On February 29, 2024, Nortech Systems Incorporated replaced asset backed line of credit agreement with $15 million Senior Secured Revolving Line of Credit with Bank of America, N.A. (the ?Revolver?). The maturity date of the Revolver is February 29, 2027. The Revolver allows for borrowings at a defined base rate, or at the one, three or six month Secured Overnight Finance Rate, also known as ?SOFR?, plus a defined margin.

If the company prepay SOFR borrowings before their contractual maturity, the company have agreed to compensate the bank for lost margin, as defined in the Revolver agreement. The company are required to quarterly pay a 20-basis point fee on the unused portion of the Revolver. The Revolver is an amendment and restatement of $16 million asset backed line of credit agreement with Bank of America which, as amended, was to expire on June 15, 2025.

The company the were in compliance with all the financial covenants under the asset backed line of credit agreement as of and for the year ended December 31, 2023. No termination penalties the were incurred by the Company in connection with the replacement of the asset backed line of credit agreement with the Revolver. The Revolver requires the company to not exceed 2.5 times leverage ratio and requires the company to maintain at least a 1.25 times minimum fixed charge coverage ratio, both of which are defined in the Revolver agreement.

There are no subjective acceleration clauses under the Revolver that would accelerate the maturity of the company?s outstanding borrowings. The Revolver contains certain covenants which, among other things, require the company to adhere to regular reporting requirements, abide by shareholder dividend limitations, maintain certain financial performance, and limit the amount of annual capital expenditures. The Revolver is secured by substantially all the company?s assets.