On October 19, 2018, Torotel, Inc. entered into three new business loan agreements with Cornerstone Bank. The Financing Agreements provide for an asset-based revolving line of credit, a guidance line of credit, and a real estate term loan, respectively. The asset-based revolving line of credit is intended to be used for working capital purposes and has a capacity of $1,000,000 with a 12-month term that is renewable annually upon mutual agreement of the Company and the Bank. The borrowing base of the revolving line of credit is limited to 80% of eligible accounts receivable, plus 50% of eligible inventory, plus 80% of eligible equipment. The associated interest rate is 0.750 percentage points over the Cornerstone Bank Corporate Base Rate (currently 6%) or a floor of 5%. Monthly repayments of interest only are required, with the principal due at maturity. This revolving line of credit is cross collateralized and cross defaulted with the other Financing Agreements. The revolving line of credit is secured by a first lien on all business assets of the Company pursuant to a Commercial Security Agreement dated October 19, 2018, between the Company and the Bank, which was entered into in connection with the Financing Agreements (the Commercial Security Agreement). Under the revolving line of credit, if the aggregate principal amount of the outstanding advances exceeds the applicable borrowing base, the Company must pay the Bank an amount equal to the difference between the outstanding principal balance of the revolving line of credit and the borrowing base.