On January 18, 2023, Nicholas Financial, Inc. and Nicholas Data Services, Inc., two wholly-owned subsidiaries of Nicholas Financial, Inc. entered into a Loan and Security Agreement among the Borrowers and Westlake Capital Finance, LLC, pursuant to which the Lender is providing the Borrowers a senior secured revolving credit facility in the principal amount of up to $50 million. The Lender is an affiliate of Westlake Portfolio Management, LLC, a California limited liability company, the servicer of substantially all of Nicholas-Florida's receivables under its automobile finance installment contracts and direct loans. The availability of funds under the Credit Facility is generally limited to an advance rate of between 70% and 85% of the value of the Borrowers' eligible receivables.

Outstanding advances under the Credit Facility will accrue interest at a rate equal to the secured overnight financing rate (SOFR) plus a specified margin, subject to a specified floor interest rate. For the quarter ending March 31, 2023, the Borrowers expect to incur interest payments between $0.7 million and $0.9 million. Unused availability under the Credit Agreement will accrue interest at a low interest rate.

The commitment period for advances under the Credit Facility is two years. The Loan Agreement contains customary events of default and negative covenants, including but not limited to those governing indebtedness, liens, fundamental changes, and sales of assets. The Loan Agreement also requires the Borrowers to maintain (i) a minimum tangible net worth equal to the lower of $40 million and an amount equal to 60% of the outstanding balance of the Credit Facility and (ii) an excess spread ratio of less than 8.0%.

Pursuant to the Loan Agreement, the Borrowers granted a security interest in substantially all of their assets as collateral for their obligations under the Credit Facility. If an event of default occurs, the Lender could increase borrowing costs, restrict the Borrowers' ability to obtain additional advances under the Credit Facility, accelerate all amounts outstanding under the Credit Facility, enforce their interest against collateral pledged under the Loan Agreement or enforce such other rights and remedies as they have under the loan documents or applicable law as secured lenders. If the Borrowers prepay the loan and terminate the Credit Facility prior to the Maturity Date, then the Borrowers would be obligated to pay the Lender a termination fee in an amount equal to a percentage of the average outstanding principal balance of the Credit Facility during the immediately preceding 90 days.

If the Borrowers were to sell their accounts receivable to a third-party prior to the Maturity Date, then the Borrowers would be obligated to pay the Lender a fee in an amount equal to a specified percentage of the proceeds of such sale. The proceeds of the Credit Facility were used in part to refinance the Company's existing indebtedness under the Loan and Security Agreement dated as of November 5, 2021 among the Borrower, the lenders party thereto, and Wells Fargo Bank, N.A., as agent for lenders.