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<SEC-DOCUMENT>0000950123-11-010310.txt : 20110208
<SEC-HEADER>0000950123-11-010310.hdr.sgml : 20110208
<ACCEPTANCE-DATETIME>20110208163039
ACCESSION NUMBER:		0000950123-11-010310
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		8
CONFORMED PERIOD OF REPORT:	20101231
FILED AS OF DATE:		20110208
DATE AS OF CHANGE:		20110208

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:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-08462
		FILM NUMBER:		11582987

	BUSINESS ADDRESS:	
		STREET 1:		20 FLORENCE AVE
		CITY:			BATAVIA
		STATE:			NY
		ZIP:			14020
		BUSINESS PHONE:		5853432216

	MAIL ADDRESS:	
		STREET 1:		20 FLORENCE AVENUE
		CITY:			BATAVIA
		STATE:			NY
		ZIP:			14020
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>l41646e10vq.htm
<DESCRIPTION>FORM 10-Q
<TEXT>
<HTML>
<HEAD>
<TITLE>e10vq</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#L41646tocpage">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<BR>
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 10-Q</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>(Mark One)</B>

</DIV>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 6pt">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><FONT style="font-family: Wingdings">&#254;</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD><B>QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</B></TD>
</TR>
</TABLE>
</DIV>


<!-- xbrl,dc -->
<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 12%"><B>For the quarterly period ended <U>December&nbsp;31, 2010</U>.</B></DIV>
<!-- /xbrl,dc -->

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


<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 6pt">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><FONT style="font-family: Wingdings">&#111;</FONT> </TD>
    <TD>&nbsp;</TD>
    <TD><B>TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</B></TD>
</TR>
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 12%"><B>For the transition period from <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> to <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>.</B></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>COMMISSION FILE NUMBER </B><U><B>1-8462</B></U></DIV>

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

<DIV align="center" style="font-size: 10pt">
<DIV style="width: 100%; border-bottom: 1px solid #000000; FONT-size: 1px">&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="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
<TR></TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top">Delaware
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">16-1194720</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">(State or other jurisdiction of
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(I.R.S. Employer</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">incorporation or organization)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">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>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">20 Florence Avenue, Batavia, New York
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">14020</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: 12pt">585-343-2216</DIV>

<DIV align="center" style="font-size: 10pt"><DIV style="margin-top: 1px"><FONT style="border-top: 1px solid #000000">(Registrant&#146;s telephone number, including area code)</FONT></DIV></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate by check mark whether the registrant: (1)&nbsp;has filed all reports required to be filed
by Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12&nbsp;months (or
for such shorter period that the registrant was required to file such reports), and (2)&nbsp;has been
subject to such filing requirements for the past 90&nbsp;days.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Yes <FONT style="font-family: Wingdings">&#254;</FONT> No <FONT style="font-family: Wingdings">&#111;</FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule&nbsp;405 of Regulation&nbsp;S-T during the preceding 12&nbsp;months (or for such shorter period
that the registrant was required to submit and post such files).
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Yes <FONT style="font-family: Wingdings">&#111;</FONT> No <FONT style="font-family: Wingdings">&#111;</FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See definitions of &#147;large
accelerated filer,&#148; &#147;accelerated filer&#148; and &#147;smaller reporting company&#148; in Rule&nbsp;12b-2 of the
Exchange Act. (Check one):
</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="22%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
</TR>
<TR></TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<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>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">Large accelerated filer <FONT style="font-family: Wingdings">&#111;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Accelerated filer <FONT style="font-family: Wingdings">&#254;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Non-accelerated filer <FONT style="font-family: Wingdings">&#111;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT style="white-space: nowrap">Smaller reporting company <FONT style="font-family: Wingdings">&#111;</FONT></FONT></TD>
</TR>
<TR valign="bottom">
    <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"><FONT style="white-space: nowrap">(Do not check if a smaller reporting company)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate by check mark whether the registrant is a shell company (as defined in Rule&nbsp;12b-2 of
the Exchange Act).
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Yes <FONT style="font-family: Wingdings">&#111;</FONT> No <FONT style="font-family: Wingdings">&#254;</FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of February&nbsp;3, 2011, there were outstanding 9,839,994 shares of the registrant&#146;s common
stock, par value $.10 per share.
</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"><!-- Folio -->&nbsp;<!-- /Folio -->
</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">
<!-- TOC -->
</DIV>
<DIV align="left">
<A name="L41646tocpage"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Graham Corporation and Subsidiaries
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">Index to Form&nbsp;10-Q
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">As of December&nbsp;31, 2010 and March&nbsp;31, 2010
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">and
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">for the Three and Nine-Month Periods Ended December&nbsp;31, 2010 and 2009
</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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Page</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#L41646101"><B>Part I. FINANCIAL INFORMATION</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#L41646102">Item&nbsp;1. Unaudited Condensed Consolidated Financial Statements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#L41646103">Item&nbsp;2. Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#L41646104">Item&nbsp;3. Quantitative and Qualitative Disclosures About
Market Risk</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#L41646105">Item&nbsp;4. Controls and Procedures</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#L41646106"><B>Part II. OTHER INFORMATION</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#L41646107">Item&nbsp;1A. Risk Factors</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#L41646108">Item&nbsp;2. Unregistered Sales of Equity Securities and Use of
Proceeds</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#L41646109">Item&nbsp;6. Exhibits</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#L41646110">Signatures</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#L41646111">Index to Exhibits</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="l41646exv10w1.htm">EX-10.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="l41646exv10w2.htm">EX-10.2</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="l41646exv10w3.htm">EX-10.3</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="l41646exv10w4.htm">EX-10.4</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="l41646exv31w1.htm">EX-31.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="l41646exv31w2.htm">EX-31.2</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="l41646exv32w1.htm">EX-32.1</A></FONT></TD></TR>
</TABLE>
</DIV>

<DIV align="left">
<!-- /TOC -->
</DIV>

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#L41646tocpage">Table of Contents</A></H5><P>

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

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


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">FORM 10-Q
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">DECEMBER 31, 2010
</DIV>
<DIV align="left">
<A name="L41646101"></A>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">PART I &#151; FINANCIAL INFORMATION
</DIV>

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#L41646tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="L41646102"></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.</B></TD>
    <TD>&nbsp;</TD>
    <TD><B>Unaudited Condensed Consolidated Financial Statements</B></TD>
</TR>
</TABLE>
</DIV>

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

<!-- xbrl,bs -->
<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>CONDENSED CONSOLIDATED BALANCE SHEETS</B>
</DIV>
<!-- xbrl,body -->


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">(Unaudited)
</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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">December 31,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">March 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">(Amounts in thousands, except per share data)</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"><B>Assets</B></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">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current assets:</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="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">20,718</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,530</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,516</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70,060</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Trade accounts receivable, net of allowances ($8 and $17 at
December&nbsp;31, and March&nbsp;31, 2010, respectively)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,065</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,294</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Unbilled revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,488</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,039</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,502</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,098</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Prepaid expenses and other current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,164</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">651</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68,453</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">91,672</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Property, plant and equipment, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,723</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,769</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Prepaid pension asset</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,917</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,335</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,326</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">199</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">203</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">105,618</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">108,979</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Liabilities and Stockholders&#146; Equity</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current portion of capital lease obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">48</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">66</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,739</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,623</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,523</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,010</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued expenses and other liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,916</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,041</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Customer deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,368</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,022</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Income taxes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">758</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred income tax liability</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">143</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">138</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,495</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,968</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital lease obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">113</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">144</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accrued compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">321</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">292</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred income tax liability</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,564</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,930</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accrued pension liability</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">237</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">246</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accrued postretirement benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">913</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">880</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Contingent liability</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other long-term liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">536</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">445</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,979</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,905</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Commitments and Contingencies (Note 12)</B></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">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stockholders&#146; equity:</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="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Preferred stock, $1.00 par value</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">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Authorized, 500 shares</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="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Common stock, $.10 par value</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">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Authorized, 25,500 shares</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="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Issued, 10,203 and 10,155 shares at December&nbsp;31 and March
31, 2010 respectively</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,020</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,016</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Capital in excess of par value</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,459</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Retained earnings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62,219</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59,539</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accumulated other comprehensive loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,174</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,386</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Treasury stock (363 and 305 shares at December&nbsp;31 and
March&nbsp;31, 2010, respectively)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,428</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,554</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71,639</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69,074</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total liabilities and stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">105,618</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">108,979</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
<!-- /xbrl,bs -->



<DIV align="center" style="font-size: 10pt; margin-top: 18pt">See Notes to Condensed Consolidated Financial Statements.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->5<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#L41646tocpage">Table of Contents</A></H5><P>

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




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

<!-- xbrl,op -->
<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS <!-- xbrl,body -->AND RETAINED EARNINGS</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">(Unaudited)
</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="52%">&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>
    <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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">Three Months Ended</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">Nine Months Ended</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">December 31,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2009</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14">(Amounts in thousands, except per share data)</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">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">19,215</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">12,166</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">48,289</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">48,412</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cost of products sold</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,352</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,345</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,229</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,459</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gross profit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,863</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,821</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,060</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,953</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other expenses and income:</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>
    <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="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Selling, general and administrative</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,583</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,718</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,169</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,998</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(47</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(44</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">96</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total other expenses and income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,584</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,707</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,152</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,084</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income before income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,279</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,114</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,908</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,869</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision for income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">442</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">350</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,636</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,119</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">837</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">764</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,272</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,750</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Retained earnings at beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61,578</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58,558</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59,539</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53,966</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividends</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(196</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(197</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(592</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(591</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Retained earnings at end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">62,219</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">59,125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">62,219</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">59,125</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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>
    <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">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Per share data:</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>
    <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="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic:</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>
    <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">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">.33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">.58</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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>
    <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="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted:</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>
    <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">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">.33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">.58</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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>
    <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="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted average common shares outstanding:</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>
    <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">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,899</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,903</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,919</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,897</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,930</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,945</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,956</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,933</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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>
    <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">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividends declared per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">.06</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">.06</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
<!-- /xbrl,op -->


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">See Notes to Condensed Consolidated Financial Statements.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->6<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#L41646tocpage">Table of Contents</A></H5><P>


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




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

<!-- xbrl,cf -->
<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS</B>
</DIV>

<!-- xbrl,body -->

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">(Unaudited)
</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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">Nine Months Ended</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2009</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">(Amounts in thousands)</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">Operating activities:</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">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,272</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,750</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Adjustments to reconcile net income to net cash provided by operating activities:</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">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">884</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">751</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Amortization of unrecognized prior service cost and actuarial losses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">218</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">508</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Discount accretion on investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(44</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(40</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Stock-based compensation expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">336</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">317</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Loss on disposal of property, plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Deferred income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(532</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(228</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">(Increase) decrease in operating asset, net of acquisition:</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="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Accounts receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,803</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(855</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Unbilled revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,852</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,419</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,149</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,027</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Income taxes receivable/payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">690</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">629</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Prepaid expenses and other current and non-current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(271</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(58</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Prepaid pension asset</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(582</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(184</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Increase (decrease)&nbsp;in operating liabilities:</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">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,461</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,996</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Accrued compensation, accrued expenses and other current and non-current
liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(569</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(945</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Customer deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,961</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(432</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Long-term portion of accrued compensation, accrued pension liability
and accrued postretirement benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net cash (used)&nbsp;provided by operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,848</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,723</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Investing activities:</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">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Purchase of property, plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,435</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(502</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from sale of property, plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Purchase of investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(138,402</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(134,673</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Redemption of investments at maturity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">180,990</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">124,710</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Acquisition of Energy Steel &#038; Supply Company (See Note 2)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(17,882</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net cash provided (used)&nbsp;by investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,285</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10,458</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Financing activities:</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="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from issuance of long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">821</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Principal repayments on long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(49</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(841</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Issuance of common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">146</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Dividends paid</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(592</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(591</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Purchase of treasury stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(874</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(229</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Excess tax deduction on stock awards</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net cash used by financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,303</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(781</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of exchange rate changes on cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net increase in cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,188</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,488</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents at beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,530</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,150</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents at end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">20,718</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,638</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
<!-- /xbrl,cf -->



<DIV align="center" style="font-size: 10pt; margin-top: 18pt">See Notes to Condensed Consolidated Financial Statements.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->7<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#L41646tocpage">Table of Contents</A></H5><P>
<!-- xbrl,ns -->

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


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


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS</B>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">December&nbsp;31, 2010 and 2009
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">(Unaudited)
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">(Amounts in thousands, except per share data)
</DIV>

<!-- xbrl,n -->
<DIV align="left" style="font-size: 10pt; margin-top: 12pt">NOTE 1 &#151; BASIS OF PRESENTATION:
</DIV>
<!-- xbrl,body -->

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Graham Corporation&#146;s (the &#147;Company&#146;s&#148;) Condensed Consolidated Financial Statements include its
wholly-owned foreign subsidiary located in China at December&nbsp;31, 2010 and March&nbsp;31, 2010 and for
the three and nine months ended December&nbsp;31, 2010 and 2009 and its wholly-owned domestic subsidiary
located in Lapeer, Michigan at December&nbsp;31, 2010 and for the period December&nbsp;15, 2010 through
December&nbsp;31, 2010 (See Note 2). The Condensed Consolidated Financial Statements have been prepared
in accordance with accounting principles generally accepted in the United States (&#147;GAAP&#148;) for
interim financial information and the instructions to Form 10-Q and Rule&nbsp;10-01 of Regulation&nbsp;S-X,
each as promulgated by the Securities and Exchange Commission. The Company&#146;s Condensed
Consolidated Financial Statements do not include all information and notes required by GAAP for
complete financial statements. The unaudited Condensed Consolidated Balance Sheet as of March&nbsp;31,
2010 presented herein was derived from the Company&#146;s audited Consolidated Balance Sheet as of March
31, 2010. For additional information, please refer to the consolidated financial statements and
notes included in the Company&#146;s Annual Report on Form 10-K for the fiscal year ended March&nbsp;31, 2010
(&#147;fiscal 2010&#148;). In the opinion of management, all adjustments, including normal recurring
accruals considered necessary for a fair presentation, have been included in the Company&#146;s
Condensed Consolidated Financial Statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s results of operations and cash flows for the three and nine months ended
December&nbsp;31, 2010 are not necessarily indicative of the results that may be expected for the fiscal
year ending March&nbsp;31, 2011 (&#147;fiscal 2011&#148;).
</DIV>

<!-- xbrl,n -->
<DIV align="left" style="font-size: 10pt; margin-top: 12pt">NOTE 2 &#151; ACQUISITION:
</DIV>

<!-- xbrl,body -->
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;14, 2010, the Company completed its acquisition of Energy Steel &#038; Supply Co.
(&#147;Energy Steel&#148;), a privately-owned code fabrication and specialty machining company located in
Lapeer, Michigan dedicated primarily to the nuclear power industry. The Company believes
that this acquisition furthers its growth strategy through market and product diversification,
broadens its offerings to the energy markets and strengthens its presence in the nuclear sector.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This transaction was accounted for under the purchase method of accounting. Accordingly, the
results of Energy Steel were included in the Company&#146;s Condensed Consolidated Financial Statements from the
date of acquisition. The purchase price was $17,882 in cash. Acquisition-related costs of $666
were expensed in the third quarter of fiscal 2011 and are included in
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->8<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#L41646tocpage">Table of Contents</A></H5><P>
<!-- xbrl -->

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Selling, general and administrative expenses in the Condensed Consolidated Statement of
Operations. The purchase agreement also includes a contingent earn-out, which ranges from $0 to
$2,000, dependent upon Energy Steel&#146;s earnings performance in calendar years 2011 and 2012. If
achieved, the earn-out will be payable in fiscal 2011 and fiscal 2012 and is treated as additional
purchase price. In addition, the Company and Energy Steel entered into a five year lease agreement
with ESSC Investments, LLC for Energy Steel&#146;s manufacturing and office facilities located in
Lapeer, Michigan which includes an option to renew the lease for an additional five year term. The
Company and Energy Steel also have an option to purchase the leased facility for $2,500 at any time
during the first two years of the lease term. ESSC Investments, LLC is partly owned by the
President of Energy Steel.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The cost of the acquisition was preliminarily allocated to the assets acquired and liabilities
assumed based upon their estimated fair values at the date of the acquisition and the amount
exceeding the fair value of $17,326 was recorded as goodwill, which is not deductible for tax
purposes. As the values of certain assets and liabilities are preliminary in nature, they are
subject to adjustment as additional information is obtained, including, but not limited to,
settlement of the contingent payment, the finalization of the valuation of intangible assets, and
the final reconciliation and confirmation of tangible assets. The valuation of acquisition-related
intangible assets will be finalized within twelve months of the close of the acquisition. The fair
value of acquisition-related intangible assets includes customer relationships, teaming partner
agreements, permits and certificates. It is estimated that a significant portion of the goodwill
will be allocated to acquisition-related intangible assets, some of which may have an indefinite
life. Changes to the preliminary valuation will result in material adjustments to the fair value
of assets and liabilities acquired. Adjustments to record intangible assets acquired will result
in a reduction of goodwill.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table summarizes the preliminary allocation of the cost of the acquisition to
the assets acquired and liabilities assumed as of the close of the acquisition:
</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="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">December 14,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</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">Assets acquired:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,768</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Property, plant &#038; equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,390</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,326</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total assets acquired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,516</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Liabilities assumed:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,834</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total liabilities assumed</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,834</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchase price</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">19,682</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->9<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#L41646tocpage">Table of Contents</A></H5><P>
<!-- xbrl -->

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Condensed Consolidated Statement of Operations for the three and nine months ended
December&nbsp;31, 2010 includes net sales from Energy Steel of $684. The following unaudited pro forma
information presents the consolidated results of operations of the Company as if the Energy Steel
acquisition had occurred at the beginning of each of the fiscal periods presented:
</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="52%">&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>
    <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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Three Months Ended</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Nine Months Ended</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">December 31,</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">December 31,</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2010</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2009</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2010</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2009</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">21,274</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">19,596</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">57,355</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">64,520</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">361</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,166</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,701</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,676</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Earnings per share</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>
    <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">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">.04</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">.22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">.37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">.67</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">.04</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">.22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">.37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">.67</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 unaudited pro forma information presents the combined operation results of Graham
Corporation and Energy Steel, with the results prior to the acquisition date adjusted to include
the pro forma impact of the adjustment of depreciation of fixed assets based on the preliminary
purchase price allocation, the adjustment to interest income reflecting the cash paid in connection
with the acquisition, including acquisition-related expenses, at the Company&#146;s weighted average
interest income rate, and the impact of income taxes on the pro forma adjustments utilizing the
applicable statutory tax rate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The unaudited pro forma results are presented for illustrative purposes only. These pro forma
results do not purport to be indicative of the results that would have actually been obtained if
the acquisition occurred as of the beginning of each of the periods presented, nor does the pro
forma data intend to be a projection of results that may be obtained in the future.
</DIV>

<!-- xbrl,n -->
<DIV align="left" style="font-size: 10pt; margin-top: 12pt">NOTE 3 &#151; REVENUE RECOGNITION:
</DIV>

<!-- xbrl,body -->
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company recognizes revenue on all contracts with a planned manufacturing process in excess
of four weeks (which approximates 575 direct labor hours) using the percentage-of-completion
method. The majority of the Company&#146;s revenue is recognized under this methodology. The
percentage-of-completion method is determined by comparing actual labor incurred to a specific date
to management&#146;s estimate of the total labor to be incurred on each contract. Contracts in progress
are reviewed monthly, and sales and earnings are adjusted in current accounting periods based on
revisions in the contract value and estimated costs at completion. Losses on contracts are
recognized immediately when evident. There is no reserve for credit
losses related to
unbilled revenue recorded for contracts accounted for on the percentage of completion method. Any
reserve for credit losses related to unbilled revenue is recorded as a reduction to
revenue.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenue on contracts not accounted for using the percentage-of-completion method is recognized
utilizing the completed contract method. The majority of the Company&#146;s contracts have a planned
manufacturing process of less than four weeks and the results reported under this method do not
vary materially from the percentage-of-completion method. The Company recognizes revenue and all
related costs on these contracts upon substantial completion or shipment to the customer.
Substantial completion is consistently defined as at least 95%
</DIV>

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

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#L41646tocpage">Table of Contents</A></H5><P>
<!-- xbrl -->

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">complete with regard to direct labor hours. Customer acceptance is generally required
throughout the construction process and the Company has no further material obligations under its
contracts after the revenue is recognized.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At March&nbsp;31, 2010, the Company&#146;s backlog included four orders with a value of $6,655 that had
been placed on hold (suspended)&nbsp;pending further customer evaluation. During the nine months ended
December&nbsp;31, 2010, two orders valued at $4,278 were returned to active status and one order valued
at $1,588 was cancelled. Production had started on the cancelled project prior to such order being
put on hold and the customer requested shipment of the partly completed project on an &#147;as is&#148;
basis. At December&nbsp;31, 2010, one order included in backlog with a value of $1,130 remained on hold
(suspended).
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt">NOTE 4 &#151; INVESTMENTS:
</DIV>

<!-- xbrl,body -->
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Investments consist solely of fixed-income debt securities issued by the United States
Treasury with original maturities of greater than three months and less than one year. All
investments are classified as held-to-maturity, as the Company has the intent and ability to hold
the securities to maturity. The investments are stated at amortized cost which approximates fair
value. All investments held by the Company at December&nbsp;31, 2010 are scheduled to mature between
January&nbsp;6, 2011 and April&nbsp;7, 2011.
</DIV>

<!-- xbrl,n -->
<DIV align="left" style="font-size: 10pt; margin-top: 12pt">NOTE 5 &#151; INVENTORIES:
</DIV>

<!-- xbrl,body -->
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories are stated at the lower of cost or market, using the average cost method. For
contracts accounted for on the completed contract method, progress payments received are netted
against inventory to the extent the payment is less than the inventory balance relating to the
applicable contract. Progress payments that are in excess of the corresponding inventory balance
are presented as customer deposits in the Condensed Consolidated Balance Sheets. Unbilled revenue
in the Condensed Consolidated Balance Sheets represents revenue recognized that has not been billed
to customers on contracts accounted for on the percentage-of-completion method. For contracts
accounted for on the percentage-of&#151;completion method, progress payments are netted against
unbilled revenue to the extent the payment is less than the unbilled revenue for the applicable
contract. Progress payments exceeding unbilled revenue are netted against inventory to the extent
the payment is less than or equal to the inventory balance relating to the applicable contract, and
the excess is presented as customer deposits in the Condensed Consolidated Balance Sheets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Major classifications of inventories are as follows:
</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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">December 31,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">March 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</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">Raw materials and supplies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,184</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,843</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Work in process</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,788</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,365</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Finished products</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">424</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">573</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,396</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,781</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less &#151; progress payments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,894</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,683</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,502</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,098</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->11<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#L41646tocpage">Table of Contents</A></H5><P>
<!-- xbrl -->

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


<!-- xbrl,n -->
<DIV align="left" style="font-size: 10pt; margin-top: 12pt">NOTE 6 &#151; STOCK-BASED COMPENSATION:
</DIV>

<!-- xbrl,body -->
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Amended and Restated 2000 Graham Corporation Incentive Plan to Increase Shareholder Value
provides for the issuance of up to 1,375 shares of common stock in connection with grants of
incentive stock options, non-qualified stock options, stock awards and performance awards to
officers, key employees and outside directors; provided, however, that no more than 250 shares of
common stock may be used for awards other than stock options. Stock options may be granted at
prices not less than the fair market value at the date of grant and expire no later than ten years
after the date of grant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There were no stock option awards granted in the three months ended December&nbsp;31, 2010 and
2009. Stock option awards granted in the nine months ended December&nbsp;31, 2010 and 2009 were 20 and
24, respectively. The stock option awards vest
33<sup>1</sup>/<sub>3</sub>% per year over a three-year term. All stock
options have a term of ten years from their grant date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There were no restricted stock awards granted in the three months ended December&nbsp;31, 2010 and
2009. Restricted stock awards granted in the nine-month periods ended December&nbsp;31, 2010 and 2009
were 24 and 15, respectively. Performance-vested restricted stock awards granted to officers in
fiscal 2011 vest 100% on the third anniversary of the grant date, subject to the satisfaction of
the performance metrics established for the applicable three-year period. Time-vested restricted
stock awards granted to officers in fiscal 2010 vest 50% on the second anniversary of the grant
date and 50% on the fourth anniversary of the grant date. Time-vested restricted stock awards
granted to directors in the fiscal 2011 and fiscal 2010 vest 100% on the first anniversary of the
grant date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the three and nine months ended December&nbsp;31, 2010, the Company recognized stock-based
compensation costs related to stock option and restricted stock awards of $124 and $307,
respectively. The income tax benefit recognized related to stock-based compensation was $43 and
$106 for the three and nine months ended December&nbsp;31, 2010, respectively. During the three and
nine months ended December&nbsp;31, 2009, the Company recognized stock-based compensation costs of $119
and $317, respectively. The income tax benefit recognized related to stock-based compensation for
the three and nine months ended December&nbsp;31, 2009 was $41 and $110, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On July&nbsp;29, 2010, the Company&#146;s stockholders approved the Graham Corporation Employee Stock
Purchase Plan (the &#147;ESPP&#148;), which allows eligible employees to purchase shares of the Company&#146;s
common stock on the last day of a six-month offering period at a purchase price equal to the lesser
of 85&nbsp;percent of the fair market value of the common stock on either the first day or the last day
of the offering period. A total of 200,000 shares of common stock may be purchased under the ESPP.
During the three and nine months ended December&nbsp;31, 2010, the Company recognized stock-based
compensation costs of $29 related to this Plan.
</DIV>

<!-- xbrl,n -->
<DIV align="left" style="font-size: 10pt; margin-top: 12pt">NOTE 7 &#151; INCOME PER SHARE:
</DIV>

<!-- xbrl,body -->
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basic income per share is computed by dividing net income by the weighted average number of
common shares outstanding for the period. Common shares outstanding include share equivalent
units, which are contingently issuable shares. Diluted income per share is calculated
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->12<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#L41646tocpage">Table of Contents</A></H5><P>
<!-- xbrl -->

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">by dividing net income by the weighted average number of common shares outstanding and, when
applicable, potential common shares outstanding during the period. A reconciliation of the
numerators and denominators of basic and diluted income per share is presented below:
</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="52%">&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>
    <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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">Three Months Ended</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">Nine Months Ended</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">December 31,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2009</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">Basic income per share</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>
    <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"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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>
    <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">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Numerator:</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>
    <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="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">837</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">764</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,272</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,750</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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>
    <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">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Denominator:</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>
    <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="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Weighted common shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,839</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,845</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,860</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,840</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Share equivalent units (&#147;SEUs&#148;)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Weighted average common shares and SEUs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,899</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,903</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,919</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,897</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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>
    <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">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic income per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">.33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">.58</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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>
    <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="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted income per share</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>
    <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"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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>
    <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">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Numerator:</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>
    <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="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">837</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">764</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,272</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,750</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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>
    <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">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Denominator:</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>
    <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="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Weighted average shares and SEUs outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,899</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,903</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,919</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,897</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Stock options outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Contingently issuable SEUs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Weighted average common and potential
common shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,930</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,945</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,956</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,933</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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>
    <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="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted income per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">.33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">.58</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&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;Options to purchase a total of 17 shares of common stock were outstanding at December,
31, 2010 and 2009, but were not included in the above computation of diluted income per share given
their exercise prices as they would be anti-dilutive upon issuance.
</DIV>

<!-- xbrl,n -->
<DIV align="left" style="font-size: 10pt; margin-top: 12pt">NOTE 8 &#151; PRODUCT WARRANTY LIABILITY:
</DIV>

<!-- xbrl,body -->
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The reconciliation of the changes in the product warranty liability is as follows:
</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="52%">&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>
    <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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">Three Months Ended</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">Nine Months Ended</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">December 31,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2009</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">Balance at beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">431</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">279</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">369</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">366</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expense (income)&nbsp;for product warranties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(136</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(30</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Product warranty claims paid</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(110</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(75</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(198</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(88</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">185</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">248</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">185</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">248</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&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;The income of $136 and $30 for product warranties in the three months ended December&nbsp;31,
2010 and nine months ended December&nbsp;31, 2009, respectively, resulted from the reversal of
provisions made that were no longer required due to lower claims experience.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->13<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#L41646tocpage">Table of Contents</A></H5><P>
<!-- xbrl -->

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The product warranty liability is included in the line item &#147;Accrued expenses and other
liabilities&#148; in the Condensed Consolidated Balance Sheets.
</DIV>

<!-- xbrl,n -->
<DIV align="left" style="font-size: 10pt; margin-top: 12pt">NOTE 9 &#151; CASH FLOW STATEMENT:
</DIV>

<!-- xbrl,body -->
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest paid was $4 and $2 for the nine months ended December&nbsp;31, 2010 and 2009,
respectively. In addition, income taxes paid for the nine months ended December&nbsp;31, 2010 were
$1,319. For the nine months ended December&nbsp;31, 2009, income taxes paid were $2,697, which was net
of a $3,426 refund of an overpayment of taxes in the fiscal year ended March&nbsp;31, 2009.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the nine months ended December&nbsp;31, 2010, non cash activities included the recording of
a $1,800 contingent liability for the contingent earn-out related to the acquisition of Energy
Steel, which was treated as additional purchase price.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the nine months ended December&nbsp;31, 2010 and 2009, stock option awards were exercised.
In connection with such stock option exercises, the related income tax benefit realized exceeded
the tax benefit that had been recorded pertaining to the compensation cost recognized by $66 and
$21, respectively, for such periods. This excess tax deduction has been separately reported under
&#147;Financing activities&#148; in the Condensed Consolidated Statements of Cash Flows.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At December&nbsp;31, 2010 and 2009, there were $34 and $7 of capital purchases that were recorded
in accounts payable and are not included in the caption &#147;Purchase of property, plant and equipment&#148;
in the Condensed Consolidated Statements of Cash Flows.
</DIV>

<!-- xbrl,n -->
<DIV align="left" style="font-size: 10pt; margin-top: 12pt">NOTE 10 &#151; COMPREHENSIVE INCOME:
</DIV>

<!-- xbrl,body -->
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total comprehensive income was as follows:
</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="52%">&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>
    <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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">Three Months Ended</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">Nine Months Ended</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">December 31,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2009</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">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">837</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">764</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,272</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,750</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</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>
    <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">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other comprehensive income:</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>
    <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="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Foreign currency translation adjustment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Defined benefit pension and other
postretirement plans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">108</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">143</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">325</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total comprehensive income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">910</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">872</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,484</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,078</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&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;Defined benefit pension and other postretirement plans reflect the amortization of prior
service costs and recognized gains and losses related to such plans during the periods.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->14<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#L41646tocpage">Table of Contents</A></H5><P>
<!-- xbrl -->

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

<!-- xbrl,n -->
<DIV align="left" style="font-size: 10pt; margin-top: 12pt">NOTE 11 &#151; EMPLOYEE BENEFIT PLANS:
</DIV>

<!-- xbrl,body -->
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The components of pension cost are as follows:
</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="52%">&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>
    <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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">Three Months Ended</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">Nine Months Ended</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">December 31,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2009</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">Service cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">97</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">79</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">289</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">237</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">335</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">324</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">973</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected return on assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(625</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(465</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,875</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,394</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of:</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>
    <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="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Unrecognized prior service cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Actuarial loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">105</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">205</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">316</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">614</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net pension (income)&nbsp;cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(87</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">144</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(262</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">433</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&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;The Company made no contributions to its defined benefit pension plan during the nine
months ended December&nbsp;31, 2010 and does not expect to make any contributions to the plan for the
balance of fiscal 2011.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The components of the postretirement benefit income are as follows:
</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="52%">&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>
    <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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">Three Months Ended</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">Nine Months Ended</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">December 31,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2009</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">Service cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of prior service cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(42</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(41</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(125</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(124</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of actuarial loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net postretirement benefit income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(22</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(20</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(66</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(62</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&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;The Company paid benefits of $3 related to its postretirement benefit plan during the
nine months ended December&nbsp;31, 2010. The Company expects to pay benefits of approximately $106 for
the balance of fiscal 2011.
</DIV>

<!-- xbrl,n -->
<DIV align="left" style="font-size: 10pt; margin-top: 12pt">NOTE 12 &#151; COMMITMENTS AND CONTINGENCIES:
</DIV>

<!-- xbrl,body -->
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has been named as a defendant in certain lawsuits alleging personal injury from
exposure to asbestos contained in products made by the Company. The Company is a co-defendant with
numerous other defendants in these lawsuits and intends to vigorously defend itself against these
claims. The claims are similar to previous asbestos suits that named the Company as defendant,
which either were dismissed when it was shown that the Company had not supplied products to the
plaintiffs&#146; places of work or were settled for amounts below the expected defense costs. The
outcome of these lawsuits cannot be determined at this time.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->15<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#L41646tocpage">Table of Contents</A></H5><P>
<!-- xbrl -->

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From time to time in the ordinary course of business, the Company is subject to legal
proceedings and potential claims. At December&nbsp;31, 2010, other than noted above, management was
unaware of any other material litigation matters.
</DIV>

<!-- xbrl,n -->
<DIV align="left" style="font-size: 10pt; margin-top: 12pt">NOTE 13 &#151; INCOME TAXES:
</DIV>

<!-- xbrl,body -->
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company files federal and state income tax returns in several domestic and foreign
jurisdictions. In most tax jurisdictions, returns are subject to examination by the relevant tax
authorities for a number of years after the returns have been filed. The Company is currently
under examination by the United States Internal Revenue Service (the &#147;IRS&#148;) for tax year 2009 and
is subject to examination for tax year 2010. The IRS has completed its examination for tax years
2006 through 2008. In June&nbsp;2010, the IRS proposed an adjustment, plus interest, to disallow
substantially all of the research and development tax credit claimed by the Company in tax years
2006 through 2008. The Company filed a protest to appeal the adjustment in July&nbsp;2010. The
Company believes its tax position is correct and will continue to take appropriate actions to
vigorously defend its position.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The cumulative tax benefit related to the research and development tax credit for the tax
years ended March&nbsp;31, 1999 through March&nbsp;31, 2011 was $2,383. The liability for unrecognized tax
benefits related to this tax position was $477 and $455 at December&nbsp;31 and March&nbsp;31, 2010,
respectively, which represents management&#146;s estimate of the potential resolution of this issue.
Any additional impact on the Company&#146;s income tax liability cannot be determined at this time. The
tax benefit and liability for unrecognized tax benefits were recorded in the Company&#146;s Consolidated
Statement of Operations as follows:
</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="28%">&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>
    <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>
    <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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="22" style="border-bottom: 1px solid #000000">Year Ended March 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2011</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Total</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">Tax benefit of research
and development tax
credit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,653</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">218</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">238</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">137</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">137</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,383</TD>
    <TD>&nbsp;</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unrecognized tax benefit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(445</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(32</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(477</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net tax benefit of
research and
development tax credit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,653</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">218</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">238</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(308</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">105</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,906</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&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;The Company is subject to examination in state and international tax jurisdictions for
tax years 2006 through 2010 and tax years 2009 through 2010, respectively. It is the Company&#146;s
policy to recognize any interest related to uncertain tax positions in interest expense and any
penalties related to uncertain tax positions in selling, general and administrative expense. The
Company had no other unrecognized tax benefits as of December, 31, 2010. During the three months
ended December&nbsp;31, 2010 and 2009, the Company recorded $13 and $0, respectively, for interest
related to its uncertain tax position. During the nine months ended December&nbsp;31, 2010 and 2009,
$27 and $32, respectively, was recorded for interest related to uncertain tax positions. No
penalties related to uncertain tax positions were recorded in any of the three- or nine-month
periods ended December&nbsp;31, 2010 or 2009.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->16<!-- /Folio -->
</DIV>

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<!-- xbrl -->

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

<!-- xbrl,n -->
<DIV align="left" style="font-size: 10pt; margin-top: 12pt">NOTE 14 &#151; DEBT:
</DIV>

<!-- xbrl,body -->
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;3, 2010, the Company entered into a new revolving credit facility agreement that
provides a $25,000 line of credit, including letters of credit and bank guarantees, expandable at
the Company&#146;s option at any time to up to $50,000. There are no sublimits in the agreement with
regard to borrowings, issuance of letters of credit or issuance of bank guarantees for the
Company&#146;s Chinese subsidiary. The agreement has a three year term, with two automatic one year
extensions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At the Company&#146;s option, amounts outstanding under the agreement will bear interest at either
(i)&nbsp;a rate equal to the bank&#146;s prime rate; or (ii)&nbsp;a rate equal to LIBOR plus a margin. The margin
is based upon the Company&#146;s funded debt to earnings before interest expense, income taxes,
depreciation and amortization (&#147;EBITDA&#148;) and may range from 2.00% to 1.00%. Amounts available for
borrowing under the agreement are subject to an unused commitment fee of between 0.375% and 0.200%,
depending on the above ratio.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Outstanding letters of credit under the agreement are subject to a fee of between 1.25% and
..75%, depending on the Company&#146;s ratio of funded debt to EBITDA. The agreement allows the Company
to reduce the fee on outstanding letters of credit to a fixed rate of .55% by securing outstanding
letters of credit with cash and cash equivalents. At December&nbsp;31, 2010, outstanding letters of
credit were secured by cash and cash equivalents.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the new revolving credit facility, the Company covenants to maintain a maximum funded
debt to EBITDA ratio of 3.5 to 1 and a minimum earnings before interest expense and income taxes to
interest ratio of 4.0 to 1. The agreement also provides that the Company is permitted to pay
dividends without limitation if it maintains a maximum funded debt to EBITDA ratio equal to or less
than 2.0 to 1 and permits the Company to pay dividends in an amount equal to 25% of net income if
it maintains a maximum funded debt to EBITDA ratio of greater than 2.0 to 1.
</DIV>
<!-- /xbrl,ns -->


<P align="center" style="font-size: 10pt"><!-- Folio -->17<!-- /Folio -->
</DIV>

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



<DIV align="left">
<A name="L41646103"></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;2.</B></TD>
    <TD>&nbsp;</TD>
    <TD><B>Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">(Dollar amounts in thousands, except per share data)
</DIV>


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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a global designer and manufacturer of custom-engineered ejectors, vacuum systems,
condensers, liquid ring pump packages and heat exchangers to the refining and petrochemical
industries, and a supplier of components and raw materials to the nuclear power generating market.
Our equipment is used in critical applications in the petrochemical, oil refining and electric
power generation industries, including nuclear, cogeneration and geothermal plants. Our equipment
can also be found in alternative energy applications, including ethanol, biodiesel and coal and
gas-to-liquids and other applications, and other diverse applications, such as metal refining, pulp
and paper processing, shipbuilding, water heating, refrigeration, desalination, soap manufacturing,
food processing, pharmaceuticals, and heating, ventilating and air conditioning.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our corporate offices are located in Batavia, New York and we have production facilities in
both Batavia, New York and Lapeer, Michigan. We have a wholly-owned foreign subsidiary located in
Suzhou, China, which supports sales orders from China and provides engineering support and
supervision of subcontracted fabrication.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
advancement of our strategy to diversify our products and broaden our offerings to the
energy industry, on December&nbsp;14, 2010, we acquired Energy Steel and Supply Company (&#147;Energy
Steel&#148;), which is now a wholly-owned domestic subsidiary of ours
located in Lapeer, Michigan. Energy Steel is a code fabrication and specialty machining company which provides products to the
nuclear industry, primarily in the United States. This transaction was accounted for under the
purchase method of accounting. Accordingly, the results of Energy Steel were included in our
Condensed Consolidated Financial Statements from the date of acquisition.
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Highlights for the three- and nine-month periods ended December&nbsp;31, 2010 (the third quarter of
the fiscal year ending March&nbsp;31, 2011 (&#147;fiscal 2011&#148;)) include:
</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="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Net sales for the third quarter of fiscal 2011 were $19,215, up 58% compared
with $12,166 for the third quarter of fiscal 2010. Net sales for the first nine
months of fiscal 2011 were $48,289, compared with net sales of $48,412 for the
first nine months of fiscal 2010. Included in net sales were $684 associated with
our acquisition of Energy Steel.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Net income and income per diluted share for the third quarter of fiscal 2011
were $837 or $0.08, respectively, compared with net income of $764 and income per
diluted share of $0.08 for the third quarter of the fiscal year ended March&nbsp;31,
2010 (&#147;fiscal 2010&#148;). Included in the third quarter of fiscal 2011 was $510, net
of income tax, or $0.05 per diluted share, of transaction costs, related to our
acquisition of Energy Steel. Excluding these transaction costs, net income and
income per diluted share for the third quarter of fiscal 2011 were $1,347 or $0.13,
respectively. With the transaction costs excluded, net income increased by $583,
or 76%.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Net income and income per diluted share for the first nine months of fiscal 2011
were $3,272 and $0.33, respectively, compared with net income of $5,750 and income
per diluted share of $0.58 for the first nine months of fiscal 2010.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->18<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#L41646tocpage">Table of Contents</A></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="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Excluding the previously mentioned acquisition transaction costs, net income and
income per diluted share for the first nine months of fiscal 2011 were $3,782 and
$0.38, respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Orders booked in the third quarter of fiscal 2011 were $17,784, which included
$839 associated with Energy Steel. In total, orders were down 66% compared with
the third quarter of fiscal 2010, when orders were $51,644. The prior year quarter
benefited from a large order that was in excess of $25,000 with Northrop Grumman
Corporation to provide surface condensers for a U.S. Navy aircraft carrier. Orders
booked in the first nine months of fiscal 2011 were $36,384, down 60% compared with
orders booked of $90,049 in the first nine months of fiscal 2010.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Backlog was $90,531 at December&nbsp;31, 2010, representing a 9% increase compared
with September&nbsp;30, 2010, when our backlog was $83,316. There was $8,625 of backlog
associated with Energy Steel at the end of the quarter. We believe 70-80% of the
current backlog will convert to sales over the next 12&nbsp;months. Normally, 85-90% of
the backlog is expected to convert to sales within the next 12&nbsp;months.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Gross profit margin for the three- and nine-month periods ended December&nbsp;31,
2010 was 25% and 29%, respectively, compared with 31% and 37%, respectively for the
three- and nine-month periods ended December&nbsp;31, 2009.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Cash and short-term investments at December&nbsp;31, 2010 were $48,234 compared with
$74,590 at March&nbsp;31, 2010.</TD>
</TR>

</TABLE>
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This report and other documents we file with the Securities and Exchange Commission include
&#147;forward-looking statements&#148; within the meaning of Section&nbsp;27A of the Securities Act of 1933, as
amended, and Section&nbsp;21E of the Securities Exchange Act of 1934, as amended.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These statements involve known and unknown risks, uncertainties and other factors that may
cause actual results to be materially different from any future results implied by the
forward-looking statements. Such factors include, but are not limited to, the risks and
uncertainties identified by us under the heading &#147;Risk Factors&#148; in Item&nbsp;1A of our Annual Report on
Form 10-K for fiscal 2010 and in Item&nbsp;1A of this Quarterly Report on Form 10-Q.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Forward-looking statements may also include, but are not limited to, statements about:
</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="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>current and future economic environments affecting us and the markets we serve;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>sources of revenue and anticipated revenue, including the contribution from the
growth of new products, services and markets;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>plans for future products and services and for enhancements to existing products
and services;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>operations in foreign countries;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>estimates regarding liquidity and capital requirements;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>timing of conversion of backlog to sales;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our ability to achieve expected profitability levels;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our ability to attract or retain customers;
</TD>
</TR>
</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->19<!-- /Folio -->
</DIV>

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<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="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the outcome of any existing or future litigation;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our acquisition strategy;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our ability to successfully integrate and operate Energy Steel; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our ability to increase our productivity and capacity.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Forward-looking statements are usually accompanied by words such as &#147;anticipate,&#148; &#147;believe,&#148;
&#147;estimate,&#148; &#147;may,&#148; &#147;intend,&#148; &#147;expect&#148; and similar expressions. Actual results could differ
materially from historical results or those implied by the forward-looking statements contained in
this report.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Undue reliance should not be placed on our forward-looking statements. Except as required by
law, we undertake no obligation to update or announce any revisions to forward-looking statements
contained in this report, whether as a result of new information, future events or otherwise.
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As the global economy slowly recovers, albeit at a sluggish pace, our principal markets,
specifically, oil refining and petrochemicals, are improving. Currently, we believe that
international markets present greater demand than those in North America. For example, Asia has
renewed its activities to invest in new refining and petrochemical capacity. China had slowed its
investments somewhat during the global recession, but appears to have reinvigorated its efforts to
build capacity. Also, there are a number of refining and petrochemical projects on the horizon in
the Middle East, while South America is moving forward with planned investment in new capacity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Underlying demand from projected economic growth in less developed countries appears to be
driving the strengthened and apparently stable price for crude oil that has remained above $75 per
barrel for over a year. Likewise, other raw material costs have increased over the past 12 to 18
months, although they remain below their peaks in 2008, with the exception of copper. However,
despite that higher commodity prices have an effect on overall project cost for the end user, it
appears that the improving economy, which is supporting the strength of the oil market, is spurring
new international investment in refineries and petrochemical plants.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the U.S., renewable energy projects in the U.S. have been very active and are expected to
remain so for the next few years. Moreover, investment in the U.S. nuclear power generation market
is anticipated to be favorable and will be driven by capital investment in existing nuclear power
plants to increase power generation and/or extend their operating lives. In addition, construction
of new nuclear power generation capacity is planned.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Currently, near-term demand trends that we believe are affecting our customers&#146; investments
include the following:
</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="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>As the global economy recovers slowly from the global recession, many emerging
economies continue to have relatively strong economic growth. This expansion is
driving growing energy requirements and the need for more refined petroleum
products.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The expansion of the Middle Eastern economies and the continued global growth in
demand for oil and refined products has renewed investment activity in this
geographic area. We believe that such renewed activity is exemplified by the re-
</TD>
</TR>
</TABLE>
</DIV>
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</DIV>

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<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="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>starting of projects in both the petrochemical and refining industries, such as the
Jubail and Yanbu export refinery projects in Saudi Arabia.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Demand for refined petroleum products, such as gasoline, in Asia
(specifically China) experienced continued growth during the last two calendar years
following reductions in demand during calendar year 2008 when economic uncertainty
stymied growth. This continued demand is driving increased investment in
petrochemical and refining projects.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>South America, specifically Brazil, Venezuela and Colombia, is seeing increased
refining and petrochemical investments that are driven by expanding economies and
increased local demand for gasoline and other products derived from oil.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The U.S. refining market has experienced some recovery from its bottom.
However, refinery utilization remains somewhat below levels prior to the global
recession. We believe that uncertainty around U.S. energy policy and its potential impact on
production costs is also affecting our customers. As a result, there have been
fewer investments in capital projects for refineries in the U.S. This trend is
expected to continue for the next few years.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Recently there have been investments in North American oil sands
extraction projects in Alberta and foreign investment in Alberta. We expect that
refineries in the U.S. may begin investing to upgrade facilities to be able to
accommodate for the synthetic feedstock. Historically, downstream investments that
involve our equipment occur two to three years after extraction projects.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Energy policy focus in the United States has generated renewed interest in
nuclear power. The time frame to design, permit, fund and build a new nuclear
facility is extremely long and we believe it is very early in that process.
However, the maintenance, license extension and re-rating of the 104 existing
nuclear plants in the United States is quite active and provides us
with sales opportunities.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A consequence of the global recession and the shift in geographic opportunities for our
products is pressure on our gross margin. The U.S. refining market has historically provided
higher margins than certain international markets and there has been significant competition for
fewer projects. As the global economy has begun to improve, we believe this pressure is beginning
to ease, although we would not expect this to be reflected in our financial results within the next
twelve months.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Despite the improving global outlook, we expect that we will continue to experience volatility
in our order pattern. For example, sequentially the past seven quarters had new order levels of
$8,838, $29,567, $51,644, $18,268, $8,124, $10,476 and $17,784 in the first, second, third and
fourth quarters of fiscal 2010 and the first, second and third quarters of fiscal 2011,
respectively. We believe that looking at our order level in any one quarter does not provide an
accurate indication of our future expectations or performance. Rather, we believe that looking at
our orders and backlog over a rolling four-quarter time period provides a better measure of our
business. For the next several quarters, we also expect to see smaller value projects than what we
had seen during the last expansion cycle. As a result, we will have to win a greater number of
orders to achieve a similar or higher level of revenue.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->21<!-- /Folio -->
</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>Shift to International Growth Expected to Drive Next Industry Cycle</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Over the long-term, we expect demand for energy products and, therefore, our customers&#146;
markets, to regain their strength and, while remaining cyclical, continue to grow. We anticipate
that recovery and growth will initially be sluggish, especially in the U.S. market. We believe the
long-term trends remain strong and that the drivers of future growth may include:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Demand Trends</I></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="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Global consumption of crude oil is estimated to expand significantly over the
next two decades, primarily in emerging markets. This is expected to offset
estimated flat to slightly declining demand in North America and Europe.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Increased demand is expected for power, refinery and petrochemical products,
stimulated by an expanding middle class in Asia, in particular China and India.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The requirement for developing clean, low cost electric power in the U.S. is
expected to continue.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Increased development of geothermal electrical power plants in certain regions
is expected to help meet projected growth in demand for electrical power.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Increased global regulations over the refining and petrochemical industries are
expected to continue to drive requirements for capital investments.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Funded defense industry plans for nuclear powered carriers, submarines and
destroyers are expected to continue.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Growth Opportunities</I></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="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Construction of new petrochemical plants in the Middle East, where natural gas
is plentiful and less expensive, is expected to continue.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Increased investments in new power projects are expected in Asia and South
America to meet projected consumer demand increases.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Global oil refining capacity is projected to increase, and is expected to be
addressed through new facilities, refinery upgrades, revamps and expansions.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Long-term growth potential is believed to exist in alternative energy markets,
such as nuclear, coal-to-liquids, gas-to-liquids and other emerging technologies,
such as biodiesel, ethanol and waste-to-energy.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Replacement or upgrading of existing equipment in U.S. nuclear power generation
plants is expected to continue.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Construction of new nuclear power generating capacity is expected.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Construction of new nuclear propelled U.S. naval vessels and replacement of worn
equipment on existing vessels is expected.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that all of the above factors offer us long-term growth opportunity to meet our
customers&#146; expected capital project needs. In addition, we believe we can continue to grow our
less cyclical smaller product lines and aftermarket businesses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Emerging
markets require petroleum-based products and are expected to continue to
grow at rates faster than the U.S. Therefore, we expect international opportunities will be more
plentiful as they relate to oil refining and petrochemical markets, whereas U.S. power generation
markets, both nuclear and alternative energy, are expected to be active and provide us additional
opportunities domestically. Our domestic sales as a percentage of
</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">aggregate product sales, which were 63% in fiscal 2009, decreased to 45% in fiscal 2010 and
declined to 41% in the first nine months of fiscal 2011.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the first nine months of fiscal 2011, international orders were 54% of total orders. With
the acquisition of Energy Steel, whose sales are almost exclusively domestic, we expect that the
weighting of international orders will be less dominant than would have occurred prior to the
addition of Energy Steel. Our order rates for fiscal 2010 were 50% domestic and 50% international.
However, the fiscal 2010 domestic order level was heavily impacted by a large order (in excess of
$25,000) from Northrop Grumman to supply surface condensers for the U.S. Navy. If we exclude this
project, the international order percentage in fiscal 2010 would have exceeded 65%.
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;14, 2010, we
 completed the acquisition of Energy Steel &#038; Supply Co.
(&#147;Energy Steel&#148;), a privately-owned code fabrication and specialty machining company located in
Lapeer, Michigan  dedicated primarily to the nuclear power industry. We believe
that this acquisition furthers our growth strategy through market and product diversification,
broadens our offerings to the energy markets and strengthens our presence in the nuclear sector.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This transaction was accounted for under the purchase method of accounting. Accordingly, the
results of Energy Steel were included in our Condensed Consolidated Financial Statements from the
date of acquisition. The purchase price was $17,882 in cash. Acquisition-related costs of $666
were expensed in the third quarter of fiscal 2011 and are included in Selling, general and
administrative expenses in the condensed consolidated statement of operations included in Part I, Item 1 of this Quarterly
Report on Form 10-Q. The purchase
agreement also includes a contingent earn-out, which ranges from $0 to $2,000, dependent upon Energy
Steel&#146;s earnings performance in calendar years 2011 and 2012. If achieved, the earn-out will be
payable in fiscal 2011 and fiscal 2012 and is treated as additional purchase price. In addition,
we entered into a five year lease agreement with ESSC Investments, LLC
for Energy Steel&#146;s manufacturing and office facilities located in Lapeer, Michigan, which agreement includes
an option to renew the lease for an additional five year term. We also
have an option to purchase the leased facility for $2,500 at any time during the first two years of
the lease term. ESSC Investments, LLC is partly owned by the President of Energy Steel.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The cost of the acquisition was preliminarily allocated to the assets acquired and liabilities
assumed based upon their estimated fair values at the date of the acquisition and the amount
exceeding the fair value of $17,326 was recorded as goodwill, which is not deductible for tax
purposes. As the values of certain assets and liabilities are preliminary in nature, they are
subject to adjustment as additional information is obtained, including, but not limited to,
settlement of the contingent payment, the finalization of the valuation of intangible assets, and
the final reconciliation and confirmation of tangible assets. The valuation of acquisition-related
intangible assets will be finalized within twelve months of the close of the acquisition. The fair
value of acquisition-related intangible assets includes customer relationships, teaming partner
agreements, permits and certificates. It is estimated that a significant portion of the goodwill
will be allocated to acquisition-related intangible assets, some of which may have an indefinite
life. Changes to the preliminary valuation will result in material adjustments to the fair value
of assets and liabilities acquired. Adjustments to record intangible assets acquired will result
in a reduction of goodwill.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->23<!-- /Folio -->
</DIV>

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table summarizes the preliminary allocation of the cost of the acquisition to
the assets acquired and liabilities assumed as of the close of the acquisition:
</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="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">December 14,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2010</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">Assets acquired:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,768</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Property, plant &#038; equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,390</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,326</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total assets acquired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,516</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Liabilities assumed:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,834</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total liabilities assumed</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,834</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchase price</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">19,682</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For an understanding of the significant factors that influenced our performance, the following
discussion should be read in conjunction with our condensed consolidated financial statements and
the notes to our condensed consolidated financial statements included in Part&nbsp;I, Item&nbsp;1 of this
Quarterly Report on Form 10-Q.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table summarizes our results of operations for the periods indicated:
</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="52%">&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>
    <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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Three Months Ended</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Nine Months Ended</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">December 31,</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">December 31,</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2010</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2009</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2010</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2009</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">19,215</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">12,166</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">48,289</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">48,412</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">837</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">764</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,272</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,750</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted income per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.58</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">105,618</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">89,240</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">105,618</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">89,240</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>The Third Quarter and First Nine Months of Fiscal 2011 Compared With the Third Quarter and
First Nine Months of Fiscal 2010</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales for the third quarter of fiscal 2011 were $19,215, up 58% compared with sales of $12,166
for the third quarter of fiscal 2010. Included in the quarter was $684 in sales associated with
Energy Steel. Other than the addition of Energy Steel, sales growth was driven by improvements in
all products, except aftermarket, and higher international sales, which more than offset the
decline in sales to the U.S. International sales accounted for 64% and 58% of total sales for the
third quarters of fiscal 2011 and fiscal 2010, respectively. International sales year-over-year
increased $5,274, or 74%, driven by stronger sales to Asia, Middle East and South America.
Domestic sales increased $1,775, or 35%, in the third quarter of fiscal 2011 compared with the
third quarter of fiscal 2010. Fluctuations in sales among products and geographic locations can
vary measurably from quarter-to-quarter based on timing and magnitude of projects. We believe the
growth in international sales will continue  into fiscal
2012. With our recent acquisition of Energy Steel, which sells primarily into the domestic market,
we expect strong domestic sales growth. Sales in the three months ended December&nbsp;31, 2010 were 40%
to the refining industry, 17% to the chemical and petrochemical industries and 43% to other commercial and industrial
applications. Sales in
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->24<!-- /Folio -->
</DIV>

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">the three months
ended December&nbsp;31, 2009 were 36% to the refining industry, 44% to the chemical and petrochemical
industries and 20% to other commercial and industrial applications. For additional information on
anticipated future sales and our markets, see &#147;Orders and Backlog&#148; below.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales for the first nine months of fiscal 2011 were $48,289, compared with sales of $48,412
for the first nine months of fiscal 2010. Increases in condensers, pumps and heat exchangers were
offset by lower ejector and spare sales. International sales accounted for 59% and 52% of total
sales for the first nine months of fiscal 2011 and fiscal 2010, respectively. International sales
year-over-year increased $3,389, or 14%. International sales increased in South America, Middle
East, Canada and Mexico. These increases were partly offset by lower sales in Asia. Domestic sales
decreased $3,512, or 15% in the nine months ended December&nbsp;31, 2010 compared with the nine months
ended December&nbsp;31, 2009. Sales in the first nine months of fiscal 2011 were 34% to the refining
industry, 28% to the chemical and petrochemical industries and 38% to other commercial and
industrial applications. Sales in the first nine months of fiscal 2010 were 43% to the refining
industry, 32% to the chemical and petrochemical industries and 25% to other commercial and
industrial applications. For additional information on future anticipated sales and our markets,
see &#147;Orders and Backlog&#148; below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross profit for the third quarter of fiscal 2011 was $4,863, up 27% compared with fiscal
2010. Higher gross profit reflects increased volume. However, as a percentage of sales, gross
profit for the third quarter of fiscal 2011 was 25% compared with 31% for the third quarter of
fiscal 2010 due to the impact of a more competitive pricing environment in which the projects that
were shipped in the third quarter were awarded. Orders for many of these projects were received in
the second half of fiscal 2010.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross profit for the first nine months of fiscal 2011 was $14,060, down 22% compared with the
same period in fiscal 2010. Our gross profit margin for the first nine months of fiscal 2011 was
29% compared with 37% for the first nine months of fiscal 2010. Gross profit decreased primarily
due to non-repeatable raw material purchasing benefits achieved in the first quarter of fiscal 2010
and as a result of having lower margin projects due to the more competitive pricing environment
associated with the projects shipped during the period that had been awarded six to twelve months
earlier as discussed above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selling, general and administrative (&#147;SG&#038;A&#148;) expense in the three- and nine-month periods
ended December&nbsp;31, 2010 increased $865, or 32%, and $171 or 2%, respectively, compared with the
same periods of the prior year. Included in the third quarter of fiscal 2011 was $666 of
transaction costs related to our acquisition of Energy Steel, which closed on December&nbsp;14, 2010.
Excluding these costs, SG&#038;A expense in the three- and nine-month periods ended December&nbsp;31, 2010
increased $199, or 7%, and decreased $495, or 6%, respectively, compared with the same periods of
the prior year. SG&#038;A expenses in the first nine months of fiscal 2011, excluding acquisition
costs, were lower due to the savings realized from restructuring, which occurred in fiscal 2010,
lower pension expense and variable compensation expenses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SG&#038;A expense as a percent of sales for the three- and nine-month periods ended December&nbsp;31,
2010 was consistent at 19%. Excluding the Energy Steel acquisition costs noted above, SG&#038;A expense
as a percent of sales for the three- and nine-month periods ended
December&nbsp;31, 2010 was 15% and 18%, respectively. This compared with 22% and 19%,
respectively, for the same periods ended December&nbsp;31, 2009.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->25<!-- /Folio -->
</DIV>

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest income for the three- and nine-month periods ended December&nbsp;31, 2010 was $13 and $47,
respectively. Interest income for the same periods of fiscal 2010 was $11 and $44, respectively.
The low level of interest income relative to the amount of cash invested reflects the persistently
low interest rates on short term U.S. government securities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest expense was $14 and $30 for the three- and nine-month periods ended December&nbsp;31,
2010, up from $0, but down from $34 for the quarter and year-to-date period ended December&nbsp;31,
2009.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our effective tax rate for the three and nine months ended December&nbsp;31, 2010 was 35% and 33%,
respectively. Our projected effective tax rate for fiscal 2011 is between 33% and 34%. The tax
rate in the three and nine months ended December&nbsp;31, 2009 was 31% and 35%, respectively (the
effective tax rate for fiscal 2010 was 37%).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net income for the three and nine months ended December&nbsp;31, 2010 was $837 and $3,272,
respectively. Excluding the costs associated with our acquisition of Energy Steel, net income for
the three and nine months ended December&nbsp;31, 2010 was $1,347 and $3,782, respectively. These
results compare with $764 and $5,750, respectively, for the same periods in the prior fiscal year.
Income per diluted share in fiscal 2011 was $0.08 and $0.33 for the three and nine-month periods,
$0.13 and $0.38, when the Energy Steel transaction costs are excluded, compared with $0.08 and
$0.58 for the same periods of fiscal 2010.
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following discussion should be read in conjunction with our Condensed Consolidated
Statements of Cash Flows:
</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="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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">December 31,</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">March 31,</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2010</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2010</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">48,234</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">74,590</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Working capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,958</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,704</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Working capital ratio<SUP style="FONT-size: 85%; vertical-align: text-top">(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.6</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">1)</TD>
    <TD>&nbsp;</TD>
    <TD>Working capital ratio equals current assets divided by current liabilities.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The $5,848 of net cash used in operating activities in the nine months of fiscal 2011
compared with the $12,723 of cash provided by operating activities in the prior year period
reflects primarily $2,478 lower net income, $7,961 reduction of customer deposits and $3,852 in
reduction of unbilled revenue.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Investing activities included the $17,882 in cash used to purchase Energy Steel during the
third quarter. Capital expenditures in the first nine months of fiscal 2011 were $1,435, compared
with $502 in the same period the prior year. The higher level of capital spending reflects an
investment in a major project for the U.S. Navy. We continue to expect capital expenditures for
fiscal 2011 will be between $2,800 and $3,300, of which $1,500 will be used to support our project
for the U.S. Navy.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We used $153 and $874 of cash to repurchase 10 and 58 shares of common stock in the three- and
nine-month periods ended December&nbsp;31, 2010. This compares with $0 and $229 which was used to
repurchase 0 and 26 shares of common stock in the three and nine month
periods ended December&nbsp;31, 2009. Our board of directors implemented a stock repurchase
program which was announced in January&nbsp;2009. The stock repurchase program is effective through the
earlier of July&nbsp;29, 2011, when all 1,000 shares available under the program are
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->26<!-- /Folio -->
</DIV>

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">repurchased by us
or when our board of directors terminates the program. In total, 362 shares have been repurchased
under this plan at a total cost of $3,392.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dividend payments in the first nine months of fiscal 2011 were $592 compared with $591 for the
first nine months of fiscal 2010.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our cash, cash equivalents, and investments on December&nbsp;31, 2010 were $48,234 compared with
$74,590 at the end of fiscal 2010. Investments on December&nbsp;31, 2010 were $27,516 compared with
$70,060 on March&nbsp;31, 2010. Investments are made in United States government instruments, generally
with maturity periods of 91 to 120&nbsp;days. Starting in the third quarter of fiscal 2010, we made a
decision to keep a portion of our cash and investments in a short term, money market account with
Bank of America, to cash collateralize our letters of credit and receive a discounted fee. Cash
and equivalents on December&nbsp;31, 2010 were $20,718 compared with $4,530 on March&nbsp;31, 2010.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our current cash, cash equivalents, and investments position includes $14,368 in customer
deposits. A small number of major customers provided upfront, negotiated cash payments to assist
in lowering our cost to complete their projects in the fourth quarter of fiscal 2010. This cash is
being utilized to procure materials for these customers&#146; projects in the fiscal years ended March
31, 2011 and 2012. Although we often obtain progress payments for large projects from our
customers throughout the procurement and manufacturing process, during fiscal 2010 more cash was
provided for certain orders shortly after the order was secured. During the remainder of fiscal
2011 and into fiscal 2012, we expect operating cash flow may be negative at times, as the customer
deposits balance is utilized to procure materials to support production. Through the first nine
months of fiscal 2011, our customer deposit liability decreased by $7,961.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The acquisition
of Energy Steel included a contingent earn-out, which ranges from $0 to $2,000,
dependent upon Energy Steel&#146;s earnings performance in calendar years 2011 and 2012. A contingent
liability of $1,800 was recorded related to the earn-out and will be payable in fiscal 2011 and
fiscal 2012, if achieved. In addition, we entered into an agreement to lease the manufacturing and
office facilities of Energy Steel, which provides us with an option to purchase the leased facility for
$2,500 at any time during the first two years of the five year lease term.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We entered into a new revolving credit facility with Bank of America, N.A. in December&nbsp;2010.
The new facility provides us with a line of credit of $25,000, including letters of credit and bank
guarantees. In addition, the facility has an accordion feature, which allows us to increase the
facility by as much as an additional $25,000, for a total of $50,000. Borrowings under our credit
facility are secured by all of our assets. Letters of credit outstanding under our credit facility
on December&nbsp;31, 2010 and March&nbsp;31, 2010 were $15,016 and $9,584, respectively. Other utilization
of our credit facility limits at December&nbsp;31, 2010 and March&nbsp;31, 2010 were $0. Our borrowing rate
as of December&nbsp;31, 2010 was Bank of America&#146;s prime rate, or 3.25%. We believe that cash generated
from operations, combined with our investments and available financing capacity under our credit
facility, will be adequate to meet our cash needs for the immediate future.
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Orders for the three- and nine-month periods ended December&nbsp;31, 2010 were $17,784 and $36,384,
respectively, compared with $51,644 and $90,049 for the same periods in the prior
fiscal year. Orders represent communications received from customers requesting us to supply
products and services. Included in orders for the three-month period ended December&nbsp;2010 was $839
associated with the acquisition of Energy Steel.
</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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the third quarter of fiscal 2011, we experienced a decline in orders in all markets,
compared with the record orders received in the third quarter of fiscal 2010 (which included the
previously mentioned U.S. Navy order in excess of $25,000).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Domestic orders were $8,953 or 50% of total orders, while international orders were $8,831 in
the third quarter. In the third quarter of fiscal 2010, domestic orders were $36,981 and
international orders were $14,663, or 72% and 28% of total orders, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the first nine months of fiscal 2011, domestic orders were 46% of total orders or $16,696,
while international orders were 54%, or $19,688. During the first nine months of fiscal 2010,
domestic orders were 52%, or $47,078, and international orders were 48% of total orders, or
$42,971.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Backlog was down 4% to $90,531 at December&nbsp;31, 2010, compared with a record $94,255 backlog at
March&nbsp;31, 2010. The current backlog includes Energy Steel, which accounts for $8,625. Backlog is
defined as the total dollar value of orders received for which revenue has not yet been recognized.
All orders in backlog represent orders from our traditional markets in established product lines.
Approximately 70% to 80% of orders currently in backlog are expected to be converted to sales
within the next twelve months. This differs from our normal conversion rate, which is
approximately 85% to 90% of backlog converting to sales over a twelve-month period. Our current
backlog conversion period has been lengthened due to a small number of large projects (especially
the project for the U.S. Navy), with extended delivery requirements. At December&nbsp;31, 2010, 38% of
our backlog was attributable to equipment for refinery project work, 8% to chemical and
petrochemical projects, and 54% for other commercial or industrial applications (including the
Northrop Grumman order for the U.S. Navy). At December&nbsp;31, 2009, 40% of our backlog was attributed
to equipment for refinery project work, 20% to chemical and petrochemical projects, and 40% for
other commercial or industrial applications.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At March&nbsp;31, 2010, our backlog included four orders with a value of $6,655 that had been
placed on hold (suspended)&nbsp;pending further customer evaluation. During the nine months ended
December&nbsp;31, 2010, two orders valued at $4,278 were returned to active status and one order valued
at $1,588 was cancelled. Production had started on the cancelled project prior to such order being
put on hold and the customer requested shipment of the partly completed project on an &#147;as is&#148;
basis. At December&nbsp;31, 2010, one order included in backlog with a value of $1,130 remained on hold
(suspended).
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales
have begun to improve, as evidenced in the second and third quarters of fiscal 2011.
Sales increased sequentially by 22% in the third quarter compared with the second quarter, at
$19,215, up from $15,723 after an increase of 18% in the second quarter of fiscal 2011 compared
with the first quarter of fiscal 2011 of $13,351. We expect the sequential sales growth, which occurred over the
past two quarters of fiscal 2011, to continue into the fourth quarter of fiscal 2011. Sales in the
first nine months of fiscal 2011 were $48,289. We expect sales for the full fiscal year to be
between $69,000 and $72,000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Orders in the third quarter of fiscal 2011 of $17,784, including $839 from Energy Steel, were
improved from the previous two trailing quarters and were about equivalent to the combined order
total of $18,600 from the first two quarters of fiscal 2011. Our order activity was strong in
fiscal 2010 and included a few very large orders with extended delivery schedules. With the
addition of the Energy Steel backlog of $8,625, total backlog on December&nbsp;31, 2010 was $90,531,
just 4% below the March&nbsp;2010 record level of $94,255.
</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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We expect near term order levels to continue to be variable by quarter. While we have seen
some improvements in the Middle East, Asia and recently, South America, it is not clear that the
recovery in the international markets has fully taken hold. We also believe the domestic market in
refining and chemical processing will be relatively weak for the remainder of fiscal 2011 and beyond. Although we are
generally encouraged by the outlook,  we anticipate that recovery will commence slowly,
particularly in the U.S. markets. We are encouraged at the strength of the domestic nuclear market
and the opportunities that this will provide for us with the acquisition of Energy Steel.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For fiscal 2011, we expect sales to increase by 11% to 16%, to between $69,000 and $72,000
when compared with fiscal 2010. This is at the upper end of our previous guidance range, due to
the addition of Energy Steel for a few weeks of the third quarter and the entire fourth quarter of
fiscal 2011.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that our gross profit margin for fiscal 2011 will be in the 28% to 30% range. This
margin level is below the gross profit margin level we achieved in fiscal 2010, which had improved
margins in the first two quarters resulting from raw material purchasing benefits. We expect that our
 margins in fiscal 2011 will  be  affected by the following:
</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="1%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A significantly enhanced competitive environment, as we and our competitors have been
aggressively pursuing fewer projects.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A shift toward international markets, where margins are generally lower when compared
with domestic projects.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Continued expected underutilization of capacity, especially in the first two quarters of
fiscal 2011.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross profit margins are expected to improve beyond fiscal 2011 as volumes increase. We
believe the gross profit margin percentage at the peak of the next cycle will be in the
mid-to-upper 30% range.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SG&#038;A spending is expected to be between $12,400 and $12,800 for fiscal 2011, excluding the
$656 transaction costs related to the Energy Steel acquisition. Our effective tax rate during
fiscal 2011 is expected to be between 33% and 34%, absent one time adjustments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash flow in fiscal 2011 is expected to be negative due to our acquisition of Energy Steel,
which utilized $17,882 in cash, and the drawdown of customer deposits (which have decreased 36% to
$14,368 on December&nbsp;31, 2010). Customer deposits grew in the fourth quarter of fiscal 2010 from
$5,461 at December&nbsp;31, 2009 to $22,022 at March&nbsp;31, 2010. The increase in customer deposits was
due to a small number of major customers who provided upfront negotiated cash payments to assist in
lowering our cost to complete their projects. This cash was and will continue to be utilized to
procure materials for these customers&#146; projects through fiscal 2013. We also expect to spend
$2,800 to $3,300 in capital spending, above our typical $1,500 to $2,000 range, due to a $1,500
capital project required for the project for the U.S. Navy.
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have been named as a defendant in certain lawsuits alleging personal injury from exposure
to asbestos contained in our products. We are a co-defendant with numerous other defendants in
these lawsuits and intend to vigorously defend ourselves against these claims. The claims are
similar to previous asbestos lawsuits that named us as a defendant. Such previous lawsuits either
were dismissed when it was shown that we had not supplied products to the
</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">plaintiffs&#146; places of
work or were settled by us for amounts below expected defense costs. Neither the outcome of these
lawsuits nor the potential for liability can be determined at this time.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From time to time in the ordinary course of business, we are subject to legal proceedings and
potential claims. As of December&nbsp;31, 2010, other than noted above, we were unaware of any material
litigation matters.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Critical Accounting Policies, Estimates, and Judgments</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our unaudited condensed consolidated financial statements are based on the selection of
accounting policies and the application of significant accounting estimates, some of which require
management to make significant assumptions. We believe that the most critical accounting estimates
used in the preparation of our condensed consolidated financial statements relate to labor hour
estimates used to recognize revenue under the percentage-of-completion method, accounting for
contingencies, under which we accrue a loss when it is probable that a liability has been incurred
and the amount can be reasonably estimated, accounting for pensions and other postretirement
benefits and determining fair value estimates as they relate to assets acquired and liabilities
assumed in business combinations. For further information, refer to Item&nbsp;7 &#147;Management&#146;s
Discussion and Analysis of Financial Condition and Results of Operations&#148; and Item&nbsp;8 &#147;Financial
Statements and Supplementary Data&#148; included in our Annual Report on Form 10-K for the year ended
March&nbsp;31, 2010.
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We did not have any off balance sheet arrangements as of December&nbsp;31, 2010 or March&nbsp;31, 2010,
other than operating leases.
</DIV>
<DIV align="left">
<A name="L41646104"></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;3.</B></TD>
    <TD>&nbsp;</TD>
    <TD><B>Quantitative and Qualitative Disclosures About Market Risk</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The principal market risks (i.e., the risk of loss arising from changes in the market) to
which we are exposed are foreign currency exchange rates, price risk and project cancellation risk.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The assumptions applied in preparing the following qualitative and quantitative disclosures
regarding foreign currency exchange rate, price risk and project cancellation risk are based upon
volatility ranges experienced by us in relevant historical periods, our current knowledge of the
marketplace, and our judgment of the probability of future volatility based upon the historical
trends and economic conditions of the markets in which we operate.
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;International sales for the three- and nine-month periods ending December&nbsp;31, 2010 were 64%
and 59% of total sales, respectively, compared with 58% and 52% for the same periods of
fiscal 2010. Operating in markets throughout the world exposes us to movements in currency
exchange rates. Currency movements can affect sales in several ways, the foremost being our
ability to compete for orders against foreign competitors that base their prices on relatively
weaker currencies. Business lost due to competition for orders against competitors using a
relatively weaker currency cannot be quantified. In addition, cash can be adversely impacted by
the conversion of sales made by us in a foreign currency to U.S. dollars.
</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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the first nine months of each of fiscal 2011 and fiscal 2010, all sales by us and our
wholly-owned Chinese subsidiary, for which we were paid, were denominated in the local currency
(the vast majority of which were in U.S. dollars, with a small amount of sales denominated in
Chinese RMB). We have limited exposure to foreign currency purchases. In the first nine months of fiscal
2011 and 2010, our purchases in foreign currencies represented 1% and 1%, respectively, of the cost
of products sold. At certain times, we may utilize forward foreign currency exchange contracts to
limit currency exposure. Forward foreign currency exchange contracts were not used in the periods
being reported on in this Quarterly Report on Form 10-Q and as of December&nbsp;31, 2010 and March&nbsp;31,
2010, we held no forward foreign currency contracts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Price Risk</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating in a global marketplace requires us to compete with other global manufacturers
which, in some instances, benefit from lower production costs and more favorable economic
conditions. Although we believe that our customers differentiate our products on the basis of our
manufacturing quality and engineering experience and excellence, among other things, such lower
production costs and more favorable economic conditions mean that certain of our competitors are
able to offer products similar to ours at lower prices. Moreover, the cost of metals and other
materials used in our products have experienced significant volatility. Such factors, in addition
to the global effects of the recent volatility and disruption of the capital and credit markets,
have resulted in downward demand and pricing pressure on our products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Project Cancellation and Project Continuation Risk</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As described in Note 3 to the Condensed Consolidated Financial Statements included in Item&nbsp;1
of this report, at March&nbsp;31, 2010, our backlog included four orders with a value of
$6,655 that had been placed on hold (suspended)&nbsp;pending further customer evaluation. During the
nine months ended December&nbsp;31, 2010, two orders valued at $4,278 were returned to active status and
one order valued at $1,588 was cancelled. Production had started on the cancelled project prior to
such order being put on hold and the customer requested shipment of the partly completed project on
an &#147;as is&#148; basis. At December&nbsp;31, 2010, one order included in backlog with a value of $1,130
remained on hold (suspended). We attempt to mitigate the risk of cancellation by structuring
contracts with our customers to maximize the likelihood that progress payments made to us for
individual projects cover the costs we have incurred. As a result, we do not believe we have a
significant cash exposure to projects which may be cancelled.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Open orders are reviewed continuously through communications with customers. If it becomes
evident to us that a project is delayed well beyond its original shipment date, management will
move the project into placed on hold (suspended)&nbsp;category. Furthermore, if a project is cancelled
by our customer, it is removed from our backlog.
</DIV>
<DIV align="left">
<A name="L41646105"></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;4.</B></TD>
    <TD>&nbsp;</TD>
    <TD><B>Controls and Procedures</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Conclusion regarding the effectiveness of disclosure controls and procedures</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our President and Chief Executive Officer (principal executive officer) and Vice President-Finance
&#038; Administration and Chief Financial Officer (principal financial officer) each have evaluated the
effectiveness of our disclosure controls and procedures (as defined in Exchange
</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">Act Rules&nbsp;13a-15(e)
and 15d-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on
such evaluation, and as of such date, our President and Chief Executive Officer and Vice
President-Finance &#038; Administration and Chief Financial Officer concluded that our disclosure
controls and procedures were effective in all material respects.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Changes in internal control over financial reporting</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other than the events discussed under the section entitled Energy Steel acquisition below, there
has been no change to our internal control over financial reporting during the quarter covered by
this Quarterly Report on Form 10-Q that has materially affected, or that is reasonably likely to
materially affect, our internal control over financial reporting.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Energy Steel Acquisition</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;14, 2010, we acquired Energy Steel, a code fabrication and specialty machining company
dedicated exclusively to the nuclear power industry and located in Lapeer, Michigan. For
additional information regarding the acquisition, refer to Note 2 to the Unaudited Condensed
Consolidated Financial Statements and Management&#146;s Discussion and Analysis of Financial Condition
and Results of Operations included in Item&nbsp;2 in this Quarterly Report on Form 10-Q.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As permitted by Securities and Exchange Commission guidance, we plan to exclude the Energy Steel
acquisition from the scope of our Sarbanes-Oxley Section&nbsp;404 report on internal control over
financial reporting for the fiscal year ending March&nbsp;31, 2011. We are in the process of
implementing our internal control structure over the Energy Steel acquisition and we expect that
this effort will be completed during the fiscal year ending March&nbsp;31, 2012.
</DIV>


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




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


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">FORM 10-Q
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">December&nbsp;31, 2010
</DIV>
<DIV align="left">
<A name="L41646106"></A>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">PART II &#151; OTHER INFORMATION
</DIV>
<DIV align="left">
<A name="L41646107"></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;1A.</B></TD>
    <TD>&nbsp;</TD>
    <TD><B>Risk Factors</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Our acquisition of Energy Steel &#038; Supply Co. may not be successful.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On
December&nbsp;14, 2010, we acquired Energy Steel &#038; Supply Co., which provides products to the
nuclear industry. We cannot provide any assurances that we will be able to integrate the operations
of Energy Steel without encountering difficulties, including unanticipated costs, difficulty in
retaining customers and supplier or other relationships, failure to retain key employees, diversion
of management&#146;s attention, failure to integrate our information and accounting systems or establish
and maintain proper internal control over financial reporting, any of which would harm our business
and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Furthermore, we may not realize the revenue and net income that we expect to achieve or that
would justify our investment in Energy Steel, and we may incur costs in excess of what we
anticipate. To effectively manage our expected future growth, we must continue to successfully
manage our integration of Energy Steel and continue to improve our operational systems, internal
procedures, accounts receivable and management, financial and operational controls. If we fail in
any of these areas, our business and results of operations could be harmed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Our acquisition of Energy Steel might subject us to unknown liabilities.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Energy Steel may have unknown liabilities, including, but not limited to, product liability,
workers&#146; compensation liability, tax liability and liability for improper business practices.
Although we are entitled to indemnification from the seller of Energy Steel for these and other
matters, we could experience difficulty enforcing those obligations or we could incur material
liabilities for the past activities of Energy Steel. Such liabilities and related legal or other
costs could harm our business or results of operations.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->33<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#L41646tocpage">Table of Contents</A></H5><P>

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

<DIV align="left">
<A name="L41646108"></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;2.</B></TD>
    <TD>&nbsp;</TD>
    <TD><B>Unregistered Sales of Equity Securities and Use of Proceeds</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under our previously announced stock repurchase program, we may make repurchases of our
common stock from time to time either in the open market or through privately negotiated
transactions and fund such repurchases with current cash on hand and cash generated from
operations. Our stock repurchase program terminates at the earlier of the expiration of the
program in July&nbsp;2011, when all 1,000 shares authorized thereunder are repurchased or when our Board
of Directors otherwise determines to terminate the program. Common stock repurchases in the quarter
ended December&nbsp;31, 2010 were as follows:
</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="52%">&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>
    <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>&nbsp;</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>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(c)<SUP style="FONT-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(d)</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</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>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Total Number</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Maximum</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</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>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">of Shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Number of</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</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>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Purchased</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Shares that</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(a)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(b)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">As Part of</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">May Yet</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Total</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Average</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Publicly</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Be Purchased</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Number</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Price</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Announced</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Under</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">of Shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Paid Per</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Plans or</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">The Plans or</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Period</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Purchased</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Share</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Programs</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Programs</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">10/1/2010 &#151; 10/31/2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14.98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">362</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">638</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">11/1/2010 &#151; 11/30/2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">362</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">638</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">12/1/2010 &#151; 12/31/2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">362</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">638</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</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>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14.98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">362</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">638</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>The total number of shares repurchased as part of our publicly announced program includes
all shares repurchased since the commencement of the stock repurchase program on January&nbsp;29,
2009.</TD>
</TR>

</TABLE>


<DIV align="left">
<A name="L41646109"></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;6.</B></TD>
    <TD>&nbsp;</TD>
    <TD><B>Exhibits</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 10%">See index to exhibits on page 36 of this report.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->34<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#L41646tocpage">Table of Contents</A></H5><P>

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



<DIV align="left">
<A name="L41646110"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">SIGNATURES
</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 thereunto 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 colspan="3" align="left">GRAHAM CORPORATION<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Jeffrey Glajch
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Jeffrey Glajch&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Vice President - Finance &#038; Administration and
Chief Financial Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Date: February&nbsp;8, 2011

</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->35<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#L41646tocpage">Table of Contents</A></H5><P>

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

<DIV align="left">
<A name="L41646111"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U>INDEX TO EXHIBITS</U>
</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="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="0%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="87%">&nbsp;</TD>
</TR>
<TR></TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">(3)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center" valign="top">(ii)
</TD>
    <TD>&nbsp;</TD>
    <TD colspan="5" nowrap valign="top" align="left">Bylaws</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 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>
    <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 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">3.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated By-Laws of Graham
Corporation, are incorporated herein by
reference from Exhibit&nbsp;3.2 to the Company&#146;s
Current Report on Form&nbsp;8-K dated October
28, 2010.</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 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>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</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 colspan="5" nowrap valign="top" align="left">Material Contracts</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 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>
    <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 nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">*</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Stock Purchase Agreement dated December&nbsp;14,
2010 by and among Graham Corporation, ES
Acquisition Corp., Energy Steel &#038; Supply
Co. and Lisa D. Rice, individually, and as
Trustee of the Lisa D. Rice Revocable Trust
dated June&nbsp;5, 2003.</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 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>
    <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 nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">*</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Earn Out Agreement dated December&nbsp;14, 2010
by and between Energy Steel Acquisition
Corp., Graham Corporation and Lisa D. Rice,
individually, and as Trustee of the Lisa D.
Rice Revocable Trust dated June&nbsp;5, 2003.</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 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>
    <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 nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">*</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10.3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Escrow Agreement dated December&nbsp;14, 2010 by
and among PNC Bank, National Association,
ES Acquisition Corp. and Lisa D. Rice,
individually and as Trustee of the Lisa D.
Rice Revocable Trust dated June&nbsp;5, 2003.</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 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>
    <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 nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">*</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10.4</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Lease Agreement by and between ESSC
Investments, LLC, Energy Steel &#038; Supply
Co., and Graham Corporation dated December
14, 2010.</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 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>
    <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 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">10.5</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Loan Agreement between the Company and Bank
of America, N.A., dated December&nbsp;3, 2010,
is incorporated herein by reference from
Exhibit&nbsp;99.1 to the Company&#146;s Current
Report on Form&nbsp;8-K dated December&nbsp;3, 2010.</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 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>
    <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 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">10.6</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Trademark Security Agreement Amendment 1
between the Company and Bank of America,
N.A., dated December&nbsp;3, 2010, is
incorporated herein by reference from
Exhibit&nbsp;99.2 to the Company&#146;s Current
Report on Form&nbsp;8-K dated December&nbsp;3, 2010.</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 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>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(31</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD colspan="5" nowrap valign="top" align="left">Rule&nbsp;13a-14(a)/15d-14(a) Certifications</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 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>
    <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 nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">*</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">31.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certification of Principal Executive Officer</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 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>
    <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 nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">*</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">31.2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certification of Principal Financial Officer</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 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>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(32</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD colspan="5" nowrap valign="top" align="left">Section&nbsp;1350 Certifications</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 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>
    <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 nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">*</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">32.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section&nbsp;1350 Certifications</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>




<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</div>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom" style="font-size: 1px">
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="87%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="right" valign="top">*</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Exhibits filed with this report.</TD>
</TR>
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</TABLE>
</DIV>



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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>2
<FILENAME>l41646exv10w1.htm
<DESCRIPTION>EX-10.1
<TEXT>
<HTML>
<HEAD>
<TITLE>exv10w1</TITLE>
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<DIV style="font-family: 'Times New Roman',Times,serif">


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


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


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>by and among</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>ES ACQUISITION CORP.,</B>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>ENERGY STEEL &#038; SUPPLY CO.</B>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>and</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>LISA D. RICE, individually<BR>
and as Trustee of the LISA D. RICE REVOCABLE TRUST DATED JUNE 5, 2003</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Dated as of December&nbsp;14, 2010</B>
</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>STOCK PURCHASE AGREEMENT</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">This <B>STOCK PURCHASE AGREEMENT </B>(this &#147;<B><I>Agreement</I></B>&#148;) has been made as of December&nbsp;14, 2010 (&#147;<B><I>Effective
Date</I></B>&#148;), by and among <B>GRAHAM CORPORATION</B>, a Delaware corporation (&#147;<B><I>Graham</I></B>&#148;), <B>ES ACQUISITION CORP.</B>, a
Delaware corporation and a direct wholly-owned Subsidiary of Graham (&#147;<B><I>Buyer</I></B>&#148;), <B>ENERGY STEEL &#038;
SUPPLY CO.</B>, a Michigan corporation (&#147;<B><I>Energy Steel</I></B>&#148;), and <B>LISA D. RICE individually (&#147;</B><B><I>Rice</I></B>&#148;) <B>and as
sole Trustee of the LISA D. RICE REVOCABLE TRUST DATED JUNE 5, 2003 </B>(the &#147;<B><I>Trust</I></B>&#148;, collectively
referred to with Rice as the &#147;<B><I>Seller</I></B>&#148;). Graham, Buyer, Energy Steel and the Seller are
collectively referred to herein as the &#147;<B><I>parties,</I></B>&#148; and each is a &#147;<B><I>party</I></B>&#148; as described further below.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>WHEREAS</B>, the Seller is the sole beneficial and record holder of nine thousand (9,000) shares
of no par value voting common stock of Energy Steel, which constitute all of the issued and
outstanding shares of capital stock of Energy Steel (the &#147;<B><I>Energy Steel Shares</I></B>&#148;);
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>WHEREAS</B>, the Buyer desires to acquire from the Seller, and the Seller desires to sell to the
Buyer, for the consideration hereinafter provided, the Energy Steel Shares; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>NOW, THEREFORE, </B>in consideration of the premises and the representations, warranties and
covenants herein contained, the parties agree as follows:
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE 1.</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>DEFINITIONS</B>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>1.1 Definitions.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to the other definitions contained in this Agreement, the following terms will,
when used in this Agreement, have the following respective meanings:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Actual Unpaid Transaction Expenses</I></B>&#148; means the actual amount of all Energy Steel Transaction
Expenses that were not paid by Energy Steel as of the close of business on the Closing Date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Affiliate</I></B>&#148; means a Person which, directly or indirectly, controls, is controlled by, or is
under common control with, the referenced party.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Business</I></B>&#148; means the business conducted by Energy Steel, both as of the date hereof and as of
the Closing, that being principally the manufacture and supply of certain products and raw
materials to the nuclear industry.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Capital Expenditure</I></B>&#148; means any expenditures by Energy Steel for the acquisition, lease,
repair or improvement of fixed or capital assets, including any and all improvements or repairs to
equipment.
</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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Certifying Officers</I></B>&#148; means: (a)&nbsp;in the case of Energy Steel, its President; and (b)&nbsp;in the
case of Graham, any one of its duly elected executive officers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Claim</I></B>&#148; means any actual or threatened contest, claim, demand, assessment, action, suit, cause
of action, complaint, litigation, proceeding, hearing, arbitration, investigation or notice
involving any Person.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Closing</I></B>&#148; means the consummation of the purchase and sale of the Energy Steel Shares as set
forth in Section&nbsp;2.3.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Code</I></B>&#148; means the Internal Revenue Code of 1986, as amended, together with all rules and
regulations promulgated thereunder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Competition Laws</I></B>&#148; means and includes the Sherman Act, as amended, the Clayton Act, as
amended, the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, the Federal Trade
Commission Act, as amended, national competition Laws, European Union competition Laws and all
other U.S. or non-U.S. Laws that are designed or intended to prohibit, restrict or regulate actions
having the purpose or effect of monopolization or restraint of trade.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Contracts</I></B>&#148; means and includes all contracts, subcontracts, agreements, leases, licenses,
sublicenses, options, notes, bonds, mortgages, indentures, deeds of trust, collateral assignments,
obligations, instruments, concessions, guarantees, franchises, purchase orders, arrangements,
commitments, undertakings and understandings of any kind, whether written or oral.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Disclosure Schedules</I></B>&#148; means the disclosure schedules, in the form approved by the Buyer and
Graham (as evidenced by their execution of this Agreement), and delivered by Energy Steel to Graham
and Buyer concurrently with the execution and delivery of this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Earn Out Agreement</I></B>&#148; means the earn out agreement delivered by Buyer to Seller at the Closing
in the form attached hereto as <U>Exhibit&nbsp;A</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Encumbrances</I></B>&#148; means and includes all liens, charges, encumbrances, mortgages, pledges,
security interests, options and any other restrictions or third party rights, including without
limitation guarantees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Energy Steel Debt</I></B>&#148; means all indebtedness of Energy Steel on which interest accrues
(including both the current and long-term portions of any long-term indebtedness), all as
identified on <U>Schedule&nbsp;1.1</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Energy Steel Transaction Expenses</I></B>&#148; means fees and expenses incurred by Energy Steel, on its
behalf or on behalf of Seller (including any obligation of Energy Steel to reimburse the Seller for
any such fees and expenses), in respect of (i)&nbsp;legal, accounting, investment banking services and
other professional services, in each case on the sell-side of the transaction in connection with
the transactions contemplated under this Agreement through and including the Closing Date, (ii)&nbsp;any
severance or stay bonus payment payable to directors, officers, employees and respective Affiliates
of Energy Steel at or prior to the Closing as a result of or in contemplation of the consummation
of the transactions contemplated by this Agreement, (iii)&nbsp;any fees paid by the Seller or Energy
Steel on behalf of the Seller to the Unrelated Accounting Firm and (iv)&nbsp;any fees or expenses paid
by or due
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">from Seller or Energy Steel in connection with that certain Letter Agreement with August Mack
Environmental, Inc. dated November&nbsp;8, 2010, accepted by Energy Steel on November&nbsp;16, 2010 and that
certain Letter Agreement with Kurschat &#038; Company dated November&nbsp;11, 2010, accepted by Energy Steel
on November&nbsp;16, 2010.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Environmental Laws</I></B>&#148; means, collectively, all U.S. federal, national, state and local
statutes, regulations, ordinances, codes, published guidelines and policies, directives and orders
(including all amendments thereto) pertaining to environmental matters (which includes air, water
vapor, surface water, groundwater, soil, natural resources, chemical use, health, safety and
sanitation), including the Comprehensive Environmental Response, Compensation and Liability Act,
the Resource Conservation and Recovery Act, the Clean Air Act, the Federal Water Pollution Control
Act, the Safe Water Drinking Act, the Toxic Substance Control Act and the Occupational Safety and
Health Act.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>ERISA</I></B>&#148; means the Employee Retirement Income Security Act of 1974, as amended, together with
all rules and regulations promulgated thereunder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Escrow Agent</I></B>&#148; means PNC Bank, National Association.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Escrow Agreement</I></B>&#148; means the escrow agreement by and among Buyer, Seller and Escrow Agent in
the form attached hereto as <U>Exhibit&nbsp;B</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Estimated Net Working Capital</I></B>&#148; means the Net Working Capital, as set forth on the Estimated
Working Capital and Unpaid Transaction Expenses Schedule.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Estimated Unpaid Transaction Expenses</I></B>&#148; means the estimate, as prepared and specified in the
Estimated Working Capital and Unpaid Transaction Expenses Schedule, of the amount of all Energy
Steel Transaction Expenses that will not be paid by Energy Steel as of the close of business on the
Closing Date and that are to be paid by Energy Steel after the Closing Date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Estimated Working Capital and Unpaid Transaction Expenses Schedule</I></B>&#148; means the draft schedule
of the Net Working Capital as of the Closing Date, prepared and delivered by Energy Steel and the
Seller at the Closing in accordance with the calculation formula attached hereto as <U>Exhibit
C</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Exchange Act</I></B>&#148; means the Securities Exchange Act of 1934, as amended, together with all rules
and regulations promulgated thereunder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Excluded Assets and Claims</I></B>&#148; means all assets and claims of Energy Steel listed on
<U>Schedule&nbsp;2.5</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Final Working Capital and Unpaid Transaction Expenses Schedule</I></B>&#148; means the schedule of the Net
Working Capital and Estimated Unpaid Transaction Expenses as of the Closing Date, which shall be in
the same format as the Estimated Working Capital and Unpaid Transaction Expenses Schedule and will
include a calculation of the Net Working Capital, as finally agreed to or otherwise determined by
operation of Section&nbsp;2.2(b), and the Working Capital Deficit or Working Capital Surplus, if any,
and the Actual Unpaid Transaction Expenses.
</DIV>

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Fiscal 2008</I></B>&#148; means Energy Steel&#146;s fiscal year beginning on October&nbsp;1, 2007 and ending on
September&nbsp;30, 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Fiscal 2009</I></B>&#148; means Energy Steel&#146;s fiscal year beginning on January&nbsp;1, 2009 and ending on
December&nbsp;31, 2009.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Foreign Corrupt Practices Act</I></B>&#148; means the Foreign Corrupt Practices Act of 1977, as amended,
and the regulations promulgated thereunder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>GAAP</I></B>&#148; means United States generally accepted accounting principles as in effect from time to
time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>GAAP Exceptions</I></B>&#148; means the exceptions to GAAP and/or the accounting principles and methods of
Energy Steel which modify or interpret GAAP, all as set forth on <U>Exhibit&nbsp;D</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Governmental Entity</I></B>&#148; means any U.S. or non-U.S. federal, national, state or local court,
legislative body, governmental or quasi-governmental body, municipality, political subdivision,
department, commission, board, bureau, tribunal, department, administration, council, agency,
arbitrator, authority or other instrumentality.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Hazardous Substances</I></B>&#148; means and includes: (a)&nbsp;any hazardous materials, hazardous wastes,
hazardous substances and toxic substances as those or similar terms are defined under any
Environmental Law; (b)&nbsp;any asbestos or any material that contains any hydrated mineral silicate,
including chrysolite, amosite, crocidolite, tremolite, anthophylite and/or actinolite, whether
friable or non-friable; (c)&nbsp;any polychlorinated biphenyls or polychlorinated biphenyl-containing
materials or fluids; (d)&nbsp;radon; (e)&nbsp;any other hazardous, radioactive, toxic or noxious substance,
material, pollutant, contaminant or solid, liquid or gaseous waste; (f)&nbsp;any petroleum, petroleum
hydrocarbons, petroleum products, crude oil or any fractions thereof, natural gas or synthetic gas;
and (h)&nbsp;any substance that, whether by its nature or its use, is or becomes subject to regulation
under any Environmental Laws or with respect to which any Environmental Laws or Governmental Entity
requires or will require environmental investigation, monitoring or remediation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Improvements</I></B>&#148; means all buildings, structures, fixtures, building systems and equipment, and
all components thereof, including the roof, foundation, load-bearing walls and other structural
elements thereof, heating, ventilation, air conditioning, mechanical, electrical, plumbing and
other building systems, environmental control, remediation and abatement systems, sewer, storm and
waste water systems, irrigation and other water distribution systems, parking facilities, fire
protection, security and surveillance systems, and telecommunications, computer, wiring and cable
installations, included in any Leased Real Property (as defined below).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Intellectual Property</I></B>&#148; means all of the following in any jurisdiction throughout the world:
(a)&nbsp;all inventions (whether patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications, and patent disclosures, together with
all reissuances, continuations, continuations-in-part, revisions, extensions, and reexaminations
thereof; (b)&nbsp;all trademarks, service marks, trade dress, logos, slogans, trade names, corporate
names, internet domain names, and rights in telephone numbers (excluding the cellular telephone
number of Seller, whether or not a paid expense of Energy Steel), together with all translations,
adaptations, derivations, and combinations thereof and including all goodwill associated therewith,
and all
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">applications, registrations, and renewals in connection therewith; (c)&nbsp;all copyrightable
works, all copyrights, and all applications, registrations, and renewals in connection therewith;
(d)&nbsp;all mask works and all applications, registrations, and renewals in connection therewith; (e)
all trade secrets and confidential business information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and production processes and techniques, technical
data, designs, drawings, specifications, customer, contact and supplier lists (including, without
limitation, all addresses, phone numbers and other relevant contact information in whatever medium
for any of the aforementioned), pricing and cost information, and business and marketing plans and
proposals); (f)&nbsp;all computer software (including source code, executable code, data, databases and
related documentation); (g)&nbsp;all advertising and promotional materials; (h)&nbsp;all other proprietary
rights; and (i)&nbsp;all copies and tangible embodiments thereof (in whatever form or medium).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>IRS</I></B>&#148; means the U.S. Internal Revenue Service.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Laws</I></B>&#148; means, collectively, all U.S. laws, statutes, rulings, rules, regulations, judgments,
orders, decrees, awards, injunctions, writs, requirements, permits, certificates and ordinances of
any Governmental Entity, as in effect from time to time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Leases</I></B>&#148; means all leases, subleases, licenses, concessions and other agreements (written or
oral), including all amendments, extensions, renewals, guaranties and other agreements with respect
thereto, pursuant to which Energy Steel holds any real property, including the right to all
security deposits and other amounts and instruments deposited by or on behalf of Energy Steel
thereunder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Liability</I></B>&#148; means any liability (whether known or unknown, whether asserted or unasserted,
whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due), including any liability for Taxes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Loss</I></B>&#148; or &#147;<B><I>Losses</I></B>&#148; means any and all judgments, losses, Liabilities, amounts paid in
settlement, damages, fees, fines, penalties, deficiencies, costs and expenses (including interest,
court costs, reasonable fees and expenses of attorneys, accountants and other experts or other
reasonable expenses of litigation or other proceedings or of any claim, default or assessment).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Material Adverse Effect&#148; </I></B>or &#147;<B><I>Material Adverse Change</I></B>&#148; means, with respect to any entity any
occurrence, incident, action, failure to act, event, change or effect that is or could reasonably
be expected to be, materially adverse to the condition (financial or otherwise), properties,
assets, liabilities, business, results of operations, or prospects of such entity and its
subsidiaries, taken as a whole, or to the enforcement of this Agreement and any agreement
contemplated herein, <U>except</U> changes or any effect resulting from (a)&nbsp;the announcement or
other disclosure of this Agreement, (b)&nbsp;changes in general business and/or economic conditions,
hostilities involving the United States or in general financial market conditions; (c)&nbsp;any changes
in Laws directly or indirectly affecting the Buyer, Seller or Energy Steel; and (d)&nbsp;general
developments affecting the industry in which Energy Steel competes (so long as such changes do not
disproportionately and adversely affect Energy Steel to a materially disproportionate degree as
compared to similarly situated businesses).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Mitchell</I></B>&#148; means Michael Mitchell.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Mitchell Note</I></B>&#148; means that certain promissory note between Seller and Michael Mitchell dated
August&nbsp;28, 2003, as amended.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Net Working Capital</I></B>&#148; means the current assets (other than cash) less the current liabilities
of Energy Steel as of the close of business on the Closing Date less debt paid as of the Closing
Date, prepared in accordance with GAAP consistently applied and the other terms and conditions set
forth herein. Current liabilities shall specifically exclude any that relate to any Energy Steel
Transaction Expenses, which shall be and remain the sole responsibility of the Seller.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Ordinary Course of Business</I></B>&#148; means, when used with respect to any Person, the ordinary course
of business of such Person, consistent with past custom and practice of such Person (including with
respect to quantity and frequency).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Person</I></B>&#148; means and includes any individual, partnership, corporation, trust, company,
unincorporated organization, joint venture or other entity, and any Governmental Entity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Pre-Closing Taxes</I></B>&#148; means (i)&nbsp;all Taxes (or the non-payment thereof) of Energy Steel
attributable to any Pre-Closing Tax Period; (ii)&nbsp;any Tax Liability resulting from the operations of
Energy Steel for the Pre-Closing Tax Period; (iii)&nbsp;all Taxes (or the non-payment thereof) of any
member of an affiliated, consolidated, combined or unitary group of which Energy Steel was a member
prior to the Closing Date imposed on Energy Steel, including pursuant to Treasury Regulation
Section&nbsp;1.1502-6 or any analogous or similar state, local, or foreign law or regulation, and (iv)
all Taxes (or the non-payment thereof) of any Person (other than Energy Steel) imposed on Energy
Steel as a transferee or successor, by Contract or pursuant to any Law, rule or regulation, which
Taxes relate to an event or transaction occurring prior to Closing. In the case of any taxable
period that includes (but does not end on) the Closing Date (a &#147;<B><I>Straddle Period</I></B>&#148;), the amount of
any Taxes based on or measured by income or receipts of Energy Steel for the Pre-Closing Tax Period
shall be determined based on an interim closing of the books as of the close of business on the
Closing Date (and for such purpose, the taxable period of any partnership or other pass-through
entity in which Energy Steel holds a beneficial interest shall be deemed to terminate at such time)
and the amount of other Taxes of Energy Steel that relate to the Pre-Closing Tax Period shall be
deemed to be the amount of such Tax for the entire taxable period multiplied by a fraction, the
numerator of which is the number of days in the taxable period ending on and including the Closing
Date and the denominator of which is the number of days in the entire taxable period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Pre-Closing Tax Period</I></B>&#148; means any taxable period or portion thereof ending on or before the
Closing Date. In the case of any Straddle Period, the portion of the Straddle Period through the
end of the Closing Date shall constitute a Pre-Closing Tax Period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Prime Rate</I></B>&#148; means the per annum rate of interest publicly announced from time to time by HSBC
Bank, N.A. as its prime rate (or reference rate).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Release</I></B>&#148; means the release, deposit, disposal or leakage of any Hazardous Substance at, into,
upon or under any land, water or air, or otherwise into the environment or in any other manner that
threatens human health or the environment, including without limitation, by means of burial,
disposal, discharge, emission, injection, spillage, leakage, seepage, leaching, dumping, pumping,
pouring, escaping, placement and the like.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Representatives</I></B>&#148; means, when used with respect to any Person, such Person&#146;s attorneys,
accountants and other advisors.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>SEC</I></B>&#148; means the U.S. Securities and Exchange Commission.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Securities Act</I></B>&#148; means the Securities Act of 1933, as amended, together with all rules and
regulations promulgated thereunder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Subsidiary</I></B>&#148; means, with respect to any Person, any corporation, partnership, joint venture,
trust or other entity of which such Person, directly or indirectly through an Affiliate, owns an
amount of voting securities, or possesses other ownership interests, having the power, direct or
indirect, to elect a majority of the board of directors or other governing body thereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Target Working Capital</I></B>&#148; means an amount specified in and/or derived from application of the
Working Capital Formula Schedule attached hereto as <U>Exhibit&nbsp;E</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Tax</I></B>&#148; or &#147;<B><I>Taxes</I></B>&#148; means, collectively, U.S. and non-U.S. federal, national, state and local
income, payroll, withholding, employment, excise, sales, use, real and personal property, use and
occupancy, business and occupation, gross receipts, mercantile, real estate, capital stock and
franchise or other taxes, duties or assessments of any nature whatsoever, including all penalties,
interest or addition thereon and estimated or deferred taxes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>U.S.</I></B>&#148; means the United States of America.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Violation</I></B>&#148; means that the referenced fact or event: (a)&nbsp;conflicts with, or results in any
violation of, or a default (with or without notice or lapse of time, or both) under, or gives rise
to a right of termination, cancellation or acceleration of any obligation or the loss of a material
benefit under, or the creation of an Encumbrance (other than a Permitted Encumbrance) on assets in
connection with, the referenced Contract or other document; or (b)&nbsp;conflicts with, or results in
any violation (with or without notice or lapse of time, or both) under, or gives rise to any
Liability, damages, penalty or remedial action under, the referenced Law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Working Capital Deficit</I></B>&#148; means the amount, if any, by which the Net Working Capital reflected
on the Final Working Capital and Unpaid Transaction Expenses Schedule is less than the Estimated
Net Working Capital applying the Working Capital Formula.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Working Capital Formula</I></B>&#148; means the formula utilized in determining both the Target Working
Capital and the Final Working Capital as set forth on <U>Exhibit&nbsp;E</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Working Capital Surplus</I></B>&#148; means the amount, if any, by which the Net Working Capital reflected
on the Final Working Capital and Unpaid Transaction Expenses Schedule is more than the Estimated
Net Working Capital.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>1.2 Interpretation.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In this Agreement, unless the express context otherwise requires:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;the words &#147;<B><I>herein</I></B>,&#148; &#147;<B><I>hereof</I></B>&#148; and &#147;<B><I>hereunder</I></B>&#148; and words of similar import refer to this
Agreement as a whole, including the Disclosure Schedules and the Exhibits, and not to any
particular provision of this Agreement;
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;references to &#147;<B><I>Article</I></B>&#148; or &#147;<B><I>Section</I></B>&#148; are to the respective Articles and Sections of this
Agreement, and references to &#147;<B><I>Exhibit</I></B>&#148; are to the respective Exhibits annexed hereto;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;references to a &#147;<B><I>party</I></B>&#148; means a party to this Agreement and include references to such
party&#146;s successors and permitted assigns;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;references to a &#147;<B><I>third party</I></B>&#148; means a Person that is neither a party to this Agreement nor
an Affiliate thereof;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;the terms &#147;<B><I>dollars</I></B>&#148; and&#148; means U.S. dollars;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;the terms <B><I>&#147;knowledge&#148; </I></B>or &#147;<B><I>known</I></B>&#148; means those facts or things of which a party has actual
information. For purposes of this Agreement, the (i)&nbsp;term &#147;<B><I>Energy Steel&#146;s knowledge</I></B>&#148; or &#147;<B><I>knowledge
of Energy Steel</I></B>&#148; shall mean the actual knowledge of Seller, Allan Valentine, Robert Paton, Waylon
Waters, Arthur Olson, Timothy Shepherd, Neal Lake and Wendy Kirk, and (ii)&nbsp;term &#147;<B><I>knowledge of
Graham</I></B>&#148; or &#147;<B><I>knowledge of Buyer</I></B>&#148; shall mean the actual knowledge of Jeffrey F. Glajch, James R.
Lines and Jennifer R. Condame;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;terms defined in the singular have a comparable meaning when used in the plural, and vice
versa;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;the masculine pronoun includes the feminine and the neuter, and vice versa, as appropriate
in the context; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;wherever the word &#147;<B><I>include</I></B>,&#148; &#147;<B><I>includes</I></B>&#148; or &#147;<B><I>including</I></B>&#148; is used in this Agreement, it will
be deemed to be followed by the words &#147;<I>without limitation</I>,&#148; unless the context provides otherwise,
i.e., <B><I>&#147;</I></B><I>including only. . . . </I>&#148;
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE 2.</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>PURCHASE AND SALE OF ENERGY STEEL SHARES</B>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>2.1 Basic Transaction</B>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On and subject to the terms and conditions of this Agreement, the Buyer agrees to purchase
from the Seller, and the Seller agree to sell the Energy Steel Shares free and clear of all
Encumbrances for a purchase price comprised of: (a)&nbsp;a fixed amount of Eighteen Million Dollars
($18,000,000) in cash (the &#147;<B><I>Initial Cash Payment</I></B>&#148;); and (b)&nbsp;an amount up to Two Million Dollars
($2,000,000) (the &#147;<B><I>Earn Out Amount</I></B>&#148;), plus <U>or</U> minus any adjustments determined in
accordance with Section&nbsp;2.2(b) (collectively, the &#147;<B><I>Purchase Price</I></B>&#148;).
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>2.2 Payment of Purchase Price; Adjustments.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;<U>Closing Payments</U>. The Purchase Price shall be paid by Graham to Seller in
accordance with Subsections 2.2(a)(i), (ii), (iii)&nbsp;and (iv)&nbsp;below at the Closing as follows:
</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;(i) <U>Initial Cash Payment</U> &#151; On the Closing Date, Graham will pay to Seller the
Initial Cash Payment, in cash or immediately available funds by wire transfer to an account
specified by Seller in writing at least two (2)&nbsp;days prior to the Closing Date, <U>less</U>
any of the following: (1)&nbsp;to the holder of the Energy Steel Debt an amount equal to the
Energy Steel Debt contemplated to be paid in cash in accordance with the instructions set
forth in the Pay-Off Letter(s); (2)&nbsp;to Mitchell in an amount equal to the outstanding
balance under the Mitchell Note to be paid in cash in accordance with the instructions set
forth in the Pay-Off Letter(s); (3)&nbsp;the payment of the Estimated Unpaid Transaction Expenses
in the amount set forth on <U>Schedule&nbsp;2.2(a)</U>; (4)&nbsp;the amount, if any, by which the
Target Working Capital exceeds the Estimated Net Working Capital; and (5)&nbsp;the Escrow Amount
(as defined below).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) <U>Earn Out Amount</U> &#151; On the Closing Date, Graham shall execute and deliver to
Seller the Earn Out Agreement in the amount of Two Million Dollars ($2,000,000);
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) <U>Escrow Amount</U> &#151; On the Closing Date, Graham shall deliver One Million
Seven Hundred Fifty Thousand Dollars ($1,750,000) (the &#147;<B><I>Escrow Amount</I></B>&#148;) to the Escrow Agent
to be held pursuant to the terms and conditions of the Escrow Agreement; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) <U>Preliminary/Working Capital Surplus/Deficit</U> &#151; On the Closing Date, in
addition to the Initial Cash Payment and the Escrow Amount, Graham shall pay to the Seller a
cash payment in an amount equal to the amount, if any, by which the Estimated Net Working
Capital exceeds the Target Working Capital.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;<U>Post-Closing Adjustments</U>. Graham shall prepare and by May&nbsp;31, 2011 deliver to the
Seller the Final Working Capital and Unpaid Transaction Expenses Schedule. Graham shall provide the
Seller and its accounting and tax representatives, at the Seller&#146;s sole cost and expense, with full
and prompt access to the books and records of Energy Steel for purposes of validating the Final
Working Capital and Unpaid Transaction Expenses Schedule. In the absence of any objections from
the Seller within thirty (30)&nbsp;days following receipt of such calculation, Graham&#146;s determination of
the Final Working Capital and Unpaid Transaction Expenses Schedule shall be conclusive, final and
binding on the parties for purposes of determining the Net Working Capital, Working Capital
Surplus, Working Capital Deficit and the Actual Unpaid Transaction Expenses. However, such
determination shall not affect any other of Graham&#146;s or Buyer&#146;s rights under this Agreement,
including without limitation under Article&nbsp;7. If Seller objects to the Final Working Capital and
Unpaid Transaction Expenses Schedule within thirty (30)&nbsp;days following receipt of such calculation
from Graham, the Seller shall deliver a written dispute notice to Graham which shall set forth the
specific line items in dispute and provide the basis for such dispute in reasonable detail,
including but not limited to a claim that Seller and Representatives have not been furnished
adequate information to confirm or refute the determination of Graham. If, after ten (10)&nbsp;days
from the date notice of a dispute is given hereunder, the Seller and Graham cannot agree on the
resolution of all of the disputed items, the Final Working Capital and Unpaid Transaction Expenses
Schedule shall be adjusted to the extent of any items that are not in dispute, and the items still
in dispute shall be referred to Grant Thornton LLP or another independent public accounting firm
acceptable to both the Seller and Graham (the <B><I>&#147;Unrelated Accounting Firm&#148;</I></B>) to resolve the dispute,
whose decision as to the issues in dispute shall be conclusive, final and binding upon the Seller
and Graham for purposes of this Agreement. The Unrelated Accounting Firm shall address only those
issues in dispute in accordance with the terms of this Section&nbsp;2.2(b) and may not assign a value to
any item
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">greater than the greatest value for such item claimed by either party or less than the
smallest value for such item claimed by either party. The fees and expenses of the Unrelated
Accounting Firm shall be paid 50/50 by the Seller and Buyer.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Upon finalizing the Final Working Capital and Unpaid Transaction Expenses Schedule, either
by agreement or by the Unrelated Accounting Firm: (i)&nbsp;to the extent there is a Working Capital
Surplus, Graham will pay the Seller an amount equal to such Working Capital Surplus within ten (10)
days of delivery of the Final Working Capital and Unpaid Transaction Expenses Schedule. If such
Working Capital Surplus is not paid within such ten (10)&nbsp;day period, then interest shall accrue and
be due and payable from Graham on the Working Capital Surplus from and including the Closing
through and including the date of payment at Prime Rate plus two percent (2%) per annum; and (ii)
to the extent there is a Working Capital Deficit or the Actual Unpaid Transaction Expenses exceeds
the Estimated Unpaid Transaction Expenses, within ten (10)&nbsp;days following the delivery of the Final
Working Capital and Unpaid Transaction Expenses Schedule, the Seller will pay to Graham in cash
(by wire transfer of immediately available funds to an account designated by Graham) the amount of
the Working Capital Deficit and the amount by which the Actual Unpaid Transaction Expenses exceeds
the Estimated Unpaid Transaction Expenses, if any. If such amounts are not paid within such
fifteen (15)&nbsp;day period, then interest shall accrue and be due and payable from the Seller on such
amounts from and including the Closing through and including the date of payment at Prime Rate plus
two percent (2%) per annum.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;Delivery of all payments required under this Section&nbsp;2.2 or any provision hereof shall be
made in cash by the wire transfer of immediately available funds to such bank account as designated
in writing by the recipient or, in the case of any payments owed Graham or Buyer by the Seller, may
be offset against any future amounts that Buyer or Graham may owe the Seller under this Agreement
or the Earn Out Agreement.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>2.3 The Closing.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Closing of the transactions contemplated by this Agreement shall take place at a location
mutually agreed to by the Buyer and Seller commencing on the date of this Agreement (the <B>&#147;</B><B><I>Closing
Date</I></B>&#148;).
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>2.4 Deliveries at the Closing.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At the Closing, (i)&nbsp;Energy Steel and the Seller will execute and deliver or cause to be
executed and delivered to the Buyer the agreements, certificates, instruments, and documents
referred to in Section&nbsp;6.2 or otherwise contemplated herein, (ii)&nbsp;Graham and the Buyer will execute
and deliver or cause to be executed and delivered to the Seller the agreements, certificates,
instruments, and documents referred to in Section&nbsp;6.3 or otherwise contemplated herein, (iii)&nbsp;the
Seller will deliver to the Buyer stock certificates representing all of the Energy Steel Shares,
endorsed in blank or accompanied by duly executed assignment documents, and (iv)&nbsp;Graham and the
Buyer will deliver the Purchase Price as specified in Section&nbsp;2.2(a).
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>2.5 Excluded Assets.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Notwithstanding anything to the contrary set forth herein, all of the tangible and intangible
assets, rights and claims listed on <U>Schedule&nbsp;2.5</U> shall be excluded from the sale
contemplated by this
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Agreement and shall remain the property of the Seller or shall be transferred and assigned by
Energy Steel to Seller prior to Closing.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE 3.</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>REPRESENTATIONS AND WARRANTIES OF ENERGY STEEL AND THE SELLER</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Energy Steel and the Seller jointly and severally represent and warrant to Graham and Buyer
that the statements contained in this Section are correct and true as of the date of this Agreement
and will be correct and true as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this Article), except as set forth
in the Disclosure Schedules.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>3.1 Organization, Standing and Power.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Energy Steel is a corporation duly organized, validly existing and in good standing under
the Laws of the State of Michigan. Energy Steel has no Subsidiaries and does not own an equity
interest in any Person. Energy Steel has all requisite power and authority to own, lease and
operate its properties and to carry on its business as now being conducted and, except as could not
reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, is
duly qualified and in good standing to do business in each other jurisdiction in which the nature
of its business or the ownership or leasing of its properties makes such qualification necessary.
Energy Steel has heretofore made available to Graham and Buyer true, correct and complete copies of
the articles of incorporation and bylaws, as currently in effect, of Energy Steel and has made
available to Graham and Buyer true, correct and complete minute books and stock records of Energy
Steel. The stock records fairly and accurately reflect the ownership of all of outstanding shares
of capital stock of Energy Steel. The minute books contain accurate records of the proceedings of
all material actions formally taken by the shareholders, the board of directors and each committee
of the board of directors of Energy Steel. The other books and records of Energy Steel have been
maintained in accordance with reasonable business practices in accordance with past practices of
Energy Steel. Energy Steel is not in default under or in violation of any provision of its charter
or bylaws.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>3.2 Capital Structure.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;The authorized capital stock of Energy Steel consists entirely of sixty thousand (60,000)
shares of <U>no</U> par value common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;As of the date hereof, the only shares of capital stock issued and outstanding of Energy
Steel are the Energy Steel Shares (being nine thousand (9,000) shares of common stock issued to or
otherwise held in the name of Seller).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;All of the Energy Steel Shares have been duly authorized, are validly issued, fully paid,
and nonassessable. Except as provided on <U>Schedule&nbsp;3.2</U>, there are no outstanding or
authorized options, warrants, purchase rights, subscription rights, conversion rights, exchange
rights, or other contracts or commitments that could require Energy Steel to issue, sell, or
otherwise cause to become outstanding any additional shares of Energy Steel capital stock. Except
as provided on <U>Schedule&nbsp;3.2</U>, there are no outstanding or authorized stock appreciation,
phantom stock, profit
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">participation, or similar rights with respect to Energy Steel. Except as provided on
<U>Schedule&nbsp;3.2</U>, there are no voting trusts, proxies, or other agreements or understandings
with respect to the voting of the capital stock of Energy Steel.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;The Seller holds of record and beneficially owns all of the Energy Steel Shares as more
particularly described in <U>Schedule&nbsp;3.2(d)</U>, free and clear of any restrictions on transfer
(other than any restrictions under the Securities Act and state securities laws), Taxes,
Encumbrances, options, warrants, purchase rights, contracts, commitments, equities, claims, and
demands. The Seller is not a party to any option, warrant, purchase right, or other agreement,
contract or commitment involving any shares of Energy Steel capital stock, including any agreement,
contract or commitment that would require the Seller to sell, transfer, or otherwise dispose of any
capital stock of Energy Steel (other than this Agreement). The Seller has full voting power over
all of the Energy Steel Shares and none of them is a party to any voting trust, proxy, or other
agreement or understanding with respect to the voting of any shares of the Energy Steel Shares.
Other than this Agreement, there is no agreement between any Seller and any other Person with
respect to the disposition of the Energy Steel Shares, except for the existing Shareholder
Agreement which shall terminate effective as of the Closing Date.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>3.3 Authority; Binding Effect.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Energy Steel has all requisite corporate power and authority and the Seller has the requisite
power and trust power (as evidenced by that certain Certificate of Trust Existence and Authority
dated December&nbsp;10, 2010 (the &#147;<B><I>Trust Certificate</I></B>&#148;)) to enter into this Agreement and, subject to the
approval of the Seller (which is evidenced by the execution and delivery of this Agreement), to
consummate the transactions contemplated hereby. The representations and certifications made in
the Trust Certificate are true and accurate in all respects as of the Closing Date. The execution
and delivery of this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of Energy Steel and the Seller,
including without limitation the approval of the Seller. The board of directors of Energy Steel
and the Seller have, as of the date of this Agreement, duly adopted resolutions which unanimously
approve and adopt this Agreement and the consummation of the transactions contemplated herein.
This Agreement has been duly executed and delivered by Energy Steel and the Seller and, assuming
the due execution and delivery hereof by Graham and Buyer, constitutes the valid and binding
obligation of Energy Steel and the Seller, enforceable against Energy Steel and the Seller in
accordance with its terms, except as the enforceability hereof may be limited by (i)&nbsp;bankruptcy,
insolvency or other Laws relating to or affecting creditors&#146; rights generally, and (ii)&nbsp;general
principles of equity (regardless of whether such enforceability is considered in a proceeding in
equity or at law).
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>3.4 No Conflict.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except for the Required Approvals set forth on <U>Schedule&nbsp;3.4</U>, the execution and
delivery of this Agreement by Energy Steel and the Seller does not, and the consummation of the
transactions contemplated hereby and the fulfillment of its obligations and undertakings hereunder
will not, result in any Violation (other than Violations, if any, arising solely out of the failure
to obtain a Required Approval as described below and as set forth on the Disclosure Schedules) of
any provision of: (a)&nbsp;the articles of incorporation or bylaws of Energy Steel; (b)&nbsp;any material
Contract applicable 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">Energy Steel, the Seller, or any of their respective assets; or (c)&nbsp;any Law applicable to
Energy Steel, the Seller, or any of their respective assets; except, in the case of Contracts and
Laws, for Violations which could not reasonably be expected to have, individually or in the
aggregate, any adverse effect on the validity or enforceability of this Agreement or a Material
Adverse Effect. Except as set forth in <U>Schedule&nbsp;3.4</U> (each, a &#147;<B><I>Required Approval</I></B>&#148;), to
Energy Steel&#146;s and the Seller&#146;s knowledge no consent, approval, order or authorization of, or
registration, declaration or filing with, or notice to, any Governmental Entity or other third
party is required by or with respect to Energy Steel in connection with the execution and delivery
of this Agreement by Energy Steel or the Seller or the consummation by Energy Steel or the Seller
of the transactions contemplated hereby.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>3.5 Energy Steel Financial Statements; Internal Accounting Controls.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Attached as <U>Schedule&nbsp;3.5(a)</U> to the Disclosure Schedules are (i)&nbsp;the unaudited
balance sheets, statements of income for Energy Steel for Fiscal 2008 (ending September&nbsp;30) and
2009 (ending December&nbsp;31), (ii)&nbsp;the unaudited balance sheet and statement of income for Energy
Steel as of and for the three (3)&nbsp;month period ended December&nbsp;31, 2008, and (iii)&nbsp;the unaudited
balance sheet and statement of income for Energy Steel as of and for the six (6)&nbsp;and nine (9)&nbsp;month
periods ended June&nbsp;30, 2010 and September&nbsp;30, 2010 (all such financial statements collectively
referred to as the &#147;<U><B><I>Financial Statements</I></B></U>&#148;). The Financial Statements (including the notes
thereto) are complete and accurate in all material respects and have been applied and prepared on a
consistent basis throughout the periods covered thereby (except as to GAAP Exceptions), and present
fairly the financial condition of Energy Steel as of such dates and the results of operations of
Energy Steel for such periods, are correct and complete in all material respects.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Subject to the application of the GAAP Exceptions, the books and records of Energy Steel
accurately and fairly reflect the income, expenses, assets and liabilities for the periods covered
and Energy Steel maintains internal accounting controls which provide reasonable assurances that:
(A)&nbsp;transactions are executed in accordance with the general or specific authorization of Energy
Steel&#146;s management, and (B)&nbsp;transactions are recorded as necessary to permit preparation of such
financial statements.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>3.6 No Additional Material Liabilities.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except as set forth in the Financial Statements or in <U>Schedule&nbsp;3.6</U>: (a)&nbsp;Energy Steel
has not had since October&nbsp;31, 2010 any material liabilities or accrued expenses, whether accrued,
absolute, contingent or otherwise, of a kind or character that would be required (in accordance
with GAAP, subject to application of the GAAP Exceptions) to be reflected in the balance sheet of
Energy Steel as of October&nbsp;31, 2010; (b)&nbsp;since October&nbsp;31, 2010, except for trade payables and
accrued expenses incurred in the Ordinary Course of Business, Energy Steel has not incurred any
such liabilities; and (c)&nbsp;since October&nbsp;31, 2010, Energy Steel has not drawn down on any line of
credit. All liabilities of Energy Steel incurred since October&nbsp;31, 2010 have been properly
recorded in their books and records. <U>Schedule&nbsp;1.1</U> sets a complete and accurate list of all
of the Energy Steel Debt.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>3.7 Energy Steel Permits; Compliance with Laws.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;<U>Schedule&nbsp;3.7(a)</U> contains a complete and accurate list, as of the date hereof, of
all licenses, permits, certificates, registrations, accreditations, orders, franchises,
authorizations,
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">approvals, consents, variances and exemptions of any Governmental Entity which are necessary
for the operation of the Business as currently operated and which are held by Energy Steel
(collectively, the &#147;<B><I>Energy Steel Permits</I></B>&#148;), including the respective termination dates thereof.
Except as could not reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect: (i)&nbsp;Energy Steel duly holds all Energy Steel Permits; (ii)&nbsp;all of the Energy Steel
Permits are in full force and effect; (iii)&nbsp;Energy Steel is in compliance with the terms of each of
the Energy Steel Permits; and (iv)&nbsp;no action is pending, or to the knowledge of Seller or Energy
Steel, threatened or recommended, by any Governmental Entity to revoke, condition, withdraw or
suspend any Energy Steel Permit.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;The Business of Energy Steel is being, and since January&nbsp;1, 2005 has been, conducted in
compliance with all Laws, except for such Violations that could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect. No investigation or review by any
Governmental Entity with respect to Energy Steel is pending or threatened nor has any Governmental
Entity indicated an intention to conduct the same.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>3.8 Assets; Title; Absence of Liens and Encumbrances.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except as provided on <U>Schedule&nbsp;3.8</U> and except with respect to Intellectual Property
(which is the subject of Section&nbsp;3.10), Energy Steel owns or validly leases all properties and
assets, real, personal and mixed, tangible and intangible, comprising and employed in the operation
of or associated with the Business. Except for leased assets, Energy Steel has good and
marketable title to each and all of its assets, including those reflected in the balance sheet of
Energy Steel as of October&nbsp;31, 2010, free and clear of all asserted and threatened title defects,
Claims and Encumbrances except, with respect to all such assets, the following Encumbrances
(collectively, &#147;<B><I>Permitted Encumbrances</I></B>&#148;): (a)&nbsp;Encumbrances securing debt reflected as liabilities
in the Financial Statements, which Encumbrances are listed in <U>Schedule&nbsp;3.8</U>; (b)&nbsp;mechanics&#146;,
carriers&#146;, workers&#146;, repairmen&#146;s, statutory or common law liens being contested in good faith and
by appropriate proceedings, which contested liens are listed in <U>Schedule&nbsp;3.8</U>; (c)&nbsp;liens or
obligations for current Taxes not yet due and payable which have been fully reserved against, or
which, if due, are being contested in good faith and by appropriate proceedings, which contested
liens are listed in <U>Schedule&nbsp;3.8</U>; (d)&nbsp;such imperfections of title, easements and
Encumbrances, if any, against the Leased Real Property as are set forth in the Leases or which are
not, individually or in the aggregate, substantial in character, amount or extent, and do not,
individually or in the aggregate, materially detract from the value, or interfere with the present
use of the Leased Real Property or otherwise have a Material Adverse Effect; and (e)&nbsp;those
additional Encumbrances listed in <U>Schedule&nbsp;3.8</U>.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>3.9 Real Property.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Energy Steel does not own any real property and, instead, leases real property as a tenant
pursuant to the Leases. <U>Schedule&nbsp;3.9(a)</U> contains a true, correct and complete list of all
real property leased, operated or used by Energy Steel (collectively, the &#147;<B><I>Leased Real Property</I></B>&#148;).
Energy Steel has delivered to Graham and Buyer a true and complete copy of each of the Leases for
the Leased Real Property.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Except as set forth in <U>Schedule&nbsp;3.9(b)</U>, with respect to each of the Leases for the
Leased Real Property:
</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;(i) assuming the due execution by lessor and enforceability against the lessor, such
Lease is legal, valid, binding, enforceable and in full force and effect;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) the transaction contemplated by this Agreement does not require the consent of any
other party to such Lease, will not result in a breach of or default under such Lease, and
will not otherwise cause such Lease to cease to be legal, valid, binding, enforceable and in
full force and effect on identical terms following the Closing;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) Energy Steel&#146;s possession and quiet enjoyment of the Leased Real Property under
such Lease has not been disturbed and there are no disputes with respect to such Lease;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) neither Energy Steel nor any other party to the Lease is in breach or default
under such Lease, and no event has occurred or circumstance exists which, with the delivery
of notice, the passage of time or both, would constitute such a breach or default, or permit
the termination, modification or acceleration of rent under such Lease;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) the other party to such Lease is not an Affiliate of, and otherwise does not have
any economic interest in Energy Steel;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) Energy Steel has not assigned, subleased, licensed or otherwise granted any Person
the right to use or occupy such Leased Real Property or any portion thereof;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii) Energy Steel has not assigned, transferred, conveyed, mortgaged, deeded in trust
or encumbered any leasehold or subleasehold interest under any such Lease; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii) the Leased Real Property, comprises all of the real property used or intended to
be used in, or otherwise related to the Business; and Energy Steel is not a party to any
agreement or option to purchase any real property or interest therein.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Except as set forth in <U>Schedule&nbsp;3.9(c)</U>, to Energy Steel&#146;s and the Seller&#146;s
knowledge, all Improvements are in reasonably good condition and repair, ordinary wear and tear
excepted, have been appropriately and routinely maintained, and are sufficient for the operation of
the Business as currently conducted. To Energy Steel&#146;s and the Seller&#146;s knowledge, there are no
structural deficiencies or latent defects affecting any of the Improvements and to their knowledge
there are no facts or conditions affecting any of the Improvements which would, individually or in
the aggregate, interfere in any material manner with the use or occupancy of the Improvements or
any portion thereof in the operation of the Business as currently conducted thereon.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;Neither Energy Steel nor Seller have been served with any written notice of a
condemnation, expropriation or other proceeding in eminent domain, pending or threatened, affecting
any parcel of Leased Real Property or any portion thereof or interest therein. There is no
injunction, decree, order, writ or judgment outstanding, nor any claims, litigation, administrative
actions or similar proceedings, pending or, to the knowledge of Energy Steel and Seller,
threatened, relating to the ownership, lease, use or occupancy of the Leased Real Property or any
portion thereof, or the operation of the Business as currently conducted thereon.
</DIV>

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;To Energy Steel&#146;s and the Seller&#146;s knowledge, the Leased Real Property as currently used
by Energy Steel is in material compliance with all applicable building, zoning, subdivision,
environmental, health and safety requirements and other land use laws, including The Americans with
Disabilities Act of 1990, as amended (collectively, the &#147;<B><I>Real Property Laws</I></B>&#148;), and the current use
and occupancy of the Leased Real Property and operation of the Business thereon does not violate
any Real Property Laws. Energy Steel has not received any notice of violation of any Real Property
Laws and, to Energy Steel&#146;s and the Seller&#146;s knowledge, there is no basis for the issuance of any
such notice or the taking of any action for such violation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;None of the Improvements or any portion thereof is dependent for its access, use or
operation on any land, building, improvement or other real property interest which is not included
in the Leased Real Property, except as would be disclosed on a survey of the Leased Real Property
or of public record.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;To Energy Steel&#146;s and the Seller&#146;s knowledge, all water, oil, gas, electrical, steam,
compressed air, telecommunications, sewer, storm and waste water systems and other utility services
or systems for the Leased Real Property have been installed and are operational and sufficient for
the operation of the Business as currently conducted thereon, ordinary wear and tear excepted.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;All certificates of occupancy, permits, licenses, franchises, approvals and authorizations
(collectively, the &#147;<B><I>Real Property Permits</I></B>&#148;) of all Governmental Entities, board of fire
underwriters, association or any other entity having jurisdiction over the Leased Real Property,
which are required or appropriate to use or occupy the Leased Real Property or operate the Business
as currently conducted thereon, have been issued and are in full force and effect. <U>Schedule
3.9(h)</U> lists all Real Property Permits held by Energy Steel with respect to each parcel of
Leased Real Property. Energy Steel has not received any notice from any governmental authority or
other entity having jurisdiction over the Leased Real Property threatening a suspension,
revocation, modification or cancellation of any Real Property Permit and, to the knowledge of
each, there is no basis for the issuance of any such notice or the taking of any such action.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;The classification of each parcel of Leased Real Property under applicable zoning laws,
ordinances and regulations permits the use and occupancy of such parcel and the operation of the
Business as currently conducted thereon, and permits the Improvements located thereon as currently
constructed, used and occupied. There are sufficient parking spaces, loading docks and other
facilities at such parcel to comply with such zoning laws, ordinances and regulations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)&nbsp;To Energy Steel&#146;s and the Seller&#146;s knowledge, the current use and occupancy of the Leased
Real Property and the operation of the Business as currently conducted thereon do not violate any
easement, covenant, condition, restriction or similar provision in any instrument of record or
other unrecorded agreement affecting such Leased Real Property, except to the extent such violation
could reasonably be likely to have a Material Adverse Effect. Neither of the Seller nor Energy
Steel has received any notice of violation of any such documents, and there is no basis for the
issuance of any such notice or the taking of any action for such violation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)&nbsp;There are no taxes, assessments, fees, charges or similar costs or expenses imposed by any
Governmental Entity, association or other entity having jurisdiction over the Leased Real Property
with respect to any Leased Real Property or portion thereof which are delinquent.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)&nbsp;Energy Steel does not occupy or possess any real property pursuant to an oral lease.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>3.10 Intellectual Property.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&#147;<B><I>Energy Steel Intellectual Property</I></B>&#148; means all Intellectual Property used or held for use
in, related to or which arise out of the Business or its products or services including, without
limitation, the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) all trademarks, service marks, trade names, trade dress, product names, product
configurations, slogans and logos, applications and registrations, including those listed in
<U>Schedule&nbsp;3.10(a)(i)</U>, and corresponding foreign applications, registrations and
rights thereto, whether or not registered (collectively, the &#147;<B><I>Trademarks</I></B>&#148;);
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) all source code, object code, design documentation and procedures for product
generation and testing of all computer software and firmware, including the software and
firmware listed in <U>Schedule&nbsp;3.10(a)(ii)</U> and including the software rules and
algorithms, flowcharts, trade secrets, know-how, inventions, patents, copyrights, designs,
technical processes, works of authorship and technical data included in or relating to the
same (collectively, the &#147;<B><I>Software</I></B>&#148;); provided, however, that the terms &#147;Software&#148; and
&#147;Energy Steel Intellectual Property&#148; do not include: (A) &#147;shrink wrap&#148; and &#147;click wrap&#148;
software; (B)&nbsp;shareware and freeware software not incorporated in any of the Products (as
defined below) or any of Energy Steel&#146;s business systems; and (C)&nbsp;software and firmware that
is owned by a third party and is the subject of a License to Energy Steel;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) all product development projects planned as of the date of this Agreement, as
listed in <U>Schedule&nbsp;3.10(a)(iii)</U>;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) all Contracts by which: (i)&nbsp;Energy Steel uses Intellectual Property owned by a
third party (other than (A)&nbsp;supply Contracts providing for the license solely of
Intellectual Property not incorporated in any of the Products or any of Energy Steel&#146;s
business systems and (B)&nbsp;Contracts relating solely to &#147;shrink wrap&#148; or &#147;click wrap&#148;
software); or (ii)&nbsp;a third party uses Intellectual Property owned by Energy Steel (other
than Contracts relating solely to &#147;shrink wrap&#148; or &#147;click wrap&#148; software); all as listed in
<U>Schedule&nbsp;3.10(a)(iv)</U> (collectively, the &#147;<B><I>Licenses</I></B>&#148;); and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) all internet, intranet and World Wide Web content, sites and pages, and all HTML
and other code related thereto; all as listed in <U>Schedule&nbsp;3.10(a)(v)</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Energy Steel does not own or license any patents or patent applications (or any division,
continuation, continuation-in-part, continuing prosecution application, continued examination
application, reinstatement, reexamination, revival, reissue, extension or substitution of any
thereof) (collectively, the &#147;<B><I>Patents</I></B>&#148;). Except as set forth on <U>Schedule&nbsp;3.16(a)</U>, Energy
Steel does not license any Patents. Energy Steel owns or has the right to use (pursuant to written
License) all of the Energy Steel Intellectual Property. Subject to the receipt or making of all
Required Approvals specifically identified for this purpose in <U>Schedule&nbsp;3.4</U>, each item of
Energy Steel Intellectual Property will be owned or available for continued use by the Energy Steel
immediately after the Closing Date, without the payment of any additional amounts to any third
party (except as may be required subsequent to the Closing Date by the express terms of any
License). Without
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">making any representation or warranty as to the substantive patentability of the Intellectual
Property, at the Closing Date and except as set forth in <U>Schedule&nbsp;3.10(b)</U>, all available
Patent rights (other than Patents that are the subject of a License to Energy Steel) that may
encompass any of the Software or any of the Products may be pursued exclusively by Energy Steel,
other than non-exclusive rights to third party software included within the Software or the
Products.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Energy Steel currently owns and will own as of the Closing Date, free and clear of all
Encumbrances (other than Permitted Encumbrances), all Intellectual Property and other proprietary
information, processes and formulae used in, related to or arising from the Business or otherwise
necessary for the ownership, maintenance and use of the Products and the conduct of the Business,
other than Intellectual Property that is owned by a third party and is the subject of a License in
favor of Energy Steel.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;To Energy Steel&#146;s and the Seller&#146;s knowledge, Energy Steel has not interfered with,
infringed upon, misappropriated or otherwise violated (whether through the use of the Energy Steel
Intellectual Property or otherwise) any Intellectual Property rights of any third party, and no
Claim has been asserted (and is currently pending) or to Energy Steel&#146;s and Seller&#146;s knowledge
threatened by any Person as to the use of the Energy Steel Intellectual Property by Energy Steel or
alleging any such interference, infringement, misappropriation or violation (including any such
Claim that Energy Steel must license or refrain from using any Intellectual Property rights of any
third party), and to their knowledge there is no valid basis for any such Claim, except for those
Claims listed in <U>Schedule&nbsp;3.18</U>. Except as set forth in <U>Schedule&nbsp;3.10(d)</U>, to Energy
Steel&#146;s and the Seller&#146;s knowledge no third party has interfered with, infringed upon,
misappropriated or otherwise violated any rights of Energy Steel with respect to the Energy Steel
Intellectual Property. Energy Steel does not possess any infringement studies, including any
opinions of counsel, prepared by or on behalf of Energy Steel.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;<U>Schedule&nbsp;3.10(a)(i)</U> identifies each trademark, service mark, trade name, trade
dress, product name, slogan and logo currently used or held for use by Energy Steel in, related to
or arising out of the Business. Energy Steel has made available to Graham correct and complete
copies of all Trademarks, as amended to date, and correct and complete copies of all other written
documentation evidencing ownership and prosecution (if applicable) of each Trademark. Except as
set forth in <U>Schedule&nbsp;3.10(e)</U>, with respect to each Trademark:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) the item is not subject to any outstanding injunction, judgment, order, decree,
ruling, or charge nor, to the knowledge of Energy Steel and Seller, is any of the foregoing
threatened;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) no Claim is pending or, to the knowledge of Energy Steel and Seller, threatened
which challenges the legality, validity, enforceability, use or ownership of the item; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) except for the terms and conditions contained in the Contracts listed on
<U>Schedule&nbsp;3.16(a)</U>, Energy Steel has not agreed to indemnify any Person for or against
any interference, infringement, misappropriation or other violation with respect to the
item.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;<U>Schedules 3.10(a)(ii)</U> and <U>3.10(a)(iv)</U> identifies all software, firmware
(other than &#147;shrink wrap&#148; and &#147;click wrap&#148; software and shareware and freeware software not
incorporated in any of the Products or any of Energy Steel&#146;s business systems) and components
thereof used or held for use by Energy Steel. Except as set forth in <U>Schedule&nbsp;3.10(f)</U>,
with respect to each item of the Software:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) the item is not subject to any outstanding injunction, judgment, order, decree,
ruling, or charge nor, to the knowledge of Energy Steel and Seller, is any of the foregoing
threatened;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) no Claim is pending or to the knowledge of Energy Steel and Seller, threatened in
writing which challenges the legality, validity, enforceability, use or ownership of the
item;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) except for standard terms and conditions contained in the Contracts entered into
in the ordinary course of business and except for the Contracts listed on <U>Schedule
3.16(a)</U>, Energy Steel has not agreed to indemnify any Person for or against any
interference, infringement, misappropriation or other violation with respect to the item;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) to Energy Steel&#146;s and the Seller&#146;s knowledge, the Software as used by Energy Steel
or its licensees does not infringe any copyright, patent, trademark, trade secret or other
Intellectual Property rights of any third party; and there are no copyright, trademark,
trade secret or patent Claims, asserted or threatened, by any third party, or any acts of
Energy Steel upon the basis of which Energy Steel has any reason to believe that the
Software will infringe any proprietary rights, including patent, copyright, trademark or
trade secret of any third party;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) to Energy Steel&#146;s and the Seller&#146;s knowledge, no third party that is not duly
authorized by Energy Steel is engaged in any activity which would constitute an infringement
or misappropriation of any proprietary rights in the Software;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) to Energy Steel&#146;s and the Seller&#146;s knowledge, none of the Software contains any
&#147;back door,&#148; &#147;time bomb,&#148; &#147;Trojan Horse,&#148; &#147;worm,&#148; &#147;drop dead device,&#148; &#147;virus,&#148; &#147;trap&#148; or
other software routines designed to permit unauthorized access, to disable or erase
software, hardware or data, or perform any other similar actions.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>3.11 Tangible Assets.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;All of the tangible assets owned or leased by Energy Steel (i)&nbsp;to Energy Steel&#146;s and the
Seller&#146;s knowledge, are free from defects (patent and latent), (ii)&nbsp;have been reasonably maintained
in accordance with normal industry practice, is in operating condition and repair, subject to
normal wear and tear and except for unused or obsolete assets, if any, and (iii)&nbsp;are currently
suitable for the purposes for which it presently is used.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;<U>Schedule&nbsp;3.11(b)</U> is a true, correct and complete listing of: (i)&nbsp;all material
tangible assets, including without limitation, all equipment, computer equipment and hardware,
furniture, fixtures, vehicles, machinery, apparatus, media, tools, appliances, implements, supplies
and other tangible personal property of Energy Steel as of October&nbsp;31, 2010, together with the cost
and
</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">depreciation recorded therefor; and (ii)&nbsp;all material additions to and dispositions of the
foregoing made between October&nbsp;31, 2010 and the date hereof. Except as set forth in <U>Schedule
3.11(b)</U>, to Energy Steel&#146;s and the Seller&#146;s knowledge, such assets are in a usable state of
repair and condition, ordinary wear and tear excepted.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;<U>Schedule&nbsp;3.11(c)</U> is a listing of all personal and tangible property of Seller
located at the Business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;<U>Schedule&nbsp;3.11(d)</U> is a true, correct and complete listing as of the date hereof of
substantially all products and services of the Business, including all approved development
projects (collectively, the &#147;<B><I>Products</I></B>&#148;).
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>3.12 Inventory.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Energy Steel&#146;s inventories consist of a quantity and quality historically useable or
saleable in the Ordinary Course of Business. Energy Steel&#146;s inventories in its balance sheet for
the period ended October&nbsp;31, 2010 and in its books and records are in material accordance with GAAP
(subject to application of the GAAP Exceptions), with inventory recorded at a lower cost
(determined on a first-in, first-out basis) or market.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;<U>Schedule&nbsp;3.12(b)</U> contains and/or Energy Steel has provided to Graham a list of all
suppliers, purchasing agents and third party manufacturers from or through whom Energy Steel has
purchased inventory during the previous fiscal year and the current fiscal year up to December&nbsp;9,
2010. Energy Steel is not a party to any minimum purchase order arrangements with such suppliers,
purchasing agents and third party manufacturers, except as expressly stated on purchase orders or
other contracts of purchase.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Energy Steel has made available to Graham a true and complete list of all purchase orders
or commitments placed as of December&nbsp;9, 2010 by it with suppliers, purchasing agents or
manufacturers for the purchase of inventory and an accurate and complete breakdown and aging of
Energy Steel&#146;s accounts payable, in each case as of December&nbsp;9, 2010.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;Neither the Seller nor Energy Steel has received any written notice specifying that any
suppliers, purchasing agents or manufacturers will or plans to terminate or cancel its relationship
with Energy Steel at any time, including after the Closing Date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;<U>Schedule&nbsp;3.12(e)</U> is a true, correct and complete listing, by category and volume
level as of December&nbsp;9, 2010, of all of Energy Steel&#146;s inventories of (i)&nbsp;Products, including
finished products, work-in-process, and raw material inventory, and (ii)&nbsp;all other unused or
reusable materials and supplies (the &#147;<B><I>Current Inventory</I></B>&#148;). All of such Current Inventory have
been properly costed and valued or properly reserved for, and properly presented in the Financial
Statements. All of such Current Inventory of Products, materials, stores and supplies are usable
and fit for their intended purpose.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>3.13 Environmental Matters.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except as disclosed in <U>Schedule&nbsp;3.13</U>, to Energy Steel&#146;s and the Seller&#146;s knowledge:
</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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;None of the Leased Real Property is in Violation of any Environmental Laws and there is no
outstanding or pending Liability under the Environmental Laws related to the Leased Real Property
or any property previously owned or leased by Energy Steel;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Energy Steel&#146;s use, handling, and disposal of Hazardous Substances has not resulted in a
Violation of or Liability under any Environmental Laws;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;None of the Leased Real Property has (i)&nbsp;ever had any underground storage tanks regulated
under Environmental Laws, whether empty, filled or partially filled with any substance, or (ii)&nbsp;any
asbestos or any material that contains any hydrated mineral silicate, including chrysolite,
amosite, crocidolite, tremolite, anthophylite and/or actinolite, whether friable or non-friable;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;Energy Steel has not received any request for information, notice or order alleging that
it may be a potentially responsible party or otherwise have Liability under any Environmental Laws
for investigation, remediation or other response action related to Hazardous Substances;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;No event has occurred with respect to any property owned or leased by Energy Steel
including the Leased Real Property which, with the passage of time or the giving of notice, or
both, is reasonably expected to constitute a Violation of, non-compliance with or Liability under
any applicable Environmental Law or Energy Steel Permit;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;There is no Encumbrance (other than a Permitted Encumbrance), Claim or threat thereof
relating to a Release or threatened Release of any Hazardous Substance on, about or beneath the
Leased Real Property (or any portion thereof), or the migration of any Hazardous Substance to or
from property adjoining or in the vicinity of the Leased Real Property, or alleging any Liability
under Environmental Laws; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;Energy Steel holds, and is in compliance with, all Energy Steel Permits required under any
Environmental Law in connection with its use of the Leased Real Property or the operation of the
Business, and all such Environmental Permits are valid and in good standing and will remain so
through the Closing Date and are not subject to meritorious challenge. A true and complete list of
all such Energy Steel Permits is set forth in <U>Schedule&nbsp;3.7(a)</U>.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>3.14 Employee Plans.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;<U>Schedule&nbsp;3.14(a)</U> lists all employee benefit plans and collective bargaining,
employment or severance agreements or other similar arrangements which Energy Steel currently
sponsors, maintains, or to which contributions are made, or for which obligations have been
incurred and currently exist, for the benefit of employees or former employees of Energy Steel
including, without limitation, (1)&nbsp;any &#147;employee benefit plan&#148; (within the meaning of Section&nbsp;3(3)
of ERISA), (2)&nbsp;any profit-sharing, deferred compensation, bonus, stock option, stock purchase,
restricted stock, equity incentive, pension, retainer, compensation, consulting, retirement,
severance, indemnification, retention, change-in-control, welfare or incentive plan, agreement or
arrangement, (3)&nbsp;any plan, agreement or arrangement providing for &#147;fringe benefits&#148; or perquisites
to employees, officers, directors or agents, including but not limited to benefits relating to
automobiles, clubs, vacation, child care, parenting, sabbatical, sick leave, tuition reimbursement,
medical, dental, hospitalization, life insurance, disability insurance and other types of
insurance, and (4)&nbsp;any employment agreement.
</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">The plans, agreements and arrangements described in this Section&nbsp;3.14(a) are referred to
herein as &#147;<B><I>Employee Plans</I></B>.&#148;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Energy Steel has delivered to Graham true, correct and complete copies of all Employee
Plans, all related summary plan descriptions, the most recent determination letters and/or opinion
letters received from the IRS, Form&nbsp;5500 Annual Reports for the last three (3)&nbsp;years (including all
schedules and attachments thereto), all communications received from or sent to the IRS or the U.S.
Department of Labor within the last five (5)&nbsp;years (including any Forms 5330) with respect to any
Employee Plan, the most recent financial reports and summary annual reports, summaries of material
modifications and material communications distributed within the last year to participants of each
Employee Plan and, where applicable, summary descriptions of any Employee Plans not otherwise
reduced to writing. Except as set forth in <U>Schedule&nbsp;3.14(b)</U>, there are no negotiations,
demands or proposals that are pending or have been made since the respective dates of the Employee
Plans which concern matters now covered, or that would be covered, by any Employee Plan. Energy
Steel has maintained all employee data necessary to administer each Employee Plan, including all
data required to be maintained under Sections&nbsp;107 and 209 of ERISA, and such data are true and
correct.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Except as set forth in <U>Schedule&nbsp;3.14(c)</U>, Energy Steel and each of the Employee
Plans (and any related trust agreement, insurance contract or fund) has been maintained, funded and
administered in accordance with its terms and any applicable collective bargaining agreement, and
Energy Steel is in compliance in all respects with the applicable provisions of the Code, ERISA and
all other applicable Laws.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;All contributions (including all employer contributions and employee salary reduction
contributions) and premium payments which are or have been due have been paid to or with respect to
each Employee Plan within the time required by law. All required or discretionary (in accordance
with historical practices) payments, premiums, contributions, reimbursements, or accruals for all
periods ending prior to or as of the Closing Date shall have been made or properly accrued on the
Closing balance sheets or will be properly accrued on the books and records of Energy Steel as of
the Closing date. None of the Employee Plans has any unfunded liabilities which are not reflected
on the Closing balance sheet or the books and records of Energy Steel. Energy Steel does not have
any assets subject to (or expected to be subject to) a lien for unpaid contributions to any
Employee Plan. Energy Steel has performed in all respects all of their obligations under all of
the Employee Plans, including the payment of all applicable Taxes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;Neither Energy Steel nor any Employee Plan fiduciary has, with respect to the Employee
Plans, engaged in a breach of fiduciary duty or engaged or permitted an Employee Plan to engage in
a non-exempt &#147;prohibited transaction,&#148; as such term is defined in Section&nbsp;4975 of the Code or
Section&nbsp;406 of ERISA. To Energy Steel&#146;s and the Seller&#146;s knowledge, no event has occurred and no
condition exists with respect to any Employee Plan which would give rise to any liability under the
Code or ERISA or other applicable law, including but not limited to Sections&nbsp;511, 4971, 4972, 4975,
4976, 4977, 4979, 4980B, 4980D, 4980E, 4980F or 6652 of the Code, or to any fine or civil penalty
under Sections&nbsp;502, 4069 or 4071 of ERISA. None of the Employee Plans, nor any fiduciary thereof,
is or has been the direct or indirect subject of an audit, investigation or examination by any
Governmental Entity within the last five (5)&nbsp;years, and to Energy Steel&#146;s and the Seller&#146;s
knowledge, there are no facts which could give rise to any liability in the event of any
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">investigation, audit, review or other proceeding. There are no Claims (other than routine
undisputed Claims for benefits) pending or threatened against or arising out of any of the Employee
Plans or the respective assets thereof and to Energy Steel&#146;s and the Seller&#146;s knowledge, no facts
exist which could give rise to any such Claims which could reasonably be expected to have,
individually or in the aggregate, a material adverse effect on any Employee Plan, or a Material
Adverse Effect.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;Each Employee Plan that is intended to be qualified under Section 401(a) of the Code has
received a favorable determination letter (or an opinion letter on which it is entitled to rely)
from the Internal Revenue Service that such Employee Plan is qualified under Section 401(a) of the
Code, and such determination letter or opinion letter considers the Economic Growth &#038; Tax Relief
Reconciliation Act of 2001. Each Employee Plan that is intended to be qualified under Section
401(a) of the Code has been timely amended to reflect the provisions of all statutory or regulatory
changes requiring amendments for which the deadline for amendment has passed, and if not entitled
to rely upon an opinion letter has been timely submitted for a determination letter in accordance
with Revenue Procedure 2007-44. To Energy Steel&#146;s and the Seller&#146;s knowledge, no event has
occurred that will or could give rise to the revocation of any applicable determination letter or
the loss of the right to rely on any applicable opinion letter, or the disqualification or loss of
tax-exempt status of any such Employee Plan or trust under Sections 401(a) or 501(a) of the Code.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;Energy Steel does not maintain and has not at any time maintained, and does not and could
not have any liability with respect to, any Employee Plan subject to Title IV of ERISA or Section
412 of the Code. No Employee Plan is or ever has been a &#147;multiemployer plan&#148; within the meaning of
Section&nbsp;3(37) of ERISA. Energy Steel does not have and could not have any liability with respect
to a &#147;multiemployer plan&#148; as defined under Section&nbsp;3(37) of ERISA. No Employee Plan now holds or
has heretofore held any stock or other securities issued by Energy Steel. Energy Steel has not
established or contributed to, is not required to contribute to, and does not have nor has ever had
any liability with respect to any &#147;voluntary employees&#146; beneficiary association&#148; within the meaning
of Section&nbsp;501(c)(9) of the Code, any &#147;welfare benefit fund&#148; within the meaning of Section&nbsp;419 of
the Code, any &#147;qualified asset account&#148; within the meaning of Section&nbsp;419A of the Code, or any
&#147;multiple employer welfare arrangement&#148; within the meaning of Section&nbsp;3(40) of ERISA.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;Each Employee Plan that constitutes a &#147;welfare benefit plan,&#148; within the meaning of
Section&nbsp;3(1) of ERISA, and for which contributions are claimed by Energy Steel as deductions under
any provision of the Code, is in compliance with all applicable requirements pertaining to such
deduction. <U>Schedule&nbsp;3.14(h)</U> discloses whether each welfare plan is (i)&nbsp;unfunded, (ii)&nbsp;with
respect to welfare plans subject to the provisions of the Code, funded through a &#147;welfare benefit
fund,&#148; as such term is defined in Section 419(e) of the code, or other funding mechanism, or (iii)
insured.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;All group health plans of Energy Steel have been operated in compliance in all material
respects with the group health plan continuation coverage requirements of Sections&nbsp;601 through 608
of ERISA and Section&nbsp;4980B of the Code or applicable state law, Title XXII of the Public Health
Service Act, the Health Insurance Portability and Accountability Act of 1996, the Medicare Part&nbsp;D
requirements of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 and the
provisions of the Social Security Act, to the extent such requirements are applicable. Except to
the extent required under Section&nbsp;4980B of the Code or applicable state law, no Employee Plan or
any other arrangement provides for or continues medical or health or other welfare benefits
(through the purchase of insurance or otherwise) for or to any retired employee, any former
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">employee or any other individual who is not an employee, and there has been no communication
to any employee, retired employee, former employee or other individual that could reasonably be
expected to promise or guarantee any such benefits.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)&nbsp;Except with respect to statutory post-termination benefits arising under non U.S. Laws and
except as set forth in <U>Schedule&nbsp;3.14(j)</U>, no provision of any Employee Plan restricts the
ability of Graham or Energy Steel to terminate the future accruals of obligations thereunder after
the Closing Date or requires the increase or acceleration of benefit entitlements, contributions or
compensation in connection with such termination; provided, however, that no such representation or
warranty is made with respect to the ability to cancel liabilities already accrued at the time of
such termination.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)&nbsp;All reports, returns and similar documents with respect to each Employee Plan required to
be filed with any Governmental Entity or distributed to any participant of any Employee Plan
(including each Form&nbsp;5500 required to be filed by Energy Steel) have been duly and timely filed or
distributed in accordance with all applicable Laws. There are no unpaid fees, penalties, interest
or assessments due from the Energy Steel or from any other Person that are or could become a lien
on any asset of Energy Steel or could otherwise adversely affect the business or assets of Energy
Steel. Energy Steel has collected or withheld all amounts that are required to be collected or
withheld by them to discharge their obligations, and all of those amounts have been paid to the
appropriate Governmental Entities or set aside in appropriate accounts for future payment when due.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)&nbsp;To Energy Steel&#146;s and the Seller&#146;s knowledge, no condition exists as a result of which
Energy Steel would have any liability, whether absolute or contingent, including any obligations
under any Employee Plan, with respect to any misclassification of a Person performing services for
Energy Steel as an independent contractor rather than as an employee.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)&nbsp;Except as described in <U>Schedule&nbsp;3.14(m)</U>, the consummation of the transactions
contemplated by this Agreement will not entitle any Person to severance pay, and will not
accelerate the time of payment or vesting, or increase the amount, of compensation due to any
Person. <U>Schedule&nbsp;3.14(m)</U> lists all severance obligations of Energy Steel owed to any
Person. None of the Employee Plans obligates Energy Steel to pay separation, severance,
termination or similar benefits solely as a result of any transaction contemplated by this
Agreement or solely as a result of a &#147;change in the ownership or effective control of the
corporation, or in the ownership of a substantial portion of the assets of the corporation&#148; (as
defined in Section&nbsp;280G of the Code).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n)&nbsp;Except as described in <U>Section&nbsp;3.14(n),</U> each &#147;nonqualified deferred compensation
plan&#148; (as defined in Section&nbsp;409A(d)(1) of the Code) with respect to which Energy Steel is a
&#147;service recipient&#148; (within the meaning of Section&nbsp;409A of the Code) has been operated since
January&nbsp;1, 2005, in compliance with the applicable provisions of Section&nbsp;409A of the Code and the
treasury regulations and other official guidance issued thereunder (or similar provision of state
law) (collectively, &#147;Section&nbsp;409A&#148;), and has been since January&nbsp;1, 2009, in documentary compliance
with the applicable provisions of Section&nbsp;409A; and Energy Steel has not been required to report
any Taxes due as a result of a failure of an Employee Plan to comply with Section&nbsp;409A. With
respect to each Employee Plan, Energy Steel does not have any indemnity obligation for any Taxes or
interest imposed or accelerated under Section&nbsp;409A.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o)&nbsp;Solely for purposes of this Section&nbsp;3.14, all references to Energy Steel includes any
Person which, together with Energy Steel, is considered an affiliated organization within the
meaning of Sections&nbsp;414(b), 414(c), 414(m) or 414(o) of the Code or sections 3(5) or 4001(b)(1) of
ERISA.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p)&nbsp;Except as described in <U>Schedule&nbsp;3.14(p)</U>, Energy Steel does not provide to any of
its non-U.S. employees any termination, severance, pension, healthcare or other benefits in excess
of statutory requirements.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>3.15 Employment Matters.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Except as disclosed in <U>Schedule&nbsp;3.15(a)</U>, (i)&nbsp;to Energy Steel&#146;s and the Seller&#146;s
knowledge, Energy Steel is, and since January&nbsp;1, 2005 has been, in compliance in all material
respects with all Laws relating to affirmative action, employment, equal employment opportunity,
nondiscrimination, immigration, wages, overtime, classification of employees, fringe benefits, wage
supplements, hours or work, benefits, collective bargaining, the withholding and payment of social
security and similar Taxes, occupational safety and health, employment termination, reductions in
force or plant closings (collectively, &#147;<B><I>Employment Laws</I></B>&#148;) and with any contract or subcontract with
any Governmental Entity or other Person; (ii)&nbsp;Energy Steel has not experienced any strikes,
grievances or asserted or threatened Claims of unfair labor practice; (iii)&nbsp;Energy Steel has no
knowledge of any organizational effort being made or threatened by or on behalf of any labor union
with respect to any employees of Energy Steel; (iv)&nbsp;there has not been, and there is not pending or
existing or to Energy Steel&#146;s and the Seller&#146;s knowledge, threatened, any strike, work stoppage,
labor arbitration or proceeding in respect of the grievance of any employee, any application,
complaint or unfair labor practice charge filed by an employee, union or works council with the
National Labor Relations Board or any comparable Governmental Entity, organizational activity or
other labor dispute against Energy Steel and the knowledge of Energy Steel and the Seller, there is
no basis for any such grievance, charge or complaint; (v)&nbsp;no application for certification of a
collective bargaining agent is pending or to Energy Steel&#146;s or the Seller&#146;s knowledge, threatened;
(vi)&nbsp;there is no lockout of any employees by Energy Steel; (vii)&nbsp;Energy Steel has withheld from the
wages and salaries of its employees as is required by law and is not liable for any arrears of
wages or any tax or penalty in connection therewith; (viii)&nbsp;there are no Claims currently pending
or to Energy Steel&#146;s and the Seller&#146;s knowledge threatened, against Energy Steel alleging the
violation of any Employment Laws, or any other asserted or to Energy Steel&#146;s and the Seller&#146;s
knowledge threatened Claim whatsoever, whether based in tort, contract or Law, arising out of or
relating in any way to any Person&#146;s employment (actual or alleged), application for employment or
termination of employment with Energy Steel and to the knowledge of Energy Steel, there is no basis
for any such Claim; (ix)&nbsp;no current or former employee of Energy Steel is owed by Energy Steel
overtime pay (other than overtime pay for the current payroll period), wages or salary for any
period other than the current payroll period, vacation, holiday or other time off or pay in lieu
thereof (other than time off or pay in lieu thereof earned in respect to the current year); (x)
Energy Steel is not, nor immediately after the Closing will be, liable for severance pay or any
other payment of monies to any employee of Energy Steel as a result of the execution of this
Agreement or Energy Steel&#146;s performance of its terms, or for any other reason in any way related to
the consummation of the transactions contemplated hereby, including any change of ownership of
Energy Steel; and (xi)&nbsp;no Governmental Entity has found Energy Steel to be liable for the payment
of Taxes, fines, penalties or other amounts, however designated, for failure to comply with any of
Employment Laws.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;<U>Schedule&nbsp;3.15(b)</U> contains a true and complete list, as of the date hereof, of all
employees employed by Energy Steel, including each such employee&#146;s (i)&nbsp;name, (ii)&nbsp;title, and (iii)
current salary and other compensation arrangement (i.e. commission rate).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;<U>Schedule&nbsp;3.15(c)</U> contains a true and complete list, as of the date hereof of all
consultants, non-employed technicians and other independent contractors who are providing services
to Energy Steel (the &#147;<B><I>Independent Contractors</I></B>&#148;), including (i)&nbsp;each such Independent Contractor&#146;s
name, (ii)&nbsp;each Independent Contractor&#146;s license number and expiration date therefore, and (ii)&nbsp;the
type of services being provided by each Independent Contractor.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>3.16 Material Agreements.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;<U>Schedule&nbsp;3.16(a)</U> lists the following Contracts to which Energy Steel is a party
which are or contain provisions relating to any of the following (hereinafter referred to
individually as a &#147;<B><I>Material Agreement</I></B>&#148; and collectively as the &#147;<B><I>Material Agreements</I></B>&#148;):
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) any Contracts which are Leases of personal property to or from any Person;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) any Contract (or group of related Contracts) for the purchase or sale of products,
or other personal property, or for the furnishing or receipt of services, the performance of
which will extend over a period of more than one year, or involve consideration in excess of
$10,000 per annum;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) any Contract concerning a partnership or joint venture;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) any Contract (or group of related Contracts) under which it has created, incurred,
assumed, or guaranteed any indebtedness for borrowed money, or any capitalized lease
obligation, in excess of $10,000 or under which it has imposed a Encumbrances on any of its
assets, tangible or intangible;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) any Contract with any officer or director of the Energy Steel and/or its
Affiliates, or any entity in which any officer or director of Energy Steel, the Seller or
any trustee or beneficiary of the Seller holds equity or any other economic interest;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) any Contract concerning non-competition, non-solicitation or confidentiality;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii) collective bargaining agreements or other Contracts to or with any labor unions
or other employee representatives, groups of employees, works councils or the like;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii) employment Contracts or other Contracts to or with individual current or
prospective employees, consultants or agents (other than Contracts with Energy Steel&#146;s
attorneys, accountants or advertising agencies that are cancelable without material penalty,
cost or expense upon advance notice of ninety &#091;90&#093; days or less);
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ix) any Contract concerning a bonus, profit sharing, incentive, deferred compensation,
severance, or change in control (exclusive of generally applicable severance policy) or
other material plan or arrangement for the benefit of any of Energy Steel&#146;s managers,
directors, officers or employees;
</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;(x) the Leases;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xi) the Licenses;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xii) Contracts by which Energy Steel indemnifies any Person;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xiii) Contracts by which Energy Steel provides warranties related to any Product or
services which involve consideration in excess of $10,000 or will extend for a period of
more than one (1)&nbsp;year;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xiv) Contracts providing for the payment of royalties by Energy Steel based in any
manner on the revenue or profits of Energy Steel;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xv) Contracts with obligations to supply parts or replacement parts for a period after
termination of the Contract;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xvi) Contracts guaranteeing the debt of any third party;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xvii) Contracts requiring the exclusive use of third party goods or services or
containing a right of first refusal to a third party in the supply of goods or services;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xviii) Contracts to acquire stock, merge or consolidate, or to create a joint venture;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xix) Contracts to borrow funds, except for trade payables incurred in the Ordinary
Course of Business;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xx) Contracts to lend to officers, employees or other third parties, except for
accounts receivable incurred in the Ordinary Course of Business;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xxi) Contracts that require Energy Steel to maintain insurance; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xxii) other Contracts, if any: (A)&nbsp;the default of which could reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect; or (B)&nbsp;which require
consent or waiver in connection with consummation of the transactions contemplated herein,
and the failure to obtain such consent or waiver could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;All of the Material Agreements are listed in the Disclosure Schedules. Except for the
Material Agreements, Energy Steel is not a party to or bound by any Contract affecting in any
material respect the operation of the Business. Without limiting the generality of the foregoing,
Energy Steel is not a party to any Contract providing for guaranteed minimum payments in excess of
$10,000 for the twelve (12)&nbsp;month period ending after the Closing Date which are not listed in the
Disclosure Schedules or which is not cancelable without material penalty, cost or expense upon
advance notice of ninety (90)&nbsp;days or less.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Energy Steel has made available to Graham true and complete copies of each Material
Agreement that is in written form (or, in the case of Material Agreements that are in standard
form, true and complete samples of such standard forms), and true and complete written summaries of
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">each Material Agreement that is oral, in each case as amended to date. To Energy Steel&#146;s and
the Seller&#146;s knowledge, each of the Material Agreements constitutes the valid and legally binding
obligation of Energy Steel and the other parties thereto, and is enforceable in accordance with its
terms, except as the enforceability thereof may be limited by (i)&nbsp;bankruptcy, insolvency or other
Laws relating to or affecting creditors&#146; rights generally, and (ii)&nbsp;general principles of equity
(regardless of whether such enforceability is considered in a proceeding in equity or at law).
Each of the Material Agreements (including any amendments, supplemental or special terms and other
modifications) constitutes the entire agreement of the respective parties thereto relating to the
subject matter thereof. Except as could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect, and except as set forth in <U>Schedule&nbsp;3.16(c)</U>, to the
knowledge of Energy Steel and Seller no act or omission has occurred or failed to occur which, with
the giving of notice, the lapse of time or both would after notice and lapse of applicable cure
period constitute a default under any of the Material Agreements or permit termination,
modification or acceleration thereunder, and each of the Material Agreements is in full force and
effect without default on the part of Energy Steel and, to the knowledge of Energy Steel and
Seller, any of the other parties thereto. Without limiting the generality of the foregoing, no
written or oral notice of termination or default has been given or received by Energy Steel with
respect to any Material Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;Except for the Required Approvals with respect to Material Agreements set forth in
<U>Schedule&nbsp;3.4</U>, no Contract to which Energy Steel is a party requires consent or waiver in
connection with consummation of the transactions contemplated herein.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;With respect to each Lease: (i)&nbsp;there are no disputes, oral agreements or forbearance
programs in effect; (ii)&nbsp;Energy Steel has not assigned, transferred, conveyed, mortgaged, deeded in
trust or encumbered any interest in the leasehold represented by any of the Leases; and (iii)
except as could not reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect, Energy Steel has obtained all authorizations of Governmental Entities (including
licenses and permits) required to be obtained in connection with their operation of the Business at
the premises leased under any of the Leases, and have operated and maintained such premises in all
material respects in accordance with applicable Laws.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;<U>Schedule&nbsp;3.16(f)</U> sets forth in detail Energy Steel&#146;s standard terms and conditions
of sale or lease, purchase orders, contracts or agreements for the sale of Products or for the
performance of any services by Energy Steel or any Independent Contractor.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;Except as set forth in <U>Schedule&nbsp;3.16(g)</U>, no Material Agreement was awarded to
Energy Steel pursuant to any program (e.g. small business, small disadvantaged business, woman
owned business, etc.) or as a result of Energy Steel&#146;s &#147;woman owned business&#148; status or &#147;small
business&#148; status or other preferred status under any applicable Law. To Energy Steel&#146;s or the
Seller&#146;s knowledge, no Material Agreement with respect to the provision of any products or services
by Energy Steel is entirely dependent upon Energy Steel being a small business or woman owned
business, whether certified or otherwise.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>3.17 Product and Service Warranty and Liability.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Except as provided on <U>Schedule&nbsp;3.17(a)</U>, to Energy Steel and Seller&#146;s knowledge,
all of the Products and services provided, distributed, manufactured, sold, licensed or delivered
by
</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">Energy Steel have conformed in all material respects with all applicable contractual
commitments, all applicable Laws, and all express and implied warranties with respect thereto and
Energy Steel has no notice and is not otherwise aware of any material liability (whether asserted
or unasserted, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, and due or
to become due) for replacement thereof or other damages in connection therewith. As of the Closing
Date, the Business will have no liability for replacement of any Products (or other damages in
connection therewith) or for the performance of any services except contingent contractual warranty
obligations. Energy Steel has made available to Graham true, correct and complete copies of the
standard terms and conditions of sale and for service performed by the Business, which contain all
(express as opposed to implied) applicable guaranty, warranty and indemnity provisions and, except
as provided on <U>Schedule&nbsp;3.17(a)</U>, no Products provided or services performed by Energy Steel
are subject to contractual guaranty, warranty or indemnity obligations beyond the standard terms
and conditions.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Except as disclosed on <U>Schedule&nbsp;3.17(b)</U>, Energy Steel does not have any continuing
Liability for replacement or repair or other damages in connection with any product manufactured,
sold, leased or delivered.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>3.18 Litigation.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except as set forth on <U>Schedule&nbsp;3.18</U>, there is no Claim pending or to Energy Steel&#146;s
or the Seller&#146;s knowledge, threatened against or affecting Energy Steel (or any of their respective
officers or directors in connection with the Business), which if adversely determined could
reasonably be expected to have, individually or in the aggregate, an adverse effect on the
consummation of the transactions contemplated herein, or a Material Adverse Effect, nor is there
any judgment, injunction, decree, rule or order of any Governmental Entity outstanding against
Energy Steel which could reasonably be expected to have, individually or in the aggregate, any such
effect.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>3.19 Tax Matters.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except as set forth in <U>Schedule&nbsp;3.19</U>:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Energy Steel (or affiliated, consolidated, unitary or combined group of which Energy Steel
has been a member) has timely filed all federal, state, local and foreign Tax returns that are
required to be filed by it on or before the date hereof. All such Tax returns were correct and
complete in all respects and were prepared in compliance with all applicable Laws. All Taxes due
and owing by Energy Steel (whether or not shown on such returns) have been paid. The Financial
Statements reflect an adequate accrual in accordance with GAAP, based on the facts and
circumstances existing as of the respective dates thereof, for all Taxes payable or accrued by
Energy Steel through the respective dates thereof; the unpaid Taxes of Energy Steel do not exceed
that reserve as adjusted for the passage of time through the Closing Date in accordance with past
custom and practice of Energy Steel in filing its tax returns. Energy Steel is not currently the
beneficiary of any extension of time within which to file any Tax return. No Claim has ever been
made by an authority in a jurisdiction where Energy Steel does not file Tax Returns that Energy
Steel is or may be subject to taxation by that jurisdiction.
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;as of the date hereof, there are no deficiencies for any Taxes proposed, asserted or
assessed against Energy Steel, and no requests for waivers of the time to assess any Taxes are
pending;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Energy Steel has complied with all Laws relating to the payment and withholding of Taxes
and has withheld and paid all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor, stockholder or other
Person;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;No federal, state, local, or non-U.S. tax audits or administrative or judicial Tax
proceedings are pending or being conducted with respect to Energy Steel. Energy Steel has not
received from any federal, state, local, or non-U.S. taxing authority (including jurisdictions
where Energy Steel has not filed Tax returns) any (a)&nbsp;notice indicating an intent to open an audit
or other review, (ii)&nbsp;request for information related to Tax matters, or (iii)&nbsp;notice of deficiency
or proposed adjustment for any amount of Tax proposed, asserted, or assessed by any taxing
authority against Energy Steel. To the extent that the Tax returns of Energy Steel have been
examined by and settled with the IRS or other relevant taxing authority (or the applicable statue
of limitations has expired), all assessments for Taxes due with respect to such completed and
settled examinations or any concluded litigation have been fully paid;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;as of the date hereof, there are no Encumbrances for Taxes (other than for current Taxes
not yet due and payable) on the assets of Energy Steel;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;Energy Steel is not bound by any Contract with any Person with respect to Taxes;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;Energy Steel has not constituted either a &#147;distributing corporation&#148; or a &#147;controlled
corporation&#148; (within the meaning of section 355(a)(1)(A) of the Code) in a distribution of stock
qualifying for tax-free treatment under section 355 of the Code (i)&nbsp;in the two (2)&nbsp;years prior to
the date of this Agreement or (ii)&nbsp;in a distribution which could otherwise constitute part of a
&#147;plan&#148; or &#147;series of related transactions&#148; (within the meaning of section 355(e) of the Code) in
conjunction with the closing the transactions contemplated herein;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;Energy Steel has never been a member of an affiliated, unitary or combined group of
corporations (within the meaning of section 1504 of the Code and any analogous provision of Law)
and has no liability for the Taxes of any Person under Treasury Regulation&nbsp;1.1502-6, as a
transferee or successor, by contract or otherwise;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;Energy Steel has not waived any statute of limitations in respect of any Taxes or agreed
to any extension of time with respect to a Tax assessment or deficiency;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)&nbsp;Energy Steel has not agreed to make, or is required to make, any adjustment under section
481(a) of the Code or any similar provision of Law by reason of a change in accounting methods or
otherwise;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)&nbsp;Energy Steel is not a party to any closing agreement described in section 7121 of the Code
(or any corresponding provision of state, local or foreign income tax Law) executed on or prior to
the Closing Date;
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)&nbsp;no asserted or threatened Claim has been made by a taxing authority in a jurisdiction
where Energy Steel does not file Tax returns that Energy Steel is or may be subject to taxation in
that jurisdiction;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)&nbsp;Energy Steel is not obligated under any Contract that provides for the payment of any
amount which would not be deductible by reason of section 280G of the Code, nor will Energy Steel
make any &#147;excess golden parachute payment&#148; under sections 280G or 4999 of the Code;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n)&nbsp;Energy Steel has delivered or made available to Graham true and complete copies of (i)&nbsp;all
income Tax returns of Energy Steel (or the portion of any affiliated, unitary or combined Tax
return relating to Energy Steel) for the three taxable years preceding the year of this Agreement,
and (ii)&nbsp;any audit report, statement of deficiency or similar report issued within the last three
(3)&nbsp;years (or otherwise with respect to any audit or proceeding in progress) relating to Taxes of
Energy Steel (or any member of an affiliated, consolidated, unitary or combined group of which
Energy Steel was a member);
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o)&nbsp;Energy Steel will not be required to include any item of income for any taxable period (or
portion thereof) ending after the Closing Date as a result of any installment sale or open
transaction disposition made on or prior to the Closing Date or any prepaid amount received on or
prior to the Closing Date;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p)&nbsp;Energy Steel is not and has never been a party to any reportable transaction as defined in
Section&nbsp;6707A(c)(1);
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(q)&nbsp;Energy Steel is not a party to any tax-sharing or similar agreements; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(r)&nbsp;Energy Steel (and any predecessor to Energy Steel) has been a validly electing S
corporation within the meaning of Code &#167;1361 and &#167;1362 at all times since January&nbsp;1, 2009 and
Energy Steel will be an S corporation up to and including the day before the Closing Date. In
addition, Seller was and remains the sole shareholder of Energy Steel since January&nbsp;1, 2009.
Except for the stock sale contemplated by this Agreement, no action has been taken by Energy Steel
or the Seller that may result in the revocation of any such election.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>3.20 Events Subsequent to October&nbsp;31, 2010.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since October&nbsp;31, 2010, except as disclosed in <U>Schedule&nbsp;3.20</U>, Energy Steel has
conducted the Business only in the Ordinary Course of Business and no Material Adverse Effect has
occurred with respect to Energy Steel or the Business. Without limiting the generality of the
foregoing, except as disclosed in <U>Schedule&nbsp;3.20</U>, since October&nbsp;31, 2010, Energy Steel has
not:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) sold, leased, transferred, or assigned any of its assets, tangible or intangible,
other than for a fair consideration in the Ordinary Course of Business;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) entered into any Contract outside the Ordinary Course of Business;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) accelerated, terminated, modified, or cancelled any Contract to which Energy
Steel is a party or by which any of them is bound;
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) imposed any Security Interest upon any of its assets, tangible or intangible;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) made any Capital Expenditure (or series of related Capital Expenditures) more than
$10,000 in the aggregate;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) made any capital investment in, any loan to, or any acquisition of the securities
or assets of, any other Person (or series of related capital investments, loans, and
acquisitions) more than $10,000 in the aggregate;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii) issued any note, bond, or other debt security or created, incurred, assumed, or
guaranteed any indebtedness for borrowed money or capitalized lease obligation either
involving more than $5,000 singly or $10,000 in the aggregate;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii) delayed or postponed the payment of accounts payable or any other Liabilities;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ix) cancelled, compromised, waived, or released any right or claim (or series of
related rights and claims) more than $10,000 in the aggregate;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(x) granted any license or sublicense of any rights under or with respect to any
Intellectual Property;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xi) made or authorized any change in the charter or bylaws of Energy Steel;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xii) issued, sold, or otherwise disposed of any of its capital stock, or granted any
options, warrants, or other rights to purchase or obtain (including upon conversion,
exchange, or exercise) any of its capital stock;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xiii) declared, set aside, or paid any dividend or made any distribution with respect
to its capital stock (whether in cash or in kind) or redeemed, purchased, or otherwise
acquired any of its capital stock;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xiv) experienced any damage, destruction, or loss (whether or not covered by
insurance) to its property more than $10,000 in the aggregate;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xv) made any loan to, or entered into any other transaction with, the Seller, any
Affiliate of the Seller or Energy Steel, or any of the directors, officers, or employees of
Energy Steel or any of its Affiliates other than compensation in the Ordinary Course of
Business;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xvi) entered into any employment contract or collective bargaining agreement, written
or oral, or modified the terms of any existing such contract or agreement;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xvii) granted any increase in the base compensation of any of its directors, officers,
and employees in excess of three percent (3%) per annum;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xviii) adopted, amended, modified, or terminated (nor has any entity affiliated with
Energy Steel within the meaning of Section&nbsp;3.14(o) adopted, amended, modified or
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">terminated) any Employee Plan or any other bonus, profit sharing, incentive, severance,
or other plan, contract, or commitment for the benefit of any of its directors, officers,
and employees;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xix) made any other change in employment terms for any of its directors, officers, and
employees outside the Ordinary Course of Business;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xx) made any change in its Tax or accounting principles, practices or methodologies
(including, but not limited to, Tax or accounting elections);
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xxi) disclosed any material Confidential Information (as defined below) to any third
party without appropriate legal protection;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xxii) obtained new revolving loans or caused letters of credit to be issued, other
than for the purchase of inventory or other working capital needs in the Ordinary Course of
Business; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xxiii) legally committed itself to any of the foregoing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>3.21 Insurance.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Schedule&nbsp;3.21</U> sets forth the following information with respect to each insurance
policy (including policies providing property, casualty, liability, and workers&#146; compensation
coverage and bond and surety arrangements) to which Energy Steel is a party, a named insured, or
otherwise the beneficiary of coverage or under which Energy Steel has a pending claim or could make
a claim:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) the name, address, and telephone number of the agent;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) the name of the insurer, the name of the policyholder, and the name of each
covered insured;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) the policy number and the period of coverage; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) a description of any retroactive premium adjustments or other loss-sharing
arrangements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;With respect to each such insurance policy in effect on the date hereof: (A)&nbsp;the policy is
legal, valid, binding, enforceable, and in full force and effect; (B)&nbsp;nothing exists within the
policy or has occurred that would preclude or interfere with the policy continuing after the
consummation of the transactions contemplated hereby to be legal, valid, binding, enforceable, and
in full force and effect on identical terms as exists prior to the consummation of the transactions
contemplated hereby (based upon the manner in which the Business is currently operated); (C)
neither Energy Steel nor any other party to the policy is in breach or default (including with
respect to the payment of premiums or the giving of notices), and to the knowledge of Energy Steel
or Seller no event has occurred which, with notice or the lapse of time, would constitute such a
breach or default, or permit termination, modification, or acceleration, under the policy; and (D)
no party to the policy has repudiated any provision thereof. <U>Schedule&nbsp;3.21</U> describes any
self-insurance arrangements affecting Energy Steel.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>3.22 Notes Receivable and Accounts Receivable.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All notes receivable and accounts receivable of Energy Steel are reflected properly on their
books and records, are valid receivables, and are current and collectible. None of the notes
receivables or accounts receivable of Energy Steel are subject to known pending or threatened
Claims by customers for setoffs or counterclaim. To the knowledge of Energy Steel and Seller, no
facts exist which would entitle any Governmental Entity to exercise any rights of setoff or
counterclaim against any notes receivable or accounts receivable of Energy Steel.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>3.23 Customers; Suppliers; Accounts Payable.</B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Energy Steel has made available to Graham a listing backlog of all pending customer
orders or commitments placed as of the Effective Date with Energy Steel.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) Neither Energy Steel nor the Seller has any knowledge or reason for believing any
single sales representative, distributor, licensee, licensor, customer or any group of
affiliated sales representatives, distributor, licensee, licensor or customers who
represented five percent (5%) or more of the consolidated revenues of Energy Steel during
the twelve (12)&nbsp;months ended November&nbsp;30, 2010, will or to Energy Steel&#146;s or Seller&#146;s
knowledge, plans to terminate or cancel its relationship with Energy Steel. To Energy
Steel&#146;s and the Seller&#146;s knowledge, there does not exist any condition, state of facts or
circumstances that could reasonably be expected to cause any of such sales representatives,
distributors, licensees, licensors or customers to terminate their relationships or for any
prospective customers to refuse to consider a prospective relationship with Energy Steel.
To the knowledge of Energy Steel and Seller, none of the business or prospective business of
Energy Steel is in any manner dependent upon the making or receipt of any improper payments,
discounts or other inducements to any officers, directors, employees, representatives or
agents of any customer.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) All accepted and unfulfilled orders for the sale of Products entered into by
Energy Steel and all outstanding contracts or commitments for the purchase of inventory,
supplies and services by or from Energy Steel were made in bona fide transactions in the
Ordinary Course of Business. There are no material claims against Energy Steel to return
products as a result of alleged over-shipments, defective products or otherwise, or of
products in the hands of customers, retailers, distributors or sales representative under an
understanding that such products would be returnable.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) To Energy Steel&#146;s and the Seller&#146;s knowledge Energy Steel does not have any
Liability arising out of or related to (i)&nbsp;any injury to individuals or property as a result
of the ownership, possession, or use of any product manufactured, sold, leased, or delivered
by Energy Steel, or (ii)&nbsp;returned products which were manufactured, sold, leased or
delivered by Energy Steel.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>3.24 Guaranties.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except as set forth on <U>Schedule&nbsp;3.24</U>, Energy Steel is not a guarantor or otherwise is
liable for any Liability or obligation (including indebtedness) of any other Person.
</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>3.25 Brokers or Finders.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except for UHY Advisors MI, Inc. (&#147;<B><I>UHY</I></B>&#148;), no agent, broker, investment banker, financial
advisor or other Person is or will be entitled to any broker&#146;s or finder&#146;s fee or any other
commission or similar fee from the Seller or Energy Steel in connection with any of the
transactions contemplated by this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>3.26 Foreign Corrupt Practices Act.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Neither Energy Steel nor any of its respective officers, directors, nor, to Energy Steel&#146;s or
the Seller&#146;s knowledge, any employees or agents (or stockholders), distributors, representatives or
other persons acting on the express, implied or apparent authority of Energy Steel, have paid,
given or received or have offered or promised to pay, give or receive, any bribe or other unlawful
payment of money or other thing of value, any unlawful discount, or any other unlawful inducement,
to or from any person or Governmental Authority in the United States or elsewhere in connection
with or in furtherance of the business of Energy Steel (including, without limitation, any unlawful
offer, payment or promise to pay money or other thing of value (i)&nbsp;to any foreign official,
political party (or official thereof) or candidate for political office for the purposes of
influencing any act, decision or omission in order to assist Energy Steel in obtaining business for
or with, or directing business to, any person, or (ii)&nbsp;to any person, while knowing that all or a
portion of such money or other thing of value will be offered, given or promised unlawfully to any
such official or party for such purposes). The business of Energy Steel is not in any manner
dependent upon the making or receipt of such unlawful payments, discounts or other inducements.
Energy Steel has not otherwise taken any action that could cause Energy Steel to be in violation of
the Foreign Corrupt Practices Act or any applicable Laws of similar effect.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>3.27 Backlog</B>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of the date specified on <U>Schedule&nbsp;3.27</U>, Energy Steel has a backlog of &#147;orders&#148;
(meaning a customer has issued a purchase order in respect of the orders listed, and not
necessarily that the order is irrevocable or otherwise not subject to cancellation in certain
circumstances dictated by applicable terms and conditions) for the sale of its products and
services as set forth in <U>Schedule&nbsp;3.27</U>. As of the date specified on <U>Schedule
3.27</U>, Energy Steel has not received notice from a respective customer that any of such orders
have been cancelled or materially reduced, and each of such orders on backlog is at a price and on
terms (including margin) generally consistent with Energy Steel&#146;s past practices and the Ordinary
Course of Business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>3.28 Full Disclosure.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All documents and other papers delivered by or on behalf of the Seller or Energy Steel in
connection with the transactions contemplated by this Agreement are accurate and complete, as of
the date and for the periods covered or therein specified, in all material respects, are authentic
and to the knowledge of Energy Steel and Seller copies of originals. To the knowledge of Energy
Steel and Seller, no representation or warranty of the Seller or Energy Steel contained in this
Agreement contains any untrue statement of a fact or omits to state a fact necessary in order to
make such respective representations and warranties the statements in this Agreement, in light of
the circumstances under which they were made, not misleading.
</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>3.29 Certain Acts or Omissions.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Seller has not knowingly, intentionally, or in a grossly negligent manner committed any act or
action or omitted to take any act or action in breach of her duties to Energy Steel the occurrence
of which has or could reasonably be expected to give rise to a Claim by or against Energy Steel
whether based in contract, tort, breach of fiduciary duty or otherwise.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE 4.</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>REPRESENTATIONS AND WARRANTIES OF GRAHAM AND BUYER</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Graham and Buyer represent and warrant to Energy Steel and Seller as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>4.1 Organization, Standing and Power.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Graham is a corporation duly organized, validly existing and in good standing under the Laws
of the State of Delaware. Buyer is a corporation duly organized, validly existing and in good
standing under the Laws of the State of Delaware. Each of Graham and Buyer has all requisite
corporate power and authority to own, lease and operate its properties and to carry on its business
as now being conducted, and is duly qualified and in good standing to do business in the State of
Michigan and each jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification necessary, other than in such jurisdictions where the
failure so to qualify could not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>4.2 Authority; Binding Effect.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each of Graham and Buyer has all requisite corporate power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of each of Graham and Buyer. This
Agreement has been duly executed and delivered by each of Graham and Buyer and, assuming the due
execution and delivery hereof by Energy Steel, constitutes the valid and binding obligation of each
of Graham and Buyer, enforceable against each of them in accordance with its terms, except as the
enforceability hereof may be limited by (a)&nbsp;bankruptcy, insolvency or other Laws relating to or
affecting creditors&#146; rights generally and (b)&nbsp;general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law). No vote of any creditor or
security holder of Graham is required in connection with the execution and delivery of this
Agreement by Graham or Buyer, or the consummation of the transactions contemplated by this
Agreement by either. Graham has adopted this Agreement as the sole stockholder of Buyer and is
jointly and severally liable for all obligations and liabilities of itself and Buyer as a direct
party to this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>4.3 No Conflict.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The execution and delivery of this Agreement by each of Graham and Buyer does not, and the
consummation of the transactions contemplated hereby and the fulfillment of the obligations and
</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">undertakings hereunder will not, result in any Violation of any provision of: (a)&nbsp;the
certificate of incorporation or bylaws of Graham or of Buyer; (b)&nbsp;any material Contract applicable
to Graham, Buyer or any of their respective assets; or (c)&nbsp;any Law applicable to Graham, Buyer or
any of their respective assets; except, in the case of Contracts and Laws, for Violations which
could not reasonably be expected to have, individually or in the aggregate, any adverse effect on
the validity or enforceability of this Agreement or a Material Adverse Effect. No consent,
approval, order or authorization of, or registration, declaration or filing with, any Governmental
Entity is required by or with respect to Graham or Buyer in connection with the execution and
delivery of this Agreement by Graham or Buyer, or for the consummation by each of Graham and Buyer
of the transactions contemplated hereby, except for: (i)&nbsp;filings and notices required under
Competition Laws; (ii)&nbsp;the filing of such documents with, and the obtaining of such orders from,
state authorities, including state securities authorities, that are required in connection with the
transactions contemplated by this Agreement; and (iii)&nbsp;such consents, approvals, orders,
authorizations or registrations the failure to obtain which could not reasonably be expected,
individually or in the aggregate, to have any adverse effect on the validity or enforceability of
this Agreement or a Material Adverse Effect.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>4.4 Litigation.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except as disclosed in Graham&#146;s filings with the SEC, there is no Claim pending or to Graham&#146;s
knowledge threatened against or affecting Graham, which if adversely determined could reasonably be
expected, individually or in the aggregate, to have an adverse effect on the consummation of the
transactions contemplated herein or a Material Adverse Effect, nor is there any judgment,
injunction, decree, rule or order of any Governmental Entity outstanding against Graham which could
reasonably be expected, individually or in the aggregate, to have any such effect.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>4.5 Brokers or Finders.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except for Harvey &#038; Company, LLC, no agent, broker, investment banker, financial advisor or
other Person is or will be entitled to any broker&#146;s or finder&#146;s fee or any other commission or
similar fee from Graham in connection with any of the transactions contemplated by this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>4.6 No Breach.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Neither Buyer nor Graham has knowledge of a breach by Seller or Energy Steel of any of their
representations or warranties made in this Agreement which are of a nature which entitle Buyer or
Graham a right to indemnification under this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>4.7 Purchase for Investment.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Buyer is acquiring the Energy Steel Shares for its own account for investment purposes and not
with a view to the distribution of the Energy Steel Shares. Buyer has such knowledge and
experience in financial and business matters so as to be capable of evaluating the merits and risks
of its investment in the Energy Steel Shares and has had an adequate opportunity to conduct an
investigation of Energy Steel. Buyer is an &#147;accredited investor&#148; as defined in Rule&nbsp;501 under the
Securities Act of 1933, as amended. Buyer will not, directly or indirectly, dispose of the Energy
Steel Shares except in compliance with applicable federal and state securities laws.
</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>4.8 Financing.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Graham and/or Buyer have sufficient funds available to satisfy, among other things, the
obligation to pay: (a)&nbsp;the Purchase Price; and (b)&nbsp;all expenses incurred by Buyer in connection
with the transactions contemplated hereby.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE 5.</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>COVENANTS OF EACH PARTY</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>5.1 Additional Agreements; Commercially Reasonable Efforts.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject to the terms and conditions of this Agreement, each of the parties agrees to use
commercially reasonable efforts to take or cause to be taken all action, and to do or cause to be
done all things necessary, proper or advisable under applicable Laws, to consummate and make
effective the transactions contemplated by this Agreement, including cooperating fully with the
other parties, providing information, making all necessary filings and giving all necessary notices
in connection with, among other things, Competition Laws, the Securities Act, the Exchange Act and
state securities Laws. Each of the parties will take or cause to be taken all reasonable actions
necessary to obtain (and will cooperate with each other in obtaining) any consent, authorization,
order or approval of, or any exemption by, any Governmental Entity or other public or private third
party, required to be obtained or made by any of them in order to consummate the transactions
contemplated herein or the taking of any action contemplated by this Agreement as agreed to be so
necessary by the parties, including without limitation the Required Approvals. In case at any
time after the Closing Date any further action is necessary or desirable to carry out the purposes
of this Agreement, each party will reasonably cooperate to take all such necessary action.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>5.2 Expenses.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Graham and Seller will each bear their respective legal, accounting and other expenses in
connection with the transactions contemplated hereby, whether or not the transactions contemplated
herein are consummated, except as provided in Article&nbsp;7, or as otherwise necessary to enforce this
Agreement and the transactions contemplated hereby.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>5.3 Other Actions.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Energy Steel, the Seller and Graham will refrain from knowingly taking any action that
would or is reasonably likely to cause any of its representations and warranties set forth in this
Agreement to be untrue as of the date made or any of the conditions to the transactions
contemplated herein set forth in Article&nbsp;6 not to be satisfied. Prior to the Closing Date, each of
the parties will use commercially reasonable efforts to: (a)&nbsp;obtain the satisfaction of its
conditions to Closing as set forth in Article&nbsp;6 as soon as practicable; (b)&nbsp;facilitate contacts,
negotiations and communications with any Persons reasonably necessary to ensure a smooth transition
of control of the Business; and (c)&nbsp;assist one another in obtaining any consents required from any
Person to effect the consummation of the transactions contemplated hereby.
</DIV>

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Prior to the Closing Date, neither Energy Steel nor the Seller shall revoke Energy Steel&#146;s
election to be taxed as an S corporation within the meaning of Code &#167;1361 and &#167;1362, nor shall
Energy Steel or Seller take or allow any action (other than the sale of Energy Steel&#146;s stock
pursuant to this Agreement) that would result in the termination of Energy Steel&#146;s status as a
validly electing S corporation within the meaning of Code &#167;1361 and &#167;1362.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>5.4 Confidentiality.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Graham and Buyer (treated as one party for this purpose) and Energy Steel and the Seller
(each, a &#147;<B><I>Receiving Party</I></B>&#148;) will, and will use commercially reasonable efforts to cause its
Affiliates, employees, representatives and agents to, hold in strict confidence all Confidential
Information of the other party (each, the &#147;<B><I>Disclosing Party</I></B>&#148;), unless compelled to disclose the
same by judicial or administrative process or, in the opinion of counsel, by other Laws; provided,
however, that in either such case the Receiving Party will provide the Disclosing Party with prompt
prior notice thereof so that the Disclosing Party may seek a protective order or other appropriate
remedy and/or waive compliance with the provisions of this Section. In the event that such
protective order or other remedy is not obtained, or the Disclosing Party waives compliance with
the provisions hereof, the Receiving Party will furnish only that portion of Confidential
Information which, in the written advice of the Receiving Party&#146;s counsel, is required, and the
Receiving Party will exercise commercially reasonable efforts to obtain reliable assurance that
confidential treatment will be accorded such of the disclosed Confidential Information as the
Disclosing Party so designates. The Receiving Party will not otherwise disclose Confidential
Information to any Person, except with the consent of the Disclosing Party. In the event that the
transactions contemplated herein are not consummated or this Agreement is terminated, the Receiving
Party will promptly return all Confidential Information to the Disclosing Party. For the purposes
hereof, &#147;<B><I>Confidential Information</I></B>&#148; means all information of any kind concerning the Disclosing
Party or any of its Affiliates, obtained directly or indirectly from the Disclosing Party or any of
its Affiliates, employees, representatives or agents in connection with the transactions
contemplated hereby, except information (a)&nbsp;ascertainable or obtained from public or published
sources, (b)&nbsp;received from a third party not known by the Receiving Party to be under an obligation
to keep such information confidential, (c)&nbsp;which is or becomes known to the public (other than
through a breach of this Agreement), or (d)&nbsp;which was in the Receiving Party&#146;s possession prior to
disclosure thereof to the Receiving Party and which was not subject to any obligation to keep such
information confidential. The Receiving Party recognizes that any breach of the provisions of this
Section would result in irreparable harm to the Disclosing Party and its Affiliates and, therefore,
that the Disclosing Party will be entitled to an injunction to prohibit any such breach or
anticipated breach, without the necessity of posting a bond, cash or otherwise, in addition to all
of its other legal and equitable remedies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>5.5 Publicity.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Neither Energy Steel nor the Seller shall issue any press release or make any public
announcement relating to the subject matter of this Agreement without the prior written approval of
Graham which consent shall not be unreasonably withheld or delayed after the consummation of the
Closing. In addition, Energy Steel and the Seller covenant and agree to cooperate with Graham in
connection with the preparation and making of any public disclosure by Graham which Graham
</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">elects to or is required to make by applicable Law or any listing or trading requirement
concerning Graham&#146;s publicly-traded securities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>5.6 Cooperation in Preparation of Audited Financial Statements and SEC Reports.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Energy Steel and the Seller agree to cooperate with Graham, at Graham&#146;s expense, in the
preparation of all filings with the SEC in connection with this Agreement and the consummation of
the transactions contemplated herein.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>5.7 Restrictions on Certain Activities.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;The Seller shall not during the longer period of: (i)&nbsp;one (1)&nbsp;year after the time in
which she may be employed by Graham or any Subsidiary of Graham; or (ii)&nbsp;for a period of five (5)
years after the Closing Date (the &#147;<B><I>Restriction Period</I></B>&#148;), anywhere in the United States, Canada,
Germany, Korea, Slovenia, Brazil and China and if employed by Graham or an Affiliate in any other
country where Graham or any Subsidiary conducts business, directly or indirectly, as a partner,
joint venturer, investor, lender, manager, licensor, manufacturer, retailer or otherwise, engage in
any business that engages in any activity which is competitive with the Business or the businesses
operated by Graham, or own stock or otherwise have an ownership interest in any person,
corporation, firm, partnership or other entity engaged in any such business except owning five
percent (5%) or less of any publically-traded company engaged in a competitive business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;The Seller will not, during the Restriction Period hire or offer to hire (as an employee,
independent contractor or otherwise) any person who on the date hereof is a director, officer or
employee of Graham, including Buyer or Energy Steel, except Danna Unrue.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;The Seller agrees that a violation of Section&nbsp;5.7(a) or 5.7(b) will cause irreparable
injury to Graham and Buyer, and Graham and Buyer will be entitled, in addition to any other rights
and remedies it may have at law or in equity, to apply for an injunction enjoining and restraining
the Seller, as the case may be, from doing or continuing to do any such act and any other
violations or threatened violations of this Section&nbsp;5.7 hereof without the necessity of posting a
bond or undertaking.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;The Seller acknowledges and agrees that the covenants set forth in this Section&nbsp;5.7 are
reasonable and valid in geographical and temporal scope and in all other respects. If any of such
covenants are found to be invalid or unenforceable by a final determination of a court of competent
jurisdiction (i)&nbsp;the remaining terms and provisions hereof shall be unimpaired and (ii)&nbsp;the invalid
or unenforceable term or provision shall be deemed replaced by a term or provision that is valid
and enforceable and that comes closest to expressing the intention of the invalid or unenforceable
term or provision. In the event that, notwithstanding the first sentence of this Section&nbsp;5.7(d),
any of the provisions of this Section&nbsp;5.7 relating to the geographic or temporal scope of the
covenants contained therein or the nature of the business restricted thereby shall be declared by a
court of competent jurisdiction to exceed the maximum restrictiveness such court deems enforceable,
such provision shall be deemed to be replaced herein by the maximum restriction deemed enforceable
by such court.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>5.8 Tax Matters</B>
</DIV>





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




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;<B><I>Final Tax Returns</I></B>. All Tax returns for Energy Steel that are to be filed after Closing
and include a period, or part of a period that began before Closing (each a &#147;<B><I>Final Tax Return</I></B>&#148;),
will be prepared by UHY and filed by Seller, at Seller&#146;s sole cost and expense, with opportunity
given to Buyer to first review and provide comments on such Final Tax Return. All Final Tax
Returns shall be prepared by UHY in a manner consistent with prior Tax returns of Energy Steel,
unless otherwise required by Law. At least twenty (20)&nbsp;days prior to the due date for filing a
Final Tax Return, Seller shall deliver a copy of each such Final Tax Return to Buyer for review and
comment. Seller will accept all reasonable comments of Buyer made to the Final Tax Returns. To
the extent permitted by applicable law, the Seller shall include any income, gain, loss, deduction
or other tax items for such periods on the Seller&#146;s Tax returns in a manner consistent with the
Schedule&nbsp;K-1s furnished by Energy Steel to the Seller for such periods. The Buyer shall be entitled
to retain all refunds provided, however, that the Seller may retain all refunds with respect to
Pre-Closing Tax Periods.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;<B><I>Tax Return Preparation</I></B>. Graham, Buyer, the Seller and Energy Steel shall cooperate fully,
as and to the extent reasonably requested by the other parties, in connection with the filing of
any Tax returns, and any audit, litigation or other proceeding with respect to Taxes. Graham,
Buyer, the Seller and Energy Steel shall, as soon as practicable, provide the other with written
notice of any audit, litigation or other proceeding with respect to Taxes. Such cooperation shall
include the retention and (upon the other party&#146;s request) the provision of records and information
which are reasonably relevant to any such Tax return, or any such audit, litigation or other
proceeding and making employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. Graham, Buyer, the Seller and
Energy Steel agree (i)&nbsp;to retain or cause to be retained all books and records with respect to Tax
matters pertinent to Energy Steel relating to any Tax period beginning before the Closing Date
until the expiration of the applicable statute of limitations (and, to the extent notified by
Graham or the Seller, any extensions thereof) of the respective Tax periods, and to abide by all
record retention agreements entered into with any Tax authority, (ii)&nbsp;to provide to the other
party, upon request, all books and records with respect to Tax matters pertinent to Energy Steel
relating to any taxable period beginning before the Closing Date until the expiration of the
statute of limitations (and, to the extent notified by Graham or the Seller, any extensions
thereof) of the respective periods, and (iii)&nbsp;to give the other parties reasonable written notice
prior to transferring, destroying or discarding any such books and records and, if any of the other
parties so requests, the other parties shall allow such requesting party to take possession of such
books and records.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>5.9 Certain Taxes and Fees.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All transfer, documentary, sales, use, stamp, registration and other such Taxes, and all
conveyance fees, recording charges and other fees and charges (including any penalties and
interest) incurred in connection with the consummation of the transactions contemplated by this
Agreement, other than real estate Taxes, shall be paid by the Seller when due, and the Seller will,
file all necessary Tax returns and other documentation with respect to all such Taxes, fees and
charges. The expense of such filings shall be paid by the Seller.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>5.10 Termination of Existing Working Capital Line of Credit.</B>
</DIV>





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




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The parties agree that effective as of the Closing Date any existing line of credit or other
commercial loan facility of Energy Steel will be terminated. Buyer shall be obligated to establish
new credit facilities as it determines appropriate on the Closing Date.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>5.11 Termination of Energy Steel 401(k) Plan.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Energy Steel shall have delivered resolutions of its board of directors terminating the Energy
Steel 401(k) Plan and and provide Graham and Buyer with written evidence of such termination in a
form satisfactory to Graham, provided that such termination shall not be required to become
effective until immediately prior to the Closing Date.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>5.12 Section&nbsp;338(h)(10) Election</B>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At the sole discretion of Graham and the Buyer upon written notice delivered to Seller no
later than February&nbsp;1, 2011, the Seller agrees to make a timely election under Code Section
338(h)(10) (&#147;<B><I>3</I></B><B><I>38(h)(10)</I></B><B><I> Election</I></B>&#148;), and Graham and Buyer shall indemnify and hold harmless Seller
from and against any and all Tax liabilities imposed on Seller (or imposed on Energy Steel and
passed through to Seller) as a result of having made any such 338(h)(10) Election to the extent
that such Tax liabilities exceed the Tax liabilities that the Seller would incur in the absence of
such election (the &#147;<B><I>Buyer Tax Payments</I></B>&#148;). In the event that the Seller incurs any Tax obligations
as a result of the 338(h)(10) Election which are in excess of amounts due had the transactions set
forth herein been taxed as a stock sale, then the amount that Graham and the Buyer shall be
required to reimburse Seller under this Section (1)&nbsp;shall be grossed up to assure that Seller does
not incur any Tax cost as a result of the 338(h)(10) Election and the reimbursement payments under
this Section and (2)&nbsp;shall take into account the highest marginal income tax rate applicable to
payments of this type at the applicable times as they apply to the Seller. Any Buyer Tax Payments
shall be treated by the parties as additional Purchase Price and shall be paid to Seller not less
than five (5)&nbsp;days prior to the time Seller is required to pay such amounts with a Federal Tax
return or estimate. Any amounts payable hereunder to the Seller shall be paid in cash unless
otherwise agreed to in writing by the Seller. Graham and Buyer will prepare and timely file with
the appropriate taxing authorities any forms used to make the 338(h)(10) Election. Buyer and
Graham shall pay, as incurred, any and all fees (including fees of UHY), costs and expenses
associated with the 338(h)(10) election. In the event that the 338(h)(10) election is denied by
the IRS, Seller agrees that is shall refund the amount of any such Buyer Tax Payments paid by Buyer
and Graham to Seller. Such refund amount from Seller shall be paid in cash unless otherwise agreed
in writing or, at Graham&#146;s and Buyer&#146;s election such amount may be setoff against the Escrow Amount
or any payments due to Seller under the Earn Out Agreement.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE 6.</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>CONDITIONS PRECEDENT TO PARTIES&#146; OBLIGATIONS</B>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>6.1 Conditions to Each Party&#146;s Obligation.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The respective obligations of Energy Steel, the Seller, Graham and Buyer to effect the
transactions contemplated herein are subject to the satisfaction prior to the Closing Date of each
of the following conditions:
</DIV>

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;<B><I>Governmental Approvals</I></B><B>. </B>All licenses, franchises, certificates, permits, accreditations,
authorizations, consents, orders or approvals of, or registrations, declarations or filings with,
or expirations of waiting periods imposed by, any Governmental Entity the failure to obtain which
would materially delay, prevent or hinder the consummation of the transactions contemplated herein,
will have occurred, been filed or been obtained, including any authorizations, filings or notices
required under Competition Laws.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;<B><I>No Injunctions or Restraints</I></B><B>. </B>No temporary restraining order, preliminary or permanent
injunction or other order or Law issued by any court of competent jurisdiction or other
Governmental Entity, or other legal restraint or prohibition, preventing the consummation of the
transactions contemplated herein shall have been issued and pending at the time of Closing.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>6.2 Conditions to Obligations of Graham and Buyer.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The obligations of Graham and Buyer to effect the transactions contemplated herein are subject
to the satisfaction of the following additional conditions, unless waived by Graham:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;<B><I>Representations and Warranties</I></B><B>. </B>The representations and warranties of Energy Steel and
the Seller set forth in this Agreement will be true and correct in each case as of the date of this
Agreement and as of the Closing Date, with the same force and effect as if made on and as of the
Closing Date, in each case except for representations and warranties that speak only as of a
specific date, which will have been true and correct as of such date; and Graham will have received
a certificate to such effect signed on behalf of Energy Steel by its Certifying Officer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;<B><I>Performance of Obligations of Energy Steel and Seller</I></B><B>. </B>Energy Steel and the Seller will
have performed in all material respects all obligations required to be performed by them under this
Agreement at or prior to the Closing Date, and Graham will have received a certificate to such
effect signed on behalf of Energy Steel by its Certifying Officers and the Seller.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;<B><I>No Material Adverse Effect. </I></B>Between the date hereof and the Closing Date, there will not
have occurred or been discovered one or more events or conditions which have, or which could be
expected to have, individually or in the aggregate, a Material Adverse Effect, and Graham will have
received a certificate to such effect signed on behalf of Energy Steel by its Certifying Officers
and the Seller.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;<B><I>No Amendments to Resolutions</I></B><B>. </B>Neither the board of directors of Energy Steel nor the
Seller will have amended, modified, rescinded or repealed the resolutions heretofore adopted by the
board of directors which approve this Agreement, the consummation of the transactions contemplated
herein and the performance of all of Energy Steel&#146;s and the Seller&#146;s obligations hereunder, and
will not have adopted any other resolutions in connection with this Agreement and the transactions
contemplated hereby inconsistent with such resolutions, and Graham will have received a certificate
to such effect signed on behalf of Energy Steel by its Certifying Officers and the Seller.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;<B><I>Articles of Incorporation</I></B><B>. </B>With respect to Energy Steel, Graham will have received a
copy, certified as of a date reasonably proximate to the Closing Date by the Secretary of State (or
other appropriate Governmental Entity) of its jurisdiction of organization, of its complete
articles of incorporation (or similar organizational document), including all amendments to date.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;<B><I>Consents Under Agreements</I></B><B>. </B>Energy Steel will have obtained the consent or approval of
each Person whose consent or approval is required in order to permit the continuation or succession
by Buyer pursuant to the transactions contemplated herein to any obligation, right or interest of
Energy Steel under any Intellectual Property or Contract which are deemed Required Approvals by the
parties as evidenced by inclusion on <U>Schedule&nbsp;3.4.</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;<B><I>New Lease Agreement</I></B>. Buyer and ESSC Investments, L.L.C. shall have executed and delivered
a new lease agreement for the property located at 3123 John Conley Drive, Lapeer, Michigan in
substantially the same form as attached hereto as <U>Exhibit&nbsp;F</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;<B><I>Escrow Agreement</I></B>. Graham, Buyer, Seller and Escrow Agent shall have executed and
delivered the Escrow Agreement in substantially the same form as attached hereto as <U>Exhibit
B</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;<B><I>Pay-Off Letters; Satisfaction of Energy Steel Debt; Release of Energy Steel Guarantees</I></B>.
Graham and Buyer shall have received letters, in form and substance reasonably satisfactory to
Graham and Buyer, from the lenders of the Energy Steel Debt and from Mitchell for the Mitchell Note
(the &#147;<B><I>Pay-Off Letters</I></B>&#148;) (A)&nbsp;stating the aggregate amount of all the outstanding debt (including a
list of all outstanding letters of credit of Energy Steel, as of the Closing Date), and (B)
agreeing that if such amount so identified is paid and such letters of credit are terminated at
Closing or any time stated thereafter, such prepayment and terminations shall not be subject to any
prepayment premiums or penalties or any other fees or expenses associated with payment thereof, and
that on such payment and letter of credit terminations all Encumbrances and liens in assets of
Energy Steel or the Energy Steel Shares held by such lenders or Mitchell shall be terminated
effective as of the Closing. The Seller shall provide satisfactory evidence that the Energy Steel
Debt and the Mitchell Note have been paid in their entirety in accordance with the Pay-Off Letters.
In addition, Energy Steel and the Seller shall deliver releases of all guarantees of any
indebtedness guaranteed by Energy Steel, including without limitation any indebtedness of ESSC
Investments, L.L.C.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)&nbsp;<B><I>Employees; Seller Employment Agreement. </I></B>Graham and Buyer will be satisfied that all
Energy Steel employees, who they deem necessary to operate the Business and to whom Graham or Buyer
have offered employment, including without limitation the Seller (on terms and conditions
substantially similar to her employment terms and work arrangements other than salary, benefit
programs and bonus as of the Closing Date) prior to the anticipated Closing Date, have agreed to be
employed by Graham, Buyer or one of their Affiliates. In addition, Graham and the Seller shall
have entered into an employment agreement on terms and conditions mutually satisfactory to Graham
and the Seller.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)&nbsp;<B><I>Assignment of Excluded Assets</I></B>. Energy Steel and Seller shall execute and deliver an
Assignment and Assumption of Excluded Assets in form and substance satisfactory to Graham and
Buyer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)&nbsp;<B><I>General Releases</I></B>. The Seller and each of the officers and directors of Energy Steel shall
have executed and delivered general releases to Energy Steel, releasing any claim to severance or
termination payments and to all other claims and causes of action which any of them may now or ever
have against Energy Steel other than for accrued compensation, each of which shall be in form and
substance reasonably satisfactory to Graham and Buyer.
</DIV>

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)&nbsp;<B><I>Resignations</I></B>. Graham and the Buyer shall have received the resignations, effective as of
the Closing Date, of each director and officer of Energy Steel.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n)&nbsp;<B><I>Opinion of Counsel to Energy Steel and Seller</I></B>. Graham and the Buyer shall have received
from Howard and Howard Attorneys PLLC, counsel to Energy Steel and counsel to the Seller an opinion
as of the Closing Date substantially in the form set forth on <U>Exhibit&nbsp;G</U>, of which shall be
addressed to Graham and the Buyer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o)&nbsp;<B><I>Mitchell Release</I></B>. Mitchell shall have executed and delivered to Energy Steel a General
Release in the form of <U>Exhibit&nbsp;H</U> attached hereto and Energy Steel shall have delivered a
copy thereof delivered to Graham and Buyer. This Release shall contain a waiver and release as to
any consideration that is or may be due as a result of this Agreement and the transactions
contemplated hereby other than any payments due pursuant to the Purchase Agreement between the
Seller and Mitchell dated August&nbsp;28, 2003, as amended by an amendment dated September&nbsp;9, 2003. In
addition, the Release will contain restrictive covenants from Mitchell in favor of Graham, Buyer
and their Affiliates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p)&nbsp;<B><I>Termination of Shareholders Agreements, Purchase Agreement and Collateral Pledge
Agreement</I></B>. Energy Steel, Seller and Mitchell shall have executed and delivered a release and
termination with respect to that certain Shareholders Agreement dated as of January&nbsp;2004, the
Purchase Agreement between Seller and Mitchell dated August&nbsp;28, 2003, as amended, and the
Collateral Pledge Agreement between Seller and Mitchell dated August&nbsp;28, 2003, as amended, which
release and termination shall be in form and substance satisfactory to Graham and Buyer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(q)&nbsp;<B><I>UHY Limited Release and Waiver</I></B>. UHY shall have executed and delivered to Energy Steel a
waiver and limited release as to any consideration that is or may be due as a result of this
Agreement and the transactions contemplated hereby other than the amount paid to them at Closing
Date, which waiver and limited release shall be in form and substance satisfactory to Graham and
Buyer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(r)&nbsp;<B><I>Direction to Apply Proceeds</I></B>. Graham and Buyer shall have received from the Seller
instructions and authorization (in form and substance satisfactory to Graham and Buyer) directing
Buyer to pay UHY all amounts due to such parties as a result of this Agreement and the transactions
contemplated hereby.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(s)&nbsp;<B><I>Other Closing Deliveries</I></B><B>. </B>Graham will have received the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) reasonable evidence of satisfaction of the covenants contained in Article&nbsp;6;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) duly executed resignations of all directors and officers of Energy Steel (in those
capacities and not as employees); and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) certificates of good standing as of a date reasonably proximate to the Closing
Date with respect to Energy Steel from the respective Secretaries of State (or other
appropriate Governmental Entities) of its jurisdiction of organization and any other
jurisdictions in which it conducts business.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>6.3 Conditions to Obligations of Energy Steel and the Seller.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The obligation of Energy Steel and the Seller to effect the transactions contemplated herein
are subject to the satisfaction of the following additional conditions, unless waived by Energy
Steel:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;<B><I>Representations and Warranties</I></B><B>. </B>The representations and warranties of Graham set forth in
this Agreement will be true and correct in each case as of the date of this Agreement and as of the
Closing Date, with the same force and effect as if made on and as of the Closing Date, in each case
except for representations and warranties that speak only as of a specific date, which will have
been true and correct as of such date; and Energy Steel will have received a certificate to such
effect signed on behalf of Graham by its Certifying Officer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;<B><I>Performance of Obligations of Graham and Buyer</I></B><B>. </B>Graham and Buyer will have performed in
all material respects all obligations required to be performed by them under this Agreement at or
prior to the Closing Date and a covenant to duly perform all post-closing obligations, and Energy
Steel will have received a certificate to such effect signed on behalf of Graham by its Certifying
Officer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;<B><I>Seller&#146;s Employment Agreement</I></B>. Seller and Graham shall have entered into an employment
agreement on terms and conditions mutually satisfactory to Graham and the Seller.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;<B><I>New Lease Agreement</I></B>. Buyer and ESSC Investments, L.L.C. shall have executed and delivered
a new lease agreement for the property located at 3123 John Conley Drive, Lapeer, Michigan in
substantially the same form as attached hereto as <U>Exhibit&nbsp;F</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;<B><I>Escrow Agreement</I></B>. Graham, Buyer, Seller and Escrow Agent shall execute and deliver the
Escrow Agreement in substantially the same form as <U>Exhibit&nbsp;B</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;<B><I>Purchase Price</I></B>. Graham and Buyer shall have paid the Purchase Price in accordance with
the terms of Section&nbsp;2.2 above, including delivery of the fully-executed and enforceable Earn Out
Agreement.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE 7.</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>INDEMNIFICATION</B>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>7.1 Survival.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The representations and warranties in this Agreement (other than the representations and
warranties contained in Sections&nbsp;3.1 (Organization, Standing and Power), 3.2 (Capital Structure),
3.3 (Authority; Binding Effect), 3.8 (Assets; Title; Absence of Liens and Encumbrances), 3.10
(Intellectual Property), 3.13 (Environmental Matters), 3.14 (Employee Plans), 3.15 (Employment
Matters), 3.19 (Tax Matters), 3.26 (Foreign Corrupt Practices Act), 4.1 (Organization, Standing and
Power), 4.2 (Authority; Binding Effect), and 4.7 (No Breach) collectively, the &#147;<B><I>Surviving
Representations and Warranties,</I></B>&#148; which shall survive the Closing for the applicable statute of
limitations) shall survive the Closing for a period of twenty-one (21)&nbsp;months from the Closing, at
which time they shall terminate; provided that a claim based on the Surviving Representations and
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Warranties, any claim based on fraud or intentional misrepresentation by the Seller or Energy
Steel in connection with this Agreement or any other agreements delivered in connection herewith
and any claim based on fraud or intentional misrepresentation by Graham or Buyer in connection with
this Agreement shall survive the Closing indefinitely, subject to any applicable statute of
limitations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>7.2 Indemnification by Energy Steel and the Seller.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From and after the Closing Date, for the applicable survival period set forth in Section&nbsp;7.1,
Energy Steel and the Seller shall jointly and severally indemnify, save and hold harmless Graham
and Buyer, and their respective directors, officers and stockholders and Representatives, or any of
them (collectively, &#147;<B><I>Graham Indemnitees</I></B>&#148;) from and against any and all Losses asserted against,
resulting to, imposed on, sustained, incurred or suffered by any of them based upon, arising out
of, related to or otherwise in respect of any of the following (including any action, suit or
proceeding based upon, arising out of, related to or otherwise in respect of any thereof):
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;the inaccuracy in or breach of any representation or warranty of Energy Steel or the
Seller contained in Article&nbsp;3 or any certificate delivered by Energy Steel or the Seller to Graham
and Buyer in connection with this Agreement;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;any failure to perform or observe or any breach of any covenant or agreement made by
Energy Steel or the Seller or any of their respective Affiliates in this Agreement or any other
agreement delivered by Energy Steel or the Seller;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;any undisclosed Liability of Energy Steel or the Seller;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;any Liabilities related, in any way, to (i)&nbsp;the employment of any employees of Energy
Steel on or prior to the Closing Date which are not assumed by Buyer or Graham, or (ii)&nbsp;employees
terminated by Energy Steel or any Affiliate on or prior to the Closing Date;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;any Liabilities related, in any way, to &#147;deferred compensation packages&#148; of any Energy
Steel employees, including without limitation the deferred compensation packages with Allan L.
Valentine and Robert J. Paton;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;any Pre-Closing Taxes, including, without limitation, (i)&nbsp;any Taxes incurred during any
period prior to the Closing Date when Energy Steel was taxable as a &#145;C&#146; corporation, and (ii)&nbsp;any
Taxes which may be incurred by Energy Steel, Graham or Buyer for any period prior to the Closing
Date as a result of, relating to or otherwise in respect of the accounting change by Energy Steel
to &#145;percentage of completion&#146; (as disclosed on Schedule&nbsp;3.19) whether or not such accounting change
is approved or denied by the IRS;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;any Liabilities related in any way to the matters described in Schedules 1.1, 2.2(a), 2.5,
3.2(item 1), (item 2) and (item 3), 3.6, 3.8, 3.13, 3.14(a)(item 10) and (item 11), 3.14(c),
3.14(n), 3.15(a), 3.19(item 1), (item 2) and (item 3), 3.20(item 7) and 3.24;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;any Liabilities related in any way to the use of or operation of the Business at the
facility located at 2715 Paldan Drive, Auburn Hills, Michigan or any other property or facility
utilized by Energy Steel prior to the Closing Date; and
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;any Liabilities related in any way to Energy Steel&#146;s failure to timely qualify to do
business in any jurisdiction in which Energy Steel operates its Business prior to the Closing Date.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>7.3 Indemnification by Graham.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From and after the Closing Date, for the applicable survival period set forth in Section&nbsp;7.1,
Graham shall indemnify, save and hold harmless the Seller and her heirs (collectively, &#147;<B><I>Seller
Indemnitees</I></B>&#148;) from and against any and all Losses asserted against, resulting to, imposed on,
sustained, incurred or suffered by any them based upon, arising out of, related to or otherwise in
respect of any of the following (including any action, suit or proceeding based upon, arising out
of, related to or otherwise in respect of any thereof):
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;the inaccuracy in or breach of any representation or warranty by Graham or Buyer contained
in Article&nbsp;4 or any certificate delivered by Graham in connection with this Agreement;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;any failure to perform or observe or any breach of any covenant or agreement made by
Graham or Buyer or any of their respective Affiliates in this Agreement or any other agreement
delivered by Graham or Buyer in connection with this Agreement; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;any and all liabilities arising out of Graham or Buyer&#146;s ownership or operation of Energy
Steel or the Business after the Closing Date.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>7.4 Limitations.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;The Seller shall be required to indemnify and hold harmless pursuant to Sections&nbsp;7.2(a)
and (b)&nbsp;with respect to Losses incurred by Graham Indemnitees only to the extent the aggregate
Losses exceed One Hundred Fifty Thousand Dollars ($150,000) (the &#147;<B><I>Basket</I></B>&#148;), whereupon the Seller
shall be liable for all such Losses in excess of the Basket; provided, that the maximum aggregate
liability of the Seller to all Graham Indemnitees taken together for all Losses pursuant to Section
7.2 shall not exceed an amount equal to Five Million Dollars ($5,000,000) (the &#147;<B><I>Indemnification
Cap</I></B>&#148;). Notwithstanding the foregoing, the Basket and the Indemnification Cap shall not apply to
(a)&nbsp;any claims that relate to a breach or inaccuracy of the Surviving Representations and
Warranties, (b)&nbsp;any claims resulting from, arising out of, relating to or in the nature of, or
caused by intentional misrepresentations, fraud or willful misconduct by the Seller or Energy
Steel, (c)&nbsp;any claims resulting from, arising out of relating to or in the nature of, or caused by
any matter which required approval by Energy Steel&#146;s board of directors and/or shareholders and
which was not authorized by resolutions specifically detailing the actions approved, but rather was
approved through an omnibus and general resolution, or (d)&nbsp;any claims under Sections&nbsp;7.2(c), (d),
(e), (f), (g), (h)&nbsp;and (i).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Graham shall be required to indemnify and hold harmless pursuant to Section&nbsp;7.3(a) and (b)
with respect to Losses incurred by Seller Indemnitees only to the extent the aggregate Losses
exceed the Basket, whereupon Graham shall be liable for all Losses in excess of the Basket;
provided that the maximum aggregate liability of Graham to all Seller Indemnitees taken together
for all Losses pursuant to Section&nbsp;7.3 shall not exceed the Indemnification Cap. Notwithstanding
the foregoing, the Basket and aforementioned liability limit shall not apply to any claims
resulting from, arising out of, relating to or in the nature of, or caused by intentional
misrepresentations, fraud or
</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">willful misconduct by Graham and shall not in any manner limit Graham&#146;s and Buyer&#146;s
obligations pursuant to Section&nbsp;4.5 (Brokers or Finders), Section&nbsp;4.7 (No Breach), and Section&nbsp;2.2
(Payment of Purchase Price or Adjustments), the Earn Out Agreement or the Seller&#146;s Employment
Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>7.5 Notice of Claims.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Except as provided in Section&nbsp;7.6, if any Graham Indemnitee or the Seller Indemnitee (an
&#147;<B><I>Indemnified Party</I></B>&#148;) believes that it has suffered or incurred any Losses for which it is entitled
to indemnification under this Article&nbsp;7, such Indemnified Party shall so notify the party from whom
indemnification is being claimed (the &#147;<B><I>Indemnifying Party</I></B>&#148;) with reasonable promptness and
reasonable particularity in light of the circumstances then existing. If any claim is instituted by
or against a third party with respect to which any Indemnified Party intends to claim
indemnification under this Article&nbsp;7, such Indemnified Party shall promptly notify the Indemnifying
Party of such claim. The notice provided by the Indemnified Party to the Indemnifying Party shall
describe the claim (the &#147;<B><I>Asserted Liability</I></B>&#148;) in reasonable detail and shall indicate the amount
(or an estimate) of the Losses that have been or may be suffered by the Indemnified Party. The
failure of an Indemnified Party to give any notice required by this Section&nbsp;7.5 shall not affect
any of the Indemnified Party&#146;s rights under this Article&nbsp;7 or otherwise except and to the extent
that such failure is prejudicial to the rights or obligations of the Indemnifying Party.
Notwithstanding the foregoing, if prior to the stated expiration of any representation and warranty
there shall have been given notice of an Asserted Liability by an Indemnified Party, such
Indemnified Party shall continue to have the right to such indemnification with respect to such
noticed claim notwithstanding such expiration.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;To the extent a claim for Losses is made by any Graham Indemitees for indemnification
under Section&nbsp;7.2 and the Seller refuses to provide such indemnification in reliance on a breach by
Buyer or Graham of Section&nbsp;4.7 (No Breach), then the burden of proof shall be on the Seller to
demonstrate that such representation and warranty was breached by Buyer or Graham.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>7.6 Opportunity to Defend Third Party Claims.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Any Indemnifying Party will have the right to defend the Indemnified Party against any
third party claim for which it is entitled to indemnification from such Indemnifying Party under
this Article&nbsp;7 with counsel reasonably satisfactory to the Indemnified Party so long as (i)&nbsp;any of
the Indemnifying Parties notifies the Indemnified Party in writing within twenty (20)&nbsp;days after
the Indemnified Party has given notice of the third party claim that all of the Indemnifying
Parties will indemnify the Indemnified Party from and against the entirety of Losses the
Indemnified Party may suffer resulting from, arising out of, relating to, in the nature of or
caused by the third party claim, (ii)&nbsp;the Indemnifying Parties provide the Indemnified Party with
evidence reasonably acceptable to the Indemnified Party that the Indemnifying Parties will have the
financial resources to defend against the third party claim and fulfill their indemnification
obligations hereunder, (iii)&nbsp;the third party claim involves only money damages and does not seek an
injunction or other equitable relief, (iv)&nbsp;settlement of, or an adverse judgment with respect to,
the third party claim is not, in the good faith judgment of the Indemnified Party, likely to
establish a precedential custom or practice materially adverse to the continuing business interests
of the Indemnified Party, and (v)&nbsp;the Indemnifying Parties diligently conduct the defense of the
third party claim.
</DIV>

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Notwithstanding the foregoing, without the prior consent of the Indemnified Party, the
Indemnifying Parties shall not settle or compromise any third party claim or consent to the entry
of a judgment in connection therewith that: (i)&nbsp;does not provide for the claimant to give an
unconditional release to the Indemnified Party in respect of the Asserted Liability; (ii)&nbsp;involves
relief other than monetary damages; (iii)&nbsp;places restrictions or conditions on the operation of the
business of the Indemnified Party or any of its Affiliates; or (iv)&nbsp;involves any finding or
admission of criminal liability or of any Laws.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;So long as the Indemnifying Party has undertaken to conduct the defense of the third party
claim in accordance with Section&nbsp;7.6(a), (i)&nbsp;the Indemnified Party may retain separate co-counsel
at its sole cost and expense and participate in the defense of the third party claim, (ii)&nbsp;the
Indemnified Party will not consent to the entry of any judgment or enter into any settlement with
respect to the third party claim without the prior written consent of the Indemnifying Party, and
(iii)&nbsp;the Indemnifying Party shall keep the Indemnified Party reasonably informed as to the status
of the claim for which it is providing a defense. Notwithstanding the foregoing or Section&nbsp;7.6(a),
in the event that (w)&nbsp;any of the conditions in Section&nbsp;7.6(a)(i) is or becomes unsatisfied or; (x)
the Indemnifying Party shall not have employed counsel reasonably satisfactory to the Indemnified
Party to defend such action within thirty (30)&nbsp;days after the Indemnifying Party notifies the
Indemnified Party of its intent to defend against the Asserted Liability; (y)&nbsp;the Indemnified Party
shall have reasonably concluded, based upon written advice of counsel, that it has defenses
available to it that are different from or additional to those available to the Indemnifying Party
(in which case the Indemnifying Party shall not have the right to direct the defense of such action
on behalf of the Indemnified Party with respect to such different defenses); or (z)&nbsp;representation
of such Indemnified Party by the counsel retained by the Indemnifying Party would be inappropriate
due to actual or potential differing interests between such Indemnified Party and any other party
represented by such counsel in such proceeding, then the Indemnified Party may defend against the
third party claim in any manner it may deem appropriate and, the Indemnifying Parties will be
responsible for the Indemnified Party&#146;s costs of defending against the third party claim (including
reasonable attorneys&#146; fees and expenses), and the Indemnifying Parties will remain responsible for
the entirety of the Losses the Indemnified Party may suffer resulting from, arising out of or
caused by the third party claim.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>7.7 Recoupment and Set-Off.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;With respect to any indemnification to which a Graham Indemnified Party is entitled under
this Agreement as a result of any Losses it may suffer, such Graham Indemnified Party may offset
such Losses from any amounts due under the Escrow Agreement, Earn Out Agreement or the Graham
Indemnified Parties may recoup such unpaid Losses from the Seller directly. Any indemnification
payment or set-off against the Escrow Amount or Earn Out Agreement made pursuant to this Section
shall be treated, to the extent permitted or required by Laws, by all parties as an adjustment to
the Purchase Price.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;With respect to any indemnification to which Seller is entitled under this Agreement as a
result of any Losses it may suffer, Seller may offset such Losses from any amounts due under any
agreement between Seller and Graham (or Buyer) or a Seller Indemnified Party may recoup such unpaid
Losses from Graham and/or Buyer directly.
</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"><B>7.8 Mitigation.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No Indemnified Party shall be entitled to recover more than the full amount of any Loss
incurred by such Indemnified Party under the provisions of this Agreement in respect of any such
Loss. Without limiting the generality of the foregoing, the amount of any Losses subject to
indemnification under Sections&nbsp;7.2 and 7.3 shall be reduced by the amounts actually recovered by
the Indemnified Party incurring such Loss under applicable insurance policies with respect to
claims related to such Losses.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>7.9 Exclusive Remedy.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except as otherwise expressly provided for in this Agreement following the Closing, the
indemnification provided by this Article&nbsp;7 shall be the exclusive remedy for Graham,
Buyer or Seller, as the case may be, with respect to this Agreement and the transactions
contemplated by this Agreement; <U>provided</U>, <U>however</U>, that nothing herein will limit
in any way any such Indemnified Party&#146;s (A)&nbsp;remedies in respect of fraud or willful or intentional
breach of any representation, warranty, covenant or agreement herein, or (B)&nbsp;rights hereunder to
injunctive or other equitable relief to enforce its rights under this Agreement, the Earn Out
Agreement, the Escrow Agreement, the Seller Employment Agreement, the Lease or in connection with
the transactions contemplated thereby.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE 8.</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>TERMINATION</B>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>8.1 Termination.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Agreement may be terminated at any time prior to the Closing:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;by mutual written consent of the Seller and Graham;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;by Graham, upon notice to the Seller, if (without any breach by Graham of any of its
obligations hereunder) compliance with any condition set forth in Sections&nbsp;6.1 or 6.2 becomes
impossible, and such failure of compliance is not waived by Graham;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;by Energy Steel or Seller, upon notice to Graham, if (without any breach by Energy Steel
or Seller of any of its obligations hereunder) compliance with any condition set forth in Sections
6.1 or 6.3 becomes impossible, and such failure of compliance is not waived by Energy Steel or
Seller;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;by Graham or by Energy Steel, upon notice to the other, at any time after December&nbsp;31,
2010 if Closing has not occurred by that date (except that the right to terminate under this
Section&nbsp;8.1(d) will not be available to any party whose failure to perform its obligations
hereunder has been the cause of the failure of Closing to occur by such date);
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;by Graham, upon notice to the Seller in the event the Seller or Energy Steel breach any
representation, warranty, or covenant contained in this Agreement in any respect, Graham has
</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">notified the Seller of the breach, and the breach has continued without cure for a period of
thirty (30)&nbsp;days after the notice of breach; or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;by Seller, upon notice to Graham in the event Graham or Buyer breach any representation,
warranty, or covenant contained in this Agreement in any respect, Seller has notified Graham of the
breach, and the breach has continued without cure for a period of thirty (30)&nbsp;days after the notice
of breach.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>8.2 Effect of Termination.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the event of termination of this Agreement by any party, this Agreement will immediately
become void and of no effect, and there will be no liability or obligation on the part of Graham,
Buyer, Energy Steel and the Seller or any of their respective officers or directors, as applicable,
to any other party hereto, except in the case of willful material breach of this Agreement.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE 9.</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>GENERAL PROVISIONS</B>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>9.1 Amendment; Waiver.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Agreement may not be amended except by an instrument in writing signed by each of the
parties. No waiver of compliance with any provision or condition hereof, and no consent provided
for herein, will be effective unless evidenced by an instrument in writing duly executed by the
party sought to be charged therewith. No failure on the part of any party to exercise, and no
delay in exercising, any of its rights hereunder will operate as a waiver thereof, nor will any
single or partial exercise by either party of any right preclude any other or future exercise
thereof or the exercise of any other right.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>9.2 Notices.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each notice and other communication given hereunder will be in writing and will be deemed
given when delivered personally, sent by telecopier (receipt of which is confirmed), or mailed,
freight prepaid, by internationally recognized overnight courier (with receipt confirmed) to the
party for which it is intended at the following address (or at such other address for a party as is
specified by like notice):
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;if to Seller and Energy Steel, to:
</DIV>
<DIV align="left" style="font-size: 10pt; margin-left: 6%; margin-top: 6pt">c/o Lisa D. Rice<BR>
2647 Invitational Drive<BR>
Oakland, Michigan 48363<BR>
Fax: (248)&nbsp;645-1568
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;with a copy (which will not constitute notice) to:
</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-left: 6%; margin-top: 6pt">Howard &#038; Howard Attorneys PLLC<BR>
450 West Fourth Street<BR>
Royal Oak, Michigan 48067<BR>
Attention: Joseph J. DeVito<BR>
Fax: (248)&nbsp;645-1568
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;if to Graham or Buyer, to:
</DIV>
<DIV align="left" style="font-size: 10pt; margin-left: 6%; margin-top: 6pt">c/o Graham Corporation<BR>
20 Florence Avenue<BR>
Batavia, New York 14020<BR>
Attention: James R. Lines, President and Chief Executive Officer<BR>
Fax: (585)&nbsp;343-1097
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;with a copy (which will not constitute notice) to:
</DIV>
<DIV align="left" style="font-size: 10pt; margin-left: 6%; margin-top: 6pt">Harter, Secrest &#038; Emery LLP<BR>
1600 Bausch &#038; Lomb Place<BR>
Rochester, New York 14604-2711<BR>
Attention: Daniel Kinel<BR>
Fax: (585)&nbsp;232-2152
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>9.3 Disclosure Schedules and Other Instruments.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Disclosure Schedules, each certificate provided hereunder and each written disclosure
required hereby is incorporated by reference into this Agreement and will be considered a part
hereof as if set forth herein in full; provided, however, that information set forth in the
Disclosure Schedules or in any certification or written disclosure constitutes a representation and
warranty of the party providing the same, and not the mutual agreement of the parties as to the
facts therein stated. The Disclosure Schedules may not be amended or updated after the date of its
delivery, except by the written agreement of Graham which shall not be unreasonably withheld or
delayed.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>9.4 Inferences.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inasmuch as this Agreement is the result of negotiations between sophisticated parties of
equal bargaining power represented by counsel, no inference in favor of or against any party will
be drawn from the fact that any portion of this Agreement has been drafted by or on behalf of such
party.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>9.5 Governing Law; Jurisdiction and Venue.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Agreement will be governed by and construed in accordance with the Laws of the State of
New York without regard to its principles of conflicts of laws. The parties agree that the sole
and exclusive forum for any Claim related to this Agreement, the interpretation or construction
hereof and the transactions contemplated hereby will be the Supreme Court of and for the County of
Monroe, State of New York. Each party unconditionally and irrevocably agrees not to bring any
Claim in any other forum and not to plead or otherwise attempt to defeat the trial of such a matter
in
</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">such court whether by asserting that such court is an inconvenient forum, lacks jurisdiction
(personal or other) or otherwise. Each party hereby waives the right to a trial by jury.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>9.6 Assignment.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Neither this Agreement nor any of the rights, interests or obligations hereunder may be
assigned by any of the parties (whether by operation of Law or otherwise) without the prior written
consent of the other parties, except that Buyer may assign, in its sole discretion, any or all of
its rights, interests and obligations hereunder to any direct wholly-owned Subsidiary of Graham,
provided such subsidiary assumes all of Buyer&#146;s obligations jointly and severally and Buyer shall
remain liable to Seller hereunder.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>9.7 Benefit.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject to express provisions herein to the contrary, this Agreement will inure to the benefit
of and be binding upon the parties hereto and their respective legal representatives, successors
and permitted assigns. Nothing contained herein shall (i)&nbsp;be treated as an amendment to any
particular employee benefit plan of Graham, Buyer, Energy Steel or any Affiliate of any of them,
(ii)&nbsp;obligate Graham, Buyer or any of their Affiliates to (A)&nbsp;maintain any particular benefit plan
or arrangement or (B)&nbsp;retain the employment of any particular employee, (iii)&nbsp;prevent Graham, Buyer
or any of their Affiliates from amending or terminating any benefit plan or arrangement, or (iv)
give any third party the right to enforce any of the provisions of this Agreement.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>9.8 Entire Agreement.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Agreement (including the documents and instruments referred to in this Agreement)
constitutes the entire agreement of the parties and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the subject matter hereof
and is not intended to confer upon any other Person any rights or remedies hereunder.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>9.9 Headings.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The heading references herein and the tables and indexes hereto are for convenience purposes
only, do not constitute a part of this Agreement and will not be deemed to limit or affect any of
the provisions hereof.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>9.10 Counterparts.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Agreement, and any document or instrument required or permitted hereunder, may be
executed in counterparts, each of which will be deemed an original and all of which together will
constitute but one and the same instrument.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>9.11 Independent Counsel</B>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The parties covenant and agree that they have carefully read this Agreement, know its
contents, and freely and voluntarily agree to all of its terms and conditions. Each party
acknowledges that it has had the opportunity to engage independent legal counsel of its choice
throughout all the negotiations that preceded the execution of this Agreement, and each party
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->54<!-- /Folio -->
</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">acknowledges that it was given the opportunity to seek the consent and advice of independent
legal counsel prior to the execution of this Agreement and consummation of the transactions
contemplated herein. Each party shall bear its own legal fees incurred as a result of the
preparation, review and negotiation of this Agreement, except that the Seller shall bear
responsibility for all Energy Steel Transaction Expenses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>9.12 Cooperation Following the Closing.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Following the Closing, each party hereto shall deliver to the other parties hereto such
further information and documents and shall execute and deliver to the other parties hereto such
further instruments and agreements as any other party hereto shall reasonably request to consummate
or confirm the transactions provided for in this Agreement, to accomplish the purpose of this
Agreement or to assure to any other party hereto the benefits of this Agreement.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><FONT style="FONT-variant: SMALL-CAPS"><b><I>&#091;signature page follows&#093;</I></b></FONT>
</DIV>




<P align="center" style="font-size: 10pt"><!-- Folio -->55<!-- /Folio -->
</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"><B>IN WITNESS WHEREOF</B>, each of Graham, Buyer, Energy Steel and the Seller have caused this
Agreement to be duly executed and delivered as of the date first above written.
</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 colspan="3" align="left"><B>GRAHAM CORPORATION</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>

<TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/
James R. Lines&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top">Name:&nbsp;&nbsp;</TD>
    <TD align="left">James R. Lines&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top">Title:&nbsp;&nbsp;</TD>
    <TD align="left">President and Chief Executive Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B>ES ACQUISITION CORP.</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>

<TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/
Jeffrey F. Glajch&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top">Name:&nbsp;&nbsp;</TD>
    <TD align="left">Jeffrey F. Glajch&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top">Title:&nbsp;&nbsp;</TD>
    <TD align="left">Chief Financial Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B>ENERGY STEEL &#038; SUPPLY CO.</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>

<TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/
Lisa D. Rice&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top">Name:&nbsp;&nbsp;</TD>
    <TD align="left">Lisa D. Price&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top">Title:&nbsp;&nbsp;</TD>
    <TD align="left">President&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">&nbsp;&nbsp;</TD>

<TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/
Lisa D. Rice
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left"><B>LISA D. RICE</B>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Individually and as sole Trustee of the Lisa D. Rice Revocable Trust
dated&nbsp;June 5, 2003</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->56<!-- /Folio -->
</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="center" style="font-size: 10pt; margin-top: 18pt"><U>Exhibits and Schedules to Stock Purchase Agreement</U>
</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="49%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="46%">&nbsp;</TD>
</TR>
<TR></TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Exhibit&nbsp;A
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Earn Out Agreement</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Exhibit&nbsp;B
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Escrow Agreement</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Exhibit&nbsp;C
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Estimated Target Working Capital &#038;<BR>
Unpaid Transaction Expenses</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Exhibit&nbsp;D
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">GAAP Departure and IRS Change in
Accounting Methods</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Exhibit&nbsp;E
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Working Capital Formula Schedule</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Schedule&nbsp;1.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Energy Steel Debt</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Schedule&nbsp;2.2(a)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Estimated Unpaid Transaction Expenses</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Schedule&nbsp;2.5
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Excluded Assets and Claims</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Schedule&nbsp;3.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Capital Structure</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Schedule 3.2(d)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Capital Structure</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Schedule&nbsp;3.4
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Required Approvals</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Schedule&nbsp;3.5(a)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Financial Statements</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Schedule&nbsp;3.6
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Material Liabilities</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Schedule&nbsp;3.7(a)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Permits</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Schedule&nbsp;3.8
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Encumbrances</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Schedule&nbsp;3.9(a), (b), (c)&nbsp;and (h)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Real Property</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Schedule&nbsp;3.10(a)(i), (ii), (iii)&nbsp;and (iv)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Intellectual Property</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Schedule&nbsp;3.10(b), (d), (e)&nbsp;and (f)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Intellectual Property</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Schedule&nbsp;3.11(b), (c)&nbsp;and (d)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Tangible Assets</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Schedule&nbsp;3.12(b) and (e)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Inventory</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Schedule&nbsp;3.13
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Environmental</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Schedule&nbsp;3.14(a), (b), (c), (h), (j),
(m), (n)&nbsp;and (p)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employee Plans</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Schedule&nbsp;3.15(b) and (c)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment Matters</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Schedule&nbsp;3.16(a), (c), (f)&nbsp;and (g)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Material Agreements</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Schedule&nbsp;3.17(a) and (b)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Product and Service Warranty and Liability</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Schedule&nbsp;3.18
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Litigation</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Schedule&nbsp;3.19
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Tax Matters</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Schedule&nbsp;3.20
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Subsequent Events</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Schedule&nbsp;3.21
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Insurance</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Schedule&nbsp;3.24
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Guaranties</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Schedule&nbsp;3.27
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Backlog</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to Regulation&nbsp;S-K Item&nbsp;601(b)(2), the above schedules and exhibits have been omitted
and will be furnished supplementally to the Securities and Exchange Commission upon request
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->57<!-- /Folio -->
</DIV>



</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>3
<FILENAME>l41646exv10w2.htm
<DESCRIPTION>EX-10.2
<TEXT>
<HTML>
<HEAD>
<TITLE>exv10w2</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="right" style="font-size: 10pt; margin-top: 6pt"><B> EXHIBIT 10.2</b>
</div>
<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EARN OUT AGREEMENT</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>THIS
EARN OUT AGREEMENT </B>(the &#147;<B><I>Agreement</I></B>&#148;), is
entered into this 14<SUP style="FONT-size: 85%; vertical-align: text-top">th</sup> day of December, 2010
by and between ENERGY STEEL ACQUISITION CORP., a Delaware corporation (&#147;<B><I>ESAC</I></B>&#148;), Graham Corporation,
a Delaware corporation (&#147;<B><I>Graham</I></B>&#148; in its capacity of Guarantor under Section&nbsp;2.3 and otherwise as
expressly provided herein as a direct party to this Agreement), and LISA D. RICE, individually and
as the Trustee of the Lisa D. Rice Revocable Trust dated June&nbsp;5, 2003 (&#147;<B><I>Seller</I></B>&#148;). Capitalized
terms not otherwise defined in this Agreement shall have the meaning ascribed to them in that
certain Stock Purchase Agreement by and among Graham, ESAC, Energy Steel &#038; Supply Co., a Michigan
corporation (&#147;<B><I>Energy Steel</I></B>&#148;) and the Seller dated on even date herewith (the &#147;<B><I>Stock Purchase
Agreement</I></B>&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>WHEREAS</B>, the Seller beneficially owns all of the outstanding shares of capital stock of Energy
Steel, which is engaged in the manufacture and supply of products and raw materials to the nuclear
power generation industry (the &#147;<B><I>Energy Steel Business</I></B>&#148;);
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>WHEREAS</B>, simultaneously with the execution of this Agreement, ESAC is acquiring Energy Steel
pursuant to and subject to the conditions set forth in the Stock Purchase Agreement; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>WHEREAS</B>, as a condition to the consummation of the transactions set forth in the Stock
Purchase Agreement, the Stock Purchase Agreement provides that this Agreement shall be entered into
by the parties, pursuant to which Seller shall be eligible to receive certain performance-based
payments from ESAC if certain performance conditions are satisfied (the &#147;<B><I>Earn Out Consideration</I></B>&#148;)
with respect to the Energy Steel Business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>NOW</B>, <B>THEREFORE</B>, in consideration of the foregoing recitals and of the mutual covenants and
conditions contained herein and such other consideration the receipt and sufficiency of which is
hereby acknowledged, the parties hereby agree as follows:
</DIV>

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


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><FONT style="FONT-variant: SMALL-CAPS"><B>EARN OUT CONSIDERATION</B></FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Section&nbsp;1.1 Defined Terms</B>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>2011 EBITDA Thresholds</I></B>&#148; and &#147;<B><I>2012 EBITDA Thresholds</I></B>&#148; mean those EBITDA thresholds set forth
in the following tables:
</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>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom:1px solid #000000"><B>2011 EBITDA Thresholds</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom:1px solid #000000"><B>Amount of First Year Payment</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD align="center" valign="top"><FONT face="Symbol">&#179;</FONT>
 $3,625,000
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$250,000</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><FONT face="Symbol">&#179;</FONT>
 $3,750,000
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$500,000</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center" valign="top"><FONT face="Symbol">&#179;</FONT>
 $3,875,000
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$750,000</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><FONT face="Symbol">&#179;</FONT>
 $4,000,000
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$1,000,000</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</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="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>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom:1px solid #000000"><B>2012 EBITDA Thresholds</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom:1px solid #000000"><B>Amount of Second Year Payment</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD align="center" valign="top"><FONT face="Symbol">&#179;</FONT>
 $3,625,000
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$250,000</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><FONT face="Symbol">&#179;</FONT>
 $3,750,000
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$500,000</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center" valign="top"><FONT face="Symbol">&#179;</FONT>
 $3,875,000
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$750,000</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><FONT face="Symbol">&#179;</FONT>
 $4,000,000
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$1,000,000</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Catch-Up EBITDA Threshold</I></B>&#148; means, subject to the satisfaction of conditions set forth in
Sections&nbsp;1.3 and 1.4, an aggregate EBITDA of Energy Steel for Fiscal Year 2011 and Fiscal Year 2012
of $7,250,000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;</B><I><b>EBITDA</b></I><B>&#148; </B>means, for any period, Energy Steel&#146;s net income from continuing operations for such
period on a stand alone basis, plus Energy Steel&#146;s (i)&nbsp;provisions for taxes based on income for
such period, (ii)&nbsp;interest expenses for such period, and (iii)&nbsp;depreciation and amortization of
tangible and intangible assets of Energy Steel for such period as determined in accordance with
GAAP and subject to the GAAP Exceptions. Further, EBITDA shall be adjusted as described in the
last sentence of this definition, and by excluding the effects of, or otherwise taking into
account, any and all of the following accounting principles to the extent otherwise included in the
determination of earnings from operations:
</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="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>gains, losses or profits realized by Energy Steel from the sale
of assets other than in the ordinary course of business and any &#147;extraordinary
items&#148; of gain or loss (as determined in accordance with GAAP and subject to
the GAAP Exceptions);</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="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any management fees, general overhead expenses, or other
intercompany charges, of whatever kind or nature, charged by ESAC, Graham or
any other Affiliates to the Energy Steel Business, except to the extent they
offset expenses that would otherwise be incurred by Energy Steel (e.g., blanket
insurance coverage);</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="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any legal or accounting fees and expenses incurred in
connection with this Agreement or the Stock Purchase Agreement.</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="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>material modifications to staffing levels and compensation
packages during the earn out period will require the reasonable agreement of
the Seller prior to the implementation of such strategy. If the Seller
disagrees with the addition, we would partition out both the costs and
corresponding benefits of such addition to be excluded from the EBITDA
calculation.</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="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(e)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Items deemed to be outside the course of normal operations of
the Energy Steel Business which are non-recurring or non-operational shall be
an adjustment for purposes of the earn out calculation.</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="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(f)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>For purposes of the earn out calculation, material variances
in the use of estimates, accounting methodologies, prepaid and accrued expense
treatment, and application of GAAP shall be adjustments.
</TD>
</TR>

</TABLE>
</DIV>


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<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="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(g)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>As of the date of closing, Graham has simultaneously entered
into a real estate lease for the premises on which Energy Steel conducts its
business. The provisions of the lease also grant Graham on option to purchase
the real estate. To the extent that Graham exercises its option to purchase
the real estate, adjustments will be made to the earn out EBITDA such that the
expenses reflect those which would have occurred under the terms of the lease
had the option not been exercised.</TD>
</TR>

</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In determining earnings from operations, the purchase and sales prices of goods and services
sold by Energy Steel (or ESAC) to Graham or its Affiliates, or purchased by the Energy Steel (or
ESAC) from Graham or its Affiliates, or payment of royalties, shall be adjusted to reflect the
amounts that Energy Steel (or ESAC) would have received or paid if dealing with an independent
party in an arm&#146;s-length commercial transaction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>First Year Payment</I></B>&#148; means the amount(s) specified in the chart included in the definition of
2011 EBITDA Thresholds and 2012 EBITDA Thresholds above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Fiscal Year 2011</I></B>&#148; means Energy Steel&#146;s year ending December&nbsp;31, 2011.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Fiscal Year 2012</I></B>&#148; means Energy Steel&#146;s year ending December&nbsp;31, 2012.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Fiscal Year 2011 EBITDA</I></B>&#148; means the EBITDA of Energy Steel for the Fiscal Year 2011, based on
the audited financial statements of Energy Steel, as determined by Graham&#146;s independent auditors in
their reasonable discretion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Fiscal Year 2012 EBITDA</I></B>&#148; means the EBITDA of Energy Steel for the Fiscal Year 2012 as
determined by Graham&#146;s independent auditors in their reasonable discretion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Second Year Payment</I></B>&#148; means the amount(s) specified in the chart included in the definition of
2011 EBITDA Thresholds and 2012 EBITDA Thresholds above.
</DIV>

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Section&nbsp;1.2 Generally</B>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;On the terms and subject to the conditions set forth in this Agreement, the Seller shall
be eligible to receive the Earn Out Consideration (as more particularly defined below). Subject to
the satisfaction of the conditions set forth herein, the Earn Out Consideration may consist of two
cash payments. The first payment shall be for and measured against the performance of the Energy
Steel Business during the Fiscal Year 2011, and it shall be known as the &#147;<B><I>First Year Payment</I></B>.&#148; The
second payment shall be for and measured against the performance of the Energy Steel Business
during the Fiscal Year 2012, and it shall be known as the &#147;<B><I>Second Year Payment</I></B>&#148; (collectively, the
First Year Payment and the Second Year Payment shall comprise the &#147;<B><I>Earn Out Consideration</I></B>&#148;).
Except as set forth in Section&nbsp;1.4 below, each payment is intended to be separate from and
independent of the other payment. Thus, the Seller need not receive the First Year Payment in
order to be eligible to receive the Second Year Payment (and vice versa). The amount of each
payment shall be determined in accordance with Section&nbsp;1.5 hereof, and no payment shall be made
unless the associated conditions to payment are satisfied in accordance with Sections&nbsp;1.3 and 1.4
hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;ESAC shall pay to the Seller (i)&nbsp;the First Year Payment that corresponds to the 2011
EBITDA Threshold attained by Energy Steel as set forth in the table above, and (ii)&nbsp;the Second Year
Payment that corresponds to the 2012 EBITDA Threshold attained by Energy Steel as set forth in the
table above.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Section&nbsp;1.3 Conditions to First Year Payment, Second Year Payment and Catch-Up Payment</B>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;ESAC shall pay to the Seller the First Year Payment if, and only if, the Energy Steel
Business as operated by ESAC (or an affiliate thereof), generates EBITDA equal to or in excess of
$3,625,000 during the Fiscal Year 2011.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;ESAC shall pay to the Seller the Second Year Payment if, and only if, the Energy Steel
Business as operated by ESAC (or an affiliate thereof), generates EBITDA equal to or in excess of
$3,625,000 during the Fiscal Year 2012.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;ESAC shall pay the Seller the Catch-Up Payment if, and only if, the Energy Steel Business
as operated by ESAC (or an affiliate thereof), generates EBITDA equal to or in excess of the
Catch-Up EBITDA Threshold set forth in the table below.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Section&nbsp;1.4 Catch-Up Payment</B>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;In the event that no First Year Payment is made during Fiscal Year 2011 as a result of
Energy Steel&#146;s failure to meet the minimum EBITDA threshold of $3,625,000, the Seller will be
entitled to receive a catch-up payment in the amount of up to $1,000,000 (the &#147;<B><I>Catch-Up Payment</I></B>&#148;),
if Energy Steel&#146;s Fiscal Year 2011 EBITDA plus Energy Steel&#146;s Fiscal Year 2012 EBITDA exceeds the
Catch-Up EBITDA Thresholds, as set forth below:
</DIV>



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<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="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom:1px solid #000000"><B>Catch-Up Payment Thresholds</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom:1px solid #000000"><B>Amount of Catch-Up Payment</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD align="center" valign="top"><FONT face="Symbol">&#179;</FONT>
 $7,250,000
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$250,000</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><FONT face="Symbol">&#179;</FONT>
 $7,500,000
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$500,000</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center" valign="top"><FONT face="Symbol">&#179;</FONT>
 $7,750,000
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$750,000</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><FONT face="Symbol">&#179;</FONT>
 $8,000,000
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$1,000,000</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">By way of examples: (i)&nbsp;if the Fiscal Year 2011 EBITDA is $3,500,000 (an event in which the First
Year Payment would not be earned) and the Fiscal Year 2012 EBITDA is $4,500,000, ESAC shall make
pay Seller the Second Year Payment of $1,000,000 plus a Catch-Up Payment in the amount of
$1,000,000; and (ii)&nbsp;if the Fiscal Year 2011 EBITDA is $3,500,000 (an event in which the First Year
Payment would not be earned) and the Fiscal Year 2012 EBITDA is $4,000,000, ESAC shall pay Seller a
Catch-Up Payment in the amount of $500,000.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;Notwithstanding the aforementioned subsection (a), Seller&#146;s right to receive the Catch-Up
Payment is conditioned upon Energy Steel&#146;s Fiscal Year 2011 EBITDA being in excess of $3,000,000.
For example, if the Fiscal Year 2011 EBITDA is $2,900,000 (an event in which the First Year Payment
would not be earned) no Catch-Up Payment would be made regardless of the Fiscal Year 2012 EBITDA
attained.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Section&nbsp;1.5 Calculation and Payment of Earn Out Consideration</B>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Within a period of ten (10)&nbsp;calendar days following ESAC&#146;s receipt of final financial
statements for Energy Steel for Fiscal Year 2011 and Fiscal Year 2012 (which shall be prepared not
more than one hundred twenty (120)&nbsp;days following the end of such fiscal year), ESAC will deliver
to Seller (i)&nbsp;a calculation of the EBITDA for each such year, and (ii)&nbsp;a statement as to whether
the Seller is entitled to the First Year Payment, Second Year Payment or Catch-Up Payment, as
applicable. If ESAC determines that any payment is due hereunder, each such payment shall be made
within ten (10)&nbsp;business days of the delivery of the calculation of such payment to the Seller.
When payments are due hereunder, in each case, ESAC shall make the payment to the Seller by issuing
a check in the payment amount. If any payment date hereunder falls on a day that is a Saturday,
Sunday or holiday on which ESAC is closed, such payment shall be due on the next day on which ESAC
is open for business.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;The parties agree that any dispute as to whether Earn Out Consideration is earned
hereunder shall be resolved in accordance with the procedures set forth in Section&nbsp;2.2 of the Stock
Purchase Agreement.
</DIV>


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


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>ADDITIONAL COVENANTS AND ACKNOWLEDGMENTS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Section&nbsp;2.1 Commercially Reasonable Efforts</B>. In consideration of the opportunity pursuant to
this Agreement to earn the Earn Out Consideration, Seller agrees to use her commercially reasonable
efforts to promote the interests of Graham, ESAC and the Energy Steel Business during the periods
of time covered by this Agreement. ESAC and Graham agree that
</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">they will use commercially reasonable efforts to promote the interests and EBITDA of the
Energy Steel Business and in carrying out its obligations under this Agreement. In this regard,
Graham and ESAC shall ensure that the Energy Steel Business has adequate working capital and other
resources necessary to carry on the business and affairs consistent with past practice in the
ordinary course of business throughout Fiscal Year 2011 and 2012.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Section&nbsp;2.2 Right of Setoff</B>. The Seller acknowledges and agrees that any and all amounts of
Earn Out Consideration owed to her pursuant to this Agreement shall be subject to the right of
setoff in favor of Graham and ESAC contained in the Stock Purchase Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Section&nbsp;2.3 Guarantee of Graham. </B>Graham hereby unconditionally and irrevocably guarantees
each and every obligation of ESAC under this Agreement as if Graham was the direct party obligated
for all payments due hereunder to Seller, as Graham will benefit directly and indirectly from the
transactions contemplated by this Agreement and the Stock Purchase Agreement. Graham hereby waives
all defenses afforded a guarantor or surety under applicable Laws. Graham&#146;s obligations hereunder
shall be binding upon its successors and assigns and shall not be extinguished by any bankruptcy or
reorganization of ESAC.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Section&nbsp;2.4 Covenants of ESAC as to Operation During Earn Out Periods.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;ESAC and Graham will maintain the Energy Steel Business as a separate enterprise within
their corporate structure;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;ESAC and Graham will provide sufficient working capital for operation of the Energy Steel
Business throughout Fiscal Years 2011 and 2012;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;ESAC shall utilize reasonable commercial efforts to maintain Key Employees of Energy Steel
throughout the Fiscal Years 2011 and 2012;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;ESAC shall operate and market the Energy Steel Business using the name &#147;Energy Steel&#148; (or
any derivative thereof deemed appropriate by Graham) throughout Fiscal Years 2011 and 2012; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;ESAC and Graham shall direct all new orders in the same product line as the Energy Steel
Business to Energy Steel and shall not otherwise divert opportunities of Energy Steel to its
Affiliates.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Section&nbsp;2.5 Acceleration and Early Termination. </B>The payment obligations of ESAC and Graham
hereunder shall be subject to acceleration upon the occurrence of any one (1)&nbsp;of the following
events:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;ESAC determines in its discretion to terminate this Agreement for its business purposes;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;The sale (subsequent to the date hereof) of all or substantially all of the assets of
Energy Steel, ESAC and/or Graham;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;A change in control of Energy Steel, ESAC and/or Graham occurs; or
</DIV>





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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;ESAC and/or Graham have committed a material breach of any of their payment obligations,
covenants, or agreements under this Agreement; provided Seller has notified Graham and ESAC of the
breach, and the breach has continued without cure for a period of thirty (30)&nbsp;days after the
written notice of breach.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the event of an acceleration under this Section&nbsp;2.5, Seller shall be entitled to immediate
payment of the maximum payments available for each Fiscal Year. Seller acknowledges that the
maximum payments hereunder shall not exceed $2,000,000 in the aggregate.
</DIV>

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


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><FONT style="FONT-variant: SMALL-CAPS"><B>GENERAL PROVISIONS</B></FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Section&nbsp;3.1 Amendment and Waiver</B>. Only a writing executed by each of the parties hereto may
amend this Agreement. No waiver of compliance with any provision or condition hereof, and no
consent provided for herein, will be effective unless evidenced by an instrument in writing duly
executed by the party sought to be charged therewith. No failure on the part of any party to
exercise, and no delay in exercising, any of its rights hereunder will operate as a waiver thereof,
nor will any single or partial exercise by any party of any right preclude any other or future
exercise thereof or the exercise of any other right.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Section&nbsp;3.2 Assignment</B>. No party will assign or attempt to assign any of its rights or
obligations under this Agreement without the prior written consent of each of the other parties
hereto and any attempted assignment will be null and void; <U>provided</U>, <U>however</U>, that
without such consent, but upon notice to Seller, ESAC may assign all of its rights and obligations
hereunder to any subsidiary of Graham so designated by Graham, it being agreed that such assignment
will not relieve ESAC from its obligations hereunder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Section&nbsp;3.3 Notices, Etc</B>. Each notice, report, demand, waiver, consent and other
communication required or permitted to be given hereunder will be in writing and will be sent in
accordance with Section&nbsp;9.2 of the Stock Purchase Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Section&nbsp;3.4 Binding Effect</B>. Subject to the provisions of Section&nbsp;3.2, this Agreement will be
binding upon and will inure to the benefit of the parties and their respective successors and
assigns. This Agreement creates no rights of any nature in any Person not a party hereto.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Section&nbsp;3.5 Governing Law</B>. This Agreement will be governed by and construed in accordance
with the Laws of the State of New York without regard to its principles of conflicts of laws. The
parties agree that the sole and exclusive forum for any Claim related to this Agreement, the
interpretation or construction hereof and the transactions contemplated hereby will be the Supreme
Court of and for the County of Monroe, State of New York. Each party unconditionally and
irrevocably agrees not to bring any Claim in any other forum and not to plead or otherwise attempt
to defeat the trial of such a matter in such court whether by asserting that such court is an
inconvenient forum, lacks jurisdiction (personal or other) or otherwise. Each party hereby waives
the right to a trial by jury.
</DIV>

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Section&nbsp;3.6 Entire Agreement</B>. This Agreement sets forth the entire understanding of the
parties, and supersedes any and all prior agreements, arrangements and understandings, written or
oral, relating to the subject matter hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Section&nbsp;3.7 Headings; Counterparts</B>. The headings of this Agreement are for convenience of
reference only and do not form a part hereof and do not in any way modify, interpret or construe
the intention of the parties. This Agreement may be executed in one or more counterparts, each of
which will be deemed an original, but all of which together will constitute one and the same
instrument. The parties agree that facsimile copies of signatures will be deemed originals for all
purposes hereof and that a party may produce such copies, without the need to produce original
signatures, to prove the existence of this Agreement in any proceeding brought hereunder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Section&nbsp;3.8 Independent Counsel; Seller Taxes. </B>The parties state that they have carefully read
this Agreement, know its contents, and freely and voluntarily agree to all of its terms and
conditions. Each party acknowledges that it has been represented by independent legal counsel of
its choice throughout all the negotiations that preceded the execution of this Agreement, and this
Agreement has been executed with the consent and upon the advice of such independent legal counsel.
Each party shall bear its own legal fees incurred as a result of the preparation, review and
negotiation of this Agreement. Seller shall be responsible for all taxes incurred by Seller as a
result of this Agreement and neither ESAC not Graham shall be required to withhold any payments
made hereunder except as may be required by law.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">&#091;<B>SIGNATURE PAGE FOLLOWS</B>&#093;
</DIV>




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




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF, the parties have duly executed this Agreement on the date first written
above.
</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 colspan="3" align="left"><B>ESAC:</B><BR>
<BR>
ENERGY STEEL ACQUISITION CORP.,<BR>
a Delaware corporation<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;</TD>

<TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/
Jeffrey F. Glajch&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 0px solid #000000" align="left">Jeffrey F. Glajch&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">Its:&nbsp;</TD>

<TD colspan="2" style="border-bottom: 0px solid #000000" align="left">Chief
Financial Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B>GRAHAM:</B><BR>
<BR>
GRAHAM CORPORATION, a Delaware<BR>
corporation<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:</TD>

<TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/
James R. Lines&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 0px solid #000000" align="left">James R. Lines&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">Its:</TD>

<TD colspan="2" style="border-bottom: 0px solid #000000" align="left">President
and Chief Executive Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left"><B>SELLER:</B></td>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>


<TR>
    <TD align="left">&nbsp;</TD>

<TD colspan="3" style="border-bottom: 1px solid #000000" align="left">/s/
Lisa D. Rice
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">LISA D. RICE,
individually and as the Trustee of the Lisa D. Rice Revocable Trust
dated&nbsp;June 5, 2003</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

</TABLE>


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<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>4
<FILENAME>l41646exv10w3.htm
<DESCRIPTION>EX-10.3
<TEXT>
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<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><B>EXHIBIT
10.3</B>
</DIV>


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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>THIS
ESCROW AGREEMENT </B>(this
<I>&#147;</I><B><I>Agreement</I></B><I>&#148;</I>), dated as of this 14<SUP style="FONT-size: 85%; vertical-align: text-top">th</sup> day of December, 2010,
is by and among PNC BANK, NATIONAL ASSOCIATION (&#147;<B><I>Escrow Agent</I></B><I>&#148;</I>), ES ACQUISITION CORP., a Delaware
corporation (<I>&#147;</I><B><I>Purchaser</I></B><I>&#148;</I>), and LISA D. RICE, individually and as Trustee of the Lisa D. Rice
Revocable Trust dated June&nbsp;5, 2003 (collectively, the &#147;<B><I>Seller</I></B>&#148;).
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>R E C I T A L S:</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.&nbsp;Purchaser, Seller and Graham Corporation have entered into that certain Stock Purchase
Agreement of even date herewith (the <I>&#147;</I><B><I>Purchase Agreement</I></B><I>&#148;</I>).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B.&nbsp;The execution and delivery of this Agreement is a condition to the consummation of the
transactions contemplated by the Purchase Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C.&nbsp;Capitalized terms used in this Agreement but not defined are used in this Agreement as
defined in the Purchase Agreement.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>A G R E E M E N T:</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>NOW THEREFORE, </B>in consideration of the mutual promises and subject to the terms and
conditions herein contained, and other good and valuable consideration, had and received the
sufficiency and receipt of which are hereby acknowledged, the parties hereto agree as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;<U><B>Appointment of Escrow Agent</B></U><B>. </B>Purchaser and Seller hereby appoint and designate the
Escrow Agent as the escrow agent for the purposes set forth in this Agreement, and the Escrow Agent
hereby accepts such appointment under the terms and conditions set forth in this Agreement.
Notwithstanding the references in this Agreement to the Purchase Agreement, Purchaser and Seller
acknowledge that the Escrow Agent is not a party to the Purchase Agreement for any purpose or
responsible for its interpretation or enforcement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;<U><B>Deposit in Escrow</B></U><B>. </B>Concurrently with the execution and delivery of this Agreement,
Purchaser shall deposit <B>$1,750,000.00 </B>by wire transfer of immediately available funds to a separate
account (the <I>&#147;</I><B><I>Escrow Amount</I></B><I>&#148;</I>) maintained by the Escrow Agent. The Escrow Agent shall hold and,
subject to the terms and conditions of this Agreement, disburse the Escrow Amount and any and all
income earned on the Escrow Amount (together, the &#147;<B><I>Escrow Funds</I></B>&#148;) as permitted by <U><B>Section&nbsp;3</B></U>
and otherwise in accordance with the terms and conditions of this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;<U><B>Investment.</B></U> The Escrow Agent shall invest the Escrow Funds in a manner specified
in writing from time to time by Purchaser and Seller. Absent such written direction, the Escrow
Agent shall invest the Escrow Funds in a PNC Bank Money Market Deposit Account (MMDA), or a
successor or similar fund or account offered by the Escrow Agent. The Escrow
</DIV>

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;Agent is hereby authorized to execute purchases and sales of permitted investments through
the facilities of its own trading or capital markets operations or those of any affiliated entity.
Any investment income realized on the Escrow Funds is to be reinvested in the account from which
the income was earned. Any and all taxes realized with respect to the investment income realized
on the Escrow Funds shall be paid by Seller. Promptly following the conclusion of each calendar
year, the Escrow Agent shall deliver to Seller (a)&nbsp;a written statement of account with respect to
any investment income realized on the Escrow Funds, and (b)&nbsp;a form 1099 for Seller with respect to
all investment income earned during the immediately preceding calendar year. At or prior to the
time of execution of this Agreement, Seller shall furnish to the Escrow Agent a certified copy of a
form W-9. Seller understands that if such tax reporting documentation is not provided and
certified to the Escrow Agent, the Escrow Agent may be required by the Internal Revenue Code of
1986, as amended, and the Regulations promulgated thereunder, to withhold a portion of any interest
or other income earned on the Escrow Funds. The Escrow Agent shall have no responsibility for the
preparation and/or filing of any tax or information return with respect to any transactions,
whether or not related to this Agreement, that occurs outside the Escrow Account. To the extent
that the Escrow Agent becomes liable for the payment of any taxes in respect of income derived from
the investment of the Escrow Funds, the Escrow Agent shall satisfy such liability to the extent
possible from the Escrow Funds. Seller hereby agrees to indemnify, defend and hold the Escrow
Agent harmless from and against any tax, late payment, interest, penalty or other cost or expense
that may be assessed against the Escrow Agent on or with respect to the Escrow Funds and the
investment thereof unless such tax, late payment, interest, penalty or other expense was directly
caused by the gross negligence or willful misconduct of the Escrow Agent. The indemnification
provided by this <U><B>Section&nbsp;3</B></U> is in addition to the indemnification provided in <U><B>Section
8</B></U> and shall survive the resignation or removal of the Escrow Agent and the termination of this
Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;<U><B>Voting of Proxies</B></U><B>. </B>The parties hereto other than the Escrow Agent hereby instruct
Escrow Agent to vote all proxies in accordance with the proxy policy in effect from time to time
for the Escrow Agent unless otherwise specifically instructed jointly by the parties. Each of said
parties specifically acknowledges that it understands that this provision may involve the Escrow
Agent&#146;s voting shares of mutual funds that pay fees to the Escrow Agent or its affiliates and that,
in voting such shares, the Escrow Agent may be in a position to vote to change fees paid at the
mutual fund level to itself or to an affiliate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.&nbsp;<U><B>Escrow Investments (FDIC insurance)</B></U><B>. </B>Shares of mutual funds are not insured by the
FDIC (or have limited FDIC insurance), are not deposits of or guaranteed by the Escrow Agent or its
affiliate(s) and are subject to investment risks, including the loss of principal.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.&nbsp;<U><B>Security Transaction Confirmation Disclosure</B></U><B>. </B>During the term of this Agreement,
the Escrow Agent shall provide each of Purchaser and Seller (for purposes of this paragraph, the
&#147;Recipient&#148;) with quarterly statements containing the beginning balance in the Escrow Account as
well as all principal and income transactions for the statement period. Recipient shall be
responsible for reconciling such statements. The Escrow Agent shall be forever released and
discharged from all liability with respect to the accuracy of such statements and the transactions
listed therein, except with respect to any such act or transaction as to which Recipient shall,
within ninety (90)&nbsp;days after making the statement available, file written
</DIV>

<DIV align="right" style="font-size: 10pt; margin-top: 12pt">Escrow Agreement
</DIV>


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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">objections with the Escrow Agent. Recipient is aware that Federal Regulations require the
Escrow Agent, without charge and within one business day of its receipt of a broker/dealer
confirmation for each security transaction in the Escrow Account to forward to Recipient a written
notification which discloses, among other things: the Escrow Agent&#146;s name, Recipient&#146;s name, the
capacity (capacities)&nbsp;in which the Escrow Agent is acting, the date (and time, within a reasonable
period, upon written request of Recipient) of execution, the identity, price, number of shares or
units or principal amount of debt securities purchased or sold by Recipient, the name of the
broker/dealer, the amount of any remuneration received by such broker/dealer from Recipient and the
amount of any remuneration received by the Escrow Agent. Recipient is also aware that, under the
terms of this Agreement, the Escrow Agent will be providing to Recipient periodic statements that
include a listing of all securities transactions, receipts and disbursements during the period,
together with a current listing of the assets held in the Escrow Account. Recipient shall accept
such periodic statements in satisfaction of the Escrow Agent&#146;s obligation to provide written
notification as described above; provided, that upon Recipient&#146;s request, the Escrow Agent will
provide to Recipient within a reasonable time and at no additional cost the information required by
Federal Regulations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.&nbsp;<U>No Liability for Investment Losses</U>. The Escrow Agent shall be entitled to sell or
redeem any investments held in the Escrow Account as necessary to make any distributions required
under this Escrow Agreement and shall not be liable or responsible for any loss resulting from any
such sale or redemption. The Escrow Agent shall not be liable or responsible for any fluctuations
in value of any such investments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.&nbsp;<U><B>Escrow Claims and Distributions</B></U><B>.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the term of this Agreement, the Escrow Funds will be utilized for reimbursement of
Losses (as defined in the Purchase Agreement) incurred by Purchaser in respect of which Seller is
obligated pursuant to <U><B>Article&nbsp;7</B></U> of the Purchase Agreement to indemnify Purchaser
(&#147;<B><I>Indemnified Losses</I></B>&#148;).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1 <U><B>Escrow Funds Distribution and Termination</B></U><B>.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;From time to time prior to the distribution of the Escrow Funds to the Seller as set forth
below, Purchaser may deliver to the Escrow Agent a written notice (an &#147;<B><I>Escrow Claim</I></B>&#148;) requesting an
immediate distribution to Purchaser of a specified amount of the Escrow Funds in full or partial
payment of the Indemnified Losses obligations of the Seller to Purchaser pursuant to Article&nbsp;7 of
the Purchase Agreement, along with a delivery receipt or other proof of delivery to the Seller of a
copy of such Escrow Claim. The Escrow Claim shall include evidence that Purchaser has notified the
Escrow Agent that an Asserted Liability (as defined in the Purchase Agreement) has been properly
and timely made in good faith under the Purchase Agreement and the amount of the Escrow Funds
(which shall be no more than the Indemnified Losses set forth in the Asserted Liability) to be
withheld from distribution to the Seller.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;If the Escrow Agent is not in actual receipt of a written objection from the Seller to an
Escrow Claim for an immediate distribution within thirty (30)&nbsp;days following the date of the Escrow
Agent&#146;s actual receipt of such Escrow Claim, then on the thirty-
</DIV>

<DIV align="right" style="font-size: 10pt; margin-top: 12pt">Escrow Agreement
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">first (31<SUP style="FONT-size: 85%; vertical-align: text-top">st</SUP>) day following such actual receipt (or if the thirty-first
(31<SUP style="FONT-size: 85%; vertical-align: text-top">st</SUP>) day is not a business day for the Escrow Agent, then on the first business day
after the thirty-first (31<SUP style="FONT-size: 85%; vertical-align: text-top">st</SUP>) day), the Escrow Agent shall disburse to Purchaser the
amount of the Escrow Funds specified in the Escrow Claim. If the Escrow Agent is in actual receipt
of a written objection from the Seller to an Escrow Claim within thirty (30)&nbsp;days following the
date of the Escrow Agent&#146;s actual receipt of such Escrow Claim (or if the thirtieth
(30<SUP style="FONT-size: 85%; vertical-align: text-top">th</SUP>) day is not a business day for the Escrow Agent, then on the first business day
after the thirtieth (30<SUP style="FONT-size: 85%; vertical-align: text-top">th</SUP>) day), the Escrow Agent shall withhold from the Escrow Funds
distributable pursuant to this <U><B>Section&nbsp;4</B></U> an amount sufficient to satisfy such Escrow Claim
and such funds shall be disbursed in accordance with <U><B>Section&nbsp;4.1(c)</B></U> below.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Except for the distribution of Escrow Funds pursuant to either <U><B>Section&nbsp;4.</B><B>1(b)</B><B>, 4.1(d)
or 4.1(e)</B></U>, the Escrow Agent shall not disburse any Escrow Funds until it shall have received
either (i)&nbsp;non-conflicting written instructions from the Seller and Purchaser as to the disposition
of the Escrow Funds, or (ii)&nbsp;an order of a court having jurisdiction over the matter which is final
and not subject to further court proceedings or appeal. Upon receipt of any such written
instructions or order, the Escrow Agent shall distribute the Escrow Funds it holds in accordance
therewith.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;Except as otherwise provided in this <U><B>Section&nbsp;4</B></U>, on the ten and one-half (10.5)
month anniversary of the Closing, the Escrow Agent shall release and disburse from the Escrow Funds
to an account designated by Seller, the amount, if any, by which the then-existing Escrow Funds
exceed the sum of (i) $875,000.00, plus (ii)&nbsp;the amount of any Escrow Claims under this Agreement
that are then pending (whether disputed or not).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;Except as otherwise provided in this <U><B>Section&nbsp;4</B></U>, on the twenty-first
(21<SUP style="FONT-size: 85%; vertical-align: text-top">st</SUP>) month anniversary of the Closing (the &#147;<B><I>Final Release Date</I></B>&#148;), the Escrow Agent
shall release and disburse from the Escrow Funds to an account designated by Seller, the amount, if
any, by which the then-existing Escrow Funds exceed the sum of any Escrow Claims under this
Agreement that are then pending (whether disputed or not). In addition, in accordance with the
foregoing, if any Escrow Funds continue to be held after the Final Release Date for any Escrow
Claim pending as of the Final Release Date, then such Escrow Funds shall be disbursed as provided
herein and as provided in the Purchase Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.&nbsp;<U><B>Escrow Agent Compensation</B></U><B>. </B>The Escrow Agent is to be compensated in accordance
with the fee schedule attached to this Agreement as <U><B>Exhibit&nbsp;B</B></U> for the performance of its
duties under this Agreement (the &#147;<I>Escrow Fees</I>&#148;) and for reimbursement of its reasonable
out-of-pocket expenses including, but not by way of limitation, the fees and costs of attorneys or
agents which it may reasonably find necessary to engage in performance of its duties hereunder.
The Escrow Fees are to be borne out of the Escrow Funds and shall be paid first out of income
realized on the Escrow Amount and then out of the principal, at the times such Escrow Fees are due.
The Escrow Agent shall have, and is hereby granted, a prior lien upon the Escrow Funds with
respect to its unpaid fees, non-reimbursed expenses and unsatisfied indemnification rights,
superior to the interests of any other persons or entities and is hereby granted the right to set
off and deduct any unpaid fees, non-reimbursed expenses and unsatisfied indemnification rights from
the Escrow Funds.
</DIV>

<DIV align="right" style="font-size: 10pt; margin-top: 12pt">Escrow Agreement
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->-4-<!-- /Folio -->
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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.&nbsp;<U><B>Obligations and Liabilities of the Escrow Agent</B></U><B>.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;The Escrow Agent has no duties or obligations other than those specifically set forth in
this Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;The Escrow Agent is not responsible in any manner whatsoever for any failure or inability
of any party other than the Escrow Agent to honor any of the provisions of this Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;The Escrow Agent is fully protected in acting or refraining from acting upon and relying
upon any written notice, direction, request, waiver, consent, receipt or other paper or document
that the Escrow Agent in good faith reasonably believes to have been signed or presented by the
proper party or parties. Concurrent with the execution of this Agreement, the Parties shall
deliver to the Escrow Agent authorized signers&#146; forms in the form of <U><B>Exhibit&nbsp;C-1</B></U> and
<U><B>Exhibit&nbsp;C-2</B></U> to this Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;The Escrow Agent will not be liable, directly or indirectly, for any (i)&nbsp;damages, losses
or expenses arising out of the services provided hereunder, other than damages, losses or expenses
which have been finally adjudicated to have directly resulted from the Escrow Agent&#146;s gross
negligence, willful misconduct or act of bad faith or (ii)&nbsp;special, indirect or consequential
damages or losses of any kind whatsoever (including without limitation lost profits) even if the
Escrow Agent has been advised of the possibility of such losses or damages and regardless of the
form of action.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;The Escrow Agent may consult with, and obtain advice from, legal counsel in the event of
any dispute or construction of any of the provisions of this Agreement or its duties under this
Agreement, and the Escrow Agent will incur no liability and will be fully protected in acting or
refraining from acting in good faith in accordance with the opinion and instruction of such
counsel.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.&nbsp;<U><B>Automatic Succession; Resignation and Removal of Escrow Agent</B></U><B>.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;Any company into which the Escrow Agent may be merged or with which it may be consolidated
or any company to whom the Escrow Agent may transfer a substantial amount of its global escrow
business, will be the successor to the Escrow Agent without the execution or filing of any paper or
further act on the part of any parties, notwithstanding anything in this Agreement to the contrary.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;The Escrow Agent may resign as escrow agent at any time with or without cause by giving
written notice to Purchaser and Seller, such resignation to be effective 30 calendar days following
the date such notice is given. In addition, Purchaser and Seller jointly may remove the Escrow
Agent as escrow agent at any time with or without cause by an instrument (which may be executed in
counterparts), given to the Escrow Agent, which instrument must designate the effective date of
such removal. If any such resignation or removal occurs, a successor escrow agent will be
appointed by Purchaser and Seller. Any such successor escrow agent shall deliver to Purchaser and
Seller a written instrument accepting such
</DIV>


<DIV align="right" style="font-size: 10pt; margin-top: 12pt">Escrow Agreement
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->-5-<!-- /Folio -->
</DIV>

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">appointment and upon such delivery it will succeed to all of the rights and duties of the
Escrow Agent under this Agreement and will be entitled to receive the Escrow Funds.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;If Purchaser and Seller are unable to agree upon a successor escrow agent or have failed
to appoint a successor escrow agent prior to the expiration of 30 calendar days following the date
of the notice of resignation or removal, the then acting escrow agent shall petition any court of
competent jurisdiction for the appointment of a successor escrow agent or other appropriate relief,
and any such resulting appointment will be binding upon all of the parties to this Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;Upon acknowledgment by any successor escrow agent of the receipt of the Escrow Funds, the
then replaced escrow agent will be fully relieved of all duties, responsibilities and obligations
under this Agreement except with respect to actions previously taken or omitted by such replaced
escrow agent.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.&nbsp;<U><B>Indemnification of Escrow Agent</B></U><B>. </B>In partial consideration of the Escrow Agent&#146;s
acceptance of this appointment, Purchaser and Seller shall indemnify and hold the Escrow Agent
harmless as to any liability incurred by it to any Person by reason of its having accepted such
appointment or in carrying out the terms of this Agreement and, subject to <U><B>Section&nbsp;5</B></U> of
this Agreement, shall reimburse the Escrow Agent for all of its reasonable costs and expenses,
including, among other things, reasonable attorneys&#146; fees and expenses arising out of any matter
for which the Escrow Agent is entitled to indemnification under this <U><B>Section&nbsp;8</B></U>.
Notwithstanding the foregoing, no indemnity need be paid in case of any liability caused by the
Escrow Agent&#146;s gross negligence, willful misconduct or breach of this Agreement. This paragraph
shall survive the termination of this Agreement for any reason and the resignation and removal of
the Escrow Agent.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.&nbsp;<U><B>Right to Interplead</B></U><B>. </B>Should any dispute arise with respect to this Escrow
Agreement or the Escrow Account, whether such dispute arises between the parties hereto and others,
or between the parties hereto themselves, it is understood and agreed that the Escrow Agent may
petition (by means of an interpleader or any other appropriate measure) any court of competent
jurisdiction for instructions with respect to such dispute and the other parties hereto will hold
the Escrow Agent harmless and indemnify it against all consequences and expenses that may be
incurred by the Escrow Agent in connection therewith, which indemnity shall survive the termination
of this Escrow Agreement or the resignation or removal of Escrow Agent.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.&nbsp;<U><B>Attachment of Escrow Funds; Compliance with Legal Orders</B></U><B>. </B>In the event that any
Escrow Funds shall be attached, garnished or levied upon by any court order, or the delivery
thereof shall be stayed or enjoined by an order of a court, or any order, judgment or decree shall
be made or entered by any court order affecting the Escrow Funds, the Escrow Agent is hereby
expressly authorized, in its sole discretion, upon five (5)&nbsp;days advance written notice to
Purchaser and Seller, to respond as it deems appropriate or to comply with all writs, orders or
decrees so entered or issued, or which it is advised by legal counsel of its own choosing is
binding upon it, whether with or without jurisdiction. In the event that the Escrow Agent obeys or
complies with any such writ, order or decree it shall not be liable to any of the parties or
</DIV>


<DIV align="right" style="font-size: 10pt; margin-top: 12pt">Escrow Agreement
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-6-<!-- /Folio -->
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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">to any other person, firm or corporation, should, by reason of such compliance
notwithstanding, such writ, order or decree be subsequently reversed, modified, annulled, set aside
or vacated.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16.&nbsp;<U><B>Notices</B></U><B>. </B>All notices must be in writing and will be deemed to have been given (i)
if delivered in person or by a nationally recognized overnight courier service or (ii)&nbsp;upon
confirmation of receipt if sent by facsimile, to the following addresses:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt;margin-left:3%" cellspacing="0" border="0" cellpadding="0" width="97%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="20%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="75%">&nbsp;</TD>
</TR>
<TR></TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(a) If to Purchaser:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">ES Acquisition Corp.<br>
c/o Graham Corporation<br>
20 Florence Avenue<br>
Batavia, New York 14020<br>
Attention: Chief Financial Officer<br>
Fax No.: (585)&nbsp;343 &#151; 1097</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;&nbsp;&nbsp;&nbsp;&nbsp;with copies to:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Harter Secrest &#038; Emery LLP<br>
One Bausch and Lomb Place<br>
Rochester, New York 14064<br>
Attention: Daniel R. Kinel, Esq.<br>
Fax No.: (585)&nbsp;232 &#151; 2152</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) If to Seller:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Lisa D. Rice<br>
c/o 2647 Invitational Drive<br>
Oakland, Michigan 48363<br>
Fax No.: 248) 645-1568</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;&nbsp;&nbsp;&nbsp;&nbsp;with copies to:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Howard &#038; Howard Attorneys PLLC<br>
450 West Fourth Street<br>
Royal Oak, Michigan 48067<br>
Attention: Joseph J. DeVito, Esq.<br>
Fax No.: (248)&nbsp;645-1568</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">(c) If to Escrow Agent:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">PNC Bank, National Association<br>
1900 East Ninth Street, 13<SUP style="FONT-size: 85%; vertical-align: text-top">th</SUP> Floor<br>
Locator B7-YB13-13-2<br>
Cleveland, Ohio 44114<br>
Attention: Lissa Vitale<br>
Fax No.: (216) 222-0178 </TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;17.&nbsp;<U><B>Bank Bound Only by Actual Receipt</B></U><B>. </B>Notwithstanding anything to the contrary
herein, Escrow Agent shall not be bound by any notice unless actually received by Escrow Agent.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;18.&nbsp;<U><B>Binding Effect</B></U><B>. </B>This Agreement is binding and inures to the benefit of the
parties and their respective successors and assigns.
</DIV>

<DIV align="right" style="font-size: 10pt; margin-top: 12pt">Escrow Agreement
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->-7-<!-- /Folio -->
</DIV>

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




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19.&nbsp;<U><B>Assignment</B></U><B>. </B>This Agreement may not be assigned or transferred except upon a
written agreement executed by each of the parties to this Agreement; <U>provided</U>,
<U>however</U>, that Purchaser may assign this Agreement to any of its lenders or any Affiliate of
Purchaser. The foregoing proviso notwithstanding, no such assignment shall be binding on the
Escrow Agent unless and until written notice of such assignment shall be delivered to and
acknowledged by the Escrow Agent.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20.&nbsp;<U><B>Third Party Beneficiaries</B></U><B>. </B>Nothing in this Agreement is intended or will be
construed to confer on any Person other than the parties or their successors and assigns any rights
or benefits under this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;21.&nbsp;<U><B>Headings</B></U><B>. </B>The headings in this Agreement are intended solely for the convenience
of reference and will be given no effect in the construction or interpretation of this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;22.&nbsp;<U><B>Exhibits</B></U><B>. </B>The Exhibits and other attachments hereto will be deemed to be a part
of this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;23.&nbsp;<U><B>Counterparts</B></U><B>. </B>This Agreement may be executed in multiple counterparts, each of
which will be deemed an original, and all of which together will constitute one and the same
document.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;24.&nbsp;<U><B>Governing Law</B></U><B>. </B>This Agreement must be governed by and construed in accordance
with the laws of the State of Pennsylvania, without regard to conflict of laws principles.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;25.&nbsp;<U><B>Amendment</B></U><B>. </B>No amendment of this Agreement is binding unless made in a written
instrument that specifically refers to this Agreement and is signed by Purchaser, Seller and the
Escrow Agent.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;26.&nbsp;<U><B>Entire Agreement</B></U><B>. </B>This Agreement and its Exhibits contains the entire
understanding among the parties and supersedes any prior understanding and agreements between them,
in each case respecting this subject matter. There are no representations, agreements or
understandings, oral or written, between or among the parties to this Agreement relating to the
subject matter of this Agreement that are not fully expressed in this Agreement.
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><I>&#091;REMAINDER OF PAGE INTENTIONALLY BLANK&#093;</I>
</DIV>

<DIV align="right" style="font-size: 10pt; margin-top: 12pt">Escrow Agreement
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->-8-<!-- /Folio -->
</DIV>



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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>IN WITNESS WHEREOF, </B>the parties hereto have executed this Agreement as of the date
first above written.
</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 colspan="3" align="left"><B>ESCROW AGENT:</B><BR>
<BR>
PNC BANK, NATIONAL ASSOCIATION<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>

<TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/
Robert Grimaldi&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD align="left">&nbsp;</TD>

    <TD colspan="2" align="left">Its: </TD>
    <TD style="border-bottom: 0px solid #000000">Robert Grimaldi&nbsp;</TD>
</TR><TR>
<TR>
    <TD align="left">&nbsp;</TD>
    <TD> </TD>
    <TD colspan="0" align="left">&nbsp; </TD>
    <TD style="border-bottom: 0px solid #000000">Vice President</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">&nbsp;<br>
</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B>PURCHASER::</B><BR>
<BR>
<BR>
ES ACQUISITION CORP., a Delaware corporation<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>

<TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/
Jeffrey F. Glajch&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Jeffrey F. Glajch&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>Its:</TD>
    <TD colspan="2" align="left">Chief Financial Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><BR>
<BR>
<B>SELLER:</B><BR><BR>
/s/ Lisa D. Rice
</td>
</tr>
<tr>
    <TD>&nbsp;</TD>

    <TD colspan="3" align="left" style="border-top:1px solid #000000">LISA D. RICE, individually and as Trustee<BR>
for the Lisa D. Rice Revocable Trust dated<BR>
June 5, 2003</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>
<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%"></TD>
    <TD width="5%"></TD>
    <TD width="30%"></TD>
    <TD width="5%"></TD>
    <TD width="30%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">Escrow Agreement</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->- 9 -<!-- /Folio -->
</DIV>

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


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


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95; &#95;&#95;, 20&#95;&#95;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">PNC Bank, National Association<BR>
1900 East Ninth Street, 13<SUP style="FONT-size: 85%; vertical-align: text-top">th</SUP> Floor<BR>
Locator B7-YB13-13-2<BR>
Cleveland, Ohio 44114<BR>
Attention: Lissa Vitale<BR>
Fax No.: (216)&nbsp;222-0178

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>&#091;Address&#093;<BR>
&#091;City, State ZIP&#093;</I></B><BR>
Attention: <B><I>&#091;&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#093;</I></B><BR>
Facsimile: <B><I>&#091;&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#093;</I></B>

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Ladies and Gentlemen:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reference is hereby made to the Escrow Agreement, dated &#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;, 2010 (the <I>&#147;</I><B><I>Escrow
Agreement</I></B><I>&#148;</I>), by and among Purchaser, Seller and you, as Escrow Agent. Capitalized terms used but
not defined in this notice are used as defined in the Escrow Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to <B>Section&nbsp;4.1 </B>of the Escrow Agreement, this letter will serve as instructions to the
Escrow Agent to deliver $&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95;&#95; <B><I>&#091;specify portion of Escrow Funds, which amount shall take into
account any applicable limitations set forth in the Purchase Agreement&#093; </I></B>of the Escrow Funds to
<B><I>&#091;specify Person or Persons to receive such portion&#093;</I></B>, for <B><I>&#091;specify the matter or matters entitling
such Person or Persons to the Escrow Funds and the aggregate dollar amount of Indemnified Losses
sustained or estimated to be sustained (including the amount by which the Indemnified Losses
claimed hereunder exceed the limitations set forth in the Purchase Agreement)&#093;</I></B>, via wire transfer
as follows: <B><I>&#091;specify wire transfer instructions of recipient(s)&#093;</I></B>. Such amount must be delivered
in accordance with the terms of Section&nbsp;4.1 of the Escrow Agreement, unless the Escrow Agent
receives a Counter Notice within thirty (30)&nbsp;calendar days of its receipt of this letter.
</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 colspan="3" align="left">Very Truly Yours,<BR>
<BR>
<BR>
<B>ES ACQUISITION CORP.</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top">Name:&nbsp;&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD valign="top">Title:&nbsp;&nbsp;</TD>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>
<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%"></TD>
    <TD width="5%"></TD>
    <TD width="30%"></TD>
    <TD width="5%"></TD>
    <TD width="30%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">Escrow Agreement</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->A &#150; 1&nbsp;<!-- /Folio -->
</DIV>

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


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


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>ESCROW AGENT&#146;S FEE SCHEDULE</B></U>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Annual administrative escrow fee payable upon execution of this Agreement, and annually
thereafter upon the anniversary date of the account opening:
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B><I>Annual Administrative Fee: $3,500.00<BR>
One Time Legal Fee: $750.00</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Any reasonable out-of-pocket expenses or extraordinary fees or expenses such as reasonable
attorney&#146;s fees or messenger costs, are additional and are not included in this schedule.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">These fees cover a full year, or any part thereof, and thus are not prorated in the year of
termination. The annual fee is billed in advance and payable prior to that year&#146;s service.
</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%"></TD>
    <TD width="5%"></TD>
    <TD width="30%"></TD>
    <TD width="5%"></TD>
    <TD width="30%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">Escrow Agreement</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->B &#150; 1&nbsp;<!-- /Folio -->
</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="center" style="font-size: 10pt; margin-top: 18pt"><U><B>EXHIBIT C-1</B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>CERTIFICATE AS TO AUTHORIZED SIGNATURES</B></U>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The specimen signatures shown below are the specimen signatures of the individuals who have
been designated as authorized representatives of ES Acquisition Corp., a Delaware corporation, and
are authorized to initiate and approve transactions of all types for the escrow account or accounts
established under the Escrow Agreement to which this Exhibit&nbsp;C-1 is attached, on behalf of
Purchaser.
</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="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
</TR>
<TR></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="center" valign="top">Name / Title
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><u>Specimen Signature</u></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="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" 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="center" valign="top">James R. Lines</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">/s/ James R. Lines&nbsp;</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="center" valign="top" style="border-top: 1px solid #000000">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" 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="center" valign="top"><I>Name</I>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><I>Signature</I></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;<br>Chairman</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</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="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" 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="center" valign="top"><I>Title</I> </TD>
    <TD>&nbsp;</TD>
    <TD align="center" 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="center" valign="top">&nbsp;<br>Jeffrey Glajch</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><BR>/s/ Jeffrey Glajch&nbsp;</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="center" valign="top" style="border-top: 1px solid #000000">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" 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="center" valign="top"><I>Name</I><BR>&nbsp;<br>
Chief Financial Officer
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><I>Signature</I></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="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" 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="center" valign="top"><I>Title</I> </TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&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="30%"></TD>
    <TD width="5%"></TD>
    <TD width="30%"></TD>
    <TD width="5%"></TD>
    <TD width="30%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">Escrow Agreement</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->C-1 &#150; 1&nbsp;<!-- /Folio -->
</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="center" style="font-size: 10pt; margin-top: 18pt"><U><B>EXHIBIT C-2</B></U>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>CERTIFICATE AS TO AUTHORIZED SIGNATURES</B></U>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The specimen signatures shown below is the specimen signature of LISA D. RICE, who is
authorized to initiate and approve transactions of all types for the escrow account or accounts
established under the Escrow Agreement to which this Exhibit&nbsp;C-2 is attached, on behalf of Seller.
</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="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
</TR>
<TR></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="center" valign="top">Name / Title
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><u>Specimen Signature</u></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="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" 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="center" valign="top">Lisa D. Rice</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">/s/ Lisa D. Rice&nbsp;</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="center" valign="top" style="border-top: 1px solid #000000">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" 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="center" valign="top"><I>Name</I>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><I>Signature</I></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">individually and as Trustee of the Lisa D.
Rice Revocable Trust dated June&nbsp;5, 2003</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&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="30%"></TD>
    <TD width="5%"></TD>
    <TD width="30%"></TD>
    <TD width="5%"></TD>
    <TD width="30%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">Escrow Agreement</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->C-2 &#150; 1&nbsp;<!-- /Folio -->
</DIV>



</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.4
<SEQUENCE>5
<FILENAME>l41646exv10w4.htm
<DESCRIPTION>EX-10.4
<TEXT>
<HTML>
<HEAD>
<TITLE>exv10w4</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="RIGHT" style="font-size: 10pt; margin-top: 6pt"><b>EXHIBIT 10.4</B>
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>THIS LEASE AGREEMENT </B>(&#147;Lease&#148;) is made as of the 14th day of December, 2010, by and between
<B>ESSC INVESTMENTS, LLC</B>, a Michigan limited liability company (&#147;Landlord&#148;), and <B>ENERGY STEEL &#038; SUPPLY
CO., a Michigan corporation, and GRAHAM CORPORATION</B>, <B>a Delaware corporation</B>, <B>jointly and severally</B>
(collectively, the &#147;Tenant&#148;), for use of the land and approximately 60,000 sq. ft. building located
at the premises commonly known as 3123 John Conley Drive, Lapeer, Michigan 48446 (such building
being herein referred to as the &#147;Building&#148;; and the Building, together with the land upon which it
is situated &#091;the &#147;Land&#148;&#093;, being herein referred to as the &#147;Premises&#148;). The following Section&nbsp;1
(the &#147;Schedule&#148;) sets forth certain basic terms of this Lease:
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">1.(A) <U>SCHEDULE OF BASIC LEASE PROVISIONS (&#147;SCHEDULE&#148;)</U>
</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="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="13%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="60%">&nbsp;</TD>
</TR>
<TR></TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">1.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Premises Address:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">3123 John Conley Drive<BR>
Lapeer, Michigan 48446</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>
    <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">1.2.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Commencement Date:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">December&nbsp;14, 2010</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>
    <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">1.3.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Expiration Date:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">November&nbsp;30, 2015</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>
    <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">1.4.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Term:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Approximately five (5)&nbsp;year initial Term, with one (1) &#151;
five (5)&nbsp;year option to renew (as set forth in Section&nbsp;1.B.(i)
and (ii)&nbsp;herein)</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>
    <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">1.5
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Rent:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT style="FONT-variant: SMALL-CAPS"><B>Three Hundred Thousand </B></FONT>
<FONT style="FONT-variant: SMALL-CAPS"><B>Dollars ($300,000.00)</B></FONT> per year payable in equal monthly
installments of <FONT style="FONT-variant: SMALL-CAPS"><B>Twenty Five Thousand Dollars </B></FONT>
<FONT style="FONT-variant: SMALL-CAPS"><B>($25,000.00) </B></FONT>each</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>
    <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">1.6.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Security Deposit:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">None</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>
    <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">1.7.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Broker:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">None</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>
    <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">1.8
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Permitted Use:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Manufacturing, office, and warehouse uses and
any lawful,
ancillary uses related thereto</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>
    <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">1.9.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Exhibits:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Exhibit&nbsp;A: Legal Description of the Land;</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">Exhibit&nbsp;B: Purchase and Sale Agreement;</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">Exhibit&nbsp;C: Memorandum of Lease;</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">Exhibit&nbsp;D: Termination of Memorandum; and</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">Exhibit&nbsp;E: Non-Disturbance Agreement.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->1<!-- /Folio -->
</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="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="13%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="60%">&nbsp;</TD>
</TR>
<TR></TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2.0.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Additional Rent
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Tenant shall pay all: (a)&nbsp;Taxes (as defined in
Section&nbsp;2(B)(iii); (b)&nbsp;Insurance (as defined
in Section&nbsp;10); and (c)&nbsp;Maintenance costs (as
defined in Section&nbsp;5&#091;B&#093;), together with all of
costs, expenses and fees reasonably necessary
to maintain the Premises (unless such
obligations relating to maintenance and repair
are expressly the obligation of Landlord under
the terms hereof), and conduct its business at
the Premises (unless otherwise set forth
herein). Landlord shall promptly supply
Tenant with copies of all invoices for Taxes,
Insurance, and other relevant invoices
required to be paid by Tenant hereunder.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>1.&nbsp;DEMISE AND TERM.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>A. </B><U><B>Term</B></U><B>. </B>Landlord leases to Tenant and Tenant leases from Landlord the Premises
described in Item&nbsp;1.1 of the Schedule, including the Land as more particularly described in the
attached <U>Exhibit&nbsp;A</U> and all improvements located thereon including the Building, subject to
the covenants, terms and conditions set forth in this Lease, for a five (5)&nbsp;year initial term (the
&#147;Term&#148;) commencing on the date (the &#147;Commencement Date&#148;) described in Item&nbsp;1.2 of the Schedule and
expiring on the date (the &#147;Expiration Date&#148;) described in Item&nbsp;1.3 of the Schedule, unless
terminated earlier as otherwise provided in this Lease. Tenant shall have access to the Premises
twenty four hours per day, 365/366&nbsp;days per year, in accordance with the terms and conditions of
this Lease, and provided no uncured Default exists.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>B. </B><U><B>Option to Renew.</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;The Tenant shall have the option to renew the Term of this Lease for one (1)&nbsp;consecutive
period of five (5)&nbsp;years, commencing on the Expiration Date of the Term. For purposes of this
Lease, the renewal period shall be referred to as the &#147;Option Period&#148;. The same terms and
conditions of this Lease shall apply during the Option Period, except that the Base Rent shall be
increased as follows:
</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="50%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&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">YEAR</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">MONTHLY</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">ANNUAL</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">#6</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">27,500.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">330,000.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">#7</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">28,050.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">336,600.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">#8</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">28,611.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">343,332.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">#9</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">29,183.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">350,196.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">#10</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">29,767.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">357,204.00</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;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;In order to exercise the Option Period, the Tenant shall be required to: (i)&nbsp;provide at
least ninety (90)&nbsp;days&#146; written notice to Landlord prior to the expiration of the Term (the &#147;Option
Notice&#148;), and (ii)&nbsp;be in good standing under the Lease and not be in default under any of the terms
and conditions herein beyond any applicable notice and cure period, both at the time of the
providing of notice of the option to renew, and at the time of the
</DIV>




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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">commencement of the Option Period. Tenant&#146;s failure to provide the Option Notice as required
herein shall be deemed to mean that Tenant has elected <U>not</U> to exercise the Option Period,
and the Lease shall terminate on the Expiration Date, or earlier as otherwise provided in this
Lease.
</DIV>


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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>A. </B><U><B>Definitions</B></U><B>. </B>For purposes of this Lease, the following terms shall have the
following meanings:
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">(i)&nbsp;Intentionally Deleted.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">(ii) &#147;Rent&#148; shall mean Base Rent and Additional Rent (all as defined below) and any
other sums or charges due by Tenant hereunder.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">(iii) &#147;Taxes&#148; shall mean all taxes, sewer fees, assessments (general and special)
and fees of any kind or nature, levied upon the Premises, the personal property of
Landlord and/or Tenant located therein or the rents collected therefrom, or charges
of any type by any governmental entity based upon the ownership, leasing, renting or
operation of the Building, including all costs and expenses of protesting any such
taxes, assessments or fees, whether now or hereinafter imposed. Taxes shall
<U>not</U> include any net income, single business tax, capital stock, succession,
transfer, franchise, gift, estate or inheritance taxes; provided, however, if at any
time during the Term, a tax or excise on income is levied or assessed by any
governmental entity, in lieu of or as a substitute for, in whole or in part, real
estate taxes or other <I>ad valorem </I>taxes, such tax shall constitute and be included in
Taxes. Only to the extent permitted under the terms and conditions of the Landlord&#146;s
existing financing documents with its Lender, JP Morgan Chase (&#147;Chase&#148;), and the
related tax-exempt bond financing documents and agreements (collectively, the &#147;Bond
Documents&#148;), and by Chase, Landlord shall reasonably cooperate with Tenant, at
Tenant&#146;s sole expense, in its efforts to secure all available tax incentives for the
benefit of Tenant. Taxes shall be appropriately pro-rated for any partial years
occurring during the Lease Term.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">(iv) &#147;Utilities&#148; shall mean all utility services provided at or on the Premises,
including but not limited to water, sewer, gas, telephone, other communication
devices, electricity, heat, light and other services delivered to the Premises, by
any third party.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>B. </B><U><B>Components of Rent</B></U><B>. </B>Tenant agrees to pay the following amounts to Landlord at such
place as Landlord designates:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;Base Rent (&#147;Base Rent&#148;) shall be paid in monthly installments in the amount set forth in
Item&nbsp;1.5 of the Schedule on or before the first (1<SUP style="FONT-size: 85%; vertical-align: text-top">st</SUP>) day of each calendar month, in
advance, and without notice or demand, and without set off or deduction (unless expressly allowed
herein), with the first month&#146;s Base Rent being due on the Commencement Date. Payment of Rent is
an independent covenant of Tenant. December&nbsp;2010 Base Rent shall be prorated based on the
Commencement Date and the days remaining in December, and shall be paid by Tenant upon execution of
this Lease.
</DIV>





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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;As additional rent (&#147;Additional Rent&#148;), Tenant shall pay all Taxes directly to the
appropriate taxing authority on or before the applicable due date, and shall pay Insurance in
accordance with the provisions of Section&nbsp;10 below. With respect to Taxes, in the event that bills
or invoices for Taxes are not sent directly to Tenant, Landlord shall provide Tenant with copies of
all actual bills for Taxes promptly following receipt of same so that Tenant shall have adequate
time to cause the direct payment of same prior to any due date. Only to the extent permitted under
the Bond Documents, or by Chase, Tenant shall have the right to challenge any Taxes (whether such
challenge is as to the assessment or tax levy) provided that any such challenge shall not subject
Landlord to any loss or forfeiture of the Premises or any penalties or fine. At no expense to
Landlord, Landlord agrees to cooperate with Tenant in any such challenge. Within ten (10)&nbsp;days
after request for same from Landlord, Tenant shall provide Landlord with evidence of its payment of
any component of Additional Rent. If Tenant fails to make timely payment of such Taxes (which
failure is not due to the failure of Landlord to provide Tenant with copies of such bills for Taxes
in a timely manner), Tenant shall also pay the amount of any interest, penalties, or late charges
due to the appropriate governmental authority. Nothing in this Section&nbsp;2.B. (ii)&nbsp;shall limit any
of Landlord&#146;s other rights or remedies set forth in this Lease or under law.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)&nbsp;Tenant agrees to pay its pro-rata portion of the Summer 2010 and Winter 2010 Taxes upon
execution of this Lease, in amounts as agreed to by Tenant and Landlord, based upon actual Tax
bills or invoices.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>C. </B><U><B>Payment of Rent</B></U><B>. </B>The following provisions shall govern the payment of Rent: (i)
if this Lease commences or ends on a day other than the first day or last day of a calendar year,
respectively, the Rent for the year in which this Lease so begins or ends shall be prorated; (ii)
all Rent shall be paid to Landlord without notice, demand, offset or deduction (unless otherwise
expressly allowed herein), and the covenant to pay Rent shall be independent of every other
covenant in this Lease; and (iii)&nbsp;Tenant shall pay Landlord a late charge for any Rent payment
which is paid more than five (5)&nbsp;days after receipt by Tenant from Landlord of notice of its
failure to pay such Rent payment when due, which late charge shall be equal to Five Hundred and
00/100 Dollars ($500.00) for the first late payment, and such late charge shall be doubled in each
following month that a late payment occurs (month 2 late charge is $1,000.00, month 3 late charge
is $2,000.00, and months 4 &#151; 12 late charge is $4,000.00; provided however, the late charge shall
re-set to $500.00 after each 12-month period and shall not exceed $4,000.00 in any one (1)&nbsp;month.
Notwithstanding the aforementioned, Landlord shall only have the obligation to provide Tenant with
five (5)&nbsp;days notice of each such failure, the late charge shall be imposed after Tenant&#146;s failure
to pay Rent within five (5)&nbsp;days after it is due without any further notification of such failure.
Landlord&#146;s obligation to give notice under this Section&nbsp;2.C. is solely for purposes of assessing
late charges. In addition to the late charge, if Tenant fails to pay any component of Rent within
twenty (20)&nbsp;days after such is due (unless otherwise expressly set forth herein), Tenant shall also
pay interest on such unpaid component of Rent at a per annum rate of twelve percent (12%) until
said amount is paid in full; and (iv)&nbsp;any amount owed to Landlord under this Lease for which the
date of payment is not expressly fixed shall be due on the same date as the Rent listed on the
statement showing such amount is due.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>D. </B><U><B>Right to Audit</B></U><B>. </B>Landlord shall maintain books and records (using its best efforts
to provide all original invoices) relating to all items of Additional Rent charged to Tenant
</DIV>




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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">during the Term, and shall maintain copies thereof throughout the Term and for one (1)&nbsp;year
after the expiration or earlier termination of this Lease. Tenant, at its sole cost and expense,
shall have the right, no more frequently than once per calendar year, and upon thirty (30)&nbsp;days
prior written notice to Landlord, to examine, or to have an independent certified public accountant
(or reputable lease audit firm) retained by Tenant examine, Landlord&#146;s books and records relating
to Additional Rent charged to Tenant for all or any portion of the Term during normal business
hours only and at a time reasonably agreed upon by Landlord and Tenant.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>E. </B><U><B>Net Lease.</B></U> It is the purpose and intent of Landlord and Tenant that, unless
otherwise set forth herein expressly to the contrary, this Lease shall be absolutely net to
Landlord and that Tenant shall pay all Rent due hereunder, without notice, demand, abatement,
deduction or set off (unless otherwise expressly provided herein), and hold Landlord harmless from
and against, all costs, taxes, insurance premiums and expenses and obligations of every kind and
nature whatsoever relating to the Premises which may arise or become due during the Term of this
Lease.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>3.&nbsp;USE. </B>Tenant agrees that it shall occupy and use the Premises only for the permitted use
set forth in Item&nbsp;1.8 of the Schedule and for no other purposes without Landlord&#146;s prior written
consent. Further, no activity shall be conducted on the Premises that does not comply with any
applicable law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>4.&nbsp;CONDITION OF PREMISES. </B>Tenant accepts the Premises in its &#147;AS IS&#148; &#147;WHERE IS&#148; condition,
and Tenant&#146;s taking possession of the Premises shall be conclusive evidence that the Premises were
in good order and satisfactory condition when Tenant took possession; and (2)&nbsp;Tenant acknowledges
that there is no agreement of Landlord to alter, remodel, decorate, clean or improve the Premises
or the Building (or to provide Tenant with any credit or allowance for the same), and no
representation regarding the condition of the Premises or the Building, have been made by or on
behalf of Landlord or relied upon by Tenant unless otherwise expressly set forth herein. Tenant
hereby waives all claims against Landlord regarding the condition of the Premises. LANDLORD HEREBY
WAIVES AND DISCLAIMS ANY AND ALL OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED INCLUDING, WITHOUT
LIMITATION, WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>5.&nbsp;REPAIRS AND MAINTENANCE.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>A. </B><U><B>Landlord&#146;s Obligations</B></U>. Landlord, as its sole maintenance and repair obligation
hereunder, shall keep and maintain in good repair the structural, but not cosmetic, condition of
the exterior walls, interior load-bearing walls, the foundation and the roof of the Building,
<U>exclusive</U> of doors, door frames, door checks, windows and window frames all of which are
the responsibility of Tenant. In addition, Landlord shall make all &#147;major repairs&#148; and all
replacements the following mechanical systems, if required (except to the extent that the
preventative maintenance and minor repairs of some of such mechanical systems are expressly the
obligations of Tenant as set forth in Section&nbsp;5(B) below) in the Premises: (i)&nbsp;heating, ventilating
and air conditioning; (ii)&nbsp;electrical and lighting; (iii)&nbsp;plumbing and sewerage; and (iv)&nbsp;fire/life
safety systems. As used in this Lease, the term &#147;major repairs&#148; shall mean any single repair which
costs more than <FONT style="FONT-variant: SMALL-CAPS"><B>Ten Thousand Dollars ($10,000.00). </B></FONT>However, Landlord shall
</DIV>




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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">not be called upon to make any such repairs or replacements occasioned by the acts, errors or
omissions of Tenant, its agents, employees, invitees, customers, licensees or contractors, except
to the extent that Landlord is fully reimbursed therefore under any policy of insurance. Landlord
shall not be called upon to make any other improvements or repairs, of any kind, upon the Premises
except as may be otherwise expressly required under the provisions of this Lease. Tenant shall
promptly notify Landlord in writing of all repairs which it deems to be Landlord&#146;s responsibility.
Landlord shall not be required to make the same repair more than once during each 12-month term of
this Lease (even if the repair is a major repair).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>B. </B><U><B>Tenant&#146;s Obligations</B></U>. Except as provided in Section&nbsp;5.A. above, Tenant shall, at
its sole cost and expense, keep and maintain in good order, condition, repair (and replace, if
necessary) the interior and exterior of Building and Premises (subject to Section&nbsp;5(A) above),
including, without limitation, non-load-bearing interior walls, windows, glass, doors, and all
sidewalks, landscaping, driveways, parking lots and fences in or about the Premises. Except to the
extent such is the express obligation of Landlord, Tenant agrees to perform all ordinary and
necessary maintenance in and to the Premises as is reasonably necessary to keep and maintain the
Premises in the same order, condition and repair as existed on the Commencement Date, ordinary wear
and tear excepted (casualty and/or condemnation events that effect the condition of the Premises
are dealt with in Sections&nbsp;12 and 13 herein). In addition, Tenant shall procure and maintain, at
its sole cost and expense, a preventative maintenance contract on the heating, ventilating and air
conditioning and boiler systems serving the Premises such that routine repair and maintenance of
such systems shall be performed at Tenant&#146;s expense. Notwithstanding the foregoing sentence,
however, Tenant shall have no obligation to pay for or cause to be made any major repairs or any
replacements of such heating, ventilating and air conditioning systems serving the Premises. which
shall be the sole responsibility and cost of Landlord (unless the required replacement is due to
Tenant&#146;s failure to maintain or repair, in which case the Tenant must pay for any major repairs or
replacements of such systems). Tenant shall, however, be responsible to maintain and make minor
repairs to such mechanical systems. Tenant agrees to indemnify and hold Landlord harmless from any
expenses incurred in connection with the breach of this Section&nbsp;5.B. by Tenant, its agents,
employees, licensees or contractors. In addition, Tenant, at its sole cost and expense, shall keep
and maintain the Premises in a clean, sanitary and safe condition in accordance with applicable law
and in accordance with all directions, rules and regulations of the health officer, fire marshal,
building inspector or other proper officials of governmental agencies having jurisdiction. Tenant
shall furnish the Premises, at its sole cost and expense, with all security services, window
washing, janitor, garbage disposal services, and other services reasonably necessary to Tenant&#146;s
use of the Premises in accordance with this Lease. Tenant shall, at its sole expense, promptly
repair any damage to the Premises caused by Tenant or any agent, officer, employee, contractor,
licensee or invitee of Tenant, or due to Tenants breach of any portion of this Lease. Tenant may
use any existing warranty that benefits Landlord, to pay for all or a portion of a repair or
maintenance obligation of Tenant hereunder, provided, Tenant shall pay any required deductibles.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>C. </B><U><B>Compliance with Laws. </B></U> As of the Commencement Date, Landlord represents to Tenant
that to the best of its knowledge, the Building (including the Premises) is in material compliance
with all applicable laws, ordinances, codes, rules, regulations, orders, and other lawful
requirements associated with construction, operation, use and maintenance of the Building,
including the Premises, for the uses permitted hereunder. From and after the
</DIV>




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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Commencement Date, Tenant shall, at its sole cost, comply with all requirements of all laws,
rules, orders, requirements, regulations or ordinances either currently existing, or hereinafter
enacted and otherwise, including, without limitation, the Americans with Disabilities Act of 1990
affecting the Premises and shall permit no waste, damage or injury thereto.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>6.&nbsp;UTILITIES. </B>Tenant shall contract directly for all Utilities with the utility provider or
supplier of same, except water, and pay for all Utilities (including water) for the entire
Premises. Tenant shall pay the water bill for the Premises upon presentment of a copy of such bill
by Landlord (or if mailed directly from municipality) to Tenant on or before its due date.
Landlord shall promptly provide Tenant with a copy of any such water bill following receipt of same
by Landlord. Tenant shall be responsible for the payment of all Utilities as soon as an invoice is
presented so that no past due accounts arise, and provide Landlord with evidence of payment upon
request. Landlord shall not be liable for damages for interruptions of Utilities, because of any
casualties, or labor disputes, because of necessary repairs or improvements or for any other causes
beyond the reasonable control of Landlord.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>7.&nbsp;CERTAIN RIGHTS RESERVED TO LANDLORD. </B>Provided that such activities shall not unreasonably
interfere with Tenant&#146;s use and occupancy of or access to the Premises, Landlord reserves the
following rights, each of which Landlord may exercise without notice to Tenant and without
liability to Tenant, and the exercise of any such rights shall not be deemed to constitute an
eviction or disturbance of Tenant&#146;s use or possession of the Premises and shall not give rise to
any claim for set-off or abatement of rent or any other claim or liability against Landlord: (a)&nbsp;to
make repairs, alterations, additions or improvements, only as required herein (&#147;Repair
Activities&#148;), and for such purposes to enter upon the Premises at reasonable times upon twenty-four
hour prior written notice; (b)&nbsp;to show or inspect the Premises (and determine if Tenant is
performing its obligations hereunder) at reasonable times upon twenty-four (24)&nbsp;hour prior
telephonic or written notice (or at any time, without notice of any kind, if necessary, due to an
emergency situation) to Tenant; (c)&nbsp;to take any other action which Landlord deems reasonable in
connection with the operation, maintenance, marketing or preservation of the Building; (d)&nbsp;to
reasonably approve the weight, size and location of safes or other heavy equipment or articles,
which articles may be moved in, about or out of the Building or Premises only at such times and in
such manner as Landlord shall reasonably direct, at Tenant&#146;s sole risk and responsibility; and (e)
in the last ninety (90)&nbsp;days of the Term (if Tenant does not exercise its Option Period), and if
Tenant exercises the Option Term, in the last ninety (90)&nbsp;days of the Option Term, to market and
show the Premises to prospective tenants for future occupancy.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>8.&nbsp;SIGNS. </B>Unless such signs are erected in full compliance with all applicable laws, and
unless Tenant has received Landlord&#146;s prior consent, which will not be unreasonably withheld,
delayed or conditioned. Tenant shall not erect or install any signs on the exterior of the
Premises. Upon the expiration or earlier termination of the Term of this Lease, Tenant shall
promptly remove all such signs and repair any damage caused by the installation of same.
Notwithstanding anything contained herein to the contrary, Landlord hereby approves all signage
existing as of the Commencement Date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>9.&nbsp;TENANT ALTERATIONS.</B>
</DIV>

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





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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;Tenant shall not make any replacement, alteration, improvement or addition to or removal
from the Premises (collectively an &#147;alteration&#148;) without the prior written consent of Landlord,
which consent shall not be unreasonably withheld, conditioned or delayed, provided that Tenant
complies with this Section&nbsp;9(A). In the event Tenant proposes to make any alteration, Tenant shall,
prior to commencing such alteration, submit to Landlord for prior written reasonable approval: (i)
detailed plans and specifications (if appropriate for the alteration contemplated by Tenant); (ii)
the names, addresses and copies of contracts for all contractors; (iii)&nbsp;all necessary permits
evidencing compliance with all applicable governmental rules, regulations and requirements; (iv)
certificates of insurance in form and amounts reasonably required by Landlord, naming Landlord, its
managing and leasing agent and any other parties reasonably designated by Landlord as additional
insureds; and (v)&nbsp;all other documents and information as Landlord may reasonably request in
connection with such alteration. Tenant agrees to pay Landlord&#146;s reasonable charges for review of
all such items of the alteration. Neither approval of the plans and specifications nor any
supervision of the alteration by Landlord shall constitute a representation or warranty by Landlord
as to the accuracy, adequacy, sufficiency or propriety of such plans and specifications or the
quality of workmanship or the compliance of such alteration with applicable law. Tenant shall pay
the entire cost of the alteration. Each alteration shall be performed in a good and workmanlike
manner, in accordance with the plans and specifications reasonably approved by Landlord, and shall
meet or exceed the standards for construction and quality of materials reasonably established by
Landlord for the Building. In addition, each alteration shall be performed in compliance with all
applicable governmental and insurance company laws, regulations and requirements. Each alteration
shall be performed by Tenant, and in harmony with any of Landlord&#146;s employees and contractors
employed at the Premises. Each alteration, whether temporary or permanent in character, made by
Landlord or Tenant in or upon the Premises (excepting only Tenant&#146;s furniture, equipment and trade
fixtures) shall become Landlord&#146;s property and shall remain upon the Premises at the expiration or
termination of this Lease without compensation to Tenant; provided, however, that Landlord shall
have the right to require Tenant to remove such alteration at Tenant&#146;s sole cost and expense in
accordance with the provisions of Paragraph&nbsp;15 of this Lease, which required removal will be
specified by Landlord when Landlord consents to Tenant&#146;s requested alterations, except, however,
Landlord may require removal of any electronic, phone, data or other telecommunications conduit and
cabling and related equipment installed by or on behalf of Tenant from and after the Commencement
Date, by notice to Tenant given at any time prior to the expiration or earlier termination of this
Lease. Any alteration required by applicable law, statute or ordinance, or by any governmental
agency having jurisdiction over the Premises, that is required due to Tenant&#146;s specific use and
occupancy of the Premises shall be made promptly, at Tenant&#146;s sole cost in accordance with this
Section&nbsp;9.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;Notwithstanding the foregoing, Tenant may make alterations, the cost of which does not
exceed <FONT style="FONT-variant: SMALL-CAPS"><B>Twenty-five Thousand and 00/100 ($25,000.00) Dollars</B></FONT> at any one time, without the
prior written consent of Landlord, provided that such alterations are &#147;cosmetic&#148;. For purposes of
this Lease, a &#147;cosmetic&#148; alteration shall be one that does not effect the structure or mechanics of
the Building and for example, would include installing new carpet or other flooring or painting.
Further, the Tenant shall not make any alteration that is not cosmetic without Landlord&#146;s prior
written consent as set forth in Section&nbsp;9.A(i).
</DIV>

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>B. </B><U><B>Liens</B></U><B>. </B>Upon completion of any alteration, Tenant shall promptly furnish Landlord
with sworn owner&#146;s and contractors&#146; statements and full and final waivers of lien covering all
labor and materials included in such alteration. Tenant shall not permit any mechanic&#146;s lien to be
filed against the Premises, or any part thereof, arising out of any alteration performed, or
alleged to have been performed, by or on behalf of Tenant. If any such lien is filed, Tenant shall
within ten (10)&nbsp;days after Tenant&#146;s receipt of notice of the filing of same, have such lien
released of record or deliver to Landlord a bond in form, amount, and issued by a surety reasonably
satisfactory to Landlord, indemnifying Landlord against all costs and liabilities resulting from
such lien and the foreclosure or attempted foreclosure thereof. If Tenant fails to have such lien
so released or to deliver such bond to Landlord, Landlord, without investigating the validity of
such lien, may pay or discharge the same, and Tenant shall reimburse Landlord upon demand 100% of
the amount so paid by Landlord, including Landlord&#146;s reasonable expenses and reasonable attorneys&#146;
fees.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>10.&nbsp;INSURANCE. </B>In consideration of the leasing of the Premises at the rent stated herein,
Tenant agrees to pay for and/or maintain insurance as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>A. </B>Landlord shall maintain, throughout the term of this Lease: (i)&nbsp;Special Perils all-risk
commercial property insurance covering the Building, including the Premises, in an amount equal to
100&nbsp;percent of the reasonably estimated replacement cost thereof, including, without limitation,
malicious mischief and sprinkler leakage, demolition and debris removal; (ii)&nbsp;business interruption
insurance including Landlord&#146;s rental loss or abatement, from damage or destruction from
environmental hazards, fire or other casualty, and (iii)&nbsp;boiler and machinery insurance
(collectively, the &#147;Landlord&#146;s Insurance&#148;). Within thirty (30)&nbsp;days (or such earlier date required
by the insurance company) after receipt of an invoice for same from Landlord, Tenant shall pay all
insurance premiums paid or payable by Landlord for Landlord&#146;s Insurance. If Tenant is able to
procure any or all of such Landlord&#146;s Insurance at a cost that is less than the cost of same
procured by Landlord, Landlord shall agree to procure such coverage from the companies suggested by
Tenant provided that such company is acceptable to Landlord&#146;s lender. If the coverage period of
any of such insurance obtained by Landlord commences before or extends beyond the Term, the premium
therefore shall be prorated to the Term. Should Tenant&#146;s occupancy or use of the Premises at any
time change and thereby cause an increase in such insurance premiums on the Premises and/or
Building, Tenant shall pay to Landlord the entire amount of such reasonably documented increase.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>B. </B>Tenant shall, at its sole cost and expense, keep in force and effect during the Term
hereof, insurance which is available at commercially reasonable rates and otherwise carried by
tenants in the area, under policies issued by insurers of recognized responsibility licensed to do
business in the State of Michigan on all personal property owned by Tenant located in the Premises.
Tenant also agrees to maintain commercial general liability insurance on an occurrence basis
covering Tenant as the insured party, and naming Landlord as an additional insured, against claims
for bodily injury and death and property damage occurring in or about the Premises, with combined
single limits of not less than <FONT style="FONT-variant: SMALL-CAPS"><B>Three Million Dollars ($3,000,000.00)</B></FONT> per occurrence.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>C. </B>All such policies shall be written in a form and with an insurance company reasonably
satisfactory to Landlord. Such policy shall name &#147;Landlord&#148; and its wholly owned
</DIV>




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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">subsidiaries and agents and any mortgagees of Landlord as loss payees (or other designation
required by such mortgagees) (with respect to Landlord&#146;s Insurance) and additional named insureds
(with respect to all insurance required of Tenant by this Section&nbsp;10). On or prior to the
Commencement Date, Tenant shall deliver to Landlord copies of certificates evidencing the existence
of the amounts and forms of coverage reasonably satisfactory to Landlord and shall supply copies of
the policy and all endorsements upon the request of Landlord. Tenant shall, within thirty (30)
days&#146; prior to the expiration of such policies, furnish Landlord with renewals or &#147;Binders&#148;
thereof, or, following ten (10)&nbsp;days prior written notice of such default to Tenant, Landlord may
order such insurance and charge the cost thereof to Tenant as Additional Rent. All policies
maintained by Tenant will provide that they may not be terminated or cancelled nor may coverage be
reduced except after thirty (30)&nbsp;days&#146; prior written notice to Landlord. To the extent of losses
caused by Tenant or its agents or employees, all commercial general liability and all-risk property
policies maintained by Tenant shall be written as primary policies, not contributing with and not
supplemental to the coverage that Landlord may carry. Landlord and Tenant each hereby waives on
behalf of themselves and their respective insurers any and all rights of recovery against the
other, its officers, members, agents and employees occurring or arising out of the use and
occupation of the Premises or the Building to the extent such loss or usage is covered by proceeds
received from insurance required under this Lease to be carried by the other party. This waiver of
subrogation provision shall be limited to loss or damage to the property of Landlord and Tenant.
It is understood that this waiver is intended to extend to all such loss or damage whether or not
the same is caused by the fault or neglect of either Landlord or Tenant and whether or not such
insurance is in force. If required by policy conditions, each party shall secure from its property
insurer a waiver of subrogation endorsement to its policy, and deliver a copy of such endorsement
to the other party to this Lease if requested.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>11.&nbsp;INDEMNIFICATION.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>A. </B>Tenant shall indemnify and hold Landlord harmless from and against all costs, damages,
claims, liabilities and expenses (including reasonable attorney&#146;s fees) suffered by or claimed
against Landlord, directly based on, arising out of or resulting from (i)&nbsp;Tenant&#146;s use and
occupancy of the Premises or the business conducted by Tenant therein, (ii)&nbsp;any negligent act or
omission by Tenant or its employees or guests, or (iii)&nbsp;any breach or default by Tenant in the
performance or observance of its covenants or obligations under this Lease.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>B. </B>Landlord shall indemnify and hold Tenant harmless from and against all costs, damages,
claims, liabilities and expenses (including reasonable attorney&#146;s fees) suffered by or claimed
against Tenant, directly based on, arising out of or resulting from (i)&nbsp;any negligent act or
omission of Landlord, its employees or agents or (ii)&nbsp;any breach by Landlord in the performance or
observance of its covenants or obligations under this Lease.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>12.&nbsp;FIRE OR OTHER CASUALTY.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>A. </B><U><B>Destruction of the Building</B></U><B>. </B>If the Building should be &#147;substantially destroyed&#148;
(which, as used herein, means destruction or damage to at least twenty five percent (25%) of the
Building) by fire or other casualty, either party hereto may, at its option, terminate this Lease
by giving written notice thereof to the other party within thirty (30)&nbsp;days of such casualty. In
such event, the Rent shall be apportioned to and shall cease as of the date of such
</DIV>




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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">casualty. In the event neither party exercises this option, then the Premises shall be
reconstructed and restored, at Tenant&#146;s expense (to extent insurance proceeds are not available),
to substantially the same condition as they were prior to the casualty.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>B. </B><U><B>Destruction of the Premises</B></U><B>. </B>If the Premises are damaged, in whole or in part, by
fire or other casualty, but the Building is not substantially destroyed as provided in 12(A) above,
then the parties hereto shall have the following options:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;If, in Landlord&#146;s reasonable judgment, the Premises cannot be reconstructed or restored
within one hundred twenty (120)&nbsp;days of the date of such casualty to substantially the same
condition as they were in prior to such casualty, Landlord may terminate this Lease by written
notice given to Tenant within thirty (30)&nbsp;days of the date of the casualty. If, in Landlord&#146;s
reasonable judgment, the Premises cannot be reconstructed or restored within one hundred twenty
(120)&nbsp;days of such casualty to substantially the same condition as they were in prior to such
casualty, but nonetheless Landlord does not so elect to terminate this Lease, then Landlord shall
notify Tenant, within thirty (30)&nbsp;days of the casualty, of the amount of time necessary, as
reasonably estimated by Landlord, to reconstruct or restore the Premises. After receipt of such
notice from Landlord, Tenant may elect to terminate this Lease. This election shall be made by
Tenant by giving written notice to Landlord within fifteen (15)&nbsp;days after the date of Landlord&#146;s
notice. If neither party terminates this Lease pursuant to the foregoing, Landlord shall proceed
to reconstruct and restore the Premises to substantially the same condition as they were in prior
to the casualty. In such event this Lease shall continue in full force and effect to the balance
of the term, upon the same terms, conditions and covenants as are contained herein; provided,
however, that the Rent shall be abated in the proportion which the approximate area of the damaged
portion bears to the total area in the Premises, from the date of the casualty until substantial
completion of the reconstruction of the Premises.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Notwithstanding the above, if the casualty occurs during the last twelve (12)&nbsp;months of the
term of this Lease, either party hereto shall have the right to terminate this Lease as of the date
of the casualty, which right shall be exercised by written notice to be given by either party to
the other party within thirty (30)&nbsp;days therefrom. If this right is exercised, Rent shall be
apportioned to and shall cease as of the date of the casualty.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additionally, notwithstanding anything contained herein to the contrary, Landlord shall have
no duty to repair or restore the Premises or Building if the damage is due to an uninsurable
casualty, or if insurance proceeds are insufficient to pay for such repair or restoration, or if
the holder of any mortgage, deed of trust or similar instrument applies proceeds of insurance to
reduce its loan balance and the remaining proceeds, if any, available to Landlord are not
sufficient to pay for such repair or restoration.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;If, in Landlord&#146;s reasonable judgment, the Premises are able to be restored within one
hundred twenty (120)&nbsp;days of such casualty to substantially the same condition as they were prior
to such casualty, Landlord shall so notify Tenant within thirty (30)&nbsp;days of the casualty, and
Landlord shall then proceed, with reasonable diligence and speed, to reconstruct and restore the
damaged portion of the Premises, to substantially the same condition as it was prior to the
casualty. Rent shall be abated in the proportion which the approximate area of the damaged portion
bears to the total area in the Premises from the date of the casualty until
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">substantial completion of the reconstruction repairs, and this Lease shall continue in full
force and effect for the balance of the Term, upon the same terms, conditions and covenants as are
contained herein.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)&nbsp;In the event Landlord undertakes reconstruction or restoration of the Premises pursuant
to subparagraph (i)&nbsp;or (ii)&nbsp;above, Landlord shall use reasonable diligence in completing such
reconstruction repairs, but in the event Landlord fails to substantially complete the same within
one hundred eighty (180)&nbsp;days from the date of the casualty (except however, if under subparagraph
(i)&nbsp;above Landlord notified Tenant that it would take longer than one hundred twenty (120)&nbsp;days to
reconstruct or restore the Premises, but Tenant nonetheless elected not to terminate the Lease but
require Landlord to reconstruct or restore the Premises, then the foregoing one hundred and eighty
(180)&nbsp;day period shall be extended to the time period set forth in Landlord&#146;s notice plus sixty
(60)&nbsp;days), except as a result of any of the force majeure occurrences set forth in Paragraph&nbsp;25.H.
below, Tenant may, at its option, terminate this Lease upon giving Landlord written notice to that
effect, whereupon both parties shall be released from all further obligations and liability
hereunder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>13.&nbsp;CONDEMNATION. </B>If the Premises or the Building is rendered untenantable by reason of a
condemnation (or by a deed given in lieu thereof), then either party may terminate this Lease by
giving written notice of termination to the other party within thirty (30)&nbsp;days after such
condemnation, in which event this Lease shall terminate effective as of the date of such
condemnation. If this Lease so terminates, Rent shall be paid through and apportioned as of the
date of such condemnation. If such condemnation does not render the Premises or the Building
untenantable, this Lease shall continue in effect and Landlord shall promptly restore the portion
not condemned to the extent reasonably possible to the condition existing prior to the
condemnation. In such event, however, Landlord shall not be required to expend an amount in excess
of the proceeds received by Landlord from the condemning authority. Rent shall be appropriately
abated or adjusted for the portion of the Premises rendered untenantable by or subject to the
taking. Notwithstanding the foregoing, all condemnation proceeds, awards, damages, compensation,
income, rent and/or interest payable in connection with such taking, shall be paid to and be the
property of Landlord but nothing contained herein shall prohibit or prevent Tenant from maintaining
its own claim for loss of its trade fixtures and relocation/moving expenses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>14.&nbsp;ASSIGNMENT AND SUBLETTING.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>A. </B><U><B>Landlord&#146;s Consent</B></U><B>. </B>Tenant shall not, without the prior written consent of
Landlord, which consent shall not be unreasonably withheld, conditioned or delayed: (i)&nbsp;assign,
convey, mortgage or otherwise transfer this Lease or any interest hereunder, or sublease the
Premises, or any part thereof, whether voluntarily or by operation of law; or (ii)&nbsp;permit the use
of the Premises by any person other than Tenant and its employees. Any such transfer, sublease or
use described in the preceding sentence (a &#147;Transfer&#148;) occurring without the prior written consent
of Landlord shall be void and of no effect and shall constitute a Default hereunder. Landlord&#146;s
consent to any Transfer shall not constitute a waiver of Landlord&#146;s right to withhold its consent
to any future Transfer. Landlord&#146;s consent to any Transfer or acceptance of Rent from any party
other than Tenant shall not release Tenant from any covenant or obligation under this Lease.
Landlord may require as a condition to its consent to any assignment of this
</DIV>



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</DIV>



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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Lease that the assignee execute an instrument in which such assignee assumes the obligations
of Tenant hereunder. Further, for the purposes of this paragraph, the transfer (whether direct or
indirect) of all or a majority of the Tenant&#146;s equity/capital interests (whether stock, LLC
membership interests, partnership interests, or otherwise) (other than the shares of the capital
stock of a corporate Tenant whose stock is publicly traded) or the merger, consolidation or
reorganization of such Tenant or any other transaction that results in a change of Tenant&#146;s voting
control (whether direct or indirect) shall be considered a Transfer.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>B. </B><U><B>Standards for Consent</B></U><B>. </B>If Tenant desires the consent of Landlord to a Transfer,
Tenant shall submit to Landlord, at least twenty (20)&nbsp;days prior to the proposed effective date of
the Transfer, a written notice which includes such information as Landlord may reasonably require
about the proposed Transfer and the transferee.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>C. </B><U><B>Recapture</B></U><B>. </B>Except in the case of the sale of Tenant&#146;s business conducted in the
Premises in which event, Landlord shall not have any right to recapture the Premises and/or
terminate this Lease; provided that no uncured Default by Tenant exists at the time of such sale,
Landlord shall have the right to terminate this Lease as to that portion of the Premises covered by
a Transfer. Landlord may exercise such right to terminate by giving notice to Tenant at any time
within twenty (20)&nbsp;days after the date on which Tenant has furnished to Landlord all of the items
required under Paragraph&nbsp;14.B. If Landlord exercises such right to terminate, Landlord shall be
entitled to recover possession of, and Tenant shall surrender such portion of, the Premises (with
appropriate demising partitions erected at the expense of Tenant) on the effective date of the
proposed Transfer. In the event Landlord exercises such right to terminate, Landlord shall have
the right to enter into a lease with the proposed transferee without incurring any liability to
Tenant on account thereof. Except in the case of the sale of Tenant&#146;s business conducted in the
Premises in which event, Landlord shall not have any right to share in the profits of same, if
Landlord consents to any Transfer, Tenant shall pay to Landlord one-half (1/2) of all net Rent and
other net consideration under the Lease received by Tenant in excess of the Rent paid by Tenant
hereunder for the portion of the Premises so transferred. As used herein, the terms &#147;net Rent&#148;
and/or &#147;net consideration&#148; shall mean the excess of the Base Rent, Additional Rent and other
consideration paid by such assignee or subtenant above the Base Rent and Additional Rent paid by
Tenant hereunder <U>after</U> deduction of all reasonable and customary expenses incurred by
Tenant in connection with such assignment or sublease including, but not limited to, brokerage
commissions, leasehold improvement costs and attorney&#146;s fees. Such Rent shall be paid as and when
received by Tenant. In addition, Tenant shall pay to Landlord any reasonable attorneys&#146; or other
fees and expenses incurred by Landlord in connection with any proposed Transfer, whether or not
Landlord consents to such Transfer and whether or not Landlord exercises its termination rights
hereunder.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>15. SURRENDER. </B>Upon termination of the Term or Tenant&#146;s right to possession of the Premises,
Tenant shall return the Premises to Landlord in good order and condition as received on the
Commencement Date, reasonable wear and damage by casualty or condemnation excepted to the extent
that such casualty or condemnation damages are covered by insurance or condemnation proceeds
payable to Landlord. If Landlord requires Tenant to remove any alterations pursuant to Section&nbsp;8,
then such removal shall be done in a good and workmanlike manner, and upon such removal Tenant
shall restore the Premises to its same condition prior to the installation of such alterations. If Tenant
does not remove such alterations within five (5)
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">business days after the expiration or earlier
termination of the Term hereof, Landlord may remove the same and restore the Premises, and Tenant
shall pay the cost (plus interest at rate of twelve percent (12%)) of such removal and restoration
to Landlord upon demand. Tenant shall also remove its furniture, equipment, trade fixtures and all
other items of personal property from the Premises prior to termination of the Term or Tenant&#146;s
right to possession of the Premises. If Tenant does not remove such items on or before the last
day of the Term or the Option Period, as applicable, Tenant shall be conclusively presumed to have
conveyed the same to Landlord without further payment or credit by Landlord to Tenant, or at
Landlord&#146;s sole option such items shall be deemed abandoned, in which event Landlord may cause such
items to be removed and disposed of at Tenant&#146;s expense, which shall be one hundred five percent
(105%) of Landlord&#146;s actual cost of removal, without notice to Tenant and without obligation to
compensate Tenant.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>16.&nbsp;DEFAULTS AND REMEDIES.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>A. </B><U><B>Default</B></U><B>. </B>The occurrence of any of the following shall constitute a default or
event of default (a &#147;Default&#148;) by Tenant under this Lease: (i)&nbsp;Tenant fails to pay any Rent within
five (5)&nbsp;days after written notice is received by Tenant from Landlord of Tenant&#146;s failure to pay
such Rent when due; (ii)&nbsp;Tenant fails to perform any other provision of this Lease and such failure
is not cured within thirty (30)&nbsp;days after notice from Landlord provided that if such default
cannot be cured within such thirty (30)&nbsp;day period but Tenant commences such cure within such
thirty (30)&nbsp;day period and diligently pursues such cure thereafter, the thirty (30)&nbsp;day period
shall be extended for such period of time as may be reasonably necessary to complete such cure but
not to exceed an additional forty-five (45)&nbsp;days without Landlord&#146;s reasonable prior written
consent ; (iii)&nbsp;the leasehold interest of Tenant is levied upon or attached under process of law;
or (iv)&nbsp;any voluntary or involuntary proceedings are filed by or against Tenant or any guarantor of
this Lease under any bankruptcy, insolvency or similar laws and, in the case of any involuntary
proceedings, are not dismissed within thirty (30)&nbsp;days after filing; and (v)&nbsp;Tenant abandons or
vacates the Premises and does not continue to perform all of its obligations hereunder.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>B. </B><U><B>Right of Re-Entry</B></U><B>. </B>Upon the occurrence of a Default, Landlord may elect to
terminate this Lease or, without terminating this Lease, terminate Tenant&#146;s right to possession of
the Premises. Upon any such termination, Tenant shall immediately surrender and vacate the
Premises and deliver possession thereof to Landlord. Upon any such termination, using all due
process of law, Tenant grants to Landlord the right to enter and repossess the Premises and, using
all due process of law, to expel Tenant and any others who may be occupying the Premises and to
remove any and all property therefrom, without being deemed in any manner guilty of trespass and
without relinquishing Landlord&#146;s rights to Rent or any other right given to Landlord hereunder or
by operation of law.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>C. </B><U><B>Termination of Right to Possession</B></U><B>. </B>If Landlord terminates Tenant&#146;s right to
possession of the Premises without terminating this Lease, Landlord may relet the Premises or any
part thereof. In such case, Landlord shall use reasonable efforts to relet the Premises on such
terms as Landlord shall reasonably deem appropriate. Tenant shall reimburse Landlord for the reasonable costs
and expenses of reletting the Premises including, but not limited to, all brokerage, advertising,
legal, reasonable alteration, reasonable redecorating, repairs and other reasonable expenses
incurred to secure a new tenant for the Premises. In
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">addition, if the consideration collected by
Landlord upon any such reletting, after payment of the expenses of reletting the Premises which
have not been reimbursed by Tenant, is insufficient to pay monthly the full amount of the Rent,
Tenant shall pay to Landlord the amount of each monthly deficiency as it becomes due. If such
consideration is greater than the amount necessary to pay the full amount of the Rent, the full
amount of such excess shall be retained by Landlord and shall in no event be payable to Tenant but
shall be available as a credit against installments of Rent thereafter becoming due from Tenant.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>D. </B><U><B>Termination of Lease</B></U><B>. </B>If Landlord terminates this Lease, Landlord may recover from
Tenant and Tenant shall pay to Landlord, on demand, as and for liquidated and final damages, an
accelerated lump sum amount equal to a sum which, at the time of the Event of Default, equals the
aggregate Base Rent payable hereunder for the period of time from such which would have become
payable by Tenant hereunder through the day previously set as the Expiration Date less the then
fair market rental value of the Premises for the balance of the Term, or the Option Term, if
exercised by Tenant (which is to be determined at such time, taking into consideration any
reasonable reletting period and deducting therefrom all costs and expenses which Landlord would
reasonably incur in connection with reletting or subletting, including without limitation,
brokerage commissions, legal expenses and expenses of preparing the Premises for tenant(s) or
subtenant(s) occupancy), which sum shall be discounted to its then present value in accordance with
accepted financial practice using a rate equal to seven percent (7.0%) per annum.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>E. </B><U><B>Other Remedies</B></U><B>. </B>Unless otherwise set forth herein, and following ten (10)&nbsp;days
prior written notice to Tenant, Landlord may, but shall not be obligated to, perform any obligation
of Tenant under this Lease, and, if Landlord so elects, all costs and expenses paid by Landlord in
performing such obligation, together with interest at the rate of twelve (12%) percent per annum,
shall be reimbursed by Tenant to Landlord on demand. Any and all remedies set forth in this Lease:
(i)&nbsp;shall be in addition to any and all other remedies Landlord may have at law or in equity; (ii)
shall be cumulative; and (iii)&nbsp;may be pursued successively or concurrently as Landlord may elect.
The exercise of any remedy by Landlord shall not be deemed an election of remedies or preclude
Landlord from exercising any other remedies in the future. Tenant waives any right of redemption
arising as a result of Landlord&#146;s exercise of any of its remedies under this Lease.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>F. </B><U><B>Bankruptcy</B></U><B>. </B>If Tenant becomes bankrupt (voluntarily or involuntarily), the
bankruptcy trustee shall not have the right to assume or assign this Lease unless the trustee
complies with all requirements of the United States Bankruptcy Code, and Landlord expressly
reserves all of its rights, claims and remedies thereunder.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>G. </B><U><B>Waiver of Trial by Jury</B></U><B>. </B>Landlord and Tenant waive trial by jury in the event of
any action, proceeding or counterclaim brought by either Landlord or Tenant against the other in connection with this
Lease.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>H. </B><U><B>Venue</B></U><B>. </B>If either Landlord or Tenant desires to bring an action against the other
in connection with this Lease, such action shall be brought in the Lapeer County Circuit Court,
Michigan. Landlord and Tenant consent to the jurisdiction of such courts and waive any
</DIV>


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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">right to
have such action transferred from such courts on the grounds of improper venue or inconvenient
forum.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>I. </B><U><B>Tenant&#146;s Primary Duty.</B></U> All agreements and covenants to be performed or observed by
Tenant under this Lease shall be at Tenant&#146;s sole cost and expense, except as otherwise set forth
herein, and, except as expressly allowed herein without any abatement of Rent. Unless otherwise
set forth herein, and following ten (10)&nbsp;days prior written notice to Tenant, if Tenant fails to
pay any sum of money to be paid by Tenant or to perform any other act to be performed by Tenant
under this Lease, Landlord shall have the right, but shall not be obligated, and without waiving or
releasing Tenant from any obligations of Tenant, to make any such payment or to perform any such
other act on behalf of Tenant in accordance with this Lease. All sums so paid by Landlord and all
costs incurred or paid by Landlord shall be deemed Additional Rent hereunder and Tenant shall pay
the same to Landlord on written demand, together with interest on all such sums and costs from the
date of expenditure by Landlord to the date of repayment by Tenant at the rate of twelve percent
(12%) per annum.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>J. </B><U><B>Landlord&#146;s Default.</B></U> If Landlord defaults in the performance of any material duty
or obligation hereunder and such default continues unremedied for a period of thirty (30)&nbsp;days
following written notice from Tenant to Landlord and to any mortgagee or ground lessor of Landlord
to whom Landlord has requested in writing that notices of default be sent, then Tenant shall have
the right to cause the Landlord&#146;s default to be cured and to recover from Landlord the reasonable
costs and expenses incurred by Tenant in curing Landlord&#146;s default through a legal action against
Landlord. Tenant shall not be entitled to offset any such costs against Rent due hereunder, unless
and until Tenant obtains a final judgment against Landlord to the effect that Landlord has
defaulted in the performance of a material duty or obligation hereunder. Tenant agrees to accept
performance of any of Landlord&#146;s obligations hereunder by any mortgagee or ground lessor of the
Project. Notwithstanding the foregoing, if the nature of Landlord&#146;s default is such that it can
not reasonably be cured within thirty (30)&nbsp;days after notice, then the time permitted for Landlord
to cure the default shall be extended as necessary to permit the cure to be accomplished, if
Landlord promptly commences the cure after receiving notice from Tenant and thereafter diligently
pursues the cure to completion, but not to exceed an additional forty-five (45)&nbsp;days, without
Tenant&#146;s reasonable prior written consent.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>K. </B><U><B>No Consequential Damages.</B></U> Neither party shall be liable to the other for
consequential or other indirect damages of the other (including, without limitation, lost profits
or business interruption).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>17.&nbsp;HOLDING OVER. </B>If Tenant retains possession of the Premises after the expiration or
termination of the Term or Tenant&#146;s right to possession of the Premises, Tenant shall be considered
a &#147;holdover&#148; tenant, and Tenant shall pay Base Rent computed on a daily rate basis equal to one
hundred ten percent (110%) of the daily Base Rent in effect at the end of the Lease Term for the first thirty (30)&nbsp;days or part
thereof of holdover and then at a daily rate equal to one hundred twenty five percent (125%) of the
daily Base Rent in effect at the end of the Lease Term for the next thirty (30)&nbsp;days or part
thereof of holdover and then at a daily rate equal to one hundred fifty percent (150%) of the daily
Base Rent in effect at the end of the Lease Term for any subsequent holdover. For purposes of this
paragraph, the annual Base Rent paid during the last year prior to such holdover shall be divided
by 365 for purposes of determining
</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">the daily Base Rent and the payments made to Landlord hereunder
shall not constitute a renewal or extension of the Lease, and shall be deemed a periodic tenancy,
from month-to-month only. The provisions of this section do not waive Landlord&#146;s right of re-entry
or right to regain possession by actions at law or in equity or any other rights hereunder, and any
receipt of payment by Landlord shall not be deemed a consent by Landlord to Tenant&#146;s remaining in
possession or be construed as creating or renewing any lease or right of tenancy between Landlord
and Tenant.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>18.&nbsp;ESTOPPEL CERTIFICATE. </B>Each party agrees that, from time to time upon not less than ten
(10)&nbsp;days&#146; prior request by the other, such party shall execute and deliver to the requesting
party, a written certificate certifying: (i)&nbsp;that this Lease is unmodified and in full force and
effect (or if there have been modifications, a description of such modifications and that this
Lease as modified is in full force and effect); (ii)&nbsp;the dates to which Rent has been paid; (iii)
that Tenant is in possession of the Premises, if that is the case; (iv)&nbsp;that, to the knowledge of
the signing party, the other party is not in default under this Lease, or, if either party believes
the other is in default, the nature thereof in detail; (v)&nbsp;that Tenant has no off-sets or defenses
to the performance of its obligations under this Lease (or if Tenant believes there are any
off-sets or defenses, a full and complete explanation thereof); (vi)&nbsp;that the Premises have been
completed in accordance with the terms and provisions hereof, that Tenant has accepted the Premises
and the condition thereof and of all improvements thereto and has no claims against Landlord or any
other party with respect thereto; and (vii)&nbsp;such additional matters as may be requested by the
requesting party, it being agreed that such certificate may be relied upon by any prospective
purchaser, mortgagee, or other person having or acquiring an interest in the Building or by any
assignee or subtenant of Tenant. If either party fails to execute and deliver any such certificate
within ten (10)&nbsp;days after written request, such party shall be deemed to consented to the terms of
such certificate as presented.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>19.&nbsp;SUBORDINATION. </B>This Lease is and shall be expressly subject and subordinate at all times
to (i)&nbsp;any ground or underlying lease of the Building, now or hereafter existing, and all
amendments, renewals and modifications to any such lease, and (ii)&nbsp;the lien of any mortgage or
trust deed now or hereafter encumbering fee title to the Premises or the Building and/or the
leasehold estate under any such lease, unless such ground lease or ground lessor, or mortgage or
mortgagee, expressly provides or elects that the Lease shall be superior to such lease or mortgage.
Landlord will use its commercially reasonable efforts to obtain a standard subordination
non-disturbance and attornment agreement from its current and all future lenders which will, among
other things, protect Tenant&#146;s tenancy provided that Tenant is not in default hereunder; provided,
however, that the Landlord and Tenant agree to execute and deliver that certain Non-Disturbance
Agreement, wherein Chase is the mortgagee, the form of which is attached hereto as <U>Exhibit
&#147;E</U>&#148; (the &#147;SNDA&#148;). If any such mortgage or trust deed is foreclosed, or if any such lease is
terminated, upon request of the mortgagee, holder or lessor, as the case may be, Tenant will
attorn to the purchaser at the foreclosure sale or to the lessor under such lease, as the case
may be as set forth in the SNDA. The foregoing provisions are declared to be self-operative and no
further instruments shall be required to effect such subordination and/or attornment (including the
SNDA); provided, however, that Tenant agrees upon request by any such mortgagee, holder, lessor or
purchaser at foreclosure, to execute and deliver such subordination and/or attornment instruments
as may be reasonably required by such person to confirm such subordination and/or attornment, or
any other documents required to evidence
</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">superiority of the ground lease or mortgage, should ground
lessor or mortgage elect such superiority. Nothing contained herein shall allow the financial
terms to be changed or increased or Tenant&#146;s rights hereunder to be changed or diminished
hereunder.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>20.&nbsp;QUIET ENJOYMENT. </B>As long as no Default exists, Tenant shall peacefully and quietly have
and enjoy the Premises for the Term and the Option Period, if applicable, free from interference by
Landlord, subject, however,
to the provisions of this Lease. The loss or reduction of Tenant&#146;s light, air or view will
not be deemed a disturbance of Tenant&#146;s occupancy of the Premises nor will it affect Tenant&#146;s
obligations under this Lease or create any liability of Landlord to Tenant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>21.&nbsp;NOTICES. </B>All notices and demands to be given by one party to the other party under this
Lease shall be given in writing, mailed or delivered to Landlord or Tenant, as the case may be, at
the following address:
</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="5%">&nbsp;</TD>
    <TD width="25%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="74%">&nbsp;</TD>
</TR>
<TR>
<TD></TD>
<TD></TD></TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD></TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">If to Landlord:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">ESSC INVESTMENTS, LLC</TD>
</TR>
<TR valign="bottom">
    <TD></TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2647 Invitational Drive</TD>
</TR>
<TR valign="bottom">
    <TD></TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Oakland, MI  48363</TD>
</TR>
<TR valign="bottom">
    <TD></TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Attention:  Lisa D. Rice</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD></TD><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD></TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">With a copy to:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">HOWARD &#038; HOWARD ATTORNEYS, PLLC</TD>
</TR>
<TR valign="bottom">
    <TD></TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">450 West Fourth Street</TD>
</TR>
<TR valign="bottom">
    <TD></TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Royal Oak, MI 48067</TD>
</TR>
<TR valign="bottom">
    <TD></TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Attention: Joseph J. DeVito, Esq.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD></TD><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD></TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">If to Tenant:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">ENERGY STEEL &#038; SUPPLY CO.</TD>
</TR>
<TR valign="bottom">
    <TD></TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">c/o GRAHAM CORPORATION</TD>
</TR>
<TR valign="bottom">
    <TD></TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">20 Florence Avenue</TD>
</TR>
<TR valign="bottom">
    <TD></TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Batavia, N.Y.  14020</TD>
</TR>
<TR valign="bottom">
    <TD></TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Attention:  James R. Lines, President and</TD>
</TR>
<TR valign="bottom">
    <TD></TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Chief Executive Officer</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD></TD><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD></TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">With a copy to:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">HARTER, SECREST &#038; EMERY, LLP</TD>
</TR>
<TR valign="bottom">
    <TD></TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">1600 Bausch &#038; Lomb Place</TD>
</TR>
<TR valign="bottom">
    <TD></TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Rochester, N.Y.  14604-2701</TD>
</TR>
<TR valign="bottom">
    <TD></TD>
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Attention:  Daniel Kinel, Esq.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">or at such other address as either party may hereafter designate. Notices shall be delivered by
hand or by United States certified or registered mail, postage prepaid, return receipt requested,
or by a nationally recognized overnight air courier service. Notices shall be considered to have
been given upon the earlier to occur of actual receipt or two (2)&nbsp;business days after posting in
the United States mail or one (1)&nbsp;business day after depositing with a nationally recognized
overnight air courier service.
</DIV>





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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>22.&nbsp;ENVIRONMENTAL COVENANTS. </B>Tenant and Landlord, as applicable covenants and agree as
follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>A. </B>Other than as disclosed to Tenant, or as set forth in that certain Phase I Environmental
Site Assessment Final Report (August Mack Project Number JK1125.316) dated December&nbsp;5, 2010 (the
&#147;Phase I&#148;), to the best of Landlord&#146;s reasonable knowledge (which knowledge is qualified and
limited to the information set forth in the Phase I), no Hazardous Materials are stored or exist in
the Premises including the Building and there are no Environmental Enforcement Actions known to
Landlord in connection with the Premises including the Building.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>B. </B>The Premises will be used and operated by Tenant and its permitted agents, invitees and
guests (&#147;Third Parties&#148;) in compliance with all applicable federal, state and local laws and
regulations related to air quality, waste disposal or management, Hazardous Substances, and the
protection of health and the environment.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>C. </B>No Hazardous Substances will be generated, stored, transported, utilized, disposed of,
managed, released or located on, under or from the Premises (whether or not in reportable
quantities), or in any manner introduced onto the Premises, including, without limitation, the
septic, sewage or other waste disposal systems serving the Premises by Tenant and Third Parties,
excepting only Hazardous Substances used by Tenant in ordinary course of its business provided that
all such Hazardous Substances will be generated, stored, transported, utilized, disposed of,
managed, released, located or introduced onto the Premises in full accordance with all applicable
Environmental Laws, and the terms and conditions of this Lease.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>D. </B>There shall be no installation on the Premises of any (i) &#147;underground storage tank,&#148; as
that term is defined in the Hazardous Solid Waste Amendments of 1984 to the Resource Conservation
and Recovery Act and/or equivalent state act; or (ii)&nbsp;above ground storage tank by Tenant and Third
Parties.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>E. </B>Tenant shall promptly notify Landlord of its knowledge of any threat of release of any
Hazardous Substances on, under or from the Premises.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>F. </B>Tenant shall promptly notify Landlord of any notice (written or oral) from the United
States Environmental Protection Agency or any other Governmental Authority (as defined below)
claiming that (i)&nbsp;the Premises or any use thereof violates any of the Environmental Laws, or (ii)
Tenant or Third Parties have violated any of the Environmental Laws. Tenant shall not take any
remedial action or enter into any agreements or settlements in response to the presence of any
Hazardous Substances in, on, or about the Premises, without prior written consent of Landlord
(which shall not be unreasonably withheld, conditioned or delayed), except in the case of an
emergency.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>G. </B>Tenant shall promptly notify Landlord of any liability incurred by Tenant or Third Parties
to the State of Michigan, the United States of America or any other Governmental Authority under
any of the Environmental Laws.
</DIV>





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




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>H. </B>Tenant shall promptly notify Landlord if there are any Environmental Enforcement Actions
brought against Tenant or Third Parties, or to its information, knowledge and belief, threatened.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>I. </B>Tenant shall indemnify and defend the Landlord Parties against and hold the Landlord
Parties harmless from all claims, demands, actions, judgments, liabilities, costs, expenses,
losses, damages, penalties, fines and obligations of any nature, including, without limitation,
Environmental Enforcement Actions (including reasonable attorneys&#146; fees and disbursements incurred
in the investigation, defense or settlement of claims) that the Landlord Parties may incur as a
result of, or in connection with, claims arising from the presence, use, storage, transportation,
treatment, disposal, release or other handling, on or about or beneath the Premises, of any
Hazardous Substances introduced or permitted on or about or beneath the Premises by any act, error
or omission of Tenant or its agents, officers, employees, contractors, invitees or licensees in
violation of any Environmental Laws, or the terms of this Lease. Tenant shall take all actions
necessary to restore the Premises to substantially the same condition as existing as of the
Commencement Date. Tenant&#146;s obligations under this Section&nbsp;22 shall survive the termination or
expiration of this Lease.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following definitions apply to this Lease:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) The term &#147;Environmental Enforcement Actions&#148; shall mean all actions or
orders instituted, threatened, required or completed by any Governmental Authority
and all claims made or threatened by any person against Tenant, Third Parties or the
Premises, arising out of or in connection with any of the Environmental Laws or the
assessment, monitoring, clean-up, containment, remediation or removal of, or damages
caused or alleged to be caused by, any Hazardous Substances (i)&nbsp;located on or under
the Premises, (ii)&nbsp;emanating from the Premises, or (iii)&nbsp;generated, stored,
transported, utilized, disposed of, managed or released by Tenant or Third Parties
(whether or not on, under or from the Premises).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) The term &#147;Environmental Laws&#148; shall mean all federal, state and local
laws, statutes, ordinances, rules, regulations, codes, orders, judgments, orders and
the like applicable to (i)&nbsp;environmental conditions on, under or emanating from the
Premises including, but not limited to, (a)&nbsp;laws of the State of Michigan; and the
associated rules and regulations promulgated in connection with any of these laws,
and (b)&nbsp;laws of the federal government commonly known as the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, the Resource
Conservation and Recovery Act, as amended, the Toxic Substance Control Act, as
amended, the Federal Water Pollution Control Act, as amended, and the Federal Clean
Air Act; and the associated rules and regulations promulgated in connection with any
of these laws; and (ii)&nbsp;the generation, storage, transportation, utilization,
disposal, management or release (whether or not on, under or from the Premises) of
Hazardous Substances by Tenant and Third Parties.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) The term &#147;Governmental Authority&#148; shall mean all agencies, authorities,
bodies, boards, commissions, courts, instrumentalities, legislatures and offices of
any nature whatsoever for any government unit or political subdivision, whether
federal, state, county, district, municipal, city or otherwise, and whether now or
later in existence.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) The term &#147;Hazardous Substances&#148; shall mean, collectively, (i)&nbsp;any
&#147;hazardous material,&#148; &#147;hazardous substance,&#148; &#147;hazardous waste,&#148; &#147;oil,&#148; &#147;regulated
substance,&#148; &#147;toxic substance,&#148; &#147;restricted hazardous waste,&#148; &#147;special waste&#148; or
words of similar import as defined under any of the Environmental Laws; (ii)
asbestos in any form; (iii)&nbsp;urea formaldehyde foam insulation; (iv)&nbsp;polychlorinated
biphenyls; (v)&nbsp;radon gas; (vi)&nbsp;flammable explosives; (vii)&nbsp;radioactive materials;
(viii)&nbsp;any chemical, contaminant, solvent, material, pollutant or substance that may
be dangerous or detrimental to the Premises, the environment, or the health and
safety of occupants of the Premises or of the owners or occupants of any other real
property nearby the Premises, and (ix)&nbsp;any substance, the generation, storage,
transportation, utilization, disposal, management, release or location of which on,
under or from the Premises is prohibited or otherwise regulated pursuant to any of
the Environmental Laws.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) The term &#147;Remediation Costs&#148; shall mean, collectively, expenses, costs,
losses, damages and liabilities incurred, including legal fees, environmental
assessments and all costs of remediation, administrative penalties, fines and fees,
arising from any violation of Environmental Laws.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>23.&nbsp;LANDLORD ENVIRONMENTAL COVENANT. </B>Landlord shall indemnify and hold Tenant harmless from
all Remediation Costs arising from any violation of Environmental Laws by Landlord Parties
occurring prior to the Commencement Date of this Lease.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>24.&nbsp;OPTION AND RIGHT OF FIRST REFUSAL TO PURCHASE PREMISES.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>A. </B><U><B>Option Grant</B></U>. In further consideration of the promises and covenants contained
herein, and the further consideration of <FONT style="FONT-variant: SMALL-CAPS"><B>One Hundred Dollars ($100.00)</B></FONT> paid by Tenant, the
receipt and sufficiency of which is hereby acknowledged, Landlord, as seller, does hereby grant to
Tenant, as buyer, a non-exclusive option (the &#147;Option to Purchase&#148;) to purchase the Premises. For
the purposes of the Option to Purchase, the Premises are referred to herein as the &#147;Option
Property&#148;. The terms set forth herein, except as otherwise specifically set forth to the contrary,
shall apply to the Option to Purchase. The term of the Option to Purchase shall run concurrently
with the Term and in any event shall be exercised, if at all, on or before December&nbsp;31, 2012 (the
&#147;Option Termination Date&#148;).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>B. </B><U><B>Manner of Exercise of Option</B></U>. The Option to Purchase granted herein may be
exercised at any time prior to the Option Termination Date, by Tenant giving at least sixty (60)
days notice to Landlord prior to the date Tenant intends to close, at the address provided herein
(the &#147;Notification&#148;) of its intent to purchase the Option Property. If the
Notification is given, the transaction shall proceed to Closing as to the Option Property on
the
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">terms and conditions hereinafter expressed. The Notification shall set forth Tenant&#146;s
unqualified commitment to purchase the Option Property, subject to no contingencies or conditions
precedent of any kind (other than Landlord&#146;s duty to convey title in the manner set forth in the
Purchase and Sale Agreement hereinafter defined).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>C. </B><U><B>Terms of Purchase</B></U>. The purchase price for the Premises shall be Two Million Five
Hundred Thousand and 00/00 ($2,500,000.00) Dollars (the &#147;Purchase Price&#148;). The Purchase Price of
the Premises shall be payable (plus or minus all customary prorations, credits or other
adjustments) by wire transfer or other immediately available funds on the Closing Date.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>D. </B><U><B>Purchase Agreement</B></U>. Closing of sale of the Option Property (the &#147;Closing&#148;) shall
take place in accordance with the terms of and subject to the provisions of that certain Purchase
and Sale Agreement attached hereto as <U>Exhibit&nbsp;B</U> and made a part hereof (the &#147;Purchase and
Sale Agreement&#148;). Upon receipt of the Notification pursuant to the terms of this Section&nbsp;24,
Landlord, as Owner, and Tenant, as Purchaser shall be deemed to have executed such Purchase and
Sale Agreement in the form attached hereto as <U>Exhibit&nbsp;B</U> and the sale of the Premises shall
proceed to Closing pursuant to the terms of such Purchase and Sale Agreement (an original of which
shall be signed by Landlord and Tenant prior to or at Closing). If the Notification is given less
than sixty (60)&nbsp;days prior to the end of the Term of this Lease then the period between the end of
the Term and the Closing Date shall be referred to as the &#147;Interim Period&#148;. This Paragraph&nbsp;24 is
referred to herein as the &#147;Option Provision&#148; and all other sections of this Agreement are referred
to herein as the &#147;Non-Option Provisions.&#148; During the Interim Period, the Lease shall continue in
effect and subject to all the provisions of the Non-Option Provisions of this Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>E. </B><U><B>Right of First Refusal.</B></U> Throughout the Term of this Lease, Tenant shall have a
continuing right of first refusal with respect to the sale by Landlord of the Premises to be
exercised subject to and in accordance with the terms and conditions of this paragraph. If, at any
time during the Term of this Lease, Landlord receives a bona fide offer to purchase the Premises
from any third party, Landlord shall furnish to Tenant a copy of such offer together with a notice
(an &#147;Offering Notice&#148;) to Tenant, which notice shall state that Landlord intends to sell the
Premises upon the terms set forth in the purchase offer. Within ten (10)&nbsp;days after Landlord&#146;s
delivery of an Offering Notice to Tenant, Tenant shall either: (i)&nbsp;give Landlord written notice
(&#147;Acceptance Notice&#148;) that Tenant elects to purchase the Premises on the terms and conditions set
forth in the purchase offer, or (ii)&nbsp;give Landlord written notice that Tenant elects not to
purchase the Premises (&#147;Refusal Notice&#148;). If Tenant timely gives the Acceptance Notice as
aforesaid, then Landlord and Tenant shall enter into a written purchase and sale agreement for the
Premises upon the same terms and conditions set forth in the Purchase Agreement attached hereto as
<U>Exhibit&nbsp;B</U> with such revisions as are memorialized in the purchase offer, within fifteen
(15)&nbsp;days following Landlord&#146;s delivery to Tenant of such written purchase offer. In the event
that (i)&nbsp;Tenant gives a Refusal Notice, or (ii)&nbsp;Tenant fails to give Landlord notice of Tenant&#146;s
election within the ten (10)&nbsp;day period following receipt of the Offering Notice, then Landlord
shall conclusively be deemed to have satisfied its obligations with respect to Tenant&#146;s right of
first refusal for the Premises and such right of first refusal shall thereafter be null, void and
of no
further force and effect and Landlord shall be free to sell the Premises to such other
purchaser.
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At any time thereafter, Tenant agrees to execute a written statement evidencing the
waiver or deemed waiver of Tenant&#146;s right of first refusal for the benefit of Landlord following
any of the circumstances described herein, however the lack of any such written waiver shall not be
determinative as to the waiver or deemed waiver of any such rights of Tenant hereunder.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>25.&nbsp;MISCELLANEOUS.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>A. </B><U><B>Successors and Assigns</B></U><B>. </B>Subject to Paragraph&nbsp;14 of this Lease, each provision of
this Lease shall extend to, bind and inure to the benefit of Landlord and Tenant and their
respective permitted legal representatives, successors and assigns, and all references herein to
Landlord and Tenant shall be deemed to include all such parties.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>B. </B><U><B>Entire Agreement</B></U><B>. </B>This Lease and the Exhibits, attached hereto which are hereby
made a part of this Lease, represent the complete agreement between Landlord and Tenant, and
Landlord has made no representations or warranties except as expressly set forth in this Lease. No
modification or amendment of or waiver under this Lease shall be binding upon Landlord or Tenant
unless in writing signed by Landlord and Tenant.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>C. </B><U><B>Time of Essence</B></U><B>. </B>Time is of the essence of this Lease and each and all of its
provisions.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>D. </B><U><B>Execution and Delivery</B></U><B>. </B>Submission of this Lease for examination or signature by
Tenant does not constitute a reservation of space or an option for lease, and it is not effective
until execution and delivery by both Landlord and Tenant. Execution and delivery of this Lease by
Tenant to Landlord shall constitute an irrevocable offer by Tenant to lease the Premises on the
terms and conditions set forth herein, which offer may not be revoked for fifteen (15)&nbsp;days after
such delivery.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>E. </B><U><B>Severability</B></U><B>. </B>The invalidity or unenforceability of any provision of this Lease
shall not affect or impair any other provisions.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>F. </B><U><B>Governing Law</B></U><B>. </B>This Lease shall be governed by and construed in accordance with
the laws of the State of Michigan.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>G. </B><U><B>Joint and Several Liability</B></U><B>. </B>If Tenant is comprised of more than one party, each
such party shall be jointly and severally liable for Tenant&#146;s obligations under this Lease.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>H. </B><U><B>Force Majeure</B></U><B>. </B>Neither party shall be in default hereunder and each party shall be
excused from performing any of its obligations hereunder if it is prevented from performing any of
its obligations hereunder due to any accident, breakage, strike, shortage of materials, acts of God
or other causes beyond such party&#146;s reasonable control. Nothing contained herein shall excuse the
prompt payment of any sums of money due hereunder by either party.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>I. </B><U><B>Captions</B></U><B>. </B>The headings and titles in this Lease are for convenience only and shall
have no effect upon the construction or interpretation of this Lease.
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>J. </B><U><B>No Waiver</B></U><B>. </B>No receipt of money by Landlord from Tenant after termination of this
Lease or after the service of any notice or after the commencing of any suit or after final
judgment for possession of the Premises shall renew, reinstate, continue or extend the Term or
affect any such notice or suit. No waiver of any default of Tenant shall be implied from any
omission by Landlord to take any action on account of such default if such default persists or be
repeated, and no express waiver shall affect any default other than the default specified in the
express waiver and then only for the time and to the extent therein stated.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>K. </B><U><B>Accord and Satisfaction</B></U><B>. </B>No payment by Tenant of a lesser amount than the monthly
Rent, or any other charge or fee stipulated, shall be deemed to be other than on account of the
earliest stipulated Rent, or other charge or fee, nor shall any endorsement or statement on any
check or any letter accompanying any check or payment be deemed as creating an accord and
satisfaction, and Landlord may accept such check or payment without prejudice to Landlord&#146;s right
to recover the balance of such Rent, or other charge or fee or pursue any other remedy provided in
this Lease.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>L. </B><U><B>Recording</B></U><B>. </B>Tenant and Landlord shall not record this Lease.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>M. </B><U><B>Memorandum of Lease, Option to Purchase and Right of First Refusal; and
Termination.</B></U> Landlord and Tenant agree to cause the execution and recordation of that certain
Memorandum of Lease, attached hereto as <U>Exhibit&nbsp;C</U> and made a part hereof (the
&#147;Memorandum&#148;). Upon termination of this Lease, or the Option to Purchase or the Right of First
Refusal, as the case may be, Landlord may cause the execution and recordation of that certain
Termination of Memorandum attached hereto as <U>Exhibit&nbsp;D</U> with respect to that specific
interest which is being terminated (the &#147;Termination&#148;). The recordation of the Memorandum shall be
at the expense of Tenant and Landlord shall cooperate as reasonably necessary to assist in same.
The recordation of the Termination shall be at the expense of Landlord and Tenant shall cooperate
as reasonably necessary to assist in same.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>N. </B><U><B>Attorney&#146;s Fees. </B></U> If there is any legal action or proceeding between Landlord and
Tenant to enforce this Lease or to protect or establish any right or remedy under this Lease, the
unsuccessful party to such action or proceeding shall pay to the prevailing party all costs and
expenses, including reasonable attorneys&#146; fees and disbursements, incurred by such prevailing party
in such action or proceeding and in any appeal in connection therewith. If such prevailing party
recovers a judgment in any such action, proceeding or appeal, such costs, expenses and attorneys&#146;
fees and disbursements shall be included in and as a part of such judgment.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>O. </B><U><B>No Construction Against Drafting Party.</B></U> Landlord and Tenant acknowledge that each
of them and their legal counsel have had an opportunity to review,
comment and negotiate this Lease and that this Lease will not be construed against Landlord
merely because Landlord has prepared it.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>P. </B><U><B>Limitation on Recourse.</B></U> It is expressly understood and agreed by Tenant that none
of Landlord&#146;s covenants, undertaking or agreements continued in this Lease are made or intended as
personal covenants, undertaking or agreements by Landlord. Tenant specifically agrees to look
solely to Landlord&#146;s right, title and interest in the Premises and sale proceeds
</DIV>



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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">therefrom for the
recovery of any judgments or any other damages hereunder from Landlord. It is agreed by Tenant
that Landlord (and its members, managers, shareholders, venturers, partners, officers, directors,
and employees) shall not be personally liable for any such judgments or any other damages
hereunder. If, however, by virtue of the foregoing limitation, Tenant is prohibited from fully
recovering any judgment obtained against Landlord, Tenant shall thereafter have the right to offset
the amount of such unrecovered judgment against installments of Rent thereafter becoming due, if
any.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Q. </B><U><B>No Merger.</B></U> The voluntary or other surrender of this Lease by Tenant or the
cancellation of this Lease by mutual agreement of Tenant and Landlord or the termination of this
Lease on account of Tenant&#146;s default shall not work as a merger, and shall, at Landlord&#146;s option,
(a)&nbsp;terminate all or any subleases and subtenancies, if any, or (b)&nbsp;operate as an assignment to
Landlord of all or any subleases or subtenancies, if any. Landlord&#146;s option under this Section
25(Q) shall be exercised by written notice to Tenant and all known sublessees or subtenants in the
Premises or any part of the Premises.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>R. </B><U><B>Brokers.</B></U> Each party represents and warrants to the other that it has not engaged
any broker, finder, or other person entitled to any commission or fees with respect to the
negotiation, execution or delivery of this Lease, and each party shall indemnify and hold the other
harmless from and against any loss, cost, liability or expense, including, but not limited to,
reasonable attorneys&#146; fees, incurred by such party as a result of any claim asserted by any such
broker, finder, or other person on the basis of any arrangements or agreements made or alleged to
have been made by or on behalf of the representing party.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>S. </B><U><B>Tax Credits.</B></U> Landlord is entitled to claim all tax credits and depreciation
attributable to the Premises; provided, however, only to the extent permitted or allowed by Chase,
or under the Bond Documents, that Tenant shall be entitled to any tax credits and depreciation for
all items for which Tenant has paid with funds not provided or reimbursed by Landlord.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>T. </B><U><B>Landlord&#146;s Fees.</B></U> Whenever Tenant requests Landlord to take any action or give any
consent required or permitted under this Lease, Tenant shall reimburse Landlord for all of
Landlord&#146;s reasonable costs incurred in reviewing the proposed action or consent, including without
limitation, reasonable attorneys&#146; engineers&#146; or architects&#146; fees, within ten (10)&nbsp;days after
Landlord&#146;s delivery to Tenant of a statement of such costs, provided such costs are reasonably
incurred and or the subject of a good faith and reasonable estimate provided by Landlord in
connection therewith. Tenant shall be obligated to make such reimbursement without regard to
whether Landlord consents to any such proposed action.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>U. </B><U><B>Confidentiality.</B></U> Tenant and Landlord each acknowledge that the terms and
conditions of this Lease are to remain confidential for their mutual benefit, and shall not be
disclosed by Landlord or Tenant to anyone, by any manner or means, directly or indirectly, without
the other&#146;s prior written consent; provided, however, Tenant may disclose such terms or conditions
to its potential lenders, investors, brokers, attorneys, accountants and advisors, provided such
parties agree to abide by the terms of this Section&nbsp;25 (U), and Landlord may disclose to its
property manager, potential purchasers and lenders, prospective investors, brokers, attorneys,
accountants and advisors and both parties may execute and allow the recordation of
</DIV>



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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">the Memorandum
of Lease and Option to Purchase provided herein. The consent by Landlord or Tenant to any
disclosures shall not be deemed to be a waiver on the part of the other of any prohibition against
any future disclosure.
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>&#091;SIGNATURES APPEAR ON NEXT PAGE&#093;</B>
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>IN WITNESS WHEREOF, </B>the parties hereto have executed this Lease in manner sufficient to bind
them as of the day and year first above written. Each person executing this Lease represents and
warrants that he or she is duly authorized to execute this Lease on behalf of the entity for which
he or she is signing.
</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="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="33%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>
<TR></TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>WITNESSES:</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" colspan="3"><B>LANDLORD:</B></TD>

    <TD align="left" valign="top">&nbsp;</TD>

    <TD align="left" valign="top">&nbsp;</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>
    <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">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><B>ESSC INVESTMENTS, LLC </B>a Michigan</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">limited liability company</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</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>
    <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">&nbsp;
</DIV></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/ Lisa D. Rice&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"><DIV style="font-size: 1pt; border-top: 0px solid #000000">&nbsp;</DIV>
</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"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>Lisa D. Rice
</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>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Its:&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD align="left" valign="top"><DIV style="font-size: 1pt; border-top: 0px solid #000000">&nbsp;</DIV>Authorized
Representative
</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>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD align="left" valign="top"><DIV style="font-size: 1pt; border-top: 0px solid #000000">&nbsp;</DIV>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</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>
    <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">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><B>TENANTS:</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</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>
    <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">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><B>ENERGY STEEL &#038; SUPPLY CO., </B>a <BR>
Michigan corporation</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</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>
    <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">&nbsp;
</DIV></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/ James R. Lines&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"><DIV style="font-size: 1pt; border-top: 0px solid #000000">&nbsp;</DIV>
</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"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
James R. Lines
</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>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Its:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chairman</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</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>
    <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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">And :</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"><!-- 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>
    <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">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><B>GRAHAM CORPORATION</B>, a Delaware</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">corporation</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</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>
    <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">&nbsp;
</DIV></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/ James R. Lines&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"><DIV style="font-size: 1pt; border-top: 0px solid #000000">&nbsp;</DIV>
</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"><DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
James R. Lines
</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>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Its:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">President and Chief Executive
Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->27<!-- /Folio -->
</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="right" style="font-size: 10pt; margin-top: 6pt"><b>EXHIBIT 10.4</B>
</DIV>

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


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><U><B>LEGAL DESCRIPTION</B></U>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt">Exhibit &#147;A&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Part of the Northeast <FONT style="FONT-size: 70%"><SUP>1</SUP></FONT>/<FONT style="FONT-size: 60%">4</FONT> of Section&nbsp;12, Town 7 North, Range 9 East, City of Lapeer, Lapeer
County, Michigan, being more particularly described as beginning at a point on the Southerly
right-of-way line of John Conley Drive extended which is South 01 degrees 45 minutes 08 seconds
East (recorded as South 01 degrees 45 minutes 11 seconds East) 267.01 feet along the East line of
said Section&nbsp;12 to said Southerly right-of-way line and along said Southerly right-of-way line by
the following four courses: 1.) South 88 degrees 21 minutes 31 seconds West 200.02 feet, 2.) along
a curve to the left 233.87 feet (radius of 531.60 feet, delta angle 25 degrees 12 minutes 24
seconds chord bearing and distance of South 75 degrees 45 minutes 19 seconds West 231.99 feet) 3.)
South 63 degrees 09 minutes 07 seconds West 256.21 feet 4.) along a curve to the right 23.54 feet (
radius of 2363.30 feet, delta angle 00 degrees 34 minutes 14 seconds, chord bearing and distance of
South 63 degrees 26 minutes 14 seconds West 23.54 feet) from the Northeast corner of said Section
12; thence continuing along said Southerly right-of-way by the following two courses: 1.) along a
curve to the right 490.73 feet (radius of 2363.30 feet, delta angle 11 degrees 53 minutes 50
seconds, chord bearing and distance of South 69 degrees 40 minutes 16 seconds West 489.85 feet) 2.)
along a curve to the left 43.11 feet (radius of 232.00 feet, delta angle 10 degrees 38 minutes 48
seconds, chord bearing and distance of South 70 degrees 17 minutes 47 seconds West 43.05 feet);
thence South 25 degrees 00 minutes 04 seconds East 710.10 feet to a point on the right-of-way line
of John Conley drive South Cul-De-Sac; thence along said Cul-De-Sac right of-way, 30.00 feet along
the arc of a non-tangent curve to the right (radius of 80.00 feet, delta angle 21 degrees 29
minutes 22 seconds, chord bearing and distance of North 89 degrees 18 minutes 53 seconds East 29.83
feet); thence North 56 degrees 22 minutes 50 seconds East 509.66 feet; thence North 25 degrees 00
minutes 04 seconds West 602.13 feet to the point of beginning.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Tax Parcel No.: 20-83-367-040-00
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Commonly Known As: 3123 John Conley Drive, Lapeer, Michigan 48446
</DIV>



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



</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>6
<FILENAME>l41646exv31w1.htm
<DESCRIPTION>EX-31.1
<TEXT>
<HTML>
<HEAD>
<TITLE>exv31w1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<DIV style="font-family: 'Times New Roman',Times,serif">


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


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">CERTIFICATION OF<BR>
PRINCIPAL EXECUTIVE OFFICER
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">I, James R. Lines, certify that:
</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%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>I have reviewed this Quarterly Report on Form 10-Q of Graham Corporation;</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%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;</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%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this report;</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%" nowrap align="left">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The registrant&#146;s other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules&nbsp;13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules&nbsp;13a-15(f) and 15d-15(f)) for the
registrant and have:</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="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Designed such disclosure controls
and procedures, or caused such
disclosure controls and procedures
to be designed under our
supervision, to ensure that material
information relating to the
registrant, including its
consolidated subsidiaries, is made
known to us by others within those
entities, particularly during the
period in which this report is being
prepared;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Designed such internal control over
financial reporting, or caused such
internal control over financial
reporting to be designed under our
supervision, to provide reasonable
assurance regarding the reliability
of financial reporting and the
preparation of financial statements
for external purposes in accordance
with generally accepted accounting
principles;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Evaluated the effectiveness of the
registrant&#146;s disclosure controls and
procedures, and presented in this
report our conclusions about the
effectiveness of the disclosure
controls and procedures, as of the
end of the period covered by this
report based on such evaluation; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Disclosed in this report any change
in the registrant&#146;s internal control
over financial reporting that
occurred during the registrant&#146;s
most recent fiscal quarter (the
registrant&#146;s fourth fiscal quarter
in the case of an annual report)
that has materially affected, or is
reasonably likely to materially
affect, the registrant&#146;s internal
control over financial reporting;
and</TD>
</TR>




</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</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 style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</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%" nowrap align="left">5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The registrant&#146;s other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the registrant&#146;s auditors and the audit committee of the
registrant&#146;s Board of Directors (or persons performing the equivalent
functions):</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="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>All significant deficiencies and material weaknesses
in the design or operation of internal control over
financial reporting which are reasonably likely to
adversely affect the registrant&#146;s ability to record,
process, summarize and report financial information;
and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant&#146;s internal control over
financial reporting.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Date: February&nbsp;8, 2011
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>

    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="48%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">/s/ <FONT style="FONT-variant: SMALL-CAPS">James R. Lines</FONT>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD colspan="3" align="left">James R. Lines&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD colspan="3" align="left">President and Chief Executive Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

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<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>7
<FILENAME>l41646exv31w2.htm
<DESCRIPTION>EX-31.2
<TEXT>
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<TITLE>exv31w2</TITLE>
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<DIV style="font-family: 'Times New Roman',Times,serif">


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


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">CERTIFICATION OF<BR>
PRINCIPAL FINANCIAL OFFICER
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">I, Jeffrey Glajch, certify that:
</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%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>I have reviewed this Quarterly Report on Form 10-Q of Graham Corporation;</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%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;</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%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this report;</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%" nowrap align="left">4.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The registrant&#146;s other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules&nbsp;13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules&nbsp;13a-15(f) and 15d-15(f)) for the
registrant and have:</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="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Designed such disclosure controls
and procedures, or caused such
disclosure controls and procedures
to be designed under our
supervision, to ensure that material
information relating to the
registrant, including its
consolidated subsidiaries, is made
known to us by others within those
entities, particularly during the
period in which this report is being
prepared;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Designed such internal control over
financial reporting, or caused such
internal control over financial
reporting to be designed under our
supervision, to provide reasonable
assurance regarding the reliability
of financial reporting and the
preparation of financial statements
for external purposes in accordance
with generally accepted accounting
principles;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Evaluated the effectiveness of the
registrant&#146;s disclosure controls and
procedures, and presented in this
report our conclusions about the
effectiveness of the disclosure
controls and procedures, as of the
end of the period covered by this
report based on such evaluation; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Disclosed in this report any change
in the registrant&#146;s internal control
over financial reporting that
occurred during the registrant&#146;s
most recent fiscal quarter (the
registrant&#146;s fourth fiscal quarter
in the case of an annual report)
that has materially affected, or is
reasonably likely to materially
affect, the registrant&#146;s internal
control over financial reporting;
and</TD>
</TR>



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



</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%" nowrap align="left">5.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The registrant&#146;s other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the registrant&#146;s auditors and the audit committee of the
registrant&#146;s Board of Directors (or persons performing the equivalent
functions):</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="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>All significant deficiencies and material weaknesses
in the design or operation of internal control over
financial reporting which are reasonably likely to
adversely affect the registrant&#146;s ability to record,
process, summarize and report financial information;
and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Any fraud, whether or not material, that involves
management or other employees who have a significant
role in the registrant&#146;s internal control over
financial reporting.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Date: February&nbsp;8, 2011
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>

    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="48%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>

    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">/s/ <FONT style="FONT-variant: SMALL-CAPS">Jeffrey Glajch</FONT>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD colspan="3" align="left">Jeffrey Glajch&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD colspan="3" align="left">Vice President - Finance &#038; Administration and
Chief Financial Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

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<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>8
<FILENAME>l41646exv32w1.htm
<DESCRIPTION>EX-32.1
<TEXT>
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<TITLE>exv32w1</TITLE>
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<DIV style="font-family: 'Times New Roman',Times,serif">


<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>

</TABLE>

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


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">CERTIFICATION PURSUANT TO<BR>
18 U.S.C. SECTION 1350<BR>
AS ADOPTED PURSUANT TO<BR>
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In connection with the Quarterly Report of Graham Corporation (the &#147;Company&#148;) on Form 10-Q for the
period ending December&nbsp;31, 2010 as filed with the Securities and Exchange Commission (the
&#147;Report&#148;), each of the undersigned certifies, pursuant to 18 U.S.C. Section&nbsp;1350, as adopted
pursuant to Section&nbsp;906 of the Sarbanes-Oxley Act of 2002 that:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">2) the information contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of the Company.
</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="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>
<TR></TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ <FONT style="FONT-variant: SMALL-CAPS">James R. Lines</FONT>
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
James R. Lines
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">/s/ <FONT style="FONT-variant: SMALL-CAPS">Jeffrey Glajch</FONT>
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Jeffrey Glajch
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">President and Chief Executive Officer
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">Vice President &#151; Finance &#038; Administration and</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">(Principal Executive Officer)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">Chief Financial Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Date: February&nbsp;8, 2011
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">(Principal Financial Officer)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&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="right" valign="bottom">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">Date: February&nbsp;8, 2011</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A signed original of this written statement required by Section&nbsp;906 has been provided to Graham
Corporation and will be retained by Graham Corporation and furnished to the Securities and Exchange
Commission or its staff upon request.
</DIV>



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