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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

 

PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Date of Report: November 11, 2005

 

Commission File No. 001-13783

 

INTEGRATED ELECTRICAL SERVICES, INC.

(Exact name of registrant as specified in its charter)

 

DELAWARE		76-0542208
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

 

1800 West Loop South

Suite 500

Houston, Texas 77027

(Address of principal executive offices) (zip code)

 

Registrant’s telephone number, including area code: (713) 860-1500

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

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Item 1.01

Entry into a Material Definitive Agreement.

 

Amendment to Loan and Security Agreement

 

On November 11, 2005, the Company and certain of its subsidiaries entered into an amendment to the Company’s $80 million revolving credit facility with Bank of America, N.A. (the “Lender”). The amendment effects the following changes:

 

•

Eliminates the application of the Fixed Charge Coverage Ratio test for the periods ended September 30, 2005 and October 31, 2005;

 

•

Requires that the Company maintain a minimum borrowing availability under the facility of at least $12 million, or if availability falls below $12 million, the Company must provide cash collateral in the amount of such shortfall. As of November 11, 2005, availability under this facility was $14.7 million. As of the same date, the Company’s cash position was $26.3 million; and

 

•

Provides that the interest rate applicable to the Company’s obligations under the credit facility will be increased by 50 basis points during the period ending on the earlier of March 31, 2006 or such time as the Lender syndicates the credit facility. The interest rate in effect thereafter remains unchanged.

 

The Company believes that it will be necessary to enter into another amendment to the credit facility before December 31, 2005 for the purpose of further amending the required Fixed Charge Coverage Ratio.

 

On November 14, 2005 the Company issued a press release announcing the foregoing matters, a copy of the which is filed as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein in its entirety.

 

Item 7.01

Regulation FD Disclosure.

 

Settlement of Litigation

 

On November 14, 2005, Integrated Electrical Services, Inc. (the “Company”) announced that it has agreed to a settlement amount in two pending lawsuits. The first is an agreement to settle litigation related to the jury verdict in favor of the Company announced on April 24, 2005 relating to a contract dispute involving a subsidiary of the Company. The settlement amount is $7.25 million. It is anticipated that this amount will be paid to the Company, subject to agreement on the final settlement documents this month. Additionally, the Company settled an outstanding prevailing wage case that was pending against a closed subsidiary. That settlement amount of $2.325 million will be paid by the Company. It is anticipated that payment of $1.5 million will be made December 1, 2005 with the remaining amount due on or before May 1, 2006.

 

The Company continues to pursue initiatives and discussions with third parties related to its previously announced refinancing or deleveraging activities with the Gordian Group.

 

On November 14, 2005 the Company issued a press release announcing the foregoing matters, a copy of the which is filed as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein in its entirety.

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Item 9.01

Financial Statements and Exhibits.

 

(c)

Exhibits.

 

Exhibit Number		Description of Exhibit
10.1		Second Amendment to Loan and Security Agreement, dated November 11, 2005, by and among Bank of America, N.A., Integrated Electrical Services, Inc. and the Subsidiaries listed on Annex I and Annex II.
99.1		Press Release dated November 14, 2005.

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Current Report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

Dated: November 15, 2005

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EXHIBIT INDEX

 

Exhibit Number		Description of Exhibit
10.1		Second Amendment to Loan and Security Agreement, dated November 11, 2005, by and among Bank of America, N.A., Integrated Electrical Services, Inc. and the Subsidiaries listed on Annex I and Annex II.
99.1		Press Release dated November 14, 2005.

Exhibit 10.1

 

SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT

 

THIS SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT (this “Amendment”) is made and entered into on November 11, 2005, to be effective as of the respective date hereinafter specified, by and among BANK OF AMERICA, N.A., a national banking association, (“BA”), in its capacity as collateral and administrative agent under the Loan Agreement (as hereinafter defined) (BA, in such capacity, the “Agent”), and BA as Lender under the Loan Agreement (BA, in such capacity, the “Lender”), and INTEGRATED ELECTRICAL SERVICES, INC., a Delaware corporation (“Parent”), and each of the Subsidiaries of Parent listed on Annex I attached hereto (Parent and such Subsidiaries of Parent being herein referred to collectively as the “Borrowers”), and the Subsidiaries of Parent listed on Annex II attached hereto (such Subsidiaries being referred to herein as the “Guarantors”, and Borrowers and Guarantors being referred to herein as the “Credit Parties”).

 

RECITALS

 

A. Agent, Lender and Credit Parties have entered into that certain Loan and Security Agreement, dated as of August 1, 2005, as amended by that certain Amendment to Loan and Security Agreement, entered into on September 30, 2005, by Agent, Lender, and Credit Parties (the Loan and Security Agreement, as amended, being referred to herein as the “Loan Agreement”).

 

B. Credit Parties, Agent and Lender desire to amend the Loan Agreement as hereinafter set forth, subject to the terms and conditions hereinafter set forth.

 

NOW, THEREFORE, in consideration of the premises herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound, agree as follows:

 

AGREEMENT

 

ARTICLE I

Definitions

 

1.01 Capitalized terms used in this Amendment are defined in the Loan Agreement, as amended hereby, unless otherwise stated.

 

SECOND AMENDMENT TO

LOAN AND SECURITY AGREEMENT

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ARTICLE II

Amendments

 

Effective as of the respective date hereinafter specified, the Loan Agreement is hereby amended as follows:

 

2.01 Amendment and Restatement of Section 9.3.1 of the Loan Agreement. Effective August 1, 2005, Section 9.3.1 of the Loan Agreement is amended and restated to read in its entirety as follows:

 

“9.3.1. Fixed Charge Coverage Ratio. The Borrower will maintain a Fixed Charge Coverage Ratio for each period of twelve consecutive months ended on the last day of each month set forth below (or with respect to the months ending on or before June 30, 2006, the period commencing on July 1, 2005 and ending on the last day of such month) of not less than the ratio set forth below opposite each such fiscal quarter:

 

Period Ending		Fixed Charge Coverage Ratio
July 2005		0.59
August 2005		0.61
November 2005		0.58
December 2005		0.55
January 2006		0.54
February 2006		0.54
March 2006		0.55
April 2006		0.58
May 2006		0.62
June 2006		0.65
July 2006		0.68
August 2006		0.71
September 2006		0.74
October 2006		0.78
November 2006		0.82
December 2006		0.87
January 2007		0.91
February 2007		0.95
March 2007		0.98
April 2007		0.99
May 2007 and each month thereafter		1.00

 

The Fixed Charge Coverage Ratio will not be tested for the respective period ending September 30, 2005, and October 31, 2005. Compliance with this Section 9.3.1 with respect to the period ended November 30, 2005 shall be tested based upon the financial statements delivered pursuant to Section 9.1.3, and no Default or Event of Default, if any,

 

SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT		2

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shall occur under this Section with respect to the period ended November 30, 2005 until delivery of such financial statements; provided, however, that notwithstanding the foregoing, if such financial statements are not delivered to Agent by December 30, 2005, the parties hereto agree that Borrower will be deemed to have failed to maintain the minimum Fixed Charge Coverage Ratio for the period ending November 30, 2005.”

 

2.02 Amendment to Appendix A of the Loan Agreement; Amendment to Definition of “Adjusted Net Earnings from Operations”. Effective as of August 1, 2005, the definition of “Adjusted Net Earnings from Operations” contained in Appendix A of the Loan Agreement is amended by deleting therefrom the phrase “and reported on the Financial Statements for such period”.

 

2.03 Amendment to Appendix A of the Loan Agreement; Amendment to Definition of “Applicable Margin”. Effective as of November 1, 2005, the definition of “Applicable Margin” contained in Appendix A of the Loan Agreement is amended by deleting therefrom the present first sentence of such definition and substituting therefor a new sentence to read in its entirety as follows:

 

“Applicable Margin – a percentage equal to 1.50% with respect to Revolver Loans that are Base Rate Loans, 3.50% with respect to Revolver Loans that are LIBOR Loans, and 3.50% with respect to fees payable to Lenders pursuant to Section 2.2.3(i), provided that, commencing on the earlier of (i) March 31, 2006 or (ii) a Participant or other Lender (other than Bank) becomes a party to this Agreement, the Applicable Margin shall be increased or (if no Default or Event of Default exists) decreased, based upon the Fixed Charge Coverage Ratio, as follows:

 

		Revolver Loans						Standby LCs
Fixed Charge Coverage Ratio		Base Rate			LIBOR			Fee Percentage
< 0.60		1.50	%		3.50	%		3.50	%
> 0.60 and < 0.75		1.25	%		3.25	%		3.25	%
> 0.75 and < 1.0		1.00	%		3.00	%		3.00	%
> 1.0 and < 1.15		0.75	%		2.75	%		2.75	%
> 1.15		0.50	%		2.50	%		2.50	%”

 

2.04 Minimum Availability. Effective as of the date of execution of this Amendment, Section 9.4 is added to the Loan Agreement to read in its entirety as set forth below, and Appendix A to the Loan Agreement is amended to include the definitions of “Eligible Cash

 

SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT		3

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Collateral” and “First Amendment Documentation” as set forth below, and to restate the definition of “Borrowing Base” in its entirety as set forth below:

 

Section 9.4 Minimum Availability.

 

9.4.1 Minimum Availability and Availability Shortfall Amount. In addition to and not in limitation of any other covenants of Credit Parties contained in the Loan Documents, Borrowers shall maintain at all times Availability of at least $12,000,000. The parties hereto agree that on any day Borrowers do not maintain Availability of at least $12,000,000 (with the amount by which Availability on such date is less than $12,000,000 being herein referred to as the “Availability Shortfall Amount” and such date being referred to as an “Availability Shortfall Date”), such occurrence shall constitute a “Default” under this Agreement, and if by the second day after such Availability Shortfall Date, Borrowers have not provided to Agent new Eligible Cash Collateral at least equal to such Availability Shortfall Amount, such occurrence shall constitute an “Event of Default” under this Agreement.

 

9.4.2 Deposit and Pledge of Eligible Cash Collateral. Eligible Cash Collateral (together with any interest accrued thereon) shall be held by Agent in the Cash Collateral Account and may be invested, in Agent’s discretion, in Cash Equivalents. Each Credit Party hereby pledges to Agent and grants to Agent a security interest in, for the benefit of Agent in such capacity and for the Pro Rata benefit of Lenders, all cash held in the Cash Collateral Account from time to time and all proceeds thereof, as security for payment of all Obligations, whether or not then due or payable. Neither any Credit Party nor any other Person claiming by, through or under or on behalf of any Credit Party shall have any right to withdraw any of the Eligible Cash Collateral held in the Cash Collateral Account, including any accrued interest. All cash in the Cash Collateral Account shall constitute Collateral and Agent, for the Pro Rata benefit of Lenders, shall have the rights and remedies as to Collateral as are specified in this Agreement or the other Loan Documents or as are otherwise available under applicable law. The parties hereto agree that the Eligible Cash Collateral shall neither constitute “Cash Collateral” for the purposes of determining the Letter of Credit Fee pursuant to Section 2.2.3 of this Agreement nor constitute “Cash Collateral” as such term is used in the definition of “LC Reserve” nor constitute the “cash collateral” required to be provided by Borrowers pursuant to the First Amendment Documentation.

 

“Eligible Cash Collateral” - cash representing proceeds of Collateral or proceeds from such other source of funding which is satisfactory to Agent, it its reasonable discretion, that is deposited after the occurrence of an Availability Shortfall Date into a demand deposit, money market or other account in Agent’s name and subject to Agent’s Liens, for the Pro Rata benefit of Lenders, and which cash deposit is in addition to and not in substitution for amounts previously deposited into the Cash Collateral Account pursuant to the other provisions of the Loan

 

SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT		4

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Documents including, without limitation, the provisions of Section 1.2.7 of this Agreement or the provisions of the First Amendment Documentation; provided, however, the term “Eligible Cash Collateral” shall not include any cash (i) to the extent Agent, on behalf of itself and the Lenders, does not have therein a valid, enforceable first priority Lien; (ii) to the extent that any defense, counterclaim, setoff or dispute exists or is asserted with respect thereto; or (iii) that it is subject to any Lien of any Person, other than Liens in favor of Agent, on behalf of itself and Lenders, or that is not owned by a Credit Party.

 

“First Amendment Documentation” - the documentation executed in connection with that certain Amendment to Loan and Security Agreement, dated September 30, 2005, executed by Agent, Lender and Credit Parties.

 

“Borrowing Base” - on any date of determination thereof, an amount equal to the lesser of: (a) the aggregate amount of the Commitments on such date minus the LC Reserves on such date minus $5,000,000, or (b) an amount equal to (i) the sum of the Accounts Formula Amount plus the Inventory Formula Amount on such date plus the Equipment Formula Amount on such date plus the Eligible Cash Collateral held by Agent on such date minus (ii) the Availability Reserve on such date minus (iii) $5,000,000 minus (iv) the LC Reserves on such date.

 

2.05 Amendment to Section 9.1.16 of the Loan Agreement. Effective as of the date of execution of this Amendment, Section 9.1.16 of the Loan Agreement is amended and restated to read in its entirety as follows:

 

“9.1.16 Enertech Consent. By December 30, 2005, deliver to Agent evidence of the assignment by Parent to another Borrower of Parent’s ownership in Enertech, together with the consent of Enertech to such assignment.”

 

2.06 New Fictitious Name. Agent and Lenders hereby agree and acknowledge that Tesla Power & Automation L.P. has since on or about September 20, 2005, been transacting business in the States of Texas, Alabama, Louisiana and Mississippi using the assumed name “PS-Service” and Agent and Lenders hereby agree that Borrowers gave sufficient notice to Agent pursuant to Section 9.2.1 of the Loan Agreement of the use of such assumed name in such States. To the extent not already supplied to Agent, Borrowers hereby agree to promptly give to Agent copies of all documentation filed in such States as to the use of such assumed name by Tesla Power & Automation, L.P.

 

2.07 Amendment Fee. Credit Parties agree to pay to Agent an amendment fee of $100,000, which amendment fee shall be deemed fully earned and non-refundable as of the date of execution of this Amendment, which amendment fee shall be due and payable in full upon the date of execution of this Amendment.

 

SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT		5

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ARTICLE III

No Waiver

 

3.01 No Waiver. Except for the amendments to the Loan Agreement expressly set forth in Article II hereof, nothing in this Amendment shall directly or indirectly whatsoever either: (i) be construed as a waiver of any covenant or provision of the Loan Agreement, any other Loan Document or any other contract or instrument or (ii) impair, prejudice or otherwise adversely affect any right of Agent or Lender at any time to exercise any right, privilege or remedy in connection with the Loan Agreement, any other Loan Document or any other contract or instrument, or (iii) constitute any course of dealing or other basis for altering any obligation of Credit Parties or any right, privilege or remedy of Agent or Lender under the Loan Agreement, any other Loan Document or any other contract or instrument or constitute any consent by Agent or Lender to any prior, existing or future violations of the Loan Agreement or any other Loan Document. Credit Parties hereby agree and acknowledge that hereafter Credit Parties are expected to strictly comply with their duties, obligations and agreements under the Loan Agreement and the other Loan Documents.

 

ARTICLE IV

Conditions Precedent

 

4.01 Conditions to Effectiveness. The effectiveness of this Amendment (including the agreements and waiver contained herein) is subject to the satisfaction of the following conditions precedent in a manner satisfactory to Agent, unless specifically waived in writing by Agent:

 

(a) Agent shall have received each of the following, each in form and substance satisfactory to Agent, in its sole discretion, and, where applicable, each duly executed by each party thereto, other than Agent or Lender:

 

(i) This Amendment, duly executed by Credit Parties; and

 

(ii) All other documents Agent may request with respect to any matter relevant to this Amendment or the transactions contemplated hereby.

 

(b) The representations and warranties contained herein and in the Loan Agreement and the other Loan Documents, as each is amended hereby, shall be true and correct in all material respects as of the date hereof, as if made on the date hereof, except for those representations and warranties specifically made as of an earlier date, which shall be true and correct in all material respects as of such earlier date.

 

(c) After giving effect to the provisions of this Amendment, no Default or Event of Default shall have occurred and be continuing, unless such Default or Event of Default has been otherwise specifically waived in writing by Agent.

 

SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT		6

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(d) All organizational proceedings taken in connection with the transactions contemplated by this Amendment and all documents, instruments and other legal matters incident thereto shall be reasonably satisfactory to Agent and its legal counsel.

 

(e) Agent shall have received, in immediately available funds, payment of the amendment fee required to be paid by Credit Parties to Agent pursuant to the provisions of Section 2.07 hereof.

 

ARTICLE V

Ratifications, Representations and Warranties

 

5.01 Ratifications. The terms and provisions set forth in this Amendment shall modify and supersede all inconsistent terms and provisions set forth in the Loan Agreement and the other Loan Documents, and, except as expressly modified and superseded by this Amendment, the terms and provisions of the Loan Agreement and the other Loan Documents are ratified and confirmed and shall continue in full force and effect. Each Credit Party and Lender and Agent agree that the Loan Agreement and the other Loan Documents, as amended hereby, shall continue to be legal, valid, binding and enforceable in accordance with their respective terms.

 

5.02 Representations and Warranties. Each Credit Party hereby represents and warrants to Lender and Agent that (a) the execution, delivery and performance of this Amendment and any and all other Loan Documents executed and/or delivered in connection herewith have been authorized by all requisite organizational action on the part of such Credit Party and will not violate the organizational or governing documents of such Credit Party; (b) the representations and warranties contained in the Loan Agreement, as amended hereby, and any other Loan Document are true and correct in all material respects on and as of the date hereof and on and as of the date of execution hereof as though made on and as of each such date, except for those representations and warranties specifically made as of an earlier date, which shall be true and correct in all material respects as of such earlier date; (c) no Default or Event of Default under the Loan Agreement, as amended hereby, has occurred and is continuing, unless such Default or Event of Default has been specifically waived in writing by Agent; (d) each Credit Party is in material compliance with all covenants and agreements contained in the Loan Agreement and the other Loan Documents, as amended hereby; and (e) except for an amendment to change the name of Brink Electric Construction Co. to IES Rapid City, Inc., no Credit Party has amended its organizational or governing documents since the date of execution of the Loan Agreement.

 

ARTICLE VI

Miscellaneous Provisions

 

6.01 Survival of Representations and Warranties. All representations and warranties made in the Loan Agreement or any other Loan Document, including, without limitation, any document furnished in connection with this Amendment, shall survive the execution and delivery of this Amendment and the other Loan Documents, and no investigation by Lender or Agent or any closing shall affect the representations and warranties or the right of Lender or Agent to rely upon them.

 

SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT		7

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6.02 Reference to Loan Agreement. Each of the Loan Agreement and the other Loan Documents, and any and all other Loan Documents, documents or instruments now or hereafter executed and delivered pursuant to the terms hereof or pursuant to the terms of the Loan Agreement, as amended hereby, are hereby amended so that any reference in the Loan Agreement and such other Loan Documents to the Loan Agreement shall mean a reference to the Loan Agreement, as amended hereby, and any reference in the Loan Agreement and such other Loan Documents to any other Loan Document amended by the provisions of this Amendment shall mean a reference to such other Loan Documents, as amended hereby.

 

6.03 Expenses of Lender. As provided in the Loan Agreement, each Credit Party agrees to pay on demand all costs and out-of-pocket expenses incurred by Lender and Agent in connection with the preparation, negotiation, and execution of this Amendment and the other Loan Documents executed pursuant hereto and any and all amendments, modifications, and supplements thereto, including, without limitation, the costs and fees of Lender’s and Agent’s legal counsel, and all costs and out-of-pocket expenses incurred by Lender and Agent in connection with the enforcement or preservation of any rights under the Loan Agreement, as amended hereby, or any other Loan Documents, including, without, limitation, the costs and fees of Lender’s and Agent’s legal counsel.

 

6.04 Severability. Any provision of this Amendment held by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Amendment and the effect thereof shall be confined to the provision so held to be invalid or unenforceable.

 

6.05 Successors and Assigns. This Amendment is binding upon and shall inure to the benefit of Lender and Agent and each Credit Party and their respective successors and assigns, except that no Credit Party may assign or transfer any of its rights or obligations hereunder without the prior written consent of Lender and Agent.

 

6.06 Counterparts. This Amendment may be executed in one or more counterparts, each of which when so executed shall be deemed to be an original, but all of which when taken together shall constitute one and the same instrument.

 

6.07 Effect of Waiver. No consent or waiver, express or implied, by Lender or Agent to or for any breach of or deviation from any covenant or condition by any Credit Party shall be deemed a consent to or waiver of any other breach of the same or any other covenant, condition or duty.

 

6.08 Headings. The headings, captions, and arrangements used in this Amendment are for convenience only and shall not affect the interpretation of this Amendment.

 

6.09 Applicable Law. THIS AMENDMENT AND ALL OTHER LOAN DOCUMENTS EXECUTED PURSUANT HERETO SHALL BE DEEMED TO HAVE BEEN

 

SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT		8

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MADE AND TO BE PERFORMABLE IN AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.

 

6.10 Final Agreement. THE LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS, EACH AS AMENDED HEREBY, REPRESENT THE ENTIRE EXPRESSION OF THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF ON THE DATE THIS AMENDMENT IS EXECUTED. THE LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS AMENDED HEREBY, 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. NO MODIFICATION, RESCISSION, WAIVER, RELEASE OR AMENDMENT OF ANY PROVISION OF THIS AMENDMENT SHALL BE MADE, EXCEPT BY A WRITTEN AGREEMENT SIGNED BY EACH CREDIT PARTY AND LENDER AND AGENT.

 

6.11 Release. EACH CREDIT PARTY HEREBY ACKNOWLEDGES THAT IT HAS NO DEFENSE, COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY KIND OR NATURE WHATSOEVER THAT CAN BE ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF ITS LIABILITY TO REPAY THE “OBLIGATIONS” OR TO SEEK AFFIRMATIVE RELIEF OR DAMAGES OF ANY KIND OR NATURE FROM LENDER OR AGENT. EACH CREDIT PARTY HEREBY VOLUNTARILY AND KNOWINGLY RELEASES AND FOREVER DISCHARGES LENDER AND AGENT AND ITS RESPECTIVE PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, FROM ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES, AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN, ANTICIPATED OR UNANTICIPATED, SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR CONDITIONAL, AT LAW OR IN EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE DATE THIS AMENDMENT IS EXECUTED, WHICH ANY CREDIT PARTY MAY NOW OR HEREAFTER HAVE AGAINST LENDER OR AGENT OR ITS RESPECTIVE PREDECESSORS, AGENTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, IF ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR OTHERWISE, AND ARISING FROM ANY “LOANS,” INCLUDING, WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING, TAKING, RESERVING, COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE HIGHEST LAWFUL RATE APPLICABLE, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THE LOAN AGREEMENT OR OTHER LOAN DOCUMENTS, AND NEGOTIATION FOR AND EXECUTION OF THIS AMENDMENT.

 

SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT		9

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IN WITNESS WHEREOF, this Amendment has been executed on November 11, 2005, to be effective as the respective date set forth above.

 

 

 

AMENDMENT TO LOAN AND SECURITY AGREEMENT

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AMENDMENT TO LOAN AND SECURITY AGREEMENT

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AMENDMENT TO LOAN AND SECURITY AGREEMENT

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AMENDMENT TO LOAN AND SECURITY AGREEMENT

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AMENDMENT TO LOAN AND SECURITY AGREEMENT

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AMENDMENT TO LOAN AND SECURITY AGREEMENT

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AMENDMENT TO LOAN AND SECURITY AGREEMENT

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AMENDMENT TO LOAN AND SECURITY AGREEMENT

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AMENDMENT TO LOAN AND SECURITY AGREEMENT

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AMENDMENT TO LOAN AND SECURITY AGREEMENT

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Annex I

 

Borrowers

 

Aladdin-Ward Electric & Air, Inc.		Florida
Amber Electric, Inc.		Florida
ARC Electric, Incorporated		Delaware
Bachofner Electric, Inc.		Delaware
Bexar Electric Company, Ltd.		Texas
IES Rapid City, Inc.		South Dakota
Bryant Electric Company, Inc.		North Carolina
Charles P. Bagby Co., Inc.		Alabama
Collier Electric Company, Inc.		Florida
Commercial Electrical Contractors, Inc.		Delaware
Cross State Electric, Inc.		California
Cypress Electrical Contractors, Inc.		Delaware
Daniel Electrical Contractors, Inc.		Florida
Daniel Electrical of Treasure Coast, Inc.		Florida
Daniel Integrated Technologies, Inc.		Florida
Davis Electrical Constructors, Inc.		South Carolina
Electro-Tech, Inc.		Nevada
Federal Communications Group, Inc.		Delaware
H.R. Allen, Inc.		South Carolina
Hatfield Reynolds Electric Company		Arizona
Haymaker Electric, Ltd.		Alabama
Holland Electrical Systems, Inc.		Delaware
Houston-Stafford Electrical Contractors LP		Texas
IES Contractors, Inc.		Delaware
IES Federal Contract Group, LP		Texas
IES Management LP		Texas
IES Management ROO, LP		Texas
IES Properties LP		Texas
IES Reinsurance, Ltd.		Bermuda
IES Ventures, Inc.		Delaware
Integrated Electrical Finance, Inc.		Delaware
Integrated Electrical Services, Inc.		Delaware
J.W. Gray Electric Co., Inc.		Delaware
J.W. Gray Electrical Contractors LP		Texas
Kayton Electric, Inc.		Nebraska
Key Electrical Supply, Inc.		Texas
Linemen, Inc.		Delaware
Mark Henderson, Incorporated		Delaware
Menninga Electric, Inc.		Delaware
Mid-States Electric Company, Inc.		Delaware
Mills Electric LP		Texas

 

AMENDMENT TO LOAN AND SECURITY AGREEMENT

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Mitchell Electric Company, Inc.		Arizona
M-S Systems, Inc.		Tennessee
Murray Electrical Contractors, Inc.		Delaware
Neal Electric LP		Texas
New Technology Electrical Contractors, Inc.		Delaware
Newcomb Electric Company, Inc.		Delaware
Pan American Electric, Inc. Pan American Electric Company, Inc.		Tennessee New Mexico
Paulin Electric Company, Inc.		Delaware
Pollock Summit Electric LP		Texas
PrimeNet, Inc.		Delaware
Primo Electric Company		Delaware
Raines Electric LP		Texas
Riviera Electric, LLC		Delaware
RKT Electric, Inc.		Delaware
Rockwell Electric, Inc.		Delaware
Rodgers Electric, Inc.		Washington
Ron’s Electric, Inc.		Delaware
SEI Electrical Contractor, Inc.		Florida
Spectrol, Inc.		Delaware
Tesla Power & Automation, L.P. Tesla Power Properties, L.P.		Texas Texas
Thomas Popp & Company		Ohio
Valentine Electrical, Inc.		Delaware
Wright Electrical Contracting, Inc.		Delaware

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Annex II

 

Guarantors

 

Bear Acquisition Corporation		Delaware
Bexar Electric II LLC		Arizona
BW Consolidated, Inc.		Nevada
BW/BEC II LLC		Arizona
BW/BEC, Inc.		Delaware
BW/BEC, LLC		Nevada
General Partners, Inc.		Alabama
Houston-Stafford Electric Holding III, Inc.		Nevada
Houston-Stafford Holdings II LLC		Delaware
Houston-Stafford Holdings LLC		Arizona
Houston-Stafford Management LLC		Arizona
ICS Holdings LLC		Arizona
IES Communications, Inc.		Delaware
IES Contractors Holdings LLC		Arizona
IES Contractors Management LLC		Arizona
IES ENC Management, Inc.		Delaware
IES ENC, Inc.		Delaware
IES Holdings II LLC		Delaware
IES Holdings LLC		Arizona
IES Operations Group, Inc.		Delaware
IES Properties Holding, Inc.		Delaware
IES Properties Holdings II LLC		Arizona
IES Properties Management, Inc.		Delaware
IES Properties, Inc.		Delaware
IES Residential Group, Inc.		Delaware
IES Specialty Lighting, Inc.		Delaware
Intelligent Buildings Solutions, Inc.		Delaware
J.W. Gray Holdings II LLC		Delaware
J.W. Gray Holdings LLC		Arizona
J.W. Gray Management LLC		Arizona
Mills Electric Contractors, Inc.		Delaware
Mills Electric Holdings II LLC		Delaware
Mills Electrical Holdings LLC		Arizona
Mills Management LLC		Arizona
Neal Electric Management LLC		Arizona
Pollock Electric, Inc.		Delaware
Pollock Summit Holdings I LLC		Delaware
Pollock Summit Holdings, Inc.		Arizona
Raines Electric Co., Inc.		Delaware
Raines Holdings II LLC		Delaware
Raines Holdings LLC		Arizona

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Raines Management LLC		Arizona
Summit Electric of Texas, Inc.		Delaware
Tesla Power (Nevada) , Inc.		Nevada
Tesla Power (Nevada) II LLC		Delaware
Tesla Power GP, Inc.		Delaware
EMC Acquisition Corporation		Delaware
Ernest P. Breaux Electrical, Inc.		Delaware
IES Albuquerque, Inc.		New Mexico
IES Austin Holding LP		Texas
IES Austin Holdings II LLC		Delaware
IES Austin Holdings LLC		Arizona
IES Austin Management LLC		Arizona
IES Austin, Inc.		Delaware
IES Charlotte, Inc.		Delaware
IES College Station Holdings II, LLC		Delaware
IES College Station Holdings LLC		Arizona
IES College Station Holdings LP		Texas
IES College Station Management LLC		Arizona
IES College Station, Inc.		Delaware
IES Decatur, Inc.		Delaware
IES East McKeesport, Inc.		Delaware
IES Meridian, Inc.		Delaware
IES Oklahoma City, Inc.		Delaware
IES Raleigh, Inc.		Delaware
IES Valdosta Inc.		Georgia
IES Wilson, Inc.		Delaware
NBH Holding Co., Inc.		Delaware

Exhibit 99.1

 

		NEWS RELEASE
		Contacts:		C. Byron Snyder, Chairman and CEO Integrated Electrical Services, Inc. 713-860-1500
FOR IMMEDIATE RELEASE				Ken Dennard / ksdennard@drg-e.com
				Karen Roan / kcroan@drg-e.com
				DRG&E
				713-529-6600

 

INTEGRATED ELECTRICAL SERVICES REPORTS AGREEMENTS

FOR SETTLEMENT OF LITIGATION MATTERS AND

AMENDMENT TO ITS REVOLVING CREDIT FACILITY

 

HOUSTON — NOVEMBER 14, 2005 — Integrated Electrical Services, Inc. (NYSE: IES) announced today that it has agreed to a settlement amount in two pending lawsuits. The first is the agreement to settle litigation related to the jury verdict announced on April 24, 2005, in favor of the Company, that was over a contract dispute involving a subsidiary. It is anticipated the settlement amount of $7.25 million will be paid to the Company, subject to agreement on the final settlement documents, this month. Additionally, the Company settled an outstanding prevailing wage case that was pending against a closed subsidiary. That settlement amount of $2.325 million will be paid by the Company. It is anticipated that a payment of $1.5 million will be made December 1, 2005 with the remaining amount due on or before May 1, 2006.

 

Additionally, on November 11, 2005, IES and certain of its subsidiaries entered into an amendment to the Company’s $80 million revolving credit facility with Bank of America, N.A. The amendment eliminates the application of the Fixed Charge Coverage Ratio test for the periods ended September 30, 2005 and October 31, 2005. In addition, the amendment requires that the Company maintain a minimum borrowing availability under the facility of at least $12 million, or if availability falls below $12 million, the Company must provide cash collateral in the amount of the shortfall. As of November 11, 2005, availability under this facility was $14.7 million. As of the same date, the Company’s cash position was $26.3 million.

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The Fixed Charge Coverage Ratio Test is a cumulative test beginning July 1, 2005. Based on preliminary results for September, which the Company is still reviewing as part of completing its year end audit, and the impact of results for September on the cumulative nature of the test, the Company believes that it will be necessary to enter into another amendment to the credit facility before December 30, 2005 for the purpose of further amending the required Fixed Charge Coverage Ratio.

 

The amendment also provides that the interest rate applicable to the Company’s obligations under the credit facility will be increased by 50 basis points during the period ending on the earlier of March 31, 2006 or such time as the Lender syndicates the credit facility. The interest rate in effect thereafter remains unchanged.

 

The Company continues to pursue initiatives and discussions with third parties related to its previously announced intention to take steps to strengthen its balance sheet, including exploring alternatives to refinance or de-lever all or a part of its long term debt. “As we undertake this process, we appreciate the continued support our customers, vendors, employees, creditors and investors have shown us,” said Byron Snyder, Chief Executive Officer. “We are working to address these issues as expeditiously as possible but realize that the solution will not be achieved overnight. Settling these litigation matters not only has a positive cash impact on IES, it allows management to focus more closely on the activities at hand, including the completion of the annual audit and issuance of our annual report on Form 10-K, which the Company expects to file timely on or about December 14, 2005.”

 

This press release includes certain statements that may be deemed to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the Company’s expectations and involve risks and uncertainties that could cause the Company’s actual results to differ materially from those set forth in the statements. Such risks and uncertainties include, but are not limited to, the inherent uncertainties relating to estimating future operating results or our ability to generate sales, income, or cash flow, potential difficulty in addressing material weaknesses in the Company’s accounting systems that have been identified to the Company by its independent auditors, potential limitations on our ability to access the credit line under our credit facility, litigation risks and uncertainties, fluctuations in operating results because of downturns in levels of construction, inaccurate estimates used in entering into and executing contracts, difficulty in managing the operation of existing entities, the high level of competition in the construction industry, changes in interest rates, the general level of the economy, level of competition from other electrical contractors, increases in costs or limitations on availability of labor, steel, copper and gasoline, limitations on the availability and the increased costs of surety bonds required for certain projects, inability to reach agreements with our surety companies to provide sufficient bonding capacity, risk associated with failure to provide surety bonds on jobs where we have commenced work or are otherwise contractually obligated to provide surety

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bonds, loss of key personnel, business disruption and costs associated with the Securities and Exchange Commission investigation and class action litigation, unexpected liabilities associated with warranties or other liabilities attributable to the retention of the legal structure of business units where we have sold substantially all of the assets of the business unit, inability to fulfill the terms or meet the required financial covenants of the credit facility, difficulty in integrating new types of work into existing subsidiaries, inability of subsidiaries to incorporate new accounting, control and operating procedures, inaccuracies in estimating revenues and percentage of completion on contracts, disruptions or inability to effectively manage opportunities related to Hurricane Katrina and Rita and the expected increase in construction, inability to continue to satisfy the listing requirements of the NYSE, inability to reach agreement with our senior lender on amendments to the credit facility in December and weather and seasonality. If the company is unable to cause its previously filed S-1 in support of the Senior Convertible Notes to become effective, penalty interest may apply under that agreement. You should understand that the foregoing important factors, in addition to those discussed in our other filings with the Securities and Exchange Commission (“SEC”), including those under the heading “Risk Factors” contained in our annual report on Form 10-K for the fiscal year ended September 30, 2004, could affect our future results and could cause results to differ materially from those expressed in such forward-looking statements. We undertake no obligation to publicly update or revise the Company’s borrowing availability, its cash position or any forward-looking statements to reflect events or circumstances that may arise after the date of this report.

 

General information about us can be found at http://www.ies-co.com under “Investor Relations.” Our annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, as well as any amendments to those reports, are available free of charge through our website as soon as reasonably practicable after we file them with, or furnish them to, the SEC.

 

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