AMENDMENT NINE TO CREDIT AGREEMENT

Exhibit 10.5

 

AMENDMENT NINE TO CREDIT AGREEMENT

 

This Amendment Nine to Credit Agreement (“Amendment”) is dated as of April 22, 2005 (“Closing Date”), among MATRIX SERVICE COMPANY , a Delaware corporation (“Borrower”), the Lenders described below, 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.

 

RECITALS

 

A. Lenders have provided credit facilities to Borrower pursuant to that certain Credit Agreement dated as of March 7, 2003, among Borrower, Agent and the various Lenders party thereto (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 the Credit Agreement dated as of November 30, 2004, that certain letter agreement dated March 23rd, 2005, and that certain letter agreement dated April 8, 2005 (as amended, the “Credit Agreement”).

 

B. Pursuant to Amendment Six to Credit Agreement referenced above, $20,000,000 of the Revolving Commitment was converted to Term Loan B. Pursuant to this Amendment, the Term Loan B Commitment of each of the Lenders other than the Revolver B Lenders will be reduced to zero and the Term Loan B Commitments of the Revolver B Lenders will be restructured as Revolver B Loan Commitments. As a condition of the Agent and the Lenders’ agreement to this Amendment, Borrower shall incur the “XYZ Subordinated Obligations” (as defined below) by borrowing from various investors on a subordinated, unsecured basis, with the proceeds of such borrowing to be applied as provided in this Amendment.

 

C. Due to and in consideration of the foregoing and other circumstances, Borrower and the Lenders have agreed to make certain modifications to the Credit Agreement as provided in this Amendment.

 

AGREEMENT

 

1. Definitions . Capitalized terms used but not defined in this Amendment (including the Recitals) shall have the meanings given to them in the Credit Agreement. All terms defined in the foregoing Recitals are incorporated herein by reference. The term “Loan Documents” is hereby amended to include the Credit Agreement, as amended by this Amendment, all as they may be further amended from time to time with the consent of the Agent and, to the extent required by the Credit Agreement, the Lenders. The term “Agreement”, as used in the Credit Agreement, is hereby amended to mean the Credit Agreement, as amended by this Amendment and as it may be further amended from time to time with the consent of the Agent and, to the extent required by the Credit Agreement, the Lenders. The term “Credit Agreement” in all other Loan Documents is hereby amended to mean the Credit Agreement, as amended by this Amendment, as it may be further

 

amended from time to time with the consent of the Agent and, to the extent required by the Credit Agreement, the Lenders.

 

The following terms shall hereafter mean the following, for purposes of this Amendment and the Credit Agreement as amended by this Agreement:

 

“Additional Accrued Margin” means the percentage rate per annum designated as such which is applicable with respect to Loans as set forth in the definition of Applicable Margin.

 

“Cash Collateralization” means the deposit of unencumbered immediately available cash into an LC Cash Collateral Account.

 

“LC Cash Collateral Account” means a blocked deposit account or accounts to be established and maintained at the office of the Agent (or an affiliate thereof) in the name of the Agent as collateral security for outstanding LC Obligations. Any such account and deposits shall be and are hereby designated as Pledged Deposits, as such term is defined in the Security Agreement.

 

“Revolver B Borrowing Base” means $10,000,000.00 (which represents a portion of the total amount the Revolver B Lenders estimate is likely to be collected by Borrower in connection with the Large Disputed Accounts), provided that such amount shall be reduced immediately upon receipt by Borrower of written notice from the Agent at any time and from time to time if the Revolver B Lenders determine, in their sole judgment, that the amount Borrower is likely to ultimately collect from the Large Disputed Accounts has declined from the amount last estimated by the Revolver B Lenders. Notwithstanding anything to the contrary in Section 8.2, the Revolver B Lenders may, by unanimous action of the Revolver B Lenders, reduce the Revolver B Borrowing Base as provided above or otherwise unanimously agree to increase or decrease the Revolver B Borrowing Base in their sole discretion without the consent or agreement of any other Lender.

 

“Revolver B Lenders” means JPMorgan Chase Bank, N.A. and Wells Fargo Bank, NA, and their respective successors and assigns in regard to the Revolving B Loan.

 

“Revolving B Loan” means, with respect to a Revolver B Lender, such Lender’s loan made pursuant to its commitment to lend set forth in Section 2.1.5. (or any conversion or continuation thereof).

 

“Revolving B Loan Commitment” means, for each Revolver B Lender, the obligation of such Lender to make Revolving B Loans to Borrower in an aggregate amount not exceeding the amount specified in Section 2.1.5. with respect to such Revolver B Lender, as such amount may be modified from time to time pursuant to the terms hereof.

 

“Revolver B Termination Date” means October 31, 2005 or any earlier date on which the Revolving B Loan Commitment is reduced to zero or otherwise terminated pursuant to the terms hereof.

 

“Securities Purchase Agreement” means that certain Securities Purchase Agreement dated as of the Closing Date among the Borrower and the investors identified on the signature pages thereto.

 

“Subordination Agreement” means that certain Subordination Agreement dated as of the Closing Date, between the Subordinated Creditors party thereto, the Agent, the Borrower and the

 

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other various obligors listed on the signature pages of such agreement, as further amended, supplemented, restated or otherwise modified from time to time in accordance with its terms and the terms of the Credit Agreement.

 

“XYZ Subordinated Loan Documents” means the Securities Purchase Agreement, the Notes (as defined in the Securities Purchase Agreement), the Registration Rights Agreement (as defined in the Securities Purchase Agreement), and any other documents or agreements executed in connection with the transactions contemplated under the Securities Purchase Agreement.

 

“XYZ Subordinated Loans” means the loans made to the Borrower pursuant to the XYZ Subordinated Loan Documents, which loans are subordinated to the Obligations in accordance with the terms of the Subordination Agreement.

 

“XYZ Subordinated Obligations” has the meaning assigned to such term in the Subordination Agreement.

 

2. Amendments to Credit Agreement .

 

2.1 The following defined terms are hereby amended by deleting the current definition and replacing it with the following:

 

“Aggregate Commitment” means the aggregate of the Revolving Credit Commitments, the Revolving B Loan Commitments and the Term Loan Commitments of all the Lenders, as reduced from time to time pursuant to the terms hereof.

 

“Applicable Margin” means the percentage rate per annum which is applicable at such time with respect to the listed Loans and Advances as set forth below:

 

 

“Borrowing Base” means eighty percent (80%) of Consolidated Eligible Accounts Receivable.

 

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“Borrowing Base Determination Date” means (i) the last day of each calendar month, and (ii) Friday of each calendar week.

 

“Consolidated EBITDA” means Consolidated Net Income plus, to the extent deducted in determining Consolidated Net Income, (i) Consolidated Interest Expense, (ii) expense for taxes paid or accrued, (iii) depreciation, amortization, other non-cash charges, (iv) losses on sale of fixed assets, and (v) extraordinary losses incurred other than in the ordinary course of business, minus, to the extent included in Consolidated Net Income, (i) gains on sales of fixed assets, (ii) extraordinary gains realized other than in the ordinary course of business, and (iii) income tax benefits, all calculated for the Borrower and its Subsidiaries on a consolidated basis for any period.

 

“Loan” means a Term Loan, a Revolving Loan, a Revolving B Loan or a Swing Line Loan.

 

“Non-Earmarked Cash” shall mean (i) the aggregate of all Cash Equivalent Investments of Borrower and all Subsidiaries excluding (ii) (A) funds required by Sections 2.7.2. (i), (ii), (iii), (v), (vi), or (viii) to be paid as mandatory prepayments under such Sections, provided that such amounts are paid as required by such Sections immediately upon being received by Borrower or the applicable Subsidiary in collected funds, and (B) funds kept on hand in the ordinary course of business of Borrower and its Subsidiaries for payroll funding.

 

“Term Loan B Commitment” means, as of the Closing Date of Amendment Nine, as to each Lender, zero.

 

2.2 Section 2.1.1. is hereby amended by deleting the last sentence thereof and adding the following language at the end of the section:

 

From and including April 22, 2005, all Revolving Loans, including those outstanding on such date and those made thereafter, will accrue interest at the Alternate Base Rate plus the Applicable Margin plus the Additional Accrued Margin. The portion of the accrued interest on all Revolving Loans attributable to the Alternate Base Rate plus the Applicable Margin shall be due and payable on each Payment Date. The portion of the accrued interest on all Revolving Loans attributable to the Additional Accrued Margin shall not be payable on each Payment Date, but shall be payable on the earlier of (i) voluntary prepayment of all Obligations associated with the Revolving Loans, (ii) as required by Section 2.7.2. or (iii) the Facility Termination Date.

 

2.3 Section 2.1.2. is hereby amended by adding the following language at the end of the section:

 

From and including April 22, 2005, the Term Loan will accrue interest at the Alternate Base Rate plus the Applicable Margin plus the Additional Accrued Margin. The portion of the accrued interest on the Term Loan attributable to the Alternate Base Rate plus the Applicable Margin shall be due and payable on each Payment Date. The portion of the interest on the Term Loan attributable to the Additional Accrued Margin shall not be payable on each Payment Date, but shall be payable on the earlier of (i) the voluntary prepayment in full of all Obligations associated with the Term Loan, (ii) as required by Section 2.7.2. , or (iii) the Facility Termination Date. If such Additional Accrued Margin interest is paid on the Facility Termination Date and the Term Loan remains outstanding after such date, the portion of interest

 

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attributable to the Additional Accrued Margin for subsequent periods shall be payable on the earlier of (i) the voluntary prepayment in full of all Obligations associated with the Term Loan, (ii) as required by Section 2.7.2. , or (iii) the Term Loan Maturity Date.

 

2.4 A new Section 2.1.5. is hereby added to the Credit Agreement and shall read as follows:

 

2.1.5. Revolving Loan B Commitment . The sum of $10,000,000 of the Term Loan B Commitment is and hereby shall be restructured and become the Revolving B Loan Commitments, as further described in this Section 2.1.5. , and the remainder of the Term Loan B Commitment is hereby permanently reduced to $0. From and including the date hereof but prior to the Revolver B Termination Date, the Revolver B Lenders agree to make Revolving B Loans to the Borrower from time to time, in amounts not to exceed in the aggregate at any one time outstanding the lesser of (i) $10,000,000 less an amount equal to the value of all outstanding checks as reported on Borrower’s most recent Borrowing Base Certificate or (ii) the Revolver B Borrowing Base less an amount equal to the value of all outstanding checks as reported on Borrower’s most recent Borrowing Base Certificate. Upon any collection of funds with respect to a Large Disputed Account, receipt of Net Cash Proceeds of any sale of common stock, preferred stock, warrants or other equity by Borrower or any of its Subsidiaries, or receipt of proceeds of any asset sale by Borrower or any of its Subsidiaries, in each case, the $10,000,000.00 amount referred to in (i) above will be automatically and permanently reduced by an amount equal to the amount of cash received by Borrower or any of its Subsidiaries, without any further action by the Agent, the Lenders or the Borrower.

 

The Borrower shall not be entitled to and no Revolver B Lender shall be obligated to make any Revolver B Loans until and unless the Revolver Commitments have been fully utilized through the issuance of the maximum aggregate amount of Revolving Loans and Facility LC’s permitted by Section 2.1.1. No Revolver B Lender shall be required to make any Revolving B Loans in excess of its pro rata share of all such Loans, as determined by dividing such Revolving B Lender’s Revolving B Loan Commitment by the aggregate amount of all Revolving B Loan Commitments.

 

Not later than 11:00 a.m. Tulsa, Oklahoma time on the date specified for each borrowing of Revolver B Loans, each Revolver B Lender shall make available the amount of the Revolving B Loan to be made by it on such date to the Agent, to an account which the Agent shall specify, in immediately available funds, for the account of the Borrower. The amounts so received by the Agent shall, subject to the terms and conditions of this Agreement, be made available to the Borrower by depositing the same, in immediately available funds, in an account of the Borrower, designated by the Borrower from time to time, written notice of the location of which shall be given to the Agent together with the notice made pursuant to Section 2.8 . As of April 22, 2005, the Revolving B Loan Commitments of each of the Lenders are as follows:

 

 

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Interest on Revolving B Loans shall accrue at a rate equal to the Alternate Base Rate plus the Applicable Margin and the Additional Accrued Margin.

 

2.5 Section 2.2. is hereby deleted and replaced with the following:

 

2.2. Required Payments; Termination .

 

(a) The Aggregate Outstanding Credit Exposure and all other unpaid Obligations, other than the Term Loan and the Revolver B Loans, shall be paid in full by the Borrower on the Facility Termination Date.

 

(b) The Term Loan shall be payable as follows: (i) interest shall be due and payable as provided in Section 2.1.2. , and (ii) principal shall be payable in nineteen (19) consecutive quarterly installments of $1,160,714.29, on the last day of each fiscal quarter ending May, August, November and February, commencing with the fiscal quarter ending August 31, 2003, and the last installment due on the Term Loan Maturity Date equal to the remaining balance.

 

(c) The Revolver B Loans shall be payable as follows: (i) interest at the Alternate Base Rate plus the Applicable Margin shall be due and payable on each Payment Date, and (ii) all unpaid Obligations attributable to the Revolver B Loans shall be paid in full by the Borrower on the Revolver B Termination Date.

 

2.6 Section 2.7. is hereby deleted and replaced with the following:

 

2.7. Prepayments .

 

2.7.1. Optional Prepayments . Loans bearing interest based on the Alternate Base Rate (other than Swing Line Loans) may be prepaid at any time without penalty or premium on the same Business Day prior written notice is delivered by noon in a minimum amount of $500,000.00.

 

2.7.2. Mandatory Prepayments . In addition to any scheduled installments due on the Loans, the following mandatory prepayments shall be made:

 

(i) Sale of Assets : Upon the sale, transfer or other disposition of any asset of the Borrower or any of its Subsidiaries (other than the sale of inventory in the ordinary course of business and the sale of up to $250,000.00 of other assets per calendar year) which is permitted by the terms of the Loan Documents, the Borrower shall immediately make a mandatory prepayment of the Obligations in an amount equal to one hundred percent (100%) of the net proceeds realized from such sale, transfer or other disposition, and such payment shall be applied in the following order:

 

(a) to the Revolver B Loans (first all Obligations other than interest or principal, then interest at the Alternate Base Rate plus the Applicable Margin, then interest at the Additional Accrued Margin, then principal), and after payment thereof in full,

 

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(b) to the Term Loan (first all Obligations other than interest or principal, then interest at the Alternate Base Rate plus the Applicable Margin, then interest at the Additional Accrued Margin, then principal in inverse order of maturity), and after payment thereof in full,

 

(c) to the Revolving Loans (first all Obligations other than interest or principal, then interest at the Alternate Base Rate plus the Applicable Margin, then interest at the Additional Accrued Margin, and then principal), and after payment thereof in full,

 

(d) to the Cash Collateralization of all LC Obligations.

 

(ii) Sale of Stock : Upon the sale of any common stock, preferred stock, warrant or other equity (other than the exercise of stock options by employees, officers and directors) Borrower shall immediately make a mandatory prepayment of the Obligations in an amount equal to one hundred percent (100%) of the Net Cash Proceeds from such sale or issuance, and such payment shall be applied in the following order:

 

(a) to the Revolver B Loans (first all Obligations other than interest or principal, then interest at the Alternate Base Rate plus the Applicable Margin, then interest at the Additional Accrued Margin, then principal), and after payment thereof in full,

 

(b) to the Obligations under the Term Loan or the Revolving Loans, or in part of both, as the Borrower may choose, provided that all prepayments on the Term Loan shall be applied first to principal installments thereunder in the inverse maturity thereof, then to any other Obligations under the Term Loan, and after payment in full of all Obligations under the Term Loan and the Revolving Loans,

 

(c) to the Cash Collateralization of all LC Obligations.

 

(iii) Issuance of Subordinated Indebtedness : Upon the receipt of proceeds from the issuance of any permitted Subordinated Indebtedness, other than the XYZ Subordinated Indebtedness, Borrower shall immediately make a mandatory prepayment of the Obligations in an amount equal to one hundred percent (100%) of the Net Cash Proceeds from such sale or issuance, and such payment shall be applied in the following order:

 

(a) to the Revolver B Loans (first all Obligations other than interest or principal, then interest at the Alternate Base Rate plus the Applicable Margin, then interest at the Additional Accrued Margin, then principal), and after payment thereof in full,

 

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(b) to the Obligations under the Term Loan or the Revolving Loans, or in part of both, as the Borrower may choose, provided that all prepayments on the Term Loan shall be applied first to principal installments thereunder in the inverse maturity thereof, then to any other Obligations under the Term Loan, and after payment in full of all Obligations under the Term Loan and the Revolving Loans,

 

(c) to the Cash Collateralization of all LC Obligations.

 

(iv) Excess Cash Flow : On or before each date on which the Borrower’s annual audited financial statements are required to be delivered pursuant to this Agreement, commencing with the fiscal year ending May 31, 2006, the Borrower shall make a mandatory prepayment in an amount equal to fifty percent (50%) of the Excess Cash Flow, if positive, for the most recently ended fiscal year. For purposes hereof, the term Excess Cash Flow, as to the applicable period, means Consolidated EBITDA, less (i) Consolidated Interest Expense, (ii) taxes paid, (iii) principal payments on the Term Loan, (