NOTE 11 — OPERATING LEASE

On October 31, 2016, Torotel entered into a Second Amendment (“Amendment”) to the lease for its manufacturing facility located in Olathe, Kansas. The Amendment will be effective January 1, 2017, and serves to extend the lease term through December 31, 2026 and expand the leased space from approximately 14,137 square feet to approximately 72,388 square feet. The Amendment provides that the monthly base rate in the first two years of the extended term will be $26,844, escalating thereafter. The Amendment required Torotel to increase its security deposit from $12,750 to $55,000 and provide a letter of credit as additional security. Additionally, the Amendment addresses other terms and conditions by which Torotel may continue to lease the facility or terminate the lease, and provides Torotel two separate options to extend the lease term for additional five year periods.

Future minimum lease payments on this operating lease are as follows:

l
Years Ending December 31,

2017	$	322,000
2018		322,000
2019		351,000
2020		395,000
2021		423,000
2022		438,000
2023		452,000
2024		452,000
2025		467,000
2026		467,000
Total	$	4,089,000