RESTRICTED STOCK AGREEMENT

EXHIBIT 10.1

TOROTEL, INC.
RESTRICTED STOCK AGREEMENT

This RESTRICTED STOCK AGREEMENT (“Agreement”) is made with an effective date of February 12, 2007 and is between Torotel, Inc., a Missouri corporation (the “Company”), and E. Mark Flynn (the “Employee”).

The Company has determined that the interests of the Company and its stockholders will be promoted by hiring talented individuals for the Company and, to induce such individuals to accept employment with the Company, the Company believes 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.

The Employee is a recently hired key management employee of the Company and will provide valuable services to the Company.  The Board of Directors (the “Board”) has determined that to induce the Employee to accept employment with the Company, it was appropriate to grant to the Employee shares of Common Stock of the Company subject to certain conditions and restrictions set forth in this Agreement.  The Board further determined that the value of the Employee’s services less the compensation to be paid to the Employee for such services equals the aggregate par value of the Common Stock of the Company to be issued pursuant to this Agreement and, therefore, has approved the issuance of shares of Common Stock to the Employee under the terms and conditions set forth herein..

THEREFORE, in consideration of the premises and the covenants herein contained, and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows:

1.          Grant of Award .  The Company hereby grants to the Employee an award of Twenty Five Thousand (25,000) shares of Common Stock, .01 par value per share, of the Company (the “Restricted Shares”), subject to the restrictions, terms and conditions set forth herein.

2.          Restrictions .  Except as otherwise provided herein, the Restricted Shares shall be subject to forfeiture and may not be sold, transferred, pledged, assigned, encumbered or otherwise alienated or hypothecated by the Employee unless and until the Employee remains in the employ of the Company until the dates of release as provided herein (the “Release Dates”).

3.          Legend .  Certificates for the Restricted Shares shall be issued as soon as practicable in the name of the Employee and shall be issued with a legend similar to the following:

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE RESTRICTED SECURITIES AND SUBJECT TO CERTAIN CONDITIONS UNDER THE APPLICABLE RESTRICTED STOCK AGREEMENT DATED FEBRUARY 12, 2007.  THESE SHARES ARE SUBJECT TO A RISK OF FORFEITURE AND CANNOT BE SOLD, DONATED, TRANSFERRED OR IN ANY OTHER MANNER ENCUMBERED EXCEPT IN ACCORDANCE WITH THE TERMS OF SUCH AGREEMENT, A COPY OF WHICH IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE COMPANY.

4.          Release Dates .  Based upon Employee attaining mutually agreed upon written annual goals, the Restricted Shares shall be released from the restrictions on transfer and risk of forfeiture Five Thousand (5,000) Shares per Year for Five (5) years beginning February 12, 2008 and each anniversary thereof.  Accordingly, as each of the Release Dates set forth below, that number Shares set forth in the column “Number of Restricted Shares (Cumulative) Released” shall reflect the total number of Shares vested at such time:

5.          Effect of Termination of Employment; Forfeiture of Restricted Shares .

(a)  If the Employee ceases to be an employee of the Company other than by reason of death, disability or termination by the Company without Cause (as hereinafter defined) and prior to all of the Restricted Shares having been released, all Restricted Shares then still subject to restrictions under this Agreement shall be forfeited and returned to the Company as of the date on which such cessation of employment occurs.  As used herein, the term “disability” means a condition that, in the judgment of the Board of Directors in its sole and exclusive discretion, has rendered the Employee completely and presumably permanently unable to perform the duties of his regular occupation.  As used herein, termination for “Cause” means (1) conviction of the Employee for having committed a felony, (2) acts of dishonesty or moral turpitude by the Employee which are materially detrimental and adverse to the Company, (3) material breach of the Employee’s duty of loyalty or other fiduciary duties to the Company, (4) material failure by the Employee to obey the lawful orders of the Board of Directors or (5) gross negligence or intentional misconduct by the Employee in the performance of the Employee’s obligations hereunder.

(b)  If the Employee ceases to be an employee of the Company by reason of death, disability or termination by the Company without Cause (as defined above), and prior to all of the Restricted Shares having been released, the Restricted Shares then still subject to restrictions under this Agreement shall be released and no longer subject to restrictions under this Agreement

6.          Acceleration Upon Change in Control .  If, prior to all of the Restricted Shares having been released, the Company undergoes a change in control (as defined below), then all of the Restricted Shares shall be released and no longer subject to restrictions under this Agreement.  For purposes of this