Effective as of June 4, 2020, the Company and M&T Bank entered into the Sixth Amended and Restated Credit Facility Agreement, as amended by the Consent and First Amendment effective as of September 30, 2020 (as amended the “Credit Facility”), which replaced the Fifth Amended and Restated Credit Facility Agreement dated as of December 14, 2015, as amended by various amendments (collectively, the “Prior Credit Facility, as amended”).

Pursuant to the Credit Facility, the Company increased its revolving credit facility to an aggregate principal amount of $45.0 million and added provisions that allow the Company, subject to certain requirements, to request further increases, in minimum amounts of $5.0 million, up to $55.0 million. The Credit Facility also amended the financial covenant, Fixed Charge Coverage Ratio, and set a Minimum Fixed Charge Coverage Ratio. In addition, the Credit Facility modified the definition of Applicable Margin used to determine interest charges on outstanding and unused borrowings under the revolving credit facility and modified the definition of Permitted Acquisitions. The Credit Facility also established a LIBOR floor of 1% and included a mechanism for adoption of a different benchmark rate when LIBOR is discontinued. The Credit Facility prohibits the Company from making cash dividends without first obtaining the consent of M&T Bank.

Also, on June 4, 2020, the Company and M&T Bank entered into a master equipment lease (the “Master Lease”) for a lease line of up to $10.0 million in lease value of equipment to the Company. The Master Lease contains terms and provisions customary for transactions of this type, including obligations relating to the use, operation and maintenance of the equipment. The Master Lease also contains customary events of default, including nonpayment of amounts due under the lease and assignments for the benefit of creditors, bankruptcy or insolvency. In the event that an event of default occurs, M&T Bank may exercise one or more remedies specified in the Master Lease. At the conclusion of the lease term, the Company will have the right to purchase the equipment under the Master Lease. The Master Lease will renew automatically for additional 12-month terms until the Company provides M&T Bank with notice of non-renewal.

On March 1, 2021, the Company and M&T Bank entered into the Second Amendment to the Sixth Amended and Restated Credit Facility Agreement (the “Second Amendment”) that amended the Credit Facility. The Second Amendment provides for a mortgage-backed term loan in the principal amount of $3.7 million. The loan is evidenced by

a five-year term loan note (the “Jetview Term Loan”) and secured by a lien and security interest in the property located at 50 Jetview Drive, Rochester, New York pursuant to a mortgage by the Company and the County of Monroe Industrial Development Agency (“COMIDA”) to M&T Bank, each dated as of March 1, 2021. As part of this transaction, the Company entered into a separate agreement with COMIDA intended to provide the Company with certain associated tax benefits. The Jetview Term Loan bears interest at a rate equal to one-month LIBOR, adjusting daily, plus 2.65%. The Jetview Term Loan is subject to customary events of default including the non-payment of principal or interest as and when due, which may result in the acceleration of all amounts outstanding under the Jetview Term Loan, the application of an interest rate at a default rate and M&T Bank’s exercise of any rights and remedies available under the Credit Agreement or under applicable law.

The Credit Facility is secured by a general security agreement covering the assets of the Company and its subsidiaries, a pledge of the Company’s equity interest in its subsidiaries, a negative pledge on the Company’s real property, and a guarantee by the Company’s subsidiaries, all of which restrict use of these assets to support other financial instruments.

Individual debt facilities provided under the Credit Facility as of July 2, 2021 and September 30, 2020, are described below:

Borrowing Base

At July 2, 2021 and September 30, 2020, under the Credit Facility, the maximum amount the Company can borrow under the Revolver was the lesser of (i) 85% of eligible receivables plus (ii) up to 90% of eligible investment grade accounts plus (iii) a percentage of eligible inventories (up to a cap of $30.0 million).

At July 2, 2021, the upper limit on Revolver borrowings was $45.0 million and $12.0 million was available. At September 30, 2020, the upper limit on Revolver borrowings was $39.4 million and $19.4 million was available. Average Revolver balances amounted to $31.7 million and $25.2 million during the nine months ended July 2, 2021 and June 26, 2020, respectively.

Interest Rates

Under the Credit Facility, variable rate debt accrues interest at LIBOR plus the applicable marginal interest rate that fluctuates based on the Company’s Fixed Charge Coverage Ratio, as defined below. At July 2, 2021, the applicable marginal interest rate was 1.75% for the Revolver. Changes to applicable margins and unused fees resulting from the Fixed Charge Coverage Ratio generally become effective mid-way through the subsequent quarter.

The Company incurs quarterly unused commitment fees ranging from 0.25% to 0.375% of the excess of $45.0 million over average borrowings under the Revolver. For the fiscal quarter ended July 2, 2021, the unused commitment fee was fixed at 0.25%. Fees incurred amounted to $30.9 thousand and $54.5 thousand during the three and nine months ended July 2, 2021, respectively. Fees incurred amounted to $5.8 thousand and $18.3 thousand during the three and nine months ended June 26, 2020, respectively. The fee percentage varies based on the Company’s Fixed Charge Coverage Ratio, as defined below.

Financial Covenants

The Credit Facility contains various affirmative and negative covenants including financial covenants. As of July 2, 2021, the Company had to maintain a minimum fixed charge coverage ratio (“Fixed Charge Coverage Ratio”). The Fixed Charge Coverage Ratio compares (i) EBITDAS minus unfinanced capital expenditures minus income tax expense, to (ii) the sum of interest expense, principal payments, payments on all capital lease obligations and dividends, if any (fixed charges). “EBITDAS” is defined as earnings before interest, income taxes, depreciation, amortization and non-cash stock compensation expense. The Fixed Charge Coverage Ratio was measured for a trailing twelve months ended July 2, 2021 as a minimum of 1.10 times. The Fixed Charge Coverage Ratio was the only covenant in effect at July 2, 2021. The Credit Facility also provides for customary events of default, subject in certain cases to customary cure periods, in which the outstanding balance and any unpaid interest would become due and payable.

The Company was in compliance with the financial debt covenant at July 2, 2021.

Contractual Principal Payments

A summary of contractual principal payments under IEC’s borrowings at July 2, 2021 for the next five years taking into consideration the Credit Facility is as follows:


	Contractual
	Principal
Debt Repayment Schedule	Payments
(in thousands)
Twelve months ending fiscal third quarter
2022	$	248
2023 ⁽¹⁾		33,529
2024		248
2025		248
2026 and thereafter		2,645
	$	36,918

⁽¹⁾ Includes Revolver balance of $33.0 at July 2, 2021.