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<SEC-DOCUMENT>0000950152-06-007747.txt : 20060921
<SEC-HEADER>0000950152-06-007747.hdr.sgml : 20060921
<ACCEPTANCE-DATETIME>20060921162621
ACCESSION NUMBER:		0000950152-06-007747
CONFORMED SUBMISSION TYPE:	8-K
PUBLIC DOCUMENT COUNT:		3
CONFORMED PERIOD OF REPORT:	20060920
ITEM INFORMATION:		Entry into a Material Definitive Agreement
ITEM INFORMATION:		Financial Statements and Exhibits
FILED AS OF DATE:		20060921
DATE AS OF CHANGE:		20060921

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:		061102422

	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>l22376ae8vk.htm
<DESCRIPTION>GRAHAM CORPORATION   8-K
<TEXT>
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<TITLE>e8vk</TITLE>
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<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: 12pt"><B>UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt"><B>WASHINGTON, DC 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">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="35%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="65%">&nbsp;</TD>
</TR>
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<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Date of Report (Date of earliest event reported):
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>September&nbsp;20, 2006</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</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="100%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="100%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><FONT style="font-size:24pt"><B>Graham Corporation</B></FONT></TD>
</TR>
<TR style="font-size: 1px">
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">(Exact name of Registrant as specified in its charter)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
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<TR valign="bottom">
    <TD width="31%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="31%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="31%">&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 incorporation)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(Commission File Number)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(IRS Employer Identification No.)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="3" valign="top" align="center"><B>20 Florence Avenue, Batavia, New York</B><BR></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>14020</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 colspan="3" valign="top" align="center">(Address of principal executive offices)<BR></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(Zip Code)</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="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="60%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Registrant&#146;s telephone number, including area code:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>(585)&nbsp;343-2216</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</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="100%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="100%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><B>N/A</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">(Former name or former address, if changed since last report)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; 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-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt"><FONT face="Wingdings">&#111;</FONT> Written communications pursuant to Rule&nbsp;425 under the Securities Act (17 CFR 230.425)</DIV>


<DIV align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt"><FONT face="Wingdings">&#111;</FONT> Soliciting material pursuant to Rule&nbsp;14a-12 under the Exchange Act (17 CFR 240.14a-12)</DIV>


<DIV align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt"><FONT face="Wingdings">&#111;</FONT> Pre-commencement communications pursuant to Rule&nbsp;14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))</DIV>


<DIV align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt"><FONT face="Wingdings">&#111;</FONT> Pre-commencement communications pursuant to Rule&nbsp;13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))</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>





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








<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;1.01. Entry into a Material Definitive Agreement.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On September&nbsp;20, 2006, Graham Corporation (the &#147;Company&#148;) entered into a Third Amendment (the
&#147;Third Amendment&#148;) to that certain Amended and Restated Credit Facility Agreement (the &#147;Credit
Agreement&#148;) with Bank of America, N.A. (the &#147;Bank&#148;) dated July&nbsp;12, 2005, as amended. The Third
Amendment was entered into to provide for the Bank&#146;s issuance of bank guarantees rather than
letters of credit for the benefit of the Company&#146;s Chinese subsidiary (&#147;Graham China&#148;) and sets
forth the process by which letters of credit and bank guarantees, as the case may be, may be issued
by the Bank to the Company and Graham China under the Credit Agreement. Pursuant to the Third
Amendment, the total amount of all undrawn and/or outstanding letters of credit and bank guarantees
issued for the benefit of the Company and Graham China under the Credit Agreement may not exceed
$12,500,000, with initial sublimits of $11,000,000 in letters of credit for the Company and
$1,500,000 in bank guarantees for Graham China. The Bank, in its discretion, may revise such
allocation from time to time based on the Company&#146;s and Graham China&#146;s respective needs. In
connection with the Third Amendment, the Company executed a Continuing and Unconditional Guarantee (the "Guarantee")
for the benefit of the Bank, pursuant to which the Company agreed to guarantee all of Graham
China&#146;s obligations to the Bank.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company entered into the Third Amendment to facilitate its anticipated letters of credit
and bank guarantee requirements. A copy of each of the Third Amendment and the Guarantee are
attached to this Current Report on Form 8-K as Exhibit&nbsp;4.1 and Exhibit&nbsp;4.2, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;9.01. Financial Statements and Exhibits.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>(d)&nbsp;Exhibits</I>. The following are attached as exhibits to this Form 8-K:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="80%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="8%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">Exhibit&nbsp;No.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Description</TD>
</TR>
<TR style="font-size: 1px">
    <TD align="center" valign="top" style="border-top: 1px solid #000000"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<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">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Third Amendment, dated as of September&nbsp;20, 2006, to Credit
Facility Agreement between Graham Corporation and Bank of
America, N.A. dated as of July&nbsp;12, 2005, as amended.</TD>
</TR>
<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">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Continuing and Unconditional Guarantee, dated as of September
20, 2006 made by Graham Corporation in favor of Bank of
America, N.A.</TD>
</TR>
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</TABLE>
</DIV>



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




<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>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="46%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><B>Graham Corporation</B></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">&nbsp;</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">Date: September&nbsp;21, 2006
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ J. Ronald Hansen</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&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">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">J. Ronald Hansen<BR>
Vice President &#151; Finance &#038; Administration and<BR>
Chief Financial Officer</TD>
</TR>
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</TABLE>
</DIV>



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


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<DOCUMENT>
<TYPE>EX-4.1
<SEQUENCE>2
<FILENAME>l22376aexv4w1.htm
<DESCRIPTION>EXHIBIT 4.1
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<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>Exhibit&nbsp;4.1</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U>THIRD AMENDMENT TO CREDIT FACILITY AGREEMENT</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;THIS THIRD AMENDMENT, dated as of the 20th day of September, 2006, to that certain Amended and
Restated Credit Facility Agreement dated as of July&nbsp;12, 2005, as amended by a First Amendment to
Credit Facility Agreement dated as of February&nbsp;24, 2006 and a Second Amendment to Credit Facility
Agreement dated as of June&nbsp;14, 2006 (as so amended, the &#147;Agreement&#148;), between BANK OF AMERICA,
N.A., a national banking association and successor by merger to Fleet National Bank, having an
office at One East Avenue, Rochester, New York 14638 (the &#147;Bank&#148;), and GRAHAM CORPORATION, a
corporation formed under the laws of the State of Delaware with offices at 20 Florence Avenue,
Batavia, New York 14020 (the &#147;Borrower&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The parties hereby agree as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;<U>Agreement Ratified.</U> Except as expressly amended hereby, the Agreement is in all
respects ratified and confirmed, and all of the terms, provisions and conditions thereof shall be
and remain in full force and effect, and this Amendment and all of its terms, provisions and
conditions shall be deemed to be a part of the Agreement. All capitalized terms used herein and
not defined shall have the meanings given them in the Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;<U>Definition Added</U>. The following new definition shall be added to the
Agreement:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Bank Guarantee&#148; shall mean a Bank Guarantee issued by the Bank&#146;s Shanghai, China
branch as described in Article&nbsp;3 of this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;<U>Section&nbsp;2.1</U>. Section&nbsp;2.1 of the Agreement shall be amended as follows:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1 <U>Revolving Line.</U> Subject to the terms and conditions of this Agreement, the
Bank hereby establishes for the benefit of the Borrower a revolving line of credit in the
maximum principal amount of Twenty Million Dollars ($20,000,000.00) outstanding at any one
time. The availability under the Revolving Line shall be used to meet the Borrower&#146;s letter
of credit and working capital requirements, and the bank guarantee requirements of the
Borrower&#146;s Chinese subsidiary, Graham Vacuum and Heat Transfer Technology (Suzhou) Co., Ltd.
(&#147;Graham China&#148;). Subject to the terms of this Agreement, the Borrower may borrow, repay,
and reborrow under the Revolving Line so long as the aggregate principal amount outstanding
at any time, plus (a)&nbsp;the undrawn amount of all Letters of Credit, (b)&nbsp;the outstanding
amounts of all Bank Guarantees, and (c)&nbsp;the outstanding principal amount of all Term Loans,
does not exceed $20,000,000.00.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;Article&nbsp;3 of the Agreement shall be amended to read as follows:
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">ARTICLE 3 &#151; LETTERS OF CREDIT AND BANK GUARANTEES
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>3.1 Letters of Credit and Bank Guarantees.</U> Subject to the terms and
conditions of this Agreement, the Bank agrees that it will make Letters of Credit available
for the account of the Borrower and will cause its Shanghai, China branch to make Bank
Guarantees available for the account of Graham China in an aggregate amount not
</DIV>

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">exceeding the lesser of (a)&nbsp;Twelve Million, Five Hundred Thousand Dollars
($12,500,000), and (b)&nbsp;the availability under the Revolving Line. The Borrower agrees that
it will guarantee to the Bank all obligations of Graham China pursuant to the Bank
Guarantees. Letters of Credit and Bank Guarantees will be made promptly available for the
Borrower&#146;s or Graham China&#146;s work in process (to support customer progress payments) or as
otherwise requested by Borrower or Graham China for general business purposes. The undrawn
amount/amount outstanding under all Letters of Credit and Bank Guarantees shall reduce the
amount available for advances under the Revolving Line at 100% of the undrawn amount of each
Letter of Credit and 105% of the outstanding amount of each Bank Guarantee. Bank Guarantees
will be issued in RMB and, for purposes of the preceding sentence, the Bank will revalue the
outstanding amount of Bank Guarantees from time to time at its discretion. If as a result
of currency fluctuations the value in US Dollars of outstanding Bank Guarantees has
increased by more than 5%, the amount available under the Revolving Credit shall be
correspondingly reduced by the amount of the excess. The Letters of Credit and Bank
Guarantees shall be in form satisfactory to the Bank and will be for a term of up to three
(3)&nbsp;years from the date of issuance, except that Letters of Credit and Bank Guarantees in
the aggregate face amount of up to $7,500,000.00 may have maturities of up to five (5)&nbsp;years
from the date of issuance and may extend for up to five (5)&nbsp;years beyond the Revolving
Credit Termination Date. The total undrawn/outstanding amount of all Letters of Credit and
Bank Guarantees issued for both the Borrower and Graham China may never exceed
$12,500,000.00, with initial sublimits of $11,000,000.00 in Letters of Credit for the
Borrower and $1,500,000.00 in Bank Guarantees for Graham China. The Bank agrees that it
will, from time to time revise this allocation on the basis of the Borrower&#146;s and Graham
China&#146;s respective needs, but subject always to the approval of the Bank.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2 <U>Commissions.</U> The Borrower or Graham China, as the case may be, will pay
commissions to the Bank on the date of issuance of each Letter of Credit and Bank Guarantee
and on each anniversary date thereafter if the Letter of Credit or Bank Guarantee is renewed
or has a maturity in excess of one year from the date of issuance, at the per annum rate of
one and one-quarter of one percent (1.25%) of the undrawn amount thereof for Standby Letters
of Credit and for Bank Guarantees, and one-quarter of one percent (0.25%) of the undrawn
amount thereof for Documentary Letters of Credit. Commissions on Letters of Credit and Bank
Guarantees having maturities of less than one year remaining shall be charged ratably. In
addition, the Borrower or Graham China, as the case may be, will pay to the Bank a $150
administrative fee for each Letter of Credit and Bank Guarantee issued pursuant to this
Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.3 <U>Reimbursement</U>. The Borrower or Graham China, as the case may be, will
execute a Reimbursement Agreement that is satisfactory to the Bank, documenting its
Obligations with respect to each of the Letters of Credit and Bank Guarantees issued for its
account. Among other items, the Reimbursement Agreement will require immediate
reimbursement to the Bank for all amounts drawn under the Letters of Credit and Bank
Guarantees, and outstanding drawn amounts not so reimbursed may, at the discretion of the
Bank, be treated as advances under the Revolving Line.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">All payments shall be made by Borrower or Graham China to Bank at the address for Bank first
shown above in this Agreement or such other place as Bank may from time to
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">time specify in writing in lawful currency of the United States of America in immediately
available funds, without counterclaim or setoff and free and clear of, and without deduction
or withholding for, any taxes or other payments. The Borrower agrees that it will be
responsible for any foreign exchange or conversion costs related to converting RMB to United
States Dollars for any drawings under Bank Guarantees, and such costs shall be added to
amounts outstanding under the Revolving Line.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. <U>Section&nbsp;10.3</U>. Section&nbsp;10.3 of the Agreement shall be amended to read as follows:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.3 <U>Contingent Liabilities.</U> (i)&nbsp;assume, guarantee, endorse, contingently agree
to purchase, or otherwise become liable in any manner upon obligations in the aggregate
exceeding $150,000 at any time during the term of this Agreement, contingent or otherwise,
whether funded or current except for endorsement of negotiable instruments for deposit,
collection, or similar transactions in the ordinary course of business and except for
guarantees in favor of the Bank, (ii)&nbsp;guarantee the dividends of any Person, or (iii)&nbsp;become
the general partner in any partnership.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. <U>Representations and Warranties.</U> The Borrower confirms the accuracy of and remakes
as of the date hereof all of its representations, warranties contained in the Agreement. The
Borrower further represents and warrants to the Bank that all necessary action on the part of the
Borrower relating to authorization of the execution and delivery of this Amendment, and the
performance of the Obligations of the Borrower thereunder has been taken. This Amendment
constitutes the legal, valid and binding obligation of the Borrower, enforceable in accordance with
its terms. The execution and delivery by the Borrower of the Amendment, and the performance by the
Borrower of the Amendment, will not violate any provision of law or the Borrower&#146;s Certificate of
Incorporation or By-laws or organizational or other documents or agreements. The execution,
delivery and performance of the Amendment, and the consummation of the transactions contemplated
thereby will not violate, be in conflict with, result in a breach of, or constitute a default under
any agreement to which the Borrower is a party or by which any of its properties is bound, or any
order, writ, injunction, or decree of any court or governmental instrumentality, and will not
result in the creation or imposition of any lien, charge or encumbrance upon any of its properties.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7. <U>No Events of Default.</U> The Borrower confirms that as of the date hereof, there
exists no condition or event that constitutes (or that would after expiration of applicable grace
or cure periods constitute) an Event of Default as described in Article&nbsp;14 of the Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8. <U>No Offsets</U>. As of the date hereof, the Borrower has no defenses, offsets, claims or
counterclaims with respect to its obligations arising under the Agreement or this Amendment and all
related documents and instruments.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9. <U>Governing Law.</U> This Amendment, together with all of the rights and obligations of
the parties hereto, shall be construed and interpreted in accordance with the laws of the State of
New York, excluding the laws applicable to conflicts or choice of law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF, the parties have executed this Amendment on the date first above written.
</DIV>

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<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="4%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="32%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="46%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD colspan="3" valign="top" align="left">BANK OF AMERICA, N.A.</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">GRAHAM CORPORATION</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">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</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">By:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Collen O&#146;Brien
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/Ron Hansen</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Title:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Colleen O&#146;Brien<BR>
Vice President
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Ron Hansen<BR>
Vice President</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
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<DOCUMENT>
<TYPE>EX-4.2
<SEQUENCE>3
<FILENAME>l22376aexv4w2.htm
<DESCRIPTION>EXHIBIT 4.2
<TEXT>
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<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>Exhibit&nbsp;4.2</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 50%">BORROWER: GRAHAM VACUUM AND HEAT TRANSFER<BR>
TECHNOLOGY (SUZHOU)&nbsp;CO., LTD.<BR>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 50%">GUARANTOR: GRAHAM CORPORATION

</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U>CONTINUING AND UNCONDITIONAL GUARANTY</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">To: Bank of America, N.A.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;<U>The Guaranty</U>. For valuable consideration, the undersigned (&#147;Guarantor&#148;) hereby
unconditionally guarantees and promises to pay promptly to Bank of America, N.A., its subsidiaries
and affiliates (collectively, &#147;Bank&#148;), or order, in lawful money of the United States, any and all
Indebtedness of Graham Vacuum and Heat Transfer Technology (Suzhou) Co., Ltd. (&#147;Borrower&#148;) to Bank
when due, whether at stated maturity, upon acceleration or otherwise, and at all times thereafter.
The liability of Guarantor under this Guaranty is not limited as to the principal amount of the
Indebtedness guaranteed and includes, without limitation, liability for all interest, fees,
indemnities (including, without limitation, hazardous waste indemnities), and other costs and
expenses relating to or arising out of the Indebtedness and for all swap, option, or forward
obligations now or hereafter owing from Borrower to Bank. The liability of Guarantor is continuing
and relates to any Indebtedness, including that arising under successive transactions which shall
either continue the Indebtedness or from time to time renew it after it has been satisfied. This
Guaranty is cumulative and does not supersede any other outstanding guaranties, and the liability
of Guarantor under this Guaranty is exclusive of Guarantor&#146;s liability under any other guaranties
signed by Guarantor. If multiple individuals or entities sign this Guaranty, their obligations
under this Guaranty shall be joint and several.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;<U>Definitions</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) &#147;Borrower&#148; shall mean the individual or the entity named in Paragraph&nbsp;1 of this
Guaranty and, if more than one, then any one or more of them.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) &#147;Guarantor&#148; shall mean the individual or the entity signing this Guaranty and, if
more than one, then any one or more of them.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) &#147;Indebtedness&#148; shall mean any and all debts, liabilities, and obligations of
Borrower to Bank, now or hereafter existing, whether voluntary or involuntary and however
arising, whether direct or indirect or acquired by Bank by assignment, succession, or
otherwise, whether due or not due, absolute or contingent, liquidated or unliquidated,
determined or undetermined, held or to be held by Bank for its own account or as agent for
another or others, whether Borrower may be liable individually or jointly with others,
whether recovery upon such debts, liabilities, and obligations may be or hereafter become
barred by any statute of limitations, and whether such debts, liabilities, and obligations
may be or hereafter become otherwise unenforceable. Indebtedness includes, without
limitation, any and all obligations of Borrower to Bank for reasonable attorneys&#146; fees and
all other out of pocket costs and expenses incurred by Bank in the collection or enforcement
of any debts, liabilities, and obligations of Borrower to Bank. Indebtedness also includes,
without limitation, all obligations of Borrower arising under any interest rate, credit,
commodity or equity swap, cap, floor, collar, forward foreign exchange transaction, currency
swap, cross currency rate swap, currency option, securities puts, calls, collars, options or
forwards or any combination of, or option with respect to, these or similar transactions now
or hereafter entered into between Borrower and Bank.
</DIV>

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</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) &#147;Loan Documents&#148; shall mean loan agreements between Borrower and Bank, promissory
notes from Borrower in favor of Bank, and all other agreements, documents, and instruments
evidencing any of the Indebtedness, and deeds of trust, mortgages, security agreements, and
other agreements, documents, and instruments executed by Borrower in connection with such
loan agreements, promissory notes, and other agreements, documents, and instruments
evidencing any of the Indebtedness, all as now in effect and as hereafter amended, restated,
renewed, or superseded.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;<U>Obligations Independent</U>. The obligations hereunder are independent of the
obligations of Borrower or any other guarantor, and a separate action or actions may be brought and
prosecuted against Guarantor whether action is brought against Borrower or any other guarantor or
whether Borrower or any other guarantor be joined in any such action or actions. Anyone executing
this Guaranty shall be bound by its terms without regard to execution by anyone else.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;<U>Rights of Bank</U>. Guarantor authorizes Bank, without notice or demand and without
affecting its liability hereunder, from time to time to:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) renew, compromise, extend, accelerate, or otherwise change the time for payment,
or otherwise change the terms, of the Indebtedness or any part thereof, including increase
or decrease of the rate of interest thereon, or otherwise change the terms of any Loan
Documents;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) receive and hold security for the payment of this Guaranty or any Indebtedness and
exchange, enforce, waive, release, fail to perfect, sell, or otherwise dispose of any such
security;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) apply such security and direct the order or manner of sale thereof as Bank in its
discretion may determine;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) release or substitute any Guarantor or any one or more of any endorsers or other
guarantors of any of the Indebtedness; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) permit the Indebtedness to exceed Guarantor&#146;s liability under this Guaranty, and
Guarantor agrees that any amounts received by Bank from any source other than Guarantor
shall be deemed to be applied first to any portion of the Indebtedness not guaranteed by
Guarantor.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;<U>Guaranty to be Absolute</U>. Guarantor agrees that until the Indebtedness has been
paid in full and any commitments of Bank or facilities provided by Bank with respect to the
Indebtedness have been terminated, Guarantor shall not be released by or because of the taking, or
failure to take, any action that might in any manner or to any extent vary the risks of Guarantor
under this Guaranty or that, but for this paragraph, might discharge or otherwise reduce, limit, or
modify Guarantor&#146;s obligations under this Guaranty. Guarantor waives and surrenders any defense to
any liability under this Guaranty based upon any such action, including but not limited to any
action of Bank described in the immediately preceding paragraph of this Guaranty. It is the
express intent of Guarantor that Guarantor&#146;s obligations under this Guaranty are and shall be
absolute and unconditional.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.&nbsp;<U>Guarantor&#146;s Waivers of Certain Rights and Certain Defenses</U>. Guarantor waives:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) any right to require Bank to proceed against Borrower, proceed against or exhaust
any security for the Indebtedness, or pursue any other remedy in Bank&#146;s power whatsoever;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) any defense arising by reason of any disability or other defense of Borrower, or
the cessation from any cause whatsoever of the liability of Borrower;
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) any defense based on any claim that Guarantor&#146;s obligations exceed or are more
burdensome than those of Borrower; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) the benefit of any statute of limitations affecting Guarantor&#146;s liability
hereunder.
</DIV>

<DIV align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">No provision or waiver in this Guaranty shall be construed as limiting the generality of any other
waiver contained in this Guaranty.</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.&nbsp;<U>Waiver of Subrogation</U>. Until the Indebtedness has been paid in full and any
commitments of Bank or facilities provided by Bank with respect to the Indebtedness have been
terminated, even though the Indebtedness may be in excess of Guarantor&#146;s liability hereunder,
Guarantor agrees not to exercise any right of subrogation, reimbursement, indemnification, and
contribution (contractual, statutory, or otherwise) including, without limitation, any claim or
right of subrogation under the Bankruptcy Code (Title 11, United States Code) or any successor
statute, arising from the existence or performance of this Guaranty, and Guarantor agrees not to
exercise any right to enforce any remedy that Bank now has or may hereafter have against Borrower,
and waives any benefit of, and any right to participate in, any security now or hereafter held by
Bank.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.&nbsp;<U>Waiver of Notices</U>. Guarantor waives all presentments, demands for performance,
notices of nonperformance, protests, notices of protest, notices of dishonor, notices of intent to
accelerate, notices of acceleration, notices of any suit or any other action against Borrower or
any other person, any other notices to any party liable on any Loan Document (including Guarantor),
notices of acceptance of this Guaranty, notices of the existence, creation, or incurring of new or
additional Indebtedness to which this Guaranty applies or any other Indebtedness of Borrower to
Bank, and notices of any fact that might increase Guarantor&#146;s risk.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.&nbsp;<U>Security</U>. To secure all of Guarantor&#146;s obligations hereunder, Guarantor assigns
and grants to Bank a security interest in all moneys, securities, and other property of Guarantor
now or hereafter in the possession of Bank, all deposit accounts of Guarantor maintained with Bank,
and all proceeds thereof. Upon default or breach of any of Guarantor&#146;s obligations to Bank
hereunder, Bank may apply any deposit account to reduce the Indebtedness, and may foreclose any
collateral as provided in the Uniform Commercial Code and in any security agreements between Bank
and Guarantor.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.&nbsp;<U>Subordination</U>. Any obligations of Borrower to Guarantor, now or hereafter
existing, including but not limited to any obligations to Guarantor as subrogee of Bank or
resulting from Guarantor&#146;s performance under this Guaranty, are hereby subordinated to the
Indebtedness. In addition to Guarantor&#146;s agreement in Section&nbsp;7 above regarding rights of
subrogation as set forth in this Guaranty with respect to any obligations of Borrower to Guarantor
as subrogee of Bank, Guarantor agrees that, if Bank so requests, Guarantor shall not demand, take,
or receive from Borrower, by setoff or in any other manner, payment of any other obligations of
Borrower to Guarantor until the Indebtedness has been paid in full and any commitments of Bank or
facilities provided by Bank with respect to the Indebtedness have been terminated. If any payments
are received by Guarantor in violation of such agreement, such payments shall be received by
Guarantor as trustee for Bank and shall be paid over to Bank on account of the Indebtedness, but
without reducing or affecting in any manner the liability of Guarantor under the other provisions
of this Guaranty. Any security interest, lien, or other encumbrance that Guarantor may now or
hereafter have on any property of Borrower is hereby subordinated to any security interest, lien,
or other encumbrance that Bank may have on any such property.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.&nbsp;<U>Revocation of Guaranty</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) This Guaranty may be revoked at any time by Guarantor in respect to future
transactions, unless there is a continuing consideration as to such transactions that
Guarantor does not renounce. Such revocation shall be effective upon actual receipt by
Bank, at the address shown below or at such other address as may have been provided to
Guarantor by
</DIV>

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Bank, of written notice of revocation. Revocation shall not affect any of Guarantor&#146;s
obligations or Bank&#146;s rights with respect to transactions committed or entered into prior to
Bank&#146;s receipt of such notice, regardless of whether or not the Indebtedness related to such
transactions, before or after revocation, has been incurred, renewed, compromised, extended,
accelerated, or otherwise changed as to any of its terms, including time for payment or
increase or decrease of the rate of interest thereon, and regardless of any other act or
omission of Bank authorized hereunder. Revocation by Guarantor shall not affect any
obligations of any other guarantor.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) In the event of the death of a Guarantor, the liability of the estate of the
deceased Guarantor shall continue in full force and effect as to (i)&nbsp;the Indebtedness
existing at the date of death, and any renewals or extensions thereof, and (ii)&nbsp;loans or
advances made to or for the account of Borrower after the date of the death of the deceased
Guarantor pursuant to a commitment made by Bank to Borrower prior to the date of such death.
As to all surviving Guarantors, this Guaranty shall continue in full force and effect after
the death of a Guarantor, not only as to the Indebtedness existing at that time, but also as
to the Indebtedness thereafter incurred by Borrower to Bank.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Guarantor acknowledges and agrees that this Guaranty may be revoked only in
accordance with the foregoing provisions of this paragraph and shall not be revoked simply
as a result of any change in name, location, or composition or structure of Borrower, the
dissolution of Borrower, or the termination, increase, decrease, or other change of any
personnel or owners of Borrower.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.&nbsp;<U>Reinstatement of Guaranty</U>. If this Guaranty is revoked, returned, or canceled,
and subsequently any payment or transfer of any interest in property by Borrower to Bank made
before such revocation, return or cancellation is rescinded or must be returned by Bank to
Borrower, this Guaranty shall be reinstated with respect to any such payment or transfer,
regardless of any such prior revocation, return, or cancellation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.&nbsp;<U>Stay of Acceleration</U>. In the event that acceleration of the time for payment of
any of the Indebtedness is stayed upon the insolvency, bankruptcy, or reorganization of Borrower or
otherwise, all such Indebtedness guaranteed by Guarantor shall nonetheless be payable by Guarantor
immediately if requested by Bank.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.&nbsp;<U>Information Relating to Borrower</U>. Guarantor acknowledges and agrees that it
shall have the sole responsibility for, and has adequate means of, obtaining from Borrower such
information concerning Borrower&#146;s financial condition or business operations as Guarantor may
require, and that Bank has no duty, and Guarantor is not relying on Bank, at any time to disclose
to Guarantor any information relating to the business operations or financial condition of
Borrower.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.&nbsp;<U>Borrower&#146;s Authorization</U>. Where Borrower is a corporation, partnership, or
limited liability company, it is not necessary for Bank to inquire into the powers of Borrower or
of the officers, directors, partners, members, managers, or agents acting or purporting to act on
its behalf, and any Indebtedness made or created in reliance upon the professed exercise of such
powers shall be guaranteed hereunder, subject to any limitations on Guarantor&#146;s liability set forth
herein.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16.&nbsp;<U>Foreign Currency</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) If any claim arising under or related to this Guaranty is reduced to judgment denominated
in a currency (the &#147;Judgment Currency&#148;) other than the currency or currencies in which the
guaranteed Indebtedness is denominated (individually, an &#147;Obligation Currency&#148;), the judgment shall
be for the equivalent in the Judgment Currency of the amount of the claim denominated in each
Obligation Currency included in the judgment, determined as of the date of judgment. The
equivalent of any Obligation Currency amount in any Judgment Currency shall be calculated at the
spot rate for the purchase of the Obligation Currency with the Judgment Currency quoted by Bank in
the place of Bank&#146;s choice at or about 8:00 a.m. on the date for determination specified above.
Guarantor shall indemnify
</DIV>

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Bank and hold Bank harmless from and against all loss or damage resulting from any change in
exchange rates between the date any claim is reduced to judgment and the date of payment thereof by
Guarantor.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The obligations hereunder shall not be affected by any acts of any governmental authority
affecting Borrower including, without limitation, any restrictions on the conversion of currency or
repatriation or control of funds or any total or partial expropriation of Borrower&#146;s property, or
by economic, political, regulatory, or other events in the countries where Borrower is located. If
Bank so notifies Guarantor in writing, at Bank&#146;s sole and absolute discretion, payments under this
Guaranty shall be made in the U.S. Dollar equivalent of any guaranteed Indebtedness that is
denominated in an Obligation Currency, determined as of the date payment is made.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;17.&nbsp;<U>Remedies</U>. If Guarantor fails to fulfill its duty to pay all Indebtedness
guaranteed hereunder, Bank shall have all of the remedies of a creditor and, to the extent
applicable, of a secured party, under all applicable law. Without limiting the foregoing, Bank
may, at its option and without notice or demand:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) declare any Indebtedness due and payable at once;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) take possession of any collateral pledged by Borrower or Guarantor, wherever
located, and sell, resell, assign, transfer, and deliver all or any part of the collateral
at any public or private sale or otherwise dispose of any or all of the collateral in its
then condition, for cash or on credit or for future delivery, and in connection therewith
Bank may impose reasonable conditions upon any such sale. Further, Bank, unless prohibited
by law the provisions of which cannot be waived, may purchase all or any part of the
collateral to be sold, free from and discharged of all trusts, claims, rights of redemption
and equities of Borrower or Guarantor whatsoever. Guarantor acknowledges and agrees that
the sale of any investment property collateral through any nationally recognized
broker-dealer, investment banker, or any other method common in the securities industry
shall be deemed a commercially reasonable sale under the Uniform Commercial Code or any
other equivalent statute or federal law, and expressly waives notice thereof except as
provided herein; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) set off against any or all liabilities of Guarantor all money owed by Bank or any
of its agents or affiliates in any capacity to Guarantor, whether or not due, and also set
off against all other liabilities of Guarantor to Bank all money owed by Bank in any
capacity to Guarantor. If exercised by Bank, Bank shall be deemed to have exercised such
right of setoff and to have made a charge against any such money immediately upon the
occurrence of such default although made or entered on the books subsequent thereto.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20.&nbsp;<U>Notices</U>. All notices required under this Guaranty shall be personally delivered
or sent by first class mail, postage prepaid, or by overnight courier, to the addresses on the
signature page of this Guaranty, or sent by facsimile to the fax numbers listed on the signature
page, or to such other addresses as Bank and Guarantor may specify from time to time in writing.
Notices sent by (a)&nbsp;first class mail shall be deemed delivered on the earlier of actual receipt or
on the fourth business day after deposit in the U.S. mail, postage prepaid, (b)&nbsp;overnight courier
shall be deemed delivered on the next business day, and (c)&nbsp;telecopy shall be deemed delivered when
transmitted.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;21.&nbsp;<U>Successors and Assigns</U>. This Guaranty (a)&nbsp;binds Guarantor and Guarantor&#146;s
executors, administrators, successors, and assigns, provided that Guarantor may not assign its
rights or obligations under this Guaranty without the prior written consent of Bank, and (b)&nbsp;inures
to the benefit of Bank and Bank&#146;s indorsees, successors, and assigns. Bank may, without notice to
Guarantor and without affecting Guarantor&#146;s obligations hereunder, sell, assign, grant
participations in, or otherwise transfer to any other person, firm, or corporation the Indebtedness
and this Guaranty, in whole or in part. Guarantor agrees that Bank may disclose to any assignee or
purchaser, or any prospective assignee or purchaser, of all or part of the Indebtedness any and all
information in Bank&#146;s possession concerning Guarantor, this Guaranty, and any security for this
Guaranty.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;22.&nbsp;<U>Amendments, Waivers, and Severability</U>. No provision of this Guaranty may be
amended or waived except in writing. No failure by Bank to exercise, and no delay in exercising,
any of its rights, remedies, or powers shall operate as a waiver thereof, and no single or partial
exercise of any such right, remedy, or power shall preclude any other or further exercise thereof
or the exercise of any other right, remedy, or power. The unenforceability or invalidity of any
provision of this Guaranty shall not affect the enforceability or validity of any other provision
of this Guaranty.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;23.&nbsp;<U>Costs and Expenses</U>. Guarantor agrees to pay all reasonable attorneys&#146; fees, and
all other out of pocket costs and expenses that may be incurred by Bank (a)&nbsp;in the enforcement of
this Guaranty or (b)&nbsp;in the preservation, protection, or enforcement of any rights of Bank in any
case commenced by or against Guarantor or Borrower under the Bankruptcy Code (Title 11, United
States Code) or any similar or successor statute.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;24.&nbsp;<U>Governing Law and Jurisdiction</U>. This Guaranty shall be governed by and construed
and enforced in accordance with federal law and the law of the State of New York. Jurisdiction and
venue for any action or proceeding to enforce this Guaranty shall be the forum appropriate for such
action or proceeding against Borrower, to which jurisdiction Guarantor irrevocably submits and to
which venue Guarantor waives to the fullest extent permitted by law any defense asserting an
inconvenient forum in connection therewith. It is provided, however, that if Guarantor owns
property in another state, notwithstanding that the forum for enforcement action is elsewhere, Bank
may commence a collection proceeding in any state in which Guarantor owns property for the purpose
of enforcing provisional remedies against such property. Service of process by Bank in connection
with such action or proceeding shall be binding on Guarantor if sent to Guarantor by registered or
certified mail at its address specified below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>25.&nbsp;Enforcement/Waiver of Jury Trial. GUARANTOR AGREES THAT ANY SUIT FOR THE ENFORCEMENT
OF THIS GUARANTY MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK LOCATED IN MONROE COUNTY OR
ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND
SERVICE OF PROCESS IN ANY SUCH SUIT BEING MADE UPON GUARANTOR BY MAIL AT THE ADDRESS SET FORTH FOR
NOTICES GIVEN BELOW. GUARANTOR HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO
THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN INCONVENIENT FORUM.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>GUARANTOR AND BANK (BY ACCEPTANCE OF THIS GUARANTY) MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED HEREON, ARISING OUT
OF, UNDER OR IN CONNECTION WITH THIS GUARANTY OR ANY OTHER LOAN DOCUMENTS OR ANY COURSE OF CONDUCT,
COURSE OF DEALINGS, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY, INCLUDING
WITHOUT LIMITATION, ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENTS OR ACTIONS OF BANK
RELATING TO THE ADMINISTRATION OR ENFORCEMENT OF THE GUARANTY, AND AGREE THAT NEITHER PARTY WILL
SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS
NOT BEEN WAIVED. EXCEPT AS PROHIBITED BY LAW, GUARANTOR HEREBY WAIVES ANY RIGHT IT MAY HAVE TO
CLAIM OR RECOVER IN ANY LITIGATION ANY SPECIAL , EXEMPLARY, PUNITIVE, OR CONSEQUENTIAL DAMAGES OR
ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. GUARANTOR CERTIFIES THAT NO
REPRESENTATIVE, AGENT, OR ATTORNEY OF BANK HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT BANK WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER. THIS WAIVER CONSTITUTES A</B>
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>MATERIAL INDUCEMENT FOR BANK TO ACCEPT THIS GUARANTY AND MAKE THE LOAN GUARANTEED HEREBY.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>26.&nbsp;</B><U><B>FINAL AGREEMENT</B></U><B>. BY SIGNING THIS DOCUMENT EACH PARTY REPRESENTS AND AGREES
THAT: (A)&nbsp;THIS DOCUMENT REPRESENTS THE FINAL AGREEMENT BETWEEN PARTIES WITH RESPECT TO THE SUBJECT
MATTER HEREOF, (B)&nbsp;THIS DOCUMENT SUPERSEDES ANY COMMITMENT LETTER, TERM SHEET, OR OTHER WRITTEN
OUTLINE OF TERMS AND CONDITIONS RELATING TO THE SUBJECT MATTER HEREOF, UNLESS SUCH COMMITMENT
LETTER, TERM SHEET, OR OTHER WRITTEN OUTLINE OF TERMS AND CONDITIONS EXPRESSLY PROVIDES TO THE
CONTRARY, (C)&nbsp;THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES, AND (D)&nbsp;THIS DOCUMENT MAY
NOT BE CONTRADICTED BY EVIDENCE OF ANY PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR
UNDERSTANDINGS OF THE PARTIES.</B>
</DIV>

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

<DIV align="left" style="margin-left: 0%; text-indent: 0%; margin-right: 0%; font-size: 10pt; margin-top: 6pt">The parties executed this agreement as of Sept. 20, 2006, intending to create an instrument
executed under seal.</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="46%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="46%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<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">GRAHAM CORPORATION</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">&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">&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">By: Ron Hansen &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <B>(Seal)</B><BR>
Printed Name: Ron Hansen<BR>
Title: Vice President</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">&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">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Address for notices to Bank:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Address for notices to Guarantor:</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">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">One East Avenue <BR>
Rochester, New York 14635<BR>
Facsimile:585-546-9278
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">20 Florence Avenue<BR>
Batavia, New York 14020<BR>
Facsimile: 585-343-6242</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



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