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<SEC-DOCUMENT>0000950152-06-002816.txt : 20060331
<SEC-HEADER>0000950152-06-002816.hdr.sgml : 20060331
<ACCEPTANCE-DATETIME>20060331171114
ACCESSION NUMBER:		0000950152-06-002816
CONFORMED SUBMISSION TYPE:	8-K
PUBLIC DOCUMENT COUNT:		4
CONFORMED PERIOD OF REPORT:	20060327
ITEM INFORMATION:		Entry into a Material Definitive Agreement
ITEM INFORMATION:		Other Events
ITEM INFORMATION:		Financial Statements and Exhibits
FILED AS OF DATE:		20060331
DATE AS OF CHANGE:		20060331

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			GRAHAM CORP
		CENTRAL INDEX KEY:			0000716314
		STANDARD INDUSTRIAL CLASSIFICATION:	GENERAL INDUSTRIAL MACHINERY & EQUIPMENT [3560]
		IRS NUMBER:				161194720
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			0331

	FILING VALUES:
		FORM TYPE:		8-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-08462
		FILM NUMBER:		06729937

	BUSINESS ADDRESS:	
		STREET 1:		20 FLORENCE AVE
		STREET 2:		POST OFFICE BOX 719
		CITY:			BATAVIA
		STATE:			NY
		ZIP:			14020
		BUSINESS PHONE:		5853432216

	MAIL ADDRESS:	
		STREET 1:		20 FLORENCE AVENUE
		STREET 2:		POST OFFICE BOX 719
		CITY:			BATAVIA
		STATE:			NY
		ZIP:			14021-0719
</SEC-HEADER>
<DOCUMENT>
<TYPE>8-K
<SEQUENCE>1
<FILENAME>l19379ae8vk.htm
<DESCRIPTION>GRAHAM CORPORATION       8-K
<TEXT>
<HTML>
<HEAD>
<TITLE>Graham Corporation       8-K</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 1pt solid black; font-size: 1pt">&nbsp;</DIV>




<DIV align="center" style="font-size: 14pt; margin-top: 12pt"><B>UNITED STATES SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt"><B>WASHINGTON, D.C. 20549</B>
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 12pt"><B>FORM 8-K</B>
</DIV>


<DIV align="center" style="font-size: 12pt; margin-top: 12pt"><B>CURRENT REPORT<BR>
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>Date of Report (Date of earliest event reported): March&nbsp;27, 2006</B>
</DIV>

<DIV align="center" style="font-size: 24pt; margin-top: 12pt"><B>Graham Corporation</B>
</DIV>

<DIV align="center"><DIV style="font-size: 3pt; margin-top: 1pt; width: 38%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>

<DIV align="center" style="font-size: 10pt">(Exact name of Registrant as specified in its charter)</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><B>Delaware</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>1-8462</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>16-1194720</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="5" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">(State or other jurisdiction of<BR>
incorporation)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(Commission<BR>
File Number)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(IRS Employer<BR>
Identification No.)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><B>20 Florence Avenue, Batavia, New York</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>14020</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="3" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">(Address of principal executive offices)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(Zip Code)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt">Registrant&#146;s telephone number, including area code: <B>(585)&nbsp;343-2216</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>N/A</B></DIV>

<DIV align="center"><DIV style="font-size: 3pt; margin-top: 1pt; width: 100%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>

<DIV align="center" style="font-size: 10pt">(Former name or former address, if changed since last report)</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the Registrant under any of the following provisions:
</DIV>


<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><FONT face="wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>Written communications pursuant to Rule&nbsp;425 under the Securities Act (17 CFR 230.425)</TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><FONT face="wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>Soliciting material pursuant to Rule&nbsp;14a-12 under the Exchange Act (17 CFR 240.14a-12)</TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><FONT face="wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>Pre-commencement communications pursuant to Rule&nbsp;14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))</TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><FONT face="wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>Pre-commencement communications pursuant to Rule&nbsp;13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))</TD>
</TR>
</TABLE>
</DIV>

<DIV style="width: 100%; border-bottom: 1pt solid black; margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>





<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>

<DIV style="font-family: 'Times New Roman',Times,serif">








<!-- TOC -->
<A name="toc"><DIV align="CENTER" style="page-break-before:always"><U><B>TABLE OF CONTENTS</B></U></DIV></A>

<P><CENTER>
<TABLE border="0" width="90%" cellpadding="0" cellspacing="0">
<TR>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
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	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="76%"></TD>
</TR>
<TR><TD colspan="9"><A HREF="#000">Item&nbsp;1.01. Entry into a Material Definitive Agreement</A></TD></TR>
<TR><TD colspan="9"><A HREF="#001">Item&nbsp;8.01. Other Events</A></TD></TR>
<TR><TD colspan="9"><A HREF="#002">Item&nbsp;9.01. Financial Statements and Exhibits</A></TD></TR>
<TR><TD colspan="9"><A HREF="#003">SIGNATURES</A></TD></TR>
<TR><TD colspan="9"><A HREF="l19379aexv99w1.htm">Exhibit 99.1 Graham Corp Stmt for U.S. Foreign Service Employee</A></TD></TR>
<TR><TD colspan="9"><A HREF="l19379aexv99w2.htm">Exhibit 99.2 Graham Corp Annual Stock-Based Incentive Award</A></TD></TR>
<TR><TD colspan="9"><A HREF="l19379aexv99w3.htm">Exhibit 99.3 Graham Corp Annual Executive Cash Bonus Program</A></TD></TR>
</TABLE>
</CENTER>
<!-- /TOC -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>




<!-- link1 "Item&nbsp;1.01. Entry into a Material Definitive Agreement" -->
<DIV align="left"><A NAME="000"></A></DIV>

<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>Item&nbsp;1.01.</B></TD>
    <TD>&nbsp;</TD>
    <TD><B>Entry into a Material Definitive Agreement.</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Senior Executive Officer Base Salaries</I>. On March&nbsp;27, 2006, the Compensation Committee of the
Board of Directors of Graham Corporation (the &#147;Company&#148;) approved the senior executive officer base
salary increases set forth below, effective as of April&nbsp;1, 2006.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Senior Executive Officer</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Amount of Increase</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>New Annual Salary</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">William C. Johnson,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">15,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">265,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Chief Executive Officer</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em">
    <TD><DIV style="margin-left:15px; text-indent:-15px">J. Ronald Hansen,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,950</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">169,957</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Vice President of Finance and
Administration and
<br>Chief Financial Officer</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em; background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">James R. Lines,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,890</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">167,918</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Vice President and General Manager</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Board of Directors Annual Committee Chair Fees</I>. On March&nbsp;27, 2006, the Compensation Committee
approved increases to the annual fees received by the Chairmen of the Committees of the Board of
Directors, effective April&nbsp;1, 2006. The Compensation Committee did not modify the annual or per
meeting fees received by the Company&#146;s Directors.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Position</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Amount of Increase</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>New Annual Fee</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Chairman of the Board</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">15,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Audit Committee Chairman</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Compensation Committee Chairman</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Benefits Committee Chairman</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Nominating Committee Chairman</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,000</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Executive Committee of the Board of Directors was previously terminated by the Board of
Directors, effective April&nbsp;1, 2006. As a result of the termination of the Executive Committee, the
net effect of the increases in Chairman fees set forth above on the overall compensation paid by
the Company to its Directors is a reduction of $4,000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Expatriate Compensation</I>. On March&nbsp;27, 2006, the Compensation Committee approved the Graham
Corporation Policy Statement for U.S. Foreign Service Employees (the &#147;Policy Statement&#148;) in order
to makes overseas assignments attractive to Company employees, including senior executive officers.
Pursuant to the Policy Statement, (i)&nbsp;an employee assigned to service in a foreign county for
greater than 30&nbsp;days but less than six months may be entitled to a special bonus of up to 5% of
base salary earned while on assignment, and (ii)&nbsp;an employee assigned to service in a foreign
country for six months or more may, among other things, be eligible to receive a one time special
increase of up to 5% of his or her base salary while on assignment, the payment or reimbursement of
various expenses associated with living overseas, a cost of living adjustment to provide equivalent
purchasing power abroad, and the reimbursement of certain other expenses (including certain travel
expenses associated with family visits). Presently, the Company&#146;s only senior executive officer
eligible to receive benefits under the Policy Statement is Stephen P. Northrup, the Company&#146;s Vice
President of Asia Operations. Mr.&nbsp;Northrup&#146;s base salary, as previously reported by the Company, was
increased by 5% to take into account his overseas assignment and no further adjustment to Mr.
Northrup&#146;s salary will be made as a result of the Company&#146;s adoption of the Policy Statement. A
copy of the Policy Statement is attached to this Current Report on Form 8-K as Exhibit&nbsp;99.1
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Annual Stock-Based Incentive Award Plan for Senior Executives</I>. On March&nbsp;27, 2006, the
Compensation Committee of the Board of Directors adopted the Annual Stock-Based Incentive Award
Plan for Senior Executives (the &#147;Stock Bonus Plan&#148;). The purpose of the Stock Bonus Plan is to
motivate the Company&#146;s senior executive officers to increase stockholder value by providing them
with long-term stock-based awards for above-average Company performance. The Stock Bonus Plan is
effective for the Company&#146;s fiscal year commencing April&nbsp;1, 2006 and ending March&nbsp;31, 2007 (the
&#147;Fiscal Year&#148;). Prior to the adoption of the Stock Award Plan by the Compensation Committee, the
number of stock options received by the Company&#146;s senior executive officers annually was not
directly tied to the Company&#146;s achievement of specific objectives. The adoption of the Stock Award
Plan will not have any effect on the Compensation Committee&#146;s determination of stock options to be
granted to the Company&#146;s senior executive officers in connection with the fiscal year ending March
31, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s senior executive officers are all eligible to participate in the Stock Bonus
Plan. Awards under the Stock Bonus Plan will consist of nonqualified stock options (&#147;Options&#148;) and
shares of restricted stock (i.e. Common Stock granted directly but subject to forfeiture in
accordance with a vesting schedule), in each case granted under the 2000 Graham Corporation
Incentive Plan to Increase Shareholder Value (the &#147;2000 Plan&#148;). Since the 2000 Plan does not
presently permit the issuance of restricted stock, the issuance of any such shares in connection
with the Stock Bonus Plan will be contingent upon the approval by the Company&#146;s stockholders of
such modifications to the 2000 Plan at the Company&#146;s 2006 Annual Meeting of Stockholders as may be
necessary to permit the issuance of restricted stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Options awarded under the Stock Bonus Plan will have an exercise price equal to the fair
market value of a share of Company Common Stock on the date of grant, a term of ten years and will
vest 25% per year over four years beginning on the first anniversary of the date of grant. The
number of Options to be awarded to a senior executive officer eligible to participate in the Stock
Bonus Plan will be determined by multiplying such officer&#146;s base salary in effect for the Fiscal
Year by 20%, and then dividing the product by the value of such an Option (determined using the
Black-Scholes valuation method), rounded to the nearest whole number.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The number of shares of restricted stock to be awarded to senior executive officers under the
Stock Bonus Plan will be determined based on Net Income and Working Capital matrixes (each as
defined in the Stock Bonus Plan). Seventy-Five percent of a senior
executive officer&#146;s restricted stock award will
be based on the Company&#146;s attainment of a Net Income target and 25% will be based on the Company&#146;s
attainment of Working Capital target for the Fiscal Year. Attainment of 100% of both targets would
result in a restricted stock award valued at 15% of such officer&#146;s base salary (the &#147;Target
Value&#148;). As set forth in the stock Bonus Plan, the Target Value may decrease to zero or increase to up to 150% of such Target Value based
on the Company&#146;s attainment of lower or higher percentages of the respective Net Income and Working
Capital target amounts. Shares of restricted stock awarded under the Stock Bonus Plan will be
valued at the fair market value of the Company&#146;s Common Stock on the date of grant and will vest as
follows: (i)&nbsp;10% on the first anniversary of the date of grant; (ii)&nbsp;20% on the second anniversary
of the date of grant; (iii)&nbsp;30% on the third anniversary of the date of grant; and (iv)&nbsp;the final
40% on the fourth anniversary of the date of grant. A copy of the Stock Award Plan is attached to
this Current Report on Form 8-K as Exhibit&nbsp;99.2.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Graham Annual Executive Cash Bonus Program</I>. On March&nbsp;27, 2006, the Compensation Committee of
the Board of Directors adopted the Graham Annual Executive Cash Bonus
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Program (the &#147;Cash Bonus Program&#148;). The objective of the Cash Bonus Program is to compensate the Company&#146;s senior executive
officers for above-average performance through an annual cash bonus related both to Company and
individual performance, with 70% of such bonus based on the attainment by the Company of a Net
Income (as defined in the Cash Bonus Program) objective, 20% based on the attainment by the Company
of an Average Working Capital (as defined in the Cash Award Program) objective and 10% based on the
attainment by the senior executive officer of personal objectives. The Cash Bonus Plan is effective
for the Company&#146;s fiscal year commencing April&nbsp;1, 2006 and ending March&nbsp;31, 2007 (the &#147;Fiscal
Year&#148;). Target bonus levels at 100% attainment of both Company and personal objectives are 60% of
base salary for the Company&#146;s Chief Executive Officer and 35% of base salary for the Company&#146;s
other senior executive officers. As set forth in the Cash Bonus Program, each participant may
receive anywhere from 0% to 150% of his target bonus level for the Net Income and Average Working
Capital portions of the eligible bonus amount, depending on the attainment of objectives. The Cash
Bonus Program is substantially similar to the annual executive cash bonus program in effect for the
fiscal year ending March&nbsp;31, 2006, except that the cash bonus program in effect for the year ending
March&nbsp;31, 2006 permits senior executive officers to receive up to 200% of target bonus levels and
provides for a target bonus level of 45% of base salary for the Company&#146;s Chief Executive Officer
and 30% of base salary for the Company&#146;s other senior executive officers. A copy of the Cash Award
Program is attached to this Current Report on Form 8-K as Exhibit&nbsp;99.3.
</DIV>

<!-- link1 "Item&nbsp;8.01. Other Events" -->
<DIV align="left"><A NAME="001"></A></DIV>

<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>Item&nbsp;8.01.</B></TD>
    <TD>&nbsp;</TD>
    <TD><B>Other Events.</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Adoption
of Stock Ownership Guidelines for Senior Executive Officers and
Directors. </I>On March&nbsp;27,
2006, the Compensation Committee established stock ownership guidelines for the Company&#146;s senior
executive officers and Directors in order to further align their
interests with those of the Company&#146;s stockholders. Under the Company&#146;s stock ownership guidelines: (i)&nbsp;the
Company&#146;s Chief Executive Officer is required to own Company Common Stock in an amount equal to
1.25 times his base salary; (ii)&nbsp;the Company&#146;s other senior executive officers are required to own
Company Common Stock in an amount equal to 1.00 times their respective base salaries; and (iii)&nbsp;the
Company&#146;s Directors are required to own not less than 4,000 shares of the Company&#146;s Common Stock.
The Company&#146;s senior executive officers and Directors must be in compliance with the stock
ownership guidelines within five years from the date the guidelines were adopted. Individuals who
become senior executive officers or Directors of the Company must comply with the ownership
guidelines within five years of becoming subject to such guidelines. The stock ownership guidelines
require the Company&#146;s senior executive officers to retain 65% of the net shares they realize (after
tax) when a restricted stock award vests or a stock option is exercised until such persons are in
compliance with the guidelines.
</DIV>
<!-- link1 "Item&nbsp;9.01. Financial Statements and Exhibits" -->
<DIV align="left"><A NAME="002"></A></DIV>

<DIV align="left" style="margin-top: 12pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><B>Item&nbsp;9.01.</B></TD>
    <TD>&nbsp;</TD>
    <TD><B>Financial Statements and Exhibits.</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;Exhibits.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="13%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="82%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Exhibit No.</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Description</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">99.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Graham Corporation Policy Statement for U.S. Foreign Service
Employees.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">99.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Graham Corporation Annual Stock-Based Incentive Award</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="13%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="82%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Exhibit No.</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Description</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Plan for Senior Executives.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">99.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Graham Corporation Annual Executive Cash Bonus Program.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<!-- link1 "SIGNATURES" -->
<DIV align="left"><A NAME="003"></A></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SIGNATURES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly
caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="2" align="left"><B>Graham Corporation</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">Date:  March 30, 2006&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">J. Ronald Hansen
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">J. Ronald Hansen&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Vice President &#150; Finance &#038; Administration and<br>
Chief Financial Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>


</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>2
<FILENAME>l19379aexv99w1.htm
<DESCRIPTION>EXHIBIT 99.1 GRAHAM CORP STMT FOR U.S. FOREIGN SERVICE EMPLOYEE
<TEXT>
<HTML>
<HEAD>
<TITLE>Exhibit 99.1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>Exhibit 99.1</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">GRAHAM CORPORATION
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt">POLICY STATEMENT
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt">U. S. FOREIGN SERVICE EMPLOYEES
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><U>Policy Statement</U></FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The need for flexibility of assignment and mobility of employment dictates that Graham makes
overseas assignments attractive to its employees.
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-variant: SMALL-CAPS">I.</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><FONT style="font-variant: SMALL-CAPS"><U>Less than Six Months</U></FONT></TD>
</TR>

</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">Foreign assignments with duration of greater than 30 consecutive days but less than six
consecutive months may result in a special bonus of up to 5% of base wages earned while on
assignment.
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-variant: SMALL-CAPS">II.</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><FONT style="font-variant: SMALL-CAPS"><U>Six Months or Greater</U></FONT></TD>
</TR>

</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">All compensation arrangements made for U. S. foreign service employees (&#147;FSE&#148;) will end when
the employee returns to non-foreign service status.
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-variant: SMALL-CAPS">III.</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><FONT style="font-variant: SMALL-CAPS"><U>Basic Compensation Package (FSE)</U></FONT></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="9%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Assuming the foreign service assignment is of equal responsibility, the
employee&#146;s base compensation bonus and benefit package while on assignment will
remain, at minimal, equal, provided benefits offered pre-foreign assignment can be
extended to overseas locations. As determined by the CEO and Vice President of
Administration, the employee may be given a one time special increase of up to 5%
in base compensation while on assignment.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="9%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company may choose to cover various expenses associated with
overseas assignments directly, such as housing, or have the employee arrange to pay
for the expenses and be reimbursed. This will depend on the circumstances.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="9%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>An employee may be given a cost of living adjustment (&#147;COLA&#148;) so that
his base wage has equivalent purchasing power while abroad. Graham is currently
using ORC Worldwide to calculate equalization allowances.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="9%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Foreign assignments of twelve consecutive months or greater may qualify
for a foreign earned income and housing exclusion deduction up to $80,000 per
annum. Any tax windfalls resulting from this exclusion may, with the approval of
the CEO and Vice President of Administration, be retained by the employee. Current
rules applicable to this exclusion are explained in IRS Publication 54, Tax Guide
for U.S. Citizens and Resident Aliens Abroad. Granting this exclusion to an</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="9%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>employee will only be considered when a person brings to the overseas assignment
unique skills or special circumstances exist that justifies doing so. This benefit
will not be extended to the employee except under rare circumstances.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="9%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">e)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Except for the foreign income exclusion if given to the employee, no
employee should incur a greater income tax liability than if employed on the same
base salary plus bonus in the U.S., nor should an employee experience a windfall as
a result of lower income taxes. Therefore, a system of Income Tax Equalization is
applicable to all U.S. Foreign Service Employees, the objective of which shall be
after-tax income from base salary plus bonus earnings of no more and no less
after-tax income, except for the tax benefit of the foreign income exclusion, than
would be the case if the same base salary plus bonus earnings were received in the
U.S.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="9%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">f)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In addition and subject to the approval of the CEO and Vice President
of Administration, various related reimbursement of expenses may be granted.
Examples of these include tax preparation expenses, up to four round trip airfares
per year (one per quarter) for one family member to visit the employee or for the
employee himself. Reimbursed expenses of direct pays that are included under this
section will be included as additional compensation.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">IV.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>While on foreign assignment, an employee is subject to the same code of ethics,
applicable employee handbook policies, proper preparation of expense reports and all
other policies as if stationed in the U.S.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">V.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company reserves the right to change this policy at any time going forward,
with a six-month notice to current foreign service employees or sooner if required by
law.</TD>
</TR>

</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>


</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2
<SEQUENCE>3
<FILENAME>l19379aexv99w2.htm
<DESCRIPTION>EXHIBIT 99.2 GRAHAM CORP ANNUAL STOCK-BASED INCENTIVE AWARD
<TEXT>
<HTML>
<HEAD>
<TITLE>Exhibit 99.2</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>Exhibit 99.2</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>GRAHAM CORPORATION</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>ANNUAL STOCK-BASED INCENTIVE AWARD PLAN FOR SENIOR EXECUTIVES</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="15%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="84%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Purpose</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">The purpose of this Annual Stock-Based Incentive Award Plan
for Senior Executives (the &#147;Plan&#148;) is to motivate the
senior executive officers of Graham Corporation (the
&#147;Company&#148;) to increase shareholder value by providing them
long-term stock-based awards for above-average Company
performance.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Administration</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">The Plan will be administered by the Compensation Committee
of the Board of Directors of the Company (the &#147;Committee&#148;),
which shall have final and conclusive authority to
administer and interpret the Plan.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Eligibility</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Eligible employees will include: (a)&nbsp;the Chief Executive
Officer; (b)&nbsp;the Chief Financial Officer; (c)&nbsp;the Vice
President of Asia Operations; (d)&nbsp;the Vice President and
General Manager of the Company; and (e)&nbsp;such other
employees of the Company selected by the Chief Executive
Officer to participate in the Plan, subject to the approval
by the Committee of such participation.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Award Periods</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Annual awards under the Plan will be based on the fiscal
year of the Company, beginning with its April&nbsp;1, 2006
through March&nbsp;31, 2007 fiscal year (each, a &#147;Fiscal Year&#148;).</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Awards</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Annual awards under the Plan will consist of nonqualified
stock options (&#147;Options&#148;) and shares of restricted stock
(&#147;Restricted Stock&#148;), which awards will be issued under the
Amended and Restated 2000 Graham Corporation Incentive Plan
to Increase Shareholder Value, or a successor plan thereto
(the &#147;Incentive Plan&#148;), and will be subject to the terms
thereof.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 16%"><U>Options</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 21%">Options will be issued with an exercise price equal to the
Fair Market Value (as such term is defined by the Incentive
Plan) of a share of Company common stock on the date of
grant, with a term of ten years, and will vest over four
years, 25&nbsp;percent per year, beginning with the first
anniversary of the date of grant.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 21%">The number of Options to be issued to an eligible employee
for a Fiscal Year will be determined by multiplying the
eligible employee&#146;s base salary in effect for the Fiscal
Year by 20&nbsp;percent, and then dividing by the Black Scholes
value of such a stock option on the date of determination,
rounded to the nearest whole number.
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 17%"><U>Restricted Stock.</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 21%">Restricted Stock will vest as follows: ten percent of the shares on the first anniversary of the date of grant; an
additional 20&nbsp;percent on the second anniversary of the date
of grant; an additional 30&nbsp;percent on the third anniversary
of the date of grant; and the remaining 40&nbsp;percent on the
fourth anniversary of the date of grant. The Restricted
Stock to be awarded to eligible employees under the Plan
will be determined based on the Net Income and Working
Capital matrixes for the Fiscal Year, which matrixes will
be determined by the Committee and announced prior to the
commencement of the Fiscal Year. In determining the net
income of the Company and/or its working capital for a
Fiscal Year, the Committee shall have the discretion to
include or exclude any extraordinary events that positively
or negatively affected the Company&#146;s financial performance
for the Fiscal Year.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 21%">The number of shares of Restricted Stock to be issued to an
eligible employee for a Fiscal Year will be the sum of the
eligible employee&#146;s Net Income Portion and Working Capital
Portion for the Fiscal Year, determined as follows (which
represents a target of 15% of base pay as payout based upon
meeting budget):
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="21%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Net Income Portion of Restricted Stock to be
awarded to an eligible employee for a Fiscal Year will
equal the number of shares of Company Stock determined by
multiplying the eligible employee&#146;s base salary in effect
for the Fiscal Year by 11.25&nbsp;percent (15% of base pay times
75%), further multiplied by the Net Income factor from the
matrix for the Fiscal Year, and then divided by the closing
price of a share of the Company&#146;s common stock on the last
trading day prior to the date of grant, rounded to the
nearest whole number.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="21%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Working Capital Portion of Restricted Stock to
be awarded to an eligible employee for a Fiscal Year will
equal the number of shares of Company Stock determined by
multiplying the eligible employee&#146;s base salary in effect
for the Fiscal Year by 3.75&nbsp;percent (15% of base times
25%), further multiplied by the Working Capital factor from
the matrix for the Fiscal Year, and then divided by the
closing price of a share of the Company&#146;s common stock on
the last trading day prior to the date of grant, rounded to
the nearest whole number.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">2
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 17%"><U>Effect of Certain Events.</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 21%">Notwithstanding any other provision of the Plan, the
following terms shall apply to all Options and Restricted
Stock awarded under the Plan:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="21%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Upon the death of an eligible employee, any
outstanding Options and Restricted Stock awarded under the
Plan will vest in full, and any Options may be exercised by
the eligible employee&#146;s designated beneficiary, estate or
heir, as applicable, within one year from the date of the
eligible employee&#146;s death.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="21%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Upon the Disability (as such term is defined by the
Incentive Plan) of an eligible employee, any outstanding
Options and Restricted Stock awarded under the Plan will
vest in full, and any Options may be exercised by the
eligible employee or his legal representative within one
year from the date of the eligible employee&#146;s Disability.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="21%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Except as otherwise provided by the Plan or by the
Committee, the unvested portion of any Options and
Restricted Stock awarded under the Plan will terminate upon
the termination or resignation of an eligible employee&#146;s
employment, and any vested Options may be exercised by the
eligible employee within three months from the date of the
eligible employee&#146;s termination.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="21%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Unless the Committee determines otherwise, upon the
termination of an eligible employee for cause (as such term
shall be defined by the Committee), the vested and unvested
portion of all unexercised Options and the unvested portion
of all Restricted Stock awarded under the Plan will
terminate, and no such Options will be exercisable
thereafter.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="15%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="84%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Payment</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Annual awards for a Fiscal Year will be approved by the
Committee and will be issued as soon as practicable after
the end of the Fiscal Year.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Amendment &#038;<BR>
Termination</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">The Plan may be amended or terminated by the Committee at
any time. No eligible employee will have any right to an
award under the Plan until such award is approved by the
Committee.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Neither the existence of the Plan nor the grant of an award
in any year shall give an eligible employee any right to an
award or similar award in future years or any right to
continue such eligible employee&#146;s employment relationship
with the Company. All eligible employees shall remain
subject to discharge to the same extent as if the Plan were
not in effect.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">3
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SCHEDULE A</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>PAYMENT MATRIXES<BR>
FOR 2006-2007 FISCAL YEAR</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><I>Payout calculations will be identical to those on the Annual Cash Bonus Plan</I>
</DIV>



<P align="center" style="font-size: 10pt">&nbsp;
</DIV>


</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.3
<SEQUENCE>4
<FILENAME>l19379aexv99w3.htm
<DESCRIPTION>EXHIBIT 99.3 GRAHAM CORP ANNUAL EXECUTIVE CASH BONUS PROGRAM
<TEXT>
<HTML>
<HEAD>
<TITLE>Exhibit 99.3</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>Exhibit 99.3</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B><I>Graham Annual Executive Cash Bonus Program</I></B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B><I>Effective April&nbsp;1, 2006</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Summary</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The objective of this plan is to compensate the CEO and direct reports for above average
performance through annual bonuses related to both Company and individual performance. Financial
budgets and individual objectives will be set on or before the start of the current fiscal year and
bonuses will be paid as soon as practicable after the end of the fiscal year.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Eligibility and Participation</B>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>1.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Eligible employees shall include the CEO and direct reports. &#147;Direct reports&#148; means
(a)&nbsp;the CFO, (b)&nbsp;the VP of Asia Operations, (c)&nbsp;the VP and General Manager, and (d)&nbsp;such
other employees of the Company selected by the CEO to participate in this plan, subject to
the approval by the Compensation Committee of such participation.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>2.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Target participation levels at 100% of financial budget and full attainment of personal
objectives are as follows:</TD>
</TR>

</TABLE>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">CEO &#151; 60% of base pay<BR>
Direct reports &#151; 35% of base pay

</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">The Compensation Committee may change these levels before the start of each fiscal year.
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>3.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Participants for this compensation plan are eligible upon employment unless otherwise
determined by the CEO for direct reports and the Compensation Committee in the case of the
CEO.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>4.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Executives who resign before the end of the fiscal year shall receive no bonus except
as approved by the Compensation Committee.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Establishment and Level of Goals</B>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Financial goals shall be set during the annual budgeting process and shall be approved
by the Board along with the annual budget.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Individual objectives shall be set on or before the annual budget. The Chairman shall
approve individual objectives for the CEO. The CEO shall approve individual objectives for
direct reports. The Chairman and CEO shall determine the number and weighting of
objectives.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Bonus components shall be as follows with financial objectives representing 90% of
bonus, and personal objectives representing 10%. For bonus purposes, Average Working</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">Capital % is defined as gross inventory plus gross trade accounts receivable minus trade
payables divided by sales. The working capital calculation for bonus purposes shall be the
average of the end of each fiscal quarter divided by full fiscal year sales.
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Bonus metrics are:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="50%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Net Income
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>&#150; 70% of bonus</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Average Working Capital %
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#150; 20% of bonus</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Personal Objectives
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#150; 10% of bonus</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Each of the two financial components shall be calculated in accordance with the tables below. No
financial bonus shall be paid for performance less than 70% of budget for net income or greater
than 110% of budget for average working capital %. Bonus for each financial component shall be
capped at 150% of budget for Net Income and 75% of budget for Average Working Capital %. Net
Income shall be based upon year-end results. Average Working Capital % shall be the average of
each quarter. Currency exchange rates will be calculated monthly at a fixed rate to eliminate
currency fluctuations from incentive calculations.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Payout Versus Budget for Net Income</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" colspan="13" style="border-bottom: 1px solid #000000"><B>Payout Matrix for Net Income</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>% Achieved</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Payout %</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>% Achieved</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Payout %</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">0-69%
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">0</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">120</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">120</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;70%
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">130</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">130</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;80%
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">60</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">140</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">140</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;90%
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">80</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">150</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">150</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;100%
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;110%
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">110</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Payout Versus Budget for Average Working Capital % (Inventory &#043;Receivables &#151; Payables/Sales).
Working Capital shall be the average of the end of each fiscal quarter divided by full fiscal year
sales.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" colspan="13" style="border-bottom: 1px solid #000000"><B>Payout Matrix for Working Capital </B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>% Achieved</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Payout %</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>% Achieved</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Payout %</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">110%
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">50</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">80</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">138</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">105%
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">75</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">75</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">150</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">100%
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;95%
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">108</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;90%
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">118</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;85%
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">128</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">2
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Individual objectives shall be calculated based upon the table below. Individual objectives are
not tied to the financial performance. Therefore, an individual may achieve up to 10% of bonus
even though the Company does not reach the required targets in either of the two financial
components.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Payout Versus Attainment of Personal Objectives</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" colspan="5" style="border-bottom: 1px solid #000000"><B>Personal Objective Matrix</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>% Attainment</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Payout</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;&nbsp;0%
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">0</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;10%
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;20%
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;30%
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;40%
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;50%
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">5</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;60%
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;70%
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">7</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;80%
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">8</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;90%
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">9</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">100%
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Other Considerations</B>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>1.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Participants who change position during the fiscal year shall receive bonus on a pro
rated basis.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>2.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Special awards may be made to any executive or employee who has made an extra ordinary
contribution to the Company during the year. Such awards must be recommended in writing by the CEO to the Chair of the Compensation Committee and may be
approved by the Committee.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>3.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Extraordinary events that either positively or negatively affect financial performance
may be included or excluded in financial calculations at the discretion of the Compensation
Committee.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>4.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Nothing herein shall be construed to limit or affect the normal and usual powers of
management, including right to terminate any individual at any time.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>5.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Compensation Committee shall have final and conclusive authority on the existence
and administration of this plan.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>6.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In the event of death, a participant&#146;s designated beneficiary will be entitled to the
participant&#146;s plan benefits. If the participant has not designated a beneficiary, the
participant&#146;s beneficiary or beneficiaries will be determined in accordance with the
participant&#146;s will. If there is no will, the beneficiary or beneficiaries shall be
determined by the laws of descent and distribution in the state in which the participant
was a resident at the time of death.</TD>
</TR>

</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">3
</DIV>


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