Document:

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EXHIBIT 4.4

NON-QUALIFIED STOCK OPTION AGREEMENT

GREY WOLF, INC. 2003 INCENTIVE PLAN

(effective as of March 26, 2003)

     THIS NON-QUALIFIED STOCK OPTION AGREEMENT (this “Agreement”) made as of
March 25, 2004, by and between GREY WOLF, INC., a corporation organized under
the laws of the State of Texas (the “Company”), and Thomas P. Richards, an
individual (the “Grantee”);

WITNESSETH:

     WHEREAS, the Company desires to provide an incentive to the Grantee to
further the business of the Company and the Company has agreed to grant the
Grantee options to purchase shares of common stock, $0.10 par value (“Common
Stock”), of the Company; and

     WHEREAS, by granting the Grantee options to purchase shares of Common
Stock pursuant to the terms of this Agreement, the Company intends to carry out
the purposes set forth in the Grey Wolf, Inc. 2003 Incentive Plan (effective as
of March 26, 2003) (the “Plan”) adopted by the Board of Directors of the
Company (the “Board of Directors”) effective March 26, 2003 and approved by the
shareholders of the Company on May 13, 2003; and

     WHEREAS, the Company and the Grantee desire to set forth the terms and
conditions of such options to purchase Common Stock;

     NOW, THEREFORE, in consideration of the mutual promises contained herein,
and other good and valuable consideration, the receipt, adequacy and
sufficiency of which are hereby acknowledged, the parties hereto do hereby
agree as follows:

1. Grant of Option. Subject to the terms and conditions hereinafter set forth,
the Company hereby grants to the Grantee a non-qualified option (the “Option”)
to purchase all or any part of an aggregate number of 300,000 shares of Common
Stock (such shares, as increased or decreased in accordance with Section 10
hereof, being referred to hereinafter as the “Option Shares”) at an exercise
price of $3.91 per share (hereinafter the “Exercise Price”).

2. Subject to Plan. The Option and its exercise are subject to the terms and
conditions of the Plan, and the terms of the Plan shall control to the extent
not otherwise inconsistent with the provisions of this Agreement. The
capitalized terms used herein that are defined in the Plan shall have the same
meanings assigned to them in the Plan. The Option is subject to any rules
promulgated pursuant to the Plan by the Board or the Committee and communicated
to the Grantee in writing.

3. Exercise Period. The Option shall be exercisable by Grantee as to twenty
(20%) of the Option Shares one (1) year after the date of this Agreement, as to
an additional twenty percent (20%) of the Option Shares two (2) years after the
date of this Agreement, as to an additional twenty percent (20%) of the Option
Shares three (3) years after the date of this Agreement, as to an additional
twenty percent (20%) of the Option Shares four (4) years after the date of this

 

 

Agreement, until the fifth anniversary of the date of this Agreement, after
which time the Option shall be exercisable in full. The Option shall expire
and terminate as to any Option Shares not purchased by the Grantee on or before
the tenth anniversary of the date of this Agreement (the “Expiration Date”),
subject to earlier termination as set forth herein or pursuant to the terms of
the Plan. Notwithstanding any other provision of this Agreement to the
contrary, the Option shall be immediately exercisable by Grantee as to one
hundred percent (100%) of the Option Shares as may be applicable pursuant to
Sections 5.5 and 5.7 of the Plan and Section 12 below.

4. Method of Exercising the Option. The Option shall be exercised by the
Grantee by delivering to the Company written notice from the Grantee as of a
date set by the Company which is in advance of the proposed exercise date. The
notice from the Grantee shall state that the Grantee is exercising the Option
and shall specify the number of Option Shares that the Grantee desires and is
entitled to purchase. Such notice shall be in a form and content as determined
by the Committee and shall be accompanied by full payment for the Option Shares
to be exercised. The Option may only be exercised with respect to full shares,
and no fractional shares shall be issued.

     The Option Price upon exercise of the Option Shares shall be payable to
the Company in full either: (i) in cash or its equivalent, or (ii) subject to
prior approval by the Committee in its discretion, by tendering previously
acquired Shares having an aggregate Fair Market Value at the time of exercise
equal to the total Option Price (provided that the Shares which are tendered
must have been held by the Grantee for at least six (6) months prior to their
tender to satisfy the Option Price), or (iii) subject to prior approval by the
Committee in its discretion, by withholding Shares which otherwise would be
acquired on exercise having an aggregate Fair Market Value at the time of
exercise equal to the total Option Price, or (iv) subject to prior approval by
the Committee in its discretion, by a combination of (i), (ii), and (iii)
above. Any payment in Shares shall be effected by the surrender of such Shares
to the Company in good form for transfer and shall be valued at their Fair
Market Value on the date when the Stock Option is exercised. Unless otherwise
permitted by the Committee in its discretion, the Grantee shall not surrender,
or attest to the ownership of, Shares in payment of the Option Price if such
action would cause the Company to recognize compensation expense (or additional
compensation expense) with respect to the Stock Option for financial reporting
purposes.

     The Committee, in its discretion, also may allow the Option Price to be
paid with such other consideration as shall constitute lawful consideration for
the issuance of Shares (including, without limitation, effecting a “cashless
exercise” with a broker of the Option), subject to applicable securities law
restrictions and tax withholdings, or by any other means which the Committee
determines to be consistent with the Plan’s purpose and applicable law. A
“cashless exercise” of an Option is a procedure by which a broker provides the
funds to the Grantee to effect an Option exercise, to the extent consented to
by the Committee in its discretion. At the direction of the Grantee, the
broker will either (i) sell all of the Shares received when the Option is
exercised and pay the Grantee the proceeds of the sale (minus the Option Price,
withholding taxes and any fees due to the broker) or (ii) sell enough of the
Shares received upon exercise of the Option to cover the Option Price,
withholding taxes and any fees due the broker and deliver to the Grantee
(either directly or through the Company) a stock certificate for the remaining
Shares. Dispositions to a broker effecting a cashless exercise are not exempt
under Section 16 of the Exchange Act.

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     The Committee, in its discretion, may also allow an Option to be exercised
by a broker-dealer acting on behalf of the Grantee if (i) the broker-dealer has
received from the Grantee a duly endorsed Incentive Agreement evidencing such
Option and instructions signed by the Grantee requesting the Company to deliver
the Shares of Common Stock subject to such Option to the broker-dealer on
behalf of the Grantee and specifying the account into which such Shares should
be deposited, (ii) adequate provision has been made with respect to the payment
of any withholding taxes due upon such exercise, and (iii) the broker-dealer
and the Grantee have otherwise complied with Section 220.3(e)(4) of Regulation
T, 12 CFR Part 220 (or its successor).

     As soon as practicable after receipt of a written notification of exercise
and full payment, the Company shall deliver, or cause to be delivered, to or on
behalf of the Grantee, in the name of the Grantee or other appropriate
recipient, Share certificates for the number of Shares purchased under the
Stock Option. Such delivery shall be effected for all purposes when the
Company or a stock transfer agent of the Company shall have deposited such
certificates in the United States mail, addressed to Grantee or other
appropriate recipient.

     Subject to Section 6.2 of the Plan, during the lifetime of a Grantee, each
Option granted to him shall be exercisable only by the Grantee (or his legal
guardian in the event of his Disability) or by a broker-dealer acting on his
behalf pursuant to a cashless exercise under the foregoing provisions of this
Section.

     Any certificate issued to evidence Shares issued upon the exercise of this
Incentive Award may bear such legends and statements as the Committee shall
deem advisable to assure compliance with federal and state laws and
regulations, including but not limited to, blue sky and securities laws, the
requirements of the stock exchange or market upon which such shares are then
listed and/or traded and any other restrictions on these Shares.

     The Grantee or other person exercising the Option Shares under this
Incentive Award may be required by the Committee to give a written
representation that the Incentive Award and the Shares subject to the Incentive
Award will be acquired for investment and not with a view to public
distribution; provided, however, that the Committee, in its sole discretion,
may release any person receiving an Incentive Award from any such
representations either prior to or subsequent to the exercise of this Incentive
Award.

5. Transferability of Option. The Option shall not be transferable or
assignable, in whole or in part, and except as otherwise provided in Section 12
of this Agreement and Section 5.2 of the Plan or by will or the laws of
descent or distribution. The Option shall be exercisable (i) only by the
Grantee during his lifetime, or (ii) in the event of his death, by his heirs,
representatives, distributees, or legatees in accordance with his will or the
laws of descent and distribution (but only to the extent that the Option would
be exercisable by the Grantee under this Agreement).

6. Payment of Taxes Upon Exercise. The Grantee understands and acknowledges
that under currently applicable law, the Grantee maybe required to include in
the Grantee’s taxable income, at the time of exercise of the Option, the amount
by which the value of the Option Shares purchased (the “Exercise Shares”)
exceeds the Exercise Price paid. The Grantee hereby authorizes the Company to
withhold Exercise Shares of a value equivalent to (but not to exceed)

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the amount of tax required to be withheld by the Company out of any taxable
income derived by the Grantee upon exercise of the Option pursuant to Section
6.3 of the Plan; provided, however, that the Grantee may, in the alternative,
in order to satisfy such withholding requirement, deliver to the Company cash
or other shares of Common Stock owned by the Grantee.

7. Investment Representation. The Grantee represents that the Option Shares
available for purchase by the Grantee under this Agreement will be acquired
only for investment and not with a view toward resale or distribution.

8. Securities Law, Other Applicable Laws and Company Policies; Legends. The
Grantee agrees and understands that the Option Shares may be restricted
securities as defined in Rule 144 promulgated under the Securities Act of 1933,
as amended (the “Securities Act”), and may not be sold, assigned or
transferred, unless the sale, assignment or transfer of such shares is
registered under the Securities Act and applicable state securities laws, as
now in effect or hereafter amended, or there is furnished an opinion of counsel
in form and substance satisfactory to the Company from counsel acceptable to
the Company that such registrations are not required. Grantee agrees and
understands that transactions under the Plan and this Agreement are intended to
and shall comply with all applicable laws including, but not limited to, the
requirements of Rule 16b-3 under the Securities Exchange Act and Securities
Regulation BTR. Grantee also agrees and understands that transactions under
the Plan and this Agreement are intended to and shall comply with the Company’s
insider trading policies as revised from time to time or such other of the
Company’s policies related to trading in the Company’s stock including, but not
limited to, policies relating to black-out periods. The Grantee further
understands and agrees that, unless issued pursuant to an effective
registration statement under the Securities Act, the following legend shall
beset forth on each certificate representing Option Shares:

	 	 	“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER THE
SECURITIES LAWS OF ANY STATE, AND MAY NOT BE SOLD OR TRANSFERRED
EXCEPT UPON SUCH REGISTRATION OR UPON RECEIPT BY THE CORPORATION
OF AN OPINION OF COUNSEL FOR THE CORPORATION, IN FORM AND
SUBSTANCE SATISFACTORY TO THE CORPORATION, THAT SUCH REGISTRATION
IS NOT REQUIRED FOR SUCH SALE OR TRANSFER.”

     In addition, the following legend shall be placed on each certificate
representing Option Shares;

	 	 	“THE SHARES REPRESENTED BY THIS CERTIFICATE ARE GOVERNED BY THE
TERMS OF THE GREY WOLF, INC. 2003 INCENTIVE PLAN (EFFECTIVE MARCH
26, 2003), WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE
CORPORATION AND A COPY OF WHICH WILL BE PROVIDED FOR INSPECTION
UPON WRITTEN REQUEST.”

9. No Rights as Shareholder. The Grantee shall not have any rights as a
shareholder with respect to any of the Option Shares until the date of issuance
by the Company to the Grantee of a stock certificate representing such Option
Shares. Except as otherwise provided in Section 5.5 of

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the Plan, the Grantee shall not be entitled to any dividends, cash or
otherwise, or any adjustment of the Option Shares for such dividends, if the
record date therefor is prior to the date of issuance of such stock
certificate. Upon valid exercise of the Option by the Grantee, the Company
agrees to cause a valid stock certificate for the number of Option Shares then
purchased to be issued and delivered to the Grantee within seven (7) business
days thereafter.

10. Corporate Proceedings of the Company. The terms respecting corporate
proceedings of the Company shall be governed by such terms as provided in
Section 5.5 of the Plan.

11. Registration Rights. The Grantee shall have no registration rights with
respect to the Option Shares.

12. Termination of Employment, Death, Disability and Retirement. Except as
otherwise provided in this Section 12, if the Grantee for any reason whatsoever
ceases to be employed by the Company, or a parent or subsidiary corporation of
the Company or successor thereto after a Change in Control, and prior to such
cessation, the Grantee was employed by the Company, or a parent or subsidiary
of the Company or a successor thereto upon a Change in Control at all times
from the date of the granting of the Option until the date of such cessation,
the Option shall be exercisable by the Grantee (whether previously exercisable
or not, i.e., whether vested or unvested) at any time on or before the
Expiration Date. Notwithstanding the foregoing:

     a. If the Grantee is terminated for Cause (as defined below), the
Option will terminate as to all of the unexercised Option Shares on the
thirtieth day following such termination, during which thirty (30) days
the Grantee may exercise the Option as to the Option Shares exercisable
on or prior to the date of such termination for Cause; provided, however,
no unvested Option shall vest during such thirty (30) day period; and

     b. If the Grantee’s employment is terminated as a result of a
voluntary resignation (which is neither a termination without cause nor a
constructive termination without cause as described in the Grantee’s
employment agreement with the Company) the Grantee may exercise the
Option as to all of the Option Shares as provided above in this Section
12; provided that no unvested Option shall vest as a result of such
voluntary resignation or thereafter.

	 	 	For purposes of this Agreement, the term “Cause” shall mean and include
(i) chronic alcoholism or controlled substance abuse as determined by a
doctor mutually acceptable to the Company and the Grantee, (ii) an act of
proven fraud or dishonesty on the part of the Grantee with respect to the
Company or its subsidiaries; (iii) knowing and material failure by the
Grantee to comply with material applicable laws and regulations relating
to the business of the Company or its subsidiaries; (iv) the Grantee’s
material and continuing failure to perform (as opposed to unsatisfactory
performance) his duties to the Company except, in each case, where such
failure is caused by the illness or other similar incapacity or
disability of the Grantee; or (v) conviction of a crime involving moral
turpitude or a felony. Prior to the effectiveness of termination for
Cause under subclause (1), (ii), (iii) or (iv) above, the Grantee shall
be given thirty (30) days prior notice from the Board specifically
identifying the reasons which are alleged to constitute Cause

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	 	 	hereunder and an opportunity to be heard by the Board in the event
Grantee disputes such allegations.

     Nothing in (a) or (b) shall extend the time for exercising the Option
granted pursuant to this Agreement beyond the Expiration Date.

13. Disposition of Stock After Exercise of Option. Notwithstanding any other
provision of this Agreement to the contrary, in consideration of the granting
of the Option, the Grantee agrees not to dispose of any Option Shares without
the prior approval of the Company unless such shares have been registered under
the Securities Act.

14. Notices. All notices, demands, requests and other communications required
or permitted hereunder shall be in writing and shall be deemed to be delivered
when actually received through U.S. Express Mail or any private express service
(as evidenced by a written receipt), or, if earlier, and regardless of whether
actually received (except where receipt is specified in this Agreement), four
(4) days following deposit in a regularly maintained receptacle for the United
States mail, registered or certified, return receipt requested, postage frilly
prepaid, addressed to the addressee at its address set forth below or at such
other address as such party may have specified theretofore by notice delivered
in accordance with this Section:

	 	 	 
	      If to the Company:

	 	GREY WOLF, Inc.
	

	 	10370 Richmond Ave., Suite 600
	

	 	Houston, Texas 77042
	

	 	Attn: Chief Financial Officer 

	      If to Grantee:

	 	Thomas P. Richards
	

	 	1318 Forest Brook
	

	 	Sugar Land, Texas 77479

15. Transferability: Binding Effect. The Option shall be transferable only as
set forth in Section 5 of this Agreement and Section 5.2 of the Plan. Subject
to the foregoing, all covenants, terms, agreements and conditions of this
Agreement shall be binding upon, inure to the benefit of, and be enforceable
by, the Company and the Grantee and their respective successors and assigns.

16. Entire Agreement. This Agreement together with the Plan supersede any and
all other prior understandings and agreements, either oral or in writing,
between the parties with respect to the subject matter hereof and constitute
the sole and only agreements between the parties with respect to the said
subject matter. All prior negotiations and agreements between the parties with
respect to this Incentive Award are merged into this Agreement. Each party to
this Agreement acknowledges that no representations, inducements, promises, or
agreements, orally or otherwise, have been made by any party or by anyone
acting on behalf of any party, which are not embodied in this Agreement or the
Plan and that any agreement, statement or promise that is not contained in this
Agreement or the Plan shall not be valid or binding or of any force or effect.

17. Governing Law. This Agreement shall be governed by the laws of the State of
Texas.

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18. Captions. The section and paragraph headings in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.

19. Counterparts. This Agreement may be executed in multiple original
counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one and. the same instrument.

20. Modification. No change or modification of this Agreement shall be valid or
binding upon the parties unless the change or modification is in writing and
signed by the parties. Notwithstanding the preceding sentence, the Company may
amend the Plan or revoke this Option to the extent permitted by the Plan.

21. Community Property. Each spouse individually is bound by, and such spouse’s
interest, if any, in any Optioned Shares is subject to, the terms of this
Agreement. Nothing in this Agreement shall create a community property interest
where none otherwise exists.

22. No Right to Continue Service or Employment. Nothing herein shall be
construed to confer upon the Grantee the right to continue in the employ or to
provide services to the Company or any Company affiliate or Subsidiary, whether
as an employee or as a consultant or as an Outside Director, or interfere with
or restrict in any way the right of the Company or any Company affiliate or
Subsidiary to discharge the Grantee as an employee, consultant or Outside
Director at any time.

23. Grantee’s Acknowledgments. The Grantee acknowledges receipt of a copy of
the Plan, which is annexed hereto, and represents that he or she is familiar
with the terms and provisions thereof, and hereby accepts this Option subject
to all the terms and provisions thereof. The Grantee hereby agrees to accept as
binding, conclusive, and final all decisions or interpretations of the
Committee or the Board, as appropriate, upon any questions arising under the
Plan or this Agreement.

     IN WITNESS WHEREOF, this Agreement has been executed and delivered as of
the date first written above.

	 	 	 	 	 
	 	COMPANY:

GREY WOLF, INC.

 	 
	 	By:  	 	 
	 	Name:  	David W. Wehlmann 	 	 
	 	Title:  	Executive Vice President & CFO	 
	 	Date:  	March 25, 2004 	 	 
	 
	 	GRANTEE:

 	 
	 	  	 	 
	 	 	Thomas P. Richards 	 
	 	Date:  	March 25, 2004	 	 
	 

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ACKNOWLEDGMENT OF SPOUSE TO

TERMS OF NON-QUALIFIED STOCK OPTION AGREEMENT

     I, Anita Richards, am the spouse of Thomas P. Richards (“Grantee”), and I
am fully aware of, understand, and fully consent and agree to the provisions of
the Non-Qualified Stock Option Agreement, dated March 25, 2004 (the
“Agreement”), executed by Grantee and GREY WOLF, INC. (the “Company”). I
understand the binding effect of this Agreement and its binding effect upon any
interest, community or otherwise, I may now or hereafter own with respect to
any option or stock of the Company which is the subject of the Agreement, and I
agree that the termination for any reason of my marital relationship with
Grantee shall not have the effect of removing any such option or stock of the
Company from the coverage of the Agreement.

     Signed this day of March 25, 2004.

	 	 	 	 	 
	 	 	 
	 	  	
 	 
	 	 	Anita Richards 	 
	 	 	Spouse of Thomas P. Richards<PAGE>
                                  EXHIBIT 10.1

                        AGREEMENT AND THIRD AMENDMENT TO
                                CREDIT AGREEMENT

         This Agreement and Third Amendment to Credit Agreement (this
"Amendment") dated as of November 18, 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
JPMORGAN CHASE BANK, N.A. (successor by merger to 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 anticipates raising up to $50,000,000 in
aggregate outstanding principal amount of Senior Convertible Notes; and

         WHEREAS, the Borrower, the Banks and the Administrative Agent now
desire to amend the Credit Agreement to (a) allow for the issuance of such Debt;
(b) provide for the application of part of the proceeds thereof; and (c)
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:

                  "Initial Issuance Senior Convertible Notes" means the first
         $36,000,000 of Senior Convertible Notes to be issued by the Borrower.

                  "Optional Issuance Senior Convertible Notes" means any Senior
         Convertible Notes issued by the Borrower other than the Initial
         Issuance Senior Convertible Notes.

                  "Senior Convertible Note Indenture" means the Indenture dated
         as of November 22, 2004 among the Borrower, certain of its Subsidiaries
         and The Bank of New York, as trustee, together with all instruments and
         other agreements entered into by the Borrower or such Subsidiaries in
         connection therewith, all relating to the Senior Convertible Notes.
<PAGE>

                  "Senior Convertible Notes" means the outstanding 6.5% Senior
         Convertible Notes due 2014 issued by the Borrower, together with the
         subsidiary guarantees thereof.

         Section 2. Clause (d) of the definition of "Permitted Debt" contained
in Section 1.1 of the Credit Agreement is hereby amended to read in its entirety
as follows:

                  (d) Debt in the form of Subordinated Debt, the Senior
         Subordinated Notes and up to $50,000,000 in principal amount of
         outstanding Senior Convertible Notes;

         Section 3. The following definitions contained in Section 1.1 of the
Credit Agreement are hereby amended to read in their entirety as follows:

                  "Debt" means, with respect to any Person, without duplication,
         (a) indebtedness of such Person for borrowed money, (b) obligations of
         such Person evidenced by bonds, debentures, notes, or other similar
         instruments, (c) obligations of such Person to pay the deferred
         purchase price of property or services (other than trade debt and
         normal operating liabilities incurred in the ordinary course of
         business), (d) obligations of such Person as lessee under Capital
         Leases, (e) obligations of such Person under or relating to letters of
         credit, (f) obligations of such Person under or relating to guaranties,
         purchase agreements, or other assurances in favor of obligees of the
         kinds of indebtedness and obligations referred to in clauses (a)
         through (e) of this definition, (g) nonrecourse indebtedness or
         obligations of others of the kinds referred to in clauses (a) through
         (f) of this definition secured by any Lien on or in respect of any
         property of such Person, and (h) obligations of such Person evidenced
         by preferred stock or other equity interests in such Person which
         provide for mandatory redemption, mandatory payment of dividends, or
         similar rights to the payment of money; provided, however, that in each
         instance such term shall not mean or include any Debt in respect of
         which monies sufficient to pay and discharge the same in full (either
         on the expressed date of maturity thereof or on such earlier date as
         such Debt may be duly called for redemption and payment) shall be
         deposited with the trustee under the Senior Convertible Note Indenture
         or appropriate Senior Subordinated Note Indenture, if relevant, or
         otherwise a depository, agency or trustee acceptable to the
         Administrative Agent, in each case in trust for the payment thereof.
         For the purposes of determining the amount of any Debt, the amount of
         any Debt described in clauses (e) and (f) of this definition shall be
         valued at the maximum amount of the contingent liability thereunder,
         the amount of any Debt described in clause (g) that is not covered by
         clause (e) or (f) shall be valued at the lesser of the amount of the
         Debt secured or the book value of the property securing such Debt, and
         the amount of any Debt described in clause (h) shall be valued at the
         stated redemption value of such Debt as of the date of determination.

                  "Fixed Charges" means, with respect to any Person and as of
         the last day of any fiscal quarter, the sum of (a) the current
         maturities of Debt (other than the

<PAGE>
         Revolving Loan, if relevant) of such Person as of such date plus (b)
         principal payments on the Senior Subordinated Notes (not including (x)
         principal payments made with the proceeds of Junior Interests Sales and
         (y) principal payments (including, for purposes of this definition, any
         cash paid in connection with a conversion of any Senior Convertible
         Note) in connection with the Contemplated Senior Subordinated Note
         Retirement), Senior Convertible Notes and the Subordinated Debt for the
         preceding four fiscal quarters then ending plus (c) Interest Expense of
         such Person for the preceding four fiscal quarters then ending.

                  "Prepayment Proceeds" means (a) all net cash proceeds
         (including, if applicable, cash proceeds received over time as and when
         the same are received) from an Asset Sale; (b) 75% of all net cash
         proceeds (including, if applicable, cash proceeds received over time as
         and when the same are received) from Eligible Junior Interest Sales;
         (c) $6,000,000 upon the issuance of the Initial Issuance Senior
         Convertible Notes, and (d) an amount equal to the outstanding principal
         amount of the Optional Issuance Senior Convertible Notes upon the
         issuance of the Optional Issuance Senior Convertible Notes.

         Section 4. Section 2.1(c)(ii) of the Credit Agreement is hereby amended
to read in its entirety as follows:

                  (ii) Upon any Asset Sale, Junior Interests Sale or issuance of
         Senior Convertible Notes by any Restricted Entity consummated before
         the payment in full of the Term Loan, the Borrower shall use the
         Prepayment Proceeds to prepay, on the date of the receipt of such
         proceeds, (A) first, the principal of the Prime Rate Tranche with
         respect to the Term Loan; (B) second, the principal of the LIBOR
         Tranches of the Term Loan, selected in such order as to minimize the
         unpaid accrued interest thereon and costs to be paid by the Borrower
         pursuant to Section 2.7 (and such unpaid accrued interest and costs
         shall be in addition to the mandatory prepayment due under this Section
         2.1(c)(ii)); (C) third, the unpaid accrued interest on the Prime Rate
         Tranche with respect to the Term Loan, and (D), fourth, the unpaid
         principal of and accrued interest on the Revolving Loan as required by
         Section 2.2(c)(ii); none of the requirements of Section 2.1(c)(i) with
         respect to the prepayment of the Term Loan shall be applicable to
         mandatory prepayments under this Section 2.1(c)(ii).

         Section 5. Section 2.2(e) of the Credit Agreement is hereby amended to
add the following sentences after the first sentence of such Section:

         The Revolving Loan Commitment shall be reduced by $6,000,000 upon the
         issuance of the Initial Issuance Senior Convertible Notes and by the
         principal amount of all issued Optional Issuance Senior Convertible
         Notes. Immediately upon each receipt of Prepayment Proceeds from an
         Asset Sale, the Revolving Loan Commitment shall be reduced by the
         amount of such Prepayment Proceeds.

         Section 6. Section 5.2(k) of the Credit Agreement is hereby amended to
read in its entirety as follows:

<PAGE>
                  (k) Indentures. (i) As soon as available, a complete and
         correct copy of the Senior Convertible Note Indenture, each of the
         Senior Subordinated Note Indentures and any Subordinated Debt
         Indenture; and (ii) no later than 5 Business Days prior to the
         effectiveness thereof, copies of substantially final drafts of any
         proposed amendment, supplement, waiver or other modification with
         respect to the Senior Convertible Note Indenture, the Senior
         Subordinated Note Indentures or any Subordinated Debt Indenture;

         Section 7. Section 5.5(e) of the Credit Agreement is hereby amended 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) the difference of
         (i) 60% (for the months of July through September, 2004) or 65% (for
         each month after September, 2004) of consolidated Unbonded Accounts
         Receivable minus (ii) the sum of (A) $6,000,000 if the Borrower has
         issued the Initial Issuance Senior Convertible Notes plus (B) the
         principal amount of all issued Optional Issuance Senior Convertible
         Notes plus (C) an amount equal to the aggregate Prepayment Proceeds
         from all Asset Sales 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 6.1(k) of the Credit Agreement is hereby amended to
read in its entirety as follows:

                  (k) Certain Events. (i) There shall occur any default or event
         of default (and such event or condition is not cured within the
         applicable grace period, if any), however denominated, under the Senior
         Convertible Notes, the Senior Subordinated Notes, the Senior
         Convertible Note Indenture, either Senior Subordinated Note Indenture,
         any Subordinated Debt or any Subordinated Debt Indenture; (ii) any
         modification shall be made to the subordination provisions or economic
         terms of the Senior Convertible Notes, the Senior Subordinated Notes,
         the Senior Convertible Note Indenture, either Senior Subordinated Note
         Indenture, any Subordinated Debt or any Subordinated Debt Indenture
         without the prior written consent of the Majority Banks; (iii) any
         "Change of Control Offer" (or any other defined term having a similar
         purpose) as defined in the Senior Convertible Note Indenture, either
         Senior Subordinated Note Indenture or any Subordinated Debt Indenture
         shall occur, or (iv) on or after December 31, 2005, the holder of any
         Senior Convertible Note has the right to convert such Senior
         Convertible Note to cash on any date on or before the Revolving Loan
         Maturity Date.

         Section 9. Mandatory Prepayment of Revolving Loan. The Borrower agrees
to prepay the Revolving Loan upon the issuance of the Senior Convertible Notes
as described in

<PAGE>

this Section. Upon the issuance of the Initial Issuance Senior Convertible
Notes, the Borrower shall prepay the Revolving Loan in the amount of
$19,000,000. Such prepayment shall be made on the date of issuance of such
Senior Convertible Notes and applied (A) first, to the principal of the Prime
Rate Tranche with respect to the Revolving Loan; (B) second, to the principal of
the LIBOR Tranches of the Revolving Loan, selected in such order as to minimize
the unpaid accrued interest thereon and costs to be paid by the Borrower
pursuant to Section 2.7 of the Credit Agreement (and such unpaid accrued
interest and costs shall be in addition to the mandatory prepayment due under
this Section), and (C) third, the unpaid accrued interest on the Prime Rate
Tranche with respect to the Revolving Loan, with any proceeds remaining
thereafter to be retained by the Restricted Entities; none of the requirements
of Section 2.2(c)(i) of the Credit Agreement with respect to the prepayment of
the Revolving Loan shall be applicable to mandatory prepayments under this
Section.

         Section 10. Application of Term Loan Prepayment. The $6,000,000 payment
due on the Term Loan Advances upon the issuance of the Initial Issuance Senior
Convertible Notes shall be applied first to the quarterly installment due on
November 30, 2004 and then to the remaining principal installments of the Term
Loan in inverse order of maturity.

         Section 11. Deposits. The Borrower shall use its best efforts to cause
the aggregate amount of all demand deposits, time deposits, certificates of
deposit and money market accounts maintained with financial institutions other
than the Banks not to exceed $15,000,000 at any time.

         Section 12. Conditions. This Amendment shall not become effective until
(a) the Borrower has delivered a copy of the executed Senior Convertible Note
Indenture to the Administrative Agent, substantially in the form of the draft of
November 18, 2004 heretofore delivered to the Administrative Agent; (b) the
Borrower has issued the Initial Issuance Senior Convertible Notes; (c) this
Amendment has been executed and delivered by the Borrower and the Majority
Banks; (d) the Borrower shall have paid to the Administrative Agent, for the
account of each Bank executing and delivering this Amendment before the issuance
of the Senior Convertible Notes, an amendment fee equal to $140,000 times the
quotient of (1) such Bank's Term Loan Advance plus its Revolving Loan Commitment
divided by (2) the aggregate Term Loan Advances plus Revolving Loan Commitments
of all Banks executing and delivering this Amendment before such time, with such
fee to be paid no later than the date of issuance of the Initial Issuance Senior
Convertible Notes; (e) 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, and (f) 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 November 24, 2004, then this Amendment shall be of no
force or effect.

         Section 13. 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.

<PAGE>

         Section 14. 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. In particular, the Borrower acknowledges and agrees that
the amendment of certain provisions of the Credit Agreement to allow for the
issuance of the Senior Convertible Notes does not constitute an amendment of
Section 5.5 of the Credit Agreement.

         Section 15. Release. The Borrower, for itself and its successors,
assigns, receivers, trustees, shareholders, directors, officers, employees and
agents, hereby RELEASES, ACQUITS and FOREVER DISCHARGES the Administrative Agent
and each Bank, and each of their respective predecessors, successors, assigns,
representatives, officers, directors, employees, attorneys and agents
(collectively, the Administrative Agent, the Banks and the above-described
Persons receiving a release hereunder are hereinafter referred to as the
"Released Parties"), from any and all "Claims," as that term is defined below,
which the Borrower may have against any of the Released Parties that directly or
indirectly arise in connection with the Credit Documents, the transactions
contemplated thereby, the Credit Obligations, or the servicing or administration
of the Credit Obligations, including, but not limited to, Claims:

         (a) based upon or arising out of breach of contract, breach of
commitment, breach of promise or representation, breach of funding commitment or
other commitments or breach of obligations of any kind;

         (b) based upon or arising out of tort, violation of law or regulations,
unconscionable acts, deceptive trade practices, lack of good faith or fair
dealing, lack of commercial reasonableness, or breach of specific relationships,
such as a partner, fiduciary, trust or confidential relationship;

         (c) based upon or arising out of fraud, dominion, control, alter ego,
instrumentality, misrepresentation, negligent misrepresentation, duress,
coercion, undue influence, interference, negligence or gross negligence,
business interruption or lost profits, slander, libel or damage to reputation;

         (d) based upon or arising out of estoppel, promissory estoppel or
waiver;

         (e) disputing, contesting or objecting to the validity or
enforceability of the Credit Obligations or any Credit Document or any claim,
rights, remedies, obligations and indebtedness thereunder;

         (f) arising out of, connected with, or resulting from usury or penalty
or damages therefor, from any advances or loans, or from the contracting for,
charging, taking, reserving, collecting or receiving interest in excess of the
Highest Lawful Rate;

         (g) based upon or arising out of any alleged breach by the
Administrative Agent or any Bank of an alleged promise to the Borrower regarding
the Credit Obligations or the Credit Documents;

<PAGE>

         (h) based upon or arising out of any alleged misrepresentation to the
Borrower relating to the Credit Obligations or the Credit Documents;

         (i) based upon or arising out of any alleged intentional or negligent
infliction of mental distress, tortuous interference with contractual relations,
tortuous interference with governance or prospective business advantage, or
mistake;

         (j) based upon or arising out of any negotiations or discussions
between the Borrower, on one hand, and the Administrative Agent or any Bank, on
the other hand;

         (k) based upon or arising out of any act, failure to act, event,
omission, transfer, payment or transaction occurring on or before the date
hereof; and

         (l) for damages, injunctive relief, and attorneys' fees.

The purpose of this Section is to release Claims. Nothing in this Section is an
admission of merit or liability regarding any Claim released herein. In any
action, claim, lawsuit or proceeding by the Administrative Agent or any Bank to
enforce or interpret this Section, (x) the Borrower shall be obligated and
liable to pay the attorneys fees and expenses of the Administrative Agent and
the Banks and (y) the Administrative Agent and the Banks, in addition to all
other relief, shall be entitled to an award against the Borrower for their
attorneys' fees and expenses, including attorneys' fees and costs on appeal.

         Section 16. Claims. As used herein, "Claims" shall mean any and all
claims, counterclaims, demands, actions, causes of actions, suits, debts, costs,
dues, sums of money, accounts, bonds, bills, covenants, contracts,
controversies, agreements, promises, variances, trespasses, damages, judgments,
executions, expenses, obligations and liabilities whatsoever, known or unknown,
at law or in equity, irrespective of whether such Claims arise out of contract,
tort, violation of laws or regulations or otherwise, which the Borrower or any
of its Subsidiaries ever had, now has or hereafter can, shall or may have
against any Released Party for, upon, or by reason of any act, event, conduct,
omission, matter, cause or thing whatsoever from any time before the date
hereof.

         Section 17. No Transfer; No Other Claim. The Borrower represents and
warrants to the Administrative Agent and each Bank that the Borrower (a) has not
assigned or otherwise transferred to any Person any alleged Claim that the
Borrower had, has or may have had against any Released Party and (b) is not
aware of any events, facts or grounds that provide, or could provide, for any
dispute, Claim, action, lawsuit, arbitration or administrative claim of any sort
against any Released Party.

         Section 18. 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.

<PAGE>

         Section 19. 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 Majority Banks); (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 (INCLUDING THIS AMENDMENT) 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.

<PAGE>

         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:
                                              ----------------------------------
                                           Name:
                                                --------------------------------
                                           Title:
                                                 -------------------------------

                                           BANKS:

                                           JPMORGAN CHASE BANK, N.A.

                                           By:
                                              ----------------------------------
                                           Name:
                                                --------------------------------
                                           Title:
                                                 -------------------------------

                                           U.S. BANK NATIONAL ASSOCIATION

                                           By:
                                              ----------------------------------
                                           Name:
                                                --------------------------------
                                           Title:
                                                 -------------------------------

                                           BANK OF SCOTLAND

                                           By:
                                              ----------------------------------
                                           Name:
                                                --------------------------------
                                           Title:
                                                 -------------------------------

                                           LaSALLE BANK NATIONAL ASSOCIATION

                                           By:
                                              ----------------------------------
                                           Name:
                                                --------------------------------
                                           Title:
                                                 -------------------------------

<PAGE>

                                           WELLS FARGO BANK, N.A.

                                           By:
                                              ----------------------------------
                                           Name:
                                                --------------------------------
                                           Title:
                                                 -------------------------------

                                           SOUTHWEST BANK OF TEXAS, N.A.

                                           By:
                                              ----------------------------------
                                           Name:
                                                --------------------------------
                                           Title:
                                                 -------------------------------

                                           FIRST AMERICAN BANK, SSB HOUSTON

                                           By:
                                              ----------------------------------
                                           Name:
                                                --------------------------------
                                           Title:
                                                 -------------------------------

                                           ALLIED IRISH BANK, P.L.C.

                                           By:
                                              ----------------------------------
                                           Name:
                                                --------------------------------
                                           Title:
                                                 -------------------------------

                                           AIB DEBT MANAGEMENT LIMITED

                                           By:
                                              ----------------------------------
                                           Name:
                                                --------------------------------
                                           Title:
                                                 -------------------------------

                                           REGIONS BANK

                                           By:
                                              ----------------------------------
                                           Name:
                                                --------------------------------
                                           Title:
                                                 -------------------------------

                                           FIRST BANK & TRUST

                                           By:
                                              ----------------------------------
                                           Name:
                                                --------------------------------
                                           Title:
                                                 -------------------------------

<PAGE>

                                           HIBERNIA NATIONAL BANK

                                           By:
                                              ----------------------------------
                                           Name:
                                                --------------------------------
                                           Title:
                                                 -------------------------------

                                           RZB FINANCE LLC

                                           By:
                                              ----------------------------------
                                           Name:
                                                --------------------------------
                                           Title:
                                                 -------------------------------

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