Exhibit 10.2

 

SUBORDINATION AGREEMENT

 

THIS SUBORDINATION AGREEMENT dated as of April 22, 2005, made by the
subordinated creditors identified on the signature pages hereto (together with
any successor thereto, each a “Subordinated Creditor” and collectively the
“Subordinated Creditors”) and the various obligors listed on the signature pages
of this Agreement, including MATRIX SERVICE COMPANY, a Delaware corporation
(“Borrower”) (each an “Obligor” and collectively the “Obligors”), in favor of
JPMORGAN CHASE BANK, N.A. (successor by merger to Bank One, N.A. (Main Office
Chicago)), as a Lender, LC Issuer and as Agent (the “Agent”) for the Lenders
under the Credit Agreement defined below, and in favor of the Lenders now or
hereafter party to the Credit Agreement (whether one or more, the “Lenders”).

 

W I T N E S S E T H:

 

WHEREAS, Borrower intends to borrow $30,000,000.00 from the Subordinated
Creditors, with the indebtedness created thereby being or to be evidenced by
those certain Senior Unsecured Convertible Notes due 2010 to be issued by
Borrower in the aggregate principal amount of $30,000,000.00 (the “Subordinated
Notes”); and

 

WHEREAS, the Lenders have extended credit to Borrower pursuant to the Credit
Agreement and the other Loan Documents described therein (the “Loans”), and the
remainder of the Obligors have guaranteed repayment of the Loans and provided
security for the Loans, all as described in the Credit Agreement and the other
Loan Documents; and

 

WHEREAS, under the terms of the Credit Agreement, Borrower is prohibited from
executing the Subordinated Notes and incurring the debt evidenced thereby,
without the consent of the Agent and Lenders; and

 

WHEREAS, Agent and Lenders have conditioned their consent to the extension of
credit by the Subordinated Creditors to Borrower upon, among other things, the
execution and delivery to the Agent of an agreement subordinating all
indebtedness of the Obligors from time to time existing in favor of the
Subordinated Creditors under the Subordinated Documents (as defined herein) to
the prior Payment in Full (as defined herein) of all of the obligations of the
Obligors from time to time existing in favor of the Lenders and the Agent under
the Senior Documents (as defined herein) and to all security interests and other
liens securing such obligations.

 

NOW, THEREFORE, in consideration of the premises and in order to induce the
Agent and the Lenders to consent to the extension of credit by the Subordinated
Creditors to Borrower, the Subordinated Creditors and the Obligors hereby agree
with the Agent and the Lenders as follows:

 

SECTION 1. Definitions. As used in this Agreement, the following terms shall
have the respective meanings indicated below, such meanings to be applicable
equally to both the singular and plural forms of such terms:

 

“Agent” has the meaning specified for such term in the introductory paragraph
herein.

 

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“Borrower” has the meaning specified for such term in the introductory paragraph
herein.

 

“Collateral” means any and all “Collateral” as defined in the Senior Documents.

 

“Credit Agreement” means the Original Credit Agreement, as amended by that
certain Amendment One to Credit Agreement dated as of May 22, 2003, that certain
Amendment Two to Credit Agreement dated as of August 27, 2003, that certain
Amendment Three to Credit Agreement dated as of December 19, 2003, that certain
Amendment Four to Credit Agreement dated as of March 11, 2004, that certain
Amendment Five to Credit Agreement dated as of May 6, 2004, that certain
Amendment Six to Credit Agreement dated as of August 5, 2004, that certain
Amendment Seven to Credit Agreement dated as of October 6, 2004, that certain
Amendment Eight to Credit Agreement dated as of November 30, 2004, that certain
letter agreement dated March 23, 2005 and that certain letter agreement dated
April 8, 2005, and that certain Amendment Nine to Credit Agreement dated as of
April 22, 2005, and as may hereafter be amended from time to time.

 

“Equity Interest” means capital stock and all warrants, options or other rights
to acquire capital stock (but excluding any debt security that is convertible
into, or exchangeable for, capital stock).

 

“Holders” means the Subordinated Creditors and/or any subsequent holders of the
Subordinated Notes.

 

“Interest Prepayment” means the amount of $4,200,000.00 Borrower has agreed to
pay to the Subordinated Creditors at the closing of the transaction involving
the Subordinated Notes in payment of interest payable under the Subordinated
Notes through the second anniversary of the Closing Date (as defined in the
Subordinated Documents).

 

“Lenders” has the meaning specified for such term in the introductory paragraph
herein.

 

“Liens” means any security interest, mortgage, pledge, hypothecation,
assignment, encumbrance, deposit arrangement, lien (statutory or otherwise),
charge against or interest in property to secure payment of a debt or
performance of an obligation.

 

“Loans” has the meaning specified for such term in the Recitals above.

 

“Notes” means any and all promissory notes payable by Borrower in favor of any
of the Lenders issued pursuant to the Credit Agreement.

 

“Obligors” has the meaning specified for such term in the introductory paragraph
herein.

 

“Original Credit Agreement” means that certain Credit Agreement dated as of
March 7, 2003, among Borrower, Agent and the various Lenders party thereto.

 

“Payment Blockage Notice” has the meaning specified in Section 4(b) below.

 

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“Payment in Full” means the indefeasible, full and final payment of all the
Senior Obligations, whether or not any of the Senior Obligations shall have been
voided, disallowed or subordinated pursuant to any provision of the United
States Bankruptcy Code or any applicable state fraudulent conveyance laws, in
any case whether asserted directly or indirectly, and the termination,
expiration or reduction to zero of all the “Commitments” under the Credit
Agreement, and the expression “Paid in Full” shall have a correlative meaning.
Notwithstanding the foregoing, for purposes of this definition, the Senior
Obligations shall be deemed Paid in Full if the Senior Obligations are fully
cash collateralized (i.e., the Agent or Lenders hold, or have a perfected first
priority security interest in, cash and cash equivalents in amount sufficient to
pay the Senior Obligations).

 

“Person” means an individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other entity
of any kind.

 

“Reorganization” means any voluntary or involuntary dissolution, winding-up,
total or partial liquidation or reorganization, or bankruptcy, insolvency,
receivership or other statutory or common law proceeding or arrangement
involving the liquidation of the Borrower or the Borrower’s assets, or any
assignment for the benefit of creditors or any marshalling of the assets or
liabilities of the Borrower.

 

“Senior Documents” means the Credit Agreement and the other Loan Documents, as
defined in the Credit Agreement, each as may be amended, restated, supplemented,
modified, extended, renewed, refinanced or replaced from time to time, and any
replacement thereof in connection with any refinancing of the Senior
Obligations.

 

“Senior Nonpayment Default” means the occurrence or existence of any event,
circumstance, condition or state of facts that, by the terms of the Senior
Documents, permits the Agent or the Lenders to declare the Senior Obligations
due and payable prior to maturity, other than a Senior Payment Default.

 

“Senior Obligations” means all indebtedness, obligations and other liabilities
of the Obligors, or any of them, now or hereafter existing in favor of the
Lenders and the Agent under the Senior Documents, whether for principal
(including, without limitation, protective advances), reimbursement obligations,
interest (including interest accruing subsequent to the filing of any petition
initiating any Reorganization, whether or not a claim for such interest is
allowed in any such proceeding), guaranteed obligations, fees, premiums,
indemnities, costs, expenses (including, without limitation, auditor, legal and
other professional fees, costs and expenses), or otherwise, provided that the
principal amount of extensions of credit under the Senior Documents that shall
constitute Senior Obligations for purposes of this Agreement shall under no
circumstances exceed $90 million.

 

“Senior Payment Default” means a default under the Senior Obligations arising
from the failure of Borrower to make a payment of principal, interest or any
other payment required in respect of the Senior Obligations (i) that, by the
terms of the Senior Documents, permits the Agent or the Lenders to declare the
Senior Obligations then due and payable prior to maturity or

 

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(ii) that has resulted from acceleration, whether automatic or upon notice, of
the Senior Obligations.

 

“Subordinated Creditors” has the meaning specified for such term in the
introductory paragraph herein.

 

“Subordinated Documents” means the Subordinated Notes and any other instrument
or document described in Schedule I hereto, and all other documents executed
concurrently or in conjunction therewith, as the same may be amended or modified
from time to time (in accordance with this Agreement).

 

“Subordinated Notes” has the meaning assigned to such term in the Recitals
above.

 

“Subordinated Obligations” means all indebtedness, obligations and other
liabilities of the Obligors, or any of them, incurred pursuant to the
Subordinated Documents, now or hereafter existing in favor of the Subordinated
Creditors, including without limitation, all interest thereon and all fees,
premiums, costs, expenses, indemnities and other amounts payable in respect
thereof, and all dividends, redemptions, put and call rights and other
contractual obligations of Borrower to Subordinated Creditors, whether now
existing or hereafter arising.

 

“Uniform Commercial Code” shall mean the Uniform Commercial Code adopted by the
State of New York, as amended from time to time.

 

SECTION 2. Agreement to Subordinate. The Subordinated Creditors and the Obligors
agree that (i) the Subordinated Obligations are and shall be subordinated, to
the extent and in the manner hereinafter set forth, in right of payment to the
prior Payment in Full of the Senior Obligations and (ii) any security interests
or other Liens on all or any part of any and all collateral securing payment of
any Subordinated Obligation or guaranty thereof, whether now existing or
hereafter granted or arising, are and shall be subordinated, to the fullest
extent permitted by law and as hereinafter set forth, to any and all Liens in
favor of the Agent securing the Senior Obligations, notwithstanding the
perfection, order of perfection or failure to perfect any such Lien in favor of
the Agent, or the filing or recording, order of filing or recording or failure
to file or record this Agreement or any instrument or other document in any
filing or recording office in any jurisdiction.

 

SECTION 3. Reorganization.

 

(a) In the event of any Reorganization relating to the Borrower prior to the
Payment in Full of the Senior Obligations:

 

(i) the holders of the Senior Obligations shall be Paid in Full all amounts due
or to become due on or in respect of all Senior Obligations before any payment
or distribution in cash, securities or other property that otherwise would be
payable or deliverable upon or with respect to any of the Subordinated
Obligations, and to that end the holders of the Senior Obligations shall be
entitled to receive, for application to the payment thereof, any payment or
distribution of any kind or character, whether in cash, securities or other

 

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property which may be payable or deliverable in respect of the Subordinated
Obligations in any Reorganization; and

 

(ii) the Subordinated Creditors will duly and promptly take such action as the
Agent may reasonably request (A) to file appropriate claims or proofs of claim
with respect thereto, (B) to enforce any and all claims with respect to, and any
security interests and other liens securing payment of, the Subordinated
Obligations, and (C) to collect and receive any and all payments or
distributions which may be payable or deliverable upon or with respect to the
Subordinated Obligations.

 

(b) For purposes of this Agreement, “cash, securities or other property” shall
not be deemed to include securities of the Borrower as reorganized, or
securities of the Borrower or any other Person provided for by a Reorganization
plan authorized by an order or decree of a court of competent jurisdiction that
are subordinated in right of payment to all Senior Obligations and any debt
securities issued in exchange for Senior Obligations in connection with the
Reorganization to substantially the same extent as, or to a greater extent than,
the Subordinated Obligations are subordinated to the Senior Obligations
hereunder.

 

SECTION 4. Restrictions on Payments and Actions.

 

(a) In the event that any Senior Payment Default (including, without limitation,
any Senior Payment Default arising from acceleration, whether automatic or upon
notice, of the Senior Obligations following the occurrence of a Senior
Nonpayment Default) shall have occurred, then no payment in respect of the
Subordinated Obligations shall be made by the Borrower or any other Obligor, and
no such payment shall be accepted by the Holders, until such time as the Senior
Payment Default is cured or waived.

 

(b) In the event that any Senior Nonpayment Default shall have occurred, then
upon the receipt by the Borrower and the Holders of written notice of such
Senior Nonpayment Default (a “Payment Blockage Notice”) from the Agent or the
Lenders, no payment in respect of the Subordinated Obligations shall be made by
the Borrower or any other Obligor, and no such payment shall be accepted by the
Holders, prior to the earlier of (i) the date on which such default is cured or
waived and (ii) 179 days after the date on which the applicable Payment Blockage
Notice was received by the Holders, unless the maturity of the Senior
Obligations has been accelerated (in which case such acceleration shall
automatically result in a Senior Payment Default). If the Holders receive any
such Payment Blockage Notice, no subsequent Payment Blockage Notice will be
effective for purposes of this Section 4(b) unless and until (A) at least 360
days have elapsed since the commencement of the immediately prior Payment
Blockage Notice and (B) all scheduled payments of principal, premium and special
interest, if any, on the Subordinated Notes that have come due have been Paid in
Full. No Senior Nonpayment Default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the Holders may be, or may be made,
the basis for a subsequent Payment Blockage Notice unless such default has been
waived for a period of not less than 180 days.

 

(c) Notwithstanding the terms of Section 4(a) and Section 4(b) above, Holders of
Subordinated Notes may receive and retain Equity Interests as part of a
conversion of the

 

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Subordinated Notes to Equity Interests as contemplated by the explicit terms of
the Subordinated Notes.

 

(d) The provisions of Section 4(a) and Section 4(b) above and of Section 5(a)
below shall have no applicability to the Interest Prepayment, which is
nonrefundable except in the limited circumstances set forth in Section 5(b)(ii)
of the Subordinated Notes. In the event a Holder elects, pursuant to Section
5(b)(ii) of the Subordinated Notes, to refund the applicable portion of the
Interest Prepayment to the Borrower in connection with a conversion of
Subordinated Notes into Equity Interests, such refund shall be paid over by the
Holder to the Agent, or failing that, by the Company to the Agent, for
application to the repayment of the Senior Obligations.

 

(e) If a default shall occur and be continuing under the Subordinated Documents
and a Senior Payment Default or Senior Nonpayment Default has occurred and is
continuing, the Holders shall not ask, demand or sue for any payment or
distribution or seek any other remedy (other than as provided in Section 4(f)
below) in respect of the Subordinated Obligations or commence or join with any
other creditor (other than the Agent or the Lenders) in commencing any
Reorganization proceeding in respect of the Borrower prior to the earliest of
(i) such time as the Senior Payment Default or Senior Nonpayment Default is
cured or waived, (ii) such time as the maturity of the Senior Obligations is
accelerated, or (iii) the 179th day after occurrence of such Senior Payment
Default or the date of receipt of the Payment Blockage Notice in respect of such
Senior Nonpayment Default.

 

(f) Nothing in this Section 4 shall limit the rights of Holders to (i) file
proofs of claim and all necessary responsive or defensive pleadings in
opposition to any motion, claim, adversary proceeding or other pleading made by
any Person objecting to or otherwise seeking the disallowance of the claims of
the Holders, (ii) vote on any Reorganization plan and appear and be heard on any
matter in connection therewith, and (iii) file all pleadings, objections,
motions or agreements which assert rights or interests available to unsecured
creditors of the Borrower arising under applicable bankruptcy or non-bankruptcy
laws, provided that any of the foregoing actions may not be otherwise
inconsistent with the terms of this Agreement.

 

(g) The failure to make a payment in respect of the Subordinated Obligations by
reason of the provisions of this Section 4 or any other provision of this
Agreement shall not be construed as preventing the occurrence of a default or
event of default under the Subordinated Obligations. Except as expressly set
forth in Section 4(e) above, nothing in this Agreement shall have any effect on
the right of the Holders to accelerate the maturity of the Subordinated
Obligations in accordance with their terms or to make a claim for payment
thereunder.

 

SECTION 5. Additional Provisions Concerning Subordination.

 

(a) All payments or distributions upon or with respect to the Subordinated
Obligations which are received by any Subordinated Creditor contrary to the
provisions of this Agreement shall be received in trust for the benefit of the
Agent, shall be segregated from other funds and property held by such
Subordinated Creditor and shall be forthwith paid over to the Agent in the same
form as so received (with any necessary endorsement) to be applied (in the case
of cash) to or held as collateral (in the case of securities or other non-cash
property) to the

 

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extent necessary for the payment or prepayment of the Senior Obligations until
the Senior Obligations shall have been Paid in Full.

 

(b) The Agent is hereby authorized to demand specific performance of this
Agreement at any time when any Subordinated Creditor or any Obligor shall have
failed to comply with any of the provisions of this Agreement applicable to such
Subordinated Creditor or such Obligor, as the case may be, whether or not the
particular Subordinated Creditor or the particular Obligor against whom such
relief is sought shall have complied with any of the provisions hereof, and the
Subordinated Creditors and the Obligors hereby irrevocably waive any defense
based on the adequacy of a remedy at law which might be asserted as a bar to
such remedy of specific performance.

 

(c) Borrower shall promptly notify Agent of (i) any facts known to Borrower that
would cause a payment with respect to the Subordinated Obligations to violate
this Agreement or (ii) any default under any Subordinated Document, but failure
to give such notice shall not affect the terms of this Agreement. The
Subordinated Creditors undertake to notify the Agent of the occurrence of any
event of default under the Subordinated Obligations, but the Subordinated
Creditors shall not incur any liability hereunder for failure to provide such
notification.

 

(d) Whenever a distribution is to be made or a notice given to any holders of
Senior Obligations with respect to the Senior Obligations, the distribution may
be made and the notice given to the Agent.

 

(e) Agent and Lenders may do any of the following from time to time without the
consent of or notice to the Subordinated Creditors, without incurring
responsibility to Subordinated Creditor and without impairing or releasing any
of Agent’s or any Lender’s rights or any of the obligations of the Subordinated
Creditors hereunder: (i) change any of the terms of the Senior Obligations,
including but not limited to the amount, manner, place or terms of payment, the
time of payment, or any renewal or other alteration of the Senior Obligations in
any respect; (ii) sell, exchange, release or otherwise deal with all or any part
of the Collateral; (iii) exercise or refrain from exercising any rights against
Borrower or others (including without limitation, the Subordinated Creditors);
and (iv) apply any sums received, by whomsoever paid or howsoever realized, to
the Senior Obligations. Neither Agent nor any of the Lenders shall at any time
be required to institute suit or exercise or exhaust remedies against any Person
obligated to pay any of the Senior Obligations prior to exercising its rights
under or receiving the benefits of this Agreement.

 

SECTION 6. Negative Covenants of the Subordinated Creditors. So long as Payment
in Full has not occurred, the Subordinated Creditors will not, without the prior
written consent of the Agent:

 

(a) (i) obtain or otherwise receive the benefit of any Lien on any property to
secure any of the Subordinated Obligations; (ii) obtain or otherwise receive the
benefit of any guaranty with respect to any of the Subordinated Obligations; or
(iii) subordinate any security interest or other Lien securing the Subordinated
Obligations to any security interest or other Lien in favor of any Person other
than the Agent; provided that the foregoing provisions of this

 

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Section 6(a) shall not apply to the issuance of Equity Interests pursuant to the
Subordinated Documents;

 

(b) sell, assign, pledge, encumber or otherwise dispose of any Subordinated
Obligation or any collateral securing any Subordinated Obligation, without first
obtaining a subordination agreement from the proposed transferee of such
Subordinated Obligation in form and substance reasonably satisfactory to the
Agent (provided that Agent shall be deemed to be acting reasonably in requesting
any term of any such subordination agreement if such term, or any substantially
similar term, is included in this Agreement); or

 

(c) permit any Subordinated Document or the terms of any Subordinated Obligation
to be amended or otherwise modified in any respect, except in such a manner as
shall not (i) grant collateral to the Subordinated Creditors or (ii) materially
increase Borrower’s obligations under the Subordinated Documents, and in the
case of clause (i) or (ii), which shall not adversely affect the rights of the
Agent or any of the Lenders.

 

SECTION 7. Collateral.

 

(a) The parties acknowledge that the Subordinated Obligations are unsecured
obligations of the Borrower. None of the provisions of this Section 7 or
otherwise contained in this Agreement that contemplate or address Liens or
security interests in favor of the Subordinated Creditors in order to secure
payment or performance of the Subordinated Obligations are intended to grant or
imply the grant of any consent to any such Lien or security interest.

 

(b) The Subordinated Creditors hereby confirm that regardless of the relative
times of attachment or perfection thereof, and regardless of anything in any
Subordinated Document or any Senior Document to the contrary, any security
interests or Liens granted from time to time to the Agent in the Collateral as
security for the Senior Obligations shall in all respects be first and senior
security interests and Liens, superior to any security interests or Liens at any
time granted to the Subordinated Creditors in the Collateral as security for the
Subordinated Obligations. The priorities specified herein are applicable
irrespective of the time or order of attachment or perfection of security
interests or the time or order of filing of financing statements. The
Subordinated Creditors agree not to seek to challenge, to avoid, to subordinate
or to contest or directly or indirectly to support any other Person in
challenging, avoiding, subordinating or contesting in any judicial or other
proceeding, including, without limitation, any Reorganization involving the
Obligors or other Person, the priority, validity, extent, perfection or
enforceability of any Lien held by the Agent or the Lender in all or any part of
the Collateral.

 

(c) In foreclosing or realizing on the Liens in favor of the Agent, for the
benefit of the Lenders, on any of the Collateral, the Agent may proceed in any
manner consistent with the provisions of the Uniform Commercial Code or other
applicable law (either individually or collectively with any other remedies
available to it) which the Agent, in its sole and absolute discretion, shall
choose, even though a higher price might have been realized if the Agent had
proceeded to foreclose or realize on its security interests and/or Liens in
another manner. The Agent hereby reserves the right, in its sole and absolute
discretion (and without in any way

 

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diminishing or altering its rights hereunder or the subordination provisions
contained herein), to modify, amend, waive or release any of the terms of the
Credit Agreement and other Senior Documents and any other agreement, instrument
and other document relating to any of the foregoing or the Senior Obligations
and to exercise or refrain from exercising any powers or rights which it may
have thereunder. Nothing herein shall be deemed to obligate the Agent to
foreclose or realize or take any action whatsoever with respect to any of the
Collateral, and the Subordinated Creditors hereby irrevocably waive any right
they may have, now or in the future, to require Agent or any of the Lenders to
foreclose or realize or take any action whatsoever with respect to any of the
Collateral.

 

(d) The Subordinated Creditors agrees for the benefit of the Agent and the
Lenders that until the Senior Obligations are Paid in Full, the Subordinated
Creditors will not take, and will not consent to the Obligors taking, any action
to sell, transfer, foreclose or realize on, levy against or execute upon, or
exercise any rights or remedies whatsoever in respect of, any Lien on the
Collateral granted to secure the Subordinated Obligations without the prior
written consent of the Agent in each instance. Until the Payment in Full of the
Senior Obligations, the Agent shall retain the sole right to exercise the rights
of a “secured party” in respect of the Collateral, whether under law, including,
without limitation, the Uniform Commercial Code, the Credit Agreement, any other
Senior Document or any other agreement, instrument or other document relating to
the Collateral or any of the foregoing or otherwise. The Subordinated Creditors
hereby agrees that any Collateral and all payments or distributions upon or with
respect to any Collateral (including proceeds thereof) that are received by the
Subordinated Creditors by reason of any Lien on all or any part of the
Collateral shall be received in trust for the benefit of the Agent, shall be
segregated from other funds and property held by the Subordinated Creditors and
shall be forthwith turned over to the Agent in the same form received (with any
necessary endorsement) to be applied (in the case of cash) to or held as
Collateral (in the case of securities or other non-cash property) for the
payment or prepayment of the Senior Obligations until the Senior Obligations
shall have been Paid in Full.

 

(e) In the event of any Reorganization of any of the Obligors, unless the Agent
shall otherwise consent in writing, and until the Payment in Full of the Senior
Obligations, (i) if the Agent shall consent to any use, sale or lease of any
Collateral (pursuant to Section 363(f) of the Bankruptcy Code or otherwise), the
Subordinated Creditors (A) shall not object to such use, sale or lease of such
Collateral, (B) shall be deemed to have consented to such use, sale or lease of
such Collateral, and (C) shall (promptly after the written request of the Agent)
consent in writing to such use, sale or lease of such Collateral, (ii) if the
Subordinated Creditors have a Lien on any of the Collateral, the Subordinated
Creditors shall not seek relief from the automatic stay imposed pursuant to
Section 362 of the Bankruptcy Code in order to exercise any rights or remedies
in respect of any of the Collateral, (iii) the Subordinated Creditors shall not
object to or otherwise file any motion seeking to prevent the Agent from
obtaining relief from the automatic stay imposed pursuant to Section 362 of the
Bankruptcy Code in order to exercise any rights or remedies in respect of any of
the Collateral, and (iv) if the Subordinated Creditors have a Lien on any of the
Collateral, the Subordinated Creditors shall not assert any right to require
adequate protection of its interest in any Collateral or any other adequate
protection to the extent that (A) any Obligor, as a debtor under the Bankruptcy
Code, seeks to subject any of

 

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the Collateral to a security interest to secure any indebtedness or (B) Agent or
any of the Lenders propose to provide debtor in possession financing to
Borrower.

 

(f) In the event the Agent consents to any sale, transfer or other disposition
of any of the Collateral, or sells, transfers or otherwise disposes of any of
the Collateral in connection with the enforcement of its rights as a secured
party and/or as mortgagee (whether prior to, during or after a Reorganization),
such sale, transfer or other disposition shall be effective to transfer such
Collateral free of any Lien of the Subordinated Creditors in such Collateral and
the Subordinated Creditor having a Lien on all or any part of the Collateral
shall take such action and execute such documents as shall be necessary or as
the Agent shall reasonably request to effect the foregoing. The sole right of
the Subordinated Creditors, if they have a Lien on all or any part of the
Collateral so sold, transferred or otherwise disposed of by the Agent, shall be
to receive the proceeds thereof after the Payment in Full of all Senior
Obligations.

 

(g) The Subordinated Creditors acknowledge and agrees with the Agent that the
Subordinated Creditors shall have no right whatsoever to require the Agent to
consult with, or solicit the approval of, the Subordinated Creditors in
connection with any sale, transfer or other disposition of any of the
Collateral, including, without limitation, any such transaction during a
Reorganization; and the Subordinated Creditors agrees to take no action to
challenge, restrain or prevent the consummation of any such transaction.
However, nothing herein shall absolve the Obligors of any obligation to notify
the Subordinated Creditors of any such disposition of Collateral.

 

SECTION 8. Legend; Further Assurances.

 

(a) The Subordinated Creditors and the Obligors will cause the Subordinated
Notes to be indorsed with the following legend:

 

“The indebtedness evidenced or secured by this instrument is subordinated to the
prior Payment in Full of the Senior Obligations (as defined in the Subordination
Agreement described below) pursuant to, and to the extent provided in, the
Subordination Agreement dated as of April 22, 2005, (the “Subordination
Agreement”) made by the Subordinated Creditors and Obligors referred to therein
in favor of JPMORGAN CHASE BANK, N.A. (successor by merger to Bank One, N.A.
(Main Office Chicago)), as a Lender, LC Issuer and as Agent for the Lenders
under the Credit Agreement dated as of March 7, 2003, as it has been amended,
and in favor of the Lenders party to the Credit Agreement.

 

(b) The Subordinated Creditors and the Obligors will (i) mark their books of
account in such a manner as shall be effective to give proper notice of the
effect of this Agreement and (ii) in the case of any Subordinated Obligation
which is not evidenced by any instrument, upon the Agent’s request, cause such
Subordinated Obligation to be evidenced by an

 

10

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appropriate instrument or instruments indorsed with the above legend. The
Subordinated Creditors and the Obligors will, at their expense and at any time
and from time to time, promptly execute and deliver all further instruments and
other documents, and take all further action, that may be necessary or, in the
reasonable opinion of the Agent, desirable, or that the Agent may reasonably
request, in order to protect any right or interest granted or purported to be
granted hereby or to enable the Agent to exercise and enforce its rights and
remedies hereunder.

 

SECTION 9. Obligations Unconditional.

 

(a) All rights and interests of the Agent hereunder, and all agreements and
obligations of the Subordinated Creditors and the Obligors hereunder, shall
remain in full force and effect irrespective of: (i) any lack of validity or
enforceability of any Senior Document or any other agreement or instrument
relating thereto; (ii) any change in the time, manner or place of payment of, or
in any other term in respect of, all or any of the Senior Obligations, or any
other amendment or waiver of or any consent to departure from any Senior
Document; (iii) any exchange or release of, or non-perfection of any Lien on or
security interest in, any Collateral, or any release or amendment or waiver of
or consent to departure from any guaranty, for all or any of the Senior
Obligations; (iv) all other notices, demands and protests, and all other
formalities of every kind in connection with the enforcement of the Senior
Obligations or of the obligations of the Subordinated Creditors and the Obligors
hereunder, the omission of or delay in which, but for the provisions of this
Section 9, might constitute grounds for relieving the Subordinated Creditors or
the Obligors of its obligations hereunder; (v) any requirement that the Agent
protect, secure, perfect or insure any security interest or other Lien or any
property subject thereto or exhaust any right to take any action against any
Obligor or any other Person or any Collateral; or (vi) any other circumstance
which might otherwise constitute a defense available to, or a discharge of, any
of the Obligors in respect of any of the Senior Obligations or a Subordinated
Creditor or any of the Obligors in respect of this Agreement.

 

(b) This Agreement shall automatically terminate without further action by any
party upon Payment in Full of all of the Senior Obligations; provided that it
shall continue to be effective or shall be reinstated, as the case may be, if at
any time any payment of any of the Senior Obligations is rescinded or must
otherwise be returned by the Lender or the Agent upon the insolvency, bankruptcy
or reorganization of Obligors or otherwise, all as though such payment had not
been made.

 

(c) No right of the Agent or any of the Lenders may be impaired by any act or
failure to act by Borrower or any Holder of any Subordinated Obligations or by
any failure of Borrower or any Subordinated Creditor to comply with any
provision of this Agreement.

 

SECTION 10. Subrogation. After all Senior Obligations have been Paid In Full and
until the Subordinated Obligations are paid in full, Holders will be subrogated
(equally and ratably with all other indebtedness pari passu with the
Subordinated Notes) to the rights of holders of the Senior Obligations to
receive distributions applicable to the Senior Obligations to the extent that
distributions otherwise payable to the Holders have been applied to the payment
of Senior Obligations. A distribution made under this Agreement to holders of
Senior Obligations that otherwise would have been made to Holders is not, as
between the Borrower

 

11

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and Holders, a payment by the Borrower on the Subordinated Notes. No payment or
distribution to the Agent pursuant to the provisions of this Agreement shall
entitle any Subordinated Creditor to exercise any rights of subrogation in
respect thereof until 91 days after the Senior Obligations shall have been Paid
in Full; provided, however, that if any payment to the Agent or any Lender is
avoided or otherwise rescinded in or as a result of a Reorganization or
otherwise, the claim of the Agent and the Lenders resulting therefrom shall be
considered to be Senior Obligations for all purposes of this Agreement and the
rights of subrogation of the Subordinated Creditors as provided herein shall
likewise be rescinded until Payment in Full of the Senior Obligations.

 

SECTION 11. Representations and Warranties.

 

(a) The Obligors hereby represents and warrants as follows:

 

(i) Each Subordinated Document constitutes the legal, valid and binding
obligation of the Borrower, enforceable against the Borrower in accordance with
its terms, except as such enforceability may be limited by general principles of
equity and subject to applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally, the
enforcement of applicable creditors rights and remedies.

 

(ii) The execution, delivery and performance of this Agreement by each Obligor
have been duly authorized by all necessary corporate action, and do not and will
not contravene any of its organizational documents or any contractual
restriction binding on or affecting such Obligor.

 

(iii) This Agreement constitutes the legal, valid and binding obligation of each
Obligor Creditor, enforceable against such Obligor in accordance with its terms.

 

(iv) None of the Subordinated Documents has been amended or otherwise modified,
and there exists no default in respect of any thereof.

 

(v) Schedule I hereto is a complete and correct description of all instruments,
agreements and other writings evidencing, governing, guaranteeing or securing
any Subordinated Obligations, and true copies thereof have been delivered to the
Agent.

 

(b) Each Subordinated Creditor hereby represents and warrants as follows:

 

(i) The aggregate principal amount of the Subordinated Obligations outstanding
as of the date hereof is $30,000,000.00.

 

(ii) Such Subordinated Creditor is an organization validly existing and in good
standing under the laws of its jurisdiction of formation, and has all requisite
power and authority to execute, deliver and perform this Agreement.

 

(iii) The execution, delivery and performance of this Agreement by such
Subordinated Creditor have been duly authorized by all necessary corporate
action, and

 

12

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do not and will not contravene any of its organizational documents or any
contractual restriction binding on or affecting such Subordinated Creditor.

 

(iv) No authorization or approval or other action by, and no notice to or filing
with, any governmental authority or other regulatory body is required for the
due execution, delivery and performance by such Subordinated Creditor of this
Agreement.

 

(v) Schedule I hereto is a complete and correct description of all instruments,
agreements and other writings evidencing, governing, guaranteeing or securing
any Subordinated Obligations, and true copies thereof have been delivered to the
Agent.

 

(vi) This Agreement constitutes the legal, valid and binding obligation of such
Subordinated Creditor, enforceable against such Subordinated Creditor in
accordance with its terms.

 

SECTION 12. Relative Rights. Nothing in this Agreement will (i) impair, as
between Borrower and the Holders of Subordinated Notes, the obligation of
Borrower, which is absolute and unconditional, to pay principal of, premium and
interest and special interest, if any, on the Subordinated Note, or (ii) affect
the relative rights of Holders of Subordinated Notes and creditors of the
Borrower other than their rights in relation to holders of Senior Obligations.
If Borrower fails, because of this Agreement, to pay principal of, premium or
interest or special interest, if any, on a Subordinated Notes on the due date,
the failure is still a Default or Event of Default under the Subordinated Notes.

 

SECTION 13. Expenses. The Obligors agree, jointly and severally, to pay to the
Agent upon demand the amount of any and all expenses, including the fees and
expenses of any counsel for the Agent or for any of the Lenders, which the Agent
or any of the Lenders may incur in connection with the exercise or enforcement
of any of the rights or interests of the Agent against the Subordinated
Creditors or the Obligors hereunder.

 

SECTION 14. Notices. All notices and other communications provided for hereunder
shall be in writing and shall be mailed, telecopied or delivered, if to the
addresses specified below, or as to any such Person at such other address as
shall be designated by such Person in a written notice to each such other Person
complying as to delivery with the terms of this Section 14. All such demands,
notices, and other communications shall be effective (i) if mailed, when
received or three Business Days after mailing, whichever occurs first, (ii) if
telecopied, when transmitted and appropriate confirmation is received or (iii)
if delivered, upon delivery.

 

13

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If to a Subordinated Creditor:   

To the address set forth under such Subordinated

    

Creditor’s name on the signature pages hereof

    

With a copy to:

 

Bryan Cave LLP

1290 Avenue of the Americas

New York, NY 10104

FAX: (212) 541-1432

Attention: Eric L. Cohen, Esq.

If to Obligors:   

Matrix Service Company

10701 East Ute Street

Tulsa, OK 74116

Attention: Michael J. Hall, CEO

Telephone: (918) 838-8822

FAX: (918) 838-8810

    

With a copy to:

 

Conner & Winters, LLP

3700 First Place Tower

15 East 5th Street

Tulsa, OK 74103-4344

FAX: (918) 586-8548

Attention: Mark D. Berman, Esq.

 

14

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If to Agent:   

JPMorgan Chase Bank, N.A.

P.O. Box 655415

Dallas, TX 75265-5414

 

Address for Deliveries:

1717 Main Street

4th Floor

Dallas, TX 75201

 

Telephone: (214) 290-2799

FAX: (214) 290-2740

    

With a copy to:

 

Gable & Gotwals

1100 ONEOK Plaza

100 West Fifth Street

Tulsa, OK 74103

FAX: (918) 595-4990

Attention: Jeffrey D. Hassell, Esq.

 

SECTION 15. Miscellaneous.

 

(a) No amendment of any provision of this Agreement shall be effective unless it
is in writing and signed by the Subordinated Creditors, the Obligors and the
Agent, and no waiver of any provision of this Agreement, and no consent to any
departure therefrom, shall be effective unless it is in writing and signed by
the Agent, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.

 

(b) No failure on the part of the Agent to exercise, and no delay in exercising,
any right hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right preclude any other or further exercise
thereof or the exercise of any other right.

 

(c) Any provision of this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining portions
hereof or thereof or affecting the validity or enforceability of such provision
in any other jurisdiction.

 

(d) This Agreement shall (i) be binding on the Subordinated Creditors and the
Obligors and their respective successors and assigns and (ii) inure, together
with all rights and remedies of the Agent, to the benefit of the Agent and its
successors, transferees and assigns. Without limiting the generality of clause
(ii) of the immediately preceding sentence, any of the Lenders may assign or
otherwise transfer a Note, and its rights under any other Senior Document, to
any other Person, and such other Person shall thereupon become vested with all
of

 

15

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the benefits in respect thereof in favor of the Lender herein or otherwise. None
of the rights or obligations of the Subordinated Creditors or the Obligors
hereunder may be assigned or otherwise transferred without the prior written
consent of the Agent except as expressly otherwise provided herein.

 

(e) This Agreement shall be governed by and construed in accordance with the
laws of the State of New York.

 

(f) THE PARTIES HEREBY IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF ANY
UNITED STATES FEDERAL COURT OR STATE COURT SITTING IN THE STATE OF NEW YORK IN
ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE
PARTIES HEREBY IRREVOCABLY AGREE THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVE
ANY OBJECTION ANY OF THEM MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH
SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN
INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE AGENT OR ANY
LENDER TO BRING PROCEEDINGS AGAINST ANY OBLIGOR IN THE COURTS OF ANY OTHER
JURISDICTION PROVIDED THAT ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH
THIS AGREEMENT SHALL BE BROUGHT ONLY IN A UNITED STATES FEDERAL OR STATE COURT
SITTING IN NEW YORK.

 

(g) THE SUBORDINATED CREDITORS, THE OBLIGORS AND THE AGENT (BY ITS ACCEPTANCE OF
THIS AGREEMENT) EACH HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING THIS
AGREEMENT, ANY SENIOR DOCUMENT OR ANY AMENDMENT, MODIFICATION OR OTHER DOCUMENT
NOW OR HEREAFTER DELIVERED IN CONNECTION WITH ANY OF THE FOREGOING, AND AGREE
THAT ANY SUCH ACTION, PROCEEDING OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT
AND NOT BEFORE A JURY.

 

(h) In the event that any suit or action is instituted by a party hereto to
enforce the provisions of this Agreement, the prevailing party in such dispute
shall be entitled to recover its reasonable attorneys fees and expenses incurred
in connection therewith from the non-prevailing party. Nothing in this Section
15(h) shall impair or limit the rights of the Agent and Lenders under Section 13
above.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]

 

16

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered by their respective officers thereunto duly authorized,
as of the date first above written.

 

BORROWER: MATRIX SERVICE COMPANY, a Delaware corporation By:  

/s/ George L. Austin

   

George L. Austin, Vice President

 

17

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OTHER OBLIGORS: MATRIX SERVICE INC., an Oklahoma corporation; MATRIX SERVICE
INDUSTRIAL CONTRACTORS, INC. (formerly known as MATRIX SERVICE MID- CONTINENT,
INC.), an Oklahoma corporation; MATRIX SERVICE, INC. CANADA, an Ontario, Canada
corporation; HAKE GROUP, INC., a Delaware corporation; BOGAN, INC. (including
Fiberspec, a division), a Pennsylvania corporation; MATRIX SERVICE SPECIALIZED
TRANSPORT, INC. (formerly known as FRANK W. HAKE, INC.), a Pennsylvania
corporation; HOVER SYSTEMS, INC., a Pennsylvania corporation; I & S, INC., a
Pennsylvania corporation; MCBISH MANAGEMENT, INC., a Pennsylvania corporation;
MECHANICAL CONSTRUCTION, INC., a Delaware corporation; MID-ATLANTIC
CONSTRUCTORS, INC., a Pennsylvania corporation; TALBOT REALTY, INC., a
Pennsylvania corporation; BISH INVESTMENTS, INC., a Delaware corporation; I & S
JOINT VENTURE, L.L.C., a Pennsylvania limited liability company

By:

 

/s/ George L. Austin

    George L. Austin, Vice President

 

18

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AGENT: JPMORGAN CHASE BANK, N.A.

(successor by merger to Bank One, N.A.

(Main Office Chicago)) Lender, LC Issuer

and as Agent

By:  

/s/ Hal E. Fudge

    Hal E. Fudge, First Vice President

 

19

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NAME OF SUBORDINATED CREDITOR:  

By:

   

Name:

   

Title:

    ADDRESS FOR NOTICE

c/o:

   

Street:

   

City/State/Zip:

   

Attention:

   

Tel:

   

Fax:

   

 

20

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Schedule I

 

1. Securities Purchase Agreement dated April 22, 2005 between Borrower and the
Subordinated Creditors.

 

2. Form of Subordinated Note, attached as Exhibit A to the Securities Purchase
Agreement.

 

3. Registration Rights Agreement dated April 22, 2005 between Borrower and the
Subordinated Creditors.

 

21