Note 8—CREDIT FACILITIES

A summary of borrowings at September 30, 2013 and 2012 follows:

	Fixed/
	Variable		September 30, 2013				September 30, 2012
Debt	Rate	Maturity Date	Balance		Interest Rate (1)		Balance		Interest Rate
(in thousands)

M&T borrowings (2):
Revolving Credit Facility	v	01/18/16	$	11,261	3.19	%	$	6,588	3.00	%
Term Loan A	f	02/01/22		9,259	3.98			-	-
Term Loan B	v	02/01/23		13,184	2.68			-	-
SCB Term Loan	v	12/17/15		-	-			13,000	3.25
Albuquerque Term Loan	v	12/16/14		-	-			2,250	3.25
Albuquerque Mortgage Loan	v	02/01/18		3,000	3.44			3,267	3.25
Celmet Term Loan	v	07/30/15		-	-			1,166	3.25
Equipment Loans - 2	v	12/17/13		-	-			672	3.25
Equipment Loans - 3	f	11/01/12		-	-			108	2.93
Energy Loan	f	04/02/13		-	-			23	2.08

Other borrowings:
Seller notes, Wire and Cable	f	06/01/13		-	-			463	3.00
Albuquerque Industrial Revenue Bond	f	03/01/19		100	5.63			100	5.63

Total debt				36,804				27,637
Less: current portion				(2,778)				(6,533)
Long-term debt			$	34,026			$	21,104

(1) Rates noted above are before impact of interest rate swap.

(2) Sale-leaseback agreement with M&T is accounted for as an operating lease, and therefore is not included above for September 30, 2012. The lease terminated during the third quarter of fiscal 2013.

M&T Bank Credit Facilities

On January 18, 2013, the Company and M&T Bank entered into the Fourth Amended and Restated Credit Facility Agreement (“2013 Credit Agreement”), replacing a prior agreement dated December 17, 2010 (“2010 Credit Agreement”). Many of the terms, conditions and covenants remain unchanged from the 2010 Credit Agreement. Borrowings under the 2013 Credit Agreement are secured by, among other things, the assets of IEC and its subsidiaries.

Individual debt facilities provided under the 2013 Credit Agreement are described below:

a) Revolving Credit Facility (“Revolver”): Up to $20 million is available through January 18, 2016. 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 may 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, 2013, the upper limit on Revolver borrowings was $20.0 million. Average available balances amounted to $12.8 million and $12.9 million during the years ended September 30, 2013 and 2012, respectively.

The Company incurs quarterly unused commitment fees ranging from 0.125% to 0.500% of the excess of $20.0 million over average borrowings under the Revolver. Fees incurred amounted to $36 thousand and $33 thousand during the years ended September 30, 2013 and 2012, respectively. The fee percentage varies based on IEC's ratio of debt to EBITDARS.

b) Term Loan A: $10.0 million was borrowed on January 18, 2013. Principal is being repaid in 108 monthly installments of $93 thousand.

c) Term Loan B: $14.0 million was borrowed on January 18, 2013. Principal is being repaid in 120 monthly installments of $117 thousand.

d) Albuquerque Mortgage Loan: $4.0 million was borrowed on December 16, 2009. The loan is secured by real property in Albuquerque, NM, and principal is being repaid in monthly installments of $22 thousand plus a balloon payment due at maturity.

e) Energy Loan: $0.2 million was borrowed on April 2, 2008, for which interest at a fixed rate of 2.08% is subsidized by the State of New York. Principal was being repaid in 60 equal monthly installments and the loan was paid in full during April 2013.

Subsequent to September 30, 2013, the Company obtained an amendment to the 2013 Credit Agreement (the “Third 2013 Amendment”) for the Celmet Building Term Loan for $1.3 million. The proceeds were used to reimburse the Company’s cost of purchasing the Rochester, New York facility.

The 2013 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 total debt to twelve month EBITDARS (“Debt to EBITDARS Ratio”) that is below a specified limit, and (iii) a minimum fixed charge coverage ratio (“Fixed Charge Coverage Ratio”) as described in the tables below. The terms of the 2013 Credit Agreement did not require measurement of financial covenants for the first quarter of fiscal 2013. For the purpose of calculating compliance with the covenants, IEC's operating lease obligation to M&T Bank for certain equipment sold to the bank on June 27, 2008 and leased back for a period of five years, was treated as debt. During the third quarter of fiscal 2013, the operating lease terminated and the assets were repurchased pursuant to a purchase option in the sale-leaseback arrangement.

On May 15, 2013 we obtained an amendment to the 2013 Credit Agreement (the “First 2013 Amendment”) which modified the Debt to EBITDARS Ratio and Fixed Charge Coverage Ratio covenants, and on August 6, 2013 we obtained a further amendment to the 2013 Credit Agreement (the “Second 2013 Amendment,” and together with the First 2013 Amendment, the “2013 Amendments”) which modified the Debt to EBITDARS Ratio, as shown in the table below. Subsequent to September 30, 2013, on December 13, 2013, we obtained a further amendment to the 2013 Credit Agreement (the “2014 Amendment”) which modified the ratios as follows:

⋅ Debt to EBITDARS Ratio: (a)

2013 Credit Agreement, before 2013 Amendments:
3/31/2013 through and including 9/29/2013	< 3.00 to 1.00

9/30/2013 and thereafter	<2.75 to 1.00

2013 Credit Agreement, after First 2013 Amendment:
6/28/2013 through and including 12/27/2013	< 3.25 to 1.00

12/28/2013 through and including 3/28/2014	<3.00 to 1.00

3/29/2014 and thereafter	< 2.75 to 1.00

2013 Credit Agreement, after Second 2013 Amendment:
6/28/2013 through and including 12/27/2013	< 3.50 to 1.00

12/28/2013 through and including 3/28/2014	<3.00 to 1.00

3/29/2014 and thereafter	< 2.75 to 1.00

2013 Credit Agreement, after 2014 Amendment:
12/13/2013 through and including 3/27/2014	< 4.50 to 1.00

3/28/2014 through and including 6/26/2014	<3.50 to 1.00

6/27/2014 through and including 9/29/2014	<3.25 to 1.00

09/30/2014 and thereafter	< 2.75 to 1.00

⋅ Fixed Charge Coverage Ratio: (b)

2013 Credit Agreement, before 2013 Amendments:
3/31/2013 and thereafter	> 1.25 to 1.00

2013 Credit Agreement, after First 2013 Amendment:
6/28/2013	>0.95 to 1.00

9/30/2013	>1.00 to 1.00

12/27/2013	>1.15 to 1.00

3/28/2014 and thereafter	>1.25 to 1.00

2013 Credit Agreement, after 2014 Amendment:
3/28/2014 through and including 6/26/2014	≥0.90 to 1.00

06/27/2014 through and including 9/29/2014	≥1.10 to 1.00

9/30/2014 and thereafter	≥1.25 to 1.00

(a) The ratio of debt to earnings before interest, taxes, depreciation, amortization, rent expense and non-cash stock compensation expense.

(b) 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).

The Second 2013 Amendment also amended two definitions used in the calculation of the financial covenants, including: (i) the definition of net income, to add back, through the fiscal quarter ending June 27, 2014, up to $1.1 million of legal and accounting fees associated with the restatement, and (ii) the definition of interest expense as related to Rate Management Transactions (defined in the 2013 Credit Agreement), to be “the net cash cost or benefit associated with Rate Management Transactions net cash benefit or loss”.

The Company was in compliance with its financial covenants at September 30, 2012. At March 29, 2013 the Company was not in compliance with these financial covenants. At June 28, 2013 and September 30, 2013 the Company was not in compliance with the Debt to EBITDARS Ratio and Fixed Charge Coverage Ratio. The Company has obtained waivers for each period from M&T Bank with respect to such noncompliance.

The waivers received by the Company for failure to comply with the financial covenants at March 29, 2013, June 28, 2013 and September 30, 2013 did not affect the quarterly calculation of the applicable interest rate margin for the Revolver and Albuquerque Mortgage Loan and the Revolver unused fees. However, the Second 2013 Amendment modified the ranges of applicable margins and unused fees by increasing both the lower and upper limit of each range with respect to the applicable debt facility. The applicable margins are determined based on the Debt to EBITDARS Ratio. Changes to applicable margins and unused fees resulting from the Debt to EBITDARS Ratio generally become effective mid-way through the subsequent quarter. The higher Debt to EBITDARS Ratio calculated as of March 29, 2013 resulted in an increase of 0.75% in the effective rate applicable to the Revolver and Albuquerque Mortgage Loan and an increase of 0.375% in the unused commitment fee for the Revolver. The higher Debt to EBITDARS Ratio calculated as of June 28, 2013, in conjunction with the Second 2013 Amendment resulted in an increase of 0.25% in the effective rate applicable to those two loans and the unused commitment fee for the Revolver remained unchanged. However, the 2014 Amendment fixed the applicable margin for the Revolver at 4.25%, for the Albuquerque Mortgage Loan at 4.50% and Term Loan B at 3.25% and the unused fee at 0.50%, in each case through December 13, 2014 and if the Company is not compliant with financial covenants on December 13, 2014, during the period of non-compliance.

Significant modifications made in the 2013 Credit Agreement and subsequent amendments to the financing arrangements previously in effect under the 2010 Credit Agreement include:

	⋅	Consolidation of all outstanding term debt, except the Albuquerque Mortgage Loan and the Energy Loan, and an $8.9 million portion of outstanding loans under the Revolver, into two new and increased term loans, described below (“Term Loan A” and “Term Loan B”);

	⋅	Creation of a new Term Loan A in the original principal amount of $10.0 million, bearing interest at the fixed rate of 3.98% per annum, payable in equal monthly principal payments of $93 thousand each plus accrued interest, with a final maturity date of February 1, 2022;

	⋅	Creation of a new Term Loan B in the original principal amount of $14.0 million, bearing interest at a variable rate equal to 2.50% above the Libor in effect from time to time, payable in equal monthly principal payments of $117 thousand each plus accrued interest, with a final maturity date of February 1, 2023. The 2014 Amendment modified the applicable margin to 3.25% until December 13, 2014. Thereafter, the applicable margin will revert back to the rate range defined in the 2013 Credit Agreement provided that the Company is compliant with all the covenants. If however, the Company is non-compliant with any of the covenants the interest rate will remain at the fixed rate of 3.25% until the Company has become compliant with all the covenants;

	⋅	Extension of the maturity date of the Albuquerque Mortgage Loan from December 16, 2014 to February 1, 2018, with no change to the monthly principal payments of $22 thousand each plus accrued interest;

	⋅	Modification of the interest rate applicable to the Albuquerque Mortgage Loan from (i) a range on the applicable quarterly adjustment date of 2.50% to 3.75% above Libor based upon the Company’s then Debt to EBITDARS Ratio (ranging from 1.75:1.00 or less to 3.25:1.00 or greater), to (ii) a range on the applicable quarterly adjustment date of 2.00% to 3.25% above Libor based upon the Company’s then Debt to EBITDARS Ratio (ranging from 0.75:1.00 or less to 2.75:1.00 or greater). The Second 2013 Amendment modified the interest rate to a range on the applicable quarterly adjustment date of 2.25% to 3.75% above Libor based upon the Company’s then Debt to EBITDARS Ratio (ranging from 1.25:1.00 or less to 3.25:1.00 or greater). The 2014 Amendment modified the applicable margin to 4.50% until December 13, 2014. Thereafter, the applicable margin will revert back to the rate range defined in the Second 2013 Amendment provided that the Company is compliant with all the covenants. If however, the Company is non-compliant with any of the covenants the applicable margin will remain at the fixed rate of 4.50% until the Company has become compliant with all the covenants ;

	⋅	Continuation of the Revolver in the maximum available principal amount of the lesser of $20.0 million or the amount available under the borrowing base (the formula for which, and interest rate surcharge applicable to optional over-base advances, remains unchanged), with an outstanding principal balance immediately after the closing of $3.7 million;

	⋅	Extension of the maturity date of the Revolver from December 17, 2013 to January 18, 2016;

	⋅	Modification of the interest rate applicable to the Revolver from (i) a range on the applicable quarterly adjustment date of 2.25% to 3.50% above Libor based upon the Company’s then Debt to EBITDARS Ratio (ranging from 1.75:1.00 or less to 3.25:1.00 or greater), to (ii) a range on the applicable quarterly adjustment date of 1.75% to 3.00% above Libor based upon the Company’s then Debt to EBITDARS Ratio (ranging from 0.75:1.00 or less to 2.75:1.00 or greater). The Second 2013 Amendment modified the interest rate to a range on the applicable quarterly adjustment date of 2.00% to 3.50% above Libor based upon the Company’s then Debt to EBITDARS Ratio (ranging from 1.25:1.00 or less to 3.25:1.00 or greater). The 2014 Amendment modified the applicable margin to 4.25% until December 13, 2014. Thereafter, the applicable margin will revert back to the rate range defined in the Second 2013 Amendment provided that the Company is compliant with all the covenants. If however, the Company is non-compliant with any of the covenants the interest rate will remain at the fixed rate of 4.25% until the Company has become compliant with all the covenants ;

	⋅	Modification of the unused fee applicable to the Revolver from (i) a range on the applicable quarterly adjustment date of 0.125% to 0.500% based upon the Company’s then ratio of Debt to EBITDARS (ranging from 1.75:1.00 or less to 3.25:1.00 or greater), to (ii) a range on the applicable quarterly adjustment date of 0.125% to 0.500% based upon the Company’s then ratio of Debt to EBITDARS (ranging from 0.75:1.00 or less to 2.75:1.00 or greater). The Second 2013 Amendment modified the unused fee to a range on the applicable quarterly adjustment date of 0.250% to 0.500% based upon the Company’s then Debt to EBITDARS Ratio (ranging from 1.25:1.00 or less to 3.25:1.00 or greater). The 2014 Amendment modified the unused fee to a fixed rate of 0.50% until December 13, 2014. Thereafter, the unused fee will revert back to the fee range defined in the Second 2013 Amendment provided that the Company is compliant with all the covenants. If however, the Company is non-compliant with any of the covenants the unused fee will remain at the fixed rate of 0.50% until the Company has become compliant with all the covenants ;

	⋅	Elimination of mandatory prepayments based upon excess cash flow;

	⋅	Continuation, unchanged, of existing financial covenants requiring minimum quarterly EBITDARS, a maximum Debt to twelve month EBITDARS ratio, and minimum Fixed Charge Coverage Ratio, all measured at the end of each quarter commencing with the quarter ending in June 2013 (but later modified in the 2013 and 2014 Covenant Amendments); and

	⋅	Modification of the prohibition against dividends and stock repurchases to permit an aggregate maximum of $3.5 million of such distributions prior to February 1, 2023 absent default at the time of the applicable payment.

In connection with the 2013 Credit Agreement, on January 18, 2013, the Company and M&T Bank entered into an interest rate swap arrangement (“Swap Transaction”). The Swap Transaction is for a notional amount of $14.0 million with an effective date of February 1, 2013 and a termination date of February 1, 2023. The Swap Transaction is designed to reduce the variability of future interest payments with respect to Term Loan B by effectively fixing the annual interest rate payable on the loan’s outstanding principal. Pursuant to the swap transaction, the Company’s one month Libor rate is swapped for a fixed rate of 1.32%. When the swap fixed rate is added to the Term Loan B spread of 2.50%, the Company’s interest rate applicable to Term Loan B is effectively fixed at 3.82%.

The 2010 Credit Agreement provided for various debt facilities as detailed below. The revolving credit facility and term loan borrowings under the 2010 Credit Agreement bore interest at Libor plus a margin that varied between 2.25% and 3.75% based on the Company's Debt to EBITDARS Ratio.

The 2010 Credit Agreement was modified on November 17, 2011 by a letter agreement that extended the Equipment Line of Credit to December 17, 2013 and made all loans under such line due and payable no later than that date. The 2010 Credit Agreement required prepayments of term loans equal to 50% of excess cash flow for fiscal years ending after September 30, 2010 and the letter agreement changed that requirement to fiscal years ending after September 30, 2011.

Individual debt facilities that were provided under the 2010 Credit Agreement are described below:

a) Revolving Credit Facility (“Revolver”): Up to $20.0 million was available through December 17, 2013. The Company could borrow up to the lesser of (i) 85% of eligible receivables plus 35% of eligible inventories or (ii) $20.0 million. At IEC's election, another 35% of eligible inventories would be included in the borrowing base for limited periods of time during which a higher rate of interest would be charged on the Revolver. Borrowings based on inventory balances were further limited to a cap of $3.75 million, or when subject to the higher percentage limit, $4.75 million.

b) SCB Term Loan: $20.0 million was borrowed on December 17, 2010 and principal was being repaid in 60 equal monthly installments. This loan was paid off during January 2013.

c) Albuquerque Term Loan: $5.0 million was borrowed on December 16, 2009, and principal was being repaid in 60 equal monthly installments. This loan was paid off during January 2013.

d) Albuquerque Mortgage Loan: $4.0 million was borrowed on December 16, 2009. The loan is secured by real property in Albuquerque, NM, and principal was being repaid in 60 monthly installments of $22 thousand plus a balloon payment due at maturity. The maturity date of the mortgage loan was modified from December 16, 2014 to February 1, 2018; with no change to the monthly principal payments of $22 thousand each plus accrued interest.

e) Celmet Term Loan: $2.0 million was borrowed on July 30, 2010, and principal was being repaid in 60 equal monthly installments. This loan was paid off during January 2013.

f) Equipment Line of Credit: Up to $1.5 million, reduced by outstanding loans, was available through December 17, 2013. The line was available for purchases of capital equipment. Borrowings under the line were supported by individual notes that specify interest and principal repayment terms. The Company had the option to select whether the interest rate was fixed or variable. Equal payments of principal were being made over 48 months for two of the loans and over 60 months for one loan. These loans were paid off during January 2013.

g) Energy Loan: $0.2 million was borrowed on April 2, 2008 under this facility, for which interest at a fixed rate of 2.08% was subsidized by the State of New York. Principal was being repaid in 60 equal monthly installments and the loan was paid in full during April 2013.

Other Credit Facilities

h) Seller Notes: The May 2008 acquisition of Wire and Cable was financed in part by three promissory notes payable to the sellers totaling $3.8 million. These notes were subordinated to borrowings under the Credit Agreement and were 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. The seller notes were paid in full during June 2013.

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

A summary of contractual principal payments under IEC's borrowings for the next five years taking into consideration the 2013 Credit Agreement follows:

	Contractual
	Principal
Debt Repayment Schedule	Payments (1)
(in thousands)

Years ended September 30,
2014	$	2,778
2015		2,778
2016 (2)		14,038
2017		2,778
2018 and thereafter		14,432
	$	36,804

(1) Does not include the Celmet Term Loan of $1.3 million the Company obtained subsequent to September 30, 2013.

(2) Includes Revolver balance of $11.3 million as of September 30, 2013.