EXHIBIT 10.1
AGREEMENT AND SECOND AMENDMENT TO
CREDIT AGREEMENT
This Agreement and Second Amendment to Credit Agreement (this
"Amendment") dated as of August 16, 2004 among the financial institutions
(collectively, the "Banks") party to the Credit Agreement (as such term is
hereinafter defined); INTEGRATED ELECTRICAL SERVICES, INC. (the "Borrower"), and
BANK ONE, NA, with its main office in Chicago, Illinois, as administrative agent
(in such capacity, the "Administrative Agent") for the Banks;
W I T N E S S E T H:
WHEREAS, the Borrower, the Banks and the Administrative Agent executed
and delivered that certain Credit Agreement (as heretofore amended and
supplemented, the "Credit Agreement") dated as of February 27, 2004;
WHEREAS, the Borrower is in the process of preparing its financial
statements and as a result cannot provide certain data to the Administrative
Agent in a timely fashion; and
WHEREAS, the Borrower, the Banks and the Administrative Agent now
desire to amend the Credit Agreement to modify their agreements during the
period that the Borrower cannot deliver such data to the Administrative Agent,
and otherwise amend the Credit Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, representations and warranties herein set forth, and for other good
and valuable consideration, the receipt and sufficiency of which are
acknowledged, the parties hereby agree as follows:
Section 1. Section 1.1 of the Credit Agreement is hereby amended to add thereto
the following definition, which shall read in its entirety as follows:
"Delivery Date" means the later of (a) the date the
Administrative Agent receives the Borrower's Annual Report on Form 10-K
for the fiscal year ending September 30, 2004 and Quarterly Report on
Form 10-Q for the fiscal quarter ending June 30, 2004, in each case as
filed with the Securities and Exchange Commission, together with
restatements (if any) of financial statements for all prior dates and
periods as may be included in either of such filings, or (b) the date
the Administrative Agent receives the materials required by Section
5.2(a) with respect to the Borrower's fiscal year ending September 30,
2004.
Section 2. Each of the following definitions contained in Section 1.1 of the
Credit Agreement is hereby amended to read in its entirety as follows:
"Applicable Margin" means, with respect to interest rates and
letter of credit fees and as of any date of its determination, an
amount equal to the percentage amount set forth in the table below
opposite the applicable Total Debt
to EBITDA ratio ("X" in the table below), measured as provided in
Section 5.5(b)(ii), of the Borrower for the four fiscal quarters then
most recently ended:
Applicable Margin
Total Debt LIBOR Tranches and Applicable Margin
to EBITDA Letter of Credit Fee Prime Rate Tranche
------------------------------------------- -------------------- ------------------
X less than or equal to 2.25 1.75% 0%
2.25 less than X less than or equal to 2.75 2.00% 0%
2.75 less than X less than or equal to 3.25 2.25% 0%
3.25 less than X less than or equal to 3.75 2.50% .25%
3.75 less than X less than or equal to 4.25 2.75% .50%
4.25 less than X 3.00% .75%
The foregoing ratio and resulting Applicable Margin shall be
based upon Schedule C of the most recent Compliance Certificate
delivered to the Administrative Agent pursuant to Section 5.2(a) or
Section 5.2(b) (provided that for the period (x) from the date of this
Agreement until August 16, 2004, the Total Debt to EBITDA ratio shall
be deemed to be greater than 3.75 but less than 4.25, and the
Applicable Margin shall be set accordingly, and (y) from August 16,
2004 until the Delivery Date, the Applicable Margin for LIBOR Tranches
and the Letter of Credit Fee shall be 3.25% and the Applicable Margin
for the Prime Rate Tranche shall be 1%).
Any adjustments to the Applicable Margin shall become
effective on the 5th Business Day following the Administrative Agent's
receipt of a Compliance Certificate; provided, however, that if any
such Compliance Certificate is not delivered when required hereunder,
the Applicable Margin shall be deemed to be the maximum percentage
amount in each table until such Compliance Certificate is received by
the Administrative Agent.
Upon any change in the Applicable Margin, the Administrative
Agent shall promptly notify the Borrower and the Banks of the new
Applicable Margin.
"Contract Status Report" means a report, in form and substance
acceptable to the Administrative Agent, detailing the status of each
contract of any Restricted Entity which contract has (a) a value equal
to or greater than $7,500,000 or (b) both a value greater than $100,000
and a projected gross margin of less than 5%.
Section 3. Existing Section 2.2(c)(iii) of the
Credit Agreement is hereby
redesignated as Section 2.2(c)(iv) and there is hereby added to the Credit
Agreement a new Section 2.2(c)(iii), which shall read in its entirety as
follows:
(iii) Notwithstanding anything in the Credit Documents to the
contrary, at no time shall the sum of (A) the Revolving Loan plus (B)
the Letter of Credit Exposure (net of any cash collateral then held in
the Letter of Credit Collateral Account) plus (C) the Term Loan plus
(D) the Swing Line Loan be greater than the numerator of the ratio
computed pursuant to Section 5.5(e), as reflected in the
most recent information delivered to the Administrative Agent; and if
such sum shall ever exceed such numerator, then the Borrower shall
immediately prepay the Revolving Loan, the Term Loan and the Swing Line
Loan in at least the amount of such excess (or, if the Revolving Loan,
the Term Loan and the Swing Line Loan have been paid in full, the
Borrower shall provide cash collateral to be held in the Letter of
Credit Collateral Account in an amount at least equal to such excess).
Section 4. The first sentence of Section 2.3(g)(i) of the Credit Agreement is
hereby amended to read in its entirety as follows:
If the Borrower is required to deposit funds in the Letter of Credit
Collateral Account pursuant to Section 2.2(c)(iii), 2.3(d) or 6.4, then
the Borrower and the Administrative Agent shall establish the Letter of
Credit Collateral Account, and the Borrower shall execute any documents
and agreements, including the Administrative Agent's standard form
assignment of deposit accounts, that the Administrative Agent
reasonably requests in connection therewith to establish the Letter of
Credit Collateral Account and grant the Administrative Agent a first
priority security interest in such account and the funds therein.
Section 5. Pursuant to Section 5.2(m) of the Credit Agreement, the
Administrative Agent hereby requests, and the Borrower agrees to deliver, the
following information for each calendar month as soon as available, and in any
event within 25 days after the end of each such month:
(a) A Contract Status Report;
(b) The aggregate consolidated cash balance of the Borrower
and its Subsidiaries, together with a reconciliation to the prior month;
(c) The contract backlog of the Borrower and its Subsidiaries
as of the end of such month, including the estimated gross margin percentage of
such contracts; and
(d) An aging of all accounts receivable of the Borrower and
its Subsidiaries, including detail as to the identities of the account debtor
and the account obligee with respect to (1) each account receivable in excess of
$5,000,000 and (2) each account obligee with aggregate accounts receivable in
excess of $10,000,000;
provided that (x) the Borrower shall not be obligated to deliver such
information pursuant to this request after the Delivery Date; (y) the
Administrative Agent or the Majority Banks may request different or additional
information at any time (before or after the Delivery Date) pursuant to Section
5.2(m) of the Credit Agreement, and (z) the Administrative Agent or the Majority
Banks may request the same information after the Delivery Date.
Section 6. Waiver, Suspension and Deferral of Certain Covenants.
(a) Notwithstanding the provisions of Section 5.2 of the
Credit Agreement to the contrary, the Borrower shall furnish to the
Administrative Agent as soon as possible, and in
any event by December 15, 2004, the materials required by Section 5.2(a) of the
Credit Agreement with respect to the Borrower's fiscal year ending September 30,
2004.
(b) The Borrower has breached the Credit Agreement by failing
to provide the materials required by Section 5.2(b) of the Credit Agreement for
the fiscal quarter of the Borrower ending June 30, 2004; such breach is referred
to herein as the "Specified Breach." The Administrative Agent and the Majority
Banks hereby waive the Specified Breach; provided that this waiver shall
terminate upon the earlier of December 15, 2004 or the date that the Borrower
receives notice (a "Default Notice") from the Trustee (the "Trustee") with
respect to the Senior Subordinated Notes, or from the holders of at least 25% in
aggregate principal amount of the Senior Subordinated Notes, of a default in the
performance, or breach, of any covenant or agreement of the Borrower under the
Senior Subordinated Note Indenture. The Borrower agrees that it will promptly
notify the Administrative Agent if the Borrower receives a Default Notice. The
Administrative Agent, as representative of the holders of the "Designated Senior
Indebtedness" (as such term is defined in the Senior Subordinated Note
Indenture) reserves the right (and the Borrower agrees that the Administrative
Agent has such right) to give a notice (a "Non-payment Default Notice") of a
"Non-payment Default" (as such term is defined in the Senior Subordinated Note
Indenture) with respect to the Specified Breach to the Trustee at any time after
the earlier of the Borrower's receipt of a Default Notice or December 15, 2004,
and the Majority Banks hereby direct the Administrative Agent to deliver a
Non-payment Default Notice to the Trustee no later than 25 days after the date
of any Default Notice, unless such Default Notice is withdrawn or such default
or breach has been waived, in each case to the satisfaction of the
Administrative Agent, before the expiration of such 25-day period.
(c) The obligations of the Borrower to provide the materials
required by Section 5.2(f) of the Credit Agreement are hereby suspended until
the Delivery Date.
(d) The obligations of the Borrower to comply with Section 5.5
of the Credit Agreement are hereby suspended until the Delivery Date; provided
that after the Delivery Date, compliance with Section 5.5 of the Credit
Agreement shall be measured by the financial information then available to the
Administrative Agent (e.g., a breach of Section 5.5 would exist on and after the
Delivery Date if the financial information then available to the Administrative
Agent indicated that the Borrower had breach a provision of such Section as of
September 30, 2004).
Section 7. From the date hereof through the Delivery Date, Section
5.5(e) of the Credit Agreement is hereby to read in its entirety as follows:
(e) Asset Coverage Ratio. As of the last day of each calendar
month, the Borrower shall not permit the ratio of (1) 60% (for the
months of July through September, 2004) or 65% (for the months of
October and November, 2004) of consolidated Unbonded Accounts
Receivable to (2) the sum of (i) the Revolving Loan plus (ii) the
Letter of Credit Exposure plus (iii) the Term Loan plus (iv) the Swing
Line Loan to be less than 1.00 to 1. Compliance with this paragraph (e)
shall be determined in a report, duly certified by a Responsible
Officer of the Borrower and delivered no later than 25 days after the
end of the relevant calendar month.
Section 8. Section 5.9(a) is hereby amended to delete exception (ii)
thereto until the Delivery Date; after the Delivery Date, Section 5.9(a)(ii) is
hereby amended to read in its entirety as follows:
(ii) The Borrower or any Subsidiary of the Borrower may make
any Acquisition (by purchase or merger) provided that (A) the Borrower
or such Subsidiary of the Borrower is the acquiring or surviving
entity, (B) the aggregate of all consideration (other than common stock
of the Borrower) paid by the Restricted Entities in connection with all
Acquisitions during any fiscal year does not exceed $25,000,000, (C) no
Default has then occurred and is continuing; (D) assuming such
Acquisition had been made on the last day of the immediately preceding
fiscal quarter, (1) the Total Debt to EBITDA ratio, as measured in
accordance with Section 5.5(b)(ii), would have been no greater than
3.50 to 1 and (2) no Default (including but not limited to any Default
under Section 5.5) would have occurred as of the last day of such
quarter, and (E) the acquired assets are in substantially the same
business as the Borrower.
Section 9. Section 5.10 of the Credit Agreement is hereby amended to
delete the proviso thereto until the Delivery Date.
Section 10. Section 6.1(g) of the Credit Agreement is hereby amended to
read in its entirety as follows:
(g) Material Agreement Default; Material Plan Event; Surety
Bond Demand. (i) There shall occur any breach by any Restricted Entity
of any contract or agreement which breach could reasonably be expected
to cause a Material Adverse Change and such breach is not cured within
the applicable grace period, if any; (ii) there shall occur or exist an
event with respect to any Plan which could in the sole judgment of the
Administrative Agent reasonably be expected to have a Material Adverse
Change, or (iii) there shall occur any breach by any Restricted Entity
of any contract or agreement with the issuer of a Surety Bond pursuant
to which such Surety Bond was issued and such breach is not cured
within the applicable grace period, if any;
Section 11. Conditions. This Amendment shall not become effective until
(a) it has been executed and delivered by the Borrower and the Majority Banks;
(b) the Borrower shall have delivered to the Administrative Agent a certificate
of the Secretary or an Assistant Secretary as to the resolutions of the Board of
Directors of the Borrower authorizing the execution and delivery of this
Amendment; (c) the Borrower shall have paid to the Administrative Agent, for the
account of each Bank executing and delivering this Amendment before 5:00 p.m.,
Houston time, on September 3, 2004, an amendment fee at the rate (which shall be
the same for all such Banks) heretofore established by the Administrative Agent
and the Borrower, and (d) the Administrative Agent shall have received such
other documents and instruments as it may reasonably request; provided, however,
that if all of such conditions are not satisfied by 5:00 p.m., Houston time, on
September 3, 2004, then this Amendment shall be of no force or effect.
Section 12. Representations True; No Default. The Borrower represents
and warrants that the representations and warranties contained in the Credit
Documents are true and correct in all material respects on and as of the date
hereof as though made on and as of such date. The Borrower hereby certifies that
no event has occurred and is continuing which constitutes a Default or an Event
of Default.
Section 13. Ratification. Except as expressly amended hereby, the Loan
Documents shall remain in full force and effect. The Credit Agreement, as hereby
amended, and all rights and powers created thereby or thereunder and under the
other Credit Documents are in all respects ratified and confirmed and remain in
full force and effect.
Section 14. Definitions and References. Any term used herein that is
defined in the Credit Agreement shall have the meaning therein ascribed to it.
The terms "Agreement" and "Credit Agreement" as used in the Credit Documents or
any other instrument, document or writing furnished to the Administrative Agent
or any Bank by the Borrower and referring to the Credit Agreement, shall mean
the Credit Agreement as hereby amended.
Section 15. Miscellaneous. This Amendment (a) shall be binding upon and
inure to the benefit of the Borrower, the Banks, the Administrative Agent and
their respective successors, assigns, receivers and trustees (but the Borrower
shall not assign its rights hereunder without the express prior written consent
of the Required Lenders); (b) may be modified or amended only by a writing
signed by the party against whom the same is to be enforced; (c) may be executed
in several counterparts, and by the parties hereto on separate counterparts, and
each counterpart, when so executed and delivered, shall constitute an original
agreement, and all such separate counterparts shall constitute but one and the
same agreement, and (e) together with the other Credit Documents, embodies the
entire agreement and understanding between the parties with respect to the
subject matter hereof and supersedes all prior agreements, consents and
understandings relating to such subject matter.
THE CREDIT DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their respective authorized officers as of the day and year
first above written.
BORROWER:
INTEGRATED ELECTRICAL SERVICES, INC.
By:
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Name:
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Title:
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BANKS:
BANK ONE, NA
By:
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Name:
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Title:
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U.S. BANK NATIONAL ASSOCIATION
By:
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Name:
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Title:
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BANK OF SCOTLAND
By:
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Name:
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Title:
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LaSALLE BANK NATIONAL ASSOCIATION
By:
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Name:
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Title:
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▇▇▇▇▇ FARGO BANK, N.A.
By:
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Name:
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Title:
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SOUTHWEST BANK OF TEXAS, N.A.
By:
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Name:
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Title:
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FIRST AMERICAN BANK, SSB HOUSTON
By:
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Name:
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Title:
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ALLIED IRISH BANK, P.L.C.
By:
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Name:
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Title:
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AIB DEBT MANAGEMENT LIMITED
By:
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Name:
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Title:
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REGIONS BANK
By:
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Name:
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Title:
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FIRST BANK & TRUST
By:
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Name:
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Title:
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HIBERNIA NATIONAL BANK
By:
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Name:
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Title:
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RZB FINANCE LLC
By:
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Name:
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Title:
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