NOTE 3—FINANCING AGREEMENTS

On September 27, 2010, Torotel Products entered into a new financing agreement (the “agreement”) with Commerce Bank, N.A (the “Bank”). The agreement provides for a revolving line of credit, a guidance line of credit, and a real estate term loan. Both Torotel, Inc. and Electronika, Inc. serve as additional guarantors to all notes described below. A summary of the notes within this agreement is provided below:



	Line of Credit			Mortgage note payable to Commerce Bank			Equipment loan note payable to Commerce Bank
Face amount	$	500,000		$	542,000		$	500,000
Proceeds received	—			542,000			380,000
Unused borrowing capacity	500,000			—			236,000
Amount previously repaid	—			9,000			264,000
Total debt outstanding	$	—		$	533,000		$	116,000

Rate	4.00		%	4.05		%	4.63		%
Maturity date	September 27, 2014			January 27, 2019			September 26, 2015
Monthly payment	$	—		$	4,873		$	7,123

Additional Criteria	Borrowing base limited to 75% of eligible receivables			15 year amortization schedule			Advance rate equal to 80% of the price of the equipment purchased

The revolving line of credit, which is available for working capital purposes, is renewable annually. The associated interest rate is equal to the greater of the floating Commerce Bank Prime Rate (currently 3.25%) or a floor of 4% (as listed above). Monthly repayments of interest only are required with the principal due at maturity. This facility is cross collateralized and cross defaulted with all other facilities and is secured by a first lien on all business assets of Torotel Products.

On February 21, 2014, Torotel Products refinanced its mortgage note under the financing agreement with the Bank. No cash proceeds were received as a result of the refinancing. Prepayment of the new note up to $100,000 per year is allowed without penalty so long as these funds are generated through internal cash flow and not borrowed from a separate financial institution. The new note is cross collateralized and cross defaulted with all other facilities of Torotel Products and is secured by a first real estate mortgage on the property located at 620 North Lindenwood Drive in Olathe, Kansas.

The guidance line of credit is to be used for equipment purchases. Monthly repayments consisting of both interest and principal are required. This facility is cross collateralized and cross defaulted with all other facilities and is secured by a purchase money security interest in the assets purchased as well as a first lien on all business assets of Torotel Products. Subsequent to April 30, 2014, we received proceeds from additional borrowing on our existing equipment loan to purchase additional machinery and equipment. Please see Note 16 of Notes to the Consolidated Financial Statements for more information on this activity.

Torotel Products is also required to comply with specified financial covenants and as of April 30, 2014, Torotel was in compliance with these covenants.

Information concerning Torotel's long-term indebtedness as of April 30 of each year is as follows:



	2014		2013
Mortgage note payable to Commerce Bank, maturing December 2018	$	533,000	$	568,000
Equipment loan note payable to Commerce Bank, maturing September 2015	116,000		195,000
Capital lease obligations	2,000		32,000
	651,000		795,000
Less: Current maturities	124,000		140,000
	$	527,000	$	655,000

The amount of long-term debt maturities by year is as follows:



Year Ending April 30,	Amount
2015	$	124,000
2016	74,000
2017	41,000
2018	42,000
2019	370,000
	$	651,000