12.

Subsequent Events

Purchase of Tealstone

April

2017,

the Company consummated the acquisition of

100%

of the outstanding stock of Tealstone Residential Concrete, Inc. and Tealstone Commercial, Inc. (collectively, “

Tealstone

”) from the stockholders thereof (the “Sellers”) for consideration consisting of

$55,000,000

in cash (less debt outstanding on the closing date and costs incurred by the Sellers and Tealstone in connection with the transaction),

1,882,058

shares of the Company’s common stock (the “

Placement Shares

”), and

$5,000,000

of promissory notes issued to the Sellers. In addition, the Company will make

$2,500,000

and

$7,500,000

of deferred cash payments on the

second

and

third

anniversaries of the closing date, respectively, and up to an aggregate of

$15,000,000

in earn-out payments

may

be made on the

first,

second,

third

and

fourth

anniversaries of the closing date to continuing Tealstone management or their affiliates if specified financial performance levels are achieved. Tealstone focuses on concrete construction of residential foundations, parking structures, elevated slabs and other concrete work for leading homebuilders, multi-family developers and general contractors in both residential and commercial markets.

The preliminary acquisition-date fair value of the consideration transferred totaled

$83.7

million, which consisted of the following:

Fair value of consideration transferred (amounts in thousands):

Cash	$	55,000
Common stock (1,882,058 shares)		17,100
Promissory notes		4,400
Deferred payments		7,200
Total	$	83,700

The fair value of the

1,882,058

common shares issued was determined based on the average market price of the Company’s common shares on the acquisition date.

The promissory notes and deferred payments have been discounted using a preliminary

12%

fair value discount rate. The earn-out arrangement requires the Company to pay up to an aggregate of

$15,000,000

in earn-out payments on the

first,

second,

third

and

fourth

anniversaries of the closing date to continuing Tealstone management or their affiliates if specified financial performance levels are achieved. The Company’s preliminary analysis indicates that the compensation is tied to the continuing employment of certain key employees and executives of Tealstone and will be treated as additional compensation and not as additional contingent consideration.

The Company is in the process of estimating the fair values of the assets acquired and liabilities assumed at the acquisition date and obtaining

third

-party valuations of certain intangible assets. Additionally, the Company is in the process of compiling the pro forma financial information required.

Loan Agreement

April

2017,

the Company, as borrower, and certain of its subsidiaries, as guarantors, entered into a Loan and Security Agreement with Wilmington Trust, National Association, as agent, and the lenders party thereto (the “

Loan Agreement

”), providing for a term loan of

$85,000,000

(the “

Loan

”) with a maturity date of

April

2022,

which replaced the then existing debt facility. The Loan is secured by substantially all of the assets of the Company and its subsidiaries.

Interest on the Loan is equal to the

one

two

three

- or

six

-month London interbank rate, or LIBOR, plus

8.75%

per annum on the unpaid principal amount of the Loan, subject to adjustment under certain circumstances. Interest on the Loan is generally payable monthly. There are no amortized principal payments; however, the Company is required to prepay the Loan, and in certain cases pay a prepayment premium thereon, with proceeds received from the issuances of debt or equity, transfers, events of loss and extraordinary receipts. The Company is required to make an offer quarterly to the lenders to prepay the Loan in an amount equal to

75%

of its excess cash flow, plus accrued and unpaid interest thereon and a prepayment premium.

The Loan Agreement contains various covenants that limit, among other things, the Company’s ability and certain of its subsidiaries’ ability to incur certain indebtedness, grant certain liens, merge or consolidate, sell assets, make certain loans, enter into acquisitions, incur capital expenditures, make investments, and pay dividends. In addition, the Company is required to maintain the following financial covenants:

a ratio of secured indebtedness to EBITDA of not more than

3.10

1.00

beginning with the

four

consecutive quarters ending

June

30,

2017,

reducing to

1.80

1.00

by the

four

consecutive quarters ending

September

30,

2019;

daily cash collateral of not less than

$10,000,000

commencing on

June

30,

2017,

increasing to

$15,000,000

October

2017,

and potentially further increasing to

$18,000,000

beginning on

April

2018;

a rolling

four

quarter gross margin in contract backlog of not less than

$60,000,000

commencing

June

30,

2017,

increasing to

$70,000,000

March

31,

2019;

the incurrence of net capital expenditures during each

four

consecutive fiscal quarters shall not exceed

$15,000,000;

bonding capacity shall be maintained at all times in an amount not less than

$1,000,000,000;

and

the EBITDA of Tealstone Residential Concrete, Inc. shall not be less than

$12,000,000

during each

four

consecutive fiscal quarters, commencing

June

30,

2017.

The Loan Agreement also includes customary events of default, including events of default relating to non-payment of principal or interest, inaccuracy of representations and warranties, breaches of covenants, cross-defaults, bankruptcy and insolvency events, certain unsatisfied judgments, loan documents not being valid, calls under the Company’s bonds, failure of specified individuals to remain employed by the Company, and a change of control. If an event of default occurs, the lenders will be able to accelerate the maturity of the Loan Agreement and exercise other rights and remedies.

Warrants

April

2017,

the Company issued Warrants (the “

Warrants

”) to the lenders under the Loan Agreement (the “

Holders

”) pursuant to which the Holders have the right to purchase, for a period of

five

years from the date of issuance, up to an aggregate of

1,000,000

shares of the Company’s common stock (the “

Warrant Shares

”) at an initial exercise price of

$10.25

per share, subject to adjustment for stock splits, combinations and similar recapitalization events and weighted-average antidilution upon the issuance by the Company of shares of common stock or rights, options or convertible securities exercisable for common stock in the future at a price below the exercise price of the Warrants.