EXHIBIT 10.2


SIXTH
AMENDMENT TO CREDIT AGREEMENT


THIS SIXTH AMENDMENT TO CREDIT AGREEMENT (this “Amendment”) is effective as of April 28,
2006, by and between NORTECH SYSTEMS INCORPORATED, a Minnesota corporation (“Borrower”), and WELLS FARGO BANK, NATIONAL
ASSOCIATION (“Lender”).


RECITALS


A.            Borrower is currently indebted to Lender pursuant to the
terms and conditions of that certain Amended and Restated Credit Agreement
between Borrower and Lender dated as of December 30, 2002, as amended from time
to time (“Credit Agreement”).


B.            Lender and Borrower have agreed to certain changes in the
terms and conditions set forth in the Credit Agreement and have agreed to amend
the Credit Agreement to reflect said changes.


NOW, THEREFORE, for valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree that the Credit Agreement shall be amended as follows:


1.             Defined Terms.
Capitalized terms used in this Amendment that are defined in the Credit
Agreements shall have the same meanings as defined therein, unless otherwise
defined herein.


In addition, Section 1.1
of the Credit Agreement is amended by adding or amending, as the case may be,
the following definitions:


“Borrowing Base” means at any time the
lesser of:


(a)           the Maximum Line; or


(b)           subject to change from time to time
in the Lender’s sole discretion, the sum of:


(i)            80% of Eligible Accounts; plus


(ii)                                  the lesser of (aa) 35% of Eligible
Inventory constituting raw material, plus 40% of Eligible Inventory constituting
finished goods, or (bb) $3,000,000.


Subparagraph (xiii) of
the definition for “Eligible Accounts”
is hereby deleted in its entirety and replaced with the following:


(xiii)         Accounts owed by an account debtor,
regardless of whether otherwise eligible, if 10% (or 25% with respect to
Accounts owing by General Electric (“GE”)
or any GE affiliate or subsidiary of GE or by Semitool, Inc.) or more of the
total amount due under Accounts from such debtor is ineligible under
clauses (i), (ii) or (xi) above; and


Subparagraph (ix) of the
definition for “Eligible Inventory”
is hereby deleted in its entirety and replaced with the following:


(ix)           All Inventory at any location other
than the premises owned by the Borrower in Bemidji, MN and Fairmont, MN; and



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“Floating Rate” means:


(a)                                  With respect to the Revolving Note, an
annual interest rate equal to the Base Rate minus one-quarter of one percent
(0.25%), which interest rate shall change when and as the Base Rate changes;


(b)                                 With respect to the Equipment Term Note,
an annual interest rate equal to the Base Rate, which interest rate shall
change when and as the Base Rate changes; and


(c)                                  With respect to the Real Estate Term
Note, an annual interest rate equal to the Base Rate, which interest rate shall
change when and as the Base Rate changes;


“Maturity Date” means April 30, 2008 for the
Revolving Note, February 5, 2007 for the Equipment Term Note and July 31, 2011
for the Real Estate Term Note.


“Maximum Line” means $10,000,000 unless said
amount is reduced pursuant to Section 2.14, in which event it means such
lower amount.


2.             Amended Revolving Note.  In conjunction with this Amendment, Borrower
shall execute and deliver that certain Amended and Restated Revolving Note of
even date herewith made payable to the order of the Lender in the original
principal amount of $10,000,000 (as hereinafter amended, modified, supplemented
or replaced, the “Amended Revolving Note”).  All references to the Revolving Note
contained in the Credit Agreement shall refer to the Amended Revolving Note.


3.             Amended Real Estate
Term Note.  In conjunction
with this Amendment, Borrower shall execute and deliver that certain Amended
and Restated Real Estate Term Note of even date herewith made payable to the
order of the Lender in the original principal amount of $2,500,000 (as
hereinafter amended, modified, supplemented or replaced, the “Amended Real Estate Term Note”).  All references to the Real Estate Term Note
contained in the Credit Agreement shall refer to the Amended Real Estate Term
Note.  The Borrower acknowledges and
agrees that as of April 28, 2006, the outstanding principal balance of the Real
Estate Term Note is $1,805,555.50.


4.             Financial
Covenants.  Subsections 6.2(b)
and (c) of the Credit Agreement are hereby deleted in their entirety and
restated as follows:


(b)           Minimum Tangible Net Worth.
The Borrower will on a consolidated basis maintain its Tangible Net Worth at
and as of each fiscal quarter end at an amount not less than $15,000,000.


(c)           Maximum Debt to Tangible
Net Worth Ratio. The Borrower will on a consolidated basis maintain
its Debt to Tangible Net Worth ratio, determined as at the end of each quarter,
at not more than 2.00 to 1.00.


5.             Compliance
Certificate.  The borrower
further agrees that the Compliance Certificate attached to the Credit Agreement
as Exhibit B is amended in its entirety and replaced by the Compliance
Certificate attached as Exhibit
B hereto.


6.             Amendment Fee.
The Borrower shall pay the Lender as of the date hereof a fully earned,
non-refundable fee in the amount of $2,500.00 in consideration of the Lender’s
execution and delivery of this Amendment.



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7.             Conditions
Precedent.  This Amendment
shall be effective when the Lender shall have received an executed original
hereof together with the following:


(a)           Amended Revolving Note executed by
the Borrower;


(b)           First Amendment to Mortgage executed
by the Borrower;


(c)           Amended Real Estate Term Note;


(d)           Payment of the fee described in
Paragraph 6 above; and


(e)           Such other documents as requested by
the Lender.


8.             No Other Changes.  Except as specifically provided
herein, all terms and conditions of the Credit Agreement remain in full force
and effect, without waiver or modification. 
This Amendment and the Credit Agreement shall be read together, as one
document.


9.             Representations and
Warranties.  Borrower hereby
remakes all representations and warranties contained in the Credit Agreement
and reaffirms all covenants set forth therein. 
Borrower further certifies that as of the date of this Amendment there
exists no Event of Default as defined in the Credit Agreement, nor any
condition, act or event which with the giving of notice or the passage of time
or both would constitute any such Event of Default.


10.           References.
All references in the Credit Agreement to “this Agreement” shall be deemed to
refer to the Credit Agreement as amended hereby; and any and all references in
the Security Documents to the Credit Agreement shall be deemed to refer to the
Credit Agreement as amended hereby.


11.           No
Waiver. Unless otherwise provided for herein, the execution of this Amendment and
acceptance of any documents related hereto shall not be deemed to be a waiver
of any Default or Event of Default under
either of the Credit Agreements or breach, default or event of default under
any Security Document or other document held by the Lender, whether or not
known to the Lender and whether or not existing on the date of this Amendment.


12.           Release.
The Borrower hereby absolutely and unconditionally releases and forever
discharges the Lender, and any and all participants, parent corporations,
subsidiary corporations, affiliated corporations, insurers, indemnitors,
successors and assigns thereof, together with all of the present and former
directors, officers, agents and employees of any of the foregoing, from any and
all claims, demands or causes of action of any kind, nature or description,
whether arising in law or equity or upon contract or tort or under any state or
federal law or otherwise, which the Borrower has had, now has or has made claim
to have against any such person for or by reason of any act, omission, matter,
cause or thing whatsoever arising from the beginning of time to and including
the date of this Amendment, whether such claims, demands and causes of action
are matured or unmatured or known or unknown.


13.           Costs
and Expenses. The Borrower hereby reaffirms its agreement under the
Credit Agreements to pay or reimburse the Lender on demand for all costs and
expenses incurred by the Lender in connection with the Loan Documents, including
without limitation all reasonable fees and disbursements of legal counsel.
Without limiting the generality of the foregoing, the Borrower specifically
agrees to pay all fees and disbursements of counsel to the Lender for the
services performed by such counsel in connection with the preparation of this
Amendment and the documents and instruments incidental hereto. The Borrower
hereby agrees that the Lender may, at any time or from time to time in its sole
discretion and without further authorization by the Borrower, make a loan to
the 



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Borrower under the Credit Agreements, or apply the
proceeds of any loan, for the purpose of paying any such fees, disbursements,
costs and expenses.


14.           Miscellaneous.
This Amendment may be executed in any number of counterparts, each of which
when so executed and delivered shall be deemed an original and all of which
counterparts, taken together, shall constitute one and the same instrument.


 


IN WITNESS
WHEREOF, the parties hereto have caused this Sixth Amendment to be executed as
of the day and year first written above.


	
  NORTECH SYSTEMS INCORPORATED

  	
   

  	
   

  	
  WELLS FARGO BANK,

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  NATIONAL ASSOCIATION

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By: 

  	
  /s/ Richard G. Wasielewski

  	
   

  	
   

  	
  By:

  	
  /s/ Mark T. Lundquist

  	
   

  	
   

  
	
  Name:

  	
  Richard G. Wasielewski

  	
   

  	
   

  	
   

  	
  Mark T. Lundquist

  	
   

  	
   

  
	
  Its Chief
  Financial Officer/Treasurer

  	
   

  	
   

  	
  Its Vice
  President

  	
   

  	
   

  



 


 



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Exhibit B to
Amended and Restated Credit and Security Agreement


Compliance
Certificate


	
  To:

  	
   

  	
  Mark T. Lundquist

  
	
   

  	
   

  	
  Wells Fargo
  Bank, N.A.

  
	
  Date:

  	
   

  	
                                 ,
  200

  
	
  Subject:

  	
   

  	
  Nortech Systems, Incorporated

  
	
   

  	
   

  	
  Financial
  Statements

  



 


In accordance with our Amended and Restated
Credit and Security Agreement dated as of December 30, 2002 (the “Credit Agreement”), attached are
the financial statements of Nortech Systems, Incorporated (the “Borrower”) as of and
for               ,
200     (the “Reporting Date”)
and the year-to-date period then ended (the “Current
Financials”). All terms used in this certificate have the
meanings given in the Credit Agreement.


As of each quarterly reporting period, I certify that the Current
Financials have been prepared in accordance with GAAP, subject to year-end
audit adjustments, and fairly present the Borrower’s financial condition as of
the date thereof.


Events of Default.
(Check one):


o            The undersigned does not have
knowledge of the occurrence of a Default or Event of Default under the Credit
Agreement except as previously reported in writing to the Lender.


o            The undersigned has knowledge of the
occurrence of a Default or Event of Default under the Credit Agreement not
previously reported in writing to the Lender and attached hereto is a statement
of the facts with respect to thereto. The Borrower acknowledges that pursuant
to Section 2.10(d) of the Credit Agreement, the Lender may impose the Default
Rate at any time during the resulting Default Period.


Financial Covenants.
I further hereby certify as follows:


1.                                       Minimum
Debt Service Coverage Ratio. Section 6.2(a) of the Credit Agreement.


Required Ratio: 1.50 to 1.00 as of the end of each fiscal quarter.


As of the Reporting Date, Borrower’s quarterly consolidated Debt
Service Coverage Ratio (calculated as shown on attached work sheet) was         
to 1.00 .


2.                                       Minimum
Tangible Net Worth. Section 6.2(b) of the Credit Agreement.


Required Covenant: $15,000,000 as of the end of each fiscal quarter.


As of the Reporting Date, Borrower’s consolidated Tangible Net Worth
was $                    .



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3.             Maximum Debt to
Tangible Net Worth Ratio. Section 6.2(c) of the Credit Agreement.


Required Ratio: 2.00 to 1.00 as of the end of
each fiscal quarter.


As of the
Reporting Date, Borrower’s quarterly consolidated Debt Service Coverage Ratio
(calculated as shown on attached work sheet) was         
to 1.00.


4.             Minimum
Net Income.  Section 6.2(d) of the
Credit Agreement.


Required
Covenant: the greater of (i) $0 or (ii) the sum of the Borrower’s principal
payments on all
indebtedness for borrowed money (including capital lease obligations),
less depreciation and amortization, determined quarterly on a rolling four
quarter basis. 

The Borrower’s consolidated Net Income for the year-to-date period ending on
the Reporting Date was $                       .


5.             Capital
Expenditures. Section 6.2(e) of the Credit Agreement.


Required Covenant: No more than $2,000,000 in
aggregate per fiscal year.


As of the
Reporting Date, Borrower’s consolidated year-to-date capital expenditures was $                     .


6.             Working
Capital. Section 6.2(f) of the Credit Agreement.


Required Covenant: $8,000,000 as of the end
of each fiscal quarter.


As of the
Reporting Date, Borrower’s Working Capital was $                     .


Attached to are all relevant facts in
reasonable detail to evidence, and the computations of the financial covenants
referred to above. These computations were made in accordance with GAAP.


	
  

  	
  NORTECH SYSTEMS,
  INCORPORATED

  
	
   

  	
   

  	
   

  
	
   

  	
  By 

  	
   

  
	
   

  	
   

  	
  Name: Richard G. Wasielewski

  
	
   

  	
  Its Chief
  Financial Officer/Treasurer

  



 



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