Restricted Stock Agreements

Restricted Stock Agreements are authorized by the Compensation and Nominating Committee ("Committee") and the Board of Directors of Torotel. The Committee and the Board have determined that the interests of Torotel and its stockholders will be promoted by hiring talented individuals and, to induce such individuals to accept employment with Torotel, the Committee and the Board believe a key component of such individuals' compensation should be granting equity ownership opportunities based upon the acceptance of employment and the continuing employment of such individual, subject to certain conditions and restrictions. The Restricted Stock Agreements afford the grantees all of the rights of a stockholder with respect to the award shares, including the right to vote such shares and to receive dividends and other distributions payable with respect to such shares since the Date of Award. Under the terms of each agreement, the non-vested shares are restricted as to disposition and subject to forfeiture under certain circumstances. The agreements further provide, subject to certain conditions, that if prior to all of the restricted shares having been released, Torotel undergoes a change in control, then all of the restricted shares shall be released and no longer subject to restrictions under the agreements. Upon issuance of the restricted stock, the aggregate number of shares issued is credited to common stock at $.01 par value per share and the excess of the market price of the common stock on the date of issuance over the par value is credited to capital in excess of par value. The restricted shares are treated as non-vested stock; accordingly, the fair value of the restricted stock at the date of award is offset against capital in excess of par value in the accompanying consolidated balance sheets under stockholders' equity.

Torotel executed Restricted Stock Agreements dated August 7, 2007, with eight key employees pursuant to the Stock Award Plan ("SAP"). The SAP provides key employees the opportunity to acquire newly issued common stock of Torotel pursuant to awards earned for accomplishing goals that promote the long-term financial performance of Torotel. Under the terms of the SAP, which was filed as Exhibit 10.9 of Form 10-KSB for the fiscal year ended April 30, 2007, the restricted stock awards have a 5-year restriction period, which shall lapse based on certain conditions as outlined in the SAP. These were newly issued shares from the number of authorized shares remaining to be issued. Stock compensation cost of $8,000 for the existing restricted stock awards, net of an appropriate pre-vesting forfeiture rate, was recorded per quarter during the remaining five-year vesting period during which the financial performance metrics as outlined in the Restricted Stock Agreement were anticipated as likely to be attained. However, due to the mid-year projections developed in the second quarter of fiscal year 2012, the likelihood of achieving the financial performance metrics as outlined in the Restricted Stock Agreement was classified as remote. As a result, Torotel stopped amortizing the stock compensation cost associated with the restricted stock awarded on August 7, 2007 and recovered the previously amortized stock compensation cost of $117,000 in the second quarter ended October 31, 2011. The 312,900 shares associated with the restricted stock awards dated August 7, 2007, were forfeited by the employees in accordance with the SAP, and were converted to treasury shares on January 27, 2012.

On September 2, 2009, Torotel entered into Restricted Stock Agreements with two key employees (Messrs. Sizemore and Serrone) pursuant to the SAP. The aggregate amount of the restricted stock awards was 250,000 shares of common stock, $.01 par value per share. These restricted shares were awarded from treasury shares. Based on the market price of $0.27 for Torotel's common stock as of September 2, 2009, the fair value of the restricted stock at the date of award was $67,500. Stock compensation cost of $3,000, net of an appropriate pre-vesting forfeiture rate, will be recorded per quarter during the five-year vesting period provided the financial performance metrics as outlined in the Restricted Stock Agreement are likely to be attained.

Total stock compensation cost for all Restricted Stock Agreements for the three months ended January 31, 2012 and 2011 was an expense of $3,000 and a credit of of $4,000, respectively. Total stock compensation cost for all Restricted Stock Agreements for the nine months ended January 31, 2012 and 2011 was a credit of $109,000 and expense of $20,000, respectively.

Restricted stock activity for the nine month periods ended January 31 is summarized as follows:



	2012				2011
	Restricted Shares Under Option		Weighted Average Grant Price		Restricted Shares Under Option		Weighted Average Grant Price
Outstanding at May 1	562,900		$	0.398	607,350		$	0.405
Granted	—		—		—		—
Vested	—		—		—		—
Forfeited	(312,900	)	0.500		(44,450	)	0.500
Outstanding at January 31	250,000		$	0.27	562,900		$	0.397