NOTE 7. CREDIT FACILITIES

A summary of borrowings at September 30, 2011 and 2010 follows:

	Fixed/
	Variable		Interest Rate				Balances at September 30,
Debt	Rate	Maturity	9/30/11		9/30/10		2011			2010
			(percents)				(thousands)
M&T borrowings
Revolving credit facility	v	12/17/13		3.25		3.50	$	7,198		$	5,823
SCB term loan	v	12/17/15		3.50		-		17,000			-
Abq term loan	v	12/16/14		3.50		3.75		3,250			4,250
Abq mortgage loan	v	12/16/14		3.50		3.75		3,533			3,800
Celmet term loan	v	07/30/15		3.50		3.75		1,533			1,933
Equipment loans (2), variable	v	01/05/15		3.25		3.75		945			273
Equipment loans (3), fixed	f	11/01/12		3.05		3.07		315			521
Wire & Cable term loan	f	01/01/12		6.70		6.70		95			435
Energy loan	f	04/02/13		2.08		2.08		64			105

Other borrowings
Seller notes, Wire & Cable	f	06/01/13		4.00		4.00		1,076			1,658
Abq industrial revenue bond	f	03/01/19		5.63		5.63		100			100
Total debt								35,109			18,898
Less: current portion								(6,896	)		(2,899	)
Long-term debt							$	28,213		$	15,999

Note: Sale-leaseback agreement with M&T is accounted for as an operating lease, and therefore is not included above.

M&T Credit Facilities

On December 17, 2010, IEC entered into the Third Amended and Restated Credit Facility Agreement (“Credit Agreement”) with M&T, replacing a prior agreement dated July 30, 2010. The Credit Agreement was modified on November 17, 2011 by a letter received and accepted by the Company from M&T. This Credit Agreement added a $20.0 million term loan used for the SCB acquisition; increased the limit on the revolving credit facility from $15.0 million to $20.0 million; eliminated a minimum threshold for variable interest tied to Libor (London interbank offered rate); and modified certain other provisions as discussed below. The basic structure of the agreement and many of the terms and conditions remained unchanged from the prior agreement. Except as otherwise noted below, the revolving credit facility and term loan borrowings under the Credit Agreement bear interest at Libor plus a margin that varies between 2.25% and 3.75% based on the Company's ratio of debt to EBITDARS, as defined. Individual debt facilities provided under the agreement are as follows:

(a) Revolving Credit Facility (“Revolver”): Up to $20 million is available through December 17, 2013. The Company may borrow up to the lesser of (i) 85% of eligible receivables plus 35% of eligible inventories or (ii) $20 million. At IEC's election, another 35% of eligible inventories will be included in the borrowing base for limited periods of time during which a higher rate of interest is charged on the Revolver. Borrowings based on inventory balances are further limited to a cap of $3.75 million, or when subject to the higher percentage limit, $4.75 million. At September 30, 2011, the upper limit on Revolver borrowings was $19.7 million. Average outstanding balances amounted to $11.7 million and $6.2 million during the years ended September 30, 2011 and 2010, respectively.

The difference between the amount borrowed under the Revolver and the $20 million limit M&T has committed is subject to an unused commitment fee, which was equal to 0.375%, or $19 thousand for the year ended September 30, 2011. This fee also varies based on IEC's ratio of debt to EBITDARS.

(b) SCB Term Loan: $20 million was borrowed on December 17, 2010 and principal is being repaid in 60 equal monthly installments.

(c) Albuquerque Term Loan: $5 million was borrowed on December 16, 2009, and principal is being repaid in 60 equal monthly installments.

(d) Albuquerque Mortgage Loan: $4 million was borrowed on December 16, 2009. The loan is effectively secured by real property in Albuquerque, NM, and principal is being repaid in 60 monthly installments of $22 thousand plus a balloon payment due at maturity.

(e) Celmet Term Loan: $2 million was borrowed on July 30, 2010, and principal is being repaid in 60 equal monthly installments.

(f) Equipment Line of Credit: Up to $1.5 million, reduced by outstanding loans, is available through December 17, 2013. The line is available for purchases of capital equipment, and borrowings under the line are supported by separate notes that specify fixed or variable interest, as selected by the Company, and principal repayment terms. Equal payments of principal are being made over 48 months for four of the loans and over 60 months for one loan.

(g) Wire & Cable Term Loan: $1.7 million was borrowed on May 30, 2008. The interest rate on this loan is fixed at 6.70%, and principal is being repaid in monthly installments of $28 thousand. The loan's original repayment period of 60 months was reduced as a result of a $0.5 million prepayment made in the fourth quarter of fiscal 2008. This loan will be paid in full in January 2012.

(h) Energy Loan (also referred to as the "NYSERDA” loan): $0.2 million was borrowed on April 2, 2008 under this facility, for which interest at a fixed rate of 2.08% is subsidized by the State of New York. Principal is being repaid in 60 equal monthly installments.

Other Credit Facilities

(i) Seller Notes: The May 2008 acquisition of Wire and Cable was financed in part by three promissory notes payable to the sellers and totaling $3.8 million. These notes are subordinated to borrowings under the Credit Agreement and are being repaid in quarterly installments of $160 thousand, including interest. Effective October 1, 2011, the interest rate on the notes was reduced from 4.0% to 3.0% without altering any other terms of the borrowings.

(j) Albuquerque Industrial Revenue Bond: When IEC acquired Albuquerque, the Company assumed responsibility for an Industrial Revenue Bond issued by the City of Albuquerque. Interest on the bond is paid semiannually, and the $100 thousand principal amount is due in its entirety at maturity.

Borrowings under the M&T Credit Agreement are secured by, among other things, the assets of IEC and its consolidated subsidiaries. The Credit Agreement also contains various affirmative and negative covenants including financial covenants. The Company is required to maintain (i) a minimum level of quarterly EBITDARS, (ii) a ratio of debt to twelve-month EBITDARS that is below a specified limit, and (iii) a minimum fixed-charge coverage ratio as described in the table below. The Company was in compliance with the three covenants at September 30, 2011.


		Actual at
Debt Covenant	Limit	September 30, 2011
Quarterly EBITDARS (000's)	Must be above $1,500	$	4,904
Total debt to EBITDARS	Must be below 3.50x		2.08	x
Fixed charge coverage ratio (a)	Must be above 1.25x		2.03	x

(a) The ratio compares (i) 12-month EBITDA plus non-cash stock compensation expense minus unfinanced capital expenditures minus cash taxes paid, to (ii) the sum of interest expense, principal payments, sale-leaseback payments and dividends, if any (fixed charges).

For the purpose of calculating compliance with the covenants, IEC's operating lease obligation to M&T for certain equipment sold to the bank on June 27, 2008 and leased back for a period of five years, is treated as debt. Rental payments of $389 thousand per year total $649 thousand for the remainder of the lease term.

Aggregate contractual principal payments under IEC's borrowings for the next five years are summarized below:

	Contractual
	principal
Debt Repayment Schedule	payments
	(thousands)
Years ending September 30,
2012	$	6,896
2013		6,533
2014*		13,137
2015		7,443
2016		1,000
2017 and thereafter		100
	$	35,109

*Includes Revolver balance of $7,198 as of September 30, 2011.