highly competitive businesses in which customer contracts are often awarded through bidding processes based on price and the acceptance of certain risks. We compete with other general and specialty contractors, both foreign and domestic, including large international contractors and small local contractors. The strong competition in our markets requires maintaining skilled personnel, investing in technology and also puts pressure on profit margins. Because of this, we could be prevented from obtaining contracts for which we have bid due to price, greater perceived financial strength and resources of our competitors and/or perceived technology advantages.

We may pay our suppliers and subcontractors before receiving or ever receiving payment from our customers for the related services, which may adversely affect our financial condition, results of operations and cash flows.

        We use subcontractors and material suppliers for portions of certain work, and our customers pay us for those related services. If we pay our suppliers and subcontractors for materials purchased and work performed for customers who fail to pay, or such customers delay in paying us for the related work or materials, we could experience a material adverse effect on our financial condition, results of operations and cash flows.

Our unionized workforce may strike or commence work stoppages, which could adversely affect our operations.

        As of December 31, 2008, approximately 67% of our hourly employees, primarily consisting of field laborers, were covered by collective bargaining agreements. Although the majority of these agreements prohibit strikes and work stoppages, we cannot be certain that strikes or work stoppages will not occur in the future. Strikes or work stoppages would adversely impact our relationships with

13

our customers and could have an adverse effect on our financial condition, results of operations and cash flow.

Our business growth could outpace the capability of our internal infrastructure and may prohibit us from expanding our operations or execute our business plan, which failures may adversely affect the value of our common stock.

        Our internal infrastructure may not be adequate to support our operations as they expand. To the extent that we are unable to buy or build equipment necessary for a project, either due to a lack of available funding or equipment shortages in the marketplace, we may be forced to rent equipment on a short-term basis or to find alternative ways to perform the work without the benefit of equipment ideally suited for the job, which could increase the costs of completing the project. We often bid for work knowing that we will have to rent equipment on a short-term basis and we include our assumptions of market equipment rental rates into our bid. If market rates for rental equipment increase between the time of bid submission and project execution, our margins for the project may be reduced. In addition, our equipment requires continuous maintenance, which we generally provide through our own repair facilities. If we are unable to continue to maintain the equipment in our fleet, we may be forced to obtain additional third-party repair services at a higher cost or be unable to bid on contracts.

A significant portion of our business depends on our ability to provide surety bonds and we may be unable to compete for or work on certain projects if we are not able to obtain the necessary surety bonds, which failure to capture or compete for such work could result in an adverse effect on our financial condition, results of operations and cash flows.

        Our contracts frequently require that we provide to our customers payment and performance bonds. Furthermore, under standard terms in the surety market, sureties issue or continue bonds on a project-by-project basis and can decline to issue bonds at any time or require the posting of additional collateral as a condition to issuing or renewing any bonds.

        Current or future market conditions, as well as changes in our surety's assessment of our operating and financial risk, could cause our surety providers to decline to issue or renew, or substantially reduce the amount of bonds for our work and could increase our bonding costs. These actions could be taken on short notice. If our surety providers were to limit or eliminate our access to bonding, our alternatives would include seeking bonding capacity from other sureties, finding more business that does not require bonds and posting other forms of collateral for project performance, such as letters of credit or cash. We may be unable to secure these alternatives in a timely manner, on acceptable terms, or at all. Accordingly, if we were to experience an interruption or reduction in the availability of bonding capacity, we may be unable to compete for or work on certain projects and such interruption or reduction could have an adverse effect on our financial condition, results of operations and cash flows.

Our bonding requirements may limit our ability to incur indebtedness, which would limit our ability to refinance our existing credit facilities or to execute our business plan, and potentially result in an adverse effect on our business.

        Our ability to obtain surety bonds depends upon various factors including our capitalization, working capital and amount of our indebtedness. In order to help ensure that we can obtain required bonds, we may be limited in our ability to incur additional indebtedness that may be needed to refinance our existing credit facilities upon maturity and to execute our business plan. Our inability to incur additional indebtedness could have an adverse effect on our business, operating results and financial condition.

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Our business may be affected by difficult work sites and environments, which may adversely affect our ability to procure materials and labor, which may adversely affect our overall business.

        We perform our work under a variety of conditions, including, but not limited to, difficult and hard to reach terrain, difficult site conditions and busy urban centers where delivery of materials and availability of labor may be impacted. Performing work under these conditions can slow our progress, potentially causing us to incur contractual liability to our customers. These difficult conditions may also cause us to incur additional, unanticipated costs that we might not be able to pass on to our customers.

Inability to perform our obligations under Engineer, Procure and Construct (EPC) contracts may lead to higher costs, which would adversely affect our business.

        EPC (Engineer, Procure and Construct) contracts require us to perform a range of services for our customers, some of which we routinely subcontract to other parties. The portion of revenue generated from EPC contracts for 2008, 2007 and 2006 was 8%, 9% and 9%, respectively. The portion of gross profit generated from EPC contracts for 2008, 2007 and 2006 was 3%, 0% and 3%, respectively. We believe that these types of contracts will become increasingly prevalent in our industry. In most instances, these contracts require completion of a project by a specific date, achievement of certain performance standards or performance of our services at certain standards of quality. If we subsequently fail to meet such dates or standards, we may be held responsible for costs resulting from such failure. Our inability to obtain the necessary material and equipment to meet a project schedule or the installation of defective material or equipment could have an adverse effect on our financial condition, results of operations and cash flows.

We require subcontractors to assist us in providing certain services and we may be unable to retain the necessary subcontractors to complete certain projects resulting in an adverse effect against our business.

        We use subcontractors to perform portions of our contracts and to manage workflow, particularly for design, engineering, procurement and some foundation work. We are not dependent on any single subcontractor. However, general market conditions may limit the availability of subcontractors on which we rely to perform portions of our contracts causing delays and increases in our costs, which results could have an adverse effect on our financial condition, results of operations and cash flows.

Backlog may not be realized or may not result in revenues or profits, which failure in realizing revenues or profits could result in an adverse effect on our financial condition, results of operations and cash flows.

        Backlog is difficult to determine accurately and different companies within our industry may define backlog differently. We refer to "backlog" as our estimated revenue on uncompleted contracts, including the amount of revenue on contracts on which work has not begun, minus the revenue we have recognized under such contracts. We calculate backlog differently for different types of contracts. For our fixed price contracts, we include the full remaining portion of the contract in our calculation of backlog. For our unit-price, time-and-equipment, time-and-materials and cost-plus contracts, we do not include any revenue in the calculation of backlog, regardless of the duration of the contract. In addition, we work with some of our customers under master service agreements ("MSAs"). We do not include any projected revenue from MSA's in our calculation of backlog.

        Most contracts may be terminated by our customers on short notice, typically 30 to 90 days, but sometimes less. Reductions in backlog due to cancellation by a customer or for other reasons could significantly reduce the revenue and profit we actually receive from contracts in backlog. In the event of a project cancellation, we may be reimbursed for certain costs but we typically have no contractual right to the total revenues reflected in our backlog. Projects may remain in backlog for extended periods of time. Given these factors and our method of calculating backlog, our backlog at any point in time may not accurately represent the revenue that we expect to realize during any period and our

15

backlog as of the end of a fiscal year may not be indicative of the revenue we expect to earn in the following fiscal year. Consequently, there can be no assurances as to the accuracy of our customers' requirements or our estimates. Inability to realize revenue from our backlog could have an adverse effect on our financial condition, results of operations and cash flows.

Our use of percentage-of-completion accounting could result in a reduction or elimination of previously reported profits, which reduction or elimination may result in an adverse effect on our financial condition, results of operations and cash flows.

        As discussed in "Management's Discussion and Analysis of Financial Condition and Results of Operations" and in the notes to our consolidated financial statements, our revenue is recognized on a percentage-of-completion method of accounting, using the cost-to-cost method, where revenues are estimated based on the percentage of costs incurred to date to total estimated costs. This method is used because management considers expended costs to be the best available measure of progress on these contracts. This accounting method is standard for fixed-price contracts. The percentage-of-completion accounting practice we use results in our recognizing contract revenues and earnings ratably over the contract term in proportion to our incurrence of contract costs. The earnings or losses recognized on individual contracts are based on estimates of contract revenues, costs and profitability. Contract losses are recognized in full when determined, and contract profit estimates are adjusted based upon ongoing reviews of contract profitability. Penalties are recorded when known or finalized, which generally is during the latter stages of the contract. In addition, we record adjustments to estimated costs of contracts when we believe the change in the estimate is probable and the amounts can be reasonably estimated. These adjustments could result in both increases and decreases in profit margins. Actual results could differ from estimated amounts and could result in a reduction or elimination of previously recognized earnings. In certain circumstances, it is possible that such adjustments could be significant and could have an adverse effect on our financial condition, results of operations and cash flows.

Our financial results are based upon estimates and assumptions that may differ from actual results and such errors between the estimates and actual results may have an adverse effect on our financial condition, results of operations and cash flows.

        In preparing our consolidated annual and quarterly financial statements in conformity with GAAP, many estimates and assumptions are used by management in determining the reported revenues and expenses recognized during the periods presented, and disclosures of contingent assets and liabilities known to exist as of the date of the financial statements. These estimates and assumptions must be made because certain information that is used in the preparation of our financial statements cannot be calculated with a high degree of precision from data available, is dependent on future events, or is not capable of being readily calculated based on generally accepted methodologies. Often times, these estimates are particularly difficult to determine and we must exercise significant judgment. Estimates may be used in our assessments of the allowance for doubtful accounts, useful lives of property and equipment, fair value assumptions in analyzing goodwill and long-lived asset impairments, self-insured claims liabilities, revenue recognition under percentage-of-completion accounting and provisions for income taxes. From time-to-time we may publicly provide earnings or other forms of guidance, which reflect our predictions about future revenue, operating costs and capital structure, among other factors. These predictions may be impacted by estimates, as well as other factors that are beyond our control and may not turn out to be correct. Actual results for all estimates could differ materially from the estimates and assumptions that we use, which could have an adverse effect on our financial condition, results of operations and cash flows.

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The timing of new contracts may result in unpredictable fluctuations in our cash flow and profitability, which could adversely affect our business.

        A substantial portion of our revenues are derived from project-based work that is awarded through a competitive bid process. The portion of revenue generated from the competitive bid process for 2008, 2007 and 2006 was 45%, 44% and 63%, respectively. It is generally very difficult to predict the timing and geographic distribution of the projects that we will be awarded. The selection of, timing of or failure to obtain projects, delays in award of projects, the re-bidding or termination of projects due to budget overruns, cancellations of projects or delays in completion of contracts could result in the under-utilization of our assets and reduce our cash flows. Even if we are awarded contracts, we face additional risks that could affect whether, or when, work will begin. For example, some of our contracts are subject to financing, permitting and other contingencies that may delay or result in termination of projects. This can present difficulty in matching workforce size and equipment location with contract needs. In some cases, we may be required to bear the cost of a ready workforce and equipment that is larger than necessary, resulting in unpredictability in our cash flow, expenses and profitability. If any expected contract award or the related work release is delayed or not received, we could incur substantial costs without receipt of any corresponding revenues. Moreover, construction projects for which our services are contracted may require significant expenditures by us prior to receipt of relevant payments by a customer and may expose us to potential credit risk if such customer should encounter financial difficulties. Finally, the winding down or completion of work on significant projects that were active in previous periods will reduce our revenue and earning if such significant projects have not been replaced in the current period.

If we fail to integrate future acquisitions successfully, we may experience operational challenges and risk which may have an adverse effect on our business and results of operations.

        As part of our growth strategy, we may acquire companies that expand, complement, or diversify our business. Future acquisitions may expose us to operational challenges and risks, including the diversion of management's attention from our existing business, the failure to retain key personnel or customers of an acquired business, the assumption of unknown liabilities of the acquired business for which there are inadequate reserves and the potential impairment of acquired intangible assets. Our ability to sustain our growth and maintain our competitive position may be affected by our inability to successfully integrate any businesses acquired.

Our business may be materially adversely impacted by regional, national and/or global requirements to significantly limit or reduce greenhouse gas emissions in the future.

        Greenhouse gases that result from human activities, including burning of fossil fuels, have been the focus of increased scientific and political scrutiny and are being subjected to various legal requirements. International agreements, national laws, state laws and various regulatory schemes limit or otherwise regulate emissions of greenhouse gases, and additional restrictions are under consideration by different governmental entities. We derive a significant amount of revenues and contract profits from engineering and construction services to clients that own and/or operate a wide range of process plants and own and/or operate electric power generating plants that generate electricity from burning natural gas or various types of solid fuels. These plants emit greenhouse gases as part of the process to generate electricity or other products. Compliance with the existing greenhouse gas regulation may prove costly or difficult. It is possible that owners and operators of existing or future process plants and electric generating plants could be subject to new or changed environmental regulations that result in significantly limiting or reducing the amounts of greenhouse gas emissions, increasing the cost of emitting such gases or requiring emissions allowances. The costs of controlling such emissions or obtaining required emissions allowances could be significant. It also is possible that necessary controls or allowances may not be available. Such regulations could negatively impact client investments in

17

capital projects in our markets, which could negatively impact the market for our products and/or services. This could materially adversely affect our business, financial condition, results of operations and cash flows.

Our international operations expose us to legal, political and economic risks in different countries as well as currency exchange rate fluctuations that could harm our business and financial results.

        During 2008 and 2007, revenue attributable to our services outside of the United States was approximately 5.2% and 4.7% of our total revenue, respectively. This revenue is derived primarily from Ecuador and Canada. There are risks inherent in doing business internationally, including:

•

Imposition of governmental controls and changes in laws, regulations, policies, practices, tariffs and taxes;

•

Political and economic instability;

•

Changes in U.S. and other national government trade policies affecting the market for our services;

•

Potential non-compliance with a wide variety of laws and regulations, including the U.S. Foreign Corrupt Practices Act and similar non-U.S. laws and regulations;

•

Currency exchange rate fluctuations, devaluations and other conversion restrictions;

•

Restrictions on repatriating foreign profits back to the United States; and

•

Difficulties in staffing and managing international operations.

        Any of these factors could have a material adverse effect on our business, financial condition, results of operations and cash flows. We review foreign operations annually to determine the viability and outlook for those operations.

Risks Related to our Common Stock

Our outstanding Warrants and option may be exercised in the future, which would increase the number of shares in the public market and result in dilution to our stockholders.

        As of December 31, 2008, there were outstanding Warrants to purchase an aggregate of 4,894,456 shares of common stock at a price of $5.00 per share and an option to purchase 450,000 Units at a price of $8.80 per Unit (each unit consisting of one share of common stock and one Warrant). These Warrants are exercisable until October 2, 2010. These Warrants will likely be exercised only if the $5.00 per share exercise price is below the market price of our common stock. The Units are exercisable until October 2, 2011. To the extent such Warrants or option are exercised, additional shares of our common stock will be issued, which will result in dilution to our stockholders and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares, as well as the sale of shares in the public market issued pursuant to our 2008 Long-term Incentive Equity Plan could adversely affect the market price of our common stock.

The NASDAQ Global Market may delist our securities from quotation on its exchange which could limit investors' ability to make transactions in our securities and subject us to additional trading restrictions.

        The Company is listed on the NASDAQ Global Market exchange, which has certain listing requirements that we must comply with. We may be unable to maintain the listing of our securities in the future.

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        If NASDAQ delists our securities from trading on its exchange, we could face significant material adverse consequences, including:

•

a limited availability of market quotations for our securities;

•

a limited amount of news and analyst coverage for our company; and

•

a decreased ability to issue additional securities or obtain additional financing in the future.

Our securities on the NASDAQ Global Market are deemed to be shares of a "controlled company" within the meaning of the NASDAQ Global Market listing requirements and, as a result, we will be exempt from certain corporate governance requirements, which may result in reduced corporate governance protections to our stockholders.

        At the time of the merger in July 2008, Brian Pratt, the Chief Executive Officer and President of the Company, beneficially held more than 50% of the voting power of the Company, through his ownership of shares of our common stock and by the delivery of revocable proxies to Mr. Pratt from certain of our stockholders. As a result, the Company is considered a "controlled company" for purposes of the NASDAQ listing requirements (a corporation which more than 50% of the voting power is held by an individual, a group or another company). Therefore, the Company is not subject to the NASDAQ listing requirements that would otherwise require the board of directors to have a majority of independent directors and the compensation and nominating committees to be comprised entirely of independent directors. Accordingly, the Company's stockholders will not have the same protections afforded to stockholders of companies that are subject to all of such NASDAQ corporate governance requirements, and the ability of independent directors to influence the business policies and affairs will likely be substantially reduced.

Three of our directors are significant stockholders, which will make it possible for them to have significant influence over the outcome of all matters submitted to our stockholders for approval and which influence may be alleged to conflict with our interests and the interests of our other stockholders.

        As of December 31, 2008, three of our directors and principal stockholders own an aggregate in excess of 50% of the outstanding shares of our common stock. On his own, with the revocable proxies that have been granted to him, Brian Pratt beneficially owned and had the power to vote approximately 76.1% of the outstanding shares of our common stock at December 31, 2008. These stockholders will have significant influence over the outcome of all matters submitted to our stockholders for approval, including the election of our directors and other corporate actions. In addition, such influence by one or more of these affiliates could have the effect of discouraging others from attempting to purchase us, take us over, and/or reducing the market price offered for our common stock in such an event.

ITEM 1B.    UNRESOLVED STAFF COMMENTS

        None.

ITEM 2.    PROPERTIES

Facilities

        Our executive offices are located at 26000 Commercentre Drive, Lake Forest, California 92630. The telephone number at our executive office is (949) 598-9242. The Construction Services segment of our business has regional offices located in Pittsburg, San Francisco, Bakersfield, and San Diego, California; Conroe and Pasadena, Texas; Sarasota and Ft. Lauderdale, Florida; and Quito, Ecuador. The Engineering segment of our business has offices located in San Dimas, California and in Calgary, Canada.

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        We lease all of the facilities used in our operations. The leases are generally for 10 to 12-year terms, expiring through 2019. The aggregate lease payments made for our facilities in 2008 were $2,814,000. We believe that our facilities are adequate to meet our current and foreseeable requirements for the next several years.

        We lease some of our facilities, employees and certain construction and transportation equipment from Stockdale Investment Group, Inc. ("SIGI"). All of these leases were entered into on similar terms as negotiated with an independent third party. Our majority stockholder, Chief Executive Officer, President and Chairman of the Board, Brian Pratt, also is a majority interest holder in SIGI. In addition, two of our officers and/or directors also serve as officers and/or directors of SIGI, as follows (with their respective positions with SIGI reflected in parentheses): Brian Pratt (chairman and director) and John M. Perisich (secretary). Two of our officers and directors also served as officers and directors of SIGI prior to the July 2008 merger, including John P. Schauerman (president and director) and Scott Summers (vice president and director).

Property, Plant and Equipment

        We own and maintain both construction and transportation equipment. In 2008, 2007 and 2006, we spent approximately $10.1 million, $2.2 million and $1.5 million, respectively, in cash for capital equipment. Additionally, we incurred debt for the acquisition of property and equipment in the amounts of approximately $7.1 million in 2008, $6.6 million in 2007 and none in 2006. An estimated breakdown of capital equipment as of December 31, 2008 is as follows:

•

Heavy construction and specialized equipment—440 units; and

•

Transportation equipment—470 units.

        We believe the ownership of equipment is preferable to leasing to ensure the equipment is available as needed. In addition, such ownership has historically resulted in lower equipment costs. We attempt to obtain projects that will keep our equipment fully utilized in order to increase profit. All equipment is subject to scheduled maintenance to insure reliability. Maintenance facilities exist at each of our regional offices as well as on-site on major jobs 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 December 31, 2008 and 2007:

	2008			2007			Useful Life
	(In Thousands)			(In Thousands)
Land and buildings	$	805		$	48		30 years
Leasehold improvements		988			988		Lease life
Office equipment		671			709		3 - 5 years
Construction equipment		46,993			39,535		3 - 7 years
Transportation equipment		10,119			6,992		3 - 18 years
		59,576			48,272
Less: accumulated depreciation and amortization		(33,352	)		(32,129	)
Net property and equipment	$	26,224		$	16,143

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ITEM 3.    LEGAL PROCEEDINGS

Legal Proceedings

        We are from time to time subject to claims and legal proceedings arising out of our business. Our management believes that we have meritorious defenses to the 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.

Government Regulations

        Our operations are subject to compliance with regulatory requirements of federal, state, and municipal agencies and authorities, including regulations concerning labor relations, affirmative action and the protection of the environment. While compliance with applicable regulatory requirements has not adversely affected operations in the past, there can be no assurance that these requirements will not change and that compliance with such requirements will not adversely affect operations.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        No matters were submitted to a vote of security holders during the fourth quarter of 2008.

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PART II

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

        On July 31, 2008, we merged with Primoris Corporation, a Nevada corporation ("Former Primoris"), and thereafter our common stock, warrants to purchase common stock ("Warrants") and Units (each unit consisting of one share of common stock and one Warrant) began trading on the NASDAQ Global Market under the symbols "PRIM", "PRIMW" and "PRIMU", respectively. Originally, our common stock traded on the OTC Bulletin Board under the ticker symbol "RPSD". As of March 19, 2009, we had outstanding 29,950,494 shares of common stock which were held of record by 56 stockholders. These holders of record include depositories that hold shares of stock for brokerage firms, which in turn, hold shares of stock for numerous beneficial owners.

        The following table shows the range of market prices of our common stock during 2007 and 2008.

	Market price per Share
	High		Low
Year ended December 31, 2008
First Quarter	$	7.99	$	7.51
Second Quarter	$	8.49	$	7.80
Third Quarter	$	8.64	$	3.44
Fourth Quarter	$	7.70	$	3.28
Year ended December 31, 2007
First Quarter	$	7.53	$	7.30
Second Quarter	$	7.58	$	7.27
Third Quarter	$	7.50	$	7.37
Fourth Quarter	$	7.54	$	7.40

Dividend Policy

        On February 19, 2008, we entered into an Agreement and Plan of Merger ("Merger Agreement") with Former Primoris and certain stockholders of Former Primoris. Subsequent to the July 2008 merger, the Merger Agreement provided that our board of directors will initially declare and pay annual dividends on our common stock at a rate of not less than $0.10 per share; provided, however, that the board of directors will not declare any such dividend unless, at the time of declaration, there is adequate surplus for such declaration under Delaware law, or if the board of directors, in the exercise of their business judgment, believes that it would be prudent to cancel or modify the dividend payment. The payment of dividends subsequent to the merger are contingent upon our revenues and earnings, if any, capital requirements and general financial condition of the company, as well as contractual restrictions and other considerations deemed relevant by the board of directors.

        On August 8, 2008, the Company's Board of Directors declared a cash dividend of $0.025 per share on the Company's outstanding shares of common stock, payable to stockholders of record as of September 23, 2008. These dividends were paid on October 10, 2008. On November 10, 2008, a cash dividend of $0.025 per share was declared, payable to stockholders of record as of December 23, 2008. These dividends were paid on January 6, 2009. On March 16, 2009, a cash dividend of $0.025 per share was declared, payable to stockholders of record as of March 31, 2009 with an anticipated distribution date on or about April 15, 2009.

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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 under all of our existing equity compensation plans as of December 31, 2008.

Plan category		Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)		Weighted-average exercise price of outstanding options, warrants and rights (b)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders			0		0		1,520,000	(1)
Equity compensation plans not approved by security holders			0		0		0
	Total		0		0		1,520,000

(1)

Represents shares of common stock available for issuance under our 2008 Long-term Incentive Equity Plan ("2008 Equity Plan"). The material features of our 2008 Equity Plan are described in Notes 2, 23 and 24 to our consolidated financial statements for the year ended December 31, 2008.

Repurchases of Securities

Period	(a) Total Number of Warrants Purchased		(b) Average Price Paid per Warrant		(c) Total Number of Warrants Purchased as Part of Publicly Announced Plans or Programs		(d) Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
November 2008 (November 25, 2008 through November 30, 2008)(1)		—		—		—	$	4,500,000
December 2008 (December 1, 2008 through December 31, 2008)(1)		1,416,908	$	1.20		1,416,908		—
Total		1,416,908	$	1.20		1,416,908		—

(1)

On November 25, 2008, the Board authorized a "modified Dutch Auction" tender offer to purchase for cash up to a maximum of $4.5 million worth of our Warrants at a price per Warrant of not less than $0.85 and not great than $1.20. The tender offer was concluded at midnight December 24, 2008 and resulted in the purchase of 1,416,908 Warrants at a price of $1.20 per Warrant. The total cost of the purchase was approximately $1.7 million, excluding fees and expenses related to the tender offer. The Warrants accepted for purchase represented approximately 22.5% of the 6,311,364 redeemable Warrants outstanding as of November 25, 2008.

23

ITEM 6.    SELECTED FINANCIAL DATA

        The following selected financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our audited financial statements and the accompanying notes included elsewhere in this Annual Report on Form 10-K.

		Year Ended December 31,
		2008			2007			2006			2005			2004
														(Unaudited)
		(In thousands except per share data)
Statement of Operations Data:
Revenues		$	609,072		$	547,666		$	439,405		$	362,485		$	307,906
Cost of revenues			537,929			488,314			399,917			333,866			284,509
(Recover of) provision for estimated losses on uncompleted contracts			700			—			(462	)		3,623			—
Gross profit (loss)			70,443			59,352			39,950			24,996			23,397
Selling, general and administrative expense			31,522			29,517			26,769			21,628			20,887
Merger related stock expense			4,050			—			—			—			—
Operating income			34,871			29,835			13,181			3,368			2,510
Other income (expense)			6,389			(1,853	)		1,244			702			(1,563	)
Income before income taxes			41,260			27,982			14,425			4,070			947
Income tax provision			(4,827	)		(848	)		(1,197	)		(18	)		(18	)
Income from continuing operations			36,433			27,134			13,228			4,052			929
(Loss) gain on discontinued operations—(2)			—			—			(28	)		1,519			(4,513	)
Net income (loss)		$	36,433		$	27,134		$	13,200		$	5,571		$	(3,584	)
Net income (loss) per share:
	Basic	$	1.39		$	1.16		$	0.56		$	0.23		$	(0.15	)
	Diluted	$	1.29		$	1.16		$	0.56		$	0.23		$	(0.15	)
Weighted average common shares outstanding:
	Basic		26,258			23,458			23,402			23,897			23,843
	Diluted		28,156			23,458			23,402			23,897			23,843
Pro Form Data (unaudited)—(1)
Income before income taxes, as reported		$	41,260		$	27,982		$	14,425		$	4,070		$	947
Pro forma provision for income taxes		$	(16,421	)	$	(11,137	)	$	(5,741	)	$	(1,620	)	$	(377	)
Pro forma net income (loss)		$	24,839		$	16,845		$	8,684		$	2,450		$	570
Pro forma earnings per common share:
	Basic	$	0.95		$	0.72		$	0.37		$	0.10		$	0.02
	Diluted	$	0.88		$	0.72		$	0.37		$	0.10		$	0.02

24

	As of December 31,
	2008		2007		2006		2005		2004
									(Unaudited)
Balance Sheet Data:
Cash and cash equivalents	$	73,018	$	62,966	$	13,115	$	16,904	$	4,746
Short term investments	$	15,036	$	—	$	—	$	—	$	—
Accounts receivable, net	$	90,826	$	113,307	$	105,915	$	59,105	$	48,238
Total assets	$	252,212	$	220,973	$	162,309	$	125,982	$	104,257
Total current liabilities	$	168,392	$	150,123	$	97,828	$	73,670	$	62,336
Long-term debt, net of current portion	$	26,965	$	22,641	$	21,328	$	18,597	$	12,403
Stockholders' equity	$	55,430	$	46,923	$	42,207	$	32,165	$	28,901

(1)

Prior to the merger in July 2008, Former Primoris was taxed as an S-Corporation for purposes of federal and state income taxes. As a result of the merger, the S-Corporation status terminated and the combined entity is now taxed as a C-Corporation under federal and state tax laws. The pro forma data reflects the combined federal and state income taxes on a pro forma basis as if both Former Primoris and we had been taxed as a C-Corporation during those periods using an effective tax rate of 39.8 percent.

(2)

During 2004, Former Primoris decided to cease all operations in Chile. During 2005, ARB Chile prevailed in a legal action against a customer in Chile, resulting in a substantial payment included in the gain on discontinued operations for 2005 of $1,519.

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion of our financial condition and results of operations in conjunction with the financial statements and the notes to those statements included elsewhere in this Annual Report on Form 10-K. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. See "Forward Looking Statements" elsewhere in this Annual Report on Form 10-K. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including certain risks inherent with our business as discussed in "Item 1A Risk Factors".

Introduction

        Primoris Services Corporation is a holding company with various subsidiaries that, cumulatively 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.

        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, to cogeneration plants, refineries and similar mechanical facilities. Through our subsidiary Onquest, Inc., we provide engineering and 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 Florida. A substantial portion of our activities are performed in the Western United States, and more specifically in California. In addition, we have strategic presences in Florida, Texas, Latin America and Canada.

        As discussed elsewhere in this Annual Report on Form 10-K, on July 31, 2008, we completed a merger of Rhapsody Acquisition Corp. and Primoris Corporation ("Former Primoris"). Unless specifically noted otherwise, as used throughout this Management's Discussion and Analysis section, "Primoris", the "Company" or "we," "our," or "us" refers to the business, operations and financial results of Former Primoris prior to, and Primoris Services Corporation subsequent to, the closing of the merger on July 31, 2008, between Rhapsody and Former Primoris as the context requires. "Rhapsody" refers to the operations or financial results of Rhapsody Acquisition Corp. prior to the closing of the merger.

        The merger was accounted for as a reverse acquisition. Under this method of accounting, we were treated as the "acquired" company for financial reporting purposes. This determination was primarily based on the operations and management of Former Primoris comprising the ongoing operations and management of the Company after the merger. In accordance with guidance applicable to these circumstances, the merger was considered to be a capital transaction in substance. Accordingly, for accounting purposes, the merger was treated as the equivalent of Former Primoris issuing stock for our net assets, accompanied by a recapitalization. Our pre-merger net assets are stated at historical cost, with no goodwill or other intangible assets recorded.

26

        We provide services in the following two segments:

Construction Services Segment:

        The Construction Services segment specializes in a range of services that include designing, building/installing, replacing, repairing/rehabilitating and providing management services for construction related projects. Our services include:

•

Providing installation of underground pipeline, cable and conduits for entities in the petroleum, petrochemical and water industries;

•

Providing installation and maintenance of industrial facilities for entities in the petroleum, petrochemical and water industries; and

•

Providing installation of complex commercial and industrial cast-in-place structures.

Engineering Segment:

        The Engineering group specializes in designing, supplying and installing high-performance furnaces, heaters, burner management systems, and related combustion and process technologies for clients in the oil refining, petrochemical, and power generation industries. It also furnishes turnkey project management with the technical expertise and the ability to deliver custom engineering solutions worldwide.

Outlook

        In 2008, Primoris attained record levels of revenues and operating income. Compared to the prior year, revenues grew by 11.2%, gross profit by 18.7% and operating income by 16.9%. Like most businesses, we expect current challenging market conditions to negatively impact our results in 2009.

        We expect that the difficult credit conditions and the downturn in the United States gross domestic product will cause some of our customers to delay or postpone construction projects. We are seeing forecasts predicting 10% to 20% potential declines in construction activity in the United States in 2009, and we anticipate less activity in the petroleum sector as oil prices remain at significantly lower levels than in July 2008. We also believe that gross profit margins may decline as competitors bid projects more aggressively in order to maintain revenue levels. Possibly offsetting these market conditions are the potential positive effects of the United States American Recovery and Reinvestment Act enacted in February 2009 and potential opportunities in the renewable energy sector.

        In 2009, we plan to emphasize our strategic goals by continuing efforts to improve the effectiveness and efficiency of our operations. We expect to maintain a strong competitive position with existing customers and in our current geographical locations. We also expect to continue to manage our working capital effectively and to be prudent in the allocation of our capital. To that end, we will carefully consider selective acquisitions.

Material trends and uncertainties

        We generate our revenue from both large and small construction and engineering projects. The award of these contracts is dependent on a number of factors, many of which are not within our control. Business in the construction industry is cyclical. We depend in part on spending by companies in the energy, and oil and gas industries, as well as on municipal water and wastewater customers. Over the past several years, both our Construction Services and Engineering segments have 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 our control may affect the amount and size of contracts in any particular period.

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        The current economic issues in the financial markets will likely have some impact on our future results. While we currently have adequate backlog and projects to bid, we are uncertain as to how the current global financial turmoil will impact our clients who provide our future work.

Seasonality and cyclicality

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

Results of operations

        Revenue, gross profit, operating income and net income for the years ended December 31, 2008, 2007 and 2006 were as follows:

	2008						2007						2006
	(Thousands)			% of Revenue			(Thousands)			% of Revenue			(Thousands)			% of Revenue
Statement of Operations Data:
Revenues	$	609,072			100.0	%	$	547,666			100.0	%	$	439,405			100.0	%
Gross profit		70,443			11.6	%		59,352			10.8	%		39,950			9.1	%
Selling, general and administrative expense		31,522			5.2	%		29,517			5.4	%		26,769			6.1	%
Merger related stock expense		4,050			0.7	%		—			—			—			0.0	%
Operating income		34,871			5.7	%		29,835			5.4	%		13,181			3.0	%
Other income (expense)		6,389			1.0	%		(1,853	)		(0.3	)%		1,244			0.3	%
Income before income taxes		41,260			6.8	%		27,982			5.1	%		14,425			3.3	%
Provision for income taxes		(4,827	)		(0.8	)%		(848	)		(0.2	)%		(1,197	)		(0.3	)%
Income from continuing operations		36,433			6.0	%		27,134			5.0	%		13,228			3.0	%
Loss on discontinued operations		—			—			—			—			(28	)		0.0	%
Net income	$	36,433			6.0	%	$	27,134			5.0	%	$	13,200			3.0	%

        Revenue increased $61.4 million, or 11.2%, for 2008 as compared to 2007 as a result of growth in both of our segments, led primarily by strong growth in facility work in our Construction Services segment. Both our Engineering segment and foreign operations revenues increased reflecting the strength of the petroleum industry. In 2008, our Construction Services segment provided 84.7% of total revenues compared to 85.9% of total revenues in 2007.

        Gross profit increased by $11.1 million, or 18.7%, for 2008 as compared to 2007 reflecting higher margin work in the refining and energy sectors of the economy. For 2008, gross profit provided by our Construction Services segment represented 92.2% of the total gross profit compared to 86.9% of total gross profit in 2007.

        Revenue increased by $108.3 million, or 24.6%, for 2007 as compared to 2006. The increase was primarily due to several large, new projects for the power sector and refining industry as well as a significant increase in the Engineering segment revenue primarily due to services for one large client. For 2007, our Construction Services segment provided 85.9% of total revenues compared to 91.0% of total revenues in 2006.

        Gross profit increased by $19.4 million, or 48.6%, for 2007 as compared to 2006, primarily due to a change in contracts from relatively low gross profit water and wastewater projects to projects in the refining industry. In 2007, gross profit provided by the Construction Services segment represented 86.9% of total gross profit compared to 84.9% of total gross profit in 2006.

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Geographic areas financial information

        Revenue by geographic area for the years ended December 31, 2008, 2007 and 2006 was as follows:

		2008					2007					2006
		(Thousands)		% of Revenue			(Thousands)		% of Revenue			(Thousands)		% of Revenue
Country:
United States		$	577,090		94.8	%	$	521,663		95.3	%	$	411,095		93.6	%
Canada			20,732		3.4	%		20,961		3.8	%		18,911		4.3	%
Equador			11,250		1.8	%		5,042		0.9	%		9,399		2.1	%
	Total Revenue	$	609,072		100.0	%	$	547,666		100.0	%	$	439,405		100.0	%

        Note that revenue is attributed to the countries based on our reporting entity that records the transaction.

Segment Results

        The following discussion describes the significant factors contributing to the results of our two operating segments.

Construction Services Segment

        Revenue and gross profit for the Construction Services segment for the years ending December 31, 2008, 2007 and 2006 were as follows:

	2008					2007					2006
	(Thousands)		% of Revenue			(Thousands)		% of Revenue			(Thousands)		% of Revenue
Construction Services
Revenue	$	516,130				$	470,366				$	399,672
Gross Profit	$	64,965		12.6	%	$	51,593		11.0	%	$	33,922		8.5	%

        Revenue for the Construction Services segment increased by $45.8 million, or 9.7%, for 2008 compared to 2007. This revenue increase was led primarily by a $98.2 million increase in Construction Services for industrial facilities primarily in the refining industry as customers increased their capacity and upgraded their infrastructure in an environment of increasing worldwide petroleum pricing. The revenue increase was offset by reductions of revenue of $57.2 million primarily in pipeline, water and wastewater and cable and conduit underground projects and cast-in-place structure projects reflecting significant work completed at the end of 2007 and early 2008, thus affecting revenue comparisons. Revenue generated by our subsidiary in Ecuador increased by $6.2 million.

        Construction Services segment gross profit increased by $13.4 million, or 25.9%, for 2008 compared to 2007. The increase resulted from both increased revenue and improved margins as a percent of revenue to 12.6% in 2008 from 11.0% in 2007. Of the $13.4 million gross profit increase, approximately $5.1 million was due to increased revenues and $8.3 million was due to the improved gross profit percentage. The primary reasons for the gross profit margin increase were changes from lower margin water and wastewater and underground and structure projects to higher margin industrial projects in the petroleum and power industry.

        Construction Services segment revenues increased by $70.7 million, or 17.7% for 2007 compared to 2006. The increase was primarily from an increase in new projects for the power sector and significant expansion in the overall refining industry. The increase was partially offset by a planned decrease in the number of new water and wastewater projects. We have made the decision to limit our construction of

29

water and wastewater projects to a highly selective few projects due to the lower profitability of these projects as compared to other underground projects.

        Construction Services segment gross profit increased by $17.7 million, or 52.1%, for 2007 compared to 2006. The increase resulted from both increased revenues and improved margins as a percentage of revenue to 11.0% in 2007 from 8.5% in 2006. Of the $17.7 million gross profit increase, approximately $6.0 million was due to increased revenues and $11.7 million was due to the improved gross profit percentage. The increase resulting from improved margins was due primarily to a shift in project work from fixed-fee water and wastewater projects to a broader mix of underground projects as well as an increase in cost-plus work for the refining industry.

Engineering Segment

        Revenue and gross profit for the Engineering segment for the years ended December 31, 2008, 2007 and 2006 were as follows:

	2008					2007					2006
	(Thousands)		% of Revenue			(Thousands)		% of Revenue			(Thousands)		% of Revenue
Engineering Segment
Revenue	$	92,942				$	77,300				$	39,733
Gross Profit	$	5,478		5.9	%	$	7,759		10.0	%	$	6,028		15.2	%

        Revenue increased by $15.6 million, or 20.2%, for 2008 compared to 2007. The primary reason for the increase was the effect of an alliance agreement we made with a major client in November 2007. Alliance projects generated $36.4 million in revenue in 2008 compared to $16.7 million in 2007.

        Engineering segment gross profit declined by $2.3 million, or 29.4%, for 2008 compared to 2007. The decrease was the result of a significant decrease in the gross profit percentage, which declined to 5.9% of revenue in 2008 from 10.0% in 2007. At the 2007 gross profit margin, the gross profit impact from the increase in revenues for 2008 was $1.6 million while the gross profit margin decrease reduced profitability by $3.9 million. In 2008, we reversed gross profit on certain alliance projects by $2.1 million and we recognized a lower gross profit percentage on a $48.1 million project with expected completion in early 2009. In addition, at the unusually high 2008 revenue levels for the segment, we allocated a greater percentage of general and administrative expenses to cost of sales, reducing the gross profit margin. We expect that the gross profitability in this segment will trend toward higher historical levels in 2009.

        Engineering segment revenue increased by $37.6 million, or 94.5%, for 2007 compared to 2006. The revenue increase was primarily the result of one large process plant project in the refining and energy sector.

        Engineering segment gross profit increased by $1.7 million, or 28.7%, for 2007 compared to 2006. The increase resulted from an increase in revenue, which was offset by reduced gross profit margins as a percentage of revenues. Gross profit was reduced by recognition of a loss of approximately $1.0 million on a project in Canada in early 2007. The comparison of 2007 and 2006 gross profit margins was also affected by an unusual high margin percentage in 2006 compared to historical gross profit margins for this segment.

Selling, general and administrative expenses

        Selling, general and administrative expenses ("SG&A") increased $2.0 million, or 6.8%, for 2008 compared to 2007. The increase was due principally to an increase in personnel expenses of $4.1 million to meet future growth, partially offset by higher absorption of overhead expenses of $2.3 million, as a result of increased activity in the Engineering segment, a decrease in legal fees of $0.6 million, and an increase in gain on sales of fixed assets of $0.5 million.

30

        SG&A as a percentage of revenue decreased to 5.2% for 2008, from 5.4% for 2007. The decrease in SG&A as a percentage of revenue was primarily related to the relatively fixed accounting, administrative and management expenses, which did not increase proportionally with the increased revenue. These benefits were partially offset by increased SG&A from public company reporting obligations, primarily increased accounting and legal expenses.

        SG&A expenses increased $2.7 million, or 10.3%, for 2007 compared to 2006. The increase was primarily due to a $2.3 million increase in personnel expenses to meet the growth in revenues.

        SG&A expenses as a percentage of revenue decreased to 5.4% for 2007 from 6.1% for 2006. The decrease in SG&A expenses as a percentage of revenue is due to the achievement of certain efficiencies as certain SG&A expenses, including some accounting, administrative and management expenses, are fixed and do not increase proportionally with expanded volume.

Merger related stock expense

        On February 19, 2008, we entered into an Agreement and Plan of Merger with Former Primoris and certain stockholders of Former Primoris ("Merger Agreement"). In connection with the Merger Agreement, we entered into agreements with two foreign managers that called for the issuance of 507,600 shares of our common stock. In accordance with Statement of Financial Accounting Standards ("SFAS") No. 123 (revised 2004), "Share-based payments" we recognized $3.7 million of non-cash expenses and recorded an increase to additional paid-in capital. The issuance of the shares was a non-recurring event directly related to the consummation of the merger and therefore, the entire value of the shares at July 31, 2008 was taken as a charge to earnings.

        As discussed in Part 1—Item 1 of this Annual Report on Form 10-K, the Company achieved a specified EBITDA milestone for 2008 and consequently, 2,500,025 shares of Company stock will be issued to Former Primoris shareholders in March 2009. The two foreign managers will receive their proportionate number of these shares, which resulted in a charge of $0.4 million.

Other income and expense

        Non-operating income and expense items for the years ended December 31, 2008, 2007 and 2006 were as follows:

		2008			2007			2006
		(Thousands)			(Thousands)			(Thousands)
Other income (expense)
Income from non-consolidated investments		$	6,065		$	(1,359	)	$	1,800
Foreign exchange gain (loss)		$	855		$	(471	)	$	168
Interest income			1,719			1,750			595
Interest expense			(2,250	)		(1,773	)		(1,319	)
	Total other income	$	6,389		$	(1,853	)	$	1,244

        For 2008, we recognized income of $6.1 million from the Otay Mesa Power Partners ("OMPP") joint venture, a power plant construction project near San Diego, California which we expect to complete in 2009. Income from non-consolidated joint ventures for 2007 consisted of income of $2.2 million from the OMPP joint venture, offset by the 49% share in the losses of ARB Arendal, a joint venture in Monterrey, Mexico, resulting in a net loss of $1.4 million for the year. In December 2007, we made the decision to record a $3.6 million "other than temporary impairment" of our investment in ARB Arendal because of a client dispute with an uncertain outcome.

        Foreign exchange gain for 2008 and foreign exchange loss for 2007 reflect currency exchange fluctuations of the United States dollar compared to the Canadian dollar. Our contracts in Calgary,

31

Canada are sold based on United States dollars, but a portion of the work is paid for with Canadian dollars, which can create a currency exchange difference.

        Interest income decreased for 2008 compared to 2007 as a result of declining interest rates and our decision to invest our excess cash balances in Treasury bills and certificate of deposits ("CDs") rather than commercial paper, partially offset by higher average cash balances in the 2008 period.

        Interest expense increased by $0.5 million for 2008 compared to 2007 reflecting our financing of net acquisitions of $15.9 million of property and equipment with long-term bank debt. The weighted average interest rate on total debt outstanding at December 31, 2008, 2007 and 2006 was 6.1%, 6.3% and 6.5%, respectively.

        Equity income (loss) from non-consolidated investments for 2006 consisted of the 49% share in the profits of ARB Arendal, a joint venture project in Monterrey, Mexico. In 2007, we made the decision to record an "other than temporary impairment" of our investment in ARB Arendal of $3.6 million, because of a client dispute with an uncertain outcome. Our carrying value in ARB Arendal was zero after recognizing the impairment. The impairment loss was partially offset by $2.2 million of profit we recognized in 2007 from the OMPP joint venture, an energy plant construction project in California with anticipated completion in 2009.

        Foreign exchange loss in 2007 reflected a currency exchange loss due to a devaluation of the U.S. dollar compared to the Canadian dollar. Our contracts in Calgary, Canada were sold based on U.S. dollars, but a portion of the work was paid for with Canadian dollars, which created a currency exchange difference.

        Interest income increased in 2007 compared to 2006 due to higher average cash balances in 2007, which in turn resulted from higher revenue and profits.

        Interest expense increased in 2007 compared to 2006 due to the financing of newly purchased equipment and the increase in long-term debt. We expect to continue to finance equipment acquisitions with increases in long-term debt.

Provision for income taxes

        Our provision for income tax increased $4.0 million for 2008 to $4.8 million from 2007 as a result of the change of tax status from that of the combined entity from that of a Subchapter S of the Internal Revenue Code ("S-Corporation") to that of a Subchapter C of the Internal Revenue Code ("C-Corporation") as part of the Merger Agreement on July 31, 2008. Thereafter, we became subject to federal and state income tax in the jurisdictions in which we do business, including California. With the change in tax status, our effective tax rate for the twelve months ended December 31, 2008 was 11.7%, which included the impact of a $3.0 million tax benefit for establishing our beginning deferred tax assets. In the prior year, as an S-Corporation we had no provision for federal income tax and only minimal provision for state income tax.

        Provision for income taxes for 2007 decreased $349,000 to $848,000 compared to a provision for income taxes of $1.2 million for 2006. For United States federal income tax purposes, Former Primoris was taxed as an S-Corporation and, accordingly, any United States federal income tax obligation was the personal liability of its stockholders. The 2007 provision for income taxes was principally the result of Canadian taxable income. The decrease in the provision for income taxes in 2007 for Former Primoris compared to 2006 was due to a lower Canadian taxable income.

32

Pro forma net income data—unaudited

        Pro forma information concerning income tax provisions as if the company were taxed as a C-Corporation for the years ended December 31, 2008, 2007 and 2006 are shown as follows:

		2008			2007			2006
		(Thousands)			(Thousands)			(Thousands)
Proforma net income data—unaudited
Income before provision for income taxes		$	41,260		$	27,982		$	14,425
Pro forma income tax provision			(16,421	)		(11,137	)		(5,741	)
	Pro forma adjusted net income	$	24,839		$	16,845		$	8,684

        The estimated pro forma tax provision amounts were calculated at an effective statutory tax rate of approximately 39.8%.

Discontinued Operations

        During September 2004, we decided to cease all operations in Chile. Related assets, liabilities, revenues and expenses were insignificant at and for the years ended December 31, 2007 and 2006. The fixed assets, consisting mainly of construction equipment, were sold locally or repatriated in 2006. In 2006, we recorded a loss on discontinued operations of $28,000, relating to the operations of ARB in Chile. We had no discontinued operations in 2007.

Critical Accounting Policies and Estimates

        General—The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us 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 our financial statements cannot be calculated with a high degree of precision from data available, is dependent on future events, or is not capable of being readily calculated based on generally accepted methodologies. Often, these estimates are particularly difficult to determine and we must exercise significant judgment. Estimates may be used in our assessments of revenue recognition under percentage-of-completion accounting, the allowance for doubtful accounts, useful lives of property and equipment, fair value assumptions in analyzing goodwill and long-lived asset impairments, self-insured claims liabilities and deferred income taxes. 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 our 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. We recognize 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

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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—We typically structure contracts as unit-price, time and material, fixed-price or cost plus fixed fee. We believe that our 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.

        We recognize 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.

        We consider unapproved change orders to be contract variations on which we have 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. We recognize 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.

        We consider claims to be amounts we seek or will seek 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—Until July 31, 2008 Former Primoris was taxed as an S-Corporation and similar codes in states in which Former Primoris was subject to taxation which meant that income was taxed for federal income tax purposes to the stockholders.

        After the merger, the combined entity became taxable as a C-Corporation, which changed the level of taxation of Former Primoris from that of its stockholders to that of the company. With the change in tax status, we completed an analysis of the effect of the provisions of SFAS No. 109 "Accounting for Income Taxes" and Financial Accounting Standards Board ("FASB") Interpretation No. 48 "Accounting for Uncertainty in Income Taxes an Interpretation of SFAS 109" ("FIN 48"). In accordance with Accounting Principles Board Opinion No. 28, "Interim Financial Reporting", we have computed our provision for income taxes for the twelve months ended December 31, 2008 using a 39.8% tax rate, which reflects the rate necessary to bring our year-to-date provision for income taxes in line with our estimated annual effective tax rate of 11.7%. Our deferred income tax provision includes approximately $4.2 million in net deferred tax benefits resulting from the recognition of beginning deferred tax assets, with realization expected primarily in 2009.

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        As of December 31, 2008, we had $4.9 million of undistributed Former Primoris S-Corporation earnings as provided for in the Merger Agreement based on the estimated 2008 S-Corporation tax liability of the Former Primoris stockholders. These amounts were distributed to the stockholders of Former Primoris on January 29, 2009 and are reflected as a liability on our balance sheet as of December 31, 2008.

        Goodwill—Goodwill is assessed for impairment annually and more frequently if triggering events occur. In performing these assessments, management relies on various factors, including operating results, business plans, economic projections, anticipated future cash flows, comparable transactions and other market data. There are inherent uncertainties related to these factors and judgment in applying them to the analysis of goodwill for impairment. Since judgment is involved in performing fair value measurements used in goodwill impairment analyses, there is risk that the carrying values of our goodwill may be overstated.

        We elected to make the first day of the fourth quarter the annual impairment assessment date for goodwill. When testing for goodwill impairment, we follow the guidance prescribed in SFAS No. 142, "Goodwill and Other Intangible Assets". First, we compare the fair value of a reporting unit with its carrying amount. Fair value for the goodwill impairment test is determined utilizing a discounted cash flow analysis based on our budgets discounted using our weighted average cost of capital and market indicators of terminal year cash flows. Other valuation methods may be used to corroborate the discounted cash flow method. If the carrying amount of a reporting unit is in excess of its fair value, goodwill is considered potentially impaired and further tests are performed to measure the amount of impairment loss. In the second step of the goodwill impairment test, we compare the implied fair value of reporting unit goodwill with the carrying amount of the reporting unit's goodwill. If the carrying amount of the reporting unit's goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to the carrying amount of goodwill over its implied fair value. The implied fair value of goodwill is determined in the same manner that the amount of goodwill recognized in a business combination is determined. We allocate the fair value of a reporting unit to all of the assets and liabilities of that unit, including intangible assets, as if the reporting unit had been acquired in a business combination. Any excess of the fair value of a reporting unit over the amounts assigned to its assets and liabilities represents the implied fair value of goodwill.

        Disruptions to our business, such as end market conditions, protracted economic weakness, unexpected significant declines in operating results of reporting units and the divestiture of a significant component of a reporting unit may result in our having to perform a goodwill impairment first step valuation analysis for some or all of our reporting units prior to the required annual assessment. These types of events and the resulting analysis could result in goodwill impairment charges in the future.

        The balance of goodwill as of December 31, 2008 and 2007 was $2.8 million and $2.2 million, respectively.

        Long-Lived Assets—Assets held and used by the Company, 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. We perform undiscounted operation cash flow analyses to determine if impairment exists. For purposes of recognition and measurement of an impairment for assets held for use, we group 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 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.

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        Reserve for uninsured risks—Estimates are inherent in the assessment of our exposure to material uninsured risks. Significant judgments by us 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.

        We self-insure worker's compensation claims to a certain level. We maintained a self-insurance reserve totaling approximately $5.5 million at December 31, 2008. Our 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 expenses and other current liabilities" on our 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, the Company's cost and availability of funding has not been adversely affected by illiquid credit markets, and we do not expect it to be materially impacted in the near future.

        We continue to have borrowing capacity for our foreseeable needs based on our current cash flow forecast. We currently have a $30 million credit facility which expires March 31, 2010 and a $10 million (Canadian dollars) facility for commercial letters of credit in Canada with an expiration date of December 31, 2012. At March 13, 2009, $5.7 million was outstanding on these two facilities representing issued letters of credit.

        At March 13, 2009, our net cash balance was $81.2 million. We believe that our cash position, amounts available under our credit facilities and cash provided by operating activities will be adequate to cover our operational and business needs at least through the remainder of 2009.

Cash Flows

        Cash flows during the years ended December 31, 2008, 2007 and 2006 are summarized as follows:

		2008			2007			2006
		(Thousands)			(Thousands)			(Thousands)
Change in cash
Net cash provided (used) by operating activities		$	66,088		$	70,564		$	(728	)
Net cash used in investing activities		$	(23,907	)	$	(2,289	)	$	(2,700	)
Net cash used in financing activities			(32,129	)		(18,424	)		(361	)
	Net change in cash	$	10,052		$	49,851		$	(3,789	)

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Operating Activities

        The source of our cash flow from operating activities and the use of a portion of that cash in our operations for the years ended December 31, 2008, 2007 and 2006 were as follows:

	2008			2007			2006
	(Thousands)			(Thousands)			(Thousands)
Operating Activities
Operating income	$	34,871		$	29,835		$	13,181
Depreciation and amortization		6,670			4,779			5,248
Gain on sale of property and equipment		(768	)		(258	)		(414	)
Merger related stock expense		4,050			—			—
Distributions received from joint venture		6,120			2,880			—
Net deferred taxes		(4,166	)		—			—
Changes in assets and liabilities		23,814			34,670			(16,990	)
Foreign exchange gain (loss)		855			(471	)		168
Interest income		1,719			1,750			595
Interest expense		(2,250	)		(1,773	)		(1,319	)
Provision for income taxes		(4,827	)		(848	)		(1,197	)
Net cash (used in) provided by operating activities	$	66,088		$	70,564		$	(728	)
Capital expenditures	$	(10,132	)	$	(2,185	)	$	(1,459	)

        The changes in assets and liabilities increased operating cash flow by $23.8 million in 2008. The components of this change are included in the consolidated statements of cash flow. The significant changes include a $22.4 million decrease in accounts receivable and a $10.7 million decrease in accounts payable. In addition, billings in excess of costs and estimated earnings increased by $18.5 million while costs and estimated earnings in excess of billings increased by $9.9 million and restricted cash increased by $1.1 million.

        The increase in restricted cash was related to the collateralization of a letter of credit for a project in Ecuador. 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 our customers.

        As of December 31, 2008, accounts receivable represented 36.0% of total assets. We have an excellent 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. We bill customers on an ongoing basis as projects are being constructed. As a contractor, we have certain lien rights that can provide additional security on the accounts receivable that are generated, which may give priority to us over lenders or certain other creditors of the project. Decreases in accounts payable were principally due to our taking advantage of discounts and early pay incentives due to our strong cash position. We expect to continue this policy.

Investing activities

        We purchased property and equipment for $17.2 million, $8.8 million and $1.5 million in the years ended December 31, 2008, 2007 and 2006, respectively, principally for our construction activities. For 2008 purchases, we paid $10.1 million in cash and incurred $ 7.1 million in additional loan obligations, secured by the underlying equipment. We believe 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 our workloads when needed. In addition, ownership has historically resulted in lower overall equipment costs.

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        Our 2008 purchases were at a higher level than previous years as we began to upgrade our equipment to meet future California emission requirements. We anticipate reducing our purchases to more historical levels in 2009, however, we cannot predict accurately the potential purchase levels that would be needed to meet future regulatory requirements.

        We periodically sell and acquire equipment, typically to update our fleet. We received proceeds from the sale of used equipment of $1.3 million for 2008. For the past few years, we have been able to rent major equipment not used for our own projects to third parties.

        As part of our cash management program, we invested $15.0 million in short term investments consisting primarily of CDs purchased through the CDARS (Certificate of Deposit Account Registry Service) process to provide FDIC backing of the CDs.

Financing activities

        Financing activities required the use of $32.1 million of cash in 2008. Significant transactions using cash flows from financing activities included:

•

Cash distributions of $61.1 million were paid to the Former Primoris stockholders during 2008. We provided distributions to the Former Primoris stockholders during the period which the Company was an S-Corporation, principally to allow them to pay their personal income tax liability stemming from the profits of the Company. A one-time distribution to Former Primoris stockholders was made as discussed below.

•

$6.8 million proceeds from the issuance of long term debt.

•

$4.7 million and $3.3 million in repayment of long-term debt during the years ended December 31, 2008 and 2007, respectively, based on scheduled maturities of such debt.

•

$1.8 million in repayment of long term capital leases during the year ended December 31, 2008.

Capital Requirements

        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 our existing credit facilities throughout the year 2009.

        During the year 2008 our operations provided cash of $66.1 million. While this was a substantial cash inflow, $18.5 million represented billings in excess of costs and estimated earnings, meaning that we received cash prior to performing the required work, and, if there were a general reduction in the amount of work being performed by us, we may experience decreases in cash as we use the cash paid in advance to complete the work to be performed.

Merger related cash

        We distributed approximately $48.9 million to the Former Primoris stockholders immediately prior to the closing of the merger on July 31, 2008. In addition, on July 31, 2008, the Rhapsody trust fund was liquidated and the proceeds of $41.3 million, including earned interest, were distributed. Of these proceeds, $777,000 was distributed to EarlyBirdCapital, Inc., which included $414,000 of deferred underwriting fees and $360,000 of investment banking fees, $613,000 was distributed for services provided in relation to the merger transaction, $367,000 for legal fees, $120,000 for NASDAQ filing fees, other miscellaneous expenses of $177,000, $190,000 was distributed to the merged company to pay accrued taxes and other accrued expenses for Rhapsody, and the remaining $39.7 million was made available for our general corporate use.

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        Holders of 417,461 shares of our common stock voted against the merger and elected to exercise their option to convert their shares to cash in accordance with our original certificate of incorporation. Each of these holders received $7.98 per share, or an aggregate of $3.3 million from the funds that had been held in the Rhapsody trust fund.

Common Stock

        Prior to the merger, Former Primoris was a non-publicly traded entity with 4,368 shares outstanding. At the time of the merger, each Former Primoris share was converted into 5,400 shares of the Company, for a total of 23,587,200 shares. Additionally, as part of the Merger Agreement, two foreign managers of Former Primoris were issued 507,600 shares of common stock. All of these shares were subject to a sale restriction that expires on July 31, 2009.

        In addition, the Merger Agreement provided for a potential additional 2,500,025 shares of common stock for each of the years ended December 31, 2008 and 2009, if the Company achieves specific financial targets. Since the 2008 financial target was achieved in the third quarter of 2008, these 2,500,025 shares of common stock will be issued during March 2009.

Credit agreements

        In October 2008, we borrowed $3.0 million from a bank at an interest rate of 5.5%. The terms of the signed note call for 60 consecutive monthly payments of principal and interest in the amount of $58,000 commencing November 3, 2008, with a maturity date of October 3, 2013. The note is secured by certain construction equipment. The note is guaranteed by our largest subsidiary, ARB, Inc.

        On October 17, 2008 we entered into a note agreement through our subsidiary, Stellaris, LLC, for $3.8 million with a bank to finance the purchase of an airplane for business use. The note is secured by the airplane and all related parts and equipment. The terms of the note call for 59 monthly payments of principal and interest of $43,000 beginning November 10, 2008, followed by one installment payment of $2.1 million in addition to any accrued and outstanding interest due. The note accrues interest at a rate of 5.6% annually. The note allows for prepayment with certain prepayment penalties if exercised in less than 36 months, and after that, the loan can be paid in full without penalty.

        In March 2007, we entered into a revolving line of credit agreement payable to Bank of America, N.A. (successor by merger to LaSalle Bank National Association) with an interest rate of prime or at LIBOR plus an applicable margin. The revolving line is secured by substantially all of our assets. Under the line of credit agreement, we can borrow up to $30.0 million, and all amounts borrowed under the line of credit are due March 31, 2010.

        In January 2008, the Company entered into a credit facility (as amended) for purposes of issuing commercial letters of credit in Canada, for an amount up to 10 million in Canadian dollars. The credit facility with a Canadian bank is for a term of 5 years, and provides for an annual fee of 1% for any issued and outstanding commercial letters of credit. Letters of credit can be denominated in either Canadian or U.S. dollars.

        We and our subsidiaries enter into agreements with banks for the banks to issue letters of credit to clients or potential clients for two separate purposes as follows:

•

Born Heaters Canada, one of our subsidiaries, has entered into contracts for the delivery of engineered equipment, which require letters of credit. These letters of credit may be drawn upon by the client in instances where Born Heaters Canada fails to provide the contracted services or equipment. Most of these letters of credit are for Canadian exports, 90% of that amount is guaranteed by the Economic Development Bank of Canada against "unfair" calling.

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•

Insurance companies may from time to time require letters of credit to cover the risk of insurance deductible programs. These letters of credit can be drawn upon by the insurance company if we fail to pay the deductible of certain insurance policies in case of a claim.

        The Bank of America line of credit agreement and the Canadian credit facility contain restrictive covenants, including, among others, restrictions on investments, minimum working capital and tangible net worth requirements. We were in compliance with all restrictive covenants during and as of the year ended December 31, 2008. None of these covenants are considered restrictive to our business.

Related Party Transactions:

        We entered into various transactions with Stockdale Investment Group, Inc. ("SIGI"). Our majority stockholder, Chief Executive Officer, President and Chairman of the Board of Directors, Brian Pratt, also is a majority interest holder in SIGI. In addition, two of our officers and/or directors also serve as officers and/or directors of SIGI as follows (with their respective positions with SIGI reflected in parentheses): Brian Pratt (chairman and director) and John M. Perisich (secretary).

        Two of our officers and/or directors also served as officers and directors of SIGI prior to the July 2008 merger, including John P. Schauerman (past president and director) and Scott Summers (past vice president and director).

        We lease some of our facilities and certain construction and transportation equipment from SIGI. All of these leases were entered into on similar terms as negotiated with an independent third party. We lease properties from SIGI located in Bakersfield, Pittsburg and San Dimas, California, as well as a property in Pasadena, Texas. During 2008, we paid $747,000 in lease payments to SIGI for the use of these properties. The lease for the Bakersfield property commenced on November 1, 2003 and will terminate on October 31, 2015, with an option by us to extend for two additional seven year terms. The lease for the Pittsburg property commenced on October 1, 2002 and will terminate on September 30, 2014, with an option by us to extend for two additional seven year terms. The lease for the San Dimas property commenced on April 1, 2007 and will terminate on March 30, 2019, with an option by us to extend for two additional seven year terms. The lease for the Pasadena property commenced on August 9, 2007 and will terminate on July 31, 2019, with an option by us to extend for two additional seven year terms.

        We previously leased certain construction equipment from SIGI. We purchased all construction equipment and terminated all the associated leases with SIGI on the closing date of the merger. The purchase price of $1.1 million was determined using a fair market value appraisal.

        The Company leases an airplane from SIGI for business use. During 2008 we paid $239,000 in lease payments to SIGI for the use of the airplane. This lease commenced on May 1, 2004 and terminates on April 30, 2012.

        We lease a property from Roger Newnham, one of our managers at Born Heaters Canada. The property is located in Calgary, Canada. During the year ended December 31, 2008 we paid $289,000 in lease payments to Mr. Newnham for the use of this property. The lease for the Calgary property commenced in 2005 and was extended until September 2009. This lease was entered into on similar terms as negotiated with an independent third party.

Contractual Obligations

        As of December 31, 2008, we had $34.8 million of outstanding long-term debt and no short-term borrowings.

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        A summary of contractual obligations as of December 31, 2008 were as follows:

	Total		1 Year		2 - 3 Years		4 - 5 Years		After 5 Years
	(In Thousands)
Long-term debt and capital lease obligations	$	34,842	$	7,877	$	12,376	$	14,589	$	—
Interest on long-term debt		5,442		1,900		2,546		996		—
Equipment operating leases		9,674		3,892		5,381		401		—
Equipment operating leases—related parties		577		239		338		—		—
Real property leases		5,420		1,570		2,325		1,525		—
Real property leases—related parties		7,246		1,012		1,560		1,624		3,050
	$	63,201	$	16,490	$	24,526	$	19,135	$	3,050
Stand-by letters of credit	$	5,658	$	1,086	$	4,572	$	—		—

        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 December 31, 2008 we had letters of credit outstanding of $5.6 million.

•

Equipment operating leases with a balance of $10.3 million at December 31, 2008.

•

In the ordinary course of our business, we may be required by our customers to post surety bid or completion bonds in connection with services that we provide. At December 31, 2008 we had $353 million in outstanding bonds.

Backlog

        In the industries in which we operate, backlog can be considered an indicator of potential future performance because it represents a portion of the future revenue stream. Different companies in our industry define backlog differently. We consider backlog as the anticipated revenue from the uncompleted portions of existing contracts. We calculate backlog differently for different types of contracts. For our fixed price and fixed unit price contracts, we include the full remaining portion of the contract in our calculation. Since their ultimate revenue amount is difficult to determine, we do 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 our customers on relatively short notice. In the event of a project cancellation, we may be reimbursed for certain costs, but typically we have no contractual right to the total revenues reflected in backlog. Projects may remain in backlog for extended periods of time.

        In December 2008, our total backlog of $374.7 million decreased $88.4 million, or 19.1%, from $463.1 million in 2007. We expect that approximately $303.9 million, or 81.1% of the total backlog at December 31, 2008, will be recognized as revenue during 2009.

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        Backlog by operating segment at December 31, 2008, 2007 and 2006 was as follows:

	2008					2007					2006
Segment:	Amount		Percentage			Amount		Percentage			Amount		Percentage
	(Dollars in Millions)
Construction Services	$	311.8		83.2	%	$	352.9		76.2	%	$	230.2		84.3	%
Engineering		62.9		16.8	%		110.2		23.8	%		43.0		15.7	%
	$	374.7		100.0	%	$	463.1		100.0	%	$	273.2		100.0	%

        Our backlog at any point in time may not accurately represent the revenue that we expect to realize during any period. Additionally, our backlog at the end of a year may not be indicative of the revenue we expect to earn in the following year.

Effects of Inflation and Changing Prices

        Our operations are affected by increases in prices, whether caused by inflation or other economic factors. We attempt 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.

Recently Issued Accounting Pronouncements

        In June 2006, the FASB issued FIN 48. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an entity's financial statements in accordance with SFAS No. 109 and prescribes a recognition threshold and measurement attribute for financial statement disclosure of tax positions taken or expected to be taken on a tax return. Additionally, FIN 48 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006, with early adoption permitted. Effective January 1, 2007, we adopted FIN 48, which did not have a material effect on our financial statements.

        In September 2006, the FASB issued SFAS No. 157, "Fair Value Measures" ("SFAS No. 157"). This Statement defines fair value, establishes a framework for measuring fair value under GAAP, expands disclosures about fair value measurements, and applies under other accounting pronouncements that require or permit fair value measurements. SFAS No. 157 does not require any new fair value measurements. However, the FASB anticipates that for some entities, the application of SFAS No. 157 will change current practice. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. We have adopted SFAS No. 157 as of January 1, 2008, and the adoption did not have a material effect on its financial statements.

        In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities" ("SFAS No. 159"). This Statement permits entities to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. We adopted SFAS No. 159 as of January 1, 2008, and the adoption did not have a material effect on our financial statements.

        In December 2007, the FASB issued SFAS No. 141 (revised 2007), "Business Combinations," ("SFAS No. 141R"). SFAS No. 141R replaces SFAS No. 141, "Business Combinations", although it retains the fundamental requirement in SFAS No. 141 that the acquisition method of accounting be used for all business combinations. SFAS No. 141R establishes principles and requirements for how the acquirer in a business combination (a) recognizes and measures the assets acquired, liabilities assumed

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and any noncontrolling interest in the acquiree, (b) recognizes and measures the goodwill acquired in a business combination or a gain from a bargain purchase and (c) determines what information to disclose regarding the business combination. SFAS No. 141R applies prospectively to business combinations for which the acquisition date is on or after January 1, 2009. The adoption of these standards did not affect the accounting for the merger between us and Former Primoris. We do not expect the adoption of SFAS No. 141R to have a material effect on our financial statements.

        In December 2007, the FASB issued SFAS No. 160, "Non-controlling Interests in Consolidated Financial Statements" ("SFAS No. 160"). SFAS No. 160 establishes accounting and reporting standards for the noncontrolling interest in a subsidiary, commonly referred to as minority interest. Among other matters, SFAS No. 160 requires (a) the noncontrolling interest to be reported within equity in the balance sheet and (b) the amount of consolidated net income attributable to the parent and to the noncontrolling interest to be clearly presented in the statement of income. SFAS No. 160 is effective for us beginning January 1, 2009. SFAS No. 160 is to be applied prospectively, except for the presentation and disclosure requirements, which are to be applied retrospectively for all periods presented. We do not expect the adoption of SFAS No. 160 to have a material effect on our operations, financial position or cash flows.

        In March, 2008, the FASB issued SFAS No. 161 "Disclosures about Derivative Instruments and Hedging Activities an amendment of FASB Statement No. 133" ("SFAS No. 161"). This Statement requires enhanced disclosures about an entity's derivative and hedging activities in an effort to improve the transparency of financial reporting. It also changes the disclosure requirements for derivative instruments and hedging activities. Under the Statement, entities will be required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity's financial position, financial performance, and cash flows. This Statement encourages, but does not require, comparative disclosures for earlier periods at initial adoption. The Statement is effective for financial statements issued for fiscal years beginning after November 15, 2008, with early application encouraged. We adopted the provisions of SFAS No. 161 in the fourth quarter of 2008, as required, which did not have a material effect on our financial statements.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        In the ordinary course of business, we are exposed to risks related to market conditions. These risks primarily include fluctuations in foreign currency exchange rates, interest rates and commodity prices. We may seek to manage these risks through the use of financial derivative instruments. These instruments may include foreign currency exchange contracts and interest rate swaps.

        We do not execute transactions or use financial derivative instruments for trading or speculative purposes. We enter into transactions with counter parties that are generally financial institutions in a matter to limit significant exposure with any one party.

        As of December 31, 2008, we had three derivative financial instruments for the purpose of hedging future currency exchange in Canadian dollars. The contracts enable us to purchase Canadian dollars before certain dates in 2009 at certain exchange rates. These contracts expire in January, April and June 2009. The related Canadian dollars purchased are two contracts for $3.0 million CAD each and one contract for $1.5 million CAD. The related gain or loss on these contracts is not significant at December 31, 2008.

        At December 31, 2008, our long-term debt portfolio consisted of fixed rate instruments. In January 2008, we paid off a $1.2 million balance of borrowings under a variable interest rate arrangement.

43

        The carrying amounts for cash and cash equivalents, accounts receivable, short term investments, notes payable and accounts payable and accrued liabilities shown in the consolidated balance sheets approximate fair value at December 31, 2008, due to the generally short maturities of these items. At December 31, 2008, we invested primarily in short-term dollar denominated bank deposits and other 90 to 180 day certificates of deposits ("CDs") through the CDARS (Certificate of Deposit Account Registry Service) process to provide FDIC backing of the CDs. We expect to hold our investments to maturity.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

        Our financial statements, supplementary financial data and financial statement schedules are included in a separate section at the end of this Annual Report on Form 10-K. The financial statements, supplementary data and schedules are listed in the index on page F-1 of this Annual Report on Form 10-K and are incorporated herein by reference.

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

        None.

ITEM 9A(T).    CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

        We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended ("Exchange Act"), is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer ("CEO") and Executive Vice President, Chief Financial Officer ("CFO"), as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, our management recognized that any system of controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

        In connection with the preparation of this Annual Report on Form 10-K, as of December 31, 2008, an evaluation was performed under the supervision and with the participation of our management, including our CEO and CFO, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Annual Report on Form 10-K to ensure that the information required to be disclosed by us in our reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and to ensure that the information required to be disclosed by us in reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosures.

Management's Annual Report on Internal Control Over Financial Reporting

        Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with

44

generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:

          (i)  pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;

         (ii)  provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

        (iii)  provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

        Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

        Management assessed and evaluated the effectiveness of our internal control over financial reporting as of December 31, 2008. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework. Management reviewed the results of its assessment with the Audit Committee of our Board of Directors. Based on the results of management's assessment and evaluation, our CEO and CFO believe that our internal control over financial reporting is effective as of December 31, 2008.

        This Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our independent registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management's report in this Annual Report on Form 10-K.

Changes in Internal Control

        During our last fiscal quarter, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting.

ITEM 9B.    OTHER INFORMATION

        None.

45

PART III

ITEM 10.    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Directors

        Information relating to the officers and directors of our company, other corporate governance matters and other information required under this Item 10 is set forth in our Proxy Statement for our 2009 Annual Meeting of Stockholders ("Proxy Statement") and is incorporated herein by reference.

Executive Officers

        Brian Pratt.    Mr. Pratt has been our President and Chief Executive Officer since July 2008. Mr. Pratt directs strategy, establishes goals and oversees our operations. Prior to that, he served as the President, Chief Executive Officer and Chairman of the Board of Former Primoris and its predecessor, ARB, Inc., a California corporation, since 1983. He assumed operational and financial control of ARB in 1983. Prior to the merger, Mr. Pratt was majority owner of Former 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 in 1974.

        Peter J. Moerbeek.    Mr. Moerbeek was named as our Executive Vice President, Chief Financial Officer effective February 6, 2009. He has served as one of our Directors since July 2008. Previously, he served as Chief Executive Officer of a private-equity funded company engaged in the acquisition and operation of water and wastewater utilities. As a founder of the company from June 2006 to February 2007, he was involved in raising equity capital for the fund. From August 1995 to June 2006, Mr. Moerbeek held several positions with publicly traded Southwest Water Company, including as Director from 2001 to 2006; as President and Chief Operating Officer from 2004 to 2006; as President of the Services Group from 1997 to 2006; as Secretary from 1995 to 2004; and as Chief Financial Officer from 1995 to 2002. From 1989 to 2005, Mr. Moerbeek was the Chief Financial and Operations Officer for publicly-traded Pico Products, Inc. Mr. Moerbeek received a BSEE in 1969 and a MBA in 1971 from the University of Washington.

        John P. Schauerman.    Mr. 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 prior to the merger, he served as the Chief Financial Officer of Former Primoris since February 2008. He also served as a Director of Former Primoris from 1993 to the time of the merger with us. He joined ARB 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, particularly in the area of renewable energy. Prior to joining ARB in 1993, he was Senior Vice President of Wedbush Morgan Securities. Mr. Schauerman received a B.S. in Electrical Engineering from UCLA in 1979 and an MBA in 1984 from Columbia University.

        Alfons Theeuwes.    Mr. Theeuwes has served as our Senior Vice President, Finance and Accounting, since February 2008. Prior to that he served as Chief Financial Officer of Former Primoris since its inception in January 2004. Previously, he was Chief Financial Officer of a Former Primoris predecessor, ARB Inc. from 2001 to January 2004. Mr. Theeuwes is responsible for our administration and accounting. He joined ARB after a 23-year career with a major engineering company in both Europe and the United States. Mr. Theeuwes received a degree in finance and accounting and is registered as an accountant with the IDAC in Belgium.

        John M. Perisich.    Mr. Perisich has served as our Senior Vice President and General Counsel since July 2008. Prior to that, he served as Senior Vice President and General Counsel of Former Primoris

46

since February 2006, and previous to that was Vice President and General Counsel of Former Primoris. Mr. Perisich joined ARB in 1995. Prior to joining Former Primoris, Mr. Perisich practiced law at Klein, Wegis, a full service law firm based in Bakersfield, California. He received a B.A. degree from UCLA in 1987, and a J.D. from the University of Santa Clara in 1991.

ITEM 11.    EXECUTIVE COMPENSATION

        Information required under this Item 11 is set forth in our Proxy Statement and is incorporated herein by reference, except for the information set forth under the caption, "Compensation Committee Report" of our Proxy Statement, which specifically is not incorporated herein by reference.

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

        Information required under this Item 12 is set forth in our Proxy Statement and is incorporated herein by reference.

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

        The information required under this Item 13 is set forth in our Proxy Statement and is incorporated herein by reference.

ITEM 14.    PRINCIPAL ACCOUNTING FEES AND SERVICES

        Information regarding principal accounting fees and services and other information required under this Item 14 is set forth in our Proxy Statement and is incorporated herein by reference.

47

PART IV

ITEM 15.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(A)

We have filed the following documents as part of this Annual Report on Form 10-K:

1.

Consolidated Financial Statements of Primoris Services Corporation and subsidiaries and Reports of Moss Adams, LLP, independent Registered Public Accounting Firm,

•

Reports of Moss Adams, LLP, independent Registered Public Accounting Firm

•

Consolidated Balance Sheets as of December 31, 2008 and 2007

•

Consolidated Statements of Income for the years ended December 31, 2008, 2007 and 2006

•

Consolidated Statements of Stockholders' Equity for the years ended December 31, 2008, 2007 and 2006

•

Consolidated Statements of Cash Flows for the years ended December 31, 2008, 2007 and 2006

•

Notes to Consolidated Financial Statements

2.

List of exhibits required by Item 601 of Regulation S-K. See part (B) below.

(B)

Exhibits

        The following exhibits are filed as part of, or incorporated by reference into, this Annual Report on Form 10-K:

Exhibit No.		Description
	2.1	Agreement and Plan of Merger dated as of February 19, 2008 by and among Rhapsody Acquisition Corp., Primoris Corporation and certain stockholders of Primoris Corporation(1)
	3.1	Third Amended and Restated Certificate of Incorporation of Primoris Services Corporation(6)
	3.2	Amended and Restated Bylaws of Primoris Services Corporation(5)
	4.1	Specimen Unit Certificate(2)
	4.2	Specimen Common Stock Certificate(2)
	4.3	Specimen Warrant Certificate(3)
	4.4	Form of Unit Purchase Option granted to Representative(7)
	4.5	Form of Warrant Agreement between Continental Stock Transfer & Trust Company and the Registrant(3)
	10.1	Form of Escrow Agreement among Rhapsody Acquisition Corp., Brian Pratt, as Representative, and Continental Stock Transfer & Trust Company, as Escrow Agent(1)
	10.2	Employment Agreement of Brian Pratt, dated February 19, 2008(#)(5)
	10.3	Employment Agreement of John P. Schauerman, dated February 18, 2008(#)(5)
	10.4	Employment Agreement of John M. Perisich, dated February 18, 2008(#)(5)
	10.5	Employment Agreement of Alfons Theeuwes, dated February 18, 2008(#)(5)

48

Exhibit No.		Description
	10.6	Form of Voting Agreement dated as of July 31, 2008 among the Registrant, Eric S. Rosenfeld, Brian Pratt, John P. Schauerman, the Scott E. Summers and Sherry L. Summers Family Trust Dated August 21, 2001, and Timothy R. Healy(5)
	10.7	2008 Long-Term Equity Incentive Plan(#)(1)
	10.8	Form of Lock-Up Agreement by and among Rhapsody Acquisition Corp. and the former stockholders and foreign managers of Primoris Corporation(4)
	10.9	Indemnity Agreement dated 2004 by and among Primoris Corporation; ARB, Inc.; ARB Structures, Inc.; Cardinal Contractors; Onquest, Inc.; and Liberty Mutual Insurance Company(5)
	10.10	Loan and Security Agreement dated as of March 22, 2007 between Primoris Corporation and LaSalle Bank National Association(5)
	10.11	First Amendment to Loan and Security Agreement between Primoris Corporation and LaSalle Bank National Association(5)
	10.12	Second Amendment to Loan and Security Agreement between Primoris Corporation and LaSalle Bank National Association(5)
	10.13	Employment Agreement of Peter J. Moerbeek, dated February 6, 2009(#)(8)
	10.14	Letter Agreement among the Registrant, EarlyBirdCapital, Inc. and Eric S. Rosenfeld(2)
	10.15	Letter Agreement among the Registrant, EarlyBirdCapital, Inc. and Arnaud Ajdler(2)
	10.16	Letter Agreement among the Registrant, EarlyBirdCapital, Inc. and Leanard B. Schlemm(2)
	10.17	Letter Agreement among the Registrant, EarlyBirdCapital, Inc. and Jon Bauer(2)
	10.18	Letter Agreement among the Registrant, EarlyBirdCapital, Inc. and Colin D. Watson(2)
	10.19	Letter Agreement among the Registrant, EarlyBirdCapital, Inc. and David D. Sgro, CFA(2)
	10.20	Letter Agreement among the Registrant, EarlyBirdCapital, Inc. and Greg Monaham(2)
	10.21	Letter Agreement among the Registrant, EarlyBirdCapital, Inc. and Joel Greenblatt(2)
	10.22	Form of Stock Escrow Agreement between the Registrant, Continental Stock Transfer & Trust Company and the Initial Stockholders(2)
	10.23	Form of Registration Rights Agreement among the Registrant and the Initial Stockholders(2)
	10.24	Form of Subscription Agreement among the Registrant, Graubard Miller and each of Eric S. Rosenfeld, Leonard B. Schlemm, Jon Bauer, Colin D. Watson and Gotham Capital V(2)
	10.25	Promissory Note and Aircraft Security Agreement and related documents thereto, dated October 14, 2008, by and between Stellaris LLC and U.S. Bancorp Equipment Finance, Inc., as amended(*)
	21.1	Subsidiaries and Equity Investments of the Registrant(*)
	31.1	Rule 13a-14(a)/15d-14(a) Certification by the Registrant's Chief Executive Officer(*)
	31.2	Rule 13a-14(a)/15d-14(a) Certification by the Registrant's Chief Financial Officer(*)
	32.1	Section 1350 Certification by the Registrant's Chief Executive Officer(*)

49

Exhibit No.		Description
	32.2	Section 1350 Certification by the Registrant's Chief Financial Officer(*)

(#)

Management contract or compensatory plan, contract or arrangement.

(*)

Filed herewith.

(1)

Attached as an annex to the Registrant's Registration Statement on Form S-4/A (File No. 333-150343) filed with the Securities and Exchange Commission on July 9, 2008 and incorporated herein by reference.

(2)

Filed as an exhibit to the Registrant's Registration Statement on Form S-1 (File No. 333-134694) filed with the Securities and Exchange Commission on June 2, 2006 and incorporated herein by reference.

(3)

Filed as an exhibit to the Registrant's Registration Statement on Form S-1/A (File No. 333-134694) filed with the Securities and Exchange Commission on August 28, 2006 and incorporated herein by reference.

(4)

Filed as an exhibit to the Registrant's Registration Statement on Form S-4 (File No. 333-150343) filed with the Securities and Exchange Commission on April 21, 2008 and incorporated herein by reference.

(5)

Filed as an exhibit to the Initial Filing of the Current Report on Form 8-K for July 31, 2008 (File No. 001-34145) filed with the Securities and Exchange Commission on August 6, 2008 and incorporated herein by reference.

(6)

Filed as an exhibit to the Registrant's Current Report on Form 8-K for August 18, 2008 (File No. 001-34145) filed with the Securities and Exchange Commission on August 18, 2008 and incorporated herein by reference.

(7)

Filed as an exhibit to Registrant's Registration Statement on Form S1/A (File No. 333-134694) filed with the Securities and Exchange Commission on July 14, 2006 and incorporated herein by reference.

(8)

Filed as an exhibit to the Registrant's Current Report on Form 8-K for February 6, 2006 (File No. 001-34145) filed with the Securities and Exchange Commission on February 12, 2009 and incorporated herein by reference.

50

SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

Primoris Services Corporation (Registrant)

BY: /s/ BRIAN PRATT Brian Pratt
President and Chief Executive Officer BY: /s/ PETER J. MOERBEEK Peter J. Moerbeek
Executive Vice President, Chief Financial Officer

Date: March 20, 2009

        Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed by the following persons on behalf of the Registrant and in the capacities indicated and on the date indicated.

BY:	/s/ BRIAN PRATT Brian Pratt Chairman of the Board of Directors
BY:	/s/ JOHN P. SCHAUERMAN John P. Schauerman Director
BY:	/s/ ERIC S. ROSENFELD Eric S. Rosenfeld Director
BY:	/s/ PETER J. MOERBEEK Peter J. Moerbeek Director
BY:	/s/ STEPHEN C. COOK Stephen C. Cook Director
BY:	/s/ DAVID D. SGRO David D. Sgro Director
BY:	/s/ THOMAS E. TUCKER Thomas Tucker Director
BY:	/s/ PETER C. BROWN Peter C. Brown Director

Date: March 20, 2009

51

PRIMORIS SERVICES CORPORATION

INDEX TO FINANCIAL STATEMENTS

	Page
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets as of December 31, 2008 and 2007	F-3
Consolidated Statements of Income for the Years Ended December 31, 2008, 2007 and 2006	F-4
Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 2008, 2007 and 2006	F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 2008, 2007 and 2006	F-6
Notes to Consolidated Financial Statements	F-8

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of
Primoris Services Corporation

        We have audited the accompanying consolidated balance sheets of Primoris Services Corporation (the "Company") as of December 31, 2008 and 2007 and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2008. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Primoris Services Corporation as of December 31, 2008 and 2007, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2008, in conformity with accounting principles generally accepted in the United States of America.

        As discussed in Note 2 to the consolidated financial statements, effective January 1, 2008, the Company adopted Statement of Financial Accounting Standards ("FASB") No. 157, Fair Value Measurements. As discussed in Note 2 to the consolidated financial statements, effective January 1, 2007, the Company adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes—an interpretation of FASB No. 109.

/s/ Moss Adams, LLP

Irvine, California
March 20, 2009

F-2

PRIMORIS SERVICES CORPORATION

CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Amounts)

			December 31,
			2008		2007
ASSETS
Current assets:
	Cash and cash equivalents		$	73,018	$	62,966
	Short term investments			15,036		—
	Restricted cash			11,111		9,984
	Accounts receivable, net			90,826		113,307
	Costs and estimated earnings in excess of billings			21,017		11,085
	Inventory			2,349		2,458
	Deferred tax assets			5,591		—
	Prepaid expenses and other current assets			3,507		1,793
		Total current assets		222,455		201,593
	Property and equipment, net			26,224		16,143
	Other assets			139		922
	Investment in non-consolidated ventures			500		—
	Other intangible assets, net			52		88
	Goodwill			2,842		2,227
		Total assets	$	252,212	$	220,973
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Accounts payable		$	56,088	$	66,792
	Billings in excess of costs and estimated earnings			72,664		54,143
	Accrued expenses and other current liabilities			26,067		18,215
	Distributions and dividends payable			5,696		6,115
	Current portion of capital leases			2,198		892
	Current portion of long-term debt			5,679		3,966
		Total current liabilities		168,392		150,123
	Long-term debt, net of current portion			26,624		21,433
	Long-term capital leases, net of current portion			341		1,208
	Deferred tax liabilities			1,425		—
	Other long-term liabilities			—		1,286
		Total liabilities		196,782		174,050
Commitments and contingencies
Stockholders' equity
	Preferred stock—$.0001 par value, 1,000,000 shares authorized, 0 outstanding			—		—
	Common stock—$.0001 par value; authorized 60,000,000; issued and outstanding: 29,977,339 and 23,587,200 at December 31, 2008 and 2007, respectively			3		3
	Additional paid-in capital			34,796		1,304
	Retained earnings			20,528		45,513
	Accumulated other comprehensive income			103		103
		Total stockholders' equity		55,430		46,923
		Total liabilities and stockholders' equity	$	252,212	$	220,973

See accompanying notes.

F-3

PRIMORIS SERVICES CORPORATION

CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts)

			Year Ended December 31,
			2008			2007			2006
Revenues			$	609,072		$	547,666		$	439,405
Cost of revenues				537,929			488,314			399,917
(Recovery of) provision for estimated losses on uncompleted contracts				700			—			(462	)
	Gross profit			70,443			59,352			39,950
Selling, general and administrative expenses				31,522			29,517			26,769
Merger related stock expense				4,050			—			—
	Operating income			34,871			29,835			13,181
Other income (expense):
	(Loss) income from non-consolidated investments			6,065			(1,359	)		1,800
	Foreign exchange gain (loss)			855			(471	)		168
	Interest income			1,719			1,750			595
	Interest expense			(2,250	)		(1,773	)		(1,319	)
		Income before provision for income taxes		41,260			27,982			14,425
Provision for income taxes				(4,827	)		(848	)		(1,197	)
		Income from continuing operations		36,433			27,134			13,228
Loss on discontinued operations				—			—			(28	)
		Net income	$	36,433		$	27,134		$	13,200
Dividends per common share			$	0.05		$	—		$	—
Basic earnings per share			$	1.39		$	1.16		$	0.56
Diluted earnings per share			$	1.29		$	1.16		$	0.56
Weighted average common shares outstanding:
		Basic		26,258			23,458			23,402
		Diluted		28,156			23,458			23,402
Pro forma net income data—Unaudited:
Income before provision for income tax, as reported			$	41,260		$	27,982		$	14,425
Pro forma adjustments for provision for income tax				(16,421	)		(11,137	)		(5,741	)
Pro forma adjusted net income			$	24,839		$	16,845		$	8,684
Pro forma earnings per share
		Basic	$	0.95		$	0.72		$	0.37
		Diluted	$	0.88		$	0.72		$	0.37

See accompanying notes.

F-4

PRIMORIS SERVICES CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In Thousands, Except Share Amounts)

		Common Stock
							Additional Paid-in Capital			Retained Earnings			Accum. Other Comprehensive Income		Total Stockholders' Equity
		Shares			Amount
Balance, December 31, 2005			4,430		$	—	$	1,631		$	30,281		$	103	$	32,015
Retroactive effect if shares issued in reverse merger dated July 31, 2008			23,917,570			3		(3	)		—			—		—
	Net income		—			—		—			13,200			—		13,200
	Issuance of common stock		291,600			—		402			—			—		402
	Repurchase of common stock		(885,600	)		—		(1,230	)		—			—		(1,230	)
	Distributions to stockholders		—			—		—			(2,180	)		—		(2,180	)
	Balance, December 31, 2006		23,328,000		$	3	$	800		$	41,301			103	$	42,207
	Net income		—			—		—			27,134			—		27,134
	Issuance of common stock		810,000			—		1,569			—			—		1,569
	Repurchase of common stock		(550,800	)		—		(1,065	)		—			—		(1,065	)
	Distributions to stockholders		—			—		—			(22,922	)		—		(22,922	)
	Balance, December 31, 2007		23,587,200		$	3	$	1,304		$	45,513			103	$	46,923
	Net income		—			—		—			36,433			—		36,433
	Stock issued to foreign managers		507,600			—		4,050			—			—		4,050
	Outstanding shares of Rhapsody Acquisition Corp. at the time of reverse merger dated July 31, 2008		6,300,000			—		34,473			—			—		34,473
	Repurchase of warrants							(1,700	)							(1,700	)
	Repurchase of common stock		(417,461	)		—		(3,331	)		—			—		(3,331	)
	Dividends		—			—		—			(1,499	)		—		(1,499	)
	Distributions to Former Primoris stockholders		—			—		—			(59,919	)		—		(59,919	)
Balance, December 31, 2008			29,977,339		$	3	$	34,796		$	20,528		$	103	$	55,430

See accompanying notes.

F-5

PRIMORIS SERVICES CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)

				Year Ended December 31,
				2008			2007			2006
Cash flows from operating activities:
	Net income			$	36,433		$	27,134		$	13,200
	Adjustments to reconcile net income to net cash provided by (used in) operating activities:
		Depreciation and amortization			6,634			4,647			4,908
		Amortization of other intangible assets			36			132			340
		Gain on sale of property and equipment			(768	)		(258	)		(414	)
		Merger related stock expense			4,050			—			—
		Loss (income) from non-consolidated investments			(6,065	)		1,359			(1,800	)
		Distributions received from joint venture			6,120			2,880			—
		Net deferred tax assets			(4,166	)		—			—
		Loss (profit) on discontinued operations			—			—			28
		Changes in assets and liabilities:
			Restricted cash		(1,127	)		(2,792	)		473
			Accounts receivable		22,481			(7,392	)		(46,810	)
			Costs and estimated earnings in excess of billings		(9,932	)		3,402			3,883
			Inventory, prepaid expenses and other current assets		(1,605	)		(893	)		206
			Other assets		(387	)		(446	)		213
			Accounts payable		(10,704	)		14,963			8,282
			Billings in excess of costs and estimated earnings		18,521			26,512			15,847
			Accrued expenses and other current liabilities		7,853			976			382
			Other long-term liabilities		(1,286	)		340			227
			Net cash from discontinued operations		—			—			307
		Net cash provided by (used in) operating activities			66,088			70,564			(728	)
Cash flows from investing activities:
	Purchase of property and equipment				(10,132	)		(2,185	)		(1,459	)
	Proceeds from sale of property and equipment				1,261			310			581
	Purchase of short term investments				(15,036	)		—			—
	Cash paid for acquisition of subsidiaries				—			(414	)		(1,822	)
		Net cash used in investing activities			(23,907	)		(2,289	)		(2,700	)
Cash flows from financing activities:
	Proceeds from short-term borrowings				—			1,221			—
	Proceeds from issuance of long-term debt				6,820			—			5,381
	Repayment of capital leases				(1,849	)
	Repayment of long-term debt				(4,704	)		(3,342	)		(2,734	)
	Repurchase of common stock				(3,331	)		(1,065	)		(1,230	)
	Proceeds from issuance of common stock				34,473			1,569			402
	Repurchase of warrants				(1,700	)		—			—
	Dividends				(749	)		—			—
	Cash distributions to former Primoris stockholders				(61,089	)		(16,807	)		(2,180	)
		Net cash used in financing activities			(32,129	)		(18,424	)		(361	)
Net change in cash and cash equivalents					10,052			49,851			(3,789	)
Cash and cash equivalents at beginning of year					62,966			13,115			16,904
Cash and cash equivalents at end of the year				$	73,018		$	62,966		$	13,115

See accompanying notes.

F-6

PRIMORIS SERVICES CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(In Thousands)

SUPPLEMENTAL DISCLOSURES OF CASHFLOW INFORMATION

		Year Ended December 31,
		2008		2007		2006
Cash paid during the year for:
	Interest	$	2,250	$	1,773	$	1,217
	Income taxes	$	6,118	$	1,798	$	21

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES

Obligations incurred for the acquisition of property and equipment	$	7,076	$	6,570	$	—
Obligations incurred for the refinancing of long-term debt	$	—	$	—	$	18,188
Accrued dividend	$	749	$	—	$	—
Accrued distributions to stockholders	$	4,947	$	6,115	$	—

See accompanying notes.

F-7

PRIMORIS SERVICES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Dollars in thousands, except per share amounts

Note 1—Nature of Business

        Organization and operations—Primoris Services Corporation and its wholly-owned subsidiaries ARB, Inc. ("ARB"), ARB Structures, Inc., Onquest, Inc., Born Heaters Canada, ULC, Cardinal Contractors, Inc., GML Coatings, LLC, Cardinal Mechanical, L.P., Stellaris, LLC and ARB Ecuador, Ltda, collectively, are engaged in various construction and engineering activities. The Company's underground and directional drilling operations install, replace and repair natural gas, petroleum, telecommunications and water pipeline systems. The Company's industrial, civil and engineering operations construct and provide maintenance services to industrial facilities including power plants, petrochemical facilities, and other processing plants, and construct multi-level parking structures. The Company is incorporated in the State of Delaware and has its corporate headquarters in Lake Forest, California.

        On February 19, 2008, Primoris Corporation (the "Former Primoris"), a privately held company, entered into an Agreement and Plan of Merger ("Merger Agreement") with Rhapsody Acquisition Corp. ("Rhapsody"), a publicly held company trading on the OTC Bulletin Board under the symbols "RPSD", "RPSDW" and "RPSDU" for its common stock, warrants to purchase common stock ("Warrants") and Units (each unit consisting of one share of common stock and one Warrant), respectively. On July 31, 2008, with the approval of the stockholders of each of Former Primoris and Rhapsody, the merger was completed. While Rhapsody was the surviving legal entity, Former Primoris was deemed the acquiring entity for accounting purposes (See Note 3, "Completed Merger"). As part of the merger, Rhapsody changed its name to "Primoris Services Corporation". The Company's common stock, Warrants and Units now trade on the NASDAQ Global Market under the symbols "PRIM", "PRIMW" and "PRIMU", respectively.

        Unless specifically noted otherwise, as used throughout these Consolidated Financial Statements, "Primoris", or the "Company" or "we," "our," "us" or "its" refers to the business, operations and financial results of Former Primoris prior to, and Primoris Services Corporation and its wholly-owned subsidiaries subsequent to, the closing of the merger between Rhapsody and Former Primoris, as the context requires. "Rhapsody" refers to the operations or financial results of Rhapsody prior to the closing of the merger transaction.

        Seasonality—Primoris' results of operations can be subject to seasonal variations. Weather, particularly rain, can impact Primoris' ability to work off backlog. In addition, demand for new projects is generally lower during the early part of the year due to reduced construction activity based on weather concerns. Since the majority of the Company's work is in California, these seasonal impacts are not as dramatic for the Company as may be experienced by companies in some other states or countries. However, as a result, there is a possibility that the Company may experience higher revenues and earnings in the third and fourth quarters of the year as compared to the first two quarters. Additionally, because of the cyclical nature of its business, the financial results for any period may fluctuate depending on whether and when the Company is awarded projects. The Company's clients' budget cycles can have an impact on the timing of these awards. Accordingly, the Company's financial condition and operating results may vary from quarter-to-quarter and may not be indicative of its financial condition or operating results for any other quarter or for an entire year.

F-8

PRIMORIS SERVICES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

Note 2—Summary of Significant Accounting Policies

        Basis of presentation—The accompanying Consolidated Financial Statements were prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and the financial statement rules and regulations of the Securities and Exchange Commission.

        Reclassifications have been made to prior year and quarter financial statement presentation to conform to the current year presentation.

        Principles of consolidation—The accompanying Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

        Use of Estimates—The preparation of the Company's Consolidated Financial Statements in conformity with GAAP requires management 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 consolidated financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could materially differ from those estimates. Significant estimates used in preparing these consolidated financial statements include estimated costs to complete contracts, which have a direct effect on gross profit.

        Operating cycle—Assets and liabilities relating to long-term construction contracts are included in current assets and current liabilities in the accompanying consolidated balance sheets, since they are expected to be realized or liquidated in the normal course of contract completion, although completion may require more than one year.

        Cash and cash equivalents—The Company considers all highly liquid investments with an original maturity when purchased of ninety days or less to be cash equivalents.

        Short term investments—The Company classifies as short term investments all securities or other assets acquired which have ready marketability, with terms over 90 days, are intended to be liquidated, if necessary, within the current operating cycle, and have readily determinable fair values. Short term investments are classified as available for sale and are recorded at fair value using the specific identification method. Currently, the Company has invested primarily in short-term dollar denominated bank deposits and other 90 to 120 day certificates of deposits ("CDs") through the CDARS (Certificate of Deposit Account Registry Service) process to provide FDIC backing of the CDs.

        Inventory—Inventory consists of materials and expendable construction equipment used in construction projects and is valued at the lower of cost, using first-in, first-out method, or market.

        Goodwill and other intangible assets—The Company accounts for goodwill and other intangible assets in accordance with Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"). Under SFAS 142, goodwill and certain intangible assets are not amortized but are subject to an annual impairment test.

        Income tax—Prior to the effective date of the merger, Former Primoris was an S-Corporation for federal and state tax purposes. Therefore, Former Primoris was generally not directly subject to federal income taxes at the corporate level and was subject to minimal tax in certain states, with its income or loss included in the tax returns of its stockholders. Upon completion of the July 2008 merger, the

F-9

PRIMORIS SERVICES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

Note 2—Summary of Significant Accounting Policies (Continued)

combined entity became subject to federal and state corporate income taxes. In foreign jurisdictions, income taxes are provided at the local company level. Eligible foreign tax credits were passed through to the stockholders. Prior to the merger, substantially all of the provision for income tax for Former Primoris relates to California state franchise tax and Canadian taxes. There were no significant deferred income taxes recognized during the years ending December 31, 2007 and 2006. Subsequent to the merger, deferred income taxes were $5,591 current and ($1,425) non-current.

        Current income tax expense is the amount of income taxes expected to be payable for the current year. A deferred income tax liability or asset is established for the expected future tax consequences resulting from the differences in financial reporting and tax bases of assets and liabilities. A valuation allowance is provided if it is more likely than not that some or all of the deferred tax assets will not be realized. In addition to valuation allowances, the Company provides for uncertain tax positions when such tax positions do not meet the recognition thresholds or measurement standards prescribed by Financial Accounting Standards Board ("FASB") Interpretation No. 48, Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109 ("FIN 48"), which was adopted by the Company effective January 1, 2007. Amounts for uncertain tax positions are adjusted in periods when new information becomes available or when positions are effectively settled. In accordance with FIN 48, the Company recognizes accrued interest and penalties related to uncertain tax positions as a component of income tax expense.

        Comprehensive income—The Company adopted SFAS No. 130, "Reporting Comprehensive Income", which specifies the computation, presentation and disclosure requirements for comprehensive income (loss). During the reported periods herein, such amounts were not significant.

        General matters—The Company has significant working capital invested in assets that may have a liquidation period extending beyond one year. The Company has claims receivable and retention due from various customers and others that are currently in dispute, the realization of which is subject to binding arbitration, final negotiation or litigation. Although management believes that it will be successful in collecting these amounts, the amounts ultimately collected upon final resolution of these matters may materially differ from the carrying value currently presented in the accompanying consolidated balance sheet.

        Foreign operations—Through its subsidiaries, the Company maintains foreign operations in Canada and Ecuador. In addition, the Company has an investment in ARB Arendal (See Note 8 "Equity Method Investments"), which has operations in Mexico. At December 31, 2008, the Company had operations with assets aggregating approximately $8,100 and $12,500 in Ecuador and Canada, respectively, compared to $3,100 and $15,000 in Ecuador and Canada as of December 31, 2007, respectively. The Company discontinued its operations in Chile in 2005 (See Note 9 "Discontinued Operations—ARB Chile").

        Equity method accounting—Partially owned equity affiliates and investments in joint venture projects are accounted for under the equity method of accounting. Equity method investments are recorded at cost and are adjusted periodically to recognize the Company's proportionate share of the affiliate's income or loss, additional contributions made and dividends and capital distributions received. In the event any of the partially owned equity affiliates were to incur a loss and the Company's cumulative proportionate share of the loss exceeded the carrying amount of the equity method investment,

F-10

PRIMORIS SERVICES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

Note 2—Summary of Significant Accounting Policies (Continued)

application of the equity method would be suspended and the Company's proportionate share of further losses would not be recognized until the Company committed to provide further financial support to the affiliate. The Company would resume application of the equity method once the affiliate becomes profitable and the Company's proportionate share of the affiliate's earnings equals the Company's cumulative proportionate share of losses that were not recognized during the period the application of the equity method was suspended.

        Cash concentration—The Company places its cash in U.S. Treasury bonds, in CDs and with several other financial institutions. The Company maintains cash balances of approximately $5 million in excess of federally insured limits. Management believes that this risk is not significant.

        Collective bargaining agreements—A significant portion of the Company's labor force is subject to collective bargaining agreements. Upon renegotiation of such agreements, the Company could be exposed to increases in hourly costs and work stoppages.

        Worker's compensation insurance—The Company self-insures worker's compensation claims to a certain level. The Company maintained a self-insurance reserve totaling approximately $5,500 and $4,400 at December 31, 2008 and 2007, respectively. The amount is included in "accrued expenses and other current liabilities" on the accompanying consolidated balance sheets. Actual payments that may be made in the future could materially differ from such reserve.

        Fair value of financial instruments—The consolidated financial statements include financial instruments for which the fair market value may differ from amounts reflected on a historical basis. Financial instruments of the Company consist of cash, accounts receivable, short-term investments, accounts payable and certain accrued liabilities. The carrying value of the Company's notes payable approximates fair value based on comparison with current prevailing market rates for loans of similar risks and maturities. The Company's other financial instruments generally approximate fair market value based on the short-term nature of these instruments.

        Functional currencies and foreign currency translation—Through its subsidiaries, the Company maintains foreign operations in Canada and Ecuador and previously had operations in Chile. The United States dollar is the functional currency in Canada and Ecuador, as substantially all monetary transactions are made in that currency, and other significant economic facts and circumstances currently support that position. As these factors may change in the future, the Company periodically assesses its position with respect to the functional currency of foreign subsidiaries. Included in other income are foreign exchange gain of $855 in 2008 and an exchange loss of $471 in 2007.

        Accounts receivable—Contract receivables are primarily concentrated with public and private companies and governmental agencies located throughout the United States, Canada and Ecuador. Credit terms for payment of products and services are extended to customers in the normal course of business and no interest is charged. The Company requires no collateral from its customers, but follows the practice of filing statutory liens or stop notices on all construction projects when collection problems are anticipated. The Company uses the allowance method of accounting for losses from uncollectible accounts. Under this method an allowance is provided based upon historical experience and management's evaluation of outstanding contract receivables at the end of each year. Receivables

F-11

PRIMORIS SERVICES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

Note 2—Summary of Significant Accounting Policies (Continued)

are written off in the period deemed uncollectible. The allowance for doubtful accounts at December 31, 2008 and 2007 was $200 and $200, respectively.

        Fixed-price contracts—Historically, substantial portions of the Company's revenues have been generated principally under 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. The Company 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 adversely affected.

        Revenue recognition—A number of factors relating to the business of the Company affect the recognition of contract revenue. The Company typically structures contracts as unit-price, time and material, fixed-price or cost plus fixed fee. Revenue is recognized 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.

        The Company includes the "Provision for estimated losses on uncompleted contracts" in accrued expenses. For the year ended December 31, 2006, the provision for estimated losses on uncompleted contracts was $3,161. There was no additional provision or recovery for estimated losses recorded in 2007, but for 2008 there was a net increase of $700. Changes in job performance, job conditions, estimated profitability, including those arising from final contract settlements, may result in revisions to costs and income. These revisions are recognized in the period in which the revisions are determined. Claims are included in revenues when realization is probable and amounts can be reliably determined. Revenues in excess of contract costs incurred on claims are recognized only when the amounts have been paid.

        The caption "Costs and estimated earnings in excess of billings" represents the excess of contract revenues from fixed-priced contracts recognized under the percentage-of-completion method over billings to date. For those fixed-priced contracts in which billings exceed contract revenues recognized to date, such excesses are included in the caption "Billings in excess of costs and estimated earnings".

        The Company considers unapproved change orders to be contract variations on which Primoris has customer approval for scope change but not for price changes 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. The Company recognizes revenue equal to costs incurred on unapproved

F-12

PRIMORIS SERVICES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

Note 2—Summary of Significant Accounting Policies (Continued)

change orders when realization of price approval is probable and the estimated amount is equal to or greater than its 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.

        The Company considers claims to be amounts Primoris seeks or will seek 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.

        Revenues on cost-plus and time and materials contracts are recognized as the related work is completed.

        In accordance with applicable terms of construction contracts, certain retainage provisions are withheld by customers until completion and acceptance of the contracts. Final payments of the majority of such amounts are expected to be receivable in the following operating cycle.

        Significant revision in contract estimate—As previously discussed, revenue recognition is based on the percentage-of-completion method for the types of contracts we enter into. Under this method, the costs incurred to date as a percentage of total estimated costs are used to calculate the revenue to be recognized. Total estimated costs, and thus contract income, are impacted by many factors. For projects that are in process in the prior year, but are either completed or continue to be in process during the current year, there can be a difference in revenues and profits based on the latest estimates of costs to complete.

        During the year ended December 31, 2008, certain contracts had revisions in estimates from those projected in 2007. If the revised estimates as of December 2008 had been applied in the prior year, the gross margin earned on these contracts would have resulted in an increase of approximately $5,900 in 2007. Similarly, the revised estimates for the year ended December 31, 2007, would have resulted in a decrease of approximately $2,600 in the year 2006 and an increase of the same amount in 2007. In addition, the revised estimates for the year ended December 31, 2006 would have resulted in a decrease of approximately $7,600 in 2005 and an increase of the same amount in 2006.

        Property and equipment—Property and equipment are recorded at cost and are depreciated using the straight-line method over the estimated useful lives of the related assets, usually ranging from three to thirty years. Maintenance and repairs are charged to expense as incurred. Significant renewals and betterments are capitalized. At the time of retirement or other disposition of property and equipment, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in operations.

F-13

PRIMORIS SERVICES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

Note 2—Summary of Significant Accounting Policies (Continued)

        The Company assesses the recoverability of property and equipment by determining whether the depreciation of property and equipment over its remaining life can be recovered through projected undiscounted future cash flows. The amount of property and equipment impairment if any, is measured based on fair value and is charged to operations in the period in which property and equipment impairment is determined by management. As of December 31, 2008 and 2007, the Company's management has not identified any material impairment of its property and equipment.

        Taxes collected from customers—In June 2006, the FASB ratified the consensus reached on Emerging Issues Task Force ("EITF") Issue No. 06-03, "How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement" (that is, Gross versus Net Presentation), ("EITF 06-05"). The EITF reached a consensus that the presentation of taxes on either a gross or net basis is an accounting policy decision that requires disclosure. EITF 06-03 is effective for the annual reporting period beginning after December 15, 2006. Taxes collected from the Company's customers are and have been recorded on a net basis. The adoption of EITF 06-03 did not have an effect on the Company's financial position or results of operations.

        Share-based Payments and Stock-based Compensation—In July 2008, the Company adopted the Primoris Services Corporation 2008 Long-term Incentive Equity Plan ("2008 Equity Plan"). As of December 31, 2008, there were 1,520,000 shares of common stock reserved to provide for the grant and exercise of all future stock option issuances, stock appreciation rights ("SARS") and grants of restricted shares under the 2008 Equity Plan.

        Under provisions of SFAS No. 123, "Share-Based Payments (revised 2004)" ("SFAS No. 123R") stock-based compensation cost is measured at the date of grant, based on the calculated fair value of the stock-based award, and is recognized as expense over the employee's requisite service period (generally the vesting period of the award).

        Share-based payments to persons or entities other than employees (such as vendors providing goods or services to Primoris) are measured at fair value. Under guidelines set by EITF 96-18, "Accounting for equity instruments that are issued to other than employees for acquiring, or in conjunction with selling, goods or services", the amount of expense or the value of the asset acquired through the issuance of equity instruments is fixed as of the measurement date. In general, the expense would be recognized over the period the service was received.

        Derivative instruments and hedging activities—From time to time the Company utilizes foreign currency hedge agreements to manage foreign currency exchange exposures, which is accounted for in accordance with SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" and SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities—an Amendment of SFAS No. 133".

        As of December 31, 2008, Primoris had three derivative financial instruments for the purpose of hedging future currency exchange in Canadian dollars. The contracts enable Primoris to purchase Canadian dollars before certain dates in 2009 at certain exchange rates. These contracts expire in January, April and June 2009. The related Canadian dollars purchased are two contracts for $3,000 CAD each and one contract for $1,500 CAD. The related gain or loss on these contracts is not

F-14

PRIMORIS SERVICES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

Note 2—Summary of Significant Accounting Policies (Continued)

significant at December 31, 2008. We intend to continue to hedge foreign currency risks in those situations where we believe such transactions are prudent.

Recently Issued Accounting Pronouncements

Fair Value Measures

        In September 2006, the FASB issued SFAS No. 157, "Fair Value Measures." ("SFAS No. 157"). This Statement defines fair value, establishes a framework for measuring fair value in GAAP, expands disclosures about fair value measurements and applies under other accounting pronouncements that require or permit fair value measurements. SFAS No. 157 does not require any new fair value measurements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The adoption of SFAS No. 157 did not have a material effect on the Company's results of operations, financial position or cash flows.

        FASB Staff Position No. FAS-157-2 provided for a deferred implementation relating to non-financial assets and non-financial liabilities to January 1, 2009. We elected to defer the requirements of SFAS 157 for our non-financial assets and non-financial liabilities, which would include goodwill and other intangible assets for purposes of impairment assessments.

        Effective January 1, 2008, we implemented SFAS 157 for our financial assets and financial liabilities that are re-measured and reported at fair value at each reporting period.

        In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs utilize data points that are observable such as quoted prices, interest rates and yield curves. Fair values determined by Level 3 inputs are unobservable data points for the asset or liability and include situations where there is little, if any, market activity for the asset or liability.

        The following table presents, for each of the fair value hierarchy levels required under SFAS No. 157, the company's financial assets that are measured at fair value on a recurring basis at December 31, 2008:

				Fair Value Measurements at Reporting Date Using:
		December 31, 2008		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
	Cash and cash equivalents	$	73,018	$	73,018		—		—
	Short-term investments	$	15,036	$	15,036		—		—

F-15

PRIMORIS SERVICES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

Note 2—Summary of Significant Accounting Policies (Continued)

Fair Value Option for Financial Assets and Financial Liabilities

        In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities" ("SFAS 159"). This Statement permits entities to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. Primoris has adopted SFAS No. 159 as of January 1, 2008, and the adoption did not have a material effect on its results of operations, financial position or cash flows.

Accounting for Uncertainty in Income Taxes

        In June 2006, the FASB issued Financial Interpretation Number ("FIN") 48, "Accounting for Uncertainty in Income Taxes—an interpretation of SFAS No. 109" ("FIN 48"). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an entity's financial statements in accordance with SFAS No. 109 and prescribes a recognition threshold and measurement attribute for financial statement disclosure of tax positions taken or expected to be taken on a tax return. Additionally, FIN 48 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006, with early adoption permitted. Effective January 1, 2007, Primoris adopted FIN 48, which did not have a material effect on its financial statements.

Business Combinations

        In December 2007, the FASB issued SFAS No. 141R, "Business Combinations" ("SFAS No. 141R"). SFAS No. 141R replaces SFAS No. 141, "Business Combinations", although it retains the fundamental requirement in SFAS No. 141 that the acquisition method of accounting be used for all business combinations. SFAS No. 141R establishes principles and requirements for how the acquirer in a business combination (a) recognizes and measures the assets acquired, liabilities assumed and any non-controlling interest in the acquiree, (b) recognizes and measures the goodwill acquired in a business combination or a gain from a bargain purchase (c) generally requires that acquisition-related costs incurred by the acquirer be expensed in the period incurred and (d) determines what information to disclose regarding the business combination. SFAS No. 141R applies prospectively to business combinations for which the acquisition date is on or after January 1, 2009. Because the July 2008 merger between Rhapsody and Former Primoris was not accounted for as a business combination, the adoption of this new standard will have no impact on the transaction. (See Note 3 "Completed Merger"). Management does not expect the adoption of SFAS No. 141R to have a material effect on its operations, financial position or cash flows.

Determination of the Useful Life of Intangible Assets

        In April 2008, the FASB issued Staff Position SFP FAS 142-3, "Determination of the Useful Life of Intangible Assets" ("SFP FAS 142-3"), effective for fiscal years beginning after December 15, 2008. SFP FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS 142, "Goodwill and Other Intangible Assets". The adoption of this staff position is not expected to have a material effect on the Company's consolidated financial statements.

F-16

PRIMORIS SERVICES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

Note 2—Summary of Significant Accounting Policies (Continued)

Non-Controlling Interests in Consolidated Financial Statements

        In December 2007, the FASB issued SFAS No. 160, "Non-controlling Interests in Consolidated Financial Statements" ("SFAS No. 160"). SFAS No. 160 establishes accounting and reporting standards for the non-controlling interest in a subsidiary, commonly referred to as minority interest. Among other matters, SFAS No. 160 requires (a) the non-controlling interest be reported within equity in the balance sheet and (b) the amount of consolidated net income attributable to the parent and to the non-controlling interest to be clearly presented in the statement of income. SFAS No. 160 is effective for Primoris beginning January 1, 2009. SFAS No. 160 is to be applied prospectively, except for the presentation and disclosure requirements, which are to be applied retrospectively for all periods presented. Management does not expect the adoption of SFAS No. 160 to have a material effect on its operations, financial position or cash flows.

Disclosures about Derivative Instruments and Hedging Activities

        In March, 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities an amendment of FASB Statement No. 133" ("SFAS No. 161"). This statement requires enhanced disclosures about an entity's derivative and hedging activities in an effort to improve the transparency of financial reporting. It also changes the disclosure requirements for derivative instruments and hedging activities. Under the statement, entities will be required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity's financial position, financial performance, and cash flows. This statement encourages, but does not require, comparative disclosures for earlier periods at initial adoption. The statement is effective for financial statements issued for fiscal years beginning after November 15, 2008, with early application encouraged. The Company adopted the provisions of SFAS No. 161 in the fourth quarter of 2008, as required, which did not have a material effect on its financial statements.

Note 3—Completed Merger

        Rhapsody was founded as a "blank check" company on April 24, 2006, to effect a merger, capital stock exchange, asset acquisition or other similar business combination with an operating business no later than October 3, 2008. As discussed in Note 1, "Nature of Business" above, on July 31, 2008 Rhapsody's merger with Former Primoris was completed. In the merger, Rhapsody was the surviving legal entity; however, the merger was accounted for as a reverse acquisition and recapitalization. Under this method of accounting, Rhapsody was treated as the "acquired" company for financial reporting purposes. This determination was primarily based on the Former Primoris comprising the ongoing operations and management of the combined company. In accordance with guidance applicable to these circumstances, the merger was considered to be a capital transaction in substance. Accordingly, for accounting purposes, the merger was treated as the equivalent of Former Primoris issuing stock for the net assets of Rhapsody, accompanied by a recapitalization. The net assets of Rhapsody are stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the merger are for those of Former Primoris.

F-17

PRIMORIS SERVICES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

Note 3—Completed Merger (Continued)

        The Former Primoris stockholders and two foreign managers of Former Primoris (collectively, the "Former Primoris Holders"), pursuant to certain termination agreements, and in exchange for all of their shares of common stock of Former Primoris that were outstanding immediately prior to the merger, received in the aggregate 24,094,800 shares of the Company's common stock. To secure the indemnity rights of Rhapsody under the Merger Agreement, 1,807,110 of the 24,094,800 shares of the Company's common stock issued to the Former Primoris Holders at the time of the merger were placed into escrow and are governed by the terms of an Escrow Agreement. The Merger Agreement also provided that the Former Primoris Holders and two foreign managers would receive up to an additional 5,000,000 shares of the Company's common stock, contingent upon the combined company attaining certain defined performance targets in 2008 and 2009.

        In connection with the merger, certain Rhapsody stockholders elected to convert their Rhapsody shares into cash as permitted by Rhapsody's certificate of incorporation. Holders of 417,461 shares of Rhapsody's common stock elected to exercise their conversion rights with respect to their shares. Each of these holders received $7.98 per share, or an aggregate of $3,331 from the funds that had been placed in Rhapsody's trust by Rhapsody.

        As a result of the closing of the merger, the Former Primoris Holders owned approximately 80.4% of the outstanding shares of the Company's common stock at the closing of the merger, and the remaining Rhapsody stockholders owned the remaining approximately 19.6% of the Company's outstanding shares of common stock.

        At the closing of the merger, the President and Chief Executive Officer of the Company and eight other executives of the Company entered into employment agreements with either the Company or one of its subsidiaries.

        Pursuant to the Merger Agreement, Former Primoris distributed approximately $48,947 to its stockholders as a distribution of prior earnings of Former Primoris and for payment of their individual income tax liabilities. As a result of the merger, approximately $39,660 of cash and investments held in trust for Rhapsody was released and became part of the assets of the Company upon consummation of the merger. No other assets were contributed by Rhapsody to the post-merger entity. Expenses paid by the Company in connection with the merger amounted to $5,234.

Note 4—Restricted Cash

        Restricted cash consists of contract retention payments placed by customers into escrow cash accounts with a bank. Investments for these amounts are limited to highly graded U.S. and municipal government debt obligations, investment grade commercial paper and CDs, which limits credit risk on these balances. Balances in these escrow cash accounts are released to the Company by the customers as the projects are completed in accordance with the terms specified in the contracts.

F-18

PRIMORIS SERVICES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

Note 5—Accounts Receivable

        The following is a summary of accounts receivable at December 31:

	2008		2007
Contracts receivable, net of allowance for doubtful accounts of $200 for both periods	$	73,430	$	96,576
Retention		15,804		14,872
		89,234		111,448
Due from affiliates		17		502
Other accounts receivable		1,575		1,357
	$	90,826	$	113,307

        Amounts "due from affiliates" primarily relate to amounts due from related parties (See Note 8 "Equity Method Investments" and Note 19 "Related Party Transactions") for the performance of construction contracts. Contract revenues earned from related parties were approximately $22,127, $12,993 and $4,747 for the years ended December 31, 2008, 2007 and 2006, respectively. At December 31, 2008 and 2007, amounts due from a joint venture, "Otay Mesa Power Partners" totaling $1,340 and $5,708, respectively, are included in contracts receivable (See Note 8 "Equity Method Investments").

Note 6—Costs and Estimated Earnings on Uncompleted Contracts

        Costs and estimated earnings on uncompleted contracts consist of the following at December 31:

	2008			2007
Costs incurred on uncompleted contracts	$	1,267,650		$	988,472
Provision for estimated loss on uncompleted contracts		700			632
Gross profit recognized		95,608			84,606
		1,363,958			1,073,710
Less: billings to date		(1,415,605	)		(1,116,768	)
	$	(51,647	)	$	(43,058	)

        This net amount is included in the accompanying consolidated balance sheet at December 31 under the following captions:

	2008			2007
Costs and estimated earnings in excess of billings	$	21,017		$	11,085
Billings in excess of cost and estimated earnings		(72,664	)		(54,143	)
	$	(51,647	)	$	(43,058	)

F-19

PRIMORIS SERVICES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

Note 7—Property and Equipment

        The following is a summary of property and equipment at December 31:

	2008			2007			Useful Life
Land and buildings	$	805		$	48		30 years
Leasehold improvements		988			988		Lease life
Office equipment		671			709		3 - 5 years
Construction equipment		46,993			39,535		3 - 7 years
Transportation equipment		10,119			6,992		3 - 18 years
		59,576			48,272
Less: accumulated depreciation and amortization		(33,352	)		(32,129	)
Net property and equipment	$	26,224		$	16,143

Note 8—Equity Method Investments

        During 2007, the Company established a joint venture, Otay Mesa Power Partners ("OMPP"), for the sole purpose of constructing a power plant near San Diego, California. The Company has a 40% interest in the project and accounts for its investment in OMPP using the equity method. ARB, the Company's wholly-owned subsidiary, acts as one of OMPP's primary subcontractors. ARB has contracts with OMPP totaling $53,081 as of December 31, 2008. ARB recognized $21,172 in related revenues in 2008 and $11,741 in 2007. These revenues are included in the contract revenues earned from related parties as stated in Note 5 "Accounts Receivable".

        The following is a summary of the financial position and results of operations as of and for the years ended December 31:

			2008			2007
Otay Mesa Power Partners
Balance sheet data:
	Assets		$	48,775		$	37,143
	Liabilities			50,540			38,769
		Net assets	$	(1,765	)	$	(1,626	)
Company's equity investment in affiliate			$	(706	)	$	(651	)
Earnings data:
	Revenue		$	109,890		$	50,893
	Gross profit			14,837			5,148
		Earnings before taxes	$	15,162		$	5,573
Company's equity in earnings			$	6,065		$	2,229

        OMPP distributed $15,300 during the twelve months ended December 31, 2008, of which, the Company's share was $6,120. The joint venture agreement states that distributions made prior to the completion of the contract are considered advances on account of the related partner's share as determined at the completion of the underlying contract. The deficit in equity investment shown in the table above is due to the excess distributions paid to the Company and such distribution has been included in accrued expenses on the Company's consolidated balance sheet.

F-20

PRIMORIS SERVICES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

Note 8—Equity Method Investments (Continued)

        The Company has a 49% interest in ARB Arendal, SRL de CV ("ARB Arendal"), and accounts for this investment under the equity method. ARB Arendal engages in construction activities in Mexico. The following is a summary of the financial position and results as of and for the years ended December 31:

			2008			2007
ARB Arendal, SRL de CV
Balance sheet data:
	Assets		$	34,930		$	32,358
	Liabilities			40,793			35,659
		Net assets	$	(5,863	)	$	(3,301	)
Company's equity investment in affiliate			$	—		$	—

			2008		2007			2006
Earnings data:
	Revenue		$	57,482	$	86,143		$	50,653
	Gross profit			10,234		6,642			6,281
		Earnings after taxes	$	363	$	3,421		$	3,673
Company's equity in earnings			$	—	$	(3,588	)	$	1,800

        Because of the uncertainty on the outcome of the negotiations of ARB Arendal with a major customer in Mexico, the Company determined there was an other than temporary impairment on its investment in ARB Arendal, and wrote down its investment to $0 as of December 31, 2007, and has not recognized any earnings for the twelve months ended December 31, 2008.

        The Company purchased a 49% interest in All Day Electric ("All Day") in December 2008 for $500 and accounts for this investment under the equity method. All Day engages in electrical construction activities mainly in Northern California. Because the purchase was at the end of the year, the Company's equity in earnings was nominal. The following is a summary of the financial position and results as of and for the years ended December 31:

			2008		2007
All Day Electric
Balance sheet data:
	Assets		$	1,763	$	2,218
	Liabilities			1,025		1,920
		Net assets	$	738	$	298
Company's equity investment in affiliate			$	500	$	—

F-21

PRIMORIS SERVICES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

Note 8—Equity Method Investments (Continued)

			2008		2007		2006
Earnings data:
	Revenue		$	5,687	$	9,250	$	9,595
	Gross profit			1,171		1,574		96
		Earnings after taxes	$	60	$	426	$	(425	)
Company's equity in earnings			$	—	$	—	$	—

Note 9—Discontinued Operations—ARB Chile

        During September 2004, the Company decided to cease all operations in Chile. The fixed assets, consisting mainly of construction equipment, were sold locally or repatriated in 2006. Related assets, liabilities, revenues and expenses were insignificant at and for the years ended December 31, 2008 and 2007.

Note 10—Goodwill and Other Intangible Assets

        During 2005, the Company through its wholly-owned subsidiary Born Heater ULC ("Born"), acquired the net assets of Born Heaters Canada Ltd. and Born Canada Services Ltd. for approximately $1,875 including a put/call option for Company stock valued at $588 (the "Born Acquisition"). The Born acquisition has been recorded pursuant to the purchase method of accounting in accordance with SFAS 141. The seller is entitled to earn out payments of up to $2,481, payable in Canadian Dollars over a five-year term, the determination of which is based on exceeding pre-established hurdle rates. Amounts paid to the seller under the earn-out agreement increase the total cost of the Born Acquisition. The excess of the Born Acquisition cost over the fair value of the net identifiable tangible assets acquired has been assigned to goodwill, contract backlog, covenant not to compete and trade name in the accompanying consolidated financial statements. During the years ended December 31, 2008, 2007 and 2006, $615, $414 and $1,303, respectively, was payable under the earn-out agreement, leaving no unearned deferred earn-out at December 31, 2008, after taking into account the Canadian Dollar exchange difference of $149.

        At December 31, 2008 and 2007, the balance of goodwill was $2,842 and $2,227, respectively. At December 31, 2008 and 2007, other intangible assets consist of a contract backlog, covenants not to compete and tradenames totaling $1,437 for both years, net of accumulated amortization of $1,385 and $1,349, respectively. Intangible assets with finite lives are amortized using the straight-line method over the estimated useful lives. At December 31, 2008, the estimated remaining useful life for finite lived intangible assets was approximately two years. Amortization expense on intangible assets was $36, $132 and $340 for the years ended December 31, 2008, 2007 and 2006, respectively. Amortization expenses related to intangible assets at December 31, 2008 is expected to be $37 and $15, respectively, in each of the next two years. As of December 31, 2008 and 2007 management determined there was not an impairment of goodwill.

F-22

PRIMORIS SERVICES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

Note 11—Accounts Payable and Accrued Liabilities

        At December 31, 2008 and 2007, accounts payable includes retentions of approximately $7,741 and $9,527, respectively, due to subcontractors, which have been retained pending contract completion and customer acceptance of jobs.

        The following is a summary of accrued expenses and other current liabilities at December 31:

	2008		2007
Payroll and related employee benefits	$	6,981	$	6,339
Insurance, including self-insurance reserves		9,994		6,301
Short-term borrowing		—		1,221
OMPP liability (note 8)		706		651
Provision for estimated losses on uncompleted contracts		700		632
Earn-out liability (note10)		615		414
Corporate income taxes and other taxes		2,807		929
Accrued leases and rents		917		1,045
Accrued overhead cost		1,521		50
Other		1,826		633
	$	26,067	$	18,215

Note 12—Capital Leases

        The Company leases vehicles and certain equipment under capital leases. The economic substance of the leases is that the Company is financing the acquisition of vehicles and equipment through leases and accordingly, they are recorded in the Company's assets and liabilities. Included in depreciation expense is amortization of vehicles and equipment held under capital leases, amortized over their useful lives on a straight-line basis. Assets with a cost of $4,722 have been capitalized under capital lease arrangements. At December 31, 2008, the net book value of assets subject to capital leases was $4,007.

        The following is a schedule by year of the future minimum lease payments required under capital leases together with their present value as of December 31, 2008:

2009	$	2,292
2010		342
Thereafter		—
Total minimum lease payments	$	2,634
Amounts representing interest		(95	)
Net present value of minimum lease payments		2,539
Less: current portion of capital lease obligations		(2,198	)
Long-term capital lease obligations	$	341

F-23

PRIMORIS SERVICES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

Note 13—Credit Arrangements

        Credit facilities and long-term debt consist of the following at December 31:

		2008			2007
Construction equipment note payable to a commercial equipment finance company, with an interest rate of 6.51% per annum. Monthly principal and interest payments are due in the amount of $350, with the final payment due in December 2013. The note is secured by certain construction equipment of the Company.		$	22,058		$	20,821
Construction equipment notes payable to a commercial equipment financing company, with interest rates of 5.30%. Monthly principal and interest payments aggregating $85 are due on the notes until their respective maturity dates on December 2012. The notes are secured by certain construction equipment of the Company.			3,262			4,069
Commercial note payable to a bank with an interest rate of 6.49%. Monthly principal and interest payments are due in the amount of $20, with the final payment due in April 2010. The note is secured by certain construction and automotive equipment of the Company.			299			509
Note payable to bank for $3,800, entered into on October 17, 2008, with a bank to finance an airplane purchased for business use. The note is secured by the airplane and all related parts and equipment and calls for 59 monthly principal and interest payments of $43, followed by one payment of $2,145. The note accrues interest at a rate of 5.6% annually and allows for prepayment with certain prepayment penalties, but after 36 months the loan can be paid in full without penalty.			3,751			—
Equipment note for $3,020 with a bank, with 60 monthly principal and interest payments of $58 beginning in October 2008, at an annual interest rate of 5.5%. The note matures on October 3, 2013. The equipment note is secured by certain construction equipment. The equipment note is guaranteed by Primoris' largest subsidiary, ARB.			2,933			—
	Total long-term debt		32,303			25,399
	Less: current portion		(5,679	)		(3,966	)
	Long-term debt, net of current portion	$	26,624		$	21,433

F-24

PRIMORIS SERVICES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

Note 13—Credit Arrangements (Continued)

        Scheduled maturities of long-term debt are as follows:

	Year Ending December 31,
2009	$	5,679
2010		5,875
2011		6,160
2012		6,028
2013		8,561
Thereafter		—
	$	32,303

        Credit facilities—In March 2007, the Company entered into a new revolving line of credit agreement payable to a bank group with an interest rate of prime or at LIBOR plus an applicable margin. The revolving line is secured by substantially all the assets of the Company. The Company can borrow up to $30,000 based on a defined rate of interest, and all amounts borrowed under the line of credit are due March 31, 2010. There were no amounts outstanding under the line of credit at December 31, 2008 or December 31, 2007, other than letters of credit issued in the amounts of $677 and $1,936, respectively, which reduces the amount available on the revolving line.

        In January 2008, the Company entered into a credit facility (as amended) for purposes of issuing commercial letters of credit in Canada, for an amount up to 10 million in Canadian dollars. The credit facility with a Canadian bank is for a term of 5 years, and provides for an annual fee of 1% for any issued and outstanding commercial letters of credit. Letters of credit can be denominated in either Canadian or U.S. dollars. As of December 31, 2008 and 2007, total commercial letters of credit outstanding under this credit facility totaled $4,981 and $2,279, respectively.

        The term loan and 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. The Company was in compliance with, or received waivers on, its restrictive covenants as of December 31, 2008 and 2007.

Note 14—Commitments and Contingencies

        The Company leases certain property and equipment under non-cancelable operating leases which expire at various dates through 2019. The leases require the Company to pay all taxes, insurance, maintenance, and utilities.

        Certain of these leases are with entities related through common ownership by stockholders, officers, and directors of the Company. The leases are classified as operating leases in accordance with SFAS No. 13, "Accounting for Leases".

F-25

PRIMORIS SERVICES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

Note 14—Commitments and Contingencies (Continued)

        The future minimum lease payments required under non-cancelable operating leases are as follows for the years ending after December 31, 2008:

For the Years Ending December 31,	Real Property		Real Property (Related Party)		Equipment		Equipment (Related Party)		Total Commitments
2009	$	1,570	$	1,012	$	3,892	$	239	$	6,713
2010		1,259		772		3,449		239		5,719
2011		1,066		788		1,932		99		3,885
2012		959		804		339		—		2,102
2013		566		820		62		—		1,448
Thereafter		—		3,050		—		—		3,050
	$	5,420	$	7,246	$	9,674	$	577	$	22,917

        Total lease expense during the years ended December 31, 2008, 2007 and 2006 amounted to approximately $7,349, $7,506 and $7,259, respectively, including amounts paid to related parties of $1,034, $990 and $894, respectively.

        Letters of credit—At December 31, 2007, the Company had a letter of credit of $1,200 pledged as collateral on a line of credit for ARB Ecuador, Ltda. This letter of credit was no longer outstanding as of December 31, 2008.

        The Company had a letter of credit of $1,000 pledged as collateral on lines of credit of ARB Arendal, SRL de CV (See Note 7 "Equity Method Investments"). The letter of credit was retired on December 31, 2007.

        Additionally, at December 31, 2008 and 2007 the Company had additional letters of credit outstanding of approximately $5,658 and $4,215, respectively.

        Litigation—The Company is subject to claims and legal proceedings arising out of its business. Management believes that the Company has meritorious defenses to the claims. Although management is 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 the consolidated financial position of the Company.

        Bonding—As of December 31, 2008, 2007 and 2006, the Company had bid and completion bonds issued and outstanding totaling approximately $353,008, $427,500 and $246,500, respectively.

Note 15—Reportable Operating Segments

        The Company operates in two reportable segments: Construction Services and Engineering. The accounting policies of the segments are the same as those described in the Note 2—"Summary of Significant Accounting Policies". The Company evaluates performance based on gross profit before allocations of selling, general and administrative expenses, other income and expense items and income

F-26

PRIMORIS SERVICES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

Note 15—Reportable Operating Segments (Continued)

taxes. The Company accounts for intersegment sales and transfers as if the sales or transfers were to third parties, that is, at current market prices. The Company's segments are as follows:

Construction Services

        The Construction Services group specializes in a range of services that include designing, building/installing, replacing, repairing/rehabilitating and providing management services for construction related projects. Our services include:

•

Providing installation of underground pipeline, cable and conduits for entities in the petroleum, petrochemical and water industries;

•

Providing installation and maintenance of industrial facilities for entities in the petroleum, petrochemical and water industries; and

•

Providing installation of complex commercial and industrial cast-in-place structures.

Engineering

        The Engineering group specializes in designing, supplying, and installing high-performance furnaces, heaters, burner management systems, and related combustion and process technologies for clients in the oil refining, petrochemical, and power generation industries. It furnishes turnkey project management with technical expertise and the ability to deliver custom engineering solutions worldwide.

        In the following tables, all intersegment revenues and gross profit have been eliminated.

        The following table sets forth the Company's revenue by segment for the years ended December 31, 2008, 2007 and 2006:

		Year Ended December 31,
		2008					2007					2006
Business Segment		Revenue		% of Revenue			Revenue		% of Revenue			Revenue		% of Revenue
Construction Services		$	516,130		84.7	%	$	470,366		85.9	%	$	399,672		91.0	%
Engineering			92,942		15.3	%		77,300		14.1	%		39,733		9.0	%
	Total	$	609,072		100.0	%	$	547,666		100.0	%	$	439,405		100.0	%

        The following table sets forth the Company's gross profit by segment for the years ended December 31, 2008, 2007 and 2006:

		Year Ended December 31,
		2008					2007					2006
Business Segment		Gross Profit		% of Revenue			Gross Profit		% of Revenue			Gross Profit		% of Revenue
Construction Services		$	64,965		12.6	%	$	51,593		11.0	%	$	33,922		8.5	%
Engineering			5,478		5.9	%		7,759		10.0	%		6,028		15.2	%
	Total	$	70,443		11.6	%	$	59,352		10.8	%	$	39,950		9.1	%

F-27

PRIMORIS SERVICES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

Note 15—Reportable Operating Segments (Continued)

        Third-party revenues and total assets as presented below are based on the geographic region in which the contracting subsidiary is located and not the location of the client or job site:

		External Revenues Year Ended December 31,															Total Assets At December 31,
		2006					2007					2008					2008		2007
Country		Revenue		% of Revenue			Revenue		% of Revenue			Revenue		% of Revenue
United States		$	577,090		94.8	%	$	521,663		95.3	%	$	411,095		93.6	%	$	231,642	$	203,047
Canada			20,732		3.4	%		20,961		3.8	%		18,911		4.3	%		12,514		14,818
Ecuador			11,250		1.8	%		5,042		0.9	%		9,399		2.1	%		8,056		3,108
	Total	$	609,072		100.0	%	$	547,666		100.0	%	$	439,405		100.0	%	$	252,212	$	220,973

Note 16—Customer Concentrations

        The Company operates in multiple industry segments encompassing the construction of commercial, industrial, and public works infrastructure assets throughout the United States, and in foreign countries, including Ecuador, Mexico, and others.

        During the years ended December 31, 2008, 2007 and 2006, the Company earned 20.8%, 16.2% and 18.7%, respectively, of its revenue from the following customers:

	2008					2007					2006
Description of Customer's Business
	Amount		Percentage			Amount		Percentage			Amount		Percentage
Public gas and electric utility	$	(*)		N/A		$	(*)		N/A		$	47,284		10.8	%
Public gas and electric utility	$	45,184		7.4	%	$	32,668		6.0	%	$	34,850		7.9	%
Engineering contractor	$	58,983		9.7	%		—		—			—		—
Engineering contractor	$	67,640		11.1	%	$	55,783		10.2	%		—		—
	$	171,807		28.2	%	$	88,451		16.2	%	$	82,134		18.7	%

(*)

Indicates a customer with less than 5% of revenues during such period.

Note 16—Customer Concentrations (Continued)

        For the year ended December 31, 2008, approximately 58.6% of total revenues were generated from ten customers of the Company. At December 31, 2008, approximately 6.1% of the Company's accounts receivable were due from one customer. For the year ended December 31, 2008, the Company earned approximately 9.7% of its total revenues from this customer.

F-28

PRIMORIS SERVICES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

Note 17—Retirement Plans

        Union Plans—The Company contributes to multi-employer benefit plans for its union employees at rates determined by the various collective bargaining agreements. Eligibility and allocations of contributions and benefits are determined by the trustees and administered by the multi-employer benefit plans. The Company contributed $12,700, $8,700 and $6,400, under these plans for the years ended December 31, 2008, 2007 and 2006, respectively. These costs are charged directly to the related construction contracts in process.

        Under U.S. legislation regarding such pension plans, a company is required to continue funding its proportionate share of a plan's unfunded vested benefits in the event of withdrawal (as defined by the legislation) from a plan or plan termination. As the Company participates in a number of these pension plans, the potential obligation may be significant. The information required to determine the total amount of this contingent obligation, as well as the total amount of accumulated benefits and net assets of such plans, is not readily available. Any adjustment for withdrawal liability will be recorded when it is probable that a liability exists and can be reasonably estimated, in accordance with GAAP. The Company has no plans to withdraw from any of these agreements.

        401(k) Plan—The Company provides a 401(k) plan for its employees not covered by collective bargaining agreements. Under the plan, employees are allowed to contribute up to 100% of their compensation, up to the Internal Revenue Service ("IRS") prescribed annual limit. The Company makes employer match contributions of 100% of the first 3% and 50% of the next 2% of employee contributions. The Company may, at the discretion of its Board of Directors, make an additional profit share contribution to the 401(k) plan. The Company's contribution to this plan for the years ended December 31, 2008, 2007 and 2006 aggregated in amounts equal to $790, $769 and $721, respectively.

        Born Heaters Canada, ULC RRSP-DPSP Plan—Beginning in January 1, 2008, the Company provides a RRSP-DPSP plan (Registered Retirement Saving Plan—Deferred Profit Sharing Plan) for its employees of Born Heaters Canada, ULC, not covered by collective bargaining agreements. There are two components to the plan. The RRSP portion will be contributed by the employee, whereas the Company portion is paid in the DPSP. Under this plan, the company makes employer match contributions of 100% of the first 3% and 50% of the next 2% of employee contributions. Vesting in the DPSP portion is one year of employment. The Company's contribution to the DPSP during the year ended December 31, 2008 was $62.

        The Company has no post-retirement benefits other than those discussed above.

Note 18—Deferred Compensation Agreements

        Put/Call Agreement—Prior to the closing of the merger as discussed in Note 3—"Completed Merger", Former Primoris had a Put/Call Agreement with a foreign manager. The Put/Call Agreement was accounted for as a liability under SFAS No. 150 (as amended), "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity," where the amount is presented as a liability and changes in fair value are recorded as expense. During the years ended December 31, 2008, 2007 and 2006, the Company recognized (income)/expenses of approximately $(195), $235 and $198, respectively. In conjunction with the Merger Agreement the foreign manager and the Company entered into a termination agreement, which terminated the Put/Call Agreement. Under the termination

F-29

PRIMORIS SERVICES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

Note 18—Deferred Compensation Agreements (Continued)

agreement the Company paid the foreign manager $826. As of December 31, 2008, there were no liabilities remaining related to the Put/Call Agreement.

        Phantom Stock Agreement—Prior to the closing of the merger, Former Primoris had a Phantom Stock Agreement with a foreign manager. During the years ended December 31, 2008, 2007 and 2006, the Company recognized deferred compensation expense of approximately $30, $105 and $30, respectively. In conjunction with the Merger Agreement the foreign manager and the Company entered into a termination agreement, which terminated the Phantom Stock Agreement (See Note 3 "Completed Merger"). Under the termination agreement the Company paid the foreign manager an amount equal to $294. As of December 31, 2008, there were no liabilities remaining related to the Phantom Stock Agreement.

Note 19—Related Party Transactions

        Primoris has entered into various transactions with Stockdale Investment Group, Inc. ("SIGI"). The majority stockholder, Chief Executive Officer, President and Chairman of the Board of Directors of Primoris, Brian Pratt, also holds a majority interest holder in SIGI. In addition, the following two officers and/or directors of Primoris also serve as officers and/or directors of SIGI as follows (with their respective positions with SIGI reflected in parentheses): Brian Pratt (chairman and director) and John M. Perisich (secretary).

        Two Primoris officers and/or directors also served as officers and directors of SIGI prior to the July 2008 merger, including John P. Schauerman (president and director) and Scott Summers (vice president and director).

        Primoris leases some of its facilities and certain construction and transportation equipment from SIGI. All of these leases were entered into on similar terms as negotiated with an independent third party.

        Primoris leases properties from SIGI located in Bakersfield, Pittsburg and San Dimas, California, as well as a property in Pasadena, Texas. During the years ended December 31, 2008, 2007 and 2006, the Company paid $747, $555 and $358, respectively, in lease payments to SIGI for the use of these properties.

        Primoris leased certain construction equipment from SIGI. During the years ended December 31, 2008, 2007 and 2006, the Company paid $0, $307 and $446, respectively, in lease payments and $175, $25 and $0, respectively, in rental payments to SIGI for the use of this equipment. The Company purchased the equipment from SIGI on the closing date of the merger for a purchase price of $1,135. The purchase price was determined using a fair market value appraisal.

        The Company leases an airplane from SIGI for business use. During the years ended December 31, 2008, 2007 and 2006, the Company paid $239, $241 and $129, respectively, in lease payments to SIGI for the use of the airplane. This lease commenced on May 1, 2004 and terminates on April 30, 2012.

        Primoris leases a property from Roger Newnham, a manager at the 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 years ended December 31, 2008, 2007 and 2006

F-30

PRIMORIS SERVICES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

Note 19—Related Party Transactions (Continued)

Primoris paid $289, $279 and $242, respectively, in lease payments to Mr. Newnham for the use of this property. The three-year lease for the Calgary property commenced in October 2005 and was renewed and extended until September 2009.

Note 20—Change in Tax Status and Pro Forma Net Income

        Through July 31, 2008 (the date of the merger), Former Primoris had elected to be taxed in accordance with Subchapter S of the United States Internal Revenue Code ("S-Corporation") and similar codes in states in which Former Primoris was subject to taxation. While this election was in effect, the income (whether distributed or not) was taxed for federal income tax purposes to the Former Primoris stockholders. Accordingly, no provision for federal income tax was required by Former Primoris. The provision for income taxes for Former Primoris in 2007 was primarily related to Canadian income taxes.

        As of the date of the merger, the combined entity effectively became taxable in accordance with Subchapter C of the Internal Revenue Code ("C-Corporation"), which changed the level of taxation for Former Primoris from the stockholders to the company. With the change in tax status, the Company completed an analysis of the effect of the provisions of SFAS No. 109 and FIN 48 (See Note 21 "Income Taxes").

        The unaudited pro forma net income taxes and the pro forma net income reflect federal and state income taxes assuming a combined federal and state statutory rate of 39.8%, as if the Company had been taxed as a C-Corporation for the six and twelve months ended December 31, 2008 and 2007. This rate is higher than our 2008 effective tax rate for the six months ended December 31, 2008 as discussed in Note 21 "Income Taxes," because the pro forma numbers do not consider the reduction in tax rate due to the Company's S-Corporation status through July 31, 2008.

        As of December 31, 2008, the Company had $4,947 of undistributed Former Primoris S-Corporation income as provided for in the Merger Agreement based on the estimated 2008 S-Corporation tax liability of the Former Primoris stockholders. These amounts were distributed on January 29, 2009 to the stockholders of Former Primoris and are reflected as a liability on the balance sheet as of December 31, 2008.

        Pro forma net income—unaudited—Unaudited pro forma net income is shown on the consolidated statements of income, and reflects an adjustment for income tax at the applicable statutory rates as if we had been taxed as a C-Corporation since the beginning of each respective period using an effective tax rate of 39.8 percent.

Note 21—Income Taxes

        Through July 31, 2008 (the date of the merger) Former Primoris had elected to be taxed as an S-Corporation under the United States Internal Revenue Code and similar codes in states in which the Company was subject to taxation. While this election was in effect, the income (whether distributed or not) was taxed for federal income tax purposes to the Former Primoris stockholders. Accordingly, no provision for federal income tax was required by Former Primoris. The provision for income taxes for Former Primoris in 2008 prior to the merger and in 2007 was related primarily to Canadian income taxes.

F-31

PRIMORIS SERVICES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

Note 21—Income Taxes (Continued)

        As of the date of the merger, the combined entity effectively became a C-Corporation, which changed the level of taxation from the Former Primoris stockholders to the company. With the change in tax status, the Company completed an analysis of the effect of the provisions of SFAS No. 109 and FIN 48. The Company's deferred income tax provision below includes $3,034 of deferred tax benefit resulting from the recognition of its beginning deferred tax asset.

        Effective January 1, 2008, the Company adopted FIN 48, which clarifies the accounting for uncertainty in income taxes recognized in the financial statements in accordance with SFAS No. 109. FIN 48 provides guidance on the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosures, and transition. In accordance with FIN 48, a tax position is a position in a previously filed tax return or a position expected to be taken in a future tax filing that is reflected in measuring current or deferred income tax assets and liabilities. Tax positions are recognized only when it is more likely than not (likelihood of greater than 50%), based on technical merits, that the position will be sustained upon examination. Tax positions that meet the more likely than not threshold should be measured using a probability weighted approach as the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement.

        As of July 31, 2008, the date of the merger, and December 31, 2008, there are no unrecognized tax benefits and the Company does not anticipate that there will be a material change in the balance of the unrecognized tax benefits within the next 12 months.

        The components of the income tax provision for the year ended December 31, 2008 are as shown in the following table. Information for the prior years while an S-Corporation are not shown as they are not material:

		2008
Current provision (benefit)
	Federal	$	5,828
	State		2,068
	Canada		995
		$	8,891
Deferred provision (benefit)
	Federal	$	(3,340	)
	State and local		(899	)
	Canada		175
		$	(4,064	)
Total		$	4,827

F-32

PRIMORIS SERVICES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

Note 21—Income Taxes (Continued)

        A reconciliation of the U.S. statutory federal income tax rate to the effective income tax rate is as follows:

		2008
U.S. federal statutory income tax rate			35.00	%
State taxes, net of federal income tax impact			3.10	%
Tax effect of earnings not subject to federal income tax due to S-Corporation election			(20.21	)%
Federal and state tax effect of S to C-Corporation conversion			(7.35	)%
Foreign tax credit			(1.81	)%
Canadian income tax			2.82	%
Domestic production activities deduction			(1.03	)%
Other items			1.17	%
	Effective tax rate		11.68	%

        Deferred income taxes are recognized for temporary differences between the financial reporting basis of the assets and liabilities and their respective tax basis and operating losses, capital losses and tax credit carry-forwards based on enacted tax rates expected to be in effect when such amounts are realized or settled. However, deferred tax assets are recognized only to the extent that it is more likely than not that they will be realized based on consideration of available evidence, including future reversals of existing taxable temporary differences, future projected taxable income and tax planning strategies. No valuation allowance has been provided to the deferred tax assets as the Company believes it is more likely than not that these deferred tax assets will be realized.

        The tax effect of temporary differences that give rise to deferred income taxes for the year ended December 31, 2008 are as follows:

Deferred tax assets
	Accrued workers compensation		$	2,064
	Insurance reserves			1,671
	Other accrued liabilities			1,751
	State income taxes			279
		Total deferred tax assets	$	5,765
Deferred tax liabilities
	Depreciation and amortization		$	(1,349	)
	Prepaid expenses			(250	)
		Total deferred tax liabilities	$	(1,599	)
Net deferred tax asset			$	4,166

        The Company recognizes interest and penalties related to uncertain tax positions, if any, in income tax expense.

F-33

PRIMORIS SERVICES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

Note 21—Income Taxes (Continued)

        The Company's tax returns were audited by the IRS for the tax years 2004 and 2005. There were no material adjustments found. The tax years 2005 through 2007 remain open to IRS examination. The tax years 2004 through 2007 remain open to examination by the other major taxing jurisdictions to which the Company is subject. The Company's Canadian subsidiary is currently under audit by Revenue Canada, Canada's federal taxing authority, for the years ended 2005, 2006 and 2007. There have been no findings thus far with respect to such audit and the Company is not expecting any material adjustments.

Note 22—Earnings Per Share

        The table below presents the computation of basic and diluted earnings per share for the years ended December 31, 2008, 2007 and 2006:

		2008		2007		2006
Numerator:
	Net income	$	36,433	$	27,134	$	13,200
	Pro forma net income—unaudited(1)	$	24,839	$	16,845	$	8,684
Denominator (shares in thousands):
Weighted average shares for computation of basic earnings per share			26,258		23,458		23,402
Dilutive effect of warrants and units			856		—		—
Dilutive effect of contingently issuable shares			1,042		—		—
Weighted average shares for computation of diluted earnings per share			28,156		23,458		23,402
	Basic earnings per share	$	1.39	$	1.16	$	0.56
	Diluted earnings per share	$	1.29	$	1.16	$	0.56
	Pro forma basic earnings per share—unaudited(1)	$	0.95	$	0.72	$	0.37
	Pro forma diluted earnings per share—unaudited(1)	$	0.88	$	0.72	$	0.37

(1)

As discussed in Note 20—"Change in Tax Status and Pro Forma Net Income", pro forma net income reflects an adjustment for income tax at the applicable statutory blended federal and state income tax rate (39.8%) as if we had been taxed as a C-Corporation since the beginning of each respective period.

Note 23—Stockholders's Equity

Common Stock

        The Company is authorized to issue 60,000,000 shares of $0.0001 par value common stock, of which 29,977,339 and 23,587,200 shares were issued and outstanding as of December 31, 2008 and 2007, respectively.

        As of December 31, 2008, there were 1,520,000 shares of common stock reserved for issuance upon exercise of all future stock option grants, SARS and grants of restricted shares under the 2008 Equity Plan, as discussed in Note 24 "Stock-Based Incentive Compensation Plans". As of

F-34

PRIMORIS SERVICES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

Note 23—Stockholders's Equity (Continued)

December 31, 2008, there were no stock options, SARS or restricted shares of stock issued or outstanding for shares of common stock.

Preferred Stock

        The Company is authorized to issue 1,000,000 shares of $0.0001 par value preferred stock, of which there have been no shares issued and there are no shares outstanding as of December 31, 2008.

Completion of Merger

        As a result of the closing of the merger, the Former Primoris Holders owned approximately 80.4% of the outstanding shares of the Company's common stock at the closing of the merger, and the remaining Rhapsody stockholders owned the remaining approximately 19.6% of the Company's outstanding shares of common stock (See Note 3—"Completed Merger").

        The Former Primoris Holders, pursuant to certain termination agreements, and in exchange for all of their shares of common stock of Former Primoris that were outstanding immediately prior to the merger, received in the aggregate 24,094,800 shares of the Company's common stock. To secure the indemnity rights of Rhapsody under the Merger Agreement, 1,807,110 of the 24,094,800 shares of the Company's common stock issued to the Former Primoris Holders at the time of the merger were placed into escrow and are governed by the terms of an Escrow Agreement.

        The Merger Agreement also provided that the Former Primoris Holders would receive up to an additional 5,000,050 shares of the Company's common stock (allowing for rounding), contingent upon the combined company attaining certain defined performance targets in 2008 and 2009. As of December 31, 2008, the Company achieved the specified EBITDA milestone for 2008 and consequently, 2,500,025 shares of Company stock are to be issued to Former Primoris stockholders in March 2009. This will result in the Former Primoris Holders owning approximately 81.9% of the outstanding shares of the Company's common stock, and the remaining Rhapsody stockholders owning approximately 18.1% of the Company's common stock.

        Merger related issuance of stock and stock expense—In connection with the Merger Agreement, Rhapsody, the Former Primoris and two foreign managers of Former Primoris entered into termination agreements related to the fulfillment of obligations under a Put/Call Agreement and a Phantom Stock Agreement (collectively the "Deferred Compensation Agreements") discussed in Note 18, "Deferred Compensation Agreements". Upon consummation of the merger (See Note 3 "Completed Merger"), the termination agreements cancelled the obligations of the parties under the Deferred Compensation Agreements and called for the issuance to the foreign managers of an aggregate of 507,600 shares of the Company's common stock and for the cash payment of the amounts already accrued under the Deferred Compensation Agreements.

        As a result of the issuance of the shares and in accordance with SFAS No. 123R "Share-based Payments", the Company recognized a charge of $3,675 of non-cash expenses related to the termination of the Deferred Compensation Agreements. The same amounts were recorded as an increase to additional paid-in capital and, therefore, had no effect on the Company's net asset value. The issuance of the shares was directly related to the consummation of the merger, therefore the entire value of the shares was taken as a charge to earnings at the time of issuance, which was the closing of the merger.

F-35

PRIMORIS SERVICES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

Note 23—Stockholders's Equity (Continued)

        As discussed above, as of December 31, 2008, the Company achieved a specified EBITDA milestone for 2008 and 2,500,025 shares of Company stock are to be issued to Former Primoris stockholders in March 2009, which includes 52,668 shares to be issued to the two foreign managers, in accordance with the Merger Agreement. As a result, the Company recognized a $375 charge for the earn-out shares the two foreign managers will receive.

Note 24—Stock-Based Incentive Compensation Plans

2008 Long-Term Incentive Equity Plan

        In July 2008, the Company adopted the 2008 Equity Plan. The 2008 Equity Plan became effective as of the closing of the merger in July 2008. As of December 31, 2008, there were 1,520,000 shares of common stock reserved to provide for the grant and exercise of all future stock option issuances, SARS and grants of restricted shares under the 2008 Equity Plan.

        Options under the plan are to be issued at no less than the closing price of the stock on the date of the grant. The Company's Board of Directors has not yet approved the period during which the option grants are expected to be exercisable; however, it is expected that such period will be established in each granting agreement, pursuant to the 2008 Equity Plan. The option grant will have a term as may be fixed by the Compensation Committee of the Board of Directors, however, any Incentive Stock Option ("ISO") may not have a term which exceeds 10 years from the date of grant (or five years in the case of an ISO that is granted to an optionee who at the time of grant, owns 10% or more of the total voting power of the Company).

        Under provisions of SFAS No. 123R, "Share-Based Payment", stock-based compensation cost is measured at the date of grant, based on the calculated fair value of the stock-based award, and is recognized as expense over the employee's requisite service period (generally the vesting period of the award). As of December 31, 2008, there were no stock options, SARS or restricted shares of stock issued or outstanding for shares of common stock. Accordingly, there has been no stock-based compensation expense recognized as a result of the 2008 Equity Plan.

Note 25—Warrants For Purchase of Stock

Warrants and Warrant under the Unit Purchase Option

        As of December 31, 2008, the Company has outstanding 4,894,456 redeemable Warrants, each of which entitles the holder to purchase one share of common stock at a price of $5.00 per share and is exercisable at any time on or prior to October 2, 2010, unless earlier redeemed by the Company.

        The number of Warrants outstanding at December 31, 2008 is net of the Warrants that were purchased for cash in a "modified Dutch auction" tender offer. The tender offer commenced on November 26, 2008 and was completed on December 24, 2008. The Company purchased 1,416,908 Warrants at a price of $1.20 per Warrant at the completion of the tender offer, for a total cost to the Company of approximately $1.7 million, excluding fees and expenses related to the tender offer. The Warrants accepted for purchase represented approximately 22.5% of the 6,311,364 redeemable Warrants outstanding as of November 25, 2008.

F-36

PRIMORIS SERVICES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

Note 25—Warrants For Purchase of Stock (Continued)

        In addition to the Warrants, as of December 31, 2008, the Company has 450,000 Unit Purchase Options ("UPO") outstanding. Each UPO includes the right to purchase a Unit at $8.80 per share, and such Unit is comprised of one share of common stock and one Warrant.

        The UPO expires on October 2, 2011. The Warrants expire on October 2, 2010, including the Warrants that are included as a part of the UPO. The Company may call the Warrants for redemption if the reported closing price of the common stock equals or exceeds $11.50 per share for 20 consecutive trading days. Each Warrant includes anti-dilution protections, unless common stock is issued by the Company at a price below the exercise price. Additionally, the ability to exercise the Warrants is subject to registration of the common stock issuable upon the exercise of the Warrant.

        The Warrants and the Units trade on the NASDAQ Global Market exchange under the ticker symbol "PRIMW" and "PRIMU", respectively.

Note 26—Selected Quarterly Financial Information (Unaudited)

        Selected unaudited quarterly consolidated financial information is presented in the tables below:

		Year Ended December 31, 2008
(In thousands, except per share data)		1st Quarter		2nd Quarter		3rd Quarter		4th Quarter
Revenues		$	169,391	$	142,444	$	146,737	$	150,500
Gross profit			16,213		14,634		21,103		18,493
Net income			9,782		8,769		10,086		7,796
Pro forma adjusted net income			6,006		5,435		7,116		6,282
Net income per share:
	Basic	$	0.41	$	0.37	$	0.36	$	0.26
	Diluted	$	0.41	$	0.37	$	0.32	$	0.23
Pro forma adjusted net income per share:
	Basic	$	0.25	$	0.23	$	0.26	$	0.21
	Diluted	$	0.25	$	0.23	$	0.23	$	0.19

F-37

PRIMORIS SERVICES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except per share amounts

Note 26—Selected Quarterly Financial Information (Unaudited) (Continued)

		Year Ended December 31, 2007
(In thousands, except per share data)		1st Quarter		2nd Quarter		3rd Quarter		4th Quarter
Revenues		$	113,837	$	110,211	$	158,054	$	165,564
Gross profit			9,753		12,378		20,565		16,656
Net income			3,243		5,744		11,494		6,653
Pro forma adjusted net income			2,069		3,566		7,122		4,088
Net income per share:
	Basic	$	0.14	$	0.25	$	0.49	$	0.28
	Diluted	$	0.14	$	0.25	$	0.49	$	0.28
Pro forma adjusted net income per share:
	Basic	$	0.06	$	0.15	$	0.30	$	0.17
	Diluted	$	0.06	$	0.15	$	0.30	$	0.17

F-38

EXHIBITS ATTACHED TO THIS ANNUAL REPORT ON FORM 10-K

Exhibit Number		Description
	10.25	Promissory Note and Aircraft Security Agreement and related documents thereto, dated October 14, 2008, by and between Stellaris LLC and U.S. Bancorp Equipment Finance, Inc., as amended
	21.1	Subsidiaries and Equity Investments of the Registrant
	31.1	Rule 13a-14(a)/15d-14(a) Certification by the Registrant's Chief Executive Officer
	31.2	Rule 13a-14(a)/15d-14(a) Certification by the Registrant's Chief Financial Officer
	32.1	Section 1350 Certification by the Registrant's Chief Executive Officer
	32.2	Section 1350 Certification by the Registrant's Chief Financial Officer

EX-10.25

Exhibit 10.25

Equipment Finance

PO Box 230789

Portland. OR 97281-0789

October 16, 2008

Alfons Theeuwes

Stellaris LLC

26000 Commercentre Drive

Lake Forest, CA 92630

RE: Stellaris LLC

944835

Dear Alfons Theeuwes:

A recent review of our files indicates that there needs to be an amendment to the Aircraft Security Agreement dated October 14, 2008 and all ancillary documents associated with the above-referenced loan. We will require your acknowledgement of the following change(s):

The signature block on all documents is amended to read as follows:

Stellaris LLC

By: Premoris Services Corporation, its Member

By:	/s/Alfons Theeuwes
Alfons Theeuwes
Senior Vice President of Finance

All other terms of the affected document(s) remain in full force and effect.

Please return this signed acknowledgement to my attention as soon as possible. Should you have any questions, please do not hesitate to contact me at (800) 253-3468 Ext. 464.

Very truly yours,	Correction or Change Acknowledged & Agreed
	Stellaris LLC
	By: Premoris Services Corporation, its Member
Gloria Brogan	By:	/s/Alfons Theeuwes
Documentation Specialist	Alfons Theeuwes
	Senior Vice President of Finance
	Dated:		10/16/08

APPROVED:   ORIGINAL GUARANTOR(S) HEREBY ACKNOWLEDGE THAT THEIR GUARANTIES REMAIN IN FULL EFFECT.

ARB, Inc.
BY:	/s/ Brian B. Pratt
Brian B. Pratt
President

Equipment Finance

PO Box 230789

Portland, OR 97281-0789

October 21, 2008

Alfons Theeuwes

Stellans LLC

26000 Commercentre Drive

Lake Forest, CA 92630

RE: Stellaris LLC

944835-AFS

Dear Alfons Theeuwes:

A recent review of our files indicates that there needs to be an amendment to the Promissory Note dated October 14, 2008 associated with the above-referenced Schedule. We will require your acknowledgement of the following change(s):

Paragraph 2 - Fifty Nine (59) installments in the amount of $43,230.10 each, followed by One (1) installment in the amount of $2,145,402.92 have been amended to Fifty Nine (59) installments in the amount of $43,026.83 each, followed by One (1) installment in the amount of $2,145,402.92.

Paragraph 3 - the rate of 5.958 percent per annum has been amended to 5.88 percent per annum

Paragraph 6 has been amended to read as follows:

Debtor may not prepay this Schedule for the first two (2) years, thereafter Debtor may prepay this Schedule in whole or in part, without paying any premium.

All other terms of the affected document(s) remain in full force and effect.

Please return this signed acknowledgement to my attention as soon as possible. Should you have any questions, please do not hesitate to contact me at (800) 253-3468 Ext. 464.

Very truly yours,	Correction or Change Acknowledged & Agreed
	Stellaris LLC
	By: Premoris Services Corporation, its Member
Gloria Brogan	By:	/s/Alfons Theeuwes
Documentation Specialist	Alfons Theeuwes
	Senior Vice President of Finance
	Dated:
cc: Erica Holbrook
9/06

PROMISSORY NOTE

Equipment Finance

Stellaris LLC

26000 Commercentre Drive

Lake Forest, CA 92630

$3,800,000.00 Effective Date 10/17/08 Schedule Number 944835-AFS

1.    This Promissory Note (“Note,” also known as “Schedule”) is made between Stellaris LLC (“Debtor”), and U.S. Bancorp Equipment Finance, Inc. (which, together with its successors and assigns, shall be called the “Secured Party”). This Note is secured by an assignment of and security interest in certain Collateral, as defined in an Aircraft Security Agreement (“Security Agreement”) executed contemporaneously herewith between Debtor and Secured Party, which Security Agreement is incorporated by reference herein. Capitalized terms used in this Note which are not otherwise defined herein shall have the meanings given in the Security Agreement.

2.    For value received, Debtor hereby promises to pay to the order of Secured Party the principal amount of Three Million Eight Hundred Thousand and no/100 Dollars ($3,800,000.00) with interest on any outstanding principal balance at the rate(s) specified herein from the Effective Date hereof until this Schedule shall have been paid in full in accordance with the following payment schedule: Fifty Nine (59) installments in the amount of $43,230.10 each, followed by One (1) installment in the amount of $2,145,402.92 including the entire amount of interest accrued on this Schedule at the time of payment of each installment. The first payment shall be due November 10, 2008 and a like payment shall be due on the same day of each succeeding month thereafter until the entire principal and interest have been paid. At the time of the final installment hereon, all unpaid principal and interest shall be due and owing. Each payment shall be applied first to accrued and unpaid interest, and the balance to the outstanding principal hereof. As a result, such final installment may be substantially more or substantially less than the installments specified herein.

3.    Debtor promises to pay interest on the principal balance outstanding at a rate of 5.958 percent per annum.

4.    Interest shall be calculated on the basis of a 360-day year. In no event shall this Note be enforced in any way which permits Secured Party to collect interest in excess of the maximum lawful rate. Should interest collected exceed such rate, Secured Party shall refund such excess interest to the Debtor. In such event, the Debtor agrees that Secured Party shall not be subject to any penalties provided by law for contracting for or collecting interest in excess of the maximum lawful rate.

5.    PAYMENT ADJUSTMENT. In the event that a forward rate lock agreement has not been executed, on the date of funding (the ‘Adjustment Date’) the interest rate set forth herein and the installments due hereunder shall be recalculated based upon changes in the spot rate of 60-month U. S. Bancorp’s Funds Transfer Pricing Rate/Cost of Funds (the “Spot Rate”) from September 17, 2008 until the Adjustment Date. If, on the Adjustment Date, the Spot Rate is greater or less than 4.48%, then such interest rate and installments shall be adjusted accordingly to reflect the actual rate. Thereafter, the interest rate and installments shall remain fixed during the Term hereof.

6.    Debtor may prepay this Schedule, in whole or in part, by paying simultaneously with and in addition to the prepayment, a premium for such prepayment privilege equal to the greater of: (1) 3% of the amount prepaid during months one (1) to twelve (12), 1% of the amount prepaid during months thirteen (13) to thirty-six (36), 0% of the amount prepaid during months thirty-seven (37) to sixty (60), or (2) an amount calculated as follows: the maximum of: (a) zero, or (b) that amount which is derived by subtracting: (i) the Net Present Value of the remaining payments discounted at the Initial Rate from (ii) the Net Present Value of the remaining payments discounted at the Rate at Prepayment.

Net Present Value shall mean the amount which is derived by summing the present values of each prospective payment of principal and interest which, without such full or partial prepayment, could otherwise have been received by Secured Party over the shorter of the remaining term of the Schedule or until the next repricing date.

Initial Rate shall mean the rate per annum, determined solely by Secured Party, on the first day of the term of this Schedule or the most recent repricing date, as the rate at which Secured Party would be able to borrow funds in Money Markets for the amount of this Schedule and for a like maturity.

Rate at Prepayment shall mean that zero-coupon rate, calculated on the date of prepayment, and determined solely by Secured Party, as the rate at which Secured Party would be able to borrow funds in Money Markets for the prepayment amount matching the maturity of the remaining term of the Schedule.

Money Markets shall mean one or more wholesale funding mechanisms available to Secured Party, including negotiable certificates of deposit, eurodollar deposits, bank notes, fed funds, interest rate swaps, or others.

If Debtor fails to pay any prepayment premium when due, the amount of such premium shall thereafter bear interest until paid at the default rate specified in this Schedule. Any prepayment of principal shall be accompanied by a payment of interest accrued thereon to date; and the prepayment shall be applied to the principal installments in the inverse order of their maturities. Except in the event of a casualty loss, all prepayments shall be in an amount of at least $100,000 or, if less, the remaining entire principal balance of the loan. Notwithstanding the foregoing, payments made within 30 days of the date an installment is due which do not exceed the scheduled amount of such installment shall not be considered prepayments.

7.    All payments on this Note shall be made in lawful money of the United States at such address as Secured Party may designate to Debtor in writing from time to time.

8.    Any notices or demands required to be given herein shall be given to the parties in writing by facsimile transmission, or by overnight courier or United States mail (first class, express, certified or otherwise) at the addresses set forth in the Security Agreement or to such other addresses as the parties may hereafter substitute by written notice given in the manner prescribed in this paragraph. If Debtor consists of more than one person, notification of any of said persons shall be complete notification of all. Notice may be given either before or reasonably soon after the effective date of each change.

9.    If any of the obligations hereunder remains overdue for more than ten (10) days, Debtor hereby agrees to pay on demand, as a late charge, an amount equal to the lesser of (i) five percent (5%) of each such overdue amount; or (ii) the maximum percentage of any such overdue amount permitted by applicable law as a late charge. Debtor agrees that the amount of such late charge represents a reasonable estimate of the cost to Secured Party of processing a delinquent payment and that the acceptance of any late charge shall not constitute a waiver of default with respect to the overdue amount or prevent Secured Party from exercising any other available rights and remedies.

10.  Upon the happening of any Event of Default which is not cured within ten (10) days or at any time thereafter, all liabilities of Debtor shall, at the option of Secured Party, become immediately due and payable and Secured Party shall have and may exercise any and all of the rights and remedies granted in the Security Agreement.

11.  Unless expressly provided otherwise in this Note, the Security Agreement and Note are non-cancelable and may not be prepaid. The waiver by Secured Party of any default hereunder or of any provisions hereof shall not discharge any party hereto from liability hereunder and such waiver shall be limited to the particular Event of Default and shall not operate as a waiver of any other or subsequent default. No modification of this Note or waiver of any right of Secured Party hereunder shall be valid unless in writing and signed by an authorized officer of Secured Party. No failure on the part of Secured Party to exercise, or delay in exercising, any right or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right or remedy. The provisions of this Note and the rights and remedies granted to Secured Party herein shall be in addition to, and not in limitation of those of any other agreement with Secured Party or any other evidence of any liability held by Secured Party or under any applicable law or in equity. The Security Agreement and Note embody the entire agreement between the parties and supersede all prior agreements and understandings relating to the same subject matter. The rights and liabilities of the parties under this Note shall be governed by applicable federal law and the laws of the state of Oregon. The Debtor, if more than one, agree to be jointly and severally liable on this Note, and that the term “Debtor,” as used herein, means any one or more of them. References herein to the “Security Agreement” and the “Note” shall mean the Security Agreement and Note as each may respectively be amended from time to time.

12.  Each of the Debtors, if more than one, and all other parties who at any time may be liable hereon in any capacity, hereby jointly and severally waive diligence, demand, presentment, presentment for payment, protest, notice of protest and notice of dishonor of this Note, and authorize Secured Party, without notice, to grant extensions in the time of payment of and reductions in the rate of interest on any monies owing on this Note. It is hereby certified and recited that all acts, conditions and things necessary to be done precedent to and in

the issuance of this Note, in order to make it a legal, valid and binding obligation of Debtor, have happened and have been done and performed in regular and due form as required by law.

13.  Debtor hereby appoints Secured Party as its Attorney-in-Fact to insert in this Note the Effective Date in accordance with the Equipment Acceptance and Authorization to Pay Proceeds form executed by Debtor in connection herewith.

IN WITNESS WHEREOF, Debtor has executed this Note as of this 14 day of October, 2008

Stellaris LLC
By:	/s/ Alfons Theeuwes
Alfons Theeuwes
Senior Vice President of Finance

8/05

ADDRESS FOR ALL NOTICES:

PO Box 230789

Portland, OR 97281-0789

EQUIPMENT ACCEPTANCE AND AUTHORIZATION TO PAY PROCEEDS AND LOAN AMENDMENT

Equipment Finance

Schedule Number 944835-AFS

To:         U.S. Bancorp Equipment Finance, Inc.

Re:          Promissory Note and Aircraft Security Agreement dated as of October 14, 2008 (the “Agreements”) between U.S. Bancorp Equipment Finance, Inc., as Secured Party, and Stellaris LLC, Debtor.

YOU ARE HEREBY AUTHORIZED to disburse the proceeds of the loan evidenced by the above Agreements as follows for the purchase of the personal property specified (the “Collateral”):

$3,800,000.00 Stellaris LLC

One (1) Cessna Citation Bravo Model 550 , serial # 550-0971, Federal Aviation Registration Number N717GK, equipped with Two (2) Pratt & Whitney Canada PW530A serial #’s PCE-DA0355 and PCE-DA0352 each in excess of 550 S.H.P.;

including, but not limited to: (i) all avionics, accessories, improvements, components, instruments, furnishings, substitutions, additions, replacements, parts, tools and equipment now or hereafter affixed to or used in connection with such airframe, engines and/or propellers, together with all products and proceeds thereof, including but not limited to all leased and/or chartered income and all insurance recoveries; and (ii) all maintenance, support, supply, warranty, and/or service rights relating to such airframe, engines, and/or propellers, and any claims thereunder, including but not limited to rights and claims under any maintenance, support, supply and/or service plans or contracts.

The above aircraft is complete as equipped.

TOTAL AMOUNT TO BE DISBURSED $3,800,000.00

YOU ARE HEREBY FURTHER AUTHORIZED to insert in the Agreement the date of disbursement of funds under this Authorization as the Effective Date of the Agreement.

WE HEREBY CERTIFY AND ACKNOWLEDGE FOR THE BENEFIT OF SECURED PARTY THAT: a) the Collateral has been delivered to us; b) any necessary installation of the Collateral has been fully and satisfactorily performed; c) after full inspection thereof, we have accepted the Collateral for all purposes as of the date hereof; d) upon the disbursement of the proceeds of the loan as set forth above, the Secured Party will have fully and satisfactorily satisfied all its obligations under the Agreements; e) any and all conditions to the effectiveness of the Agreements or to our obligations under the Agreements have been satisfied; f) we have no defenses, set-offs or counterclaims to any such obligations; and, g) the Agreements are in full force and effect.

WE HEREBY REPRESENT AND WARRANT FOR THE BENEFIT OF SECURED PARTY THAT: a) any right we may have now or in the future to reject the Collateral or to revoke our acceptance thereof has terminated as of the date of hereof; b) we hereby waive any such right; c) the date of this Authorization is the earliest date upon which the certifications, acknowledgments, representations and warranties made herein could be correctly and properly made. We hereby acknowledge that the Secured Party is relying on this Authorization as a condition to disbursing the proceeds of the loan as set forth above.

IN WITNESS WHEREOF, we have executed this Certificate as of the 14 day of October, 2008.

Please sign, date and return to:	Stellaris LLC
U.S. Bancorp Equipment Finance, Inc.	By:	/s/ Alfons Theeuwes
13010 S. W. 68th Parkway	Alfons Theeuwes
Portland, OR 97223	Senior Vice President of Finance

6/04

ASSIGNMENT FOR SECURITY PURPOSES
(Rental and Lease Agreements)

Equipment Finance

Schedule Number 944835-AFS

For valuable consideration, Stellaris LLC (“Assignor”), intending to be legally bound, in order to secure all obligations owing now or hereafter by Assignor to U.S. Bancorp Equipment Finance, Inc. and its successors and assigns (“Assignee”), hereby grants a security interest in and assigns to Assignee certain chattel paper, consisting of any and all now-existing or hereafter-arising rental and lease agreements and all income, rents, accounts, payment intangibles, and monies arising now or hereafter thereunder and all proceeds of any of the foregoing (the “Leases”) between Assignor, as Lessor, and any respective renters and sub-users (“Lessees”), relating to the equipment and/or inventory described on Exhibit A attached hereto, and all rights, powers, and remedies in the Leases, including the right, after a default by Assignor under any transaction with Assignee, to collect all rents, income, and sums due or to become due thereon and on any notes, contracts of guaranty or surety and collateral of any kind or nature which Assignor has or may have, now or hereafter, and any and all proceeds of all of the foregoing (all the property assigned being called the “Assigned Property”), and the right, either in Assignee’s own name, or in Assignor’s name, to take such actions as Assignor might have taken save for this assignment.

Assignor guarantees the payment when due of each sum payable under the Leases (regardless of any right of Lessees to abatement or adjustment) and the payment upon demand of the entire unpaid balance in the event of any default under the Leases, without first requiring Assignee to proceed against Lessees. Assignor has retained, and does not assign to Assignee, any of Assignor’s obligations, representations or warranties under the Leases, and Assignor shall fully perform all such obligations thereunder. ASSIGNEE SHALL HAVE NO OBLIGATIONS FOR MAINTENANCE, SERVICE, SECURITY, INDEMNITY, LICENSING AND OBTAINING PERMITS, FURNISHING OF FUEL, PARTS, ACCESSORIES OR REPLACEMENTS, OR ANY OTHER OBLIGATIONS OR WARRANTIES OF ASSIGNOR UNDER THE LEASES.

Assignor further represents and covenants that Assignor has not assigned and will not assign the Leases and its rights thereunder to anyone other than Assignee and Assignee shall have a first-priority perfected security interest therein; there is and shall be only one counterpart of the Leases; Assignor is the lawful holder of the Leases; if Assignee requests, the original Leases and related documents have been or will be delivered by Assignor to Assignee. Assignor will reimburse Assignee for all expenses of collection, repossession, and sale incurred by Assignee in connection with enforcing its rights hereunder, including but not limited to, attorney’s fees and court costs. Assignor agrees that Assignee may audit Assignor’s books and records relating to the Assigned Property and agrees that, without notice to or assent by Assignor, and without releasing the liability of Assignor hereunder, Assignee may: (i) take any action under the provisions of the Leases, (ii) release any rights against, grant extensions of time to, and compromise claims with, Lessees, and (iii) repossess and resell or release any or all of the Assigned Property. Assignor waives any surety defenses. This Assignment shall be binding upon, and inure to the benefit of the parties hereto and their respective successors and assigns, and shall be governed by the laws of the state of Oregon. The parties each submit to the jurisdiction of any state or federal court sitting in Portland, Oregon over all claims in any action or proceeding arising from or relating to this Assignment. THE PARTIES EACH IRREVOCABLY WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY LITIGATION ARISING FROM OR RELATING TO THIS ASSIGNMENT. Assignor hereby authorizes Assignee to file and amend, as Assignee may deem necessary, financing statements regarding the Assigned Property. In any effort to enforce this Assignment, the prevailing party shall be entitled to an award of its reasonable attorney fees, including any incurred before suit is commenced, prior to or at trial, in any appeal and in any other proceeding.

IN WITNESS WHEREOF, the parties hereto have caused this Assignment for Security Purposes to be duly executed as of October, 2008.

U.S. Bancorp Equipment Finance, Inc.		Stellaris LLC, Assignor
By:	/s/ [Illegible]	By:	/s/Alfons Theeuwes
An Authorized Officer Thereof		Alfons Theeuwes
		Senior Vice President of Finance

1/07

ADDRESS FOR ALL NOTICES TO ASSIGNEE:

PO Box 230789

Portland, OR 97281-0789

EXHIBIT “A”

Equipment Finance

Schedule Number 944835-AFS

The Assigned Collateral (as defined and used in the Assignment for Security Purposes) includes the following:

One (1) Cessna (described as CESSNA on the International Registry drop down menu) Model 550, serial # 550-0971, Federal Aviation Registration Number N717GK, equipped with Two (2) Pratt & Whitney Canada model PW530A engine serial #’s PCE-DA0355 and PCE-DA0352 (described on the International Registry drop down menu as PRATT & WHITNEY CANADA model PW500 SERIES with serial numbers DA0355 and DA0352, respectively) each in excess of 550 shp;

including, but not limited to: (i) all avionics, accessories, improvements, components, instruments, furnishings, substitutions, additions, replacements, parts, tools and equipment now or hereafter affixed to or used in connection with such airframe, engines and/or propellers, together with all products and proceeds thereof, including but not limited to all leased and/or chartered income and all insurance recoveries; and (ii) all maintenance, support, supply, warranty, and/or service rights relating to such airframe, engines, and/or propellers, and any claims thereunder, including but not limited to rights and claims under any maintenance, support, supply and/or service plans or contracts.

The above Aircraft is type certified by the Federal Aviation Administration to transport at least eight persons including crew or goods weighing in excess of 2,750 kilograms.

The above Engines are powered by jet propulsion and each has at least 1,750 pounds of thrust or its equivalent.

The above aircraft is complete as equipped.

Plus

Certain chattel paper, consisting of any and all now existing or hereafter arising rental and lease agreements and all rents, income, accounts, payment intangibles, and sums due arising now or hereafter thereunder and all proceeds of any of the foregoing (each an “Agreement” and collectively the “Agreements”) between Assignor and its sub-users, and relating to the equipment and/or inventory that is the subject of such Agreements and is described above. Any purchase of an Agreement, or perfection of a security interest therein by possession or other control of the Agreement, violates the rights of U.S. Bancorp Equipment Finance, Inc. (and its successors and assigns).

U.S. Bancorp Equipment Finance, Inc.		Stellaris LLC
[Assignee]		[Lessor]
By:	/s/ [Illegible]	By:	/s/Alfons Theeuwes
An authorized officer thereof		Alfons Theeuwes
		Senior Vice President of Finance

AIRCRAFT SECURITY AGREEMENT

Equipment Finance

Schedule Number 944835-AFS

1.0  PARTIES, COLLATERAL AND OBLIGATIONS

1.1   For valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Stellaris LLC (hereinafter called “Debtor”) with offices at 26000 Commercentre Drive, Lake Forest, CA 92630 intending to be legally bound, hereby grants a first priority security interest in and assigns, transfers and sets over to U.S. Bancorp Equipment Finance, Inc., an Oregon corporation having offices at PO Box 230789, Portland, OR 97281-0789 (hereinafter called “Secured Party”), and to the successors and assigns thereof, the property specified in Section 7.0 wherever located, any and all proceeds thereof, Associated Rights (as defined below), insurance recoveries, and all replacements, additions, accessions, accessories and substitutions thereto or therefor, and all logs, manuals, records and documents issued for and reflecting the use thereof (hereinafter called the “Aircraft”). The security interest granted hereby is to secure the payment and performance of the Promissory Note of even date herewith (the “Note”), as well as any and all liabilities or obligations of Debtor to the Secured Party, matured or unmatured, direct or indirect, absolute or contingent, heretofore arising, now existing or hereafter arising, and whether under this Agreement or under any other writing between Debtor and Secured Party (all hereinafter called the “obligations” and/or the “liabilities”). In the event there is more than one Debtor, all obligations shall be joint and several obligations of all Debtors regardless of the source of Collateral (as hereinafter defined) or the particular Debtor with which the obligation originated, and each Debtor waives any surety defenses that it might raise with respect to any other Debtor. For the purposes of this Agreement, (a) the term “Associated Rights” and certain other terms used but not defined in this Agreement, or by reference to any other source, shall have the meaning provided for that term in the Cape Town Convention; and (b) the term “Cape Town Convention” shall mean and include, collectively, the official English language texts of Convention on International Interests in Mobile Equipment (the “Convention”) and the Protocol to the Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment (the “Aircraft Protocol”), each adopted on 16 November 2001 at a diplomatic conference held in Cape Town, South Africa, together with all regulations and procedures promulgated pursuant thereto (the “International Registry Regulations and Procedures”), as the same may be amended or modified from time to time.

1.2   Assignment and Security Interest. Debtor hereby grants a first priority security interest in and assigns, transfers and sets over to Secured Party, and Secured Party hereby accepts collateral assignment of, any and all leases and charter agreements relating to the Aircraft and any proceeds thereof (each a “Lease”, and collectively, the “Leases”) and all of Debtor’s right, title and interest in and to the property leased pursuant to the Leases and all rights, powers and remedies therein, to further secure the payment and performance by Debtor of the obligations; provided that Debtor shall not enter into any Lease without Secured Party’s prior written consent in accordance with Section 6.2 of this Agreement. Each lessee who is a party to each such Lease shall be referred to herein as a “Lessee.” Debtor shall deliver to Secured Party all original(s) of any Leases. The Leases and Aircraft shall be collectively referred to herein as the “Collateral.” Debtor hereby consents to the registration of such security interest granted to Secured Party in any such Lease with the international registry established pursuant to the Cape Town Convention and located in Dublin, Ireland (the “International Registry”) and shall, at closing, authorize its Professional User Entity to consent to the registrations of the International Interests (as defined in the Cape Town Convention) therein. Any such Lease shall be expressly subject and subordinate to this Agreement. Should an Event of Default (as defined herein) occur and continue, Secured Party shall have the right, either in its own name, or in Debtor’s name, to notify each Lessee that Secured Party should thereafter be regarded by such Lessee as Secured Party under each Lease and that Debtor shall no longer have any right, title or interest in or to such Lease. Thereafter, Secured Party may take any action under the provisions of the Leases as assignee of the Debtor’s interest in such Leases in accordance with the terms thereof, and may release any rights against, grant extensions of time to, and compromise claims with, each Lessee and may repossess and resell or re-lease the property which is the subject thereof. Debtor shall reimburse Secured Party for all expenses of collection and repossession incurred by Secured Party in connection with enforcing its rights under the Leases, including but not limited to, reasonable attorney’s fees, court costs, expenses of repossession and sale and interest on overdue payments. Debtor agrees that Secured Party may, upon reasonable prior notice and at a reasonable time, audit Debtor’s books and records relating to the Leases. Each Lease shall be filed with the U.S. Federal Aviation Administration (“FAA”), with a copy of this Agreement attached, and any International Interest (as defined in the Cape Town Convention) created in favor of Debtor thereby shall be registered with the International Registry and assigned to Secured Party. Each lessee under any Lease shall be a Transacting User Entity (as defined below), shall appoint a Professional User Entity and shall consent to the registration of any International Interest upon the closing of such Lease.

2.0   WARRANTIES AND COVENANTS OF DEBTOR: Debtor hereby represents, warrants and covenants that:

2.1   Business Organization, Status and Authority. (i) Debtor is duly organized, validly existing and in good standing under the laws of the state of its organization and is qualified to do business in all states and countries in which such qualification is necessary; (ii) Debtor has the lawful power and authority to own its assets and to conduct the business in which it is engaged; and to execute and comply with the provisions of this Agreement, the Note and any related documents (collectively, the “Financing Documents”); (iii) the

execution and delivery of the Financing Documents have been duly authorized by all necessary action, and the Financing Documents constitute valid, legal and binding agreements, enforceable in accordance with their terms; (iv) no authorization, consent, approval, license or exemption of, or filing or registration with, any or all of the owners of Debtor or any governmental entity was, is or will be necessary to the valid execution, delivery, performance or full enforceability of the Financing Documents; (v) except as specifically disclosed to Secured Party, Debtor utilizes no trade names in the conduct of its business and/or has not changed its name within the past five years; (vi) Debtor is and shall continue to be a “citizen of the United States”, within the meaning of the Transportation Code (Title 49, Subtitle VII of the United States Code), as amended, and the regulations thereunder (collectively, the “Transportation Code”) and is “situated” in a country that is a party to the Cape Town Convention within the meaning of Article 4 of the Convention so long as any of the obligations remain due; (vii) any Lessee is and shall be in good standing under the laws of the state of its organization and is duly qualified to do business in all required jurisdictions; and (viii) the Aircraft has not been registered in any jurisdiction other than the United States. Debtor shall not change its state of organization, headquarters or residence without providing prior written notice to Secured Party. Debtor shall give written notice to Secured Party within 30 days of any termination or revocation of Debtor’s existence by its state of organization.

2.2   Merger; Transfer of Assets. Debtor shall not consolidate or merge with or into any other entity, liquidate or dissolve, distribute, sell, lease, transfer or dispose of all of its ownership interests, properties or assets or any substantial portion thereof other than in the ordinary course of its business, unless the Secured Party shall give its prior written consent, and the surviving, or successor entity or the transferee of such assets, as the case may be, shall assume, by a written instrument which is legal, valid and enforceable against such surviving or successor entity or transferee, all of the obligations of Debtor to Secured Party or any affiliate of Secured Party.

2.3   No Violation of Covenants or Laws. Debtor is not party to any agreement or subject to any restriction which materially and adversely affects its ability to perform its obligations under the Financing Documents. The execution of and compliance with the terms of the Financing Documents does not and will not (i) violate any provision of law, or (ii) conflict with or result in a breach of any order, injunction, or decree of any court or governmental authority or the formation documents of Debtor, or (iii) constitute or result in a default under any agreement, bond or indenture by which Debtor is bound or to which any of its property is subject, or (iv) result in the imposition of any lien or encumbrance upon any of Debtor’s assets, except for any liens created under the Financing Documents.

2.4   Accurate Information. All financial information submitted to the Secured Party in regard to Debtor or any shareholder, officer, director, member, or partner thereof, or any guarantor of any of the obligations thereof, was prepared in accordance with generally accepted accounting principles, consistently applied, and fairly and accurately depicts the financial position and results of operations of Debtor or such other person, as of the respective dates or for the respective periods, to which such information pertains. Debtor had good, valid and marketable title to all the properties and assets reflected as being owned by it on any balance sheet of Debtor submitted to Secured Party as of the date thereof.

2.5   Judgments; Pending Legal Action. There are no judgments outstanding against Debtor, and there are no actions or proceedings pending or, to the best knowledge of Debtor, threatened against or affecting Debtor or any of its properties in any court or before any governmental entity which, if determined adversely to Debtor, would result in any material adverse change in the business, properties or assets, or in the condition, financial or otherwise, of Debtor or would materially and adversely affect the ability of Debtor to satisfy its obligations under the Financing Documents.

2.6   No Breach of Other Agreements; Compliance with Applicable Laws. Debtor is not in breach of or in default under any loan agreement, indenture, bond, note or other evidence of indebtedness, or any other material agreement or any court order, injunction or decree or any lien, statute, rule or regulation. The operations of Debtor comply with all laws, ordinances and governmental rules and regulations applicable to them. Debtor has filed all federal, state and municipal income tax returns which are required to be filed and has paid all taxes as shown on said returns and on all assessments billed to it to the extent that such taxes or assessments have become due. Debtor does not know of any other proposed tax assessment against it or of any basis for one.

2.7   Sale or Pledge Prohibited. Debtor shall not sell, dispose of or offer to sell or otherwise transfer the Collateral or any interest therein without the prior written consent of Secured Party. Debtor shall not grant any security interest in or pledge any of the Collateral to any party other than Secured Party. If Secured Party is requested to give consent to any sublease of any of the Collateral by any Lessee, such consent shall be conditioned on, among other things, any sublessee’s interest under any sublease being subordinate to Debtor’s interest under the related Lease.

2.8   Location of the Aircraft. The home airport(s) of the Aircraft shall be at:

18601 Airport Way, Santa Ana, CA 92707 County: Orange

Debtor shall not change the principal domicile of the Aircraft from said location(s) without the prior written consent of Secured Party.

2.9   Cape Town Convention Matters. Debtor hereby makes the following representations and warranties, and undertakes the following obligations:   (i)   there are no International Interests registered with the International Registry (as defined below) with

respect to the Collateral or this Agreement, and Debtor will not permit any International Interests to be filed with the International Registry except (A) for the sale of the Aircraft by the seller thereof to Debtor, (B) Debtor’s International Interest with respect to any Lease (which interest shall be assigned to Secured Party), (C) with respect to Secured Party’s interest in the Collateral or (D) as otherwise consented to in writing by Secured Party; (ii) Debtor is a Transacting User Entity, has appointed an Administrator and has designated a Professional User Entity (as defined in the International Registry Regulations and Procedures, which Professional User Entity shall be McAfee & Taft, A Professional Corporation (as such terms are defined in the International Registry Regulations and Procedures) acceptable to Secured Party; (iii) Debtor has paid all required fees and taken all actions necessary to enable Secured Party to register any International Interest in the Collateral with the International Registry; (iv) Debtor has the power to grant any security interests described herein, lease the aircraft pursuant to a Lease and assign any International Interests in any Lease(s), each within the meaning of Article 7(b) of the Convention; (v) Debtor shall not discharge nor allow to be discharged any International Interest created in favor of or assigned to Secured Party without Secured Party’s prior written consent; (vi) Debtor shall promptly cause any non-consensual lien that is registered with the International Registry to be discharged; (vii) Debtor hereby consents to the registration of any International Interest arising in connection with this Agreement and/or any Financing Document in favor of Secured Party and hereby authorizes its Professional User Entity to consent to the registration (including all related Final Consents, as defined in the International Registry Regulations and Procedures) of any International Interest with the International Registry upon Secured Party’s request; (viii) at closing, Debtor hereby agrees to authorize its Professional User Entity to consent to the registration(s) of any International Interest(s); (ix) each of the engines of the Aircraft has at least 1,750 pounds of thrust or its equivalent; (x) the airframe comprising the Aircraft is type certified by the FAA to transport at least eight people (including crew) or goods in excess of 2,750 kilograms; and (xi) the Irrevocable De-Registration and Export Request Authorization, which shall be substantially in the form of Exhibit A hereto (the “IDERA”) has been duly executed and delivered by an authorized representative of Debtor.

2.10   Perfection of Security Interest. Except for (i) the security interest and International Interest granted hereby and (ii) any other security interest previously disclosed by Debtor to Secured Party in writing, Debtor is the owner of the Collateral free from any adverse lien, security interest, International Interest or encumbrance. Debtor shall defend the Collateral against all claims and demands of all persons at any time claiming any interest therein. At the request of Secured Party, Debtor shall execute, acknowledge and deliver to Secured Party any document or instrument, in form satisfactory to Secured Party, required by Secured Party to further the purposes of the Financing Documents. Debtor hereby authorizes Secured Party to file any financing statement(s) and to be named as lienholder or creditor on any registration(s) and other filings needed to perfect Secured Party’s interest in the Collateral, including, without limitation: (a) any registrations and filings with the FAA; (b) any registrations and filings pursuant to the Cape Town Convention; and (c) any financing statements, amendments and continuation statements thereto pursuant to the Uniform Commercial Code. All such registrations, filings and financing statements shall be in form satisfactory to Secured Party, and Debtor shall pay the cost of filing the same in all public offices where filing is deemed by Secured Party to be necessary or desirable. In addition to the foregoing, Debtor shall take such further action at its own cost as Secured Party may request to establish, maintain and protect Secured Party’s rights and interests in the Collateral and the Financing Documents under the Cape Town Convention and the Transportation Code, as applicable.

2.11   Insurance. Unless otherwise agreed, Debtor, at its own expense, shall have and maintain insurance from financially sound carriers at all times with respect to all Collateral against loss, damage, or destruction, including hull insurance, including all-risk ground, taxiing, and flight coverage of the Aircraft and all-risk coverage of all engines and parts, all for the full insurable value thereof, plus breach of warranty insurance, liability insurance, and coverage of such other risks as Secured Party may require, containing such terms, in such form, for such periods and written by such companies as may be satisfactory to Secured Party. Each insurance policy shall name Secured Party as lender’s loss payee and shall be payable to Secured Party and Debtor as their interests may appear; all policies of insurance shall provide for not less than thirty (30) days’ written cancellation notice to Secured Party; Debtor shall furnish Secured Party with certificates or other evidence satisfactory to Secured Party of compliance with the foregoing insurance provisions. As to Secured Party’s interest in such policies, no act or omission of Debtor or any of its officers, agents, employees or representatives shall affect the obligations of the insurer to pay the full amount of any loss. Debtor hereby assigns to Secured Party any monies which may become payable, including returned and unearned premiums, under any insurance on the Collateral.

2.12   Use, Operation, Maintenance and Repair of the Aircraft.

(a)Debtor shall (or cause each Lessee to) use, operate, maintain, and store the Aircraft, and every part thereof, carefully and in compliance with all applicable statutes, ordinances, and regulations of all jurisdictions in which the Aircraft is used, and with all applicable insurance policies, manufacturer’s recommendations and operating and maintenance manuals, including, without limitation FAR 121 or 135 as may be applicable, and all applicable maintenance, service, repair and overhaul manuals and service bulletins published by the manufacturers of the Aircraft or of the accessories, equipment and parts installed on the Aircraft. Without limitation of the foregoing, the Aircraft shall be continuously maintained on an external engine maintenance service insurance plan (the “Program”) satisfactory to Secured Party. At or prior to the time the Note is funded, Debtor shall provide to Secured Party a copy of the Program. Secured Party shall be given an interest in the Program, and the Program shall provide that Secured Party shall be given thirty (30) days’ notice of Debtor’s default, with an ability for Secured Party to cure such default. Debtor shall keep complete and continuing records and documents regarding the performance of all maintenance under the Program, and shall provide copies of all such records and documents to Secured Party upon request. In the event of any default under the Financing Documents, Secured Party

shall have the right, but not the obligation, to continue the Program at Debtor’s sole cost and expense. Debtor shall use the Aircraft primarily for business purposes. Debtor shall not base, or permit the Aircraft to be based, outside the continental limits of the United States of America. Debtor shall not operate or locate the Aircraft, or permit the Aircraft to be operated or located or permitted to go over or into (i) any country or jurisdiction that does not maintain full diplomatic relations with the United States, (ii) any area of hostilities, (iii) any geographic area which is not covered by the required insurance policies, or (iv) any country or jurisdiction for which exports or transactions are subject to specific restrictions under any law or directive of the United States or of the United Nations Security Council, including without limitation. The Trading With the Enemy Act, 50 U.S.C. App. Section 1 et seq., the International Emergency Economic Powers Act, 50 U.S.C. App. Section 1701 et seq. and the United States Export Administration Act, 50 U.S.C. App. Section 2401 et seq., nor shall the Debtor violate or permit the violation of such laws. Debtor shall adhere to reasonable practices for Debtor’s industry and the type of Aircraft, for security against terrorism and other risks At its own risk, Debtor shall use or permit the use of the Aircraft only by entities which are duly organized and in good standing in the jurisdictions in which such entities are formed. Debtor shall not loan, lease, rent (except pursuant to the Leases), or otherwise dispose of the Aircraft, without Secured Party’s prior written consent. Debtor shall not use or permit the use of the Aircraft in any unintended, injurious or unlawful manner and shall not change or alter or permit the change or alteration of the Aircraft (except pursuant to the Leases) without Secured Party’s written consent. In the event that laws or regulations require the alteration of the Aircraft, Debtor shall conform or obtain conformance therewith at no expense of Secured Party. No technical or non-substantial non-compliance with the provisions of this paragraph shall be deemed a material breach if Debtor shall have obtained from the appropriate authorities permissions, extensions or continuances.

(b)The Aircraft shall be operated at all times by a currently-certificated pilot having the minimum total pilot hours and pilot-in-command hours required by FAA rules or regulations and applicable insurance policies. Debtor shall pay for all expenses, including storage, fuel, lubricants, service, inspections, overhauls, replacements, and repairs.

(c) Debtor shall keep the Aircraft free from any adverse lien, International Interest or encumbrance (and shall promptly notify Secured Party of any attachment of any such lien or any seizure or levy) and in airworthy condition, good working order and repair and shall not waste or destroy the Aircraft or any part thereof. Debtor shall furnish all required parts and servicing (including any contract service necessary to maintain the benefit of any warranty of the manufacturer). Debtor shall maintain (or cause each Lessee to maintain) all records, logs and other materials required by the aeronautics authority to be maintained in respect to the Aircraft, regardless of upon whom such requirements are, by their terms, normally imposed. Secured Party may examine and inspect the Aircraft and any and all books and records of Debtor during business hours at any time; such right of inspection shall include the right to copy Debtor’s books and records and to converse with Debtor’s officers, employees, agents, and independent accountants. Debtor shall promptly reimburse Secured Party for any costs incurred by Secured Party for such inspections, including but not limited to consultants’ fees and expenses.

2.13   Taxes and Assessments. Debtor shall pay promptly when due all taxes, assessments, levies, imposts, duties and charges, of any kind or nature, imposed upon the Collateral or for its use or operation or upon this Agreement or upon any instruments evidencing the obligations.

2.14   Financial Statements. Within thirty (30) days after Secured Party’s request, Debtor shall deliver all information requested by Secured Party which Secured Party deems reasonably necessary to determine Debtor’s current financial condition. Each financial statement submitted by Debtor to Secured Party shall be prepared in accordance with generally accepted accounting principles consistently applied and shall fairly and accurately present the Debtor’s financial condition and results of operations for the period to which it pertains.

2.15   Enforceability of Leases. All Leases have been or shall be duly executed by Debtor and the respective Lessee and shall constitute the legal, valid and binding obligations of all parties thereto, enforceable against the Lessees.

3.0   EVENTS OF DEFAULT

3.1   Each of the following shall be considered an Event of Default: (i) failure on the part of Debtor to promptly perform in complete accordance with its representations, warranties and covenants made in this Agreement or in any other agreement with Secured Party, including, but not limited to, the payment of any liability, with interest, when due or default by Debtor under the provisions of any other material agreement to which Debtor is party; (ii) the death of Debtor if an individual or the dissolution of Debtor if a business organization; (iii) the filing of any petition or complaint under the federal Bankruptcy Code or other federal or state acts of similar nature, by or against Debtor; or an assignment for the benefit of creditors by Debtor; (iv) an application for or the appointment of a receiver, trustee or conservator, voluntary or involuntary, by or against Debtor or for any substantial assets of Debtor; (v) insolvency of Debtor under either federal or state law or applicable principles of equity; (vi) entry of judgment, issuance of any garnishment or attachment, or filing of any lien, claim or government attachment against the Collateral or which, in Secured Party’s sole discretion, might impair the Collateral; (vii) the determination by Secured Party that a material misrepresentation of fact has been made by Debtor in this Agreement or in any writing supplementary or ancillary hereto; (viii) a determination by Secured Party that Debtor has suffered a material adverse change in its financial condition, business or operations from the date of this Agreement; (ix) bankruptcy,

insolvency, termination, death, dissolution or default of any guarantor for Debtor; (x) any actual or anticipated (in Secured Party’s reasonable discretion) unauthorized revocation, nonrenewal or termination of a letter of credit, surety bond or other instrument issued for the benefit of Secured Party as additional security for the obligations of Debtor hereunder; or (xi) any unauthorized filing by Debtor of a termination for or discharge of any financing statement or registration (including, without limitation, any registration of any International Interest) filed by, assigned to or in favor of Secured Party. A default hereunder constitutes a default as contemplated under the Cape Town Convention.

4.0   REMEDIES

4.1   Upon the happening of any Event of Default which is not cured within ten (10) days or at any time thereafter: (i) all liabilities of Debtor shall, at the option of Secured Party, become immediately due and payable; (ii) Secured Party shall have and may exercise all of the rights and remedies granted to a secured party under the Uniform Commercial Code and, in addition thereto and without limitation thereof, all of the rights and remedies (including, without limitation, interim remedies) granted to a creditor under the Cape Town Convention; (iii) Secured Party shall have the right, immediately, and without notice or other action, to set-off against any of Debtor’s liabilities to Secured Party any money owed by Secured Party in any capacity to Debtor, whether or not due; (iv) Secured Party may proceed with or without judicial process to take possession of all or any part of the Collateral; Debtor agrees that upon receipt of notice of Secured Party’s intention to take possession of all or any part of said Collateral, Debtor shall do everything necessary to make same available to Secured Party (including, without limitation, assembling the Collateral and making it available to Secured Party at a place designated by Secured Party which is reasonably convenient to Debtor and Secured Party); and so long as Secured Party acts in a commercially reasonable manner, Debtor agrees to assign, transfer and deliver at any time the whole or any portion of the Collateral or any rights or interest therein in accordance with the Uniform Commercial Code and/or the Cape Town Convention, and without limiting the scope of Secured Party’s rights thereunder; (v) Secured Party may sell the Collateral at public or private sale or in any other commercially reasonable manner and, at the option of Secured Party, in bulk or in parcels and with or without having the Collateral at the sale or other disposition, and Debtor agrees that in case of sale or other disposition of the Collateral, or any portion thereof, Secured Party shall apply all proceeds first to all costs and expenses of disposition, including attorneys’ fees, and then to Debtor’s obligations to Secured Party; (vi) Secured Party may elect to accept the Collateral or any part thereof in satisfaction of all sums due from Debtor; and (vii) Secured Party may procure the de-registration and export of the Aircraft pursuant to the IDERA. All remedies provided in this paragraph shall be cumulative. Secured Party may exercise any one or more of such remedies in addition to any and all other remedies Secured Party may have under any applicable law or in equity, including, without limitation, under the Uniform Commercial Code and/or the Cape Town Convention.

4.2   Expenses; Disposition. Any notification of a sale or other disposition of Collateral or of other action by Secured Party required to be given by Secured Party, will be sufficient and deemed reasonable if given personally, mailed, or delivered by facsimile transmission or overnight carrier not less than ten (10) days prior to the day on which such sale or other disposition will be made or action taken. Upon default, any amounts due and to become due hereunder shall, without notice, bear interest, from the date such amounts are due until paid, at a rate (the “Default Rate”) which is the lesser of: (i) the maximum rate per annum which Secured Party is permitted by law to charge, or (ii) the greater of: (y) eighteen percent (18%) per annum, or (z) five percent (5%) per annum over the prime rate which is announced from time to time by U.S. Bank National Association to be its prime rate. Debtor shall pay all reasonable expenses of realizing upon the Collateral hereunder and collecting all liabilities of Debtor to Secured Party, including any collection agency fee. In any interpretation or enforcement of the Financing Documents or any dispute related thereto or to the relationship between the parties. Debtor shall pay Secured Party’s legal expenses and reasonable attorneys’ fees, including any incurred before and at trial, on appeal, in any other proceeding or without any litigation being filed.

5.0   MISCELLANEOUS

5.1   No Implied Waivers; Entire Agreement. Unless expressly provided otherwise in the Note, this Agreement and the Note are non-cancelable and may not be prepaid. The waiver by Secured Party of any default hereunder or of any provisions hereof shall not discharge any party hereto from liability hereunder and such waiver shall be limited to the particular Event of Default and shall not operate as a waiver of any other or subsequent default. No modification of this Agreement or waiver of any right of Secured Party hereunder shall be valid unless in writing and signed by an authorized officer of Secured Party. No failure on the part of Secured Party to exercise, or delay in exercising, any right or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right or remedy. The provisions of this Agreement and the rights and remedies granted to Secured Party herein shall be in addition to, and not in limitation of those of any other agreement with Secured Party or any other evidence of any liability held by Secured Party. The Financing Documents embody the entire agreement between the parties and supersede all prior agreements and understandings relating to the same subject matter. If any of the Financing Documents are delivered to Secured Party by facsimile transmission, such documents (and signatures thereon) shall be treated as, and have the same force and effect as, originals. References herein to the “Agreement” and the “Note” shall mean the Agreement and Note as each may respectively be amended from time to time.

5.2   Choice of Law; Waiver of Jury. The Financing Documents and the rights and liabilities of the parties shall be governed by applicable federal law and the laws of the state of Oregon. Any legal action or proceeding with respect to the Financing Documents shall be brought in state court sitting in Portland, Oregon, and, by execution and delivery of the Financing Documents, each of the

parties consents to the jurisdiction of such court and waives any defense of lack of jurisdiction or inconvenient forum. Service of process by overnight courier will be sufficient to confer personal jurisdiction over the Debtor. SECURED PARTY AND DEBTOR EACH IRREVOCABLY WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY LITIGATION ARISING FROM OR RELATED TO ANY OF THE FINANCING DOCUMENTS. Notwithstanding anything in the foregoing to the contrary, Secured Party may bring a judicial proceeding involving the Registrar of the International Registry in the Republic of Ireland, as and to the extent Secured Party deems it necessary in connection with its exercise of its rights and remedies under the Financing Documents.

5.3   Late Charge. If any of the obligations remains overdue for more than ten (10) days, Debtor hereby agrees to pay on demand, as a late charge, an amount equal to the lesser of (i) five percent (5%) of each such overdue amount; or (ii) the maximum percentage of any such overdue amount permitted by applicable law as a late charge. Debtor agrees that the amount of such late charge represents a reasonable estimate of the cost to Secured Party of processing a delinquent payment and that the acceptance of any late charge shall not constitute a waiver of default with respect to the overdue amount or prevent Secured Party from exercising any other available rights and remedies.

5.4   Protection of the Collateral. At its option, Secured Party may discharge taxes, liens or other encumbrances at any time levied or placed on the Collateral, may pay for insurance on the Collateral and may pay for the maintenance and preservation of the Collateral. Debtor agrees to reimburse Secured Party on demand for any payment made or any expense incurred by Secured Party pursuant to the foregoing authorization and to pay a fee for additional monitoring incurred by Secured Party for Debtor’s failure to maintain coverage or protection as provided herein. Any payments made by Secured Party shall be immediately due and payable by Debtor and shall bear interest at the Default Rate. Until default, Debtor may retain possession of the Collateral and use it in any lawful manner not inconsistent with the provisions of this Agreement and any other agreement between Debtor and Secured Party and not inconsistent with any policy of insurance thereon.

5.5   Binding Agreement; Time of the Essence. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto, their respective heirs, executors, administrators, successors, and assigns. Time is of the essence with respect to the performance of Debtor’s obligations under this Agreement and any other agreement between Debtor and Secured Party.

5.6   Enforceability. Any term, clause or provision of this Agreement or of any evidence of indebtedness from Debtor to Secured Party which is unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective only to the extent of such prohibition or unenforceability without invalidating the remaining terms or clauses of such provision or the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such term, clause or provision in any other jurisdiction.

5.7   Notices. Any notices or demands required to be given herein shall be given to the parties in writing by facsimile transmission, or by overnight courier or United States mail (first class, express, certified or otherwise) at the addresses set forth on page 1 of this Agreement or to such other addresses as the parties may hereafter substitute by written notice given in the manner prescribed in this paragraph.

5.8   Additional Security. If there shall be any other collateral for any of the obligations, or for the obligations of any guarantor thereof, Secured Party may proceed against and/or enforce any or all of the Collateral and such collateral in whatever order it may, in its sole discretion, deem appropriate. Any amount(s) received by Secured Party from whatever source and applied by it to any of the obligations shall be applied in such order of application as Secured Party shall from time to time, in its sole discretion, elect.

6.0   ASSIGNMENT

6.1   SECURED PARTY MAY SELL OR ASSIGN ANY AND ALL RIGHT, TITLE AND INTEREST IT HAS IN THE COLLATERAL, ANY ASSOCIATED RIGHTS AND/OR ARISING UNDER THIS AGREEMENT. DEBTOR HERBY CONSENTS TO ANY SUCH SALE OR ASSIGNMENT BY SECURED PARTY, INCLUDING, WITHOUT LIMITATION, FOR PURPOSES OF THE CAPE TOWN CONVENTION. DEBTOR SHALL, UPON THE DIRECTION OF SECURED PARTY: 1) EXECUTE ALL DOCUMENTS NECESSARY TO EFFECTUATE SUCH ASSIGNMENT (INCLUDING, WITHOUT LIMITATION, INTERNATIONAL REGISTRY FILINGS (AND ANY NECESSARY CONSENTS THERETO, AS WELL AS ANY RENEWAL OF ANY AUTHORIZATIONS REQUIRED BY THE INTERNATIONAL REGISTRY IN CONNECTION WITH SUCH FILING, SUCH AS RENEWING DEBTOR’S TRANSACTING USER ENTITY STATUS AND RE-DESIGNATING A PROFESSIONAL USER ENTITY, IF NECESSARY IN SECURED PARTY’S JUDGMENT)) AND, 2) PAY DIRECTLY AND PROMPTLY TO SECURED PARTY’S ASSIGNEE WITHOUT ABATEMENT, DEDUCTION OR SET-OFF, ALL AMOUNTS WHICH HAVE BECOME DUE UNDER THE ASSIGNED AGREEMENTS. SECURED PARTY’S ASSIGNEE SHALL HAVE ANY AND ALL RIGHTS, IMMUNITIES AND DISCRETION OF SECURED PARTY HEREUNDER AND SHALL BE ENTITLED TO EXERCISE ANY REMEDIES OF SECURED PARTY HEREUNDER. ALL REFERENCES HEREIN TO SECURED PARTY SHALL INCLUDE SECURED PARTY’S ASSIGNEE (EXCEPT THAT SAID ASSIGNEE SHALL NOT BE CHARGEABLE WITH ANY OBLIGATIONS OR LIABILITIES HEREUNDER OR IN RESPECT HEREOF). DEBTOR SHALL NOT ASSERT AGAINST SECURED PARTY’S ASSIGNEE ANY DEFENSE, COUNTERCLAIM OR SET-OFF WHICH DEBTOR MAY HAVE AGAINST SECURED PARTY.

6.2   DEBTOR SHALL NOT ASSIGN OR IN ANY WAY DISPOSE OF ALL OR ANY OF ITS RIGHTS, ASSOCIATED RIGHTS OR OBLIGATIONS UNDER THIS AGREEMENT OR ENTER INTO ANY AGREEMENT REGARDING ALL OR ANY PART OF THE COLLATERAL AND/OR ANY ASSOCIATED RIGHTS WITHOUT THE PRIOR WRITTEN CONSENT OF SECURED PARTY. IN CONNECTION WITH THE GRANTING OF SUCH CONSENT AND THE PREPARATION OF NECESSARY DOCUMENTATION (INCLUDING, WITHOUT LIMITATION, SATISFACTION OF ALL REQUIREMENTS OF THE CAPE TOWN CONVENTION WITH RESPECT TO SUCH ASSIGNMENT), A FEE SHALL BE ASSESSED EQUAL TO ONE PERCENT (1%) OF THE TOTAL REMAINING BALANCE THEN DUE HEREUNDER.

7.0   SCHEDULE OF AIRCRAFT

One (1) Cessna (described as CESSNA on the International Registry drop down menu) Model 550, serial # 550-0971, Federal Aviation Registration Number N717GK, equipped with Two (2) Pratt & Whitney Canada model PW530A engine serial #’s PCE-DA0355 and PCE-DA0352 (described on the International Registry drop down menu as PRATT & WHITNEY CANADA model PW500 SERIES with serial numbers DA0355 and DA0352, respectively) each in excess of 550 shp;

including, but not limited to: (i) all avionics, accessories, improvements, components, instruments, furnishings, substitutions, additions, replacements, parts, tools and equipment now or hereafter affixed to or used in connection with such airframe, engines and/or propellers, together with all products and proceeds thereof, including but not limited to all leased and/or chartered income and all insurance recoveries; and (ii) all maintenance, support, supply, warranty, and/or service rights relating to such airframe, engines, and/or propellers, and any claims thereunder, including but not limited to rights and claims under any maintenance, support, supply and/or service plans or contracts.

The above Aircraft is type certified by the Federal Aviation Administration to transport at least eight persons including crew or goods weighing in excess of 2,750 kilograms.

The above Engines are powered by jet propulsion and each has at least 1,750 pounds of thrust or its equivalent.

The above aircraft is complete as equipped.

Plus

Certain chattel paper, consisting of any and all now existing or hereafter arising rental and lease agreements and all rents, income, accounts, payment intangibles, and sums due arising now or hereafter thereunder and all proceeds of any of the foregoing (each an “Agreement” and collectively the “Agreements”) between Assignor and its sub-users, and relating to the equipment and/or inventory that is the subject of such Agreements and is described above. Any purchase of an Agreement, or perfection of a security interest therein by possession or other control of the Agreement, violates the rights of U.S. Bancorp Equipment Finance, Inc. (and its successors and assigns).

Debtor represents and warrants that the information contained in this Section 7.0 (including the registration number of the airframe, the serial numbers of the airframe and engines, and the manufacturer and model numbers of the airframe and engines) is true and accurate in all respects.

8.0   POWER OF ATTORNEY

8.1   Debtor hereby appoints Secured Party as its attorney-in-fact to sign Debtor’s name and to make non-material amendments (including completing and conforming the description of the Collateral) on any document in connection with this Agreement, including any document necessary for processing aircraft registration(s), and to obtain, adjust and settle any insurance required by this Agreement and to endorse any drafts in connection with such insurance.

9.0   NOTICE

9.1   Under Oregon law, most agreements, promises and commitments made by Secured Party concerning loans and other credit extensions must be in writing, express consideration and be signed by Secured Party to be enforceable.

This instrument may be executed in separate counterparts, each of which when executed and delivered shall be deemed an original, but all such counterparts shall together constitute but one and the same instrument.

In Witness Whereof, the parties hereto have caused this Agreement to be duly executed the 14 day of October, 2008.

Stellaris LLC	U.S. Bancorp Equipment Finance, Inc.
[Debtor]	[Secured Party]

By:	/s/ Alfons Theeuwes	By:
Alfons Theeuwes		An authorized officer thereof
Senior Vice President of Finance
9/06

ADDRESS FOR NOTICES TO SECURED PARTY:

PO Box 230789

Portland, OR 97281-0789

In Witness Whereof, the parties hereto have caused this Agreement to be duly executed the    day of          , 20  .

Stellaris LLC	U.S. Bancorp Equipment Finance, Inc.
[Debtor]	[Secured Party]

By:	By:	/s/ [Illegible]
Alfons Theeuwes	An authorized officer thereof
Senior Vice President of Finance
9/06

ADDRESS FOR NOTICES TO SECURED PARTY:

PO Box 230789

Portland, OR 97281-0789

EXHIBIT A TO AIRCRAFT SECURITY AGREEMENT

FORM OF IRREVOCABLE DE-REGISTRATION AND EXPORT REQUEST AUTHORIZATION

October 14, 2008

To: Federal Aviation Administration, Civil Aircraft Registry

Re: Irrevocable De-Registration and Export Request Authorization(1)

The undersigned is the registered owner of the Cessna (described as CESSNA model 550 on the International Registry drop down menu) model 550 bearing manufacturer’s serial number 550-0971 and registration number N717GK; including two (2) Pratt & Whitney Canada model PW530A aircraft engines bearing manufacturer’s serial numbers PCE-DA0352 and PCE-DA0355 (described as PRATT & WHITNEY CANADA model PW500 SERIES aircraft engines serial numbers DA0355 and DA0352 on the International Registry drop down menu) (together with all installed, incorporated or attached accessories, parts and equipment, the “aircraft”).

This instrument is an irrevocable de-registration and export request authorization issued by the undersigned in favor of U.S. Bancorp Equipment Finance, Inc. (“the authorized party”) under the authority of Article XIII of the Protocol to the Convention on International Interests in Mobile Equipment on Matters specific to Aircraft Equipment. In accordance with that Article, the undersigned hereby requests:

(i) recognition that the authorized party or the person it certifies as its designee is the sole person entitled to:

(a) procure the de-registration of the aircraft from the Civil Aircraft Registry maintained by the Federal Aviation Administration for the purposes of Chapter III of the Convention on International Civil Aviation, signed at Chicago, on 7 December 1944, and

(b) procure the export and physical transfer of the aircraft from the United States of America; and

(ii) confirmation that the authorized party or the person it certifies as its designee may take the action specified in clause (i) above on written demand without the consent of the undersigned and that, upon such demand, the authorities in the United States of America shall co-operate with the authorized party with a view to the speedy completion of such action.

The rights in favor of the authorized party established by this instrument may not be revoked by the undersigned without the written consent of the authorized party.

[SIGNATURE PAGE FOLLOWS]

3/06

(1) Filed in connection with and made a part of the Aircraft Security Agreement dated as of                    , 2008, between Stellaris, LLC, as Debtor, and U.S. Bancorp Equipment Finance, Inc., as secured party, filed with the FAA simultaneously herewith.

Please acknowledge your agreement to this request and its terms by appropriate notation in the space provided below and lodging this instrument in Civil Aviation Registry of the Federal Aviation Administration.

Agreed to and lodged this l4 day of October, 2008.

Stellaris LLC

[Debtor]

By:	/s/ Alfons Theeuwes
Alfons Theeuwes
Senior Vice President of Finance

  CERTIFICATE OF AUTHORITY
(LEASE/LOAN)

Equipment Finance

I/WE HEREBY CERTIFY to U.S. Bancorp Equipment Finance, Inc. (the “Creditor”) that: a) I/we am/are the person(s) authorized to certify on behalf of Stellaris LLC, a business entity (the “Company”) organized and maintaining good standing under the laws of the State of Nevada; b) the following is a true and correct copy of certain Resolutions duly adopted or voted by the Board of Directors, Members or Managers, as appropriate, of the Company; c) I/we have placed a copy of such Resolutions in the official records of the Company; d) such Resolutions have not been rescinded, amended, or otherwise altered or repealed; and e) such Resolutions are now in full force and effect and are in full compliance with the formation documents of the Company, as such may have been amended. The Company has resolved the following:

1)  That the Company from time to time leases personal property and/or borrows money or otherwise obtains credit from Creditor and that the entire amount of leasing, borrowing or credit under this resolution at any one time, whether direct or indirect, absolute or contingent, shall be unlimited;

2)  That any one of the officers, agents, members, or managers designated below is hereby authorized to borrow money and to obtain credit and other financial accommodations (including the leasing of personal property) for the Company; and to execute and deliver on behalf of the Company any and all documentation required in connection therewith in such form and containing such terms and conditions as the person(s) executing such documents shall approve as being advisable and proper and in the best interests of the Company; and that the execution thereof by such person(s) shall be conclusive evidence of such approval; and, as security for the Company’s obligations to Creditor to pledge, assign, transfer, mortgage, grant a security interest in, hypothecate, or otherwise encumber any and all property of the Company, whether tangible or intangible; and to execute and deliver all instruments of assignment and transfer;

3)  That any officer, member, manager, agent or employee of the Company is hereby further authorized to take any and all such other actions as may be necessary to carry out the intent and purposes of these Resolutions, and that any and all actions taken by such person(s) to carry out such intent and purposes prior to the adoption of these Resolutions are hereby ratified and confirmed by, and adopted as the action of, the managers of the Company; and

4)  That these Resolutions shall constitute a continuing authority to the designated person or persons to act on behalf of the Company, and the powers and authority granted herein shall continue until revoked by the Company and formal written notice of such revocation shall have been given to Creditor. These Resolutions do not supersede similar prior resolutions given to Creditor.

I/WE HEREBY FURTHER CERTIFY that pursuant to the formation documents and any other appropriate documents of the Company as may be necessary, the following named person(s) have been properly designated and appointed to the position(s)/office(s) indicated below, that such person(s) continue to hold such position(s)/office(s) at the time of execution of the documentation for the transaction(s) with Creditor, and that the signature(s) of such person(s) shown below are genuine.

OFFICE	NAME	SIGNATURE
Senior Vice President of Finance	Alfons Theeuwes	/s/ Alfons Theeuwes

I/WE HEREBY FURTHER CERTIFY that, pursuant to the formation documents of the Company, and any other appropriate documents of the Company as may be necessary, I/we have the power and authority to execute this Certificate on behalf of the Company, and that I/we have so executed this Certificate on the 14 day of October, 2008. A copy of this Certificate, which is duly signed and which is received by facsimile transmission (“fax”), shall be deemed to be of the same force and effect as the original.

By:		/s/ John Schauerman
John Schauerman
CFO
	(Must be certified by another officer or director other than the above authorized signer)

6/02

ADDRESS FOR ALL NOTICES

PO Box 230789

Portland, OR 97281-0789

CERTIFICATE OF AUTHORITY
(GUARANTY AND/OR PLEDGE)

Equipment Finance

I/WE HEREBY CERTIFY to U.S. Bancorp Equipment Finance, Inc. (the “Creditor”) that: a) I/we am/are the person(s) authorized to certify on behalf of ARB, Inc., a business entity (the “Company”) organized and maintaining good standing under the laws of the State of California; b) the following is a true and correct copy of certain Resolutions duly adopted by the Board of Directors, Members, or Managers, as appropriate, of the Company; c) I/we have placed a copy of such Resolutions in the official records of the Company; d) such Resolutions have not been rescinded, amended, or otherwise altered or repealed; and e) such Resolutions are now in full force and effect and are in full compliance with the formation documents of the Company, as such may have been amended. The Company has resolved the following:

1)  That it is to the benefit of the Company that Stellaris LLC, (“Customer”) from time to time leases personal property, borrows money or otherwise obtains credit from Creditor, (“Transaction(s)”); and, whereas Creditor is unwilling to enter into the Transaction(s) unless the Company shall execute and deliver that certain continuing Guaranty of the Customer’s obligations to Creditor (the “Guaranty”) and/or any pledge or security agreement, securing the Customer’s obligations to Creditor (the “Agreement”); and, that the Company shall execute and deliver such Guaranty and/or Agreement;

2)  That any one of the officers, agents, members or managers of the Company is hereby authorized to execute and deliver on behalf of the Company the Guaranty and/or Agreement together with any and all other documentation required in connection therewith in such form and containing such terms and conditions as the person(s) executing such documents shall approve as being advisable and proper and in the best interests of the Company; and that the execution thereof by such person(s) shall be conclusive evidence of such approval;

3)  That any officer, member, manager, agent, or employee of the Company is hereby authorized to take any and all such other actions as may be necessary to carry out the intent and purposes of these Resolutions, and that any and all actions taken by such person(s) to carry out such intent and purposes prior to the adoption of these Resolutions are hereby ratified and confirmed by, and adopted as the action of the Company; and

4)  That these Resolutions shall constitute a continuing authority to the designated person or persons to act on behalf of the Company, and the powers and authority granted herein shall continue until revoked by the Company and formal written notice of such revocation shall have been given to Creditor. These Resolutions do not supersede similar prior resolutions given to Creditor.

I/WE HEREBY FURTHER CERTIFY that pursuant to the formation documents of the Company, and any other appropriate documents of the Company as may be necessary, the following named person(s) have been properly designated and appointed to the position(s)/office(s) indicated below, that such person(s) continue to hold such position(s)/office(s) at the time of execution of the Guaranty and/or Agreement and that the signature(s) of such person(s) shown below are genuine.

OFFICE	NAME	SIGNATURE
CFO	Alfons Theeuwes	/s/ Alfons Theeuwes

I/WE HEREBY FURTHER CERTIFY that, pursuant to the formation documents of the Company, and any other appropriate documents of the Company as may be necessary, I/we have the power and authority to execute this Certificate on behalf of the Company, and that I/we have so executed this Certificate on the 14 day of October, 20  . A copy of this Certificate, which is duly signed and which is received by facsimile transmission (“fax”), shall be deemed to be of the same force and effect as the original.

By:	/s/ John Perisich
John Perisich
Sr. Vice President /General Counsel

7/02

ADDRESS FOR ALL NOTICES:

PO Box 230789

Portland, OR 97281-0789

  GUARANTY

Equipment Finance

1.  In order to induce U.S. Bancorp Equipment Finance, Inc. (“Creditor”) and any entity affiliated with or related to Creditor to enter into one or more financing arrangements (“Transaction”) with, or otherwise directly or indirectly make financing or property available to Stellaris LLC (the “Obligor”), and/or to induce Creditor to grant to Obligor such renewals, extensions, forbearances, releases of collateral or other relinquishments of rights, whether in connection with the Transaction(s) or otherwise, as Creditor may in its sole discretion deem advisable, and in consideration of any agreements heretofore or hereafter entered into between Creditor and Obligor (any and all such leases, loan agreements, notes, security agreements, pledges, and assignments, together with any and all schedules and riders thereto and any and all other agreements executed and delivered by Obligor in connection therewith, being hereinafter called the “Agreements”), and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, THE UNDERSIGNED (“GUARANTOR”), INTENDING TO BE LEGALLY BOUND, HEREBY JOINTLY AND SEVERALLY GUARANTEES THE FULL, PROMPT, COMPLETE AND FINAL PAYMENT AND PERFORMANCE OF ALL THE OBLIGOR’S OBLIGATIONS PURSUANT TO THE AGREEMENTS OR IN ANY WAY ARISING THEREFROM AND ANY AND ALL OTHER OBLIGATIONS AND LIABILITIES OF OBLIGOR TO CREDITOR, WHETHER NOW IN EXISTENCE OR ARISING HEREAFTER, DIRECT OR INDIRECT, CONTINGENT OR ABSOLUTE, MATURED OR UNMATURED, SECURED OR UNSECURED, AND HOWEVER CONTRACTED OR ARISING (ALL SUCH OBLIGATIONS AND LIABILITIES BEING HEREINAFTER CALLED THE “OBLIGATIONS”)

2.  Guarantor hereby promises to pay Creditor when due, on demand, all indebtedness of any kind or nature emanating from the Agreements (including, without limitation, if an event of default shall occur under the Agreements, payment on demand of all unpaid sums to become due under the defaulted Agreements for the entire term thereof), whether now or hereafter arising; and Guarantor agrees to indemnify and hold Creditor harmless from and against any and all losses, liabilities and costs caused by or arising from (in any way, directly or indirectly) any failure of Obligor to fully, promptly and completely satisfy the Obligations. “Losses, liabilities and costs” shall include (without limitation) all obligations, claims, demands, judgments, costs and expenses of whatever kind or nature (including, without limitation, attorneys’ fees). Time is of the essence with regard to the performance of Guarantor’s obligations hereunder

3.  In enforcing this Guaranty, Creditor shall not be required to (i) present for payment any evidence of the Obligations (known as “presentment” or “presentment for payment”); (ii) give notice that amounts due have not been paid (known as “notice of dishonor”), or (iii) obtain an official certification of nonpayment (known as “protest”) or give Guarantor notice of any such “protest;” and Guarantor hereby waives presentment, presentment for payment, notice of dishonor, protest and notice of protest, and notice of acceptance hereof.

4.  Guarantor hereby consents and agrees that without any further notice to, or assent by Guarantor, the liability of Obligor or any other guarantor of the Obligations may from time to time, in whole or in part, be amended, including, without limitation, extended, renewed, accelerated, supplemented, settled, assigned, assumed or released, in Creditor’s sole discretion, and that any collateral for any of the Obligations or for any guaranty thereof (including this Guaranty) may from time to time, in whole or part, be exchanged, sold, released or surrendered in Creditor’s sole discretion. No such amendment, exchange, sale, release or surrender shall in any way impair, affect or release the liability of Guarantor or constitute a waiver of any of Creditor’s rights hereunder.

5.  This Guaranty is unlimited, absolute, irrevocable and unconditional and shall continue in full force and effect until all the Obligations shall have been fully, completely and finally satisfied and paid. The obligations of Guarantor hereunder shall continue and survive the repossession of any property leased pursuant to the Agreements, or any property in which Creditor has a security interest securing any of the Obligations, whether or not any such repossession constitutes an “election of remedies” against the Obligor or any other person. Guarantor agrees to be obligated hereunder notwithstanding any termination of the Agreements in whole or part by operation of law or any unenforceability or invalidity of the Agreements for any reason whatsoever. The obligations of the Guarantor shall not be subject to any abatement, setoff, defense or counterclaim for any cause whatsoever Guarantor’s liability hereunder is joint and several with any other guarantor of the Obligations, whether such guarantor executes this document or any other guaranty document. This Guaranty is in addition to, and not in limitation or derogation of, any and all other guaranties of the Obligations executed by any guarantor. In the event of any conflict between the provisions of this Guaranty and those of any other guaranty, the provisions of this Guaranty shall govern.

6.  Creditor may proceed directly and in the first instance against any Guarantor or combination of Guarantors and have its remedy hereunder without first being obliged to resort to any other right or remedy of security for any of the Obligations. If there shall be any securities for any of the Obligations, or for the obligations of Guarantor hereunder, or for the obligations of any other guarantor of any of the Obligations, Creditor may proceed against and/or enforce any or all of such securities in whatever order it may, in its sole discretion, deem appropriate. Any amount(s) received by Creditor from whatever source and applied by it to any of the Obligations shall be applied in such order of application as Creditor shall, in its sole discretion, elect.

7.  Notwithstanding any provision hereof or any provision of any of the Agreements, or any presumption of applicable law or principle of legal construction to the contrary: (i) nothing shall discharge or satisfy Guarantor’s obligations hereunder except full, complete and final payment and satisfaction of all the Obligations and all indebtedness and indemnities owed hereunder; and (ii) Guarantor hereby waives any and all defenses to its obligations hereunder including, without limitation, any defense arising by reason of any cessation of the Obligor’s business or any bankruptcy, insolvency or business failure of the Obligor or any other person. Each and every waiver made herein by Guarantor is and shall be construed as an absolute, irrevocable and unconditional waiver of the right waived. Payments received by Creditor from or on behalf of Obligor shall be solely for the benefit of Creditor and shall not benefit Guarantor in any way, Guarantor acknowledges that Guarantor is not and shall not be construed as a “Creditor” of Obligor by virtue of this Guaranty.

8.  Within 120 days after the close of each fiscal year of Guarantor, Guarantor shall deliver to Creditor true and complete copies of its work in process and backlog reports and its financial statements (including, without limitation, a balance sheet, a statement of income, a statement of cash flow, a statement of changes in equity, and notes to financial statements) for the immediately preceding fiscal year, setting forth the corresponding figures for the prior fiscal year in comparative form, all in reasonable detail without any qualification or exception deemed material by Creditor. Such financial statements shall be audited by Guarantor’s independent certified public accountants and shall be certified by such accountants. Guarantor shall also furnish Creditor, upon request, with any other financial information (including tax returns and copies of its quarterly management-prepared financial statements) deemed reasonably necessary by Creditor. Each financial statement submitted by Guarantor to Creditor shall be prepared in accordance with generally accepted accounting principles consistently applied and shall fairly and accurately present the Guarantor’s financial condition and results of operations for the period to which it pertains.

9.  Guarantor hereby represents and warrants to Creditor that all information concerning such Guarantor, including (without limitation) financial statements and other financial information furnished to Creditor in connection with the Agreements, was true, complete and accurate as of the date of delivery thereof to Creditor, and all such information remains true, complete and accurate, and there has been no material adverse change in Guarantor’s financial condition as of the date of the most recently delivered financial data. In the event of any breach of Guarantor’s representations and warranties herein or any material adverse change in the financial condition of Guarantor, upon the request of Creditor. Guarantor shall promptly furnish to Creditor such additional security for the performance of Guarantor’s obligations hereunder as Creditor may reasonably request. Guarantor shall not transfer all or substantially all of its assets without the prior written consent of Creditor. A default hereunder shall be a default under the Agreements.

10.  No notice of termination of this Guaranty shall be effective unless and until such notice shall be in writing and executed by Guarantor and shall have been received by Creditor, provided, however, that in the event of such notice, this Guaranty shall continue in full force and effect with regard to all Obligations created, existing or arising prior to the date of such receipt. No modification hereof or amendment hereto and no waiver of any term or provision hereof shall be valid unless in writing and signed by an authorized officer of Creditor. No delay or failure on the part of Creditor in the exercise of any right or remedy shall operate as a waiver thereof, and no single or partial exercise by Creditor of any right or remedy shall preclude any other or further exercise thereof or the exercise of any other right or remedy. No action of Creditor permitted hereunder shall invalidate or in any way impair this Guaranty. No waiver of any right or remedy hereunder shall constitute a waiver of any other or further right or remedy hereunder.

11.  Without any further notice to, or assent by Guarantor, this Guaranty may be assigned by Creditor and reassigned, in the sole discretion of Creditor or its assignee. As used herein, the term “Creditor” includes Creditor and any successor or assign of Creditor. Guarantor may not assign Guarantor’s obligations hereunder, without the prior written consent of Creditor. Nevertheless, this Guaranty shall be binding upon Guarantor’s heirs, successors, representatives, and assigns.

12.  Guarantor represents and warrants that this Guaranty is intended to be legal, valid, binding and enforceable in accordance with its terms. Whenever possible, each term and provision of this Guaranty shall be interpreted so as to be effective and to effectuate its intent under applicable law. If any of the provisions of this Guaranty are contrary to, prohibited by, or held invalid under applicable laws, regulations or public policy of any jurisdiction in which it is sought to be enforced, then that provision shall be considered inapplicable and omitted but shall not invalidate the remaining provisions. If this executed Guaranty is delivered to Creditor by facsimile transmission, such document (and any signature thereon) shall be treated as, and have the same force and effect as, an original.

13.  In any dispute arising hereunder, Guarantor shall pay Creditor’s costs and expenses, including reasonable attorneys’ fees and costs incurred in connection herewith and/or arising under the Agreements, including any incurred prior to commencement of a suit, prior to or at trial, on appeal or in any other proceeding. This Guaranty shall be governed by and construed in accordance with the laws of the State of Oregon, and service of process by certified mail, return receipt requested, or overnight courier will be sufficient to confer personal jurisdiction over Guarantor for purposes of litigating any actions arising hereunder. Venue shall be in Portland, Oregon, at Creditor’s option. This Guaranty shall take effect as a sealed instrument. GUARANTOR AND CREDITOR EACH IRREVOCABLY WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY LITIGATION ARISING FROM OR RELATED TO THIS GUARANTY.

14.  In connection with this Guaranty and the Transaction(s) with the Obligor, any Guarantor who is an individual confirms his/her instruction that Creditor obtain a credit report on him/her self, and further authorizes Creditor to obtain such a credit report for purposes of reviewing and/or considering additional financing arrangements with the Obligor.

IN WITNESS WHEREOF, the undersigned has caused this Guaranty to be duly executed and delivered as of October 08, 2008.

ARB, lnc.
By:	/s/ Alfons theeuwes
Alfons theeuwes
CFO
26000 Commercentre Drive Lake Forest, CA 92630

09/08

ADDRESS FOR ALL NOTICES TO CREDITOR:

PO Box 230789

Portland, OR 97281-0789

EX-21.1

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Exhibit 21.1

Subsidiaries and Equity Investments of the Registrant

Subsidiary	Jurisdiction of Organization
ARB, Inc.	California
ARB Structures, Inc.	California
Onquest, Inc.	California
Cardinal Contractors, Inc.	Florida
GML Coatings, LLC	Florida
Cardinal GP, Inc.	Texas
Cardinal Mechanical, LP	Texas
Pipeline Trenching, LP	Nevada
ARB International Ltd.	Bermuda
ARB Ecuador, Cia Ltda	Ecuador
ARB Chile, Ltda	Chile
Onquest Heaters, Inc.	Delaware
Born Heaters Canada, ULC	Alberta, Canada
Stellaris, LLC	Nevada

        The subsidiaries do not conduct business under any names other than those set forth above.

Equity Investments of Registrant

Organization	Jurisdiction of Organization	Registrant's Equity Interest
ARB Arendal, S. de R.L. de C.V.	Mexico		49	%
Otay Mesa Power Partners	California		40	%
All Day Electric, Inc.	California		49	%

        The above noted entities do not conduct business under any names other than those set forth above.

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Exhibit 21.1

Subsidiaries and Equity Investments of the Registrant
Equity Investments of Registrant

EX-31.1

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Exhibit 31.1

Certification of Chief Executive Officer
RULE 13a-14(a)/15d-14(a) CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Brian Pratt, certify that:

1.

I have reviewed this Annual Report on Form 10-K for the period ended December 31, 2008 of Primoris Services Corporation;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: March 20, 2009

/s/ BRIAN PRATT
Brian Pratt
Chief Executive Officer and President

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Exhibit 31.1

Certification of Chief Executive Officer RULE 13a-14(a)/15d-14(a) CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

EX-31.2

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Exhibit 31.2

Certification of Chief Financial Officer
RULE 13a-14(a)/15d-14(a) CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Peter J. Moerbeek, certify that:

1.

I have reviewed this Annual Report on Form 10-K for the period ended December 31, 2008, of Primoris Services Corporation;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: March 20, 2009

/s/ PETER J. MOERBEEK
Peter J. Moerbeek
Executive Vice President, Chief Financial Officer

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Exhibit 31.2

Certification of Chief Financial Officer RULE 13a-14(a)/15d-14(a) CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

EX-32.1

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Exhibit 32.1

Certification of Chief Executive Officer
Certification Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
(18 U.S.C. Section 1350)

        In connection with the Annual Report of Primoris Services Corporation (the "Company") on Form 10-K for the period ended December 31, 2008, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Brian Pratt, Chief Executive Officer and President of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1.

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



2.

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

        In witness whereof, the undersigned has executed and delivered this certificate as of the date set forth opposite his signature below.

Date: March 20, 2009 /s/ BRIAN PRATT
Brian Pratt
Chief Executive Officer and President

        The foregoing certification is being furnished solely to accompany the Report pursuant to 18. U.S.C. Sectioin 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities Exchange Commission or its staff upon request.

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Exhibit 32.1

Certification of Chief Executive Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)

EX-32.2

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Exhibit 32.2

Certification of Chief Financial Officer
Certification Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
(18 U.S.C. Section 1350)

        In connection with the Annual Report of Primoris Services Corporation (the "Company") on Form 10-K for the period ended December 31, 2008, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Peter J. Moerbeek, Executive Vice President, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1.

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



2.

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

        In witness whereof, the undersigned has executed and delivered this certificate as of the date set forth opposite his signature below.

Date: March 20, 2009 /s/ PETER J. MOERBEEK
Peter J. Moerbeek
Executive Vice President, Chief Financial Officer

        The foregoing certification is being furnished solely to accompany the Report pursuant to 18. U.S.C. Sectioin 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities Exchange Commission or its staff upon request.

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Exhibit 32.2

Certification of Chief Financial Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350)