Exhibit 10.5

 

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JPMorgan Chase Bank, N. A.

 

September 28, 2005

 

Matrix Service Company

Attn: George L. Austin, Vice President

10701 East Ute Street

Tulsa, OK 74116

 

All Other Loan Parties Under the Credit

Agreement Described Below

 

Re:   Credit Agreement dated as of March 7, 2003 among Matrix Service Company,
as “Borrower,” the Lenders described therein, and 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, and others, as amended (as amended, the
“Credit Agreement”)

 

Gentlemen:

 

This is in regard to the above-referenced Credit Agreement. Capitalized terms
not defined in this waiver letter and amendment have the same meanings as in the
Credit Agreement.

 

Borrower has asked for a waiver of certain provisions of the Credit Agreement
and certain other Loan Documents as follows (such waivers collectively the “Sale
Waivers”):

 

(i) a partial waiver of Section 2.7.2(x) of the Credit Agreement to allow the
sale of the Sale Property as described in the Credit Agreement (the “First
Subject Sale”), with these terms that vary from the Credit Agreement:

 

(a) the “Price” shall be $3,500,000, along with an additional series of deferred
payments of up to an aggregate of $200,000 as provided in the purchase agreement
applicable to the First Subject Sale,

 

(b) the “Release Price” shall be “$3,000,000 plus the pledge and assignment of
all Seller’s rights to receive the remaining $700,000 of the Price and all
related rights in form acceptable to Agent, and with documents evidencing such
obligation also in form acceptable to Agent”, and

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(c) the “Payment and Certain Other Terms” shall be “Net Cash Sale Proceeds (less
$700,000) paid at closing, plus an additional $500,000 paid in cash over a term
of sixty-three (63) months, plus the remaining $200,000 paid over a term of five
(5) years if certain conditions are met as described in the purchase agreement
related to the First Subject Sale. Buyer’s obligation to pay the additional
$500,000 shall be evidenced by a promissory note in favor of Matrix Service,
Inc., an Oklahoma corporation (the “Purchase Note”), and in regard to the
Purchase Note (i) all rights of the Loan Parties, or any of them, in, to and
arising under the Purchase Note are and shall be subject to the existing liens,
pledges and security interests in favor of Agent as set forth in the Security
Agreements, (ii) Borrower and the Loan Parties hereby grant to Agent, consistent
with the terms of the Security Agreements, a first priority lien and security
interest in, and pledge of, the Purchase Note, and (iii) Borrower shall deliver
(or cause to be delivered) the Purchase Note to Agent immediately after closing,
along with an allonge to the Purchase Note assigning the Purchase Note to
Agent;” and

 

(d) the “Application of Net Cash Sale Proceeds after Receipt by Agent” shall be
“Of Net Cash Sale Proceeds received at closing, all shall be paid to Agent
immediately, and $1,550,000 shall be applied to the principal balance of the
Term Loan in the inverse order of maturity thereof, and the other Net Cash Sale
Proceeds shall be applied to the principal balance of the Revolving Loan (but
not Revolving B Loan) (with no corresponding decrease in the Revolving Loan
Commitment). All payments received by Borrower or any Loan Party attributable to
the $500,000 and $200,000 obligations (including without limitation all payments
of interest thereon) shall be paid immediately to Agent and applied to the
principal balance of the Revolving Loan (with no corresponding decrease in the
Revolving Loan Commitment). Notwithstanding the foregoing, if as of the date of
receipt of any such proceeds an Unmatured Default or Default has occurred and is
continuing, all proceeds shall be applied as specified by the Required Lenders;”

 

(ii) a partial waiver of Sections 6.4 and 6.13 of the Credit Agreement to allow
the sale outside the ordinary course of business by Borrower or one or more of
its Subsidiaries (such Person who is the selling party is hereinafter referred
to as the “Seller”) of the property described on the attached Exhibit “A” (the
“New Sale Property”) (which property Borrower has determined to be surplus, not
necessary for Borrower’s business plans or otherwise in the Borrower’s best
interests to sell), according to the terms set forth on Exhibit “A” (the “New
Subject Sale,” collectively with the First Subject Sale the “Subject Sales” and
each a “Subject Sale”),

 

(iii) a partial waiver of the provisions of Section 2.1.5 of the Credit
Agreement so that the $10,000,000.00 amount set forth in Section 2.1.5(i) shall
be reduced by the amount of proceeds received from any Subject Sale only to the
extent that, on the date of Borrower’s receipt of the first proceeds from such
Subject Sale, there exists any outstanding principal balance of Revolver B, and

 

(iv) a partial waiver of Section 4.1.5 of the Security Agreement and Exhibit B,
paragraph 8 of the applicable Mortgage, Assignment of Leases and Rents, Security
Agreement and Financing Statement if any (the “Mortgage”) by the Seller in favor
of the Agent, to the extent any of the Subject Sales may be restricted, limited
or prohibited by the Security Agreement or the Mortgage.

 

The Lenders shall have agreed to grant the Sale Waivers upon the satisfaction of
the following:

 

(a) execution and delivery of this waiver letter and amendment by the Loan
Parties, the Agent and all Lenders; and

 

Member FDIC

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(b) payment by Borrower of all currently invoiced legal fees of Agent and
Lenders and all currently invoiced fees of Capstone Corporate Recovery, LLC.

 

Notwithstanding the foregoing, the Sale Waivers shall be applicable only to any
Subject Sale that meets the following requirements (collectively the “Subject
Sale Requirements”):

 

(i) except as specifically set forth otherwise in the Credit Agreement or in
this waiver letter and amendment (in regard to the First Subject Sale) or on
Exhibit “A” (in regard to the New Subject Sale), such Subject Sale shall be for
cash paid to the Seller in full on or before closing and before transfer of
possession or delivery of the applicable Sale Property to the purchaser;

 

(ii) the sale price for each item of Sale Property shall be no less than the
amount set forth in the Credit Agreement (as to the First Subject Sale) or on
Exhibit “A” (as to the New Subject Sale) unless otherwise agreed by the Required
Lenders;

 

(iii) all other terms of such Subject Sale shall be in accordance with the
Credit Agreement (as to the First Subject Sale) and Exhibit “A” (as to the New
Subject Sale);

 

(iv) all Net Cash Sale Proceeds of such Subject Sale shall be paid to Agent
immediately upon receipt by the applicable Loan Party for application to the
Obligations as provided above (as to the First Subject Sale) and as provided in
Exhibit “A” (as to the New Subject Sale);

 

(v) all requirements relating to the First Subject Sale set forth in the Credit
Agreement or the New Subject Sale set forth on Exhibit “A”, as applicable, are
met;

 

(vi) the definitive agreements for such Subject Sale shall be acceptable to
Agent and Agent’s counsel;

 

(vii) such Subject Sale must be closed and all Net Cash Sale Proceeds paid to
Agent on or before November 30, 2005; and

 

(viii) there does not exist at the time of closing such Subject Sale any
Unmatured Default or Default.

 

Borrower also hereby agrees with the Lenders as follows:

 

(a) within two (2) Business Days of closing of each Subject Sale, Borrower shall
deliver to Agent a completed Borrowing Base Certificate prepared as of the time
immediately after such closing, certified by the chief financial officer of the
Borrower;

 

(b) from and after such closing and until the delivery of the Borrowing Base
Certificate described in (a) above, notwithstanding anything to the contrary in
Exhibit “A”, the Borrowing Base shall be immediately reduced by the amount of
proceeds required to be paid to Agent for application to the Revolving Loans,
and after the delivery of such Borrowing Base Certificate the Borrowing Base
shall be calculated as provided in the Credit Agreement; and

 

(c) all rights, interests and claims of the Loan Parties, or any of them, under
or related to any of the Subject Sales, including but not limited to the right
to receive any payments under or arising from any of the Subject Sales, are and
shall be part of and included in the Collateral, and to the extent necessary all
Loan Documents are hereby amended to reflect the preceding provisions of this
subparagraph (c).

 

Member FDIC

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The term “Net Cash Sale Proceeds” in regard to any Subject Sale shall mean the
amount of cash received by the Seller and all other Loan Parties on account of
or arising from the closing of such Subject Sale minus the sum of the Seller’s
reasonable and necessary expenses incurred in connection with the negotiation
and consummation of such Subject Sale.

 

To the extent a Sale Waiver is applicable to any particular Sale Property, Agent
shall, and is authorized by all Lenders to, release all mortgages, liens and
security interests encumbering such Sale Property upon receipt by Agent of
(i) Net Sale Proceeds from the applicable Subject Sale in an amount greater than
or equal to (or constituting) the Release Price reflected in the Credit
Agreement (as to the First Subject Sale) and on Exhibit “A” (as to the New
Subject Sale) or such other amount as may be authorized by the Required Lenders
and (ii) a written report itemizing all deductions from the gross sales price
used to arrive at the amount of Net Cash Proceeds.

 

The waivers described above are limited to Subject Sales that meet the Subject
Sale Requirements and shall not waive any provisions of the Credit Agreement or
any of the other Loan Documents as they may relate to any other facts and
circumstances. The Subject Sales described in this waiver letter and amendment
are mutually exclusive of those Subject Sales (the “Other Subject Sales”)
described in that certain waiver letter and amendment dated on or about July 20,
2005 (the “Other Waiver Letter”), and none of the Other Subject Sales shall be
affected or addressed by the terms of this waiver letter and amendment, nor
shall any of the Subject Sales described herein be affected or addressed by the
Other Waiver Letter.

 

This waiver letter and amendment shall constitute a supplement and amendment to
the Credit Agreement. From and after the date hereof, references in the Credit
Agreement to “this Agreement” and like terms shall be deemed to be references to
the Credit Agreement as supplemented by this waiver, and as otherwise amended,
supplemented, restated or otherwise modified from time to time in accordance
with the Loan Documents. References in the other Loan Documents to the Credit
Agreement shall be deemed to be references to the Credit Agreement as
supplemented by this waiver letter and amendment and as further amended,
supplemented, restated or otherwise modified from time to time. This waiver
letter and amendment is a Loan Document executed pursuant to the Credit
Agreement and shall (unless otherwise expressly indicated therein) be construed,
administered and applied in accordance with the terms and provisions of the
Credit Agreement. The Credit Agreement as supplemented by this waiver letter and
amendment is ratified and confirmed in all respects, and all other Loan
Documents are hereby ratified and confirmed in all respects.

 

Except as expressly provided hereby, all of the representations, warranties,
terms, covenants and conditions of the Credit Agreement and the other Loan
Documents shall remain unamended and unwaived and shall continue to be, and
shall remain, in full force and effect in accordance with their respective
terms, including express limitations therein relating to the date on which such
representations and warranties were made. The waiver and agreements set forth
herein shall be limited precisely as provided for herein, and shall not be
deemed to be a waiver of, amendment to, consent to or modification of any other
term or provision of the Credit Agreement or of any event, condition, or
transaction on the part of the Borrower or any other Person which would require
the consent of the Agent or any of the Lenders.

 

Member FDIC

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The Borrower and each Loan Party, for itself and on behalf of all its
predecessors, successors, assigns, agents, employees, representatives, officers,
directors, general partners, limited partners, joint shareholders,
beneficiaries, trustees, administrators, subsidiaries, affiliates, employees,
servants and attorneys (collectively the “Releasing Parties”), hereby releases
and forever discharges Agent and each Lender and their respective successors,
assigns, partners, directors, officers, agents, attorneys, and employees from
any and all claims, demands, cross-actions, controversies, causes of action,
damages, rights, liabilities and obligations, at law or in equity whatsoever,
known or unknown, whether past, present or future, now held, owned or possessed
by the Releasing Parties, or any of them, or which the Releasing Parties or any
of them may, as a result of any actions or inactions occurring on or prior to
the date hereof, hereafter hold or claim to hold under common law or statutory
right, arising, directly or indirectly out of any Loan or any of the Loan
Documents or any of the documents, instruments or any other transactions
relating thereto or the transactions contemplated thereby. Borrower and each
Loan Party understands and agrees that this is a full, final and complete
release and agrees that this release may be pleaded as an absolute and final bar
to any or all suit or suits pending or which may hereafter be filed or
prosecuted by any of the Releasing Parties, or anyone claiming by, through or
under any of the Releasing Parties, in respect of any of the matters released
hereby, and that no recovery on account of the matters described herein may
hereafter be had from anyone whomsoever, and that the consideration given for
this release is no admission of liability.

 

Please indicate your approval of the terms and provisions hereof by executing
this letter in the space provided below.

 

This waiver letter and amendment may be executed in any number of counterparts,
all of which together shall constitute a single instrument, and it shall not be
necessary that any counterpart be signed by all the parties hereto. A facsimile
copy of this waiver letter and amendment and signatures thereon shall be
considered for all purposes as originals.

 

Yours very truly,

J. P. MORGAN CHASE BANK, N.A., as Agent

By:  

 

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    Dianne Wooley, Vice President

 

Member FDIC

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ACCEPTED AND AGREED TO:

 

Borrower:

 

MATRIX SERVICE COMPANY

 

By:  

 

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    George L. Austin, Vice President

 

Loan Parties:

 

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:  

 

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    George L. Austin, Vice President

 

Member FDIC

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Lenders: J. P. MORGAN CHASE BANK, N.A.

By:

 

 

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Dianne Wooley, Vice President

WACHOVIA BANK, NATIONAL ASSOCIATION

By:

 

 

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Patrick McGovern, Senior Vice President

UMB BANK, N.A.

By:

 

 

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Michael P. Nash, Senior Vice President

WELLS FARGO BANK, NA

(formerly known as Wells Fargo Bank Texas, NA)

By:

 

 

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Roger Fruendt, Senior Vice President

 

INTERNATIONAL BANK OF COMMERCE,

successor in interest to

LOCAL OKLAHOMA BANK,

an Oklahoma Banking Corporation

formerly known as LOCAL OKLAHOMA BANK, NA,

By:  

 

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    David Moore, Senior Vice President

 

Member FDIC

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Exhibit “A”

 

Common Name

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   Description of Any Real
Property Included (As
Applicable)

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   Personal
Property
Included

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   Price

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   Release Price

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   Payment and Certain
Other Terms

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   Application of Net Sale
Proceeds after Receipt by
Agent

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Holmes Facility    Street Address: 0 Price
Street a/k/a 101 Talbot
Ave,Ridley Township,
Delaware County,
Pennsylania.    That property
described on
the attached
Schedule A-1    $750,000    $720,000    All Net Cash Proceeds
paid at closing    Applied to principal
balance of Term Loan in
inverse order of maturity
thereof

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SCHEDULE A-1

 

Description of Personal Property