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<SEC-DOCUMENT>0000914122-05-000026.txt : 20050429
<SEC-HEADER>0000914122-05-000026.hdr.sgml : 20050429
<ACCEPTANCE-DATETIME>20050429172038
ACCESSION NUMBER:		0000914122-05-000026
CONFORMED SUBMISSION TYPE:	10-K
PUBLIC DOCUMENT COUNT:		11
CONFORMED PERIOD OF REPORT:	20050131
FILED AS OF DATE:		20050429
DATE AS OF CHANGE:		20050429

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			MFRI INC
		CENTRAL INDEX KEY:			0000914122
		STANDARD INDUSTRIAL CLASSIFICATION:	INDUSTRIAL & COMMERCIAL FANS & BLOWERS & AIR PURIFYING EQUIP [3564]
		IRS NUMBER:				363922969
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			0131

	FILING VALUES:
		FORM TYPE:		10-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-18370
		FILM NUMBER:		05787395

	BUSINESS ADDRESS:	
		STREET 1:		7720 LEHIGH AVE
		CITY:			NILES
		STATE:			IL
		ZIP:			60714
		BUSINESS PHONE:		8479661000

	MAIL ADDRESS:	
		STREET 1:		7720 LEHIGH AVE
		CITY:			NILES
		STATE:			IL
		ZIP:			60714

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	MIDWESCO FILTER RESOURCES INC
		DATE OF NAME CHANGE:	19970402
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>d63590_10-k.htm
<DESCRIPTION>MFRI 2004 FORM 10K
<TEXT>
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    <td align="center"><FONT face="Times New Roman, Times, Serif" size=2><B>UNITED STATES<br>
    </B></FONT><FONT face="Times New Roman, Times, Serif" size=2><B>SECURITIES AND EXCHANGE COMMISSION<br>
    </B></FONT><FONT face="Times New Roman, Times, Serif" size=2>Washington, DC&nbsp; 20549</FONT></td>
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    <td align="center">&nbsp;</td>
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    <td align="center"><hr align="center" width="100" size=1 noshade></td>
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    <td align="center"><FONT face="Times New Roman, Times, Serif" size=2><B>FORM 10-K</B></FONT></td>
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    <td>&nbsp;</td>
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    <td width="7%" align="left" valign="top"><font size="2" face="Wingdings">x</font></td>
    <td><FONT face="Times New Roman, Times, Serif" size=2><B>ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE <br>
      SECURITIES

EXCHANGE ACT OF 1934</B></FONT></td>
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    <td align="left" valign="top">&nbsp;</td>
    <td><FONT face="Times New Roman, Times, Serif" size=2>For the fiscal year ended January 31, 2005</FONT></td>
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    <td align="left" valign="top">&nbsp;</td>
    <td>&nbsp;</td>
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  <tr align="center">
    <td colspan="2" valign="top"><FONT face="Times New Roman, Times, Serif" size=2><B>OR</B></FONT></td>
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    <td align="left" valign="top">&nbsp;</td>
    <td>&nbsp;</td>
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    <td align="left" valign="top"><font size="2" face="Wingdings">o</font></td>
    <td><FONT face="Times New Roman, Times, Serif" size=2><B>TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE <br>
      SECURITIES

EXCHANGE ACT OF 1934</B></FONT></td>
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    <td>&nbsp;</td>
    <td><FONT face="Times New Roman, Times, Serif" size=2>For the transition period from __________ to ____________</FONT></td>
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    <td>&nbsp;</td>
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    <td align="center"><FONT face="Times New Roman, Times, Serif" size=2><B>Commission File No. 0-18370</B></FONT></td>
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    <td align="center">&nbsp;</td>
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    <td align="center"><FONT face="Times New Roman, Times, Serif" size=2><B>MFRI, INC.</B></FONT></td>
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    <td align="center"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;(Exact name of registrant as specified in its charter)</FONT></td>
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    <td>&nbsp;</td>
    <td align="center">&nbsp;</td>
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    <td width="50%"><FONT face="Times New Roman, Times, Serif" size=2><B>Delaware</B></FONT></td>
    <td align="center"><FONT face="Times New Roman, Times, Serif" size=2><B>36-3922969</B></FONT></td>
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    <td><FONT face="Times New Roman, Times, Serif" size=2>(State or other jurisdiction of<br>
    incorporation or organization)    </FONT></td>
    <td align="center"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;(I.R.S. Employer Identification No.)</FONT></td>
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    <td>&nbsp;</td>
    <td align="center">&nbsp;</td>
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  <tr valign="bottom">
    <td><FONT face="Times New Roman, Times, Serif" size=2><B>7720 Lehigh Avenue<br>
    Niles, Illinois </B></FONT></td>
    <td align="center"><FONT face="Times New Roman, Times, Serif" size=2><B>60714 </B></FONT></td>
  </tr>
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    <td><FONT face="Times New Roman, Times, Serif" size=2>(Address of principal executive offices)</FONT></td>
    <td align="center"><FONT face="Times New Roman, Times, Serif" size=2>(Zip Code)</FONT></td>
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    <td>&nbsp;</td>
    <td align="center">&nbsp;</td>
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    <td align="center"><FONT face="Times New Roman, Times, Serif" size=2><B>(847) 966-1000<br>
    </B></FONT><FONT face="Times New Roman, Times, Serif" size=2>(Registrant&#146;s telephone number, including area code)</FONT></td>
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  <tr>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td align="center"><FONT face="Times New Roman, Times, Serif" size=2>Securities registered pursuant to Section 12(b) of the Act:</FONT></td>
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    <td align="center"><FONT face="Times New Roman, Times, Serif" size=2><B>None</B></FONT></td>
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    <td align="center"><FONT face="Times New Roman, Times, Serif" size=2>Securities registered pursuant to Section 12(g) of the Act:<br>
    </FONT><FONT face="Times New Roman, Times, Serif" size=2><B>Common Stock, par value $.01 per share</B></FONT></td>
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    <td align="center">&nbsp;</td>
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<TR>
<TD><P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate
by check mark whether the registrant:&nbsp;(1) has filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes <font size="2" face="Wingdings">x</font>&nbsp;No <font size="2" face="Wingdings">o</font></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate
by check mark if disclosure of delinquent filers pursuant to Item&nbsp;405 of Regulation&nbsp;S-K
is not contained herein, and will not be contained, to the best of registrant&#146;s knowledge, in
definitive proxy or information statements incorporated by reference in Part&nbsp;III of this Form&nbsp;10-K
or any amendment to this Form&nbsp;10-K. <font size="2" face="Wingdings">x</font></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate
by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12-b).
Yes<font size="2" face="Wingdings">o</font>&nbsp;No <font size="2" face="Wingdings">x</font></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
aggregate market value of the voting securities of the registrant beneficially owned by non-affiliates
of the registrant (the exclusion of the market value of the shares owned by any person shall not
be deemed an admission by the registrant that such person is an affiliate of the registrant) was
approximately $12,385,843 based on the closing sale price of $3.39 per share as reported on the NASDAQ
National Market on July 30, 2004.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
number of shares of the registrant&#146;s common stock outstanding at April 15, 2005 was 5,230,933.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
DOCUMENTS INCORPORATED BY REFERENCE</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Portions
of the following document of the registrant are incorporated herein by reference: </FONT></P>
</TD>
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    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="center">
    <td width="55%"><FONT face="Times New Roman, Times, Serif" size=2><B><U>Document</U></B></FONT></td>
    <td nowrap><FONT face="Times New Roman, Times, Serif" size=2><B><U>Part of Form 10-K</U></B></FONT></td>
  </tr>
  <tr align="center">
    <td nowrap><FONT face="Times New Roman, Times, Serif" size=2>Proxy Statement for the 2005 annual meeting of stockholders</FONT></td>
    <td><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;III</FONT></td>
  </tr>
  <tr align="center">
    <td nowrap>&nbsp;</td>
    <td>&nbsp;</td>
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<TD>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>FORM 10-K CONTENTS<br>
</FONT><FONT face="Times New Roman, Times, Serif" size=2>JANUARY 31, 2005</FONT></P>

</TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
  <TR VALIGN=Bottom>
    <TH COLSPAN=2><div align="left"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Item</FONT></div></TH>
    <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
    <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Page</FONT></TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="4" ALIGN=LEFT><hr size="2" noshade></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD height="20" ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD height="20" ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD height="20" ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD height="20" ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD height="20" ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">Part I:</font></TD>
    <TD width="2%" height="20" ALIGN=LEFT>&nbsp;</TD>
    <TD height="20" ALIGN=LEFT>&nbsp;</TD>
    <TD height="20" ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD height="20" ALIGN=LEFT>&nbsp;</TD>
    <TD height="20" colspan="2" ALIGN=LEFT>&nbsp;</TD>
    <TD height="20" ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD WIDTH=9% height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.</FONT></TD>
    <TD height="20" colspan="2" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a1">Business</a></FONT></TD>
    <TD WIDTH=7% height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD width="2%" height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD height="20" ALIGN=LEFT><a href="#a2"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Company Profile</FONT></a></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD width="2%" height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD height="20" ALIGN=LEFT><a href="#a3"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Filtration Products</FONT></a></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD width="2%" height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD height="20" ALIGN=LEFT><a href="#a4"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Piping Systems</FONT></a></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD width="2%" height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD height="20" ALIGN=LEFT><a href="#a5"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Industrial Process Cooling Equipment</FONT></a></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD width="2%" height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD height="20" ALIGN=LEFT><a href="#a6"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Employees</FONT></a></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD width="2%" height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD height="20" ALIGN=LEFT><a href="#a6b"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Executive Officers of the Registrant</FONT></a></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.</FONT></TD>
    <TD height="20" colspan="2" ALIGN=LEFT><a href="#a7"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Properties</FONT></a></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.</FONT></TD>
    <TD height="20" colspan="2" ALIGN=LEFT><a href="#a8"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Legal Proceedings</FONT></a></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.</FONT></TD>
    <TD height="20" colspan="2" ALIGN=LEFT><a href="#a9"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Submission of Matters to a Vote of Security Holders</FONT></a></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11</FONT></TD>
  </TR>
</TABLE>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
  <TR VALIGN=Bottom>
    <TH width="2%" COLSPAN=2>&nbsp;</TH>
    <TH>&nbsp;</TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <td COLSPAN=2><div align="left"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Part II:</FONT></div></td>
    <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
    <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT valign="top">&nbsp;</TD>
    <TD colspan="2" ALIGN=LEFT valign="top">&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD WIDTH=9% height="20" ALIGN=LEFT valign="top"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.</FONT></TD>
    <TD height="20" colspan="2" ALIGN=LEFT valign="top"><a href="#a10"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Market for Registrant&#146;s Common Equity and Related Stockholder Matters</FONT></a></TD>
    <TD WIDTH=7% height="20" ALIGN=RIGHT valign="top"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD height="20" ALIGN=LEFT valign="top"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.</FONT></TD>
    <TD height="20" colspan="2" ALIGN=LEFT valign="top"><a href="#a11"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Selected Financial Data</FONT></a></TD>
    <TD height="20" ALIGN=RIGHT valign="top"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD height="35" ALIGN=LEFT valign="top"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7.</FONT></TD>
    <TD height="20" colspan="2" ALIGN=LEFT valign="top"><a href="#a12"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Management&#146;s Discussion and Analysis of Financial Condition<br>
</FONT></a><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;<a href="#a12">and Results of Operations </a></FONT></TD>
    <TD height="20" ALIGN=right valign="bottom"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13</FONT></TD>
  </TR>
  <TR VALIGN=top>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7A.</FONT></TD>
    <TD height="20" colspan="2" ALIGN=LEFT><a href="#a13"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Quantitative and Qualitative Disclosures About Market Risk</FONT></a></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>23</FONT></TD>
  </TR>
  <TR VALIGN=top>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8.</FONT></TD>
    <TD height="20" colspan="2" ALIGN=LEFT><a href="#a14"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Financial Statements and Supplementary Data</FONT></a></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>23</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD height="20" ALIGN=LEFT valign="top"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.</FONT></TD>
    <TD height="35" colspan="2" ALIGN=LEFT valign="top"><a href="#a15"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Changes in and Disagreements with Accountants on Accounting<br>
    and Financial Disclosure </FONT></a></TD>
    <TD height="20" ALIGN=right valign="bottom"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>24</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9A.</FONT></TD>
    <TD height="20" colspan="2" ALIGN=LEFT><a href="#a16"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Controls and Procedures</FONT></a></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>24</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9B.</FONT></TD>
    <TD height="20" colspan="2" ALIGN=LEFT><a href="#a16b"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Other Information</FONT></a></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>24</FONT></TD>
  </TR>
</TABLE>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
  <TR VALIGN=Bottom>
    <TH COLSPAN=2><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TH>
    <TH><font size="2" face="Times New Roman, Times, serif"></font></TH>
    <TH><font size="2" face="Times New Roman, Times, serif"></font></TH>
  </TR>
  <TR VALIGN=Bottom>
    <td COLSPAN=2><div align="left"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Part III:</FONT></div></td>
    <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
    <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
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    <TD height="20" ALIGN=LEFT>&nbsp;</TD>
    <TD height="20" ALIGN=RIGHT>&nbsp;</TD>
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    <TD WIDTH=9% height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.</FONT></TD>
    <TD height="20" colspan="2" ALIGN=LEFT><a href="#a17"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Directors and Executive Officers of the Registrant</FONT></a></TD>
    <TD WIDTH=7% height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>25</FONT></TD>
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    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11.</FONT></TD>
    <TD height="20" colspan="2" ALIGN=LEFT><a href="#a18"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Executive Compensation</FONT></a></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>25</FONT></TD>
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    <TD height="20" ALIGN=LEFT valign="top"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12.</FONT></TD>
    <TD height="20" colspan="2" ALIGN=LEFT><a href="#a19"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Security Ownership of Certain Beneficial Owners and Management<br>
</FONT></a><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;<a href="#a19">and Related Stockholder Matters</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>25</FONT></TD>
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    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13.</FONT></TD>
    <TD height="20" colspan="2" ALIGN=LEFT><a href="#a20"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Certain Relationships and Related Transactions</FONT></a></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>25</FONT></TD>
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    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14.</FONT></TD>
    <TD height="20" colspan="2" ALIGN=LEFT><a href="#a21"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Principal Accountant Fees and Services</FONT></a></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>25</FONT></TD>
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    <td COLSPAN=2><div align="left"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Part IV:</FONT></div></td>
    <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
    <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
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    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD colspan="2" ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
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    <TD WIDTH=9% height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>15.</FONT></TD>
    <TD height="20" colspan="2" ALIGN=LEFT><a href="#a22"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Exhibits, Financial Statement Schedules and Reports on Form 8-K</FONT></a></TD>
    <TD WIDTH=7% height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>25</FONT></TD>
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    <TD height="20" ALIGN=LEFT>&nbsp;</TD>
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    <TD height="20" ALIGN=LEFT>&nbsp;</TD>
    <TD height="20" ALIGN=RIGHT>&nbsp;</TD>
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    <TD height="20" colspan="3" ALIGN=LEFT><a href="#a23"><font size="2" face="Times New Roman, Times, serif">Signatures</font></a></TD>
    <TD height="20" ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">51</font></TD>
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    <TD height="20" colspan="3" ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">Certifications</font></TD>
    <TD height="20" ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">57</font></TD>
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    <TD colspan="3" ALIGN=LEFT>&nbsp;</TD>
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    <TD colspan="4" ALIGN=LEFT><hr size="2" noshade></TD>
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<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B>PART I</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><a name="a1"></a>Item 1. &nbsp;BUSINESS</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><a name="a2"></a>Company Profile</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>MFRI, Inc. (&#147;MFRI&#148; or the &#147;Company&#148;) is a holding company which has subsidiaries
engaged in the manufacture and sale of products in three distinct business segments:&nbsp;filtration
products, piping systems and industrial process cooling equipment.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The Company&#146;s filtration products business (the &#147;Filtration Products Business&#148;) is conducted
by Midwesco Filter Resources, Inc. (&#147;Midwesco Filter&#148;). Perma-Pipe, Inc. (&#147;Perma-Pipe&#148;)
conducts the piping systems business (the &#147;Piping Systems Business&#148;). The industrial process
cooling equipment business (the &#147;Industrial Process Cooling Equipment Business&#148;) is conducted
by Thermal Care, Inc. (&#147;Thermal Care&#148;). Midwesco Filter, Perma-Pipe and Thermal Care are
wholly-owned subsidiaries of MFRI. As used herein, unless the context otherwise requires, the term
&#147;Company&#148; includes MFRI and its subsidiaries, Midwesco Filter, Perma-Pipe, Thermal Care,
and their respective predecessors and subsidiaries.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Midwesco Filter manufactures and sells a wide variety of filter elements for air filtration and particulate
collection systems. Air filtration systems are used in many industries in the United States and abroad
to limit particulate emissions to comply with environmental regulations. Midwesco Filter markets
air filtration-related products and accessories, and provides maintenance services, consisting primarily
of dust collector inspection, filter cleaning and filter replacement.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Perma-Pipe engineers, designs, manufactures and sells specialty piping systems and leak detection and
location systems. Perma-Pipe&#146;s specialty piping systems include (i) industrial and secondary
containment piping systems for transporting chemicals, waste streams and petroleum liquids, (ii)
insulated and jacketed district heating and cooling piping systems for efficient energy distribution
to multiple locations from central energy plants, and (iii) oil and gas gathering flow lines and
long lines for oil and mineral transportation. Perma-Pipe&#146;s leak detection and location systems
are sold as part of many of its piping systems products and on a stand-alone basis, to monitor areas
where fluid intrusion may contaminate the environment, endanger personal safety, cause a fire hazard,
impair essential services or damage equipment or property.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Thermal Care engineers, designs, manufactures and sells industrial process cooling equipment, including
liquid chillers, mold temperature controllers, cooling towers, plant circulating systems, and related
accessories for use in industrial process applications.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Additional information with respect to the Company&#146;s lines of business is included in the following
discussions of the separate business segments and in the financial statements and related notes thereto.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><a name="a3"></a>Filtration Products Business</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Air Filtration and Particulate Collection Systems.</I></B> &nbsp;Air filtration and particulate collection systems have been used for 65 years in many industrial
applications. However, the enactment of federal and state legislation and related regulations and
enforcement have increased the demand for air filtration and particulate collection systems by requiring
industry to meet primary and secondary ambient air quality standards for specific pollutants, including
particulate. In certain manufacturing applications, particulate collection systems are an integral
part of the production process. Examples of such applications include the production of cement, carbon
black and industrial absorbents.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The principal types of industrial air filtration and particulate collection systems in use today are
baghouses, cartridge collectors, electrostatic precipitators, scrubbers and mechanical collectors.
The type of technology most suitable for a particular application is a function of such factors as
the ability of the system to meet applicable regulations, initial investment, operating costs and
the parameters of the process, including operating temperatures, chemical constituents present, size
of particulate and pressure differential.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Cartridge collectors and baghouses are typically box-like structures, which operate in a manner similar
to a vacuum cleaner. They can contain a single filter element or an array of several thousand cylindrical
or envelope filter elements (as short as two feet or as long as 30 feet) within a housing, which
is sealed to prevent the particulate from escaping. Exhaust gases are passed through the filtration
elements, and the particulate is captured on the media of the filter element. The particulate is
removed from the filter element by such methods as mechanical shaking, reverse air flow or compressed
air pulse. </FONT></P></TD></TR></TABLE>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Cartridge collectors and baghouses are generally used with utility and industrial boilers, cogeneration
plants and incinerators and in the chemicals, cement, asphalt, metals, grain and foundry industries,
as well as with air intake filters for gas turbines. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Because air pollution control equipment represents a substantial capital investment, such systems usually
remain in service for the entire life of the plant in which they are installed. A baghouse can last
up to 30 years and is typically rebagged six to eight times during its useful life. The useful life
of a cartridge collector is 10 to 20 years, with five to ten cartridge changes during its useful
life. Although reliable industry statistics do not exist, the Company believes there are more than
26,000 locations in the United States presently using baghouses and/or cartridge collectors, many
of which have multiple pieces of such equipment.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Products and Services.</I></B> &nbsp;The Company manufactures and sells a wide variety of filter elements for cartridge collectors
and baghouse air filtration and particulate collection systems. Cartridge collectors and baghouses
are used in many industries in the United States and abroad to limit particulate emissions, primarily
to comply with environmental regulations. The Company manufactures filter elements in standard industry
sizes, shapes and filtration media and to custom specifications, maintaining manufacturing standards
for more than 10,000 styles of filter elements to suit substantially all industrial applications.
Filter elements are manufactured from industrial yarn, fabric and papers purchased in bulk. Most
filter elements are produced from cellulose, acrylic, fiberglass, polyester, aramid or polypropylene
fibers. The Company also manufactures filter elements from more specialized materials, sometimes
using special finishes.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The Company markets numerous filter-related products and accessories used during the installation,
operation and maintenance of cartridge collectors and baghouses, including wire cages used to support
filter bags, spring assemblies for proper tensioning of filter bags and clamps and hanger assemblies
for attaching filter elements. In addition, the Company markets other hardware items used in the
operation and maintenance of cartridge collectors and baghouses. These include sonic horns to supplement
the removal of particulate from filter bags and cartridge collectors and baghouse parts such as door
gaskets, shaker bars, tube sheets, dampers, solenoid valves, timer boards, conveyors and airlocks.
The Company currently manufactures wire cages and purchases all other filter-related products and
accessories for resale. The Company also provides maintenance services, consisting primarily of air
filtration system inspection and filter element replacement, using a network of independent contractors.
The sale of filter-related products and accessories, collector inspection, maintenance services and
leak detection account for approximately 12% of the net sales of the Company&#146;s filtration products and services.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Over the past three years, the Company&#146;s Filtration Products Business has served more than 4,000
user locations. The Company has particular expertise in supplying filter bags for use with electric
arc furnaces in the steel industry. The Company believes its production capacity and quality control
procedures make it a leading supplier of filter bags to large users in the electric power industry.
Orders from that industry tend to be substantial in size, but are usually at lower margins than other
industries. In the fiscal year ended January 31, 2005, no customer accounted for 10% or more of net
sales of the Company&#146;s filtration products and services. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Marketing.</I></B> <B>&nbsp;</B>The customer base for the Company&#146;s filtration products and services is industrially and geographically
diverse. These products and services are used primarily by operators of utility and industrial coal-fired
boilers, incinerators and cogeneration plants and by producers of metals, cement, chemicals and other
industrial products.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The Company has an integrated sales program for its Filtration Products Business, which consists of
field-based sales personnel, manufacturers&#146; representatives, a telemarketing operation and computer-based
customer information systems containing data on nearly 18,000 user locations. These systems enable
the Company&#146;s sales force to access customer information classified by industry, equipment type,
operational data and the Company&#146;s quotation and sales history. The Company believes the computer-based
information systems are instrumental in increasing sales of filter-related products and accessories
and maintenance services, as well as sales of filter elements. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The Company markets its U.S. manufactured filtration products internationally using domestically based
sales resources to target major users in foreign countries. Export sales, which were approximately
8% of the domestic filtration company&#146;s product sales during the year ended January 31, 2005,
were about the same level as the previous year. Nordic Air Filtration A/S (&#147;Nordic Air&#148;),
a wholly-owned subsidiary of the Company, manufactures in Nakskov, Denmark, and markets pleated filter
elements throughout Europe and Asia, primarily to original equipment manufacturers. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Trademarks.</I></B> &nbsp;The Company owns the following trademarks covering its filtration products:&nbsp;Seamless Tube&reg;, Leak Seeker&reg;, Prekote&reg;, We Take the Dust Out of Industry&reg;, Pleatkeeper&reg;, Pleat Plus&reg; &nbsp;and EFC&reg;. </FONT></P></TD>
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<TD><P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Backlog.</I></B> &nbsp;&nbsp;As of January 31, 2005, the dollar amount of backlog (uncompleted firm orders) for filtration
products was $17,518,000. As of January 31, 2004, the amount of backlog was $14,499,000. One customer
has placed an order that is deliverable over multiple years. Therefore, approximately&nbsp;$3,800,000
of the backlog as of January 31, 2005 is not expected to be completed in 2005. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Raw Materials and Manufacturing.</I></B> &nbsp;The basic raw materials used in the manufacture of the Company&#146;s filtration products are
industrial fibers and media supplied by leading producers of such materials. The majority of raw
materials purchased are woven fiberglass fabric, yarns for manufacturing Seamless Tube&reg; &nbsp;products and other woven, felted, spun bond and cellulose media. Only a limited number of suppliers
are available for some of these materials. From time to time, any of these materials could be in
short supply, adversely affecting the Company&#146;s business. The Company believes that supplies
of all materials are adequate to meet current demand. The Company&#146;s inventory includes substantial
quantities of various types of media because lead times from suppliers are frequently longer than
the delivery times required by customers. Nevertheless, the Company employs an aggressive program
to limit inventory to levels compatible with meeting customer needs.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The manufacturing processes for filtration products include proprietary computer-controlled systems
for measuring, cutting, pleating, tubing and marking media. The Company also operates specialized
knitting machines and proprietary fabric stabilization equipment to produce the Seamless Tube&reg; &nbsp;product. Skilled sewing machine operators perform the finish assembly work on each filter bag
using both standard sewing equipment and specialized machines developed by or for the Company. The
manufacturing process for pleated filter elements involves the assembly of metal and, sometimes,
plastic end components, filtration media and support hardware. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The Company maintains a quality assurance program involving statistical process control techniques
for examination of raw materials, work in progress and finished goods. Certain orders for particularly
critical applications receive 100% quality inspection.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Competition.</I></B> &nbsp;&nbsp;The Filtration Products Business is highly competitive. In addition, new installations
of cartridge collectors and baghouses are subject to competition from alternative technologies. The
Company believes that, based on domestic sales, the BHA brand within GE Energy Services; the Menardi
division of Beacon Industrial Group; W.L. Gore &amp; Associates, Inc. and the Company are the leading
suppliers of filter elements, parts and accessories for baghouses. The Company believes that Donaldson
Company, Inc.; Farr Company; Clarcor, Inc. and the Company are the leading suppliers of filter elements
for cartridge collectors. There are at least 50 smaller competitors, most of which are doing business
on a regional or local basis. In Europe, several companies supply filtration products, and Nordic
Air is a relatively small participant in that market. Some of the Company&#146;s competitors have
greater financial resources than the Company.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The Company believes quality, service, and price are the most important competitive factors in its
Filtration Products Business. Often, a manufacturer has a competitive advantage when its products
have performed successfully for a particular customer in the past. Additional effort is required
by a competitor to market products to such a customer. In certain applications, the Company&#146;s
proprietary Seamless Tube&reg; &nbsp;product and customer support provide the Company with a competitive advantage. Certain competitors
of the Company may have a competitive advantage with respect to their own proprietary products and
processes, such as specialized fabrics and fabric finishes. In addition, some competitors may have
cost advantages with respect to certain products as a result of lower wage rates and/or greater vertical
integration.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Government Regulation.</I></B> &nbsp;The Company&#146;s Filtration Products Business is substantially dependent upon governmental
regulation of air pollution at the federal and state levels. Federal clean air legislation requires
compliance with national primary and secondary ambient air quality standards for specific pollutants,
including particulate. The states are primarily responsible for implementing these standards and,
in some cases, have adopted more stringent standards than those issued by the U.S. Environmental
Protection Agency (&#147;U.S. EPA&#148;) under the Clean Air Act Amendments of 1990 (&#147;Clean
Air Act Amendments&#148;). The U.S. Supreme Court decision upholding the right of the U.S. EPA to
reduce the minimum size of particulates regulated by the National Air Quality Standard from 10 microns
to 2.5 microns could have a significant positive effect on demand for the Company&#146;s filtration
products in future years.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><a name="a4"></a>Piping Systems Business</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Products and Services.</I></B> &nbsp;The Company engineers, designs, manufactures and sells specialty piping systems and leak detection
and location systems. The Company&#146;s specialty piping systems include (i)&nbsp;industrial and
secondary containment piping systems for transporting chemicals, hazardous fluids and petroleum products,
(ii)&nbsp;insulated and jacketed district heating and cooling piping systems for efficient energy
distribution to multiple locations from central energy plants, and (iii) </FONT></P></TD></TR></TABLE>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>oil and gas gathering flow lines and long lines for oil and mineral transportation. The Company&#146;s
leak detection and location systems are sold as part of many of its piping systems, and on a stand-alone
basis, to monitor areas where fluid intrusion may contaminate the environment, endanger personal
safety, cause a fire hazard, impair essential services or damage equipment or property.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The Company&#146;s industrial and secondary containment piping systems, manufactured in a wide variety
of piping materials, are generally used for the handling of chemicals, hazardous liquids and petroleum
products. Industrial piping systems often feature special materials, heat tracing, leak detection
and special fabrication. Secondary containment piping systems consist of service pipes housed within
outer containment pipes, which are designed to contain any leaks from the service pipes. Each system
is designed to provide economical and efficient secondary containment protection that will meet all
governmental environmental regulations. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The Company&#146;s district heating and cooling (DHC) piping systems are designed to transport steam,
hot water and chilled water to provide efficient energy distribution to multiple locations from a
central energy plant. These piping systems consist of a carrier pipe made of steel, ductile iron,
copper or fiberglass; insulation made of mineral wool, calcium silicate or polyurethane foam; and
an outer conduit or jacket of steel, fiberglass reinforced polyester resin, polyethylene or PVC.
The Company manufactures several types of piping systems using different materials, each designed
to withstand certain levels of temperature and pressure.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The Company&#146;s oil and gas flow lines are designed to transport crude oil or natural gas from the
well head, either on land or on the ocean floor, to the gathering point. Long lines for oil and mineral
transportation are used for solution mining and long line transportation of heated hydrocarbons or
other substances. These piping systems consist of a carrier pipe made of steel, usually supplied
by the customer; insulation made of polyurethane; jackets made of high density polyurethane,&nbsp;polyethylene
or polypropylene and sometimes a steel outer pipe, also usually supplied by the customer.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The Company&#146;s leak detection and location systems consist of a sensor cable attached to a microprocessor,
which uses proprietary software. The system sends pulse signals through the sensor cable, which is
positioned in the area to be monitored (e.g., along a pipeline in the ground or in a sub floor),
and employs a patented digital mapping technique to plot pulse reflections to continuously monitor
the sensor cable for anomalies. The system is able to detect one to three feet of wetted cable in
a monitored cable string of up to fifteen miles in length and is able to determine the location of
the wetted cable within five feet. Once wetted cable is detected, the microprocessor uses the software
to indicate the location of the leak. The Company offers a variety of cables specific to different
environments. The Company&#146;s leak detection and location systems can sense the difference between
water and petroleum products and can detect and locate multiple leaks. With respect to these capabilities,
the Company believes that its systems are superior to systems manufactured by other companies. Once
in place, the Company&#146;s leak detection and location system can be monitored off-site because
the system can communicate with computers through telephone or internet connections. The Company&#146;s
leak detection and location systems are being used to monitor fueling systems at airports, including
those located in Denver, Colorado; Atlanta, Georgia; and Frankfurt and Hamburg, Germany. They are
also used in facilities used for mission-critical operations such as those operated by web hosts,
application service providers, internet service providers, and in many clean rooms, including such
facilities operated by IBM, Intel and Motorola. The Company believes that, in the United States,
it is the only major supplier of the above-referenced types of specialty piping systems that manufactures
its own leak detection and location systems.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The Company&#146;s piping systems are frequently custom-fabricated to job site dimensions and/or incorporate
provisions for thermal expansion due to varying temperatures. This custom fabrication helps to minimize
the amount of field labor required by the installation contractor. Most of the Company&#146;s piping
systems are produced for underground installations and, therefore, require trenching, which is done
by unaffiliated installation contractors. Generally, sales of the Company&#146;s piping systems tend
to be lower during the winter months, due to weather constraints over much of the country. In the
fiscal year ended January 31, 2005, no single customer accounted for more than 10% of the net sales
of the Company&#146;s piping systems.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The Company&#146;s leak detection and location systems and its secondary containment piping systems
are used primarily by operators of military and commercial airport fueling systems, oil refineries,
pharmaceutical companies, chemical companies, and in museums, dry storage areas, and tunnels. They
are also used for water detection by internet service providers, application service providers, and
web hosts, as well as financial, telecommunication and other electronic service companies. The Company&#146;s
district heating and cooling systems are used primarily at prisons, housing developments, military
bases, cogeneration plants, hospitals, industrial locations and college campuses. The Company believes
many district heating and cooling systems in place are 30 to 50 years old and ready for replacement.
Replacement of district </FONT></P></TD></TR></TABLE>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>heating and cooling systems is often motivated by the increased cost of operating older systems due
to leakage and/or heat loss. The primary users of the Company&#146;s insulated flow lines are the
major oil companies, gas companies and other providers of mineral resources.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Marketing.</I></B> &nbsp;&nbsp;The customer base for the Company&#146;s piping systems products is industrially and geographically
diverse. The Company employs a national sales manager and regional sales managers who use and assist
a network of approximately 80 independent manufacturers&#146; representatives, none of whom sells
products that are competitive with the Company&#146;s piping systems. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Patents, Trademarks and Approvals.</I></B> &nbsp;The Company owns several patents covering the features of its piping and electronic leak detection
systems, which expire commencing in 2006. In addition, the Company&#146;s leak detection system is
listed by Underwriters Laboratories and the U.S. EPA and is approved by Factory Mutual and the Federal
Communications Commission. The Company is also approved as a supplier of underground district heating
systems under the federal government guide specifications for such systems. The Company owns numerous
trademarks connected with its piping systems business. In addition to Perma-Pipe&reg;, the Company owns
other trademarks for its piping and leak detection systems including the following:
Chil-Gard&reg;, Double-Pipe&reg;, Double-Quik&reg;, Escon-A&reg;, Ferro-Shield&reg;, FluidWatch&reg;, Galva-Gard&reg;, Hi Gard&reg;, Poly-Therm&reg;, Pal-AT&reg;, Ric-Wil&reg;, Ric-Wil Dual Gard&reg;, Stereo-Heat&reg;, Safe-T-Gard&reg;, Therm-O-Seal&reg;, Uniline&reg;, LiquidWatch&reg;, TankWatch&reg;, PalCom&reg;, Xtru-therm&reg;, Ultra-Pipe&reg;, PEX-GARD&reg;, and ULTRA-THERM&reg;. The Company also owns United Kingdom trademarks for Poly-Therm&reg;, Perma-Pipe&reg; &nbsp;and Ric-Wil&reg;, and a Canadian trademark for Ric-Wil&reg;.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Backlog.</I></B> &nbsp;&nbsp;As of January 31, 2005, the dollar amount of backlog (uncompleted firm orders) for piping
and leak detection systems was $18,125,000, substantially all of which is expected to be completed
in 2005. As of January 31, 2004, the amount of backlog was $16,635,000. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Raw Materials and Manufacturing.</I></B> &nbsp;The basic raw materials used in the production of the Company&#146;s piping systems products
are pipes and tubes made of carbon steel, alloy and plastics and various chemicals such as polyols,
isocyanate,&nbsp;polyester resin, polyethylene and fiberglass, mostly purchased in bulk quantities.
The Company believes that there are currently adequate supplies or sources of availability of the
needed raw materials. However, there are risks and uncertainties with respect to the supply of certain
of these raw materials that could impact their availability in sufficient quantities to meet our
needs. In particular, the price of steel and alloy tube rose rapidly during the early months of 2004. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The sensor cables used in the Company&#146;s leak detection and location systems are manufactured to
the Company&#146;s specifications by companies regularly engaged in the business of manufacturing
such cables. The Company owns patents for some of the features of its sensor cables. The Company
assembles the monitoring component of the leak detection and location system from standard components
purchased from many sources. The Company&#146;s proprietary software is installed in the system on
a read-only memory chip.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The Company&#146;s manufacturing processes for its piping systems include equipment and techniques
to fabricate piping systems from a wide variety of materials, including carbon steel, alloy and copper
piping, and engineered thermoplastics and fiberglass-reinforced polyesters and epoxies. The Company
uses computer-controlled machinery for electric plasma metal cutting, filament winding, pipe coating,
insulation foam and protective jacket application, pipe bending, pipe cutting and pipe welding. The
Company employs skilled workers for carbon steel and alloy welding to various code requirements.
The Company is authorized to apply the American Society of Mechanical Engineers code symbol stamps
for unfired pressure vessels and pressure piping. The Company&#146;s inventory includes bulk resins,
chemicals and various types of pipe, tube, insulation, pipe fittings and other components used in
its products. The Company maintains a quality assurance program involving lead worker sign-off of
each piece at each workstation, statistical process control, and nondestructive testing protocols.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Competition.</I></B> &nbsp;&nbsp;The piping system products business is highly competitive. The Company believes its competition
in the district heating and cooling market consists of two other national companies, Rovanco Piping
Systems, Inc. and Thermacor Process, Inc., as well as numerous regional competitors. The Company&#146;s
secondary containment piping systems face several competitors including Asahi/America and GF Plastics
Systems. The Company&#146;s oil and gas gathering flow lines face worldwide competition, including
Bredero-Price, a subsidiary of Shaw Industries, Inc.; CRP of UK; Soctherm of Italy, Soccoreal of
Argentina; and Logstor Rohr of Denmark. In addition to factory-fabricated systems of the type sold
by the Company, the Company competes with district heating and cooling systems and secondary containment
systems manufactured on the job site by contractors and sellers of component parts of systems. Products
competitive with the Company&#146;s leak detection and location systems include:&nbsp;(1) cable-based
systems manufactured by the TraceTek; by </FONT></P></TD></TR></TABLE>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Raychem, a Division of Tyco Thermal Controls LLC, a subsidiary of Tyco Industries, and by RLE Technologies;
(2) linear gaseous detector systems manufactured by Tracer Technologies and Arizona Instrument Corp.;
and (3) probe systems manufactured by Veeder Root and Pneumecator, as well as several other competitors
that provide probe systems for the service station and hydrocarbon leak detection industries.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The Company believes that quality, service, a comprehensive product line and price are the key competitive
factors in the Company&#146;s Piping Systems Business. The Company believes it has a more comprehensive
line of piping systems products than any of its competitors. Certain competitors of the Company have
cost advantages as a result of manufacturing a limited range of products. Some of the Company&#146;s
competitors have greater financial resources than the Company.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Government Regulation.</I></B> &nbsp;The demand for the Company&#146;s leak detection and location systems and secondary containment
piping systems is driven by federal and state environmental regulation with respect to hazardous
waste. The Federal Resource Conservation and Recovery Act requires, in some cases, that the storage,
handling and transportation of certain fluids through underground pipelines feature secondary containment
and leak detection. The National Emission Standard for Hydrocarbon Airborne Particulates requires
reduction of airborne volatile organic compounds and fugitive emissions. Under this regulation, many
major refineries are required to recover fugitive vapors and dispose of the recovered material in
a process sewer system, which then becomes a hazardous secondary waste system that must be contained.
Although there can be no assurances as to the ultimate effects of these governmental regulations,
the Company believes they may increase the demand for its piping systems products.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><a name="a5"></a>Industrial Process Cooling Equipment Business</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Products and Services.</I></B> &nbsp;The Company engineers, designs, manufactures and sells coolers for industrial purposes. The
Company&#146;s cooling products include:&nbsp;(i)&nbsp;chillers (portable and central); (ii)&nbsp;cooling
towers; (iii)&nbsp;plant circulating assemblies; (iv)&nbsp;hot water, hot oil, and negative pressure
temperature controllers; (v)&nbsp;water treatment equipment; (vi) specialty cooling devices for printing
presses and ink management; and (vii)&nbsp;replacement parts and various accessories relating to
the foregoing products. The Company&#146;s cooling products are used to optimize manufacturing productivity
by quickly removing heat from manufacturing processes. The Company combines chillers and/or cooling
towers with plant circulating systems to create plant-wide systems that account for a large portion
of its business. The Company specializes in customizing cooling systems and their computerized controls
according to customer specifications.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The principal markets for the Company&#146;s cooling products are thermoplastics processing and the
printing industries. The Company also sells its products to original equipment manufacturers, to
other cooling manufacturers on a private branded basis and to manufacturers in the laser, metallizing,
and machine tool industries.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Chillers.</I></B> &nbsp;&nbsp;Chillers are refrigeration units designed to provide cool water to a process for the purpose
of removing heat from the process and transferring that heat to an area where it can be dissipated.
This heat is either dissipated using air (air-cooled chillers) or water (water-cooled chillers).
Water-cooled chillers use a cooling tower to transfer the heat from the chiller using water and then
releasing the heat to the atmosphere.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The Company believes it manufactures the most complete line of chillers available in its primary markets.
The Company&#146;s line of portable chillers is available from &#189; horsepower to 40 horsepower.
It incorporates a microprocessor capable of computer communications to standard industry protocols.
While portable chillers are considered to be a commodity product by many customers, the Company believes
that its units enable it to provide the customer with quality, features, customization and other
benefits at a competitive price.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Central chillers are used for plant-wide cooling and, while some models incorporate their own pump
and tank, most are sold with separate pumping systems that are usually attached to reservoirs. These
chillers are distinguished by the manner in which the compressor (refrigerant pump) and the evaporator
(heat exchanger water-to-refrigerant) are used in the chiller. These chillers also use unique programmed
logic controllers capable of handling either the chillers only or they can be programmed to handle
the entire plant cooling system based on customer-plant demand. The Company believes that the ability
to offer these chiller systems provides it with a unique, total cooling approach concept sales advantage.
The Company&#146;s central chillers are available from 20 horsepower to 400 horsepower.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Cooling Towers.</I></B> &nbsp;A cooling tower is essentially a cabinet with heat transfer fill media in which water flows
down across the fill while air is pulled up through the fill. Cooling takes place by evaporation.
Cooling towers are located outdoors and are designed to provide water at a temperature of approximately
85 &deg; F to remove heat from water-cooled chillers, air compressors, hydraulic oil heat exchangers and other
processes that can effectively be cooled in this manner.</FONT></P></TD></TR></TABLE>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The Company markets two lines of cooling towers. The fiberglass tower line was introduced in 1984 and
at the time was the first fiberglass cooling tower line to be sold in the United States. The cabinets
for these towers are imported from China and are available in sizes ranging from 22 to 120 tons.
(One tower ton equals 15,000 BTU&#146;s/hour of heat removal.)&nbsp;The FC fiberglass tower line
is designed and engineered by the Company and is manufactured in the U.S.A. The FC line is available
from 100 to 240 tons. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Plant Circulating Systems</I></B>. The Company manufactures and markets a variety of tanks in various sizes with pumps and piping arrangements
that use alarms and other electrical options. Thus, the Company can provide a plant circulating system
which is unique and customized to meet the individual customer&#146;s needs. These plant circulating
systems are used as an integral part of central tower and chiller systems. These tanks are available
in milled steel, stainless steel, fiberglass reinforced polyester and polyethylene.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Temperature Control Units</I></B>. Most of the Company&#146;s temperature control units are used by injection molders of plastic parts
and by printing companies. They are designed to remove heat from the molds for the purpose of improving
part quality. More than 90% of the temperature control units sold in the industry are water units,
while the remaining units use oil as the heat transfer medium. Boe-Therm A/S (&#147;Boe-Therm&#148;),
a wholly-owned Danish subsidiary of the Company, manufactures a line of temperature control units,
including oil units and negative pressure units. The Company markets Boe-Therm&#146;s oil and negative
pressure units under Boe-Therm&#146;s name. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Water Treatment Equipment and Accessories</I></B>. Sold as an accessory to cooling tower systems, water treatment equipment must be used to protect
the equipment that is being cooled. The Company sells units manufactured to its specifications by
a supplier that provides all the equipment and chemicals needed to properly treat the water. While
a relatively small part of the Company&#146;s business, this arrangement allows the Company to offer
a complete system to its cooling products customers. In addition, the Company provides other items
to complement a system, principally heat exchangers, special valves, and &#147;radiator type&#148;
coolers. These items are purchased from suppliers and usually drop-shipped directly to customers.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Products for the Printing Industry</I></B>. These products are sold specifically for the proper temperature control and distribution of the ink
and cooling solutions used by printing companies. These include printers of large newspapers, magazines,
forms, etc.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Parts</I></B>. &nbsp;The Company strives to fill parts orders within 24&nbsp;hours and sells parts at competitive
margins in order to serve existing customers and to enhance new equipment sales.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Marketing.</I></B> &nbsp;&nbsp;In general, the Company sells its cooling products in the domestic and international thermoplastics
and printing markets as well as to manufacturers of digital video discs (&#147;DVDs&#148;) and other
non-plastics industries that require specialized heat transfer equipment.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Domestic thermoplastics processors are the largest market served by the Company, representing the core
of its business. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>There are approximately 8,000 companies processing plastic products in the United States, primarily
using injection molding, extrusion, and blow molding machinery. The Company believes the total U.S.
market for water cooling equipment in the plastics industry is $100 million annually, and that the
Company is one of the three largest suppliers of such equipment to the plastics industry. The Company
believes that the plastics industry is a mature industry with growth generally consistent with that
of the national economy. Due to the high plastics content in many major consumer items, such as cars
and appliances, this industry experiences cyclical economic activity. The Company believes that it
is recognized in the domestic plastics market as a quality equipment manufacturer and that it will
be able to maintain current market share, with potential to increase its market share through product
development. The Company&#146;s cooling products are sold through independent manufacturers&#146;
representatives on an exclusive-territory basis. Twenty agencies are responsible for covering the
United States and are supported by four regional managers employed by the Company.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Sales of the Company&#146;s cooling products outside the United States have mainly been in Latin America.
Some international sales have been obtained elsewhere as a result of the assembly of complete worldwide
PET (plastic bottle) plants by multinational companies. The Company believes that it has a significant
opportunity for growth due to the high quality of its equipment and the fact that it offers complete
system design. Many United States competitors do not provide equipment outside the U.S. and, while
European competitors sell equipment in Latin America, the Company believes that they lack system
design capabilities and have a significant freight disadvantage. The Company markets its cooling
products through a combination of manufacturers&#146; representatives, distributors and consultants
managed by regional managers, reporting to a </FONT></P></TD></TR></TABLE>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>National Sales and Marketing Manager. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The Company has increased sales to non-plastics industries that require specialized heat transfer equipment,
usually sold to end users as a package by the supplier of the primary equipment, particularly in
the laser industry, metallizing industry, and machine tool industry. The Company believes that the
size of this market is more than $200 million annually. The original equipment manufacturer generally
distributes products to the end user in these markets. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Trademarks.</I></B> &nbsp;&nbsp;The
Company has registered the trademarks Thermal Care&#174;, AWS&#174; and Applied Web
Systems&#174;.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Backlog.</I></B> &nbsp;&nbsp;As of
January 31, 2005, the dollar amount of backlog (uncompleted firm orders) for industrial process cooling equipment
 was $5,321,000, substantially all of which is expected to be completed
in 2005. As of January&nbsp;31, 2004, the amount of backlog was $3,825,000. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Raw Materials and Manufacturing.</I></B> &nbsp;The
Company uses prefabricated sheet metal and subassemblies manufactured by both Thermal Care
and outside vendors for temperature controller fabrication. The production line is self-contained
to reduce handling required to assemble, wire, test, and crate the units for shipment.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>FT towers up to 120 tons in capacity are assembled
to finished goods inventory, which allows the Company to meet quick delivery requirements. FT cooling towers are
manufactured using fiberglass and hardware components purchased from a Chinese manufacturer, which is the Company&#146;s sole source for such
products. The wet deck is cut from bulk fill material and installed inside the tower. Customer-specified
options can be added at any time.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The Company believes that its access to sheet metal, subassemblies, fiberglass and hardware components
is adequate.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The FC towers are designed and engineered by
the Company. Two different cabinet sizes of the FC tower account for eight different model variations. All FC cooling
towers are assembled at the Company&#146;s Niles facility. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The Company assembles all plant circulating systems
by fabricating the steel to meet the size requirements
and adding purchased components to meet customers&#146; specifications. Electrical control boxes
assembled in the electrical panel shop are then added to the tank and hardwired to all electrical
components. The interior of the steel tanks are coated with an immersion service epoxy and the exterior is painted in a spray booth. The Company also sells a fiberglass
tank for nonferrous applications.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Portable chillers are assembled utilizing components both manufactured by the Company and supplied
by outside vendors. Portable chillers are assembled using refrigeration components, a non-corrosive
tank, hose, and pre-painted sheet metal. Many of the components used in these chillers are fabricated
as subassemblies and held in inventory. Once the water and refrigeration components have been assembled,
the unit is moved to the electrical department for the addition of control subassemblies and wiring.
The chillers are then evacuated, charged with refrigerant and tested under fully loaded conditions.
The final production step is to clean, insulate, label, and crate the chiller for shipment.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Central chillers are manufactured to customer specifications. Many of the components are purchased
to the job requirements and production is planned so that subassemblies are completed to coincide
with the work center movements. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>After mechanical and electrical assembly, the chiller is
 evacuated, charged with refrigerant and tested
at full and partial load conditions. The equipment is then insulated and prepared for painting. The
final production step is to complete the quality control inspection and prepare the unit for shipment.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Competition.</I></B> &nbsp;&nbsp;The Company
believes that there are about 15 competitors selling cooling equipment in
the domestic plastics market. The Company further believes that three manufacturers, including the
Company, account for approximately 50% of the domestic plastics cooling equipment market. Many international
customers, with relatively small cooling needs, are able to purchase small refrigeration units (portable
chillers) that are manufactured in their respective local markets at prices below that which the
Company can offer due to issues such as freight cost and customs duties. However, such local manufacturers
often lack the technology and products needed for plant-wide cooling systems. The Company believes
that its reputation for producing quality plant-wide cooling products results in a significant portion
of the Company&#146;s business in this area.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The Company believes that quality, service, a comprehensive
product line and price are the key competitive
factors in its Industrial Process Cooling Equipment Business. The Company believes that it has a
more comprehensive line of cooling </FONT></P></TD></TR></TABLE>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>products than any of its competitors. Certain competitors of the Company have cost advantages as a
result of manufacturing in non-union shops and offering a limited range of products. Some of the
Company&#146;s competitors may have greater financial resources than the Company.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Government Regulation.</I></B> &nbsp;The Company does not expect compliance with federal, state and local provisions regulating the
discharge of materials into the environment or otherwise relating to the protection of the environment
to have a material effect on capital expenditures, earnings or the Company&#146;s competitive position.
Management is not aware of the need for any material capital expenditures for environmental control
facilities for the foreseeable future. Regulations, promulgated under the Federal Clean Air Act,
prohibit the manufacture and sale of certain refrigerants. The Company does not use these refrigerants
in its products. The Company expects that suitable refrigerants conforming to federal, state and
local laws and regulations will continue to be available to the Company, although no assurances can
be given as to the ultimate effect of the Federal Clean Air Act and related laws on the Company.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><a name="a6"></a>Employees</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>As of March 31, 2005, the Company had 728 full-time employees, 77 of whom were engaged in sales and
marketing, 186 of whom were engaged in management, engineering and administration, and 465 were engaged
in production. Hourly production employees of the Company&#146;s Filtration Products Business in
Winchester, Virginia are covered by a collective bargaining agreement with the International United
Automobile, Aerospace &amp; Agricultural Implement Workers of America, which expires in October 2006.
Most of the production employees of the Company&#146;s Industrial Process Cooling Equipment Business
are represented by two unions, the United Association of Journeymen and Apprentices of the Plumbing
and Pipefitting Industry of the United States (UAJAPPI) and the International Brotherhood of Electrical
Workers Union (IBEW). The collective bargaining agreement for UAJAPPI is scheduled to expire on June
1, 2005, and the IBEW agreement expires on May 31, 2005, with both agreements thereafter continuing
to be in effect for yearly periods unless amended or terminated in writing. The collective bargaining
agreement of the Piping Systems Business in Lebanon, Tennessee, with the Metal Trades Division of
UAJAPPI expires in March&nbsp;2007.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B>Executive Officers of the Registrant</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The following table set forth information regarding the officers of the Company as of March&nbsp;31,
2005:</FONT></P></TD></TR>
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    <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Name</FONT></TH>
    <TH>&nbsp;</TH>
    <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Offices and Positions, if any,<BR>held with the Company; Age </FONT></TH>
    <TH>&nbsp;</TH>
    <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Executive Officer of the<BR>
      Company<BR>
      or its Predecessor since</FONT></TH>
    <TH>&nbsp;</TH>
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    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD WIDTH=21% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>David Unger</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director, Chairman of the Board, and Chief Executive</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=21% ALIGN=LEFT><div align="center"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1972</FONT></div></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Officer of the Company; Age 70</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><div align="center"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Henry M. Mautner</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director and Vice Chairman of the Board of the</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><div align="center"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1972</FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Company; Age 78</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><div align="center"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Bradley E. Mautner</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Director, President and Chief Operating Officer of</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><div align="center"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1994</FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>the Company; Age 49</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><div align="center"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Gene K. Ogilvie</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vice President; Age 65</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><div align="center"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1969</FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Fati A. Elgendy</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vice President; Age 56</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><div align="center"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1990</FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Don Gruenberg</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vice President; Age 62</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><div align="center"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1980</FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Michael D. Bennett</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vice President, Chief Financial Officer,</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><div align="center"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1989</FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Secretary and Treasurer; Age 60</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><div align="center"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Thomas A. Benson</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vice President; Age 51</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><div align="center"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1988</FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Billy E. Ervin</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vice President; Age 59</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><div align="center"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1986</FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Robert A. Maffei</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vice President; Age 56</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><div align="center"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1987</FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Herbert J. Sturm</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Vice President; Age 54</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><div align="center"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1977</FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
</TABLE>
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<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>All of the officers serve at the discretion of the Board of Directors.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>David Unger has been employed by the Company and its predecessors in various executive and administrative
capacities since 1958, served as President of Midwesco, Inc. (&#147;Midwesco&#148;) from 1972 through
January 1994, and was Vice President from February 1994 through December 1996. He was also a director
of Midwesco from 1972 through </FONT></P></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>9</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><page><br>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>December 1996 and served that company in various executive and administrative capacities from 1958
until the consummation of the merger of Midwesco into the Company in December 1996 (the &#147;Merger&#148;).
He became a director and Vice President of the company formed to succeed to the non-Thermal Care
business of Midwesco (&#147;New Midwesco&#148;). He is the Company&#146;s Chairman of the Board of
Directors&nbsp;and Chief Executive Officer.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Henry M. Mautner has been employed by the Company and its predecessors in various executive capacities
since 1972, served as Chairman of Midwesco from 1972 through December 1996, and served that company
in various executive and administrative capacities from 1949 until the consummation of the Merger.
Since the consummation of the Merger, he has served as the Chairman of New Midwesco. Mr. Mautner
is the father of Bradley E. Mautner.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Bradley E. Mautner has been employed by the Company and its predecessors in various executive and administrative
capacities since 1978, has served as President and Chief Operating Officer since December 2004, was
Executive Vice President from December 2002 to December 2004, was Vice President of the Company from
December 1996 through December 2002 and has been a director of the Company since 1995. From 1994
to the consummation of the Merger, he served as President of Midwesco and since December 30, 1996
he has served as President of New Midwesco. In addition, since February 1996, he has served as the
Chief Executive Officer of Midwesco Services, Inc. (&#147;Midwesco Services&#148;) which was 50%
owned by New Midwesco until May 19, 2000, at which time it became a wholly-owned subsidiary of New
Midwesco. On November 17, 2000, Midwesco Services was merged into New Midwesco (&#147;Midwesco Services
Merger&#148;). From February 1988 to January 1996, he served as the President of Mid Res Inc. (predecessor
to Midwesco Services). Bradley E. Mautner is the son of Henry M. Mautner.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Gene K. Ogilvie has been employed by the Company and its predecessors in various executive capacities
since 1969. He has been general manager of Midwesco Filter or its predecessor since 1980 and President
and Chief Operating Officer of Midwesco Filter since 1989. From 1982 until the consummation of the
Midwesco Merger, he served as Vice President of Midwesco, Inc.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Fati&nbsp;A. Elgendy, who has been associated with the Company and its predecessors since 1978, was
Vice President, Director of Sales of the Perma-Pipe Division of Midwesco, Inc. from 1990 to 1991.
In 1991, he became Executive Vice President of the Perma-Pipe Division, a position he continued to
hold after the acquisition by the Company to form Perma-Pipe. In March 1995, Mr. Elgendy became President
and Chief Operating Officer of Perma-Pipe.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Don Gruenberg has been employed by the Company and its predecessors in various executive capacities
since 1974, with the exception of a period in 1979-1980. He has been general manager of Thermal Care
or its predecessor since 1980, and was named President and Chief Operating Officer of Thermal Care
in 1988. He has been a Vice President and director of the Company since December 1996. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Michael D. Bennett has served as the Chief Financial Officer and Vice President of the Company and
its predecessors since August&nbsp;1989.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Thomas A. Benson has served as Vice President Sales and Marketing of Thermal Care since May&nbsp;1988.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Billy E. Ervin has been Vice President, Director of Production of Perma-Pipe since 1986.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Robert A. Maffei has been Vice President, Director of Sales and Marketing of Perma-Pipe since August&nbsp;1996.
He had served as Vice President, Director of Engineering of Perma-Pipe since 1987 and was an employee
of Midwesco, Inc. from 1986 until the acquisition of Perma-Pipe by the Company in 1994.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Herbert J. Sturm has served the Company since 1975 in various executive capacities including Vice President,
Materials and Marketing Services of Midwesco Filter.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><a name="a7"></a>Item 2. &nbsp;PROPERTIES</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The Company&#146;s Filtration Products Business has three production facilities located in Winchester,
Virginia and Cicero, Illinois and Nakskov, Denmark, and it owns the land and buildings for each of
these facilities. The Midwesco Filter facility has a total area of 97,500 square feet and is
located on 5 acres in Winchester, Virginia. The building occupied by Company subsidiary TDC Filter
Manufacturing has a total area of 130,700 square feet and is located on 2.75 acres in Cicero, Illinois.
The building occupied by Nordic has a total area of 48,900 square feet on a 3.5-acre site in Nakskov,
Denmark, with construction of a new 20,900 square foot addition to be completed in 2005.</FONT></P></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>10</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>On June 17, 2004, Midwesco Filter sold one of its buildings located in Winchester, Virginia. The building
sold consisted of 66,998 square feet on 10 acres. The mortgage of $1,088,000 was paid at the closing.
The Company is leasing from the buyer approximately 12,000 square feet of office space in the building.
This transaction did not materially affect the earnings of the Company. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The production facilities for the Company&#146;s piping systems products are located in Lebanon, Tennessee
and New Iberia, Louisiana. The Lebanon facility is located on approximately 24 acres and is housed
in five buildings totaling 152,000 square feet, which contain manufacturing, warehouse and office
facilities, as well as a quality assurance laboratory. The Company owns the buildings and the land
for the Tennessee facility. The New Iberia production facility is comprised of two buildings with
a total area of 12,000 square feet, which contain automated manufacturing and warehouse facilities.
In September 2000, the Company purchased the buildings and signed a long-term lease for the land,
which lease expires in 2017.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The Company&#146;s principal executive offices and the production facilities for the Company&#146;s
Industrial Process Cooling Equipment Business are located in a 131,000 square foot building on 8.1
acres in Niles, Illinois owned by the Company. The Industrial Process Cooling Equipment Business
uses approximately 88,000 square feet of this facility for production and offices. The Industrial
Process Cooling Equipment Business also owns a 20,000 square foot manufacturing and office facility
in Assens, Denmark, which was purchased as part of the Boe-Therm acquisition in June 1998. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The Company believes its properties and equipment are well maintained and in good operating condition
and that productive capacities will generally be adequate for present and currently anticipated needs.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Compliance with environmental regulations by the Company in its manufacturing operations has not had,
and is not anticipated to have, a material effect on the capital expenditures, earnings or competitive
position of the Company.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><a name="a8"></a>Item 3. &nbsp;LEGAL PROCEEDINGS</B></FONT></P>
<P><FONT face="Times New Roman, Times, Serif" size=2>None</FONT></P>
<P><FONT face="Times New Roman, Times, Serif" size=2><B><a name="a9"></a>Item 4. &nbsp;SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>None. </FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B>PART II</B></FONT></P>
</TD>
</TR></TABLE>
<table width="600" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="9%">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign="top">
    <td nowrap><FONT face="Times New Roman, Times, Serif" size=2><B><a name="a10"></a>Item 5.</B></FONT></td>
    <td><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2><B>MARKET FOR REGISTRANT&#146;S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES</B></FONT></div></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td colspan="2"><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The Company&#146;s fiscal year ends on January 31. Years described as 2004, 2003 and 2002 are the fiscal years ended January 31, 2005, 2004 and 2003, respectively. Balances described as balances as of 2004 and 2003 are balances as of January 31, 2005 and 2004, respectively. </FONT></div></td>
  </tr>
</table>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>11</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><page><br>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The Company&#146;s Common Stock is traded on the Nasdaq National Stock Market under the symbol &#147;MFRI.&#148;&nbsp;The
following table sets forth, for the periods indicated, the high and low sale prices as reported by
the Nasdaq National Market for 2004 and for 2005.</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
  <TR VALIGN=Bottom>
    <TH><b><font size="1" face="Times New Roman, Times, serif">2003</font></b></TH>
    <TH COLSPAN=2><b><FONT FACE="Times New Roman, Times, serif" SIZE=1>High</FONT></b></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><b><font size="1" face="Times New Roman, Times, serif">Low</font></b></TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><hr align="center" width="25" size="1" noshade></TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>First Quarter</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1</FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.84</FONT></TD>
    <TD WIDTH=4% ALIGN=RIGHT>&nbsp;</TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1</FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.65</FONT></TD>
    <TD WIDTH=2% ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Second Quarter</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1</FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.95</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1</FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.67</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Third Quarter</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2</FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.68</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1</FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.91</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Fourth Quarter</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2</FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.86</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2</FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.31</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
</TABLE>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
  <TR VALIGN=Bottom>
    <TH><b><font size="1" face="Times New Roman, Times, serif">2004</font></b></TH>
    <TH COLSPAN=2><b><FONT FACE="Times New Roman, Times, serif" SIZE=1>High</FONT></b></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><b><font size="1" face="Times New Roman, Times, serif">Low</font></b></TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><hr align="center" width="25" size="1" noshade></TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT bgcolor="#eaf9e8"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>First Quarter</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 2</FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.87</FONT></TD>
    <TD WIDTH=4% ALIGN=RIGHT>&nbsp;</TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2</FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.50</FONT></TD>
    <TD WIDTH=2% ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Second Quarter</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3</FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.39</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2</FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.99</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Third Quarter</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6</FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.67</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3</FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.28</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Fourth Quarter</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11</FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.20</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5</FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>.85</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
</TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>As of April 15, 2005, there were approximately 100&nbsp;stockholders of record.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The Company has never declared or paid a cash dividend and does not anticipate paying cash dividends
on its Common Stock in the foreseeable future. Management presently intends to retain all available
funds for the development of the business and for use as working capital. Future dividend policy
will depend upon the Company&#146;s earnings, capital requirements, financial condition and other
relevant factors. The Company&#146;s line of credit agreement and note agreements contain certain
restrictions on the payment of dividends.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Neither the Company nor any &#147;affiliated purchaser&#148; as defined in Rule 10b-18 purchased any
shares of the Company&#146;s Common Stock during the period covered by this report. The Company has
not made any sale of unregistered securities during the preceding three years. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><a name="a11"></a>Item 6. &nbsp;SELECTED FINANCIAL DATA</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The following selected financial data for the Company for the years 2004, 2003, 2002, 2001, and 2000
are derived from the financial statements of the Company. The information set forth below should
be read in conjunction with &#147;Management&#146;s Discussion and Analysis of Financial Condition
and Results of Operations&#148; included herein in response to Item&nbsp;7 and the consolidated financial
statements and related notes included herein in response to Item&nbsp;8.</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD colspan="2" ALIGN=RIGHT><div align="center"><font size="1" face="Times New Roman, Times, serif"><b>2004</b></font></div></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD colspan="2" ALIGN=RIGHT><div align="center"><font size="1" face="Times New Roman, Times, serif"><b>2003</b></font></div></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD colspan="2" ALIGN=RIGHT><div align="center"><font size="1" face="Times New Roman, Times, serif"><b>2002</b></font></div></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD colspan="2" ALIGN=RIGHT><div align="center"><font size="1" face="Times New Roman, Times, serif"><b>2001</b></font></div></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD colspan="2" ALIGN=RIGHT><div align="center"><font size="1" face="Times New Roman, Times, serif"><b>2000</b></font></div></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><div align="left"><font size="1" face="Times New Roman, Times, serif"><i><b>(In thousands, except per share information)</b></i></font></div></TD>
    <TD colspan="14" ALIGN=RIGHT><div align="center"><font size="1" face="Times New Roman, Times, serif"><b>Fiscal Year ended January 31,</b></font></div></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD colspan="14" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD colspan="2" ALIGN=RIGHT><div align="center"><font size="1" face="Times New Roman, Times, serif"><b>2005</b></font></div></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD colspan="2" ALIGN=RIGHT><div align="center"><font size="1" face="Times New Roman, Times, serif"><b>2004</b></font></div></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD colspan="2" ALIGN=RIGHT><div align="center"><font size="1" face="Times New Roman, Times, serif"><b>2003</b></font></div></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD colspan="2" ALIGN=RIGHT><div align="center"><font size="1" face="Times New Roman, Times, serif"><b>2002</b></font></div></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD colspan="2" ALIGN=RIGHT><div align="center"><font size="1" face="Times New Roman, Times, serif"><b>2001</b></font></div></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><b><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Statements of Operations Data:</FONT></b></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net sales</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 145,096</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 120,889</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 122,897</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 125,534</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 149,533</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Income (loss) from operations</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5,177</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(721</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>914</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,172</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,920</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Income (loss) before extraordinary items and<br>
&nbsp;&nbsp;&nbsp;cumulative effect of accounting change</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,813</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,097</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(824</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(374</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,126</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net income (loss)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,813</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,097</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(11,528</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(374</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,126</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net income (loss) per share &#150; basic</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.56</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(0.22</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2.34</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(0.08</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.23</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net income (loss) per share &#150; diluted</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.54</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(0.22</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2.34</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(0.08</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.23</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
</TABLE>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><div align="left"><i><b><font face="Times New Roman, Times, serif"><font size="1"></font></font></b></i></div></TD>
    <TD colspan="14" ALIGN=RIGHT><div align="center"><font size="1" face="Times New Roman, Times, serif"><b>As of January 31,</b></font></div></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD colspan="14" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD colspan="2" ALIGN=RIGHT><div align="center"><font size="1" face="Times New Roman, Times, serif"><b>2005</b></font></div></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD colspan="2" ALIGN=RIGHT><div align="center"><font size="1" face="Times New Roman, Times, serif"><b>2004</b></font></div></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD colspan="2" ALIGN=RIGHT><div align="center"><font size="1" face="Times New Roman, Times, serif"><b>2003</b></font></div></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD colspan="2" ALIGN=RIGHT><div align="center"><font size="1" face="Times New Roman, Times, serif"><b>2002</b></font></div></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD colspan="2" ALIGN=RIGHT><div align="center"><font size="1" face="Times New Roman, Times, serif"><b>2001</b></font></div></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT bgcolor="#eaf9e8"><b><FONT FACE="Times New Roman, Times, serif" SIZE=2>Balance Sheet Data:</FONT></b></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=2>Total assets</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=2> 85,516</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=2> 78,927</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=2> 78,976</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=2> 92,529</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=2> 104,785</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=2>Long-term debt (excluding capital leases), less<br>
&nbsp;&nbsp;&nbsp;current portion</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=2>26,190</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=2>16,653</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=2>18,983</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=2>20,883</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=2>36,073</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=2>Capitalized leases, less current portion</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=2>15</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=2>8</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=2>66</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=2>217</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=2>348</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
</TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>12</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><page><br>
<table width="600" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="9%"><FONT face="Times New Roman, Times, Serif" size=2><B><a name="a12"></a>Item 7.</B></FONT></td>
    <td><FONT face="Times New Roman, Times, Serif" size=2><B>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS </B></FONT></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td><FONT face="Times New Roman, Times, Serif" size=2><B>OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</B></FONT></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
</table>

<table width="600" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td><P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The statements contained under the caption &#147;Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations&#148; and certain other information contained elsewhere in this annual report, which can be identified by the use of forward-looking terminology such as &#147;may,&#148; &#147;will,&#148; &#147;expect,&#148; &#147;continue,&#148; &#147;remains,&#148; &#147;intend,&#148; &#147;aim,&#148; &#147;should,&#148; &#147;prospects,&#148; &#147;could,&#148; &#147;future,&#148; &#147;potential,&#148; &#147;believes,&#148; &#147;plans,&#148; &#147;likely&#148; and &#147;probable&#148; or the negative thereof or other variations thereon or comparable terminology, constitute &#147;forward-looking statements&#148; within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are subject to the safe harbors created thereby. The





se statements should be considered as subject to the many risks and uncertainties that exist in the Company&#146;s operations and business environment. Such risks and uncertainties could cause actual results to differ materially from those projected. These uncertainties include, but are not limited to, economic conditions, market demand and pricing, competitive and cost factors, raw material availability and prices, global interest rates, currency exchange rates, labor relations and other risk factors. </FONT></P>
      <P><FONT face="Times New Roman, Times, Serif" size=2><B><U>RESULTS OF OPERATIONS</U></B></FONT></P>
    <P><FONT face="Times New Roman, Times, Serif" size=2><B><I>MFRI, Inc. </I></B></FONT></P></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
  </tr>
</table>
<table width="600" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td colspan="2"><img src="image13.jpg" width="587" height="146"></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
</table>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Generally, sales of the Company&#146;s piping systems have had a tendency to be lower during the winter

months, due to weather constraints over much of the country.</FONT></P>
<P align=left><FONT face="Times New Roman, Times, Serif" size=2><I>2004 Compared to 2003</I></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Net sales of $145,096,000 in 2004 increased 20.0% from $120,889,000 in 2003. Sales increased in all
business segments. Gross profit of $31,128,000 in 2004 increased 26.5% from $24,598,000 in 2003.
Gross margin increased to 21.5% of net sales in 2004 from 20.3% in 2003. (See discussion of each
business segment below.)</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Selling, general and administrative expenses increased 2.0% to $25,951,000 in 2004 from $25,319,000
in 2003. (See discussion of each business segment below.)</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Net income rose to $2,813,000 or $0.56 per common share (basic), compared with a loss of $1,097,000
or $0.22 per common share in 2003. The increase in net income was due to increased revenue and increased
gross profit. </FONT></P>
<P align=left><FONT face="Times New Roman, Times, Serif" size=2><I>2003 Compared to 2002</I></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Net sales of $120,889,000 in 2003 decreased 1.6% from $122,897,000 in 2002. Sales declined in the Piping
Systems and the Industrial Process Cooling Equipment businesses due to the weak economy which was
partially offset by increased sales from the Filtration Products business. Gross profit of $24,598,000
in 2003 decreased 8.7% from $26,940,000 in 2002. Gross margin decreased to 20.3% of net sales in
2003 from 21.9% in 2002. Overall gross margin decreased primarily as the result of competitive pricing
pressures and the unfavorable effect of spreading fixed manufacturing costs over lower production
volumes. (See discussion of each business segment below.)</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Selling, general and administrative expenses decreased 2.7% to $25,319,000 in 2003 from $26,026,000
in 2002. The prior-year period included significant legal expense associated with a patent-infringement
suit that has been settled, a </FONT></P></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>13</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><page><br>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>warranty claim that has been settled, higher data processing expenses and recognition of uncollectible
receivables. Additionally, cost-reduction measures implemented in 2003 have led to reductions in
general and administrative expense. (See discussion of each business segment below.)</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Loss before extraordinary items and cumulative effect of an accounting change was $1,097,000 or $0.22
per common share, compared with a loss of $824,000 or $0.17 per common share in 2002. This loss was
due to decreased sales and decreased gross profit.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Filtration Products Business</I></B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The Company&#146;s Filtration Products Business is characterized by a large number of relatively small
orders and a limited number of large orders, typically from electric utilities and original equipment
manufacturers. In 2004, the average order amount was approximately $3,540. The timing of large orders
can have a material effect on the comparison of net sales and gross profit from period to period.
Large orders generally are highly competitive and result in a lower gross margin. In 2004, 2003 and
2002, no customer accounted for 10% or more of the net sales of the Company&#146;s filtration products
and services. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The Company&#146;s Filtration Products Business is primarily dependent on governmental regulation of
air pollution at the federal and state levels. The Company believes that growth in the sale of its
filtration products and services will be materially dependent on continued enforcement of environmental
laws such as the Clean Air Act Amendments. Although there can be no assurances as to what ultimate
effect, if any, the Clean Air Act Amendments will have on the Company&#146;s Filtration Products
Business, the Company believes that the Clean Air Act&nbsp;Amendments are likely to have a long-term
positive effect on demand for the Company&#146;s filtration products and services. </FONT></P>
</TD></TR>
<TR>
  <TD vAlign=top>&nbsp;</TD>
</TR>
<TR>
  <TD vAlign=top><hr width="100%" size="1" noshade></TD>
</TR>
<TR>
  <TD vAlign=top>&nbsp;</TD>
</TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2><U>Filtration Products Business</U></FONT></TD></TR></TABLE>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><i><b><font size="1" face="Times New Roman, Times, serif">(In thousands) </font></b></i></TD>
    <TD colspan="2" ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD colspan="2" ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD colspan="2" ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD colspan="5" ALIGN=RIGHT><div align="center"><font size="1" face="Times New Roman, Times, serif"><b>% Increase<br>
        (Decrease)&nbsp;</b></font></div></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD colspan="2" ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD colspan="2" ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD colspan="2" ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD colspan="5" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TH><FONT FACE="Times New Roman, Times, serif" SIZE=1></FONT></TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, serif" SIZE=1>2004</FONT></TH>
    <TH><font size="1" face="Times New Roman, Times, serif"></font></TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, serif" SIZE=1>2003</FONT></TH>
    <TH><font size="1" face="Times New Roman, Times, serif"></font></TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, serif" SIZE=1>2002</FONT></TH>
    <TH><font size="1" face="Times New Roman, Times, serif"></font></TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, serif" SIZE=1>2004</FONT></TH>
    <TH><font size="1" face="Times New Roman, Times, serif"></font></TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, serif" SIZE=1>2003</FONT></TH>
    <TH><font size="1" face="Times New Roman, Times, serif"></font></TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net sales</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 61,740</FONT></TD>
    <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 54,872</FONT></TD>
    <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 53,174</FONT></TD>
    <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12.5</FONT></TD>
    <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.2</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Gross profit</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12,320</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9,782</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9,498</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>25.9</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.0</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;As a percentage of net sales</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>20.0</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">17.8</font></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">17.9</font></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Income from operations</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,539</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,145</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>400</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>209.1</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>186.3</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;As a percentage of net sales</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.7</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.1</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.8</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
</TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
  <TD vAlign=top><hr width="100%" size="1" noshade></TD>
</TR>
<TR>
  <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">&nbsp;&nbsp; </font></TD>
</TR>
<TR>
<TD vAlign=top>
<P><FONT face="Times New Roman, Times, Serif" size=2><I>2004 Compared to 2003</I></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Net sales increased 12.5% to $61,740,000 in 2004 from $54,872,000 in 2003. This increase was the result
of increased sales of all product lines. This increase was primarily due to a better economic environment
including improved conditions in the domestic steel industry.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Gross profit as a percent of net sales increased to 20.0% in 2004 from 17.8% in 2003, primarily as
a result of improved manufacturing efficiency on higher unit volume and a favorable product mix. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Selling expense increased to $5,644,000 or 9.1% of net sales in 2004 from $5,531,000 or 10.1% of net
sales in 2003. The increase primarily resulted from increased selling expense in pleated element
product line.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>General and administrative expenses decreased by 0.6% of sales to $3,137,000 or 5.1% of net sales in
2004 from $3,106,000 or 5.7% of net sales in 2003. This dollar increase was primarily due to increased
professional services expenses.</FONT></P></TD>
</TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>14</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><page><br>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD><P><FONT face="Times New Roman, Times, Serif" size=2><I>2003 Compared to 2002</I></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Net sales increased 3.2% to $54,872,000 in 2003 from $53,174,000 in 2002. This increase was the result
of increased sales of pleated filter elements, which are partially offset by lower filter bag sales.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Gross profit as a percent of net sales decreased to 17.8% in 2003 from 17.9% in 2002, primarily as
a result of product mix and competitive pricing pressures in the marketplace. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Selling expense decreased to $5,531,000 or 10.1% of net sales in 2003 from $5,598,000 or 10.5% of net
sales in 2002. The decrease was primarily a result of staff reductions.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>General and administrative expenses decreased to $3,106,000 or 5.7% of net sales in 2003 from $3,500,000
or 6.6% of net sales in 2002. The prior-year period included significant legal expense associated
with a patent-infringement suit that has been settled, a warranty claim that has been settled, higher
data processing expenses and recognition of uncollectible receivables. Additionally, cost-reduction
measures implemented in 2003 have led to reductions in current general and administrative expense. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Piping Systems Business</I></B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Generally, sales of the Company&#146;s piping systems have had a tendency to be lower during the winter

months, due to weather constraints over much of the country.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Generally, the Company&#146;s leak detection and location systems have higher profit margins than its
DHC piping systems and secondary containment piping systems. The Company has benefited from continuing
efforts to have its leak detection and location systems included as part of the customers&#146; original
specifications for construction projects. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Although demand for the Company&#146;s secondary containment piping systems is generally affected by
the customer&#146;s need to comply with governmental regulations, purchases of such products at times
have been delayed by customers due to adverse economic factors. In 2004, 2003 and 2002, no customer
accounted for 10% or more of net sales of the Company&#146;s Piping Systems Business. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The Company&#146;s Piping Systems Business is characterized by a large number of small and medium orders
and a small number of large orders. The average order amount for 2004 was approximately $45,000.
The timing of such orders can have a material effect on the comparison of net sales and gross profit
from period to period. Most of the Company&#146;s piping systems are produced for underground installations
and, therefore, require trenching, which is performed directly for the customer by installation contractors
unaffiliated with the Company. </FONT></P>

</TD></TR>
<TR>
  <TD vAlign=top>&nbsp;</TD>
</TR>
<TR>
  <TD vAlign=top><hr width="100%" size="1" noshade></TD>
</TR>
<TR>
  <TD vAlign=top>&nbsp;</TD>
</TR>
<TR>
  <TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2><U>Piping Systems Business</U></FONT></TD>
</TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><i><b><font size="1" face="Times New Roman, Times, serif">(In thousands) </font></b></i></TD>
    <TD colspan="2" ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="3" ALIGN=RIGHT><div align="center"><b><font size="1" face="Times New Roman, Times, serif">% Increase<br>
        (Decrease)&nbsp;</font></b></div></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="3" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TH><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, serif" SIZE=1>2004</FONT></TH>
    <TH><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, serif" SIZE=1>2003</FONT></TH>
    <TH><font size="1" face="Times New Roman, Times, serif"></font></TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, serif" SIZE=1>2002</FONT></TH>
    <TH><font size="1" face="Times New Roman, Times, serif"></font></TH>
    <TH><FONT FACE="Times New Roman, Times, serif" SIZE=1>2004</FONT></TH>
    <TH><font size="1" face="Times New Roman, Times, serif"></font></TH>
    <TH><FONT FACE="Times New Roman, Times, serif" SIZE=1>2003</FONT></TH>
    <TH><font size="1" face="Times New Roman, Times, serif"></font></TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT bgcolor="#eaf9e8"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net sales</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 54,053</FONT></TD>
    <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 40,523</FONT></TD>
    <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 44,037</FONT></TD>
    <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>33.4</FONT></TD>
    <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(8.0</FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Gross profit</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10,284</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7,516</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10,187</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>36.8</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(26.2</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;As a percentage of net sales</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>19.0</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>18.5</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>23.1</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Income from operations</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5,405</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,281</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,321</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>137.0</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(47.2</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;As a percentage of net sales</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.0</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.6</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.8</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
</TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
  <TD vAlign=top><hr width="100%" size="1" noshade></TD>
</TR>
<TR>
  <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">&nbsp;&nbsp; </font></TD>
</TR>
<TR>
<TD vAlign=top>
<P><FONT face="Times New Roman, Times, Serif" size=2><I>2004 Compared to 2003</I></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Net sales increased 33.4% to $54,053,000 in 2004 from $40,523,000 in 2003. This increase was primarily
due to some recovery from the weak economy in both the private and public sectors and to a single
large international sale. </FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Gross profit as a percent of net sales increased to 19.0% in 2004 from 18.5% in 2003, mainly due to
product mix and </FONT></P></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>15</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><page><br>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD>
<P><FONT face="Times New Roman, Times, Serif" size=2>increased volume.</FONT></P>
<P align="left"><FONT face="Times New Roman, Times, Serif" size=2>Selling expense decreased to $1,209,000 or 2.2% of net sales in 2004 from $1,250,000 or 3.1% of net
sales in 2003. The decrease was primarily due to one less sales employee.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>General and administrative expense decreased to $3,670,000 or 6.8% of net sales in 2004 from $3,985,000
or 9.8% of net sales in 2003. The decrease was primarily due to a 2003 legal settlement of $510,000
and legal fees associated with that settlement.</FONT></P>
<P><FONT face="Times New Roman, Times, Serif" size=2><I>2003 Compared to 2002</I></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Net sales decreased 8% to $40,523,000 in 2003 from $44,037,000 in 2002. This decrease was primarily
due to lower sales in product lines that are mainly dependent on state and federal government spending.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Gross profit as a percent of net sales decreased to 18.5% in 2003 from 23.1% in 2002, mainly due to
accepting lower margin jobs to maintain work levels.</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Selling expense decreased to $1,250,000 or 3.1% of net sales in 2003 from $1,430,000 or 3.2% of net
sales in 2002. The decrease was primarily due to reduced commissions due to lower sales.</FONT></P>
<P align="left"><FONT face="Times New Roman, Times, Serif" size=2>General and administrative expense decreased to $3,985,000 or 9.8% of net sales in 2003 from $4,435,000
or 10.1% of net sales in 2002. A settlement of $510,000 and $360,000 in related legal fees were incurred
in 2003. This was offset by lower MIS expenses, currency exchange gains from the collection of Canadian
Dollar accounts receivable, lower management incentive expenses, and reduced salaries charged to
general and administrative expense.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Industrial Process Cooling Equipment Business</I></B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The Company&#146;s Industrial Process Cooling Equipment Business is characterized by a large number
of relatively small orders and a limited number of large orders. In 2004, the average order amount
was approximately $2,200. In 2004, 2003 and in 2002, no customer accounted for 10% or more of net
sales of the Cooling Equipment Business. </FONT></P></TD></TR>
<TR>
  <TD vAlign=top>&nbsp;</TD>
</TR>
<TR>
  <TD vAlign=top><hr size="1" noshade></TD>
</TR>
<TR>
  <TD vAlign=top>&nbsp;</TD>
</TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2><U>Industrial Process Cooling Equipment Business</U></FONT></TD></TR></TABLE>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><i><b><font size="1" face="Times New Roman, Times, serif">(In thousands) </font></b></i></TD>
    <TD colspan="2" ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="3" ALIGN=RIGHT><div align="center"><b><font size="1" face="Times New Roman, Times, serif">% Increase<br>
        (Decrease)&nbsp;</font></b></div></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="3" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TH><FONT FACE="Times New Roman, Times, serif" SIZE=1></FONT></TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, serif" SIZE=1>2004</FONT></TH>
    <TH><font size="1" face="Times New Roman, Times, serif"></font></TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, serif" SIZE=1>2003</FONT></TH>
    <TH><font size="1" face="Times New Roman, Times, serif"></font></TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, serif" SIZE=1>2002</FONT></TH>
    <TH><font size="1" face="Times New Roman, Times, serif"></font></TH>
    <TH><FONT FACE="Times New Roman, Times, serif" SIZE=1>2004</FONT></TH>
    <TH><font size="1" face="Times New Roman, Times, serif"></font></TH>
    <TH><FONT FACE="Times New Roman, Times, serif" SIZE=1>2003</FONT></TH>
    <TH><font size="1" face="Times New Roman, Times, serif"></font></TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT bgcolor="#eaf9e8"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net sales</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <td width="6%" valign="bottom"><p align="right"><font size="2" face="Times New Roman, Times, serif"> 29,303 </font></p></td>
    <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <td width="6%" valign="bottom"><p align="right"><font size="2" face="Times New Roman, Times, serif"> 25,494 </font></p></td>
    <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <td width="6%" valign="bottom"><p align="right"><font size="2" face="Times New Roman, Times, serif"> 25,686 </font></p></td>
    <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <td width="6%" valign="bottom"><p align="right"><font size="2" face="Times New Roman, Times, serif"> 14.9</font></p></td>
    <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <td width="6%" valign="bottom"><p align="right"><font size="2" face="Times New Roman, Times, serif"> (0.7</font></p></td>
    <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Gross profit</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <td width="6%" valign="bottom"><p align="right"><font size="2" face="Times New Roman, Times, serif"> 8,524 </font></p></td>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <td width="6%" valign="bottom"><p align="right"><font size="2" face="Times New Roman, Times, serif"> 7,300 </font></p></td>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <td width="6%" valign="bottom"><p align="right"><font size="2" face="Times New Roman, Times, serif"> 7,255 </font></p></td>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <td width="6%" valign="bottom"><p align="right"><font size="2" face="Times New Roman, Times, serif"> 16.8</font></p></td>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <td width="6%" valign="bottom"><p align="right"><font size="2" face="Times New Roman, Times, serif"> 0.6</font></p></td>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;As a percentage of net sales</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <td width="6%" valign="bottom"><p align="right"><font size="2" face="Times New Roman, Times, serif"> 29.1</font></p></td>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <td width="6%" valign="bottom"><p align="right"><font size="2" face="Times New Roman, Times, serif"> 28.6</font></p></td>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <td width="6%" valign="bottom"><p align="right"><font size="2" face="Times New Roman, Times, serif"> 28.2</font></p></td>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <td width="6%" valign="bottom"></td>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <td width="6%" valign="bottom"></td>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Income from operations</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <td width="6%" valign="bottom"><p align="right"><font size="2" face="Times New Roman, Times, serif"> 1,570</font></p></td>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <td width="6%" valign="bottom"><p align="right"><font size="2" face="Times New Roman, Times, serif"> 738</font></p></td>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <td width="6%" valign="bottom"><p align="right"><font size="2" face="Times New Roman, Times, serif"> 702</font></p></td>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <td width="6%" valign="bottom"><p align="right"><font size="2" face="Times New Roman, Times, serif"> 112.7</font></p></td>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <td width="6%" valign="bottom"><p align="right"><font size="2" face="Times New Roman, Times, serif"> 5.1</font></p></td>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;As a percentage of net sales</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <td width="6%" valign="bottom"><p align="right"><font size="2" face="Times New Roman, Times, serif"> 5.4</font></p></td>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <td width="6%" valign="bottom"><p align="right"><font size="2" face="Times New Roman, Times, serif"> 2.9</font></p></td>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <td width="6%" valign="bottom"><p align="right"><font size="2" face="Times New Roman, Times, serif"> 2.7</font></p></td>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
</TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
  <TD vAlign=top><hr size="1" noshade></TD>
</TR>
<TR>
  <TD vAlign=top>&nbsp;</TD>
</TR>
<TR>
<TD vAlign=top>
<P><FONT face="Times New Roman, Times, Serif" size=2><I>2004 Compared to 2003</I></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Net sales increased 14.9% to $29,303,000 in 2004 from $25,494,000 in 2003 mainly due to some recovery
from the weak economy. Sales increased in both the domestic and international markets.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Gross profit as a percentage of net sales increased to 29.1% in 2004 from 28.6% in 2003, primarily
due improved pricing and production efficiencies </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>As a percentage of sales, selling expense decreased 0.8% to $3,624,000 or 12.4% of net sales in 2004
from $3,361,000 or 13.2% of net sales in 2003. The dollar increase was primarily due to the higher
commissions associated with increased sales. </FONT></P></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>16</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><page><br>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>General and administrative expense decreased 1.2% of sales to $3,330,000 or 11.4% of net sales in 2004
from $3,201,000 or 12.6% of net sales in 2003. The dollar increase was primarily due to higher costs
for the international operation resulting from additional headcount and increased product development
costs.</FONT></P>
<P><FONT face="Times New Roman, Times, Serif" size=2><I>2003 Compared to 2002</I></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Net sales decreased 0.7% from $25,686,000 in 2002 to $25,494,000 in 2003. Demand for equipment was
down, but largely offset by increased orders for installation and other services and new product
sales from the July 2002 purchase of a business (by acquiring specified assets and assuming specified
liabilities). </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Gross profit as a percentage of net sales increased to 28.6% in 2003 from 28.2% in 2002, primarily
due increased sales for services, new product features and some new products associated with the
July 2002 purchase of a business (by acquiring specified assets and assuming specified liabilities)
to competitive pricing pressures and higher production costs associated with new products.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Selling expense decreased to $3,361,000 or 13.2% of net sales in 2003 from $3,418,000 or 13.3% in 2002.
This decrease was primarily due to increased sales to direct manufacturers, which resulted in lower
selling expenses, partially offset by the additional sales employees associated with the July 2002
purchase of a business (by acquiring specified assets and assuming specified liabilities). </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>General and administrative expense increased to $3,201,000 or 12.6% of net sales in 2003 from $3,136,000
or 12.2% of net sales in the prior year. The dollar increase was due to additional employees and
certification expenses for the ISO partially offset by elimination of expenses associated with the
prior-year completion of a new ERP business applications software.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B>General Corporate Expense</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>General corporate expense included interest expense and general and administrative expenses that were
not allocated to the business segments.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><I>2004 Compared to 2003</I></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>General and administrative expense increased 9.2% from $4,886,000 in 2003 to $5,337,000 in 2004, and
decreased as a percentage of consolidated net sales from 4.0% in 2003 to 3.7% in 2004. The dollar
increase was mainly due to management incentive compensation earned and building repairs and maintenance
costs.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Interest expense decreased 17.2% to $1,658,000 in 2004 from $2,003,000 in 2003. The decrease was primarily
due to lower interest expense due to the sale of a building in Winchester, Virginia in June 2004,
and to lower floating interest rates in 2004. Interest income on federal tax refunds and a long-term
distribution gain were received in 2004. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><I>2003 Compared to 2002</I></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>General and administrative expense increased 8.4% from $4,509,000 in 2002 to $4,886,000 in 2003, and
increased as a percentage of net sales from 3.7% in 2002 to 4.0% in 2003. Adoption of SFAS No. 145
resulted in the reclassification of an extraordinary loss of $133,000 recorded in the quarter ended
July 31, 2002 to an operating expense in the current year&#146;s presentation of prior-year financial
information. The increase in 2003 was mainly due to increased salaries due to filled positions that
were vacant in the prior-year, partially offset by reduced expenses for temporary help, increased
costs related to maintenance of director and officer insurance, increased loan amortization expense
due to debt restructuring in July 2002 and amendments thereafter, and increased utilities costs. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Interest expense decreased 4.9% from $2,107,000 in 2002 to $2,003,000 in 2003. The decrease was primarily
due to reduced interest rates from the July 2002 debt restructuring.</FONT></P></TD>
</TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>17</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><page><br>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD><P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Income Taxes</I></B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The effective income tax expense (benefit) rates were 24.9%, (50.8%) and (27.5%) in 2004, 2003 and
2002, respectively. The differences between the effective income tax rate and the U.S. Statutory
tax rate for 2004 and 2003 were:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
  <TR VALIGN=Bottom>
    <TH bgcolor="#FFFFFF">&nbsp;</TH>
    <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
    <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004</FONT></TH>
    <TH>&nbsp;</TH>
    <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT></TH>
    <TH>&nbsp;</TH>
    <TH bgcolor="#FFFFFF">&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT bgcolor="#FFFFFF">&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT bgcolor="#FFFFFF">&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD width="8%" ALIGN=LEFT bgcolor="#FFFFFF"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=2>Statutory tax rate</FONT></TD>
    <TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=2>34.0</FONT></TD>
    <TD WIDTH=4% ALIGN=RIGHT><div align="left"><FONT FACE="Times New Roman, Times, serif" SIZE=2>%</FONT></div></TD>
    <TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=2>(34.0</FONT></TD>
    <TD WIDTH=3% ALIGN=RIGHT><div align="left"><FONT FACE="Times New Roman, Times, serif" SIZE=2>%)</FONT></div></TD>
    <TD WIDTH=8% ALIGN=RIGHT bgcolor="#FFFFFF"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT bgcolor="#FFFFFF"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=2>State taxes, net of federal benefit</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=2>4.2</FONT></TD>
    <TD ALIGN=RIGHT><div align="left"><FONT FACE="Times New Roman, Times, serif" SIZE=2>%</FONT></div></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=2>(5.4</FONT></TD>
    <TD ALIGN=RIGHT><div align="left"><FONT FACE="Times New Roman, Times, serif" SIZE=2>%)</FONT></div></TD>
    <TD ALIGN=RIGHT bgcolor="#FFFFFF"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT bgcolor="#FFFFFF"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=2>Differences in foreign tax rate</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=2>(1.6</FONT></TD>
    <TD ALIGN=RIGHT><div align="left"><FONT FACE="Times New Roman, Times, serif" SIZE=2>%)</FONT></div></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=2>(7.6</FONT></TD>
    <TD ALIGN=RIGHT><div align="left"><FONT FACE="Times New Roman, Times, serif" SIZE=2>%)</FONT></div></TD>
    <TD ALIGN=RIGHT bgcolor="#FFFFFF"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT bgcolor="#FFFFFF"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=2>All other, net</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=2>(11.7</FONT></TD>
    <TD ALIGN=RIGHT><div align="left"><FONT FACE="Times New Roman, Times, serif" SIZE=2>%)</FONT></div></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=2>(3.8</FONT></TD>
    <TD ALIGN=RIGHT><div align="left"><FONT FACE="Times New Roman, Times, serif" SIZE=2>%)</FONT></div></TD>
    <TD ALIGN=RIGHT bgcolor="#FFFFFF"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT bgcolor="#FFFFFF"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT bgcolor="#FFFFFF"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT bgcolor="#FFFFFF"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=2>Effective tax rate</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=2>24.9</FONT></TD>
    <TD ALIGN=RIGHT><div align="left"><FONT FACE="Times New Roman, Times, serif" SIZE=2>%</FONT></div></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=2>(50.8</FONT></TD>
    <TD ALIGN=RIGHT><div align="left"><FONT FACE="Times New Roman, Times, serif" SIZE=2>%)</FONT></div></TD>
    <TD ALIGN=RIGHT bgcolor="#FFFFFF"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
</TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P><FONT face="Times New Roman, Times, Serif" size=2><B><U>LIQUIDITY AND CAPITAL RESOURCES</U></B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Cash and cash equivalents as of January 31, 2005 were $723,000 as compared to $154,000 at January 31,
2004. The Company generated $249,000 from operations in 2004. Operating cash flows decreased by $6,542,000
from 2003. The $1,804,000 proceeds from the sale of property, plant and equipment mainly resulted
from the sale of a building and land to a third party in June 2004. A cash distribution of $50,000
in June 2004 was received from the Company&#146;s investment in a joint venture. These cash flows
were used to support $1,755,000 in capital spending.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Trade receivables increased $4,287,000 and inventories increased $2,659,000 in 2004 due to increased
sales. Prepaid expenses and other current assets increased $1,594,000 in 2004 due to an increase
in deferred tax assets and an insurance premium being paid in January 2005. Other operating assets
and liabilities decreased $1,028,000 in 2004. Net cash provided by operating activities in 2003 was
$6,791,000, which resulted mainly from earnings from operations, decreases in inventory, decreases
in prepaid expenses, decreases in other current assets, and increases in accounts payable, partially
offset by an increase in other assets and liabilities. Net cash provided by operating activities
was $2,833,000 in 2002, mainly from earnings from operations, decreases in accounts receivable, decreases
in prepaid expenses, and decreases in other current assets, partially offset by an increase in other
assets and liabilities and a decrease in accounts payable.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Net cash from investing activities in 2004 was $99,000 and net cash used for investing activities in
2003 was $3,199,000. From 2003 to 2004, proceeds from the sale of property and equipment increased
$1,328,000. On June 17, 2004, the Company sold one of its buildings located in Winchester, Virginia.
The building sold consisted of 66,998 square feet on 10 acres. The Company is leasing from the Buyer
approximately 12,000 square feet of office space in the building. This transaction did not materially
affect the earnings of the Company. 2004 capital expenditures decreased to $1,755,000 from $4,102,000
in 2003. The capital expenditures related to new ERP business applications software and to equipment
purchases. In 2003, capital additions of $2,042,000 related to the Company&#146;s construction of
a new building for one of its foreign subsidiaries, $281,000 related to new ERP business applications
software, and the remainder related to equipment purchases. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The Company estimates that capital expenditures for 2005 will be approximately $2,264,000. The Filtration
Products Business in Nakskov, Denmark, has begun construction of a new 20,900 square foot addition
which will be completed in 2005. Nordic is awaiting final execution of financing. Other capital expenditures
primarily will relate to machinery and equipment, building and leasehold improvements, and computer
hardware and software purchases. The Company may finance capital expenditures through internally
generated funds or its revolving line of credit. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Debt totaled $27,539,000, down $986,000 since the beginning of 2004. Net cash inflows from financing
activity were $303,000, consisting of $1,476,000 from stock options exercised offset by $1,130,000
net payments on debt obligations and $43,000 used for payments on capitalized lease obligations.
In 2003, the Company paid a net $3,458,000 of debt obligations and utilized $141,000 to pay capitalized
lease obligations.</FONT></P></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>18</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><page><br>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The following table summarizes the Company&#146;s estimated contractual obligations at January 31,
2005. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Payment Due by:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
  <TR VALIGN=Bottom>
    <TH><div align="left"><FONT FACE="Times New Roman, Times, serif" SIZE=1>Contractual Obligations</FONT></div></TH>
    <TH><font size="1" face="Times New Roman, Times, serif"></font></TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, serif" SIZE=1>Total</FONT></TH>
    <TH><font size="1" face="Times New Roman, Times, serif"></font></TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, serif" SIZE=1>1/31/06</FONT></TH>
    <TH><font size="1" face="Times New Roman, Times, serif"></font></TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, serif" SIZE=1>1/31/07</FONT></TH>
    <TH><font size="1" face="Times New Roman, Times, serif"></font></TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, serif" SIZE=1>1/31/08</FONT></TH>
    <TH><font size="1" face="Times New Roman, Times, serif"></font></TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, serif" SIZE=1>1/31/09</FONT></TH>
    <TH><font size="1" face="Times New Roman, Times, serif"></font></TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, serif" SIZE=1>1/31/10</FONT></TH>
    <TH><font size="1" face="Times New Roman, Times, serif"></font></TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, serif" SIZE=1>Thereafter</FONT></TH>
    <TH><font size="1" face="Times New Roman, Times, serif"></font></TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD colspan="2" ALIGN=LEFT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>Mortgages</FONT></TD>
    <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>$</FONT></TD>
    <TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1> 9,161,300</FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>$</FONT></TD>
    <TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1> 534,600</FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>$</FONT></TD>
    <TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1> 536,000</FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>$</FONT></TD>
    <TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1> 569,700</FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>$</FONT></TD>
    <TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1> 1,693,300</FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>$</FONT></TD>
    <TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1> 602,400</FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>$</FONT></TD>
    <TD WIDTH=6% ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, serif" SIZE=1>5,225,300</FONT></div></TD>
    <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>Senior Debt</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>3,125,000</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>750,000</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>750,000</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>1,625,000</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, serif" SIZE=1>&#151;</FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>IRB Payable</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>3,150,000</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>3,150,000</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, serif" SIZE=1>&#151;</FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>Term Loans</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>32,600</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>32,600</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2><font face="Times New Roman, Times, serif"><font size="1"></font></font></FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD colspan="20" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;&nbsp;Subtotals (1)</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>15,468,900</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>1,317,200</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>1,286,000</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>5,344,700</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>1,693,300</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>602,400</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, serif" SIZE=1>5,225,300</FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>Capitalized Lease<br>
&nbsp;&nbsp;Obligations</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>31,500</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>16,300</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>5,800</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>3,900</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>3,900</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>1,600</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, serif" SIZE=1>&#151;</FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>Operating Lease<br>
&nbsp;&nbsp;Obligations</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>1,951,300</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>478,700</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>455,600</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>360,600</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>272,100</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>40,800</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, serif" SIZE=1>343,500</FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>Purchase<br>
&nbsp;&nbsp;Commitments (2)</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>10,716,100</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>10,432,000</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>217,500</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>52,800</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>13,800</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2><font face="Times New Roman, Times, serif"><font size="1"></font></font></FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD colspan="20" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;&nbsp;Totals</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1> 28,167,800</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1> 12,244,200</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1> 1,964,900</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1> 5,762,000</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1> 1,983,100</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=1> 644,800</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>$</FONT></TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, serif" SIZE=1>5,568,800</FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=1>&nbsp;</FONT></TD>
  </TR>
</TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
  <TD vAlign=top></TD>
  <TD vAlign=top>&nbsp;</TD>
  <TD vAlign=top>&nbsp;</TD>
</TR>
<TR>
<TD vAlign=top width=24></TD>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>(1)<FONT face="Times New Roman, Times, Serif" size=2></FONT></FONT></TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2><FONT face="Times New Roman, Times, Serif" size=2></FONT>Scheduled maturities, excluding the revolving lines of credit of $12,038,000.</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=24></TD>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>(2)<FONT face="Times New Roman, Times, Serif" size=2></FONT></FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2><FONT face="Times New Roman, Times, Serif" size=2></FONT>Purchase commitments are for purchases made in the normal course of business to meet operational and
  capital expenditure requirements.</FONT></div></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P><FONT face="Times New Roman, Times, Serif" size=2>Other long term liabilities of $2,748,000 was composed of accrued pension cost and deferred compensation.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The Company&#146;s working capital was approximately $26,332,000 at January 31, 2005 compared to approximately
$8,759,000 at January 31, 2004. This increase was partially due to the change in the classification
of the revolver debt. At January 31, 2004 the revolver of $7,229,000 was classified as current. On
March 28, 2005 the Company amended this loan agreement for its revolving line of credit in order
to, among other things, classify the revolving debt as long-term pursuant to Emerging Issues Task
Force 95-22 &#147;Balance Sheet Classification of Borrowings Outstanding under Revolving Credit Agreements
That Include both a Subjective Acceleration Clause and a Lock-Box Arrangement&#148; (EITF 95-22),
which had previously required the Company to classify such borrowings as current maturities of long-term
debt. Accordingly, at January 31, 2005 borrowings under the Loan Agreement and those that were refinanced
under the Amendment are classified as long-term debt.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The Company&#146;s current ratio was 2.0 to 1 and 1.3 to 1 at January 31, 2005 and January 31, 2004,
respectively. Debt to total capitalization at January 31, 2005 decreased to 46.8% from 51.5% at January
31, 2004. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The Company has no off-balance sheet arrangements requiring disclosure.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Financing</I></B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>At January 31, 2005, the Company was in compliance with all terms and covenants of all loans.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>On July 11, 2002, the Company entered into secured note purchase agreements with certain institutional
investors (&#147;Note Purchase Agreements&#148;). Under the terms of the Note Purchase Agreements,
the Company entered into a five-year $6,000,000 term loan replacing prior term loans with an aggregate
original principal balance of $25,000,000 (&#147;Prior Term Loans&#148;). The outstanding principal
balance of the Prior Term Loans at July 11, 2002 was $16,000,000. The Company borrowed $10,000,000
from its new revolving line of credit from another financial institution (described below) to pay
down this loan from $16,000,000 to $6,000,000. Interest rates under the Note Purchase Agreements
were 12% per annum if the outstanding principal was greater than $5,000,000 or 10% per annum if the
outstanding principal was $5,000,000 or less. The Company was scheduled to pay $188,000 in aggregate
principal on the last days of March, June, September and December in each year, commencing on September
30, 2002 and ending on June 30, 2007. In addition, the Company was scheduled to make annual prepayments
of excess cash flow (as defined in the Note Purchase Agreements). Finally, the Loan Agreement (defined
below) and the Note Purchase Agreements permit voluntary prepayments sufficient to reduce the outstanding
term loan principal to $5,000,000 subject to certain conditions. The Company met such conditions
and made such a prepayment on July 31, 2002. As is described below, the $3,125,000 balance remaining
under the Note Purchase Agreement at March 28, 2005 was repaid in full on that date.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>On July 11, 2002, the Company entered into a secured loan and security agreement with a financial institution
(&#147;Loan </FONT></P></TD></TR></TABLE>
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<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>19</FONT></P>
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<TR>
<TD>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Agreement&#148;). &nbsp;Under the terms of the Loan Agreement, which matures on November 30, 2007,
the Company can borrow up to $27,000,000, subject to borrowing base and other requirements, under
a revolving line of credit. Interest rates generally are based on options selected by the Company
as follows:&nbsp;(a) a margin in effect plus a prime rate; or (b) a margin in effect plus the LIBOR
rate for the corresponding interest period. At January 31, 2005, the prime rate was 5.25%, and the
margins added to the prime rate and the LIBOR rate, which are determined each quarter based on the
applicable financial statement ratio, were 1.25 and 3.25 percentage points, respectively. Monthly
interest payments were made. The average interest rate for the year ending January 31, 2005 was 4.99%.
As of January 31, 2005, the Company had borrowed $11,370,000 and had $2,182,000 available to it under
the revolving line of credit. In addition, $4,727,000 of availability was used under the Loan Agreement
primarily to support letters of credit to guarantee amounts owed for Industrial Revenue Bond borrowings.
The Loan Agreement provides that all payments by the Company&#146;s customers are deposited in a
bank account from which all funds may only be used to pay the debt under the Loan Agreement. At January
31, 2005, the amount of restricted cash was $973,000. Cash required for operations is provided by
draw-downs on the line of credit.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>On March 28, 2005, the Company&#146;s Loan Agreement was amended to (1) add a term loan of $4,300,000
(&#147;Term Loan&#148;) and (2) amend certain covenants (the &#147;Amendment&#148;). The total that
can be borrowed under the Loan Agreement is unchanged at $27,000,000, subject to borrowing base and
other requirements. Interest rates under the Term Loan are based on options selected by the Company
as follows:&nbsp;(a) a margin in effect plus a prime rate; or (b) a margin in effect plus the LIBOR
rate for the corresponding interest period. At March 28, 2005 the prime rate was 5.75% and the margins
added to the prime rate and the LIBOR rate, which are determined each quarter based on the applicable
financial statement ratio, were 1.25 and 3.5 percentage points, respectively. The Company is scheduled
to pay $215,000 of principal on the first days of March, June, September, and December in each year,
commencing on June 1, 2005 and ending on September 30, 2007, with the remaining unpaid principal
payable on November 30, 2007. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The proceeds of the Term Loan were used to repay the outstanding balance due under the Company&#146;s
Note Purchase Agreements ($3,125,000), which have now been cancelled and to reduce the Company&#146;s
revolving debt under the Loan Agreement ($1,175,000). Interest rates under the Note Purchase Agreements
had been 10% per annum.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>On January 29, 2003, the Company obtained a loan from a Danish bank to construct a building, in the

amount of 1,050,000 Euro, approximately $1,136,000 at the exchange rate prevailing at the time
of
the transaction. The loan has a term of twenty years. The loan bears interest at 6.1% with quarterly

payments of $19,000 for both principal and interest.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>On April 26, 2002, Midwesco Filter borrowed $3,450,000 under two mortgage notes secured by two parcels

of real property and improvements owned by Midwesco Filter in Winchester, Virginia. Proceeds from

the mortgages, net of a prior mortgage loan, were approximately $2,700,000 and were used to make

principal payments to the lenders under the Prior Term Loans and the bank which was the lender
under
the Company&#146;s revolving line of credit at that time. On June 17, 2004, Midwesco Filter
sold
one of its buildings located in Winchester, Virginia. The building sold consisted of 66,998
square
feet on 10 acres. The mortgage of $1,088,000 was paid at the closing and has been cancelled.
The
note on the remainder property bears interest at 7.10% with a monthly payment of $23,616 for
both
principal and interest, and the note&#146;s amortization schedule and term are ten years.</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
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<TR>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On July 31, 2002 Perma-Pipe, Inc. borrowed $1,750,000 under a mortgage note secured by its manufacturing
  facility in Lebanon, Tennessee. From the proceeds, $1,000,000 was used for a payment of amounts borrowed
  under the Note Purchase Agreements with the remaining proceeds used to repay amounts borrowed under
  the Loan Agreement. The loan bears interest at 7.75% with monthly payments of $21,001 for both principal
  and interest, and has a ten-year term. </FONT></div></TD></TR>
<TR>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On September 20, 2000, the Company purchased

an 8.1-acre parcel of land with a 131,000-square foot building in Niles, Illinois, from two principal

stockholders, who are also members of management, for approximately $4,438,000. This amount included

the assumption of a $2,500,000 mortgage note with a remaining balance of $2,405,000. The loan bears

interest at 7.52% with monthly payments of $18,507 for both principal and interest based on an
  amortization
  schedule of 25 years with a balloon payment at the end of the ten-year term. At the
  date of purchase,
  the remaining term of the loan was 7.25 years.</FONT></div></TD></TR>
<TR>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On June 30, 1998, the Company borrowed $1,400,000

under a mortgage note secured by the manufacturing facility in Cicero, Illinois. The loan bears
  interest
  at 6.76% with monthly payments of $9,682 for both principal and interest based on an amortization

schedule of 25 years with a balloon payment at the end of the ten-year term. </FONT></div></TD></TR>
<TR>
<TD vAlign=top>&nbsp;</TD></TR></TABLE>
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<TR>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On June 1, 1998, the Company obtained a loan in the amount of 4,500,000 DKK (approximately $650,000
  at the </FONT></div></TD></TR></TABLE>
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<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>20</FONT></P>
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<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>prevailing exchange rate at the time of the transaction) from a Danish bank to partially finance the
  acquisition of Boe-Therm A/S (&#147;Boe-Therm&#148;). It is secured by the land and building of Boe-Therm,
  bears interest at 6.48% and has a term of twenty years. Another loan in the amount of 850,000 DKK&nbsp;(approximately
  $134,000 at the prevailing&nbsp;exchange rate at the time of the&nbsp;transaction)&nbsp;was&nbsp;obtained&nbsp;on
  January 1, 1999 to acquire land and a building,&nbsp;bears&nbsp;interest at 6.1% and has a term of
  twenty&nbsp;years. The interest rates on both the twenty-year loans are guaranteed for the first
  ten years, after which they will be renegotiated based on prevailing market conditions.</FONT></div></TD></TR>
<TR>
<TD vAlign=top>&nbsp;</TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On October 18, 1995,&nbsp;Perma-Pipe in Lebanon,

Tennessee received $3,150,000 of proceeds of Industrial Revenue Bonds, which mature on September

1, 2007. The bonds are fully secured by bank letters of credit, which the Company expects to renew,

reissue, extend or replace prior to each expiration date during the term of the bonds. The bonds

bear interest at a variable rate, which approximates 4.5% per annum, including letter of credit
  and
  re-marketing fees. The bond proceeds were available for capital expenditures related to manufacturing

capacity expansions and efficiency improvements during a three-year period which commenced in the

fourth quarter of 1995 and ended during the Company&#146;s fiscal quarter ended October 31, 1998.

On November 1, 1999, the Company used $1,100,000 of unspent bond proceeds to redeem bonds outstanding

as provided in the indenture. </FONT></div></TD></TR></TABLE>
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<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>On September 14, 1995, Midwesco Filter Resources, Inc. in Winchester, Virginia received $2,050,000

of proceeds from Industrial Revenue Bonds, which were to mature on August 1, 2007. These bonds
had
been fully secured by bank letters of credit. As a result of the sale of land and a building
on June
17, 2004, the Company redeemed the bonds in September 2004. </FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The Company also has short-term credit arrangements used by its European subsidiaries. These credit arrangements are generally in the form of overdraft facilities at rates competitive in the countries in which the Company operates. At January 31, 2005, borrowings under these credit arrangements totaled $668,000; an additional $1,117,000 remained unused. </FONT></div></TD></TR></TABLE>
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<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P><FONT face="Times New Roman, Times, Serif" size=2><B><U>CRITICAL ACCOUNTING POLICIES</U></B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Use of Estimates:</I></B> &nbsp;The preparation of financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities
at the date of the financial statements, and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The Company has accounting
policies which it believes are important to the Company&#146;s financial condition and results of
operations, and which require the Company to make estimates about matters that are inherently uncertain.
These critical accounting policies include revenue recognition, realizability of inventories, collectibility
of accounts receivable, depreciation of plant and equipment, and income taxes<B>.</B> &nbsp;The Company believes that the above critical policies have resulted in past actual results approximating
the estimated amounts in those areas. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Percentage of Completion Method Revenue Recognition:</I></B> &nbsp;Perma-Pipe recognizes revenues on contracts under the &#147;percentage of completion&#148; method.

The percentage of completion is determined by the relationship of costs incurred to the total estimated

costs of the contract. Provisions are made for estimated losses on uncompleted contracts in the
period
in which such losses are determined. Changes in job performance, job conditions, and estimated
profitability,
including those arising from contract penalty provisions and final contract settlements
may result
in revisions to costs and income. Such revisions are recognized in the period in which
they are determined.
Claims for additional compensation due the Company are recognized in contract
revenues when realization
is probable and the amount can be reliably estimated.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Revenue Recognition:</I></B> &nbsp;All subsidiaries of the Company other than Perma-Pipe recognize revenues at the date of shipment.

</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Inventories:</I></B> &nbsp;&nbsp;Inventories are stated at the lower of cost or market. Cost is determined using the first-in,
first-out method for substantially all inventories. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Goodwill and other intangible assets with indefinite lives:</I></B> &nbsp;Goodwill, which represents the excess of acquisition cost over the net assets acquired in business
combinations, was amortized through 2001 on a straight-line basis over periods ranging from 25 to
40 years. On February 1, 2002, the Company adopted Statement of Financial Accounting Standards (&#147;SFAS&#148;)
No. 142, &#147;Goodwill and Other Intangible Assets&#148;. SFAS No. 142 changes the accounting for
goodwill and other intangible assets with indefinite lives from an amortization method to an impairment-only
approach. Amortization </FONT></P></TD></TR></TABLE>
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<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>21</FONT></P>
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<TD>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>of goodwill and intangible assets with indefinite lives, including such assets recorded in past business
combinations, ceased upon adoption. Thus, no amortization for such goodwill and indefinite lived
intangibles was recognized in the accompanying consolidated statements of operations for the years
ended January 31, 2005, 2004, and 2003. SFAS No. 142 requires that goodwill and other intangible
assets with indefinite lives be analyzed for impairment upon adoption with any resulting impairment
loss recorded as a cumulative effect of change in accounting principle. Subsequent to the initial
impairment test, SFAS No. 142 requires that goodwill and other intangible assets with indefinite
lives be analyzed for impairment on an annual basis or when there is reason to suspect that their
values have been impaired. The Company has designated the beginning of its fiscal year as the date
of its annual goodwill impairment test. The Company&#146;s initial impairment analysis of its goodwill
in 2002 resulted in an impairment loss of $11,849,000 or $10,739,000 net of a tax benefit of $1,110,000
for the year ended January 31, 2003. As required by SFAS No. 142, the impairment loss was recognized
in the first quarter of 2002 to reflect the cumulative effect of accounting change. The Company&#146;s
annual impairment test at February 1, 2004 did not result in an impairment. Goodwill was $2,616,000
and $2,549,000 at January 31, 2005 and January 31, 2004, respectively. As of January 31, 2005 and
2004, $1,100,000 of goodwill was allocated to the Industrial Process Cooling Equipment segment. As
of January 31, 2005 and 2004 $1,516,000 and $1,449,000, respectively, was allocated to the Filtration
Products segment. The change in goodwill of the Filtration Products segment was due to foreign currency translation.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><U>ACCOUNTING PRONOUNCEMENTS</U></B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting
Standards No. 123 (revised 2004), Share-Based Payment (&#147;SFAS 123R&#148;). The Company is required
to adopt SFAS 123R in the fourth quarter of 2005. SFAS 123R requires the Company to measure the cost
of employee services received in exchange for an equity award based on the grant date fair value.
The cost will be recognized as an expense in financial statements over the period during which an
employee is required to provide service. If SFAS 123R had been in effect in 2004, the Company&#146;s
net income per diluted share would have been lower by 4 cents. If the Company continues to issue
the same type and amount of equity compensation, the Company anticipates the future impact to be comparable.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>In November 2004, the FASB issued SFAS No. 151, &#147;Inventory Costs - an amendment of ARB No. 43,

Chapter 4.&#148; This statement amends the guidance in Accounting Research Bulletin (ARB) No. 43,

Chapter 4, &#147;Inventory Pricing,&#148; to clarify the accounting for abnormal amounts of idle

facility expense, freight, handling costs and wasted material (spoilage) and requires that those

items be recognized as current-period charges regardless of whether they meet the criterion of
&#147;so
abnormal.&#148; The statement also requires that allocation of fixed production overheads
to the
costs of conversion be based on the normal capacity of the production facilities. The provisions

of this statement are effective for inventory costs incurred during fiscal years beginning after

June 15, 2005 (as of February 1, 2006 for the Company) and are to be applied prospectively. The
Company
does not expect adoption of SFAS No. 151 to have a material effect on its results of operations
or
financial position.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>In December 2003, the Financial Accounting Standards Board (FASB) issued a revision to SFAS No. 132,

&#147;Employers&#146; Disclosure about Pensions and Other Postretirement Benefits.&#148; This Statement

retains the disclosures previously required by SFAS 132 but adds additional disclosure requirements

about the assets, obligations, cash flows, and net periodic benefit cost of defined benefit pension

plans and other defined benefit postretirement plans. It also calls for the required information

to be provided separately for pension plans and for other postretirement benefit plans. In addition

to expanded annual disclosures, the standard improves information available to investors in interim

financial statements. SFAS 132R was effective for fiscal years ending after December 15, 2003,
and
for quarters beginning after December 15, 2003. The adoption of SFAS 132R did not have a material

impact on the Company&#146;s financial statements, however, required disclosures have been reflected

in the current financial statements.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>In May 2003, the FASB issued SFAS No. 150, &#147;Accounting for certain financial instruments with

characteristics of both liabilities and equity,&#148; effective in June 2003. SFAS No. 150 requires

an issuer to classify, as liabilities, any financial instruments that fall within the scope of
this
pronouncement. Adoption of SFAS 150 did not have a material effect on the results of operations,

financial condition, or cash flows of the Company.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>In April 2003, the FASB issued SFAS No. 149, &#147;Amendment of Statement 133 on Derivative Instruments
and Hedging Activities,&#148; parts of which apply to existing contracts, but which was generally
effective for contracts entered into after June 30, 2003. Adoption of SFAS No. 149 did not have a
material effect on the results of operations, financial condition or cash flows of the Company.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>In December 2003, the FASB issued Interpretation No. 46R, &#147;Consolidation of Variable Interest
Entities, an </FONT></P></TD></TR></TABLE>
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<TR vAlign=top>
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<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>22</FONT></P>
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<TD>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Interpretation of ARB No. 51,&#148; which requires that the assets, liabilities, and the results of
activities of a variable interest entity in which a business enterprise has controlling financial
interest be included in consolidation with those of the business enterprise. Adoption of FIN No.
46R did not have a material effect on the results of operations, financial condition or cash flows
of the Company. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>In December 2002, the FASB issued SFAS No. 148, &#147;Accounting for Stock-Based Compensation&#148;

which was effective for the Company on December 15, 2002. SFAS No. 148 provides alternative methods

of transition for a voluntary change to the fair-value method of accounting for stock-based employee

compensation. In addition, this Statement amends the disclosure requirements of SFAS No. 123 to
require
prominent disclosures in both the annual and interim financial statements about the Company&#146;s

method of accounting for stock-based employee compensation and the effects of the method used on

reported results. Adoption of SFAS No. 148 did not have a material effect on the results of operations,

financial condition or cash flows of the Company.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>In November 2002, the FASB issued Interpretation No. 45, &#147;Guarantor&#146;s Accounting and Disclosure

Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.&#148;&nbsp;This

Interpretation requires the recognition of certain guarantees as liabilities at fair market value

and was effective for guarantees issued or modified after December 31, 2002. Adoption of the provisions

of the Interpretation has not had a material effect on the financial statements of the Company,
based
on guarantees in effect on January 31, 2005.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>In April 2002, the FASB issued SFAS No. 145, &#147;Rescission of FASB Statements 4, 44, and 64, Amendment

of FASB Statement No. 13, and Technical Corrections.&#148;&nbsp;The Statement was effective for
fiscal
years beginning after May 15, 2002 and rescinds SFAS No. 4, &#147;Reporting Gains and Losses
from
Extinguishment of Debt,&#148; and an amendment of that Statement, SFAS No. 64, &#147;Extinguishments

of Debt Made to Satisfy Sinking-Fund Requirements.&#148;&nbsp;Under SFAS No. 4, all gains and losses

from extinguishments of debt were required to be aggregated and, if material, classified as an
extraordinary
item, net of related income tax effect. SFAS No. 145 eliminated SFAS No. 4 and, thus,
the exception
to applying Accounting Principles Board (APB) No. 30 to all gains and losses related
to extinguishments
of debt (other than extinguishments of debt to satisfy sinking-fund requirements.
As a result, gains
and losses from extinguishments of debt should be classified as extraordinary
items only if they
meet the criteria in APB No. 30. Adoption of SFAS No. 145 resulted in the reclassification
of an
extraordinary loss of $133,000 ($79,000 net of tax) recorded in 2002 to an operating expense.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><a name="a13"></a>Item 7A. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The Company is subject to market risk associated with changes in foreign currency exchange rates, interest
rates and commodity prices. Foreign currency exchange rate risk is mitigated through maintenance
of local production facilities in the markets served, invoicing of customers in the same currency
as the source of the products and use of foreign currency denominated debt in Denmark. The Company
has used foreign currency forward contracts to reduce exposure to exchange rate risks. The forward
contracts are short-term in duration, generally one year or less. The major currency exposure hedged
by the Company is the Canadian dollar. The contract amounts, carrying amounts and fair values of
these contracts were not significant at January 31, 2005, 2004 and 2003.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The changeover from national currencies to the Euro began on January 1, 2002 and it has not materially
affected the Company&#146;s foreign currency exchange risk profile, although some customers may require
the Company to invoice or pay in Euros rather than the functional currency of the manufacturing entity.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The Company has attempted to mitigate its interest rate risk by maintaining a balance of fixed-rate
long-term debt and floating-rate debt. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Commodity price risk is the possibility of higher or lower costs due to changes in the prices of commodities,
such as ferrous alloys (e.g., steel) which the Company uses in the production of piping systems.
The Company attempts to mitigate such risks by obtaining price commitments from its commodity suppliers
and, when it appears appropriate, purchasing quantities in advance of likely price increases.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><a name="a14"></a>Item 8. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The consolidated financial statements of the Company for each of the three years in the period ended
as of January 31, 2005, January&nbsp;31, 2004 and January 31, 2003 and the notes thereto are set
forth elsewhere herein.</FONT></P></TD>
</TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>23</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><page><br>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD><P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><a name="a15"></a>Item 9. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;CHANGES
IN AND DISAGREEMENTS WITH <br>
</B></FONT><FONT face="Times New Roman, Times, Serif" size=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>On December 7, 2004, the Company filed a current report on Form 8-K relating to the Company&#146;s
engagement of Grant Thornton LLP as the Company&#146;s new independent auditors effective December
2, 2004. On December 20, 2004, the Company filed a current report on Form 8-K relating to the Company&#146;s
dismissal of Deloitte &amp; Touche LLP as the Company&#146;s independent auditors for its fiscal
year ended January 31, 2005. During the Company&#146;s two most recent fiscal years ended January
31, 2004 and the subsequent interim period through October 31, 2004, there were no disagreements
between the Company and Deloitte &amp; Touche LLP on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved
to Deloitte &amp; Touche LLP&#146;s satisfaction, would have caused Deloitte &amp; Touche LLP to
make reference to the subject matter of the disagreement in connection with its reports. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><a name="a16"></a>Item 9A. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
CONTROLS AND PROCEDURES</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Disclosures Control and Procedures</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>As of January 31, 2005, the Company carried out an evaluation, under the supervision and with the participation
of its management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness
of the design and operation of the Company&#146;s disclosure controls and procedures pursuant to
Exchange Act Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934, as amended. Based
on that evaluation and because of the material weakness described below, the Company&#146;s Chief
Executive Officer and Chief Financial Officer concluded that, as of January 31, 2005, such disclosure
controls and procedures were not entirely effective as they relate to inventory for the Company&#146;s
subsidiany, Midwesco Filter. Due to this material weakness, the Company, in preparing its consolidated
financial statements as of and for the year ended January 31, 2005, performed additional procedures
relating to inventory to enable it to conclude that the consolidated financial statements were stated
fairly in all material respects in accordance with U.S. generally accepted accounting principles. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>In conjunction with the implementation of a new ERP system in December 2004 the Company recorded the
value of its Midwesco Filter inventory based on standard, rather than actual costs. The new system
has a feature which permits the Company to compare its standard costs to the most recent average
actual purchase costs to evaluate the reasonableness of its standard costs; however, as of January
31, 2005, the Company did not have steps in place as part of its routine monthly closing process
to make this comparison. Audit testing of actual costs using the average cost method revealed a difference
between standard and actual costs. These differences were not identified by the Company, and without
the discovery of the differences through the audit process, would have gone undetected. The existence
of this material weakness created more than a remote likelihood that a material misstatement of the
annual or interim financial statements would not be prevented or detected prior to its correction
as set forth below. </FONT></P>
<P><FONT face="Times New Roman, Times, Serif" size=2>Changes in Internal Controls</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Since January 31, 2005, the Company has undertaken the following measures to remediate the material
weakness in internal control over inventory discussed above:</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The Midwesco Filter accounting department has implemented a monthly procedure to calculate and record
a reserve for adjustment from standard to actual inventory valuation. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Other than the change discussed above, there have been no significant changes in the Company&#146;s internal controls or in other factors
that could significantly affect these controls, subsequent to the date of that evaluation. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B>Item 9B. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
OTHER INFORMATION</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>None.</FONT></P></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>24</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><page><br>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
PART III</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><a name="a17" id="a17"></a>Item 10. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;DIRECTORS
AND EXECUTIVE OFFICERS OF THE REGISTRANT</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Information with respect to directors of the Company is incorporated herein by reference to the table
under the caption &#147;Nominees for Election as Directors&#148; and the textual paragraphs following
the aforesaid table and the information contained under the captions &#147;Board of Director Meetings
and Committees&#148; and &#147;Section 16(a) Benefical Ownership Reporting Compliance&#148;
in the Company&#146;s proxy statement for the 2005 annual meeting of stockholders.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Information with respect to executive officers of the Company is included in Item&nbsp;1, Part&nbsp;I
hereof under the caption &#147;Executive Officers of the Registrant.&#148;</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><a name="a18" id="a18"></a>Item 11. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
EXECUTIVE COMPENSATION</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Information with respect to executive compensation is incorporated herein by reference to the information
under the caption &#147;Executive Compensation&#148; in the Company&#146;s proxy statement for the
2005 annual meeting of stockholders.</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top width=96><FONT face="Times New Roman, Times, Serif" size=2><B><a name="a19"></a>Item 12. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT></TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2><B>SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS</B></FONT></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Information with respect to security ownership of certain beneficial owners and management of the Company
and related stockholder matters is incorporated herein by reference to the information under the
captions &#147;Beneficial Ownership of Common Stock&#148; and &#147;Equity Compensation Plan Information&#148;
in the Company&#146;s proxy statement for the 2005 annual meeting of stockholders.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><a name="a20"></a>Item 13. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Information with respect to certain relationships and transactions is incorporated herein by reference
to the information under the caption &#147;Certain Transactions&#148; in the Company&#146;s proxy
statement for the 2005 annual meeting of stockholders.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><a name="a21"></a>Item 14. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;PRINCIPAL
ACCOUNTANT FEES AND SERVICES</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Information with respect to the independence of the Company&#146;s public accountants and the fees
paid to such accountants is incorporated herein by reference to the information under the caption
&#147;Independent Registered Public Accounting Firm&#148; in the Company&#146;s proxy statement for
the 2005 annual meeting of stockholders. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
PART IV</B></FONT></P>
</TD>
</TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">
<TR>
  <TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2><B><a name="a22"></a>Item&nbsp;15.</B></FONT></TD>
  <TD colspan="2" vAlign=top><FONT face="Times New Roman, Times, Serif" size=2><B>EXHIBITS, FINANCIAL STATEMENT<br>
    SCHEDULES AND REPORTS ON FORM 8-K  </B></FONT></TD>
  </TR>
<TR>
  <TD vAlign=top></TD>
  <TD vAlign=top>&nbsp;</TD>
  <TD vAlign=top>&nbsp;</TD>
</TR>
<TR>
  <TD align="center" vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>a.</FONT></TD>
  <TD colspan="2" align="left" vAlign=top><FONT face="Times New Roman, Times, Serif" size=2><U>List of documents filed as part of this report:</U></FONT></TD>
  </TR>
<TR>
  <TD align="center" vAlign=top></TD>
  <TD align="left" vAlign=top>&nbsp;</TD>
  <TD align="left" vAlign=top>&nbsp;</TD>
</TR>
<TR>
<TD width=96 align="center" vAlign=top></TD>
<TD width=48 align="left" vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>(1)<FONT face="Times New Roman, Times, Serif" size=2></FONT></FONT></TD>
<TD align="left" vAlign=top><FONT face="Times New Roman, Times, Serif" size=2><FONT face="Times New Roman, Times, Serif" size=2></FONT>Financial Statements - Consolidated Financial Statements of the Company<br>
  Refer to Part II, Item 8 of this report.</FONT></TD></TR>
<TR>
  <TD align="center" vAlign=top></TD>
  <TD align="left" vAlign=top>&nbsp;</TD>
  <TD align="left" vAlign=top>&nbsp;</TD>
</TR>
<TR>
  <TD align="center" vAlign=top></TD>
  <TD align="left" vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>(2)</FONT></TD>
  <TD align="left" vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>Financial Statement Schedules<br>
Schedule II &#150; Valuation and Qualifying Accounts  </FONT></TD>
</TR>
<TR>
  <TD align="center" vAlign=top></TD>
  <TD align="left" vAlign=top>&nbsp;</TD>
  <TD align="left" vAlign=top>&nbsp;</TD>
</TR>
<TR>
  <TD align="center" vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>b.</FONT></TD>
  <TD colspan="2" align="left" vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2><U>Exhibits:</U> The exhibits, as listed in the Exhibit Index included herein, are submitted as a separate section of this report.</FONT></div></TD>
  </TR>
<TR>
  <TD align="center" vAlign=top></TD>
  <TD align="left" vAlign=top>&nbsp;</TD>
  <TD align="left" vAlign=top>&nbsp;</TD>
</TR>
<TR>
  <TD align="center" vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>c.</FONT></TD>
  <TD colspan="2" align="left" vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>The response to this portion of Item&nbsp;15 is submitted under 15a(2) above.</FONT></TD>
  </TR>
</TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>25</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><page><br>

<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">
<TR>
<TD><P><FONT face="Times New Roman, Times, Serif" size=2><B>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</B></FONT></P>
<P><FONT face="Times New Roman, Times, Serif" size=2>Board of Directors and Stockholders <br>
</FONT><FONT face="Times New Roman, Times, Serif" size=2>MFRI, Inc. and subsidiaries</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>We have audited the accompanying consolidated balance sheet of MFRI, Inc. (a Delaware corporation)
and subsidiaries as of January 31, 2005, and the related consolidated statements of operations, stockholders&#146;
equity, and cash flows for the year then ended. Our audit also included the financial statement schedule
listed in the Index at Item 15a(2). These financial statements and financial statement schedule are
the responsibility of the Company&#146;s management. Our responsibility is to express an opinion
on these financial statements and financial statement schedule based on our audit.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit includes
consideration of internal control over financial reporting as a basis for designing audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company&#146;s internal control over financial reporting. Accordingly, we express
no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the financial position of MFRI, Inc. and subsidiaries as of January 31, 2005, and the results
of their operations and their cash flows for the year then ended in conformity with accounting principles
generally accepted in the United States of America. Also, in our opinion, such financial statement
schedule, when considered in relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein. </FONT></P>
<P><FONT face="Times New Roman, Times, Serif" size=2>/S/GRANT THORNTON LLP</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Chicago, Illinois<br>
</FONT><FONT face="Times New Roman, Times, Serif" size=2>April 15, 2005</FONT></P>
</TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>26</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><page><br>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD>
<P><FONT face="Times New Roman, Times, Serif" size=2><B>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</B></FONT></P>
<P><FONT face="Times New Roman, Times, Serif" size=2>To the Board of Directors and Stockholders of<br>
</FONT><FONT face="Times New Roman, Times, Serif" size=2>MFRI, Inc. and subsidiaries<br>
</FONT><FONT face="Times New Roman, Times, Serif" size=2>Chicago, Illinois</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>We have audited the accompanying consolidated balance sheet of MFRI, Inc. and subsidiaries as of January
31, 2004, and the related consolidated statements of operations, stockholders&#146; equity, and cash
flows for each of the two years in the period ended January 31, 2004. Our audits also included the
financial statement schedule listed in the Index at Item 15a(2). These financial statements&nbsp;and&nbsp;financial&nbsp;statement&nbsp;schedule&nbsp;are
the&nbsp;responsibility&nbsp;of the Company&#146;s&nbsp;management. Our&nbsp;responsibility&nbsp;is
to&nbsp;express&nbsp;an opinion on these financial statements and financial statement schedule based
on our audits.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>In our opinion, such consolidated financial statements present fairly, in all material respects, the
financial position of MFRI, Inc. and subsidiaries at January 31, 2004, and the results of their operations
and their cash flows for each of the two years in the period ended January 31, 2004, in conformity
with accounting principles generally accepted in the United States of America. Also, in our opinion,
such financial statement schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly in all material respects the information set forth therein.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>As discussed in Note 2, effective February 1, 2002, MFRI, Inc. changed its method of accounting for
goodwill and intangible assets upon adoption of Statement of Financial Accounting Standards No. 142,
&#147;Goodwill and Other Intangible Assets.&#148;</FONT></P>
<P><FONT face="Times New Roman, Times, Serif" size=2>DELOITTE &amp; TOUCHE LLP</FONT></P>
<P><FONT face="Times New Roman, Times, Serif" size=2>Chicago, Illinois<br>
</FONT><FONT face="Times New Roman, Times, Serif" size=2>May 14, 2004</FONT></P>
</TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>27</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><page><br>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD>
<P><FONT face="Times New Roman, Times, Serif" size=2><B>MFRI, INC. AND SUBSIDIARIES<br>
</B></FONT><FONT face="Times New Roman, Times, Serif" size=2><B>CONSOLIDATED STATEMENTS OF OPERATIONS<br>
</B></FONT><FONT face="Times New Roman, Times, Serif" size=2><I>(In thousands except per share information)</I></FONT></P>
</TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
  <TR VALIGN=Bottom>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004</FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2002</FONT></TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TH COLSPAN=2><font size="2" face="Times New Roman, Times, serif"></font></TH>
    <TH COLSPAN=8><font size="2" face="Times New Roman, Times, serif"></font></TH>
    <TH><font size="2" face="Times New Roman, Times, serif"></font></TH>
  </TR>
  <TR VALIGN=Bottom>
    <TH COLSPAN=2>&nbsp;</TH>
    <TH COLSPAN=8><b><font size="1" face="Times New Roman, Times, serif">Fiscal Year Ended January 31,</font></b></TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2005</FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004</FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT></TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="10" ALIGN=LEFT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net sales</FONT></TD>
    <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 145,096</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 120,889</FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 122,897</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Cost of sales</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>113,968</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>96,291</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>95,957</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Gross profit</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>31,128</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>24,598</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>26,940</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Operating expenses:</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Selling expense</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10,477</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10,141</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10,446</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;General and administrative expense</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>15,474</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>15,178</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>15,580</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total operating expenses</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>25,951</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>25,319</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>26,026</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Income (loss) from operations</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5,177</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(721</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>914</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Income from Joint Venture</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>225</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>492</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>57</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Interest expense &#150; net</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,658</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,003</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,107</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Income (loss) before income taxes, extraordinary items and<br>
      cumulative effect of accounting change</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,744</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2,232</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,136</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Income tax expense (benefit)</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>931</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,135</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(312</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Income (loss) before extraordinary items and cumulative effect of<br>
&nbsp;&nbsp;&nbsp;accounting change</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,813</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,097</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(824</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net extraordinary gain, net of tax benefit of $23</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(35</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Income (loss) before cumulative effect of accounting change</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,813</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,097</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(789</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Loss on cumulative effect of a change in accounting for goodwill, net<br>
      &nbsp;&nbsp;&nbsp;of tax benefit of $1,110</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(10,739</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net income (loss)</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 2,813</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (1,097</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (11,528</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="2" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="2" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="2" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Weighted average number of common shares outstanding - basic</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,986</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,922</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,922</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Basic earnings per share:</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Income (loss) before extraordinary items and cumulative effect of<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;accounting change</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 0.56</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.22</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.17</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Net extraordinary gain</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.01</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Income (loss) before cumulative effect of accounting change</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.56</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(0.22</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(0.16</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Loss on cumulative effect of accounting change</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2.18</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Net income (loss)</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 0.56</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.22</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (2.34</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Weighted average number of common shares outstanding - diluted</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5,223</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,922</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,922</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Diluted earnings per share:</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Income (loss) before extraordinary items and cumulative effect of<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;accounting change</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 0.54</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.22</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.17</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Net extraordinary gain</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.01</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Income (loss) before cumulative effect of accounting change</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.54</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(0.22</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(0.16</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Loss on cumulative effect of accounting change</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(2.18</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Net income (loss)</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 0.54</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.22</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (2.34</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
</TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P><FONT face="Times New Roman, Times, Serif" size=2>See notes to consolidated financial statements.</FONT></P></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>28</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><page><br>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD>
<P><FONT face="Times New Roman, Times, Serif" size=2><B>MFRI, INC. AND SUBSIDIARIES<br>
</B></FONT><FONT face="Times New Roman, Times, Serif" size=2><B>CONSOLIDATED BALANCE SHEETS<br>
</B></FONT><FONT face="Times New Roman, Times, Serif" size=2><I>(In thousands except per share information)</I></FONT></P>
</TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
  <TR VALIGN=Bottom>
    <TH COLSPAN=2>&nbsp;</TH>
    <TH COLSPAN=5><b><font size="1" face="Times New Roman, Times, serif">As of January 31,</font></b></TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TH COLSPAN=2><div align="left"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>ASSETS</FONT></div></TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2005</FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004</FONT></TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="7" ALIGN=LEFT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Current Assets:</FONT></TD>
    <TD WIDTH=6% ALIGN=LEFT bgcolor="#eaf9e8"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=7% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Cash and cash equivalents</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 723</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 154</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Restricted cash</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>973</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>238</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Trade accounts receivable, less allowance for doubtful<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;accounts of $482 in 2004 and $557 in 2003</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>22,715</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>18,353</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Accounts receivable &#150; related companies</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>887</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>853</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Costs and estimated earnings in excess of billings<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;on uncompleted contracts</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,472</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,115</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Income taxes receivable</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>48</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>393</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Inventories</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>21,050</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>18,275</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Deferred income taxes</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,842</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,639</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>915</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>857</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current assets</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>51,625</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>41,877</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Property, Plant and Equipment, Net</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>25,800</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>28,828</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Other Assets:</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Patents, net of accumulated amortization</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>582</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>716</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Goodwill</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,616</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,549</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Other assets</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,893</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,957</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total other assets</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8,091</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8,222</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total Assets</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 85,516</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 78,927</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="2" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="2" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>LIABILITIES AND STOCKHOLDERS&#146; EQUITY</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Current Liabilities:</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Trade accounts payable</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 13,072</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 12,337</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Accrued compensation and payroll taxes</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,665</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,673</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Other accrued liabilities</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,172</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,835</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Commissions payable</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,192</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,046</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Current maturities of long-term debt</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,334</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11,864</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Billings in excess of costs and estimated earnings<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;on uncompleted contracts</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>790</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>299</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Income taxes payable</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>68</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>64</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current liabilities</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>25,293</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>33,118</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Long-Term Liabilities:</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Long-term debt, less current maturities</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>26,205</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>16,661</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Other</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,748</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,275</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total long-term liabilities</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>28,953</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>18,936</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Stockholders&#146; Equity:</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Common stock, $0.01 par value, authorized-<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;50,000 shares in 2004 and 2003, respectively;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5,226 and 4,922 issued and outstanding in 2004 and 2003,<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;respectively</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>52</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>49</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Additional paid-in capital</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>22,868</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>21,397</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Retained earnings</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7,913</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5,100</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Accumulated other comprehensive income</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>437</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>327</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total stockholders&#146; equity</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 31,270</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 26,873</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total Liabilities and Stockholders&#146; Equity</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 85,516</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 78,927</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="2" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="2" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
</TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P><FONT face="Times New Roman, Times, Serif" size=2>See notes to consolidated financial statements.</FONT></P></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>29</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><page><br>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD>
<P><FONT face="Times New Roman, Times, Serif" size=2><B>MFRI INC. AND SUBSIDIARIES<br>
</B></FONT><FONT face="Times New Roman, Times, Serif" size=2><B>CONSOLIDATED STATEMENTS OF STOCKHOLDERS&#146; EQUITY<br>
</B></FONT><FONT face="Times New Roman, Times, Serif" size=2><I>(In thousands)</I></FONT></P>
</TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
  <TR VALIGN=Bottom>
    <TD rowspan="3" ALIGN=LEFT>&nbsp;</TD>
    <TD rowspan="3" ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="5" ALIGN=LEFT><div align="center"><b><font size="1" face="Times New Roman, Times, serif">Common Stock </font></b></div></TD>
    <TD rowspan="3" ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" rowspan="3" ALIGN=LEFT><div align="center"><b><font size="1" face="Times New Roman, Times, serif">Additional<br>
        Paid-in <br>
        Capital</font></b></div></TD>
    <TD rowspan="3" ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" rowspan="3" ALIGN=LEFT><div align="center"><b><font size="1" face="Times New Roman, Times, serif">Retained<br>
        Earnings</font></b></div></TD>
    <TD rowspan="3" ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" rowspan="3" ALIGN=RIGHT><div align="center"><b><font size="1" face="Times New Roman, Times, serif">Accumulated <br>
        Other <br>
        Comprehensive<br>
        Income (Loss)</font></b></div></TD>
    <TD rowspan="3" ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" rowspan="3" ALIGN=RIGHT><div align="center"><b><font size="1" face="Times New Roman, Times, serif">Comprehensive<br>
        Income (Loss)<br>
    </font></b></div></TD>
    <TD rowspan="3" ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="5" ALIGN=LEFT><hr align="center" size="1" noshade>
    </TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="2" ALIGN=LEFT><div align="center"><b><font size="1" face="Times New Roman, Times, serif">Shares</font></b></div></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=LEFT><div align="center"><b><font size="1" face="Times New Roman, Times, serif">Amount</font></b></div></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=LEFT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=LEFT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=LEFT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=LEFT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT bgcolor="#eaf9e8"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance January 31, 2002</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=LEFT>&nbsp;</TD>
    <TD WIDTH=5% ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,922</FONT></div></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$ </FONT></TD>
    <TD WIDTH=6% ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>49</FONT></div></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$ </FONT></TD>
    <TD WIDTH=8% ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>21,397</FONT></div></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$ </FONT></TD>
    <TD WIDTH=1% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>17,725</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (1,184</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=6% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (812</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net (loss)</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(11,528</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(11,528</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Minimum pension liability adjustment<br>
&nbsp;(net of tax benefit of $348)</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(577</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(577</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Unrealized translation adjustment</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>730</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>730</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=LEFT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=LEFT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=LEFT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=LEFT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance January 31, 2003</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,922</FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>49</FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>21,397</FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6,197</FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,031</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(11,375</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net (loss)</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,097</FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,097</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Minimum pension liability adjustment<br>
&nbsp;(net of tax benefit of $217)</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>715</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>715</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Unrealized translation adjustment</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>643</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>643</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=LEFT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=LEFT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=LEFT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=LEFT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance January 31, 2004</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,922</FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>49</FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>21,397</FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$ </FONT></TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5,100</FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 327</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 261</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net income</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,813</FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,813</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Stock options exercised (including a tax benefit of $542)</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>304</FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3</FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,471</FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Minimum pension liability adjustment<br>
&nbsp;(net of tax benefit of $320)</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(168</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(168</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Unrealized translation adjustment</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>278</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>278</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=LEFT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=LEFT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=LEFT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=LEFT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance January 31, 2005</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5,226</FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$ </FONT></TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>52</FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 22,868</FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$ </FONT></TD>
    <TD ALIGN=LEFT><div align="right"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7,913</FONT></div></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 437</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 2,923</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=LEFT><hr size="2" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=LEFT><hr size="2" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=LEFT><hr size="2" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=LEFT><hr size="2" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="2" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="2" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
</TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P><FONT face="Times New Roman, Times, Serif" size=2>See notes to consolidated financial statements.</FONT></P></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>30</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><page><br>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD>
<P><FONT face="Times New Roman, Times, Serif" size=2><b>3MFRI, INC. AND SUBSIDIARIES<br>
CONSOLIDATED STATEMENTS OF CASH FLOWS<br>
</b><I>(In thousands)</I></FONT></P>
</TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<table width=600 border=0 cellpadding=0 cellspacing=0>
  <tr valign=Bottom>
    <th><font size="1" face="Times New Roman, Times, serif"></font></th>
    <th colspan=2><b><font face="Times New Roman, Times, serif" size=1>2004</font></b></th>
    <th><font size="1" face="Times New Roman, Times, serif"></font></th>
    <th colspan=2><b><font face="Times New Roman, Times, serif" size=1>2003</font></b></th>
    <th><font size="1" face="Times New Roman, Times, serif"></font></th>
    <th colspan=2><b><font face="Times New Roman, Times, serif" size=1>2002</font></b></th>
    <th><font size="1" face="Times New Roman, Times, serif"></font></th>
  </tr>
  <tr valign=Bottom>
    <th><font size="1" face="Times New Roman, Times, serif"></font></th>
    <th><font size="1" face="Times New Roman, Times, serif"></font></th>
    <th><font size="1" face="Times New Roman, Times, serif"></font></th>
    <th><font size="1" face="Times New Roman, Times, serif"></font></th>
    <th><font size="1" face="Times New Roman, Times, serif"></font></th>
    <th><font size="1" face="Times New Roman, Times, serif"></font></th>
    <th><font size="1" face="Times New Roman, Times, serif"></font></th>
    <th><font size="1" face="Times New Roman, Times, serif"></font></th>
    <th><font size="1" face="Times New Roman, Times, serif"></font></th>
    <th><font size="1" face="Times New Roman, Times, serif"></font></th>
  </tr>
  <tr valign=Bottom>
    <th><font face="Times New Roman, Times, serif" size=1></font></th>
    <th colspan=8><font face="Times New Roman, Times, serif" size=1>Fiscal Year Ended January 31,</font></th>
    <th>&nbsp;</th>
  </tr>
  <tr valign=Bottom>
    <th><font face="Times New Roman, Times, serif" size=1></font></th>
    <th colspan=2><font face="Times New Roman, Times, serif" size=1>2005</font></th>
    <th><font size="1" face="Times New Roman, Times, serif"></font></th>
    <th colspan=2><font face="Times New Roman, Times, serif" size=1>2004</font></th>
    <th><font size="1" face="Times New Roman, Times, serif"></font></th>
    <th colspan=2><font face="Times New Roman, Times, serif" size=1>2003</font></th>
    <th><font size="1" face="Times New Roman, Times, serif"></font></th>
  </tr>
  <tr valign=Bottom>
    <td colspan="9" align=LEFT><hr size="1" noshade></td>
    <td align=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>Cash Flows from Operating Activities:</font></td>
    <td width=1% align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td width=8% align=RIGHT><font face="Times New Roman, Times, Serif" size=2></font></td>
    <td width="3%" align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td width=1% align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td width=8% align=RIGHT><font face="Times New Roman, Times, Serif" size=2></font></td>
    <td width="3%" align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td width=1% align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td width=8% align=RIGHT><font face="Times New Roman, Times, Serif" size=2></font></td>
    <td width="2%" align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Net income (loss)</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>$</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> 2,813</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>$</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(1,097</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>$</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(11,528</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><p><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Adjustments, to reconcile net income (loss) to<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;net cash flows from operating activities:</font></p></td>
    <td align=LEFT>&nbsp;</td>
    <td align=LEFT>&nbsp;</td>
    <td align=LEFT>&nbsp;</td>
    <td align=LEFT>&nbsp;</td>
    <td align=LEFT>&nbsp;</td>
    <td align=LEFT>&nbsp;</td>
    <td align=LEFT>&nbsp;</td>
    <td align=LEFT>&nbsp;</td>
    <td align=LEFT>&nbsp;</td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net extraordinary gain (net of tax of $23)</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>35</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss on impairment of goodwill (net of tax of $1,110)</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>10,739</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income from Joint Venture</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(225</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(492</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(57</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation and amortization</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>3,779</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>3,677</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>3,944</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Provisions for uncollectible accounts</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(75</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>147</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>67</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT bgcolor="#EAF9E8"><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred income taxes</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(184</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(1,259</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>365</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gain on sales of assets</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(10</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(23</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Changes in operating assets and liabilities:</font></td>
    <td align=RIGHT>&nbsp;</td>
    <td align=RIGHT>&nbsp;</td>
    <td align=LEFT>&nbsp;</td>
    <td align=RIGHT>&nbsp;</td>
    <td align=RIGHT>&nbsp;</td>
    <td align=LEFT>&nbsp;</td>
    <td align=RIGHT>&nbsp;</td>
    <td align=RIGHT>&nbsp;</td>
    <td align=LEFT>&nbsp;</td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(4,287</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(694</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>448</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income taxes receivable</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>348</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>632</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(9</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(2,659</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>1,594</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(7</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(1,594</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>1,922</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>1,428</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>693</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>2,519</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(159</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Compensation and payroll taxes</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(29</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>442</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>138</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other assets and liabilities</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>1,181</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(1,044</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(2,571</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
  </tr>
  <tr>
    <td></td>
    <td colspan=2 align=RIGHT><hr noshade size=1></td>
    <td></td>
    <td colspan=2 align=RIGHT><hr noshade size=1></td>
    <td></td>
    <td colspan=2 align=RIGHT><hr noshade size=1></td>
    <td></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>Net Cash Flows from Operating Activities</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>249</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>6,791</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>2,833</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr>
    <td></td>
    <td colspan=2 align=RIGHT><hr noshade size=1></td>
    <td></td>
    <td colspan=2 align=RIGHT><hr noshade size=1></td>
    <td></td>
    <td colspan=2 align=RIGHT><hr noshade size=1></td>
    <td></td>
  </tr>
  <tr>
    <td><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan=2 align=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan=2 align=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan=2 align=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>Cash Flows from Investing Activities:</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Proceeds from sales of property and equipment</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>1,804</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>476</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>10</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Purchases of property and equipment</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(1,755</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(4,102</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(1,185</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Investment in joint venture</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>50</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>427</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(10</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Purchase of a business by acquiring specified assets and</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;assuming specified liabilities</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(500</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
  </tr>
  <tr>
    <td></td>
    <td colspan=2 align=RIGHT><hr noshade size=1></td>
    <td></td>
    <td colspan=2 align=RIGHT><hr noshade size=1></td>
    <td></td>
    <td colspan=2 align=RIGHT><hr noshade size=1></td>
    <td></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>Net Cash Flows from Investing Activities</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>99</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(3,199</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(1,685</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
  </tr>
  <tr>
    <td></td>
    <td colspan=2 align=RIGHT><hr noshade size=1></td>
    <td></td>
    <td colspan=2 align=RIGHT><hr noshade size=1></td>
    <td></td>
    <td colspan=2 align=RIGHT><hr noshade size=1></td>
    <td></td>
  </tr>
  <tr>
    <td><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan=2 align=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan=2 align=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan=2 align=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>Cash Flows from Financing Activities:</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Borrowings under revolving, term and mortgage loans</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>15,141</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>27,396</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>25,050</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Repayment of debt</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(16,271</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(30,854</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(25,610</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Net payments on capitalized lease obligations</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(43</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(141</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(142</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
  </tr>
  <tr>
    <td></td>
    <td colspan=2 align=RIGHT></td>
    <td></td>
    <td colspan=2 align=RIGHT></td>
    <td></td>
    <td colspan=2 align=RIGHT></td>
    <td></td>
  </tr>
    <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Stock options exercised</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>934</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr>
    <td></td>
    <td colspan=2 align=RIGHT></td>
    <td></td>
    <td colspan=2 align=RIGHT></td>
    <td></td>
    <td colspan=2 align=RIGHT></td>
    <td></td>
  </tr>
<tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Tax benefit of stock options exercised</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>542</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr>
    <td></td>
    <td colspan=2 align=RIGHT><hr noshade size=1></td>
    <td></td>
    <td colspan=2 align=RIGHT><hr noshade size=1></td>
    <td></td>
    <td colspan=2 align=RIGHT><hr noshade size=1></td>
    <td></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>Net Cash Flows from Financing Activities</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>303</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(3,599</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(702</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
  </tr>
  <tr>
    <td></td>
    <td colspan=2 align=RIGHT><hr noshade size=1></td>
    <td></td>
    <td colspan=2 align=RIGHT><hr noshade size=1></td>
    <td></td>
    <td colspan=2 align=RIGHT><hr noshade size=1></td>
    <td></td>
  </tr>
  <tr>
    <td></td>
    <td colspan=2 align=RIGHT>&nbsp;</td>
    <td></td>
    <td colspan=2 align=RIGHT>&nbsp;</td>
    <td></td>
    <td colspan=2 align=RIGHT>&nbsp;</td>
    <td></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>Effect of Exchange Rate Changes on Cash and</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Cash Equivalents</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(82</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(185</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(219</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
  </tr>
  <tr>
    <td></td>
    <td colspan=2 align=RIGHT><hr noshade size=1></td>
    <td></td>
    <td colspan=2 align=RIGHT><hr noshade size=1></td>
    <td></td>
    <td colspan=2 align=RIGHT><hr noshade size=1></td>
    <td></td>
  </tr>
  <tr>
    <td></td>
    <td colspan=2 align=RIGHT>&nbsp;</td>
    <td></td>
    <td colspan=2 align=RIGHT>&nbsp;</td>
    <td></td>
    <td colspan=2 align=RIGHT>&nbsp;</td>
    <td></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>Net Increase (Decrease) in Cash and Cash Equivalents</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>569</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(192</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>227</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>Cash and Cash Equivalents &#150; Beginning of Year</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>154</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>346</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>119</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr>
    <td></td>
    <td colspan=2 align=RIGHT><hr noshade size=1></td>
    <td></td>
    <td colspan=2 align=RIGHT><hr noshade size=1></td>
    <td></td>
    <td colspan=2 align=RIGHT><hr noshade size=1></td>
    <td></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>Cash and Cash Equivalents &#150; End of Year</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>$</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> 723</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>$</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> 154</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>$</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> 346</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr>
    <td></td>
    <td colspan=2 align=RIGHT><hr noshade size=2></td>
    <td></td>
    <td colspan=2 align=RIGHT><hr noshade size=2></td>
    <td></td>
    <td colspan=2 align=RIGHT><hr noshade size=2></td>
    <td></td>
  </tr>
  <tr>
    <td></td>
    <td colspan=2 align=RIGHT>&nbsp;</td>
    <td></td>
    <td colspan=2 align=RIGHT>&nbsp;</td>
    <td></td>
    <td colspan=2 align=RIGHT>&nbsp;</td>
    <td></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>Supplemental cash flow information:</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;Cash paid for:</font></td>
    <td align=LEFT>&nbsp;</td>
    <td align=LEFT>&nbsp;</td>
    <td align=LEFT>&nbsp;</td>
    <td align=LEFT>&nbsp;</td>
    <td align=LEFT>&nbsp;</td>
    <td align=LEFT>&nbsp;</td>
    <td align=LEFT>&nbsp;</td>
    <td align=LEFT>&nbsp;</td>
    <td align=LEFT>&nbsp;</td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest, net of capitalized amounts</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>$</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> 1,818</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>$</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> 1,962</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>$</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> 2,099</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income taxes paid (refunded)</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(207</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(400</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(796</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
  </tr>
</table>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P><FONT face="Times New Roman, Times, Serif" size=2>See notes to consolidated financial statements.</FONT></P></TD>
</TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>31</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><page><br>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD><P align=left><FONT face="Times New Roman, Times, Serif" size=2><B>MFRI, INC. AND SUBSIDIARIES<br>
</B></FONT><FONT face="Times New Roman, Times, Serif" size=2><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
</B></FONT><FONT face="Times New Roman, Times, Serif" size=2><B>YEARS ENDED JANUARY 31, 2005, 2004 AND 2003</B></FONT></P>
  <P><FONT face="Times New Roman, Times, Serif" size=2><B>Note 1 - Basis of Presentation</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>MFRI, Inc. (&#147;MFRI&#148; or the &#147;Company&#148;) was incorporated on October 12, 1993. MFRI
is a holding company which has subsidiaries engaged in the manufacture and sale of products in three
distinct business segments:&nbsp;filtration products, piping systems and industrial process cooling
equipment. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Fiscal Year:</I></B> &nbsp;&nbsp;The Company&#146;s fiscal year ends on January 31. Years described as 2004, 2003 and 2002
are the fiscal years ended January 31, 2005, 2004 and 2003, respectively. Balances described as balances
as of 2004, 2003 and 2002 are balances as of January 31, 2005, 2004 and 2003, respectively. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Nature of Business:</I></B> &nbsp;Midwesco Filter Resources, Inc (&#147;Midwesco Filter&#148;) is engaged principally in the manufacture
and sale of filter elements for use in industrial air filtration systems and particulate collection
systems. Air filtration systems are used in a wide variety of industries to limit particulate emissions,
primarily to comply with environmental regulations. Midwesco Filter markets air filtration-related
products and accessories, and provides maintenance services, consisting primarily of dust collector
inspection, filter cleaning and filter replacement. Perma-Pipe, Inc (&#147;Perma-Pipe&#148;) is engaged
in engineering, designing, manufacturing and selling specialty piping systems and leak detection
and location systems. Perma-Pipe&#146;s specialty piping systems include (i) industrial and secondary
containment piping systems for transporting chemicals, waste streams and petroleum liquids, (ii)
insulated and jacketed district heating and cooling piping systems for efficient energy distribution
to multiple locations from central energy plants, and (iii) oil and gas gathering flow lines and
long lines for oil and mineral transportation. Perma-Pipe&#146;s leak detection and location systems
are sold as part of many of its piping system products, and on a stand-alone basis, to monitor areas
where fluid intrusion may contaminate the environment, endanger personal safety, cause a fire hazard,
impair essential services or damage equipment or property. Thermal Care is engaged in engineering,
designing, manufacturing and selling industrial process cooling equipment, including chillers, cooling
towers, plant circulating systems, and related accessories for use in industrial process applications.
The Company&#146;s products are sold both within the United States and internationally. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B>Note 2 - Significant Accounting Policies</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Reclassifications</I></B> <B>:</B> &nbsp;Reclassifications have been made to prior-year financial statements to conform to the current-year
presentations.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Use of Estimates:</I></B> &nbsp;The preparation of financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities
at the date of the financial statements, and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Percentage of Completion Revenue Recognition:</I></B> &nbsp;Perma-Pipe recognizes revenues on contracts under the &#147;percentage of completion&#148; method.

The percentage of completion is determined by the relationship of costs incurred to the total estimated

costs of the contract. Provisions are made for estimated losses on uncompleted contracts in the
period
in which such losses are determined. Changes in job performance, job conditions, and estimated
profitability,
including those arising from contract penalty provisions and final contract settlements
may result
in revisions to costs and income. Such revisions are recognized in the period in which
they are determined.
Claims for additional compensation due the Company are recognized in contract
revenues when realization
is probable and the amount can be reliably estimated.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Revenue Recognition:</I></B> &nbsp;All subsidiaries of the Company other than Perma-Pipe recognize revenues at the date of shipment.

</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Operating Cycle:</I></B> &nbsp;&nbsp;The length of Perma-Pipe contracts vary, but are typically less than one year. The Company
includes in current assets and liabilities amounts realizable and payable in the normal course of
contract completion unless completion of such contracts extends significantly beyond one year.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Principles of Consolidation:</I></B> &nbsp;The consolidated financial statements include the accounts of MFRI; its principal wholly- owned
subsidiaries, Midwesco Filter, Perma-Pipe and Thermal Care, Inc. (&#147;Thermal Care&#148;); and
the majority-owned </FONT></P></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>32</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><page><br>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>and controlled domestic and foreign subsidiaries of MFRI, Midwesco Filter, Perma-Pipe and Thermal Care
(collectively referred to as the &#147;Company&#148;). All significant intercompany balances and
transactions have been eliminated. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Contingencies:</I></B> &nbsp;&nbsp;The Company is subject to various legal proceedings and claims that arise in the ordinary
course of business, including those involving environmental, tax, product liability and general liability
claims. The Company accrues for such liabilities when it is probable that future costs will be incurred
and such costs can be reasonably estimated. Such accruals are based on developments to date, the
Company&#146;s estimates of the outcomes of these matters, its experience in contesting, litigating
and settling other similar matters. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The Company does not currently anticipate the amount of any ultimate liability with respect to these
matters will materially affect the Company&#146;s financial position, liquidity or future operations.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Cash Equivalents:</I></B> &nbsp;All highly liquid investments with a maturity of three months or less when purchased are considered
to be cash equivalents. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Restricted Cash</I></B> <I>:</I> &nbsp;The Loan Agreement provides that all payments by the Company&#146;s customers are deposited
in a bank account from which all funds may only be used to pay the debt under the Loan Agreement.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Accounts Receivable Collection:&nbsp;</I></B> The Company estimates and records its best estimate of uncollectible receivables based on historical
bad debt experience, knowledge of our customers, economic conditions, and other factors. Subsequent
changes in collections realized may result in changes to the Company&#146;s provision for bad debt.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Inventories:</I></B> &nbsp;&nbsp;Inventories are stated at the lower of cost or market. Cost is determined using the first-in,
first-out method for substantially all inventories. Inventories consist of the following:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
  <TD vAlign=top><font size="2" face="Times New Roman, Times, serif"><i>(In thousands)</i></font></TD>
</TR>
</TABLE>
<TABLE WIDTH=600 BORDER=0 CELLPADDING=0 CELLSPACING=0>
  <TR VALIGN=Bottom>
    <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004</FONT></TH>
    <TH width="3%">&nbsp;</TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT></TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD WIDTH=88 ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Raw materials</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 17,049</FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT bgcolor="#EAF9E8"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 13,593</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Work in process</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,211</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,905</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Finished goods</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,790</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,777</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR>
    <TD></TD>
    <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD></TD>
    <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 21,050</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 18,275</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR>
    <TD></TD>
    <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD></TD>
    <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD></TD>
  </TR>
</TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Long-Lived Assets:</I></B> &nbsp;Property, plant and equipment are stated at cost. Interest is capitalized in connection with
the construction of facilities and amortized over the asset&#146;s estimated useful life. No interest
was capitalized during 2004 and 2003.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Depreciation is computed using the straight-line method over the estimated useful lives of the assets,
which range from 3 to 30 years. Amortization of assets under capital leases is included in depreciation
and amortization.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The Company&#146;s investment in property, plant and equipment as of January 31 is summarized below:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
  <TD vAlign=top><font face="Times New Roman, Times, Serif" size=2><i>(In thousands)</i></font></TD>
</TR>
</TABLE>
<table width=600 border=0 cellpadding=0 cellspacing=0>
  <tr valign=Bottom>
    <th><font face="Times New Roman, Times, Serif" size=1></font></th>
    <th colspan=2><font face="Times New Roman, Times, Serif" size=1>2005</font></th>
    <th>&nbsp;</th>
    <th colspan=2><font face="Times New Roman, Times, Serif" size=1>2004</font></th>
    <th>&nbsp;</th>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT>&nbsp;</td>
    <td colspan="2" align=RIGHT><HR NOSHADE SIZE=1></td>
    <td align=LEFT>&nbsp;</td>
    <td colspan="2" align=left><HR NOSHADE SIZE=1></td>
    <td align=LEFT>&nbsp;</td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>Land, buildings and improvements</font></td>
    <td width=1% align=RIGHT><font face="Times New Roman, Times, Serif" size=2>$</font></td>
    <td width=8% align=RIGHT><font face="Times New Roman, Times, Serif" size=2> 19,859</font></td>
    <td width=3% align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td width=1% align=RIGHT><font face="Times New Roman, Times, Serif" size=2>$</font></td>
    <td width=8% align=RIGHT><font face="Times New Roman, Times, Serif" size=2> 21,398</font></td>
    <td width=2% align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>Machinery and equipment</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>21,996</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>21,920</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>Furniture, office equipment and computer software and systems</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>8,930</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>8,382</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>Transportation equipment</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>155</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>279</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr>
    <td></td>
    <td colspan=2 align=RIGHT><HR NOSHADE SIZE=1></td>
    <td></td>
    <td colspan=2 align=RIGHT><HR NOSHADE SIZE=1></td>
    <td></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>50,940</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>51,979</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>Less accumulated depreciation and amortization</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(25,140</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(23,151</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
  </tr>
  <tr>
    <td></td>
    <td colspan=2 align=RIGHT><HR NOSHADE SIZE=1></td>
    <td></td>
    <td colspan=2 align=RIGHT><HR NOSHADE SIZE=1></td>
    <td></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>Property, plant and equipment, net</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>$</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> 25,800</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>$</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> 28,828</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr>
    <td></td>
    <td colspan=2 align=RIGHT><HR NOSHADE SIZE=2></td>
    <td></td>
    <td colspan=2 align=RIGHT><HR NOSHADE SIZE=2></td>
    <td></td>
  </tr>
</table>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Goodwill and other intangible assets with indefinite lives:</I></B> &nbsp;Goodwill, which represents the excess of acquisition cost over the net assets acquired in business
combinations, was amortized through 2001 on a straight-line basis over periods ranging from 25 to
40 years. On February 1, 2002, the Company adopted Statement of Financial Accounting Standards (&#147;SFAS&#148;)
No. 142, &#147;Goodwill and Other Intangible Assets&#148;. SFAS No. 142 changes the accounting for
goodwill and other intangible assets with indefinite lives from an amortization method to an impairment-only
approach. Amortization of goodwill and intangible assets with indefinite lives, including such assets
recorded in past business combinations, </FONT></P></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>33</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><page><br>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>ceased upon adoption. Thus, no amortization for such goodwill and indefinite lived intangibles was
recognized in the accompanying consolidated statements of operations for the years ended January
31, 2005, 2004, and 2003. SFAS No. 142 requires that goodwill and other intangible assets with indefinite
lives be analyzed for impairment upon adoption with any resulting impairment loss recorded as a cumulative
effect of change in accounting principle. Subsequent to the initial impairment test, SFAS No. 142
requires that goodwill and other intangible assets with indefinite lives be analyzed for impairment
on an annual basis or when there is reason to suspect that their values have been impaired. The Company
has designated the beginning of its fiscal year as the date of its annual goodwill impairment test.
The Company&#146;s initial impairment analysis of its goodwill in 2002 resulted in an impairment
loss of $11,849,000 or $10,739,000 net of a tax benefit of $1,110,000 for the year ended January
31, 2003. As required by SFAS No. 142, the impairment loss was recognized in the first quarter of
2002 to reflect the cumulative effect of accounting change. The Company&#146;s annual impairment
test at February 1, 2004 did not result in an impairment. Goodwill was $2,616,000 and $2,549,000
at January 31, 2005 and January 31, 2004, respectively. As of January 31, 2005 and 2004, $1,100,000
of goodwill was allocated to the Industrial Process Cooling Equipment segment. As of January 31,
2005 and 2004 $1,516,000 and $1,449,000, respectively, was allocated to the Filtration Products segment.
The change in goodwill of the Filtration Products segment was due to foreign currency translation.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The changes in the carrying amount of goodwill for the year ended January 31, 2005, are as follows:
</FONT></P>
</td></tr>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE WIDTH=600 BORDER=0 CELLPADDING=0 CELLSPACING=0>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(In Thousands)</i></FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance as of February 1, 2004</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 2,549</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Foreign translation effect</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>67</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR>
    <TD></TD>
    <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance as of January 31, 2005</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 2,616</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
</TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Other intangible assets with definite lives:</I></B> &nbsp;Patents are capitalized and amortized on a straight-line basis over a period not to exceed the
legal lives of the patents. Patents, net of accumulated amortization, were $582,000 and $716,000
at January 31, 2005 and January 31, 2004, respectively. Accumulated amortization was $1,636,000 and
$1,453,000 at January 31, 2005 and January 31, 2004, respectively. Future amortizations over the
next five years ending January 31, will be 2006 - $180,500, 2007 - $173,800, 2008 - $29,400, 2009
- - $26,400 and 2010 - $22,100.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Investment in Joint Venture:</I></B> &nbsp;In April 2002, Perma-Pipe and two unrelated companies formed an equally owned joint venture
to more efficiently market their complementary thermal insulation products and systems for use in
undersea pipeline flow assurance projects worldwide. During the year ended January 31, 2003, the
Company invested $10,000 as its initial capital contribution and loaned $50,000, its share of advances
to fund costs and expenses. The $50,000 loan was paid in July 2003. In October 2003 and January 2004,
the Company received a partner distribution of $160,000 and $266,700, respectively, from its investment
in the joint venture. In June 2004 the Company received a partner distribution of $50,000 from its
investment in the joint venture. The Company accounts for its joint venture investment using the
equity method. The Company&#146;s share of income in 2004 was $225,000.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Financial Instruments:</I></B> &nbsp;The Company uses foreign currency forward contracts to reduce exposure to exchange rate risks
primarily associated with transactions in the regular course of the Company&#146;s export and international
operations. The Company uses forward contracts which are short-term in duration, generally one year
or less. The major currency exposure hedged by the Company is the Canadian dollar. The contract amount,
carrying amount and fair value of these contracts were not significant at January 31, 2005, 2004
and 2003.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Income Tax Provision</I></B>:&nbsp;Deferred income taxes have been provided for temporary differences arising from differences
in basis of assets and liabilities for tax and financial reporting purposes. Deferred income taxes
on temporary differences have been recorded at the current tax rate. The Company assessed its deferred
tax assets for realizability at each reporting period.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Net Income (Loss) Per Common Share:&nbsp;</I></B> Earnings (loss) per share are computed by dividing net income by the weighted average number of common
shares outstanding (basic) plus all potentially dilutive common shares outstanding during the year
(diluted).</FONT></P></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>34</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><page><br>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The basic weighted average shares reconcile to diluted weighted average shares as follows (in thousands):</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE WIDTH=600 BORDER=0 CELLPADDING=0 CELLSPACING=0>
  <TR VALIGN=Bottom>
    <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
    <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004</FONT></TH>
    <TH>&nbsp;</TH>
    <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT></TH>
    <TH>&nbsp;</TH>
    <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2002</FONT></TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Basic weighted average number of common shares outstanding</FONT></TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,986</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,922</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,922</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR>
    <TD></TD>
    <TD COLSPAN=2></TD>
    <TD COLSPAN=2></TD>
    <TD COLSPAN=2></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dilutive effect of stock options</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>237</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR>
    <TD></TD>
    <TD ALIGN=RIGHT><HR NOSHADE SIZE=1>
    </TD>
    <TD></TD>
    <TD ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD></TD>
    <TD ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><p><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;Weighted average number of common shares<BR>
&nbsp;&nbsp;&nbsp;&nbsp;outstanding assuming full dilution</FONT></p></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5,223</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,922</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,922</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR>
    <TD></TD>
    <TD ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD></TD>
    <TD ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD></TD>
    <TD ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD></TD>
  </TR>
  <TR>
    <TD><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
</TABLE>
<TABLE WIDTH=600 BORDER=0 CELLPADDING=0 CELLSPACING=0>
  <TR VALIGN=Bottom>
    <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
    <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004</FONT></TH>
    <TH width="2%">&nbsp;</TH>
    <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT></TH>
    <TH width="2%">&nbsp;</TH>
    <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2002</FONT></TH>
    <TH width="2%">&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Weighted average number of stock options not included in the<BR>
      computation of diluted earnings per share of common stock because<BR>
      the option exercise prices exceeded the average market prices of<BR>
      the common shares</FONT></TD>
    <TD width="8%" ALIGN=RIGHT valign="bottom"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>340</FONT></TD>
    <TD ALIGN=LEFT valign="bottom"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD width="8%" ALIGN=RIGHT valign="bottom"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>775</FONT></TD>
    <TD ALIGN=LEFT valign="bottom"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD width="8%" ALIGN=RIGHT valign="bottom"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>910</FONT></TD>
    <TD ALIGN=LEFT valign="middle"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Outstanding Options at the end of each year (excluding expired<BR>
      options)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>30</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>15</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Stock options with an exercise price below the average stock price</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>611</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>225</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>130</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
</TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>In 2004, a total of 303,757 stock options were exercised. As of April 15,2005, 4,812 stock options
were exercised. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Stock Options:</I></B> &nbsp;The Company&#146;s stock option plans are accounted for in accordance with Accounting Principles
Board Opinion No. 25, <I>Accounting for Stock Issued to Employees</I>, using the intrinsic value method and, accordingly, no compensation cost has been recognized. The
Company&#146;s net income (loss) and income (loss) per share would have been reduced to the amounts
shown below if compensation cost related to stock options had been determined based on fair value
at the grant dates in accordance with Statement of Financial Accounting Standards No. 148, Accounting
for Stock-Based Compensation (&#147;SFAS 148&#148;). The pro forma net income effect of applying
SFAS 148 was as follows:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
</TABLE>
<TABLE WIDTH=600 BORDER=0 CELLPADDING=0 CELLSPACING=0>
  <TR VALIGN=Bottom>
    <TH align="left" valign="bottom"><FONT FACE="Times New Roman, Times, Serif" SIZE=2><i><font size="1">(In thousands except per share information)</font></i></FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004</FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2002</FONT></TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net income (loss) &#150; as reported</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 2,813</FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (1,097</FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (11,528</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;Compensation cost under fair-market value-based accounting<BR>
&nbsp; method, net of tax</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 221</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (134</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (136</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net income (loss) &#150; pro forma</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 2,592</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (1,231</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (11,664</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net income (loss) per common share &#150; basic and diluted, as reported</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 0.56</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.22</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (2.34</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net income (loss) per common share &#150; basic, and diluted pro forma</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 0.52</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.25</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (2.37</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Reported diluted EPS higher than pro forma diluted EPS</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 0.04</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 0.02</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 0.03</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
</TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The weighted average fair value of options granted during 2004 (net of options surrendered), 2003 and

2002 are estimated at $1.85, $1.14 and $1.17, per share, respectively, on the date of grant using

the Black-Scholes option-pricing model with the following weighted average assumptions:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp; </FONT></TD></TR></TABLE>
<TABLE WIDTH=600 BORDER=0 CELLPADDING=0 CELLSPACING=0>
  <TR VALIGN=Bottom>
    <TH bgcolor="#FFFFFF">&nbsp;</TH>
    <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;  </FONT></TH>
    <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004</FONT></TH>
    <TH>&nbsp;</TH>
    <TH><font face="Times New Roman, Times, Serif" size=1>2003</font></TH>
    <TH>&nbsp;</TH>
    <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2002</FONT></TH>
    <TH>&nbsp;</TH>
    <TH bgcolor="#FFFFFF">&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT bgcolor="#FFFFFF">&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT bgcolor="#FFFFFF">&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD width="7%" ALIGN=LEFT bgcolor="#FFFFFF">&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Expected volatility</FONT></TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>49.18</FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>50.01</FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>46.81</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD WIDTH=7% ALIGN=LEFT bgcolor="#FFFFFF">&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT bgcolor="#FFFFFF">&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Risk-free interest rate</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.31</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.93</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.51</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=LEFT bgcolor="#FFFFFF">&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT bgcolor="#FFFFFF">&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dividend yield</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.0</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.0</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.0</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=LEFT bgcolor="#FFFFFF">&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT bgcolor="#FFFFFF">&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Expected life in years</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7.0</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7.0</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7.0</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT bgcolor="#FFFFFF">&nbsp;</TD>
  </TR>
</TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Fair Value of Financial Instruments</I></B> <I>:</I> &nbsp;The carrying values of cash and cash equivalents, accounts receivable and accounts payable are
reasonable estimates of their fair value due to their short-term nature. The carrying values of the
Company&#146;s unsecured senior notes at January 31, 2005 and 2004 are also reasonable estimates
of their fair value, as evidenced by the renegotiation of interest rates and terms that occurred
recently as described in Note 7. </FONT></P></TD>
</TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>35</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><page><br>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD><P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Accumulated Other Comprehensive Income (Loss):</I></B> &nbsp;Accumulated other comprehensive income loss consists of the following:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
  <TD vAlign=top><FONT FACE="Times New Roman, Times, Serif" SIZE=2><i>(In thousands)</i></FONT></TD>
</TR>
</TABLE>
<TABLE WIDTH=600 BORDER=0 CELLPADDING=0 CELLSPACING=0>
  <TR VALIGN=Bottom>
    <TH align="left" valign="bottom"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
    <TH COLSPAN=2 align="center" nowrap><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Accumulated<BR>
      Translation<BR>
      Adjustment</FONT></TH>
    <TH align="center">&nbsp;</TH>
    <TH COLSPAN=2 align="center" nowrap><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Minimum<BR>
      Pension<BR>
      Liability<BR>
      Adjustment</FONT></TH>
    <TH align="center">&nbsp;</TH>
    <TH COLSPAN=2 align="center"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Total</FONT></TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance &#150; January 31, 2002</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT>&nbsp;</TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(691</FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT>&nbsp;</TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(493</FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT>&nbsp;</TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,184</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Unrealized translation adjustment</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>730</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><font face="Times New Roman, Times, Serif" size=2>730</font></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><p><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Minimum pension liability adjustment<br>
        &nbsp;&nbsp;(net of tax benefit of $348)</FONT></p></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(577</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(577</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance &#150; January 31, 2003</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>39</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,070</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,031</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Unrealized translation adjustment</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>643</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>643</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Minimum pension liability adjustment<br>
    &nbsp;&nbsp;(net of tax benefit of $217)</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>715</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>715</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance &#150; February 1, 2004</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>682</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(355</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>327</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Unrealized translation adjustment</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>278</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>278</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Minimum pension liability adjustment<br>
    &nbsp;&nbsp;(net of tax benefit of $320)</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(168</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(168</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Balance &#150; January 31, 2005</FONT></TD>
    <TD ALIGN=RIGHT><font face="Times New Roman, Times, Serif" size=2>$</font></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;960</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><font face="Times New Roman, Times, Serif" size=2>$</font></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;(523</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=left><font face="Times New Roman, Times, Serif" size=2>$</font></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;437</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
</TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Accounting Pronouncements:</I></B> &nbsp;In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting
Standards No. 123 (revised 2004), Share-Based Payment (&#147;SFAS 123R&#148;). The Company is required
to adopt SFAS 123R in the first quarter of 2006. SFAS 123R requires the Company to measure the cost
of employee services received in exchange for an equity award based on the grant date fair value.
The cost will be recognized as an expense in financial statements over the period during which an
employee is required to provide service. If SFAS 123R had been in effect in 2004, the Company&#146;s
net income per diluted share would have been lower by 4 cents. If the Company continues to issue
the same type and amount of equity compensation, the Company anticipates the future impact to be comparable.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>In November 2004, the FASB issued SFAS No. 151, &#147;Inventory Costs - an amendment of ARB No. 43,

Chapter 4.&#148; This statement amends the guidance in Accounting Research Bulletin (ARB) No. 43,

Chapter 4, &#147;Inventory Pricing,&#148; to clarify the accounting for abnormal amounts of idle

facility expense, freight, handling costs and wasted material (spoilage) and requires that those

items be recognized as current-period charges regardless of whether they meet the criterion of
&#147;so
abnormal.&#148; The statement also requires that allocation of fixed production overheads
to the
costs of conversion be based on the normal capacity of the production facilities. The provisions

of this statement are effective for inventory costs incurred during fiscal years beginning after

June 15, 2005 (as of February 1, 2006 for the Company) and are to be applied prospectively. The
Company
does not expect adoption of SFAS No. 151 to have a material effect on its results of operations
or
financial position.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>In December 2003, the Financial Accounting Standards Board (FASB) issued a revision to SFAS No. 132,

&#147;Employers&#146; Disclosure about Pensions and Other Postretirement Benefits.&#148; This Statement

retains the disclosures previously required by SFAS 132 but adds additional disclosure requirements

about the assets, obligations, cash flows, and net periodic benefit cost of defined benefit pension

plans and other defined benefit postretirement plans. It also calls for the required information

to be provided separately for pension plans and for other postretirement benefit plans. In addition

to expanded annual disclosures, the standard improves information available to investors in interim

financial statements. SFAS 132R was effective for fiscal years ending after December 15, 2003,
and
for quarters beginning after December 15, 2003. The adoption of SFAS 132R did not have a material

impact on the Company&#146;s financial statements, however, required disclosures have been reflected

in the current financial statements.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>In May 2003, the FASB issued SFAS No. 150, &#147;Accounting for certain financial instruments with

characteristics of both liabilities and equity,&#148; effective in June 2003. SFAS No. 150 requires

an issuer to classify, as liabilities, any financial instruments that fall within the scope of
this
pronouncement. Adoption of SFAS 150 did not have a material effect on the results of operations,

financial condition, or cash flows of the Company.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>In April 2003, the FASB issued SFAS No. 149, &#147;Amendment of Statement 133 on Derivative Instruments
and Hedging Activities,&#148; parts of which apply to existing contracts, but which was generally
effective for contracts entered into after </FONT></P></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>36</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><page><br>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>June 30, 2003. &nbsp;Adoption of SFAS No. 149 did not have a material effect on the results of operations,
financial condition or cash flows of the Company.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>In December 2003, the FASB issued Interpretation No. 46R, &#147;Consolidation of Variable Interest
Entities, an Interpretation of ARB No. 51,&#148; which requires that the assets, liabilities, and
the results of activities of a variable interest entity in which a business enterprise has controlling
financial interest be included in consolidation with those of the business enterprise. Adoption of
FIN No. 46R did not have a material effect on the results of operations, financial condition or cash
flows of the Company. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>In December 2002, the FASB issued SFAS No. 148, &#147;Accounting for Stock-Based Compensation&#148;

which was effective for the Company on December 15, 2002. SFAS No. 148 provides alternative methods

of transition for a voluntary change to the fair-value method of accounting for stock-based employee

compensation. In addition, this Statement amends the disclosure requirements of SFAS No. 123 to
require
prominent disclosures in both the annual and interim financial statements about the Company&#146;s

method of accounting for stock-based employee compensation and the effects of the method used on

reported results. Adoption of SFAS No. 148 did not have a material effect on the results of operations,

financial condition or cash flows of the Company.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>In November 2002, the FASB issued Interpretation No. 45, &#147;Guarantor&#146;s Accounting and Disclosure

Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.&#148;&nbsp;This

Interpretation requires the recognition of certain guarantees as liabilities at fair market value

and was effective for guarantees issued or modified after December 31, 2002. Adoption of the provisions

of the Interpretation has not had a material effect on the financial statements of the Company,
based
on guarantees in effect on January 31, 2005.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>In April 2002, the FASB issued SFAS No. 145, &#147;Rescission of FASB Statements 4, 44, and 64, Amendment

of FASB Statement No. 13, and Technical Corrections.&#148;&nbsp;The Statement was effective for
fiscal
years beginning after May 15, 2002 and rescinds SFAS No. 4, &#147;Reporting Gains and Losses
from
Extinguishment of Debt,&#148; and an amendment of that Statement, SFAS No. 64, &#147;Extinguishments

of Debt Made to Satisfy Sinking-Fund Requirements.&#148;&nbsp;Under SFAS No. 4, all gains and losses

from extinguishments of debt were required to be aggregated and, if material, classified as an
extraordinary
item, net of related income tax effect. SFAS No. 145 eliminated SFAS No. 4 and, thus,
the exception
to applying Accounting Principles Board (APB) No. 30 to all gains and losses related
to extinguishments
of debt (other than extinguishments of debt to satisfy sinking-fund requirements.
As a result, gains
and losses from extinguishments of debt should be classified as extraordinary
items only if they
meet the criteria in APB No. 30. Adoption of SFAS No. 145 resulted in the reclassification
of an
extraordinary loss of $133,000 ($79,000 net of tax) recorded in 2002 to an operating expense.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B>Note 3 - Related Party Transactions</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The Company provides certain services and facilities to a company (affiliate) primarily owned by two
principal stockholders who are also members of management. The Company also purchases certain services
from that company under a lease and management services agreement. The Company recorded revenue of
$140,000 and expense of $147,000 from the affiliate under such agreements in 2004, revenue of $260,000
and expense of $171,000 in 2003, and revenue of $250,000 and expense of $167,000 in 2002.
</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The lease agreement and the management services agreement were approved by the Company&#146;s Committee
of Independent Directors. Management of the Company believes the amounts paid and received under
these agreements were comparable to those which would have been paid and received in arm&#146;s-length
transactions.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B>Note 4 &#150; Acquisitions and Divestitures</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Other </I></B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>On June 19, 2002, the Company purchased a business by acquiring specified assets and assuming specified
liabilities for $500,000 in cash. In accordance with SFAS No. 141, the purchase price plus purchase-related
expenses is first applied to current assets and any excess of value over the current assets is allocated
to extraordinary gain. The asset values were $815,000 and $0 for inventory and other assets, which
mainly consisted of property, plant and equipment, respectively, which, combined with purchase-related
expenses of $257,000, resulted in the recognition of an extraordinary gain of $58,000 ($35,000 net
of tax). The results of operations of the acquired assets have been included in the consolidated
results of operations since the date of acquisition.</FONT></P></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>37</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><page><br>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B>Note 5 &#150; Retention Receivable</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Retention is the amount withheld by a customer until a contract is completed. Retentions of $142,800
and $64,000 are included in the balance of trade accounts receivable at January 31, 2005 and 2004,
respectively.</FONT></P>
<P><FONT face="Times New Roman, Times, Serif" size=2><B>Note 6 - Costs and Estimated Earnings on Uncompleted Contracts</B></FONT></P>
<P><FONT face="Times New Roman, Times, Serif" size=2>Costs and estimated earnings on uncompleted contracts are as follows: </FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
  <TD vAlign=top><FONT FACE="Times New Roman, Times, Serif" SIZE=2><i>(In thousands)</i></FONT></TD>
</TR>
</TABLE>
<TABLE WIDTH=600 BORDER=0 CELLPADDING=0 CELLSPACING=0>
  <TR VALIGN=Bottom>
    <TH align="left" valign="top"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004</FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT></TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Costs incurred on uncompleted contracts</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 19,186</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 7,233</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Estimated earnings</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5,664</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>979</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Earned revenue</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>24,850</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8,212</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Less billings to date</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>23,168</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7,396</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1,682</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 816</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Classified as follows:</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Costs and estimated earnings in excess of&nbsp;&nbsp;&nbsp;&nbsp;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;billings on uncompleted contracts</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 2,472</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1,115</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>

    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Billings in excess of costs and estimated<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;earnings on uncompleted contracts</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(790</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(299</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1,682</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 816</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
</TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P><FONT face="Times New Roman, Times, Serif" size=2><B>Note 7 &#150; Debt </B></FONT></P>
<P><FONT face="Times New Roman, Times, Serif" size=2>Debt consists of the following:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
  <TD vAlign=top><FONT FACE="Times New Roman, Times, Serif" SIZE=2><i>(In thousands)</i></FONT></TD>
</TR>
</TABLE>
<TABLE WIDTH=600 BORDER=0 CELLPADDING=0 CELLSPACING=0>
  <TR VALIGN=Bottom>
    <TH align="left" valign="top"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004</FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT></TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Secured senior notes due 2007 (1)</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 3,125</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 3,875</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Revolving bank loan Domestic</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11,370</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7,229</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Industrial Revenue Bonds</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,150</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5,200</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Mortgage notes</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9,163</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10,809</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Term loans</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>32</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>122</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Short-term credit arrangements</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>668</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,215</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Capitalized lease obligations (Note 8)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>31</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>75</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total Debt</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>27,539</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>28,525</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Less current maturities</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,334</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11,864</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total Long-Term Debt</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 26,205</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 16,661</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
</TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
  <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
</TR>
<TR>
<TD vAlign=top width=24></TD>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>(1)<FONT face="Times New Roman, Times, Serif" size=2></FONT></FONT></TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2><FONT face="Times New Roman, Times, Serif" size=2></FONT>Although these notes were outstanding at January 31, 2005, they were repaid in full on March 28, 2005.</FONT></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P><FONT face="Times New Roman, Times, Serif" size=2>The following table summarizes the Company&#146;s scheduled maturities, excluding the revolving line
of credits of $12,038,000 at January 31, 2005. </FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE WIDTH=600 BORDER=0 CELLPADDING=0 CELLSPACING=0>
  <TR VALIGN=Bottom>
    <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Total</FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>1/31/06</FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>1/31/07</FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>1/31/08</FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>1/31/09</FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>1/31/10</FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Thereafter</FONT></TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Mortgages</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 9,161,100</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 534,600</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 536,000</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 569,700</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1,693,300</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 602,400</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 5,225,300</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Senior Debt</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,125,000</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>750,000</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>750,000</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,625,000</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>IRB Payable</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,150,000</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,150,000</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Term Loans</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>32,600</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>32,600</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Capitalized Lease Obligations</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>31,500</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>16,300</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5,800</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,900</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,900</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,600</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="20" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;Total</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 15,500,400</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1,333,500</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1,291,800</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 5,348,600</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1,697,200</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 604,000</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 5,225,300</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="20" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
</TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Financing</I></B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>At January 31, 2005, the Company was in compliance with all terms and covenants of all loans.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>On July 11, 2002, the Company entered into secured note purchase agreements with certain institutional
investors </FONT></P></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>38</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><page><br>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>(&#147;Note Purchase Agreements&#148;). Under the terms of the Note Purchase Agreements, the Company
entered into a five-year $6,000,000 term loan replacing prior term loans with an aggregate original
principal balance of $25,000,000 (&#147;Prior Term Loans&#148;). The outstanding principal balance
of the Prior Term Loans at July 11, 2002 was $16,000,000. The Company borrowed $10,000,000 from its
new revolving line of credit from another financial institution (described below) to pay down this
loan from $16,000,000 to $6,000,000. Interest rates under the Note Purchase Agreements were 12% per
annum if the outstanding principal was greater than $5,000,000 or 10% per annum if the outstanding
principal was $5,000,000 or less. The Company was scheduled to pay $188,000 in aggregate principal
on the last days of March, June, September and December in each year, commencing on September 30,
2002 and ending on June 30, 2007. In addition, the Company was scheduled to make annual prepayments
of excess cash flow (as defined in the Note Purchase Agreements). Finally, the Loan Agreement (defined
below) and the Note Purchase Agreements permit voluntary prepayments sufficient to reduce the outstanding
term loan principal to $5,000,000 subject to certain conditions. The Company met such conditions
and made such a prepayment on July 31, 2002. As is described below, the $3,125,000 balance remaining
under the Note Purchase Agreement at March 28, 2005 was repaid in full on that date.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>On July 11, 2002, the Company entered into a secured loan and security agreement with a financial institution
(&#147;Loan Agreement&#148;). Under the terms of the Loan Agreement, which matures on November 30,
2007, the Company can borrow up to $27,000,000, subject to borrowing base and other requirements,
under a revolving line of credit. Interest rates generally are based on options selected by the Company
as follows:&nbsp;(a) a margin in effect plus a prime rate; or (b) a margin in effect plus the LIBOR
rate for the corresponding interest period. At January 31, 2005, the prime rate was 5.25%, and the
margins added to the prime rate and the LIBOR rate, which are determined each quarter based on the
applicable financial statement ratio, were 1.25 and 3.25 percentage points, respectively. Monthly
interest payments were made. The average interest rate for the year ending January 31, 2005 was 4.99%.
As of January 31, 2005, the Company had borrowed $11,370,000 and had $2,182,000 available to it under
the revolving line of credit. In addition, $4,727,000 of availability was used under the Loan Agreement
primarily to support letters of credit to guarantee amounts owed for Industrial Revenue Bond borrowings.
The Loan Agreement provides that all payments by the Company&#146;s customers are deposited in a
bank account from which all funds may only be used to pay the debt under the Loan Agreement. At January
31, 2005, the amount of restricted cash was $973,000. Cash required for operations is provided by
draw-downs on the line of credit.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>On March 28, 2005, the Company&#146;s Loan Agreement was amended to (1) add a term loan of $4,300,000
(&#147;Term Loan&#148;) and (2) amend certain covenants (the &#147;Amendment&#148;). The total that
can be borrowed under the Loan Agreement is unchanged at $27,000,000, subject to borrowing base and
other requirements. Interest rates under the Term Loan are based on options selected by the Company
as follows:&nbsp;(a) a margin in effect plus a prime rate; or (b) a margin in effect plus the LIBOR
rate for the corresponding interest period. At March 28, 2005 the prime rate was 5.75% and the margins
added to the prime rate and the LIBOR rate, which are determined each quarter based on the applicable
financial statement ratio, were 1.25 and 3.5 percentage points, respectively. The Company is scheduled
to pay $215,000 of principal on the first days of March, June, September, and December in each year,
commencing on June 1, 2005 and ending on September 30, 2007, with the remaining unpaid principal
payable on November 30, 2007.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The proceeds of the Term Loan were used to repay the outstanding balance due under the Company&#146;s
Note Purchase Agreements ($3,125,000),which has been cancelled and to reduce the Company&#146;s revolving
debt under the Loan Agreement ($1,175,000). Interest rates under the Note Purchase Agreements had
been 10% per annum.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>On January 29, 2003, the Company obtained a loan from a Danish bank to construct a building, in the

amount of 1,050,000 Euro, approximately $1,136,000 at the exchange rate prevailing at the time
of
the transaction. The loan has a term of twenty years. The loan bears interest at 6.1% with quarterly

payments of $19,000 for both principal and interest.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>On April 26, 2002, Midwesco Filter borrowed $3,450,000 under two mortgage notes secured by two parcels

of real property and improvements owned by Midwesco Filter in Winchester, Virginia. Proceeds from

the mortgages, net of a prior mortgage loan, were approximately $2,700,000 and were used to make

principal payments to the lenders under the Prior Term Loans and the bank which was the lender
under
the Company&#146;s revolving line of credit at that time. On June 17, 2004, Midwesco Filter
sold
one of its buildings located in Winchester, Virginia. The building sold consisted of 66,998
square
feet on 10 acres. The mortgage of $1,088,000 was paid at the closing and has been cancelled.
The
note on the remainder property bears interest at 7.10% with a monthly payment of $23,616 for
both
principal and interest, and the note&#146;s amortization schedule and term are ten years.</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On July 31, 2002 Perma-Pipe, Inc. borrowed $1,750,000 under a mortgage note secured by its manufacturing
  facility in Lebanon, Tennessee. From the proceeds, $1,000,000 was used for a payment of amounts borrowed
  under the Note </FONT></div></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>39</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><page><br>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Purchase Agreements with the remaining proceeds used to repay amounts borrowed under the Loan Agreement.
  The loan bears interest at 7.75% with monthly payments of $21,001 for both principal and interest,
  and has a ten-year term. </FONT></div></TD></TR>
<TR>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On September 20, 2000, the Company purchased

an 8.1-acre parcel of land with a 131,000-square foot building in Niles, Illinois, from two principal

stockholders, who are also members of management, for approximately $4,438,000. This amount included

the assumption of a $2,500,000 mortgage note with a remaining balance of $2,405,000. The loan bears

interest at 7.52% with monthly payments of $18,507 for both principal and interest based on an
  amortization
  schedule of 25 years with a balloon payment at the end of the ten-year term. At the
  date of purchase,
  the remaining term of the loan was 7.25 years.</FONT></div></TD></TR>
<TR>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On June 30, 1998, the Company borrowed $1,400,000

under a mortgage note secured by the manufacturing facility in Cicero, Illinois. The loan bears
  interest
  at 6.76% with monthly payments of $9,682 for both principal and interest based on an amortization

schedule of 25 years with a balloon payment at the end of the ten-year term. </FONT></div></TD></TR>
<TR>
<TD vAlign=top>&nbsp;</TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On June 1, 1998, the Company obtained a loan in the amount of 4,500,000 DKK (approximately $650,000
  at the prevailing exchange rate at the time of the transaction) from a Danish bank to partially finance
  the acquisition of Boe-Therm A/S (&#147;Boe-Therm&#148;). It is secured by the land and building
  of Boe-Therm, bears interest at 6.48% and has a term of twenty years. Another loan in the amount
  of 850,000 DKK&nbsp;(approximately $134,000 at the prevailing&nbsp;exchange rate at the time of the&nbsp;transaction)&nbsp;was&nbsp;obtained&nbsp;on
  January 1, 1999 to acquire land and a building,&nbsp;bears&nbsp;interest at 6.1% and has a term of
  twenty&nbsp;years. The interest rates on both the twenty-year loans are guaranteed for the first
  ten years, after which they will be renegotiated based on prevailing market conditions.</FONT></div></TD></TR>
<TR>
<TD vAlign=top>&nbsp;</TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>On September 14, 1995,&nbsp;Perma-Pipe in Lebanon,

Tennessee received $3,150,000 of proceeds of Industrial Revenue Bonds, which mature on September

1, 2007. The bonds are fully secured by bank letters of credit, which the Company expects to renew,

reissue, extend or replace prior to each expiration date during the term of the bonds. The bonds

bear interest at a variable rate, which approximates 4.5% per annum, including letter of credit
  and
  re-marketing fees. The bond proceeds were available for capital expenditures related to manufacturing

capacity expansions and efficiency improvements during a three-year period which commenced in the

fourth quarter of 1995 and ended during the Company&#146;s fiscal quarter ended October 31, 1998.

On November 1, 1999, the Company used $1,100,000 of unspent bond proceeds to redeem bonds outstanding

as provided in the indenture. </FONT></div></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>On September 14, 1995, Midwesco Filter Resources, Inc. in Winchester, Virginia received $2,050,000

of proceeds from Industrial Revenue Bonds, which were to mature on August 1, 2007. These bonds
had
been fully secured by bank letters of credit. As a result of the sale of land and a building
on June
17, 2004, the Company redeemed the bonds in September 2004. </FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The Company also has short-term credit arrangements used by its European subsidiaries. These credit arrangements are generally in the form of overdraft facilities at rates competitive in the countries in which the Company operates. At January 31, 2005, borrowings under these credit arrangements totaled $668,000; an additional $1,117,000 remained unused. </FONT></div></TD>
</TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P><FONT face="Times New Roman, Times, Serif" size=2><B>Note 8 - Lease Information</B></FONT></P>
<P><FONT face="Times New Roman, Times, Serif" size=2>The following is an analysis of property under capitalized leases:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
  <TD vAlign=top><FONT FACE="Times New Roman, Times, Serif" SIZE=2><i>(In thousands)</i></FONT></TD>
</TR>
</TABLE>
<TABLE WIDTH=600 BORDER=0 CELLPADDING=0 CELLSPACING=0>
  <TR VALIGN=Bottom>
    <TH align="left" valign="top"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004</FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT></TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Machinery and equipment</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 164</FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT bgcolor="#EAF9E8"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 124</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Furniture and office equipment</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>698</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>698</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Transportation equipment</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>245</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>225</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,107</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,047</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Less accumulated amortization</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,084</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>957</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 23</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 90</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
</TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The Piping Systems Business leases manufacturing and warehouse facilities, land, transportation equipment
and office space under non-cancelable operating leases, which expire beginning 2007 through 2017.
The Filtration Products Business leases approximately 12,000 square feet of office space under an
operating lease which began in June 2004 and expires in June 2007. Management expects that these
leases will be renewed or replaced by other leases in the normal </FONT></P></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>40</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><page><br>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>course of business. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>At January 31, 2005, future minimum annual rental commitments under non-cancelable lease obligations
were as follows:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE WIDTH=600 BORDER=0 CELLPADDING=0 CELLSPACING=0>
  <TR VALIGN=Bottom>
    <TH align="left" valign="bottom"><FONT FACE="Times New Roman, Times, Serif" SIZE=1><i>(In thousands)</i></FONT></TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Capital<BR>
      Leases</FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Operating<BR>
      Leases</FONT></TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2006</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 16</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 480</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2007</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>454</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2008</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>347</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2009</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>268</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2010</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>130</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Thereafter</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>149</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>32</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,829</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=2>Less amount representing interest</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Present value of future minimum lease payments (Note 7)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 32</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1,829</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
</TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P><FONT face="Times New Roman, Times, Serif" size=2>Rental expense for operating leases was $752,300, $807,000 and $914,000 in 2004, 2003 and 2002, respectively.
</FONT></P>
<P><FONT face="Times New Roman, Times, Serif" size=2><B>Note 9 - Income Taxes</B></FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The following is a summary of domestic and foreign income (loss) before income taxes, extraordinary
items and cumulative effect of accounting change: </FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
  <TD vAlign=top><i><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(In thousands)</FONT></i></TD>
</TR>
</TABLE>
<TABLE WIDTH=600 BORDER=0 CELLPADDING=0 CELLSPACING=0>
  <TR VALIGN=Bottom>
    <TH align="left" valign="top"><i></i></TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004</FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2002</FONT></TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Domestic</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 2,172</FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (2,995</FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (1,817</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Foreign</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,572</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>763</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>681</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 3,744</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (2,232</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (1,136</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
</TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P><FONT face="Times New Roman, Times, Serif" size=2>Components of income tax expense (benefit) are as follows:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
  <TD vAlign=top><FONT FACE="Times New Roman, Times, Serif" SIZE=2><i>(In thousands)</i></FONT></TD>
</TR>
</TABLE>
<TABLE WIDTH=600 BORDER=0 CELLPADDING=0 CELLSPACING=0>
  <TR VALIGN=Bottom>
    <TH align="left" valign="top"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004</FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2002</FONT></TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Current:</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Federal</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 467</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 41</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (390</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Foreign</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>475</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>158</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>173</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;State and other</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>173</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>78</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(460</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,115</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>277</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(677</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Accrued (Deferred)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(184</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,412</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>365</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Totals</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 931</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (1,135</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (312</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
</TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P><FONT face="Times New Roman, Times, Serif" size=2>The tax benefit related to stock options recorded through equity was $542,000 which did not affect net income in 2004.
</FONT></P>
<P align="justify"><FONT face="Times New Roman, Times, Serif" size=2>The difference between the provision (benefit) for income taxes and the amount computed by applying
the federal statutory rate is as follows:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
  <TD vAlign=top><FONT FACE="Times New Roman, Times, Serif" SIZE=2><i>(In thousands)</i></FONT></TD>
</TR>
</TABLE>
<TABLE WIDTH=600 BORDER=0 CELLPADDING=0 CELLSPACING=0>
  <TR VALIGN=Bottom>
    <TH align="left" valign="top"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004</FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2002</FONT></TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Tax (benefit) at federal statutory rate</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1,273</FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (759</FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (359</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Foreign rate tax differential</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(59</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(171</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(13</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>State (benefit) taxes, net of federal benefit</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>157</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(120</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(70</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR>
    <TD></TD>
    <TD COLSPAN=3></TD>
    <TD COLSPAN=3></TD>
    <TD COLSPAN=3></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>R&amp;D Credit</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(401</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Other &#150; net</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(39</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(85</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>130</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Totals</FONT></TD>
    <TD width="1%" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD width="8%" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 931</FONT></TD>
    <TD width="3%" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD width="1%" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD width="8%" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (1,135</FONT></TD>
    <TD width="3%" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD width="1%" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD width="8%" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (312</FONT></TD>
    <TD width="2%" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
</TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>41</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><page><br>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD>
<P><FONT face="Times New Roman, Times, Serif" size=2>Components of the current deferred income tax asset balance are as follows:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp; </FONT></TD>
</TR>
<TR>
  <TD vAlign=top><font face="Times New Roman, Times, Serif" size=2><i>(In thousands)</i></font></TD>
</TR>
</TABLE>
<table width=600 border=0 cellpadding=0 cellspacing=0>
  <tr valign=Bottom>
    <th align="left" valign="top"><font face="Times New Roman, Times, Serif" size=1></font></th>
    <th colspan=2><font face="Times New Roman, Times, Serif" size=1>2004</font></th>
    <th>&nbsp;</th>
    <th colspan=2><font face="Times New Roman, Times, Serif" size=1>2003</font></th>
    <th>&nbsp;</th>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT>&nbsp;</td>
    <td colspan="2" align=RIGHT><HR NOSHADE SIZE=1></td>
    <td align=LEFT>&nbsp;</td>
    <td colspan="2" align=RIGHT><HR NOSHADE SIZE=1></td>
    <td align=LEFT>&nbsp;</td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>Accrued commissions and bonuses</font></td>
    <td width=1% align=RIGHT><font face="Times New Roman, Times, Serif" size=2>$</font></td>
    <td width=8% align=RIGHT><font face="Times New Roman, Times, Serif" size=2> 788</font></td>
    <td width=2% align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td width=1% align=RIGHT><font face="Times New Roman, Times, Serif" size=2>$</font></td>
    <td width=8% align=RIGHT><font face="Times New Roman, Times, Serif" size=2> 643</font></td>
    <td width=2% align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>Other accruals not yet deducted</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>507</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>550</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>Inventory valuation allowance</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>373</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>353</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>Allowance for doubtful accounts</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>140</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>160</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>Inventory uniform capitalization</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(15</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(16</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>Other</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>49</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(51</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT>&nbsp;</td>
    <td colspan="2" align=RIGHT><HR NOSHADE SIZE=1></td>
    <td align=LEFT>&nbsp;</td>
    <td colspan="2" align=RIGHT><HR NOSHADE SIZE=1></td>
    <td align=LEFT>&nbsp;</td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>Totals</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>$</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> 1,842</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>$</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> 1,639</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT>&nbsp;</td>
    <td colspan="2" align=RIGHT><HR NOSHADE SIZE=2></td>
    <td align=LEFT>&nbsp;</td>
    <td colspan="2" align=RIGHT><HR NOSHADE SIZE=2></td>
    <td align=LEFT>&nbsp;</td>
  </tr>
</table>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P><FONT face="Times New Roman, Times, Serif" size=2>Components of the long-term deferred income tax asset (liability) balances are as follows:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE WIDTH=600 BORDER=0 CELLPADDING=0 CELLSPACING=0>
  <TR VALIGN=Bottom>
    <TH align="left" valign="bottom"><FONT FACE="Times New Roman, Times, Serif" SIZE=1><i>(In thousands)</i></FONT></TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004</FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT></TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Capital loss carryforward from sale of foreign subsidiary</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 307</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 307</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Depreciation</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,291</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(1,164</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Goodwill</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>424</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>509</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Non-qualified deferred compensation</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>434</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>336</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Minimum pension liability</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(91</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>269</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net operating loss</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>536</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,233</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Research &amp; development credit</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>358</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Alternative minimum tax credit</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>55</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Foreign deferred liability</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(145</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(84</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Other</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>524</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(34</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Totals</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1,111</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1,372</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
</TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P><FONT face="Times New Roman, Times, Serif" size=2>At January 31, 2005 the Company had a net operating loss carryforward of $1,576,000 available to offset
future taxable income in the United States and certain foreign jurisdictions, which expires in 2024.</FONT></P>
<P><FONT face="Times New Roman, Times, Serif" size=2><B>Note 10 - Employee Retirement Plans</B></FONT></P>
<P><FONT face="Times New Roman, Times, Serif" size=2><B><I>Pension Plan</I></B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Midwesco Filter has a defined benefit plan covering its hourly rated employees. The benefits are based
on fixed amounts multiplied by years of service of retired participants. The Company engages outside
actuaries to calculate its obligations and costs. The funding policy is to contribute such amounts
as are necessary to provide for benefits attributed to service to date and those expected to be earned
in the future. The amounts contributed to the plan are sufficient to meet the minimum funding requirements
set forth in the Employee Retirement Income Security Act of 1974. Midwesco Filter may contribute
additional amounts at its discretion. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The market related value of plan assets at January 31, 2005 was $3,090,812. The plans hold no securities
of MFRI, Inc. 100% of the assets are held for benefits under the plan. The target asset allocation
was 95% to 100% mutual funds. The investment policy is to invest all funds in the Vanguard Balanced
Index Fund except for cash needed to pay benefits and investment expenses for the year. At January
31, 2005, 92% of plan assets were held in a mutual fund and the remaining 8% were in a money market
fund. The expected long-term rate-of-return-on-assets is based on historical long-term rates of equity
and fixed income investments and the asset mix objective of the fund.</FONT></P>
</TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>42</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><page><br>
<table width="600" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td><FONT face="Times New Roman, Times, Serif" size=2>The following provides a reconciliation of benefit obligations, plan assets and funded status of the plan:</FONT></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
  </tr>
</table>
<TABLE WIDTH=600 BORDER=0 CELLPADDING=0 CELLSPACING=0>
  <TR VALIGN=Bottom>
    <TH align="left" valign="bottom"><FONT FACE="Times New Roman, Times, Serif" SIZE=1><i>(In thousands)</i></FONT></TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004</FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT></TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Accumulated benefit obligations:</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Vested benefits</FONT></TD>
    <TD width="1%" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD width="8%" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 3,413</FONT></TD>
    <TD width="3%" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD width="1%" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD width="8%" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 2,915</FONT></TD>
    <TD width="2%" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Accumulated benefits</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,422</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,933</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total Accumulated benefit obligations</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6,835</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5,848</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>Change in benefit obligation:</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2></font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2></font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Benefit obligation &#150; beginning of year</font></td>
    <td width="1%" align=RIGHT><font face="Times New Roman, Times, Serif" size=2>$</font></td>
    <td width="8%" align=RIGHT><font face="Times New Roman, Times, Serif" size=2> 3,312</font></td>
    <td width="3%" align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td width="1%" align=RIGHT><font face="Times New Roman, Times, Serif" size=2>$</font></td>
    <td width="8%" align=RIGHT><font face="Times New Roman, Times, Serif" size=2> 2,711</font></td>
    <td width="2%" align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Service cost</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>99</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>96</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Interest cost</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>187</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>169</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Amendments</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>206</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Actuarial loss</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>1,134</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>210</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Benefits paid</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(85</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(80</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT>&nbsp;</td>
    <td colspan="2" align=RIGHT><HR NOSHADE SIZE=1></td>
    <td align=LEFT>&nbsp;</td>
    <td colspan="2" align=RIGHT><HR NOSHADE SIZE=1></td>
    <td align=LEFT>&nbsp;</td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Benefit obligation &#150; end of year</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>4,647</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>3,312</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT>&nbsp;</td>
    <td colspan="2" align=RIGHT><HR NOSHADE SIZE=1></td>
    <td align=LEFT>&nbsp;</td>
    <td colspan="2" align=RIGHT><HR NOSHADE SIZE=1></td>
    <td align=LEFT>&nbsp;</td>
  </tr>
  <tr valign=Bottom bgcolor="#eaf9e8">
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>Change in plan assets:</font></td>
    <td align=RIGHT>&nbsp;</td>
    <td align=RIGHT>&nbsp;</td>
    <td align=LEFT>&nbsp;</td>
    <td align=RIGHT>&nbsp;</td>
    <td align=RIGHT>&nbsp;</td>
    <td align=LEFT>&nbsp;</td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Fair value of plan assets &#150; beginning of year</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>2,683</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>1,868</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Actual return on plan assets</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>163</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>476</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Company contributions</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>330</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>419</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Benefits paid</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(85</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(80</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT>&nbsp;</td>
    <td colspan="2" align=RIGHT><HR NOSHADE SIZE=1></td>
    <td align=LEFT>&nbsp;</td>
    <td colspan="2" align=RIGHT><HR NOSHADE SIZE=1></td>
    <td align=LEFT>&nbsp;</td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;Fair value of plan assets &#150; end of year</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>3,091</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>2,683</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT>&nbsp;</td>
    <td colspan="2" align=RIGHT><HR NOSHADE SIZE=1></td>
    <td align=LEFT>&nbsp;</td>
    <td colspan="2" align=RIGHT><HR NOSHADE SIZE=1></td>
    <td align=LEFT>&nbsp;</td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>Funded status</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(1,556</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(629</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>Unrecognized prior service cost</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>571</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>653</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>Unrecognized actuarial loss</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>2,067</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>951</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT>&nbsp;</td>
    <td colspan="2" align=RIGHT><HR NOSHADE SIZE=1></td>
    <td align=LEFT>&nbsp;</td>
    <td colspan="2" align=RIGHT><HR NOSHADE SIZE=1></td>
    <td align=LEFT>&nbsp;</td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>Prepaid benefit cost recognized in the<br>
      &nbsp;&nbsp;consolidated balance sheet</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>$</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> 1,082</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>$</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> 975</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT>&nbsp;</td>
    <td colspan="2" align=RIGHT><HR NOSHADE SIZE=2></td>
    <td align=LEFT>&nbsp;</td>
    <td colspan="2" align=RIGHT><HR NOSHADE SIZE=2></td>
    <td align=LEFT>&nbsp;</td>
  </tr>
  <tr valign=Bottom bgcolor="#eaf9e8">
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;Amounts recognized in the consolidated<BR>
&nbsp;balance sheet:</font></td>
    <td align=RIGHT>&nbsp;</td>
    <td align=RIGHT>&nbsp;</td>
    <td align=LEFT>&nbsp;</td>
    <td align=RIGHT>&nbsp;</td>
    <td align=RIGHT>&nbsp;</td>
    <td align=LEFT>&nbsp;</td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid benefit cost</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>$</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> 1,082</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>$</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> 975</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued benefit liability</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(1,413</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(1,225</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Intangible asset</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>571</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>653</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT bgcolor="#EAF9E8"><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accumulated other comprehensive income</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>842</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>572</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT>&nbsp;</td>
    <td colspan="2" align=RIGHT><HR NOSHADE SIZE=1></td>
    <td align=LEFT>&nbsp;</td>
    <td colspan="2" align=RIGHT><HR NOSHADE SIZE=1></td>
    <td align=LEFT>&nbsp;</td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>Net amount recognized</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>$</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> 1,082</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>$</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> 975</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT>&nbsp;</td>
    <td colspan="2" align=RIGHT><HR NOSHADE SIZE=2></td>
    <td align=LEFT>&nbsp;</td>
    <td colspan="2" align=RIGHT><HR NOSHADE SIZE=2></td>
    <td align=LEFT>&nbsp;</td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2" align=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2" align=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
</table>
<TABLE WIDTH=600 BORDER=0 CELLPADDING=0 CELLSPACING=0>
  <TR VALIGN=Bottom>
    <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004</FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT></TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Weighted-average assumptions used to determine net cost and <BR>
      benefit obligations for years</FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><BR>
&nbsp;&nbsp; ended January 31:</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;End of year benefit obligation</FONT></TD>
    <TD width="1%" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD width="8%" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.735</FONT></TD>
    <TD width="3%" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD width="1%" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD width="8%" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.320</FONT></TD>
    <TD width="2%" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Service Cost Discount rate</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.388</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.735</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Expected return on plan assets</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8.000</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8.000</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Rate of compensation increase</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>N/A</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>N/A</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Components of net periodic benefit cost:</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Service cost</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 99</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 96</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Interest cost</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>187</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>169</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Expected return on plan assets</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(223</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(166</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Amortization of prior service cost</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>82</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>57</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Recognized actuarial loss</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>78</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>97</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Net periodic benefit cost</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 223</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 253</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
</TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>43</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><page><br>
<table width=600 border=0 cellpadding=0 cellspacing=0>
  <tr valign=Bottom>
    <th colspan=5 align="left"><font face="Times New Roman, Times, Serif" size=1><u><font size="2">Cash Flows:</font></u></font><font face="Times New Roman, Times, Serif" size=2></font></th>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>Expected Employer Contributions for Fiscal Year Ending 1/31/2006</font></td>
    <td width=1% align=RIGHT><font face="Times New Roman, Times, Serif" size=2>$</font></td>
    <td width=8% align=RIGHT><font face="Times New Roman, Times, Serif" size=2> 159</font></td>
    <td width=2% align=RIGHT>&nbsp;</td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>Expected Employee Contributions for Fiscal Year Ending 1/31/2006</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&#151;</font></td>
    <td align=RIGHT>&nbsp;</td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>Estimated Future Benefit Payments Reflecting Expected Future Service for the <br>
      FiscalYear(s) Ending:</font></td>
    <td align=LEFT>&nbsp;</td>
    <td align=LEFT>&nbsp;</td>
    <td align=LEFT>&nbsp;</td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1/31/2006</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>139</font></td>
    <td align=RIGHT>&nbsp;</td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1/31/2007</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>153</font></td>
    <td align=RIGHT>&nbsp;</td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1/31/2008</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>170</font></td>
    <td align=RIGHT>&nbsp;</td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1/31/2009</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>187</font></td>
    <td align=RIGHT>&nbsp;</td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1/31/2010</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>199</font></td>
    <td align=RIGHT>&nbsp;</td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1/31/2011 &#150; 1/31/2014</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>1,210</font></td>
    <td align=RIGHT>&nbsp;</td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
</table>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>401(k) Plan</I></B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The domestic employees of the Company participate in the MFRI, Inc. Employee Savings and Protection
Plan, which is applicable to all employees except certain employees covered by collective bargaining
agreement benefits. The plan allows employee pretax payroll contributions of up to 16% of total compensation.
The Company matches 50% of each participant&#146;s contribution, up to a maximum of 2% of each participant&#146;s
salary.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Contributions to the 401(k) Plan and its predecessors were $329,300, $347,000 and $329,000 for the
years ended January 31, 2005, 2004 and 2003, respectively. The Company estimates that it will contribute
$347,000 for the year ending January 31, 2006.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B><I>Deferred Compensation Plans</I></B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The Company also has deferred compensation agreements with key employees. Vesting is based on years
of service. Life insurance contracts have been purchased which may be used to fund the Company&#146;s
obligation under these agreements. The cash surrender value of the life insurance contracts is included
in other assets and the deferred compensation liability is included in other long-term liabilities
in the consolidated balance sheet. The charges to expense were $288,200, $209,000 and $187,000 in
2004, 2003 and 2002, respectively. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B>Note 11 - Business Segment and Geographic Information</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><I>Business Segment Information</I></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The Company has three reportable segments:&nbsp;the Filtration Products Business, the Piping Systems
Business and the Industrial Process Cooling Equipment Business. The Filtration Products Business
manufactures and sells a wide variety of filter elements for air filtration and particulate collection
systems. The Piping Systems Business engineers, designs, manufactures, and sells specialty piping
systems and leak detection and location systems. The Industrial Process Cooling Equipment Business
engineers, designs, manufactures and sells chillers, mold temperature controllers, cooling towers,
plant circulating systems and coolers for industrial process applications. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The accounting policies of the segments are the same as those described in the summary of significant
accounting policies. (See Note 2.)&nbsp;The Company evaluates performance based on gross profit and
income or loss from operations. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>MFRI&#146;s reportable segments are strategic businesses that offer different products and services.
Each is managed separately based on fundamental differences in their operations. Each strategic business
was acquired as a unit and management at the time of acquisition was retained. </FONT></P></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>44</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><page><br>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The following is information relevant to the Company&#146;s business segments:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
  <TD vAlign=top><FONT FACE="Times New Roman, Times, Serif" SIZE=2><i>(In thousands)</i></FONT></TD>
</TR>
</TABLE>
<TABLE WIDTH=600 BORDER=0 CELLPADDING=0 CELLSPACING=0>
  <TR VALIGN=Bottom>
    <TH align="left" valign="top"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004</FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2002</FONT></TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net Sales:</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Filtration Products</FONT></TD>
    <TD width="1%" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD width="8%" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 61,740</FONT></TD>
    <TD width="3%" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD width="1%" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD width="8%" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 54,872</FONT></TD>
    <TD width="3%" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD width="1%" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD width="8%" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 53,174</FONT></TD>
    <TD width="2%" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Piping Systems</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>54,053</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>40,523</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>44,037</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Industrial Process Cooling Equipment</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>29,303</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>25,494</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>25,686</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total Net Sales</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 145,096</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 120,889</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 122,897</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Gross Profit:</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Filtration Products</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 12,320</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 9,782</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 9,498</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Piping Systems</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10,284</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7,516</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10,187</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Industrial Process Cooling Equipment</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8,524</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7,300</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7,255</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total Gross Profit</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 31,128</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 24,598</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 26,940</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Income from Operations:</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Filtration Products</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 3,539</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1,145</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 400</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Piping Systems</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5,405</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,281</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,321</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Industrial Process Cooling Equipment</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,570</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>738</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>702</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Corporate</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(5,337</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(4,885</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(4,509</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total Income (loss) from Operations</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 5,117</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (721</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 914</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT colspan="10"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Segment Assets:</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Filtration Products</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 33,511</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 35,621</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 39,916</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Piping Systems</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>29,696</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>22,852</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>25,444</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Industrial Process Cooling Equipment</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12,101</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11,228</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11,560</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Corporate</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10,208</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9,226</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,056</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total Segment Assets</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 85,516</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 78,927</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 78,976</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD colspan="10" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Capital Expenditures:</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Filtration Products</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 623</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 2,236</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 297</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Piping Systems</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>762</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,605</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>698</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Industrial Process Cooling Equipment</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>139</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>87</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>50</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Corporate</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>226</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>174</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>140</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total Capital Expenditures</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1,750</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 4,102</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1,185</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT colspan="10"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Depreciation and Amortization:</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Filtration Products</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1,214</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1,262</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1,222</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Piping Systems</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,385</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,577</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,493</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Industrial Process Cooling Equipment</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>357</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>385</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>377</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Corporate</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>823</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>920</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>852</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total Depreciation and Amortization</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 3,779</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 4,144</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 3,944</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
</TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>45</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><page><br>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD><P><FONT face="Times New Roman, Times, Serif" size=2><I>Geographic Information</I></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Net sales are attributed to a geographic area based on the destination of the product shipment. Long-lived
assets are based on the physical location of the assets and consist of property, plant and equipment
used in the generation of revenues in the geographic area. </FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
  <TD vAlign=top><FONT FACE="Times New Roman, Times, Serif" SIZE=2><i>(In thousands)</i></FONT></TD>
</TR>
</TABLE>
<TABLE WIDTH=600 BORDER=0 CELLPADDING=0 CELLSPACING=0>
  <TR VALIGN=Bottom>
    <TH align="left" valign="top"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004</FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2002</FONT></TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net Sales:</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;United States</FONT></TD>
    <TD width="1%" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD width="8%" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 117,511</FONT></TD>
    <TD width="2%" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD width="1%" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD width="8%" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 100,017</FONT></TD>
    <TD width="2%" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD width="1%" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD width="8%" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 107,513</FONT></TD>
    <TD width="2%" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Europe</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12,994</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10,219</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8,502</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Asia</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8,200</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,588</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,253</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Canada</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,415</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,711</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,776</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Mexico, South America, Central America</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and the Caribbean</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2,686</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,201</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,224</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Other</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>290</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>153</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>629</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total Net Sales</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 145,096</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 120,889</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 122,897</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT colspan="10">&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT colspan="10"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Long-Lived Assets:</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;United States</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 21,882</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 25,054</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 26,408</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Europe</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,918</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3,774</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,480</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Total Long-Lived Assets</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 25,800</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 28,828</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 27,888</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
</TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P><FONT face="Times New Roman, Times, Serif" size=2><B>Note 12 - Supplemental Cash Flow Information</B></FONT></P>
<P><FONT face="Times New Roman, Times, Serif" size=2>A summary of annual supplemental cash flow information follows:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
  <TD vAlign=top><FONT FACE="Times New Roman, Times, Serif" SIZE=2><i>(In thousands)</i></FONT></TD>
</TR>
</TABLE>
<TABLE WIDTH=600 BORDER=0 CELLPADDING=0 CELLSPACING=0>
  <TR VALIGN=Bottom>
    <TH align="left" valign="top"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004</FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2002</FONT></TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><HR NOSHADE SIZE=1></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Cash paid for:</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Income taxes, net of refunds received</FONT></TD>
    <TD width="1%" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD width="8%" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (207</FONT></TD>
    <TD width="3%" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD width="1%" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD width="8%" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (400</FONT></TD>
    <TD width="3%" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD width="1%" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD width="8%" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (796</FONT></TD>
    <TD width="2%" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Interest paid , net of amounts capitalized</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1,818</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1,962</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 2,099</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Noncash Financing and Investing Activities:</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Fixed assets acquired under capital leases</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> &#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 18</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> &#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Sale of business:</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Note receivable from buyer</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> &#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> &#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 44</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Purchase of a business for specified assets and</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;assumption of specified liabilities:</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Purchase price</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> &#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> &#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 500</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Cash paid</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>500</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Net liabilities assumed</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> &#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> &#151;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 257</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR>
    <TD></TD>
    <TD COLSPAN=3></TD>
    <TD COLSPAN=3></TD>
    <TD COLSPAN=3></TD>
  </TR>
</TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=1>&nbsp;&nbsp; </FONT></TD>
</TR>
<TR>
<TD vAlign=top>
<P><FONT face="Times New Roman, Times, Serif" size=2><B>Note 13 - Stock Options</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Under the 1993 and 1994 Stock Option Plans (&#147;Option Plans&#148;), 100,000 and 250,000 shares of
common stock, respectively, are reserved for issuance to key employees of the Company and its affiliates
as well as certain advisors and consultants to the Company. In addition, under the 1994 Option Plan,
an additional one percent of shares of the Company&#146;s common stock outstanding have been added
to the shares reserved for issuance each February 1, beginning February 1, 1995 and ending February 1, 1997, and an additional two percent of shares of
the Company&#146;s common stock outstanding are added to the shares reserved for issuance each February
1, beginning February 1, 1998. Option exercise prices will be no less than fair market value for
the common stock on the date of grant. The options</FONT></P></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>46</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><page><br>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>granted under the Option Plans may be either non-qualified options or incentive options. Such options
vest ratably over four years and are exercisable for up to ten years from the date of grant.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Pursuant to the 2001 Independent Directors&#146; Stock Option Plan (the &#147;Directors&#146; Plan&#148;),
an option to purchase 10,000 shares of common stock is granted automatically to each director who
is not an employee of the Company (an &#147;Independent Director&#148;) on the date the individual
is first elected as an Independent Director, an option to purchase 1,000 shares was granted to each
Independent Director acting on December 31, 2001, and options to purchase 1,000 shares are granted
to each Independent Director upon each date such Independent Director is re-elected as an Independent
Director, commencing with the Company&#146;s annual meeting for the year 2002. Provisions of a predecessor
plan, the 1990 Independent Directors&#146; Stock Option Plan, were the same as those of the Directors&#146;
Plan in every significant respect.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>In connection with the purchase agreement relating to the acquisition of TDC Filter Manufacturing,
Inc., (acquired in December 1997 as part of the Filtration Products business), the Company issued
stock options to purchase 75,000 shares of common stock at $9.60. These options may be exercised
through November 2008. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The following summarizes the changes in options under the plans:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<table width=600 border=0 cellpadding=0 cellspacing=0>
  <tr valign=Bottom>
    <th><font face="Times New Roman, Times, Serif" size=1></font></th>
    <th colspan=5><font face="Times New Roman, Times, Serif" size=1>2004</font><font face="Times New Roman, Times, Serif" size=1></font></th>
    <th>&nbsp;</th>
    <th colspan=5><font face="Times New Roman, Times, Serif" size=1>2003</font><font face="Times New Roman, Times, Serif" size=1></font></th>
    <th>&nbsp;</th>
    <th colspan=5><font face="Times New Roman, Times, Serif" size=1>2002</font><font face="Times New Roman, Times, Serif" size=1></font></th>
    <th>&nbsp;</th>
  </tr>
  <tr valign=Bottom>
    <th>&nbsp;</th>
    <th colspan=5><hr size="1" noshade></th>
    <th>&nbsp;</th>
    <th colspan=5><hr size="1" noshade></th>
    <th>&nbsp;</th>
    <th colspan=5><hr size="1" noshade></th>
    <th>&nbsp;</th>
  </tr>
  <tr valign=Bottom>
    <th><font face="Times New Roman, Times, Serif" size=1></font></th>
    <th colspan=2><font face="Times New Roman, Times, Serif" size=1>Shares</font></th>
    <th>&nbsp;</th>
    <th colspan=2><font face="Times New Roman, Times, Serif" size=1>Weighted<br>
      Average<br>
      Exercise Price</font></th>
    <th>&nbsp;</th>
    <th colspan=2><font face="Times New Roman, Times, Serif" size=1>Shares</font></th>
    <th>&nbsp;</th>
    <th colspan=2><font face="Times New Roman, Times, Serif" size=1>Weighted<br>
      Average<br>
      Exercise Price</font></th>
    <th>&nbsp;</th>
    <th colspan=2><font face="Times New Roman, Times, Serif" size=1>Shares</font></th>
    <th>&nbsp;</th>
    <th colspan=2><font face="Times New Roman, Times, Serif" size=1>Weighted<br>
      Average<br>
      Exercise Price</font></th>
    <th>&nbsp;</th>
  </tr>
  <tr valign=Bottom>
    <th>&nbsp;</th>
    <th colspan=2><hr size="1" noshade></th>
    <th>&nbsp;</th>
    <th colspan=2><hr size="1" noshade></th>
    <th>&nbsp;</th>
    <th colspan=2><hr size="1" noshade></th>
    <th>&nbsp;</th>
    <th colspan=2><hr size="1" noshade></th>
    <th>&nbsp;</th>
    <th colspan=2><hr size="1" noshade></th>
    <th>&nbsp;</th>
    <th colspan=2><hr size="1" noshade></th>
    <th>&nbsp;</th>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>Outstanding at beginning <br>
      &nbsp;&nbsp;of
      year</font></td>
    <td width="1%" align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td width="7%" align=RIGHT><font face="Times New Roman, Times, Serif" size=2>1,017,950</font></td>
    <td width="2%" align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td width="1%" align=RIGHT><font face="Times New Roman, Times, Serif" size=2>$</font></td>
    <td width="9%" align=RIGHT><font face="Times New Roman, Times, Serif" size=2> 3.44</font></td>
    <td width="2%" align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td width="1%" align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td width="7%" align=RIGHT><font face="Times New Roman, Times, Serif" size=2>946,400</font></td>
    <td width="2%" align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td width="1%" align=RIGHT><font face="Times New Roman, Times, Serif" size=2>$</font></td>
    <td width="9%" align=RIGHT><font face="Times New Roman, Times, Serif" size=2> 3.57</font></td>
    <td width="2%" align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td width="1%" align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td width="7%" align=RIGHT><font face="Times New Roman, Times, Serif" size=2>845,600</font></td>
    <td width="2%" align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td width="1%" align=RIGHT><font face="Times New Roman, Times, Serif" size=2>$</font></td>
    <td width="9%" align=RIGHT><font face="Times New Roman, Times, Serif" size=2> 3.80</font></td>
    <td width="2%" align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>Granted</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>4,000</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>3.31</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>103,250</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>2.16</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>132,000</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>2.15</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>Exercised</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(303,757</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>3.08</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&#151;</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>Cancelled</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(29,813</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>2.91</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(31,700</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>3.41</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>(31,200</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>)</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>3.77</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT>&nbsp;</td>
    <td colspan="2" align=RIGHT><hr size="1" noshade></td>
    <td align=LEFT>&nbsp;</td>
    <td colspan="2" align=RIGHT><hr size="1" noshade></td>
    <td align=LEFT>&nbsp;</td>
    <td colspan="2" align=RIGHT><hr size="1" noshade></td>
    <td align=LEFT>&nbsp;</td>
    <td colspan="2" align=RIGHT><hr size="1" noshade></td>
    <td align=LEFT>&nbsp;</td>
    <td colspan="2" align=RIGHT><hr size="1" noshade></td>
    <td align=LEFT>&nbsp;</td>
    <td colspan="2" align=RIGHT><hr size="1" noshade></td>
    <td align=LEFT>&nbsp;</td>
  </tr>
  <tr valign=Bottom bgcolor="#EAF9E8">
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>Outstanding at end of year</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>688,380</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>$</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> 3.62</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>1,017,950</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>$</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> 3.44</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>946,400</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>$</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2> 3.57</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT>&nbsp;</td>
    <td colspan="2" align=RIGHT><hr size="2" noshade></td>
    <td align=LEFT>&nbsp;</td>
    <td colspan="2" align=RIGHT><hr size="2" noshade></td>
    <td align=LEFT>&nbsp;</td>
    <td colspan="2" align=RIGHT><hr size="2" noshade></td>
    <td align=LEFT></td>
    <TD colspan="2"><hr size="2" noshade></TD>
    <TD></TD>
    <TD colspan="2"><hr size="2" noshade></TD>
    <TD></TD>
    <TD colspan="2"><hr size="2" noshade></TD>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT>&nbsp;</td>
    <td align=RIGHT>&nbsp;</td>
    <td align=RIGHT>&nbsp;</td>
    <td align=LEFT>&nbsp;</td>
    <td align=RIGHT>&nbsp;</td>
    <td align=RIGHT>&nbsp;</td>
    <td align=LEFT>&nbsp;</td>
    <td align=RIGHT>&nbsp;</td>
    <td align=RIGHT>&nbsp;</td>
    <td align=LEFT></td>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD></TD>
    <td></td>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>Options exercisable at year-end</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>385,025</font></td>
    <td align=LEFT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2></font></td>
    <td align=LEFT>&nbsp;</td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>&nbsp;</font></td>
    <td align=RIGHT><font face="Times New Roman, Times, Serif" size=2>486,374</font></td>
    <td align=LEFT></td>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD><font face="Times New Roman, Times, Serif" size=2>276,899</font></TD>
    <TD></TD>
    <TD></TD>
  </tr>
  <tr valign=Bottom>
    <td align=LEFT>&nbsp;</td>
    <td colspan="2" align=RIGHT><hr size="2" noshade></td>
    <td align=LEFT>&nbsp;</td>
    <td colspan="2" align=RIGHT>&nbsp;</td>
    <td align=LEFT>&nbsp;</td>
    <td colspan="2" align=RIGHT><hr size="2" noshade></td>
    <td align=LEFT></td>
    <TD colspan="2">&nbsp;</TD>
    <TD></TD>
    <TD colspan="2"><hr size="2" noshade></TD>
    <TD></TD>
    <TD colspan="2">&nbsp;</TD>
  </tr>
</table>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P><FONT face="Times New Roman, Times, Serif" size=2>The following table summarizes information concerning outstanding and exercisable options at January
31, 2005:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE WIDTH=600 BORDER=0 CELLPADDING=0 CELLSPACING=0>
  <TR VALIGN=Bottom>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
    <TH COLSPAN=6><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Options Outstanding</FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=4><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Options Exercisable</FONT></TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TH COLSPAN=2>&nbsp;</TH>
    <TH COLSPAN=6><hr size="1" noshade></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=4><hr size="1" noshade></TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Range of<BR>
      Exercise<BR>
      Prices</FONT></TH>
    <TH>&nbsp;</TH>
    <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Number<BR>
      Outstanding at<BR>
      Jan. 31, 2005</FONT></TH>
    <TH>&nbsp;</TH>
    <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Weighted Average<BR>
      Remaining<BR>
      Contractual Life </FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><p><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Weighted <BR>
        Average<BR>
        Exercise Price</FONT></p></TH>
    <TH>&nbsp;</TH>
    <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Number<BR>
      Exercisable at<BR>
      Jan. 31, 2005</FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Weighted<BR>
      Average<BR>
      Exercise Price </FONT></TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TH>&nbsp;</TH>
    <TH>&nbsp;</TH>
    <TH><hr size="1" noshade></TH>
    <TH>&nbsp;</TH>
    <TH><hr size="1" noshade></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><hr size="1" noshade></TH>
    <TH>&nbsp;</TH>
    <TH><hr size="1" noshade></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><hr size="1" noshade></TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD WIDTH=10% ALIGN=LEFT nowrap><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$2.00-$2.99</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=15% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>169,773</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=15% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7.9 years</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=15% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 2.16</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT>&nbsp;</TD>
    <TD WIDTH=15% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>35,944</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT>&nbsp;</TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=15% ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.15</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$3.00-$3.99</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>430,407</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.9 years</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.12</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>260,881</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD></TD>
    <TD align="right"><font face="Times New Roman, Times, Serif" size=2>3.12</font></TD>
    <td></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$4.00-$4.99</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11,200</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.9 years</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.14</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11,200</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD></TD>
    <TD align="right"><font face="Times New Roman, Times, Serif" size=2>4.14</font></TD>
    <TD></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$6.00-$6.99</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,500</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.9 years</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.92</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,500</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.92</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$8.00-$8.99</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>500</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.2 years</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8.10</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>500</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8.10</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$9.00-$9.99</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>75,000</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.8 years</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.60</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>75,000</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD></TD>
    <TD align="right"><font face="Times New Roman, Times, Serif" size=2>9.60</font></TD>
    <TD></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=right><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>688,380</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.7 years</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 3.62</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>385,025</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=right><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.34</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT><hr size="2" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT><hr size="2" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="2" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT><hr size="2" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=right><hr size="2" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
</TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The Company&#146;s stock option plans are accounted for in accordance with Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees, using the intrinsic value method and, accordingly,
no compensation cost has been recognized. The Company&#146;s net income (loss) and income (loss)
per share would have been reduced to the amounts shown below if compensation cost related to stock
options had been determined based on fair value at the grant dates in accordance with Statement of
Financial Accounting Standards No. 148, Accounting for Stock-Based Compensation (&#147;SFAS 148&#148;).
The pro forma net income effect of applying SFAS 148 was as follows:</FONT></P></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>47</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><page><br>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
  <TR VALIGN=Bottom>
    <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004</FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2002</FONT></TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net income (loss) &#150; as reported (in thousands)</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 2,813</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (1,097</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (11,528</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Compensation cost under fair-market value-based accounting</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;method, net of tax (in thousands)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (221</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (134</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (136</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net income (loss) &#150; pro forma (in thousands)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 2,592</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (1,231</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (11,664</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net income (loss) per common share &#150; basic and diluted, as reported</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 0.56</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.22</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (2.34</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net income (loss) per common share &#150; basic and diluted, pro forma</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 0.52</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.25</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (2.37</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Reported diluted EPS higher than pro forma diluted EPS</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 0.04</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 0.02</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 0.03</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
</TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The weighted average fair value of options granted during 2004 (net of options surrendered), 2003 and

2002 are estimated at $1.85, $1.14 and $1.17, per share, respectively, on the date of grant using

the Black-Scholes option-pricing model with the following weighted average assumptions:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
  <TR VALIGN=Bottom>
    <TH bgcolor="#FFFFFF">&nbsp;</TH>
    <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004</FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2002</FONT></TH>
    <TH>&nbsp;</TH>
    <TH bgcolor="#FFFFFF">&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT bgcolor="#FFFFFF">&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=LEFT bgcolor="#FFFFFF">&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD width="7%" ALIGN=LEFT bgcolor="#FFFFFF">&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Expected volatility</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>49.18</FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>50.01</FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>46.81</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD WIDTH=7% ALIGN=LEFT bgcolor="#FFFFFF">&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT bgcolor="#FFFFFF">&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Risk-free interest rate</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.31</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.93</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.51</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=LEFT bgcolor="#FFFFFF">&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT bgcolor="#FFFFFF">&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Dividend yield</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.0</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.0</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>0.0</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>%</FONT></TD>
    <TD ALIGN=LEFT bgcolor="#FFFFFF">&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT bgcolor="#FFFFFF">&nbsp;</TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Expected life in years</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7.0</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7.0</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7.0</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT bgcolor="#FFFFFF">&nbsp;</TD>
  </TR>
</TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P><FONT face="Times New Roman, Times, Serif" size=2><B>Note 14 &#150; Stock Rights</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>On September 15, 1999, the Company&#146;s Board of Directors declared a dividend of one common stock
purchase right (a &#147;Right&#148;) for each share of MFRI&#146;s common stock outstanding at the
close of business on September 22, 1999. The stock issued after September 22, 1999 and before the
redemption or expiration of the Rights are also entitled to one Right for each such additional share.
Each Right entitles the registered holders, under certain circumstances, to purchase from the Company
one share of MFRI&#146;s common stock at $25.00, subject to adjustment. At no time will the Rights
have any voting power. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The Rights may not be exercised until 10 days after a person or group acquires 15% or more of the Company&#146;s
common stock, or announces a tender offer that, if consummated, would result in 15% or more ownership
of the Company&#146;s common stock. Separate Rights certificates will not be issued and the Rights
will not be traded separately from the stock until then. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Should an acquirer become the beneficial owner of 15% or more of the Company&#146;s common stock, Rights
holders other than the acquirer would have the right to buy common stock in MFRI, or in the surviving
enterprise if MFRI is acquired, having a value of two times the exercise price then in effect. Also,
MFRI&#146;s Board of Directors may exchange the Rights (other than those of the acquirer which will
have become void), in whole or in part, at an exchange ratio of one share of MFRI common stock (and/or
other securities, cash or other assets having equal value) per Right subject to adjustment. The Rights
described in this paragraph and the preceding paragraph shall not apply to an acquisition, merger
or consolidation approved by the Company&#146;s Board of Directors. </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The Rights will expire on September 15, 2009, unless exchanged or redeemed prior to that date. The
redemption price is $0.01 per Right. MFRI&#146;s Board of Directors may redeem the Rights by a majority
vote at any time prior to the 20<SUP>th</SUP> day following public announcement that a person or group has acquired 15% of MFRI&#146;s common stock.
Under certain circumstances, the decision to redeem requires the concurrence of a majority of the
independent directors. </FONT></P></TD>
</TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>48</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><page><br>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD><P><FONT face="Times New Roman, Times, Serif" size=2><B>Note 15 - Quarterly Financial Data (Unaudited)</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The following is a summary of the unaudited quarterly results of operations for the years 2004 and
2003:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><i><b><font size="1" face="Times New Roman, Times, serif">(In thousands except per share information)</font></b></i></TD>
    <TD colspan="11" ALIGN=RIGHT><div align="center"><b><font size="1" face="Times New Roman, Times, serif">2004</font></b></div></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="11" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>First<BR>
      Quarter</FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Second<BR>
      Quarter</FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Third<BR>
      Quarter</FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Fourth<BR>
      Quarter</FONT></TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net Sales</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 32,128</FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 38,068</FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 39,708</FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 35,192</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Gross Profit</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5,906</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8,952</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9,164</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7,106</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net income (loss)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(329</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,369</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1,614</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>160</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Weighted average number of common shares:</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Outstanding &#150; basic</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,922</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,922</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,961</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5,138</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Outstanding &#150; diluted</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,922</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,997</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5,304</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5,527</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Per Share Data:</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Net income (loss) &#150; basic</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.07</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 0.27</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 0.33</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 0.03</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Net income (loss) &#150; diluted</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.07</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 0.27</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 0.31</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 0.03</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
</TABLE>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="11" ALIGN=RIGHT><div align="center"><b><font size="1" face="Times New Roman, Times, serif">2003</font></b></div></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="11" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>First<BR>
      Quarter</FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Second<BR>
      Quarter</FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Third<BR>
      Quarter</FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Fourth<BR>
      Quarter</FONT></TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT bgcolor="#EAF9E8"><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net Sales</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 28,010</FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 33,148</FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 32,635</FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=8% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 27,096</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Gross Profit</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5,194</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7,681</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6,903</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,820</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Net income (loss)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(865</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>603</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(127</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(709</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Weighted average number of common shares:</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Outstanding &#150; basic</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,922</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,922</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,922</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,922</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Outstanding &#150; diluted</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,922</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,922</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,922</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4,922</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Per Share Data:</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Net income (loss) &#150; basic</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.18</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 0.12</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.03</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.13</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;Net income (loss) &#150; diluted</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.18</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 0.12</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.03</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> (0.13</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
</TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P><FONT face="Times New Roman, Times, Serif" size=2><B>Note 16 &#150; Product Warranties</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>The Company issues a standard warranty with the sale of its products and sells extended warranty contracts
to customers. The Company&#146;s recognition of warranty liability is based, generally, on analyses
of warranty claims experiences in the operating units in the preceding years. Changes in the warranty
liability in 2004 and 2003 are summarized below:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
  <TR VALIGN=Bottom>
    <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2004</FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>2003</FONT></TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Aggregate product warranty liability at beginning of year</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 629,826</FONT></TD>
    <TD WIDTH=3% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD WIDTH=9% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 552,644</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Aggregate accruals related to product warranties</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>450,773</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>534,607</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Aggregate reductions for payments</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(386,516</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>(566,921</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>)</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Aggregate changes for pre-existing warranties</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>43,968</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>109,496</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="1" noshade></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Aggregate product warranty liability at end of year</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 738,051</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 629,826</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="2" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD colspan="2" ALIGN=RIGHT><hr size="2" noshade></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
</TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>49</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><page><br>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD>
<P><FONT face="Times New Roman, Times, Serif" size=2>Schedule II</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B>MFRI, INC. AND SUBSIDIARIES</B></FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B>VALUATION AND QUALIFYING ACCOUNTS<br>
</B></FONT><FONT face="Times New Roman, Times, Serif" size=2><B>For the Years Ended January 31, 2005, 2004 and 2003</B></FONT></P>
</TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
  <TR VALIGN=Bottom>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Description</FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Balance at<br>
    Beginning of Period</FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Charged to Costs<br>
    and Expenses</FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Deductions from<br>
    Reserves (1)</FONT></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Balance at<br>
    End of Period</FONT></TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Year Ended January 31, 2005:</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=12% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=12% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=12% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=1% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=12% ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;Allowance for possible<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp; &nbsp;losses in collection of<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp; &nbsp;trade receivables</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 557,000</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 189,000</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 264,000</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 482,000</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR>
    <TD COLSPAN=2></TD>
    <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD></TD>
    <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD></TD>
    <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD></TD>
    <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Year Ended January 31, 2004:</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;Allowance for possible<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp; &nbsp;losses in collection of<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;trade receivables</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 410,000</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 308,000</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 161,000</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 557,000</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR>
    <TD COLSPAN=2></TD>
    <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD></TD>
    <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD></TD>
    <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD></TD>
    <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#EAF9E8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>Year Ended January 31, 2003:</FONT></TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=LEFT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;Allowance for possible<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp; &nbsp;losses in collection of<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp; &nbsp;trade receivables</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 343,000</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 352,000</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 285,000</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>$</FONT></TD>
    <TD ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 410,000</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
  </TR>
  <TR>
    <TD COLSPAN=2></TD>
    <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD></TD>
    <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD></TD>
    <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD></TD>
    <TD COLSPAN=2 ALIGN=RIGHT><HR NOSHADE SIZE=2></TD>
    <TD></TD>
  </TR>
</TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;(1)&nbsp; Uncollectible accounts charged off. </FONT></P></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>50</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><page><br>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B><a name="a23"></a>SIGNATURES</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
to the requirements of Section&nbsp;13 or 15(d) 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.</FONT></P>
</TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
  <TD vAlign=top>&nbsp;</TD>
  <TD colspan="2" vAlign=top><FONT face="Times New Roman, Times, Serif" size=2><B>MFRI, INC.</B></FONT></TD>
  </TR>
<TR>
  <TD vAlign=top>&nbsp;</TD>
  <TD vAlign=top>&nbsp;</TD>
  <TD vAlign=top>&nbsp;</TD>
</TR>
<TR>
  <TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>Date: April 29, 2005</FONT></TD>
  <TD vAlign=top nowrap><FONT face="Times New Roman, Times, Serif" size=2>By:&nbsp;</FONT></TD>
  <TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2> /s/ David Unger </FONT></TD>
</TR>
<TR>
  <TD vAlign=top>&nbsp;</TD>
  <TD vAlign=top>&nbsp;</TD>
  <TD vAlign=top><hr size="1" noshade></TD>
</TR>
<TR>
  <TD vAlign=top>&nbsp;</TD>
  <TD vAlign=top>&nbsp;</TD>
  <TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>David Unger,</FONT></TD>
</TR>
<TR>
<TD width=55% vAlign=top>&nbsp;</TD>
<TD width="4%" vAlign=top>&nbsp;</TD>
<TD vAlign=top nowrap><FONT face="Times New Roman, Times, Serif" size=2>Chairman of the Board of Directors, and Chief<br>
  Executive Officer (Principal Executive Officer)</FONT></TD>
</TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on the date indicated.</FONT></P>
</TD>
</TR>
<TR>
  <TD vAlign=top>&nbsp;</TD>
</TR>
</TABLE>
<table width="600" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td colspan="3"><font size="2" face="Times New Roman, Times, serif">DAVID UNGER*</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif"> Director, Chairman of the </font></td>
    <td><font size="2" face="Times New Roman, Times, serif"> )</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>

    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="4%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="left"><font size="2" face="Times New Roman, Times, serif"> &nbsp;&nbsp;&nbsp;Board of Directors, <br>
    </font></td>
    <td width="2%">&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;and Chief Executive Officer (Principal </font></td>
    <td><font size="2" face="Times New Roman, Times, serif">)</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;Executive Officer) </font></td>
    <td><font size="2" face="Times New Roman, Times, serif">)</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">)</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td colspan="3"><font size="2" face="Times New Roman, Times, serif">HENRY M. MAUTNER* </font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif"> Director </font></td>
    <td><font size="2" face="Times New Roman, Times, serif">)</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">April 29, 2005</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">)</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td colspan="3"><font size="2" face="Times New Roman, Times, serif">BRADLEY E. MAUTNER* </font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif"> Director and President </font></td>
    <td><font size="2" face="Times New Roman, Times, serif">)</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">)</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td colspan="3"><font size="2" face="Times New Roman, Times, serif">MICHAEL D. BENNETT* </font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Vice President, Secretary and </font></td>
    <td><font size="2" face="Times New Roman, Times, serif">)</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif"> &nbsp;&nbsp;&nbsp;Treasurer (Principal Financial <br>
    </font></td>
    <td><font size="2" face="Times New Roman, Times, serif">)</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;&nbsp;&nbsp;&nbsp;and Accounting Officer) </font></td>
    <td><font size="2" face="Times New Roman, Times, serif">)</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">)</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td colspan="3"><font size="2" face="Times New Roman, Times, serif">ARNOLD F. BROOKSTONE* </font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif"> Director </font></td>
    <td><font size="2" face="Times New Roman, Times, serif">)</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">)</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td colspan="3"><font size="2" face="Times New Roman, Times, serif">EUGENE MILLER* </font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif"> Director </font></td>
    <td><font size="2" face="Times New Roman, Times, serif">)</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">)</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td colspan="3"><font size="2" face="Times New Roman, Times, serif">STEPHEN B. SCHWARTZ* </font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif"> Director </font></td>
    <td><font size="2" face="Times New Roman, Times, serif">)</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">)</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td colspan="3"><font size="2" face="Times New Roman, Times, serif">DENNIS KESSLER*</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif"> Director </font></td>
    <td><font size="2" face="Times New Roman, Times, serif">)</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">)</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td width="3%" valign="bottom"><font size="2" face="Times New Roman, Times, serif">*By:</font></td>
    <td valign="bottom">&nbsp;</td>
    <td valign="bottom"><font size="2" face="Times New Roman, Times, serif"> /s/ David Unger <br>
    </font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Individually and as Attorney-in-Fact <br>
    </font></td>
    <td><font size="2" face="Times New Roman, Times, serif">)</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><hr size="1" noshade></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td valign="top">&nbsp;</td>
    <td width="2%" valign="top">&nbsp;</td>
    <td valign="top"><font size="2" face="Times New Roman, Times, serif">David Unger </font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">)</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
</table>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>51</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><page><br>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B><U>EXHIBIT INDEX</U></B></FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE width="600" border="0" cellPadding="0" cellSpacing="0">
  <TR>
    <TD colspan="2" vAlign=top><font size="2" face="Times New Roman, Times, serif"><B><U>Exhibit No.</U></B></font></TD>
    <TD align="center" vAlign=top><font size="2" face="Times New Roman, Times, serif"><B> <U>Description</U></B></font></TD>
  </TR>
  <TR>
    <TD vAlign=top></TD>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD width="3%" vAlign=top></TD>
    <TD width="8%" vAlign=top><font size="2" face="Times New Roman, Times, serif"> 3(i)</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Certificate of Incorporation of MFRI, Inc. [Incorporated by reference to Exhibit3.3 to Registration Statement No. 33-70298]</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top></TD>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top></TD>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif"> 3(ii)</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">By-Laws of MFRI, Inc. [Incorporated by reference to Exhibit3.4 to Registration Statement No. 33-70298]</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top></TD>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top></TD>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif"> 4</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Specimen Common Stock Certificate [Incorporated by reference to Exhibit4 to Registration Statement No. 33-70794]</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top></TD>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top></TD>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif"> 10(a)</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">1993 Stock Option Plan [Incorporated by reference to Exhibit10.4 of Registration Statement No. 33-70794]</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top></TD>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top></TD>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif"> 10(b)</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">1994 Stock Option Plan [Incorporated by reference to Exhibit10(c) to the Company&#146;s Annual Report on Form10-K for the fiscal year ended January31, 1994 (SEC File No. 0-18370)]</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top></TD>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top></TD>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif"> 10(c)</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">2001 Independent Directors Stock Option Plan, as amended [Incorporated by reference to Exhibit10(d)(5) to the Company&#146;s Schedule TO filed on May 25, 2001 (SEC File No. 0-18370)]</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top></TD>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top></TD>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif"> 10(d)</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Form of Directors Indemnification Agreement [Incorporated by reference to Exhibit10.7 to Registration Statement No. 33-70298]</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top></TD>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top></TD>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif"> 10(e)</font></TD>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">MFRI 2004 Stock Incentive Plan</font></TD>
  </TR>
  <TR>
    <TD vAlign=top></TD>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top></TD>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif"> 10(f)*</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Loan and Security Agreement between the Company and Fleet Capital Corporation dated July 11, 2002
and the amendments thereto dated October 3, 2002, December 12, 2002, April 30, 2003, October 31, 2003, July 1, 2004, and March 28, 2005.</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top></TD>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top></TD>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif"> 14</font></TD>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">Code of Conduct</font></TD>
  </TR>
  <TR>
    <TD vAlign=top></TD>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top></TD>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif"> 21*</font></TD>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">Subsidiaries of MFRI, Inc.</font></TD>
  </TR>
  <TR>
    <TD vAlign=top></TD>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top></TD>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif"> 23*</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Consent of Independent Registered Public Accounting Firm &#150; Deloitte &amp; Touche LLP</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top></TD>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top></TD>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif"> 23.1*</font></TD>
    <TD vAlign=top><div align="justify"><font size="2" face="Times New Roman, Times, serif">Consent of Independent Registered Public Accounting Firm &#150; Grant Thornton LLP</font></div></TD>
  </TR>
  <TR>
    <TD vAlign=top></TD>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top></TD>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif"> 24*</font></TD>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">Power of Attorney executed by directors and officers of the Company</font></TD>
  </TR>
  <TR>
    <TD vAlign=top></TD>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
  <TR>
    <TD vAlign=top></TD>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif"> 31*</font></TD>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">Rule 13a &#150; 14(a)/15d &#150; 14(a) Certifications</font> </TD>
  </TR>
  <TR>
    <TD vAlign=top></TD>
    <TD vAlign=top>&nbsp;</TD>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
</TABLE>
<table width="600" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="3%">&nbsp;</td>
    <td width="8%">&nbsp;</td>
    <td width="3%" align="left" valign="top"><font size="2" face="Times New Roman, Times, serif">(1)</font></td>
    <td width="2%" align="left" valign="top">&nbsp;</td>
    <td align="left" valign="top"><div align="justify"><font size="2" face="Times New Roman, Times, serif"> Chief Executive Officer certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 </font> </div></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">(2)</font></td>
    <td>&nbsp;</td>
    <td><div align="justify"><font size="2" face="Times New Roman, Times, serif">Chief Financial Officer certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002</font></div></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">32*</font></td>
    <td colspan="3"><font size="2" face="Times New Roman, Times, serif">Section 1350 Certifications</font> </td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">(1)</font></td>
    <td>&nbsp;</td>
    <td><div align="justify"><font size="2" face="Times New Roman, Times, serif">Chief Executive Officer certification pursuant to Section 906 of the Sarbanes Oxley Act of 2002</font></div></td>
  </tr>
  <tr align="left" valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">(2)</font></td>
    <td>&nbsp;</td>
    <td><div align="justify"><font size="2" face="Times New Roman, Times, serif"> </font> <font size="2" face="Times New Roman, Times, serif">Chief Financial Officer certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002</font></div></td>
  </tr>
</table>
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<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
  <TD vAlign=top><hr align="left" width="200" size="1" noshade></TD>
</TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>* Filed herewith</FONT></P></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>52</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>



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<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>2
<FILENAME>d63590_ex21.htm
<DESCRIPTION>MFRI EXHIBIT 21 TO FORM 10K
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<P align=right><FONT face="Times New Roman, Times, Serif" size=2><U><B>Exhibit 21</B></U></FONT></P>
<P><FONT face="Times New Roman, Times, Serif" size=2></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>
MFRI, Inc. has the following wholly owned subsidiaries:</FONT></P>
<P><FONT face="Times New Roman, Times, Serif" size=2>1.  Midwesco Filter Resources, Inc. (Delaware corporation)<br></FONT></P>
<P><FONT face="Times New Roman, Times, Serif" size=2>
2.  Perma-Pipe, Inc. (Delaware corporation)</FONT></P>
<P><FONT face="Times New Roman, Times, Serif" size=2>3.  TDC Filter Manufacturing, Inc. (Delaware corporation)<br></FONT></P>

4. Thermal Care, Inc. (Delaware corporation)
</TD></TR></TABLE>
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<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>53</FONT></P>
<HR color=gray noShade SIZE=5>
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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>3
<FILENAME>d63590_ex23.htm
<DESCRIPTION>MFRI EXHIBIT 23 TO FORM 10K
<TEXT>
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<P align=right><FONT face="Times New Roman, Times, Serif" size=2><U><B>Exhibit 23</B></U></FONT></P>
<P><FONT face="Times New Roman, Times, Serif" size=2><B>CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>We consent to the incorporation by reference in Registration Statement No. 333-21951 on Form S-3, Registration
Statement No. 333-44787 on Form S-3, and Registration Statement No. 333-121526&nbsp;on Form S-8,
of MFRI, Inc. of our report dated May 14, 2004, (which report expresses an unqualified opinion and
includes an explanatory paragraph as to MFRI Inc.&#146;s change in its method of accounting for goodwill
and intangible assets) appearing in this Annual Report on Form 10-K of MFRI, Inc. and subsidiaries
for the year ended January 31, 2005.</FONT></P>
<P><FONT face="Times New Roman, Times, Serif" size=2>DELOITTE &amp; TOUCHE LLP<br>
</FONT><FONT face="Times New Roman, Times, Serif" size=2>Chicago, Illinois<BR>April 25, 2005</FONT></P>
</TD></TR></TABLE>
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<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>53</FONT></P>
<HR color=gray noShade SIZE=5>
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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23
<SEQUENCE>4
<FILENAME>d63590_ex23-1.htm
<DESCRIPTION>MFRI EXHIBIT 23.1 TO FORM 10K
<TEXT>

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<P align=right><FONT face="Times New Roman, Times, Serif" size=2><B>Exhibit 23.1</B></FONT></P>
<P><FONT face="Times New Roman, Times, Serif" size=2><B>CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</B></FONT></P></TD></TR></TABLE>


<P ALIGN="Justify"><FONT FACE="Times New Roman" SIZE="2">We have issued our report dated April 15, 2005, accompanying the cosolidated balance sheets of MFRI, Inc.
(a Delaware corporation) and Subsidiaries as of January 31, 2005, and the related consolidated statements of operations, stockholders' equity, and cash flows for the
year then ended, included in their Annual Report on Form 10-K filed with the Securities and Exchange Commission. We hereby consent to the incorporation by reference in
Registration Statement No. 333-21951 on Form S-3, Registration Statement No. 333-44787 on Form S-3, Registration Statement No. 333-08767 on Form S-8, and Registration
Statement No. 333-121526 on Form S-8, of MFRI, Inc. and Subsidiaries. </FONT></P>
<P><FONT face="Times New Roman, Times, Serif" size=2>/S/ GRANT THORNTON LLP</FONT></P>
<P><FONT face="Times New Roman, Times, Serif" size=2>Chicago, Illinois<br>
</FONT><FONT face="Times New Roman, Times, Serif" size=2>April 27, 2005</FONT></P>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>55</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-24
<SEQUENCE>5
<FILENAME>d63590_ex24.htm
<DESCRIPTION>MFRI EXHIBIT 24 TO FORM 10K
<TEXT>
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<TR>
<TD><P align=right><FONT face="Times New Roman, Times, Serif" size=2><B><U>Exhibit 24</U></B></FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B>POWER OF ATTORNEY</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><B>KNOW ALL MEN BY THESE PRESENTS</B>, that each of the undersigned, being a director or officer, or both, of <B>MFRI, INC.,</B> a Delaware corporation (the &#147;Company&#148;), does hereby constitute and appoint DAVID UNGER,
HENRY M. MAUTNER and MICHAEL D. BENNETT, with full power to each of them to act alone, as the true
and lawful attorneys and agents of the undersigned, with full power of substitution and resubstitution
to each of said attorneys to execute, file or deliver any and all instruments and to do all acts
and things which said attorneys and agents, or any of them, deem advisable to enable the Company
to comply with the Securities Exchange Act of 1934, as amended, and any requirements or regulations
of the Securities and Exchange Commission in respect thereof, in connection with the Company&#146;s
filing of an annual report on Form 10-K for the Company&#146;s fiscal year 2004, including specifically,
but without limitation of the general authority hereby granted, the power and authority to sign his
name as a director or officer, or both, of the Company, as indicated below opposite his signature,
to the Form 10-K, and any amendment thereto; and each of the undersigned does hereby fully ratify
and confirm all that said attorneys and agents, or any of them, or the substitute of any of them,
shall do or cause to be done by virtue hereof.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><B>IN WITNESS WHEREOF</B>, each of the undersigned has executed this Power of Attorney as of this 26th day of April, 2005.</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">
  <TR align="left">
    <TD width=50% vAlign=top><font size="2" face="Times New Roman, Times, serif">/s/ David Unger</font></TD>
    <TD width="5%" vAlign=top><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">/s/ Arnold F. Brookstone</font></TD>
  </TR>
  <TR align="left">
    <TD vAlign=top><hr size="1" noshade></TD>
    <TD width="5%" vAlign=top><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD vAlign=top><hr size="1" noshade></TD>
  </TR>
  <TR align="left">
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif"><B>David Unger</B>, Chairman of the Board of Directors, and<br>
    Chief Executive Officer (Principal Executive Officer)</font></TD>
    <TD width="5%" vAlign=top><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif"><B>Arnold F. Brookstone</B>, Director</font></TD>
  </TR>
  <TR align="left">
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD width="5%" vAlign=top><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR align="left">
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">/s/ Henry M. Mautner </font></TD>
    <TD width="5%" vAlign=top><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">/s/ Eugene Miller </font></TD>
  </TR>
  <TR align="left">
    <TD vAlign=top><hr size="1" noshade></TD>
    <TD width="5%" vAlign=top><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD vAlign=top><hr size="1" noshade></TD>
  </TR>
  <TR align="left">
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif"><B>Henry M. Mautner</B>, Vice Chairman of the Board of <br>
    Directors</font></TD>
    <TD width="5%" vAlign=top><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif"><B>Eugene Miller</B>, Director</font></TD>
  </TR>
  <TR align="left">
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD width="5%" vAlign=top><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR align="left">
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">/s/ Bradley E. Mautner</font></TD>
    <TD width="5%" vAlign=top><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">/s/ Stephen B. Schwartz </font></TD>
  </TR>
  <TR align="left">
    <TD vAlign=top><hr size="1" noshade></TD>
    <TD width="5%" vAlign=top><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD vAlign=top><hr size="1" noshade></TD>
  </TR>
  <TR align="left">
    <TD width=50% vAlign=top><font size="2" face="Times New Roman, Times, serif"><B>Bradley E. Mautner</B>, Director and President</font></TD>
    <TD width=5% vAlign=top><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD width=295 vAlign=top><font size="2" face="Times New Roman, Times, serif"><B>Stephen B. Schwartz</B>, Director</font></TD>
  </TR>
  <TR align="left">
    <TD width=50% vAlign=top><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD width=5% vAlign=top><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD width=295 vAlign=top><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR align="left">
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">/s/ Michael D. Bennett </font></TD>
    <TD width="5%" vAlign=top><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD vAlign=top><font size="2" face="Times New Roman, Times, serif">/s/ Dennis Kessler </font></TD>
  </TR>
  <TR align="left">
    <TD vAlign=top><hr size="1" noshade></TD>
    <TD width="5%" vAlign=top><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD vAlign=top><hr size="1" noshade></TD>
  </TR>
  <TR align="left">
    <TD width=50% vAlign=top><font size="2" face="Times New Roman, Times, serif"><B>Michael D. Bennett</B>, Vice President, Secretary and <br>
    Treasurer (Principal Financial and Accounting Officer)</font></TD>
    <TD width=5% vAlign=top><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD width=295 vAlign=top><font size="2" face="Times New Roman, Times, serif"><B>Dennis Kessler</B>, Director</font></TD>
  </TR>
  <TR>
    <TD vAlign=top width=50%></TD>
    <TD vAlign=top width=17></TD>
    <TD vAlign=top width=295></TD>
  </TR>
  <TR>
    <TD vAlign=top width=50%></TD>
    <TD vAlign=top width=17></TD>
    <TD vAlign=top width=295></TD>
  </TR>
  <TR>
    <TD vAlign=top width=50%></TD>
    <TD vAlign=top width=17></TD>
    <TD vAlign=top width=295></TD>
  </TR>
</TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>55</FONT></P>
<HR color=gray noShade SIZE=5>
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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31
<SEQUENCE>6
<FILENAME>d63590_ex31-1.htm
<DESCRIPTION>MFRI EXHIBIT 31.1 TO FORM 10K
<TEXT>

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<P align=right><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;Exhibit 31.1</FONT></P>
<P><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;I, David Unger, certify that:</FONT></P>
</TD></TR>
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  <TD>&nbsp;</TD>
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<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
  <TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>1.<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></FONT></TD>
  <TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>I have reviewed this annual report on Form 10-K of MFRI, Inc.</FONT></TD>
</TR>
<TR>
  <TD vAlign=top>&nbsp;</TD>
  <TD vAlign=top>&nbsp;</TD>
</TR>
<TR>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>2.<FONT face="Times New Roman, Times, Serif" size=2></FONT></FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2><FONT face="Times New Roman, Times, Serif" size=2></FONT>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;</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>3.<FONT face="Times New Roman, Times, Serif" size=2></FONT></FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2><FONT face="Times New Roman, Times, Serif" size=2></FONT>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;</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>4.<FONT face="Times New Roman, Times, Serif" size=2></FONT></FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2><FONT face="Times New Roman, Times, Serif" size=2></FONT>The registrant&#146;s other certifying officer and I are responsible for establishing and maintaining

disclosure controls and procedures (as defined in Exchange Act rules 13a-15(e) and 15d-15(e)) for

the registrant and we have:</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top width=24></TD>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>(a)<FONT face="Times New Roman, Times, Serif" size=2></FONT></FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2><FONT face="Times New Roman, Times, Serif" size=2></FONT>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;</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top></TD>
<TD vAlign=top><div align="justify">&nbsp;&nbsp;</div></TD></TR>
<TR>
<TD vAlign=top width=24></TD>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>(b)<FONT face="Times New Roman, Times, Serif" size=2></FONT></FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2><FONT face="Times New Roman, Times, Serif" size=2></FONT>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</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top></TD>
<TD vAlign=top><div align="justify">&nbsp;&nbsp;</div></TD></TR>
<TR>
<TD vAlign=top width=24></TD>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>(c)<FONT face="Times New Roman, Times, Serif" size=2></FONT></FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2><FONT face="Times New Roman, Times, Serif" size=2></FONT>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 that has materially affected,

or is reasonably likely to materially affect, the registrant&#146;s internal control over financial

reporting; and</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>5.<FONT face="Times New Roman, Times, Serif" size=2></FONT></FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2><FONT face="Times New Roman, Times, Serif" size=2></FONT>The registrant&#146;s other certifying officer 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):</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top width=48></TD>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>a)<FONT face="Times New Roman, Times, Serif" size=2></FONT></FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2><FONT face="Times New Roman, Times, Serif" size=2></FONT>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</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48></TD>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>b)<FONT face="Times New Roman, Times, Serif" size=2></FONT></FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2><FONT face="Times New Roman, Times, Serif" size=2></FONT>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.</FONT></div></TD></TR></TABLE>
<table width="600" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Date: April 29, 2005</FONT></P>
      <P align=justify><FONT face="Times New Roman, Times, Serif" size=2>/s/ David Unger</FONT></P>
    </td>
  </tr>
  <tr>
    <td><hr align="left" width="230" size="1" noshade></td>
  </tr>
  <tr>
    <td><P align=justify><FONT face="Times New Roman, Times, Serif" size=2>David Unger<br>
    </FONT><FONT face="Times New Roman, Times, Serif" size=2>Director, Chairman of the Board of Directors,<br>
    </FONT><FONT face="Times New Roman, Times, Serif" size=2>and Chief Executive Officer<br>
    </FONT><FONT face="Times New Roman, Times, Serif" size=2>(Principal Executive Officer)<B></B></FONT></P>
    </td>
  </tr>
</table>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>56</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
</body>
</html>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31
<SEQUENCE>7
<FILENAME>d63590_ex31-2.htm
<DESCRIPTION>MFRI EXHIBIT 31.2 TO FORM 10K
<TEXT>

<html>
<head>
<title></title>
</head>

<body>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">
<TR>
  <TD vAlign=top>&nbsp;</TD>
</TR>
<TR>
<TD vAlign=top>
<P align=right><FONT face="Times New Roman, Times, Serif" size=2><B>Exhibit 31.2</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>I, Michael D. Bennett, certify that:</FONT></P>
</TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
  <TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>1.<FONT face="Times New Roman, Times, Serif" size=2></FONT></FONT></TD>
  <TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>I have reviewed this annual report on Form 10-K of MFRI, Inc.</FONT></TD>
</TR>
<TR>
  <TD vAlign=top>&nbsp;</TD>
  <TD vAlign=top>&nbsp;</TD>
</TR>
<TR>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>2.<FONT face="Times New Roman, Times, Serif" size=2></FONT></FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2><FONT face="Times New Roman, Times, Serif" size=2></FONT>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;</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>3.<FONT face="Times New Roman, Times, Serif" size=2></FONT></FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2><FONT face="Times New Roman, Times, Serif" size=2></FONT>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;</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>4.<FONT face="Times New Roman, Times, Serif" size=2></FONT></FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2><FONT face="Times New Roman, Times, Serif" size=2></FONT>The registrant&#146;s other certifying officer and I are responsible for establishing and maintaining

disclosure controls and procedures (as defined in Exchange Act rules 13a-15(e) and 15d-15(e)) for

the registrant and we have:</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top width=24></TD>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>(a)<FONT face="Times New Roman, Times, Serif" size=2></FONT></FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2><FONT face="Times New Roman, Times, Serif" size=2></FONT>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;</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=24></TD>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>(b)<FONT face="Times New Roman, Times, Serif" size=2></FONT></FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2><FONT face="Times New Roman, Times, Serif" size=2></FONT>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</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=24></TD>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>(c)<FONT face="Times New Roman, Times, Serif" size=2></FONT></FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2><FONT face="Times New Roman, Times, Serif" size=2></FONT>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 that has materially affected,

or is reasonably likely to materially affect, the registrant&#146;s internal control over financial

reporting; and</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>5.<FONT face="Times New Roman, Times, Serif" size=2></FONT></FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2><FONT face="Times New Roman, Times, Serif" size=2></FONT>The registrant&#146;s other certifying officer 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):</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top width=48></TD>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>a)<FONT face="Times New Roman, Times, Serif" size=2></FONT></FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2><FONT face="Times New Roman, Times, Serif" size=2></FONT>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</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48></TD>
<TD vAlign=top width=24><FONT face="Times New Roman, Times, Serif" size=2>b)<FONT face="Times New Roman, Times, Serif" size=2></FONT></FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2><FONT face="Times New Roman, Times, Serif" size=2></FONT>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.</FONT></div></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
  <TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>Date: April 29, 2005</FONT></TD>
</TR>
<TR>
  <TD vAlign=top>&nbsp;</TD>
</TR>
<TR>
  <TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2> /s/ Michael D. Bennett</FONT></TD>
</TR>
<TR>
  <TD vAlign=top><hr align="left" width="230" size="1" noshade></TD>
</TR>
<TR>
<TD vAlign=top>

<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Michael D. Bennett<br>
</FONT><FONT face="Times New Roman, Times, Serif" size=2>Vice President, Secretary and Treasurer<br>
</FONT><FONT face="Times New Roman, Times, Serif" size=2>(Principal Financial and Accounting Officer)</FONT></P>
</TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>57</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
</body>
</html>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>8
<FILENAME>d63590_ex32-1.htm
<DESCRIPTION>MFRI EXHIBIT 32.1 TO FORM 10K
<TEXT>
<html>
<head>
<title></title>
</head>

<body>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
  <TD>&nbsp;</TD>
</TR>
<TR>
<TD>
<P align=right><FONT face="Times New Roman, Times, Serif" size=2><B>Exhibit 32.1</B></FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B>Certification of Principal Executive Officer<br>
</B></FONT><FONT face="Times New Roman, Times, Serif" size=2><B>Pursuant to 18 U.S.C. 1350<br>
</B></FONT><FONT face="Times New Roman, Times, Serif" size=2><B>(Section 906 of the Sarbanes-Oxley Act of 2002)</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>I, David Unger, Chief Executive Officer (principal executive officer) of MFRI, Inc. (the &#147;Registrant&#148;),
certify that to the best of my knowledge, based upon a review of the Annual Report on Form 10-K for
the period ended January 31, 2005 of the Registrant (the &#147;Report&#148;):</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top width=48></TD>
<TD vAlign=top width=48><FONT face="Times New Roman, Times, Serif" size=2>(1)<FONT face="Times New Roman, Times, Serif" size=2></FONT></FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2><FONT face="Times New Roman, Times, Serif" size=2></FONT>The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of

1934, as amended; and</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48></TD>
<TD vAlign=top width=48><FONT face="Times New Roman, Times, Serif" size=2>(2)<FONT face="Times New Roman, Times, Serif" size=2></FONT></FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2><FONT face="Times New Roman, Times, Serif" size=2></FONT>The information contained in the Report fairly presents, in all material respects, the financial condition

and results of operations of the Registrant.</FONT></div></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
  <TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>/s/ David Unger</FONT></TD>
</TR>
<TR>
  <TD vAlign=top><hr align="left" width="230" size="1" noshade></TD>
</TR>
<TR>
<TD vAlign=top>
<P><FONT face="Times New Roman, Times, Serif" size=2>David Unger<br>
</FONT><FONT face="Times New Roman, Times, Serif" size=2>Director and Chairman of the Board of Directors,<br>
</FONT><FONT face="Times New Roman, Times, Serif" size=2>and Chief Executive Officer<br>
</FONT><FONT face="Times New Roman, Times, Serif" size=2>(Principal Executive Officer)<br>
</FONT><FONT face="Times New Roman, Times, Serif" size=2>April 29, 2005</FONT></P>
<P><FONT face="Times New Roman, Times, Serif" size=2>A signed original of this written statement required by Section 906 has been provided to MFRI, Inc.
and will be retained by MFRI, Inc. and furnished to the Securities and Exchange Commission or its
staff upon request.</FONT></P></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>58</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
</body>
</html>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>9
<FILENAME>d63590_ex32-2.htm
<DESCRIPTION>MFRI EXHIBIT 32.2 TO FORM 10K
<TEXT>
<html>
<head>
<title></title>
</head>

<body>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
  <TD>&nbsp;</TD>
</TR>
<TR>
<TD>
<P align=right><FONT face="Times New Roman, Times, Serif" size=2><U><B>Exhibit 32.2</B></U></FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B>Certification of Principal Financial Officer<br>
</B></FONT><FONT face="Times New Roman, Times, Serif" size=2><B>Pursuant to 18 U.S.C. 1350<br>
</B></FONT><FONT face="Times New Roman, Times, Serif" size=2><B>(Section 906 of the Sarbanes-Oxley Act of 2002)</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>I, Michael D. Bennett, Chief Financial Officer (principal financial officer) of MFRI, Inc. (the &#147;Registrant&#148;),
certify that to the best of my knowledge, based upon a review of the Annual Report on Form 10-K for
the period ended January 31, 2005 of the Registrant (the &#147;Report&#148;):</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top width=48></TD>
<TD vAlign=top width=48><FONT face="Times New Roman, Times, Serif" size=2>(1)<FONT face="Times New Roman, Times, Serif" size=2></FONT></FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2><FONT face="Times New Roman, Times, Serif" size=2></FONT>The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of

1934, as amended; and</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48></TD>
<TD vAlign=top width=48><FONT face="Times New Roman, Times, Serif" size=2>(2)<FONT face="Times New Roman, Times, Serif" size=2></FONT></FONT></TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2><FONT face="Times New Roman, Times, Serif" size=2></FONT>The information contained in the Report fairly presents, in all material respects, the financial condition

and results of operations of the Registrant.</FONT></div></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
  <TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>/s/ Michael D. Bennett</FONT></TD>
</TR>
<TR>
  <TD vAlign=top><hr align="left" width="230" size="1" noshade></TD>
</TR>
<TR>
<TD vAlign=top>
<P><FONT face="Times New Roman, Times, Serif" size=2>Michael D. Bennett<br>
</FONT><FONT face="Times New Roman, Times, Serif" size=2>Vice President, Secretary and Treasurer<br>
</FONT><FONT face="Times New Roman, Times, Serif" size=2>(Principal Financial and Accounting Officer)<br>
</FONT><FONT face="Times New Roman, Times, Serif" size=2>April 29, 2005</FONT></P>
<P><FONT face="Times New Roman, Times, Serif" size=2>A signed original of this written statement required by Section 906 has been provided to MFRI, Inc.
and will be retained by MFRI, Inc. and furnished to the Securities and Exchange Commission or its
staff upon request. </FONT></P></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>59</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
</body>
</html>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>10
<FILENAME>d63590_ex10f.htm
<DESCRIPTION>MFRI EXHIBIT 10F TO FORM 10K
<TEXT>
<HTML>
<HEAD>
<TITLE></TITLE>
</HEAD>
<BODY>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD>

<br>
<hr width="350" size="1" noshade>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B>MFRI, INC., MIDWESCO FILTER RESOURCES, INC.,<BR>PERMA-PIPE, INC., THERMAL CARE, INC. AND<BR>TDC FILTER MANUFACTURING, INC., AS BORROWERS</B></FONT></P>
<hr width="350" size="1" noshade>
<br>
<br>
<hr width="350" size="1" noshade>
<hr width="350" size="1" noshade>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B>LOAN AND SECURITY AGREEMENT</B></FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2>Dated:&nbsp; July 11, 2002</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2>$28,000,000</FONT></P>
<hr width="350" size="1" noshade>
<hr width="350" size="1" noshade>
<br>
<br>
<hr width="350" size="1" noshade>
<p align="center"><FONT face="Times New Roman, Times, Serif" size=2><B>FLEET CAPITAL CORPORATION</B></FONT><FONT face="Times New Roman, Times, Serif" size=2><B><br>
  Individually and as Agent for any Lender which is<br>
</B></FONT><FONT face="Times New Roman, Times, Serif" size=2><B>or becomes a Party hereto</B></FONT>
</p>
<hr width="350" size="1" noshade></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2></FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
  <TR VALIGN=Bottom>
    <TH COLSPAN=6><FONT FACE="Times New Roman, Times, Serif" SIZE=2>TABLE OF CONTENTS </FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2></FONT></TH>
  </TR>
  <TR VALIGN=Bottom>
    <TH COLSPAN=3>&nbsp;</TH>
    <TH>&nbsp;</TH>
    <TH colspan="2"><font size="1" face="Times New Roman, Times, serif">Page</font></TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD colspan="4" ALIGN=left>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD height="20" colspan="4" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>SECTION</FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 1. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#a1">CREDIT FACILITY</a></FONT></TD>
    <TD WIDTH=3% height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1</FONT></TD>
    <TD WIDTH=2% ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD width="5%" ALIGN=RIGHT>&nbsp;</TD>
    <TD width="5%" height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.1</FONT></TD>
    <TD width="3%" height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a2">Loans</a></FONT></TD>
    <TD width="3%" height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1</FONT></TD>
    <TD width="2%" ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>1.2</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a3">Letters of Credit; LC Guaranties</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD height="20" colspan="4" ALIGN=left>&nbsp;</TD>
    <TD height="20" ALIGN=RIGHT>&nbsp;</TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD height="20" colspan="4" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>SECTION</FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 2. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#a4">INTEREST, FEES AND CHARGES</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.1</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a5">Interest</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.2</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a6">Computation of Interest and Fees</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.3</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a7">Fee Letter</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.4</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a8">Letter of Credit and LC Guaranty Fees</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.5</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a9">Unused Line Fee</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.6</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a10">Prepayment Fee</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.7</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a11">Audit Fees</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.8</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a12">Reimbursement of Expenses</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.9</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a13">Bank Charges</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.10</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a14">Collateral Protection Expenses; Appraisals</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.11</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a15">Payment of Charges</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>2.12</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a16">No Deductions</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR>
    <TD height="20" COLSPAN=3></TD>
    <TD height="20"></TD>
    <TD height="20"></TD>
    <TD></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD height="20" colspan="4" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>SECTION</FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 3. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#a17">LOAN ADMINISTRATION</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.1</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a18">Manner of Borrowing Revolving Credit Loans/LIBOR Option</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.2</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a19">Payments</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.3</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a20">Mandatory and Optional Prepayments</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.4</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a21">Application of Payments and Collections</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.5</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a22">All Loans to Constitute One Obligation</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.6</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a23">Loan Account</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>13</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.7</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a24">Statements of Account</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.8</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a25">Increased Costs</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>14</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.9</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a26">Basis for Determining Interest Rate Inadequate</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>15</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>3.10</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a27">Sharing of Payments, Etc</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>15</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR>
    <TD height="20" COLSPAN=3></TD>
    <TD height="20"></TD>
    <TD height="20"></TD>
    <TD></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD height="20" colspan="4" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>SECTION</FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 4. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#a28">TERM AND TERMINATION</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>16</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.1</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a29">Term of Agreement</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>16</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>4.2</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a30">Termination</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>16</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR>
    <TD height="20" COLSPAN=3></TD>
    <TD height="20"></TD>
    <TD height="20"></TD>
    <TD></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD height="20" colspan="4" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>SECTION 5. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#a31">SECURITY INTERESTS</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>17</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.1</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a32">Security Interest in Collateral</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>17</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.2</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a33">Other Collateral</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>18</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.3</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a34">Lien Perfection; Further Assurances</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>19</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>5.4</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a35">Lien on Realty</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>19</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR>
    <TD height="20" COLSPAN=3></TD>
    <TD height="20"></TD>
    <TD height="20"></TD>
    <TD></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD height="20" colspan="4" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>SECTION 6. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#a36">COLLATERAL ADMINISTRATION</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>20</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.1</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a37">General</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>20</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.2</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a38">Administration of Accounts</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>21</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.3</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;</FONT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a39">Administration of Inventory</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>22</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR>
    <TD COLSPAN=3></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
  </TR>
</TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>i</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
  <TR align="center" VALIGN=Bottom>
    <Td COLSPAN=6><b><FONT FACE="Times New Roman, Times, Serif" SIZE=2>TABLE OF CONTENTS </FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></b><FONT FACE="Times New Roman, Times, Serif" SIZE=1><br>
          <font size="2">(continued)</font></FONT></Td>
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  <TR VALIGN=Bottom>
    <TH height="20" COLSPAN=3><font size="1" face="Times New Roman, Times, serif"></font></TH>
    <TH height="20"><font size="1" face="Times New Roman, Times, serif"></font></TH>
    <TH height="20" colspan="2"><font size="1" face="Times New Roman, Times, serif"></font></TH>
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    <TH height="20" COLSPAN=3><font size="1" face="Times New Roman, Times, serif"></font></TH>
    <TH height="20"><font size="1" face="Times New Roman, Times, serif"></font></TH>
    <TH height="20" colspan="2"><font size="1" face="Times New Roman, Times, serif">Page</font></TH>
  </TR>
  <TR VALIGN=Bottom>
    <TH>&nbsp;</TH>
    <TH height="20"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
    <TH height="20"></TH>
    <TH height="20"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
    <TH height="20"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD WIDTH=5% ALIGN=RIGHT>&nbsp;</TD>
    <TD WIDTH=5% height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.4</FONT></TD>
    <TD WIDTH=3% height="20" ALIGN=LEFT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a40">Administration of Equipment</a></FONT></TD>
    <TD WIDTH=3% height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>22</FONT></TD>
    <TD WIDTH=2% ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>6.5</FONT></TD>
    <TD height="20" ALIGN=LEFT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a41">Payment of Charges</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>23</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR>
    <TD></TD>
    <TD height="20" align="left"></TD>
    <TD height="20"></TD>
    <TD height="20"></TD>
    <TD height="20"></TD>
    <TD></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD height="20" colspan="4" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>SECTION 7. </FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#a42">REPRESENTATIONS AND WARRANTIES</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>23</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7.1</FONT></TD>
    <TD height="20" ALIGN=LEFT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a43">General Representations and Warranties</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>23</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><font size="2" face="Times New Roman, Times, serif">7.2</font></TD>
    <TD height="20" ALIGN=LEFT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a44">Continuous Nature of Representations and Warranties</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">29</font></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>7.3</FONT></TD>
    <TD height="20" ALIGN=LEFT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a45">Survival of Representations and Warranties</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>29</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR>
    <TD></TD>
    <TD height="20"></TD>
    <TD height="20"></TD>
    <TD height="20"></TD>
    <TD height="20"></TD>
    <TD></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD height="20" colspan="4" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>SECTION</FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 8. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#a46">COVENANTS AND CONTINUING AGREEMENTS</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>30</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8.1</FONT></TD>
    <TD height="20" ALIGN=LEFT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a47">Affirmative Covenants</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>30</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8.2</FONT></TD>
    <TD height="20" ALIGN=LEFT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a48">Negative Covenants</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>33</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>8.3</FONT></TD>
    <TD height="20" ALIGN=LEFT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a49">Specific Financial Covenants</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>38</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR>
    <TD></TD>
    <TD height="20"></TD>
    <TD height="20"></TD>
    <TD height="20"></TD>
    <TD height="20"></TD>
    <TD></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD height="20" colspan="4" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>SECTION 9. </FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#a50">CONDITIONS PRECEDENT</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>39</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.1</FONT></TD>
    <TD height="20" ALIGN=LEFT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a51">Documentation</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>39</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.2</FONT></TD>
    <TD height="20" ALIGN=LEFT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a52">No Default</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>39</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.3</FONT></TD>
    <TD height="20" ALIGN=LEFT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a53">Other Conditions</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>39</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.4</FONT></TD>
    <TD height="20" ALIGN=LEFT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a54">Availability</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>40</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.5</FONT></TD>
    <TD height="20" ALIGN=LEFT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a55">No Litigation</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>40</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.6</FONT></TD>
    <TD height="20" ALIGN=LEFT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a56">Material Adverse Effect</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>40</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.7</FONT></TD>
    <TD height="20" ALIGN=LEFT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a57">Term Loan</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>40</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>9.8</FONT></TD>
    <TD height="20" ALIGN=LEFT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a58">Consultant</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>40</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR>
    <TD></TD>
    <TD height="20" align="left"></TD>
    <TD height="20"></TD>
    <TD height="20"></TD>
    <TD height="20"></TD>
    <TD></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD height="20" colspan="4" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>SECTION</FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 10.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <a href="#a59">EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>40</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.1</FONT></TD>
    <TD height="20" ALIGN=LEFT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a60">Events of Default</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>40</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.2</FONT></TD>
    <TD height="20" ALIGN=LEFT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a61">Acceleration of the Obligations</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>43</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.3</FONT></TD>
    <TD height="20" ALIGN=LEFT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a62">Other Remedies</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>43</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.4</FONT></TD>
    <TD height="20" ALIGN=LEFT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a63">Set Off and Sharing of Payments</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>44</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>10.5</FONT></TD>
    <TD height="20" ALIGN=LEFT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a64">Remedies Cumulative; No Waiver</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>45</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR>
    <TD></TD>
    <TD height="20"></TD>
    <TD height="20"></TD>
    <TD height="20"></TD>
    <TD height="20"></TD>
    <TD></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD height="20" colspan="4" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>SECTION</FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 11. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#a65">AGENT</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>45</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11.1</FONT></TD>
    <TD height="20" ALIGN=LEFT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a66">Authorization and Action</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>45</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11.2</FONT></TD>
    <TD height="20" ALIGN=LEFT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a67">Agent&#146;s Reliance, Etc</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>46</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11.3</FONT></TD>
    <TD height="20" ALIGN=LEFT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a68">Fleet and Affiliates</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>47</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11.4</FONT></TD>
    <TD height="20" ALIGN=LEFT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a69">Lender Credit Decision</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>47</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11.5</FONT></TD>
    <TD height="20" ALIGN=LEFT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a70">Indemnification</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>47</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11.6</FONT></TD>
    <TD height="20" ALIGN=LEFT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a71">Rights and Remedies to be Exercised by Agent Only</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>48</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11.7</FONT></TD>
    <TD height="20" ALIGN=LEFT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a72">Agency Provisions Relating to Collateral</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>48</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11.8</FONT></TD>
    <TD height="20" ALIGN=LEFT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a73">Agent&#146;s Right to Purchase Commitments</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>49</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11.9</FONT></TD>
    <TD height="20" ALIGN=LEFT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a74">Right of Sale, Assignment, Participations</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>49</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11.10</FONT></TD>
    <TD height="20" ALIGN=LEFT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a75">Amendment</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>50</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11.11</FONT></TD>
    <TD height="20" ALIGN=LEFT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a76">Resignation of Agent; Appointment of Successor</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>51</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>11.12</FONT></TD>
    <TD height="20" ALIGN=LEFT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a77">Audit and Examination Reports; Disclaimer by Lenders</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>51</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
  </TR>
</TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>ii</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
  <TR align="center" VALIGN=Bottom>
    <Td COLSPAN=6><b><FONT FACE="Times New Roman, Times, Serif" SIZE=2>TABLE OF CONTENTS </FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></b><FONT FACE="Times New Roman, Times, Serif" SIZE=1><br>
          <font size="2">(continued)</font></FONT></Td>
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    <TH COLSPAN=3><font size="2" face="Times New Roman, Times, serif"></font></TH>
    <TH><font size="2" face="Times New Roman, Times, serif"></font></TH>
    <TH colspan="2"><font size="2" face="Times New Roman, Times, serif"></font></TH>
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    <TH COLSPAN=3></TH>
    <TH></TH>
    <TH colspan="2"><font size="1" face="Times New Roman, Times, serif">Page</font></TH>
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    <TH width="5%">&nbsp;</TH>
    <TH width="5%"><FONT FACE="Times New Roman, Times, Serif" SIZE=1></FONT></TH>
    <TH width="3%"></TH>
    <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TH>
    <TH><FONT FACE="Times New Roman, Times, Serif" SIZE=1>&nbsp;</FONT></TH>
    <TH>&nbsp;</TH>
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    <TD height="20" colspan="4" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>SECTION</FONT><FONT FACE="Times New Roman, Times, Serif" SIZE=2> 12. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a href="#a78">MISCELLANEOUS</a></FONT></TD>
    <TD WIDTH=3% height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>52</FONT></TD>
    <TD WIDTH=2% ALIGN=RIGHT>&nbsp;</TD>
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    <TD ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD height="20" ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD height="20" ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD height="20" ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD height="20" ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
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    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12.1</FONT></TD>
    <TD height="20" ALIGN=LEFT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a79">Power of Attorney</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>52</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12.2</FONT></TD>
    <TD height="20" ALIGN=LEFT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a80">Indemnity</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>53</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12.3</FONT></TD>
    <TD height="20" ALIGN=LEFT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a81">Sale of Interest</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>53</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12.4</FONT></TD>
    <TD height="20" ALIGN=LEFT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a82">Severability</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>53</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12.5</FONT></TD>
    <TD height="20" ALIGN=LEFT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a83">Successors and Assigns</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>54</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12.6</FONT></TD>
    <TD height="20" ALIGN=LEFT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a84">Cumulative Effect; Conflict of Terms</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>54</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12.7</FONT></TD>
    <TD height="20" ALIGN=LEFT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a85">Execution in Counterparts</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>54</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12.8</FONT></TD>
    <TD height="20" ALIGN=LEFT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a86">Notice</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>54</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12.9</FONT></TD>
    <TD height="20" ALIGN=LEFT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a87">Consent</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>55</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12.10</FONT></TD>
    <TD height="20" ALIGN=LEFT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a88">Credit Inquiries</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>55</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12.11</FONT></TD>
    <TD height="20" ALIGN=LEFT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a89">Time of Essence</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>55</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12.12</FONT></TD>
    <TD height="20" ALIGN=LEFT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a90">Entire Agreement</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>56</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12.13</FONT></TD>
    <TD height="20" ALIGN=LEFT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a91">Interpretation</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>56</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12.14</FONT></TD>
    <TD height="20" ALIGN=LEFT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a92">Confidentiality</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>56</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12.15</FONT></TD>
    <TD height="20" ALIGN=LEFT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a93">GOVERNING LAW; CONSENT TO FORUM</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>56</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12.16</FONT></TD>
    <TD height="20" ALIGN=LEFT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a94">WAIVERS BY BORROWERS</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>57</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12.17</FONT></TD>
    <TD height="20" ALIGN=LEFT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a95">Advertisement</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>58</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=RIGHT>&nbsp;</TD>
    <TD height="20" ALIGN=left><FONT FACE="Times New Roman, Times, Serif" SIZE=2>12.18</FONT></TD>
    <TD height="20" ALIGN=LEFT></TD>
    <TD height="20" ALIGN=LEFT><FONT FACE="Times New Roman, Times, Serif" SIZE=2><a href="#a96">Reimbursement</a></FONT></TD>
    <TD height="20" ALIGN=RIGHT><FONT FACE="Times New Roman, Times, Serif" SIZE=2>58</FONT></TD>
    <TD ALIGN=RIGHT>&nbsp;</TD>
  </TR>
  <TR>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
  </TR>
</TABLE>
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<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>iii</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>
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<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B>LOAN AND SECURITY AGREEMENT</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><B>THIS LOAN AND SECURITY AGREEMENT</B> &nbsp;is made as of this 11th day of July, 2002, by and among <B>FLEET CAPITAL CORPORATION</B> (&#147;Fleet&#148;), a Rhode Island corporation with an office at One South Wacker Drive, Suite 1400,
Chicago, Illinois 60606, individually as a Lender and as Agent (&#147;Agent&#148;) for itself and
any other financial institution which is or becomes a party hereto (each such financial institution,
including Fleet, is referred to hereinafter individually as a &#147;Lender&#148; and collectively
as the &#147;Lenders&#148;), the <B>LENDERS</B> and <B>MFRI, INC.</B>, a Delaware corporation (&#147;MFRI&#148;), <B>MIDWESCO FILTER RESOURCES, INC.</B>, a Delaware corporation (&#147;Midwesco&#148;), <B>PERMA-PIPE, INC.</B>, a Delaware corporation (&#147;Perma-Pipe&#148;), <B>THERMAL CARE, INC.</B>, a Delaware corporation (&#147;Thermal Care&#148;) and <B>TDC FILTER MANUFACTURING, INC.</B>, a Delaware corporation (&#147;TDC&#148;). Capitalized terms used in this Agreement have the meanings
assigned to them in Appendix&nbsp;A, General Definitions. Accounting terms not otherwise specifically
defined herein shall be construed in accordance with GAAP consistently applied. MFRI, Midwesco, Perma-Pipe,
Thermal Care, and TDC are sometimes hereinafter referred to individually as a &#147;Borrower&#148;
and collectively as &#147;Borrowers&#148;.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B><a name="a1"></a>SECTION&nbsp;1. &nbsp;CREDIT FACILITY</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>Subject to the terms and conditions of, and in reliance upon the representations and warranties made
in, this Agreement and the other Loan Documents, Lenders agree to make a Total Credit Facility of
up to Twenty-Eight Million Dollars ($28,000,000) available upon Borrowers&#146; request therefor,
as follows:</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="a2"></a>&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>1.1<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Loans</U>.</FONT></P>
<p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>1.1.1<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Revolving Credit Loans</U>. Each Lender agrees, severally and not jointly, for so long as no Default or Event of Default exists,
  to make Revolving Credit Loans to Borrowers from time to time during the period from the date hereof
  to, but not including, the last day of the Term, as requested by MFRI, on its own behalf and on behalf
  of all Borrowers, in the manner set forth in subsection&nbsp;3.1.1 hereof, up to a maximum principal
  amount at any time outstanding equal to the lesser of (i)&nbsp;such Lender&#146;s Revolving Loan
  Commitment <U>minus</U> the product of such Lender&#146;s Revolving Loan Percentage and the LC Amount <U>minus</U> the product of such Lender&#146;s Revolving Loan Percentage and reserves, if any and (ii)&nbsp;the
  product of such Lender&#146;s Revolving Loan Percentage and an amount equal to the Borrowing Base
  at such time <U>minus</U> the LC Amount <U>minus</U> reserves, if any. Agent shall have the right to establish reserves in such amounts, and with respect
  to such matters, as Agent shall deem necessary or appropriate in its sole judgment, exercised in
  a commercially reasonable manner, against the amount of Revolving Credit Loans which Borrowers may
  otherwise request under this subsection&nbsp;1.1.1, including without limitation, with respect to
  (i)&nbsp;price adjustments, damages, unearned discounts, returned products or other matters for which
  credit memoranda are issued in the ordinary course of any Borrower&#146;s business; (ii)&nbsp;potential
  dilution related to Accounts; (iii)&nbsp;shrinkage, spoilage and obsolescence of any Borrower&#146;s
  Inventory; (iv)&nbsp;slow-moving Inventory; (v)&nbsp;other sums chargeable against Borrowers&#146;
  Loan Account as Revolving Credit Loans under any section of this Agreement; (vi)&nbsp;amounts owing
  by any Borrower to any Person to the extent secured by a Lien on, or trust over, any Property of
  any Borrower; (vii)&nbsp;amounts owing by any Borrower in connection with Product Obligations; and
  (viii)&nbsp;such other specific events, conditions or </FONT></p></TD>
</TR></TABLE>
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<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2></FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
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<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>contingencies as to which Agent, in its sole judgment, exercised in a commercially reasonable manner,
determines reserves should be established from time to time hereunder. The Revolving Credit Loans
shall be repayable in accordance with the terms of the Revolving Notes and shall be secured by all
of the Collateral.</FONT></P>
<p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>1.1.2<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Overadvances</U>. Insofar as Borrowers may request and Agent or Majority Lenders (as provided below) may be willing
  in their sole and absolute discretion to make Revolving Credit Loans to Borrowers at a time when
  the unpaid balance of Revolving Credit Loans plus the sum of the LC Amount plus the amount of LC
  Obligations that have not been reimbursed by Borrowers or funded with a Revolving Credit Loan, plus
  reserves, exceeds, or would exceed with the making of any such Revolving Credit Loan, the Borrowing
  Base (and such Loan or Loans being herein referred to individually as an &#147;Overadvance&#148;
  and collectively, as &#147;Overadvances&#148;), Agent shall enter such Overadvances as debits in
  the Loan Account. All Overadvances shall be repaid on demand, shall be secured by the Collateral
  and shall bear interest as provided in this Agreement for Revolving Credit Loans generally. Any Overadvance
  made pursuant to the terms hereof shall be made by all Lenders ratably in accordance with their respective
  Revolving Loan Percentages. Overadvances in the aggregate amount of $500,000 or less may, unless
  a Default or Event of Default has occurred and is continuing, be made in the sole and absolute discretion
  of Agent. Overadvances in an aggregate amount of more than $500,000 but less than $1,000,000 may,
  unless a Default or an Event of Default has occurred and is continuing, be made in the sole and absolute
  discretion of the Majority Lenders. Overadvances in an aggregate amount of $1,000,000 or more and
  Overadvances to be made after the occurrence and during the continuation of a Default or an Event
  of Default shall require the consent of all Lenders. The foregoing notwithstanding, in no event,
  unless otherwise consented to by all Lenders, (w)&nbsp;shall any Overadvances be outstanding for
  more than sixty (60) consecutive days, (x)&nbsp;after all outstanding Overadvances have been repaid,
  shall Agent or Lenders make any additional Overadvances unless sixty (60) days or more have expired
  since the last date on which any Overadvances were outstanding, (y)&nbsp;shall Overadvances be outstanding
  on more than ninety (90) days within any one hundred eighty day (180) period or (z)&nbsp;shall Agent
  make Revolving Credit Loans on behalf of Lenders under this subsection&nbsp;1.1.2 to the extent such
  Revolving Credit Loans would cause a Lender&#146;s share of the Revolving Credit Loans to exceed
  such Lender&#146;s Revolving Loan Commitment minus such Lender&#146;s Revolving Loan Percentage of the LC Amount.</FONT>
</p>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>1.1.3<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Use of Proceeds</U>. The Revolving Credit Loans shall be used solely for (i)&nbsp;the satisfaction of existing Indebtedness
of Borrowers to Harris Trust and Savings Bank; (ii)&nbsp;the satisfaction of existing Indebtedness
of Borrowers&#146; outstanding under the Term Loan Documents in an amount not to exceed Ten Million
Seventy Thousand Dollars ($10,070,000.00); (iii)&nbsp;Borrowers&#146; general operating capital needs
in a manner consistent with the provisions of this Agreement and all applicable laws, and (iv) other
purposes permitted under this Agreement, including without limitation, repayments of the Term Loan
in excess of the amount referred to in clause&nbsp;(ii)&nbsp;as provided in Section&nbsp;8.2.6 hereof.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>1.1.4<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Agent Loans</U>. Upon the occurrence and during the continuance of an Event of Default, Agent, in its sole discretion,
may make Revolving Credit Loans on behalf of Lenders, in an aggregate amount not to exceed One Million
Dollars ($1,000,000), if Agent, in its reasonable business judgment, deems that such Revolving Credit
Loans are necessary or </FONT></P></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>2</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
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<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>desirable (i)&nbsp;to protect all or any portion of the Collateral, (ii)&nbsp;to enhance the likelihood,
or maximize the amount of, repayment of the Loans and the other Obligations, or (iii)&nbsp;to pay
any other amount chargeable to any Borrower pursuant to this Agreement, including without limitation
costs, fees and expenses as described in Sections&nbsp;2.8 and 2.9 (hereinafter, &#147;Agent Loans&#148;);
<U>provided</U>, that in no event shall (a)&nbsp;the maximum principal amount of the Revolving Credit Loans exceed
the aggregate Revolving Loan Commitments and (b)&nbsp;Majority Lenders may at any time revoke Agent&#146;s
authorization to make Agent Loans. Any such revocation must be in writing and shall become effective
prospectively upon Agent&#146;s receipt thereof. Each Lender shall be obligated to advance its Revolving
Loan Percentage of each Agent Loan. If Agent Loans are made pursuant to the preceding sentence, then
(a)&nbsp;the Borrowing Base shall be deemed increased by the amount of such permitted Agent Loans,
but only for so long as Agent allows such Agent Loans to be outstanding, and (b)&nbsp;all Lenders
that have committed to make Revolving Credit Loans shall be bound to make, or permit to remain outstanding,
such Agent Loans based upon their Revolving Loan Percentages in accordance with the terms of this Agreement.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><a name="a3"></a>1.2<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Letters of Credit; LC Guaranties</U>. Agent agrees, for so long as no Default or Event of Default exists and if requested by MFRI, on its
own behalf and on behalf of all other Borrowers, to (i)&nbsp;issue its, or cause to be issued by
Bank or another Affiliate of Agent, on the date requested by MFRI, on its own behalf and on behalf
of all other Borrowers, Letters of Credit for the account of Borrowers or (ii)&nbsp;execute LC Guaranties
by which Agent, Bank, or another Affiliate of Agent, on the date so requested by MFRI, shall guaranty
the payment or performance by Borrowers of their reimbursement obligations with respect to letters
of credit; <U>provided</U> that the LC Amount shall not exceed Seven Million Dollars ($7,000,000) at any time. No Letter of Credit
or LC Guaranty may have an expiration date after the last day of the Term. Notwithstanding anything
to the contrary contained herein, Borrowers, Agent and Lenders hereby agree that all LC Obligations
and all obligations of Borrowers relating thereto shall be satisfied by the prompt issuance of one
or more Revolving Credit Loans that are Base Rate Portions, which Borrowers hereby acknowledge are
requested and Lenders hereby agree to fund. In the event that Revolving Credit Loans are not, for
any reason, promptly made to satisfy all then existing LC Obligations, each Lender hereby agrees
to pay to Agent, on demand, an amount equal to such LC Obligations <U>multiplied</U> <U>by</U> such Lender&#146;s Revolving Loan Percentage, and until so paid, such amount shall be secured by the
Collateral and shall bear interest and be payable at the same rate and in the same manner as Base
Rate Portions. Immediately upon the issuance of a Letter of Credit or an LC Guaranty under this Agreement,
each Lender shall be deemed to have irrevocably and unconditionally purchased and received from Agent,
without recourse or warranty, an undivided interest and participation therein equal to such LC Obligations
<U>multiplied</U> <U>by</U> such Lender&#146;s Revolving Loan Percentage.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B><a name="a4"></a>SECTION&nbsp;2. &nbsp;INTEREST, FEES AND CHARGES</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="a5"></a></FONT><FONT face="Times New Roman, Times, Serif" size=2>2.1<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Interest</U>.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>2.1.1<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Rates of Interest</U>. Interest shall accrue on the principal amount of the Base Rate Current Asset Revolving Portion outstanding
at the end of each day at a fluctuating rate per annum equal to the Applicable Margin (Current Asset)
then in effect <U>plus</U> the Base Rate. Interest shall accrue on the principal amount of the Base Rate Real Estate Revolving
Portion outstanding at the end of each day at a fluctuating rate per annum equal to the Applicable
Margin </FONT></P></TD></TR></TABLE>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>(Real Estate) then in effect <U>plus</U> the Base Rate. Said rate of interest shall increase or decrease by an amount equal to any increase
or decrease in the Base Rate, effective as of the opening of business on the day that any such change
in the Base Rate occurs. If MFRI, on its own behalf and on behalf of all other Borrowers, exercises
its LIBOR Option as provided in Section&nbsp;3.1, (i) interest shall accrue on the principal amount
of the LIBOR Current Asset Revolving Portions outstanding at the end of each day at a rate per annum
equal to the Applicable Margin (Current Asset) then in effect <U>plus</U> the LIBOR applicable to each LIBOR Portion for the corresponding Interest Period and (ii) interest
shall accrue on the principal amount of the LIBOR Real Estate Revolving Portions outstanding at the
end of each day at a per annum rate equal to the Applicable Margin (Real Estate) then in effect <U>plus</U> the LIBOR applicable to each LIBOR Portion for the corresponding Interest Period. For purposes of
computing interest hereunder, the Base Rate Real Estate Portion and the LIBOR Real Estate Portion
shall be deemed first borrowed and last repaid. As of the Closing Date, the LIBOR Real Estate Portion
shall be deemed to be included within the LIBOR Portion with the shortest Interest Period and thereafter
shall be deemed to be automatically continued pursuant to Section 3.1.9 until such time as the Real
Estate Component is reduced to Zero Dollars ($0).</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>2.1.2<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Default Rate of Interest</U>. At the option of Agent, upon and after the occurrence of an Event of Default, and during the continuation
thereof, the principal amount of all Loans shall bear interest at a rate per annum equal to 2.0% <U>plus</U> the interest rate otherwise applicable thereto (the &#147;Default Rate&#148;).</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>2.1.3<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Maximum Interest</U>. In no event whatsoever shall the aggregate of all amounts deemed interest hereunder or under the
Notes and charged or collected pursuant to the terms of this Agreement or pursuant to the Notes exceed
the highest rate permissible under any law which a court of competent jurisdiction shall, in a final
determination, deem applicable hereto. If any provisions of this Agreement or the Notes are in contravention
of any such law, such provisions shall be deemed amended to conform thereto (the &#147;Maximum Rate&#148;).
If at any time, the amount of interest paid hereunder is limited by the Maximum Rate, and the amount
at which interest accrues hereunder is subsequently below the Maximum Rate, the rate at which interest
accrues hereunder shall remain at the Maximum Rate, until such time as the aggregate interest paid
hereunder equals the amount of interest that would have been paid had the Maximum Rate not applied.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="a6"></a></FONT><FONT face="Times New Roman, Times, Serif" size=2>2.2<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Computation of Interest and Fees</U>. Interest, Letter of Credit and LC Guaranty fees and Unused Line Fees hereunder shall be calculated
daily and shall be computed on the actual number of days elapsed over a year of 360 days. For the
purpose of computing interest hereunder, all items of payment received by Agent shall be deemed applied
by Agent on account of the Obligations (subject to final payment of such items) on the first Business
Day after receipt by Agent of such items in Agent&#146;s account located in Hartford, Connecticut.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="a7"></a></FONT><FONT face="Times New Roman, Times, Serif" size=2>2.3<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Fee Letter</U>. Borrowers shall pay to Agent certain fees and other amounts in accordance with the terms of the fee
letter between Borrowers and Agent (the &#147;Fee Letter&#148;).</FONT></P></TD></TR></TABLE>
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<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>4</FONT></P>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><a name="a8" id="a8"></a>2.4<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Letter of Credit and LC Guaranty Fees</U>. Borrowers shall pay to Agent:</FONT></P></TD></TR>
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<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(i)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> for standby Letters of Credit and LC Guaranties of standby letters of credit, for the ratable benefit
  of Lenders a per annum fee equal to one and three-quarters percent (1-3/4%) of the aggregate face
  amount of such Letters of Credit and LC Guaranties outstanding from time to time during the term
  of this Agreement, <U>plus</U> all normal and customary charges associated with the issuance thereof, which fees and charges shall
  be deemed fully earned upon issuance of each such Letter of Credit or LC Guaranty, shall be due and
  payable on the first Business Day of each month and shall not be subject to rebate or proration upon
  the termination of this Agreement for any reason;</FONT></p></TD></TR>
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<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
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<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(ii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> for documentary Letters of Credit and LC Guaranties of documentary letters of credit, for the ratable
  benefit of Lenders, a per annum fee equal to one and three-quarters percent (1-3/4%) of the face
  amount of each such Letter of Credit or LC Guaranty, payable upon the issuance of such Letter of
  Credit or execution of such LC Guaranty and an additional fee equal to one and three-quarters percent
  (1-3/4%) per annum of the face amount of such Letters of Credit or LC Guaranty payable upon each
  renewal thereof and each extension thereof <U>plus</U> all normal and customary charges associated with the issuance and administration of each such Letter
  of Credit or LC Guaranty (which fees and charges shall be fully earned upon issuance, renewal or
  extension (as the case may be) of each such Letter of Credit or LC Guaranty, shall be due and payable
  on the first Business Day of each month, and shall not be subject to rebate or proration upon the
  termination of this Agreement for any reason); and</FONT></p></TD></TR>
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<TD vAlign=top>&nbsp;</TD></TR>
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<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(iii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> with respect to all Letters of Credit and LC Guaranties, for the account of Agent only, a per annum
  fronting fee equal to one-quarter of one percent (&#188;%) of the aggregate face amount of such Letters
  of Credit and LC Guaranties outstanding from time to time during the term of this Agreement, which
  fronting fees shall be payable monthly in arrears on the first Business Day of each month and shall
  not be subject to rebate or proration upon the termination of this Agreement for any reason.</FONT></p></TD></TR></TABLE>
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<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><a name="a9"></a>2.5<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Unused Line Fee</U>. Borrowers shall pay to Agent, for the ratable benefit of Lenders, a fee (the &#147;Unused Line Fee&#148;)
equal to the Applicable Margin per annum multiplied by the average daily amount by which Revolving
Credit Maximum Amount exceeds the sum of (i)&nbsp;the outstanding principal balance of the Revolving
Credit Loans <U>plus</U> (ii)&nbsp;the LC Amount. The Unused Line Fee shall be payable monthly in arrears on the first day
of each month hereafter.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><a name="a10"></a>2.6<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Prepayment Fee</U>. At the effective date of termination of this Agreement for any reason, Borrowers shall pay to Agent,
for the ratable benefit of Lenders (in addition to the then outstanding principal, accrued interest
and other charges owing under the terms of this Agreement and any of the other Loan Documents) and
any amounts owing pursuant to subsection&nbsp;3.2.5, as liquidated damages for the loss of the bargain
and not as a penalty, an amount equal to one percent (1%) of the Total Credit Facility if termination
occurs during the first twelve-month period of the Term (July 11, 2002 through July 10, 2003); one-half
of one percent (&#189;%) of the Total Credit Facility if termination occurs during the second 12-month
period of the Term (July 11, 2003 through July 10, 2004); and one-quarter of one percent (&#188;%) </FONT></P></TD></TR></TABLE>
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<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>5</FONT></P>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>of the Total Credit Facility if termination occurs during the third 12-month period of the Term (July
11, 2004 through July 9, 2005). If termination occurs on the last day of the Term, no termination
charge shall be payable.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><a name="a11"></a>2.7<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Audit Fees</U>. Borrowers shall pay to Agent audit fees in accordance with Agent&#146;s current schedule of fees
payable by borrowers of Agent generally in effect from time to time in connection with audits of
the books and records and Properties of Borrowers and their Subsidiaries and such other matters as
Agent shall deem appropriate in its sole judgment, plus all reasonable out-of-pocket expenses incurred
by Agent in connection with such audits, whether such audits are conducted by employees of Agent
or by third parties hired by Agent. Such audit fees and out-of-pocket expenses shall be payable on
the first day of the month following the date of issuance by Agent of a request for payment thereof
to Borrowers immediately upon demand therefor by Agent from time to time. Agent may, in its discretion,
provide for the payment of such amounts by making appropriate Revolving Credit Loans to Borrowers
and charging Borrowers&#146; Loan Account therefor.</FONT></P>
<p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="a12"></a></FONT><FONT face="Times New Roman, Times, Serif" size=2>2.8<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Reimbursement of Expenses</U>. If, at any time or times regardless of whether or not an Event of Default then exists, (i)&nbsp;Agent
  incurs legal or accounting expenses or any other costs or out-of-pocket expenses in connection with
  (1)&nbsp;the negotiation and preparation of this Agreement or any of the other Loan Documents, any
  amendment of or modification of this Agreement or any of the other Loan Documents, or any syndication
  or attempted syndication of the Obligations (including, without limitation, printing and distribution
  of materials to prospective Lenders and all costs associated with bank meetings, but excluding any
  closing fees paid to Lenders in connection therewith) or (2)&nbsp;the administration of this Agreement
  or any of the other Loan Documents and the transactions contemplated hereby and thereby; or (ii)&nbsp;Agent
  or any Lender incurs legal or accounting expenses or any other costs or out-of-pocket expenses in
  connection with (1)&nbsp;any litigation, contest, dispute, suit, proceeding or action (whether instituted
  by Agent, any Lender, any Borrower or any other Person) relating to the Collateral, this Agreement
  or any of the other Loan Documents or any Borrower&#146;s, any of its Subsidiaries&#146; or any Guarantor&#146;s
  affairs; (2)&nbsp;any attempt to enforce any rights of Agent or any Lender against any Borrower or
  any other Person which may be obligated to Agent or any Lender by virtue of this Agreement or any
  of the other Loan Documents, including, without limitation, the Account Debtors; or (3)&nbsp;any
  attempt to inspect, verify, protect, preserve, restore, collect, sell, liquidate or otherwise dispose
  of or realize upon the Collateral; then all such legal and accounting expenses, other costs and out
  of pocket expenses of Agent or any Lender, as applicable, shall be charged to Borrowers; <U>provided</U>, that Borrowers shall not be responsible for such costs and out-of-pocket expenses to the extent incurred
  because of the gross negligence or willful misconduct of Agent or any Lender. All amounts chargeable
  to Borrowers under this Section&nbsp;2.8 shall be Obligations secured by all of the Collateral, shall
  be payable on demand to Agent or such Lender, as the case may be, and shall bear interest from the
  date such demand is made until paid in full at the rate applicable to Base Rate Revolving Portions
  from time to time. Borrowers shall also reimburse Agent for expenses incurred by Agent in its administration
  of the Collateral to the extent and in the manner provided in Sections&nbsp;2.9 and 2.10 hereof.</FONT>
</p>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="a13"></a>&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>2.9<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Bank Charges</U>. Borrowers shall pay to Agent, on demand, any and all fees, costs or expenses which Agent or any Lender
pays to a bank or other similar institution arising out of or in connection with (i)&nbsp;the forwarding
to any Borrower or any other Person on behalf of any </FONT></P></TD></TR></TABLE>
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<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>6</FONT></P>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Borrower, by Agent or any Lender, of proceeds of Loans made to Borrowers pursuant to this Agreement
and (ii)&nbsp;the depositing for collection by Agent or any Lender of any check or item of payment
received or delivered to Agent or any Lender on account of the Obligations.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="a14"></a>&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>2.10<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Collateral Protection Expenses; Appraisals</U>. All out-of-pocket expenses incurred in protecting, storing, warehousing, insuring, handling, maintaining
and shipping the Collateral, and any and all excise, property, sales, and use taxes imposed by any
state, federal, or local authority on any of the Collateral or in respect of the sale thereof shall
be borne and paid by Borrowers. If Borrowers fail to promptly pay any portion thereof when due, Agent
may, at its option, but shall not be required to, pay the same and charge Borrowers therefor. Additionally,
from time to time, if Agent or any Lender determines that obtaining appraisals is necessary in order
for it to comply with applicable laws or regulations, and at any time if a Default or an Event of
Default shall have occurred and be continuing, Agent may, at Borrowers&#146; expense, obtain appraisals
from appraisers (who may be personnel of Agent), stating the then current fair market value of all
or any portion of the real estate or personal property of any Borrower or any of its Subsidiaries,
including without limitation the Inventory of Borrowers and their Subsidiaries.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="a15"></a>&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>2.11<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Payment of Charges</U>. All amounts chargeable to Borrowers under this Agreement shall be Obligations secured by all of the
Collateral, shall be, unless specifically otherwise provided, payable on demand and shall bear interest
from the date demand was made or such amount is due, as applicable, until paid in full at the rate
applicable to the Base Rate Portion from time to time.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="a16"></a></FONT><FONT face="Times New Roman, Times, Serif" size=2>2.12<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>No Deductions</U>. Any and all payments or reimbursements made hereunder shall be made free and clear of and without
deduction for any and all taxes, levies, imposts, deductions, charges or withholdings, and all liabilities
with respect thereto; excluding, however, the following:&nbsp;taxes imposed on the income of Agent
or any Lender or franchise taxes by the jurisdiction under the laws of which Agent or any Lender
is organized or doing business or any political subdivision thereof and taxes imposed on its income
by the jurisdiction of Agent&#146;s or such Lender&#146;s applicable lending office or any political
subdivision thereof or franchise taxes (all such taxes, levies, imposts, deductions, charges or withholdings
and all liabilities with respect thereto excluding such taxes imposed on net income, herein &#147;Tax
Liabilities&#148;). If any Borrower shall be required by law to deduct any such Tax Liabilities from
or in respect of any sum payable hereunder to Agent or any Lender, then the sum payable hereunder
shall be increased as may be necessary so that, after all required deductions are made, Agent or
such Lender receives an amount equal to the sum it would have received had no such deductions been made.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B><a name="a17"></a>SECTION&nbsp;3. &nbsp;LOAN ADMINISTRATION</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="a18"></a></FONT><FONT face="Times New Roman, Times, Serif" size=2>3.1<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Manner of Borrowing Revolving Credit Loans/LIBOR Option</U>. Borrowings under the credit facility established pursuant to Section&nbsp;1 hereof shall be as follows:</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>3.1.1<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Loan Requests; Revolving Credit Loans</U>. A request for a Revolving Credit Loan shall be made, or shall be deemed to be made, in the following
manner:&nbsp;(a)&nbsp;MFRI, on its own behalf and on behalf of all other Borrowers, may give Agent
notice of its intention to borrow, in which notice MFRI shall specify the amount of the proposed
borrowing of a </FONT></P></TD></TR></TABLE>
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<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>7</FONT></P>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Revolving Credit Loan and the proposed borrowing date, which shall be a Business Day, no later than
11:00&nbsp;a.m. (Chicago, Illinois time) on the proposed borrowing date (or in accordance with subsection&nbsp;3.1.7,
3.1.8 or 3.1.9, as applicable, in the case of a request for a LIBOR Portion), <U>provided</U>, <U>however</U>, that no such request may be made at a time when there exists a Default or an Event of Default; and
(b)&nbsp;the becoming due of any amount required to be paid under this Agreement, or the Notes, whether
as interest or for any other Obligation, shall be deemed irrevocably to be a request for a Revolving
Credit Loan on the due date in the amount required to pay such interest or other Obligation.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>3.1.2<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Disbursement</U>. Borrowers hereby irrevocably authorize Agent to disburse the proceeds of each Loan requested, or
deemed to be requested, pursuant to subsection&nbsp;3.1.1 as follows:&nbsp;(i)&nbsp;the proceeds
of each Revolving Credit Loan requested under subsection&nbsp;3.1.1(a) shall be disbursed by Agent
in lawful money of the United States of America in immediately available funds, in the case of the
initial borrowing, in accordance with the terms of the written disbursement letter from MFRI, on
its own behalf and on behalf of all other Borrowers, and in the case of each subsequent borrowing,
by wire transfer to Borrowers&#146; main disbursement account or such other bank account as Agent
in its discretion may agree to from time to time; and (ii)&nbsp;the proceeds of each Revolving Credit
Loan deemed requested under subsection&nbsp;3.1.1(b) shall be disbursed by Agent by way of direct
payment of the relevant interest or other Obligation. If at any time any Loan is funded by Agent
or Lenders in excess of the amount requested or deemed requested by MFRI, on its own behalf and on
behalf of all other Borrowers, Borrowers agree to repay the excess to Agent immediately upon the
earlier to occur of (a)&nbsp;any Borrower&#146;s discovery of the error and (b)&nbsp;notice thereof
to Borrowers from Agent or any Lender.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>3.1.3<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Payment by Lenders</U>. Agent shall give to each Lender prompt written notice by facsimile, telex or cable of the receipt
by Agent from MFRI of any request for a Revolving Credit Loan. Each such notice shall specify the
requested date and amount of such Revolving Credit Loan, whether such Revolving Credit Loan shall
be subject to the LIBOR Option, and the amount of each Lender&#146;s advance thereunder (in accordance
with its applicable Revolving Loan Percentage. Each Lender shall, not later than 12:00&nbsp;p.m.
(Chicago time) on such requested date, wire to a bank designated by Agent the amount of that Lender&#146;s
Revolving Loan Percentage of the requested Revolving Credit Loan. The failure of any Lender to make
the Revolving Credit Loans to be made by it shall not release any other Lender of its obligations
hereunder to make its Revolving Credit Loan. Neither Agent nor any other Lender shall be responsible
for the failure of any other Lender to make the Revolving Credit Loan to be made by such other Lender.
The foregoing notwithstanding, Agent, in its sole discretion, may from its own funds make a Revolving
Credit Loan on behalf of any Lender. In such event, the Lender on behalf of whom Agent made the Revolving
Credit Loan shall reimburse Agent for the amount of such Revolving Credit Loan made on its behalf,
on a weekly (or more frequent, as determined by Agent in its sole discretion) basis. On each such
settlement date, Agent will pay to each Lender the net amount owing to such Lender in connection
with such settlement, including without limitation amounts relating to Loans, fees, interest and
other amounts payable hereunder. The entire amount of interest attributable to such Revolving Credit
Loan for the period from the date on which such Revolving Credit Loan was made by Agent on such Lender&#146;s
behalf until Agent is reimbursed by such Lender, shall be paid to Agent for its own account.</FONT></P></TD></TR></TABLE>
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<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>8</FONT></P>
<HR color=gray noShade SIZE=5>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>3.1.4<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Authorization</U>. Borrowers hereby irrevocably authorize Agent, in Agent&#146;s sole discretion, to advance to Borrowers,
and to charge to Borrowers&#146; Loan Account hereunder as a Revolving Credit Loan (which shall be
a Base Rate Revolving Portion), a sum sufficient to pay all interest accrued on the Obligations during
the immediately preceding month and to pay all fees, costs and expenses and other Obligations at
any time owed by any Borrower to Agent or any Lender hereunder.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>3.1.5<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Letter of Credit and LC Guaranty Requests</U>. A request for a Letter of Credit or LC Guaranty shall be made in the following manner:&nbsp;MFRI,
on its own behalf and on behalf of all other Borrowers, may give Agent and Bank a written notice
of its request for the issuance of a Letter of Credit or LC Guaranty, not later than 11:00&nbsp;a.m.
(Chicago, Illinois time), one Business Day before the proposed issuance date thereof, in which notice
MFRI shall specify the proposed issuer, issuance date and format and wording for the Letter of Credit
or LC Guaranty being requested (which shall be satisfactory to Agent and the Person being asked to
issue such Letter of Credit or LC Guaranty); <U>provided</U>, that no such request may be made at a time when there exists a Default or Event of Default. Such
request shall be accompanied by an executed application and reimbursement agreement in form and substance
satisfactory to Agent and the Person being asked to issue the Letter of Credit or LC Guaranty, as
well as any required resolutions.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>3.1.6<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Method of Making Requests</U>. As an accommodation to Borrowers, unless a Default or an Event of Default is then in existence, (i)&nbsp;Agent
shall permit telephonic or electronic requests for Revolving Credit Loans to Agents, (ii)&nbsp;Agent
and Bank may, in their discretion, permit electronic transmittal of requests for Letters of Credit
and LC Guaranties to them, and (iii)&nbsp;Agent may, in Agent&#146;s discretion, permit electronic
transmittal of instructions, authorizations, agreements or reports to Agent. Unless MFRI, on its
own behalf and on behalf of all other Borrowers, specifically directs Agent or Bank in writing not
to accept or act upon telephonic or electronic communications from any Borrower, neither Agent nor
Bank shall have any liability to Borrowers for any loss or damage suffered by any Borrower as a result
of Agent&#146;s or Bank&#146;s honoring of any requests, execution of any instructions, authorizations
or agreements or reliance on any reports communicated to it telephonically or electronically and
purporting to have been sent to Agent or Bank by any Borrower, and neither Agent nor Bank shall have
any duty to verify the origin of any such communication or the authority of the Person sending it.
Each telephonic request for a Revolving Credit Loan, Letter of Credit or LC Guaranty accepted by
Agent and Bank, if applicable, hereunder shall be promptly followed by a written confirmation of
such request from MFRI, on its own behalf and on behalf of all other Borrowers, to Agent and Bank, if applicable.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>3.1.7<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>LIBOR Portions</U>. Provided that as of both the date of the LIBOR Request and the first day of the Interest Period,
no Default or Event of Default exists, in the event Borrowers desire to obtain a LIBOR Portion, MFRI,
on its own behalf and on behalf of all other Borrowers, shall give Agent a LIBOR Request no later
than 11:00&nbsp;a.m. (Chicago, Illinois time) on the third Business Day prior to the requested borrowing
date. Each LIBOR Request shall be irrevocable and binding on all Borrowers. In no event shall Borrowers
be permitted to have outstanding at any one time LIBOR Portions with more than five (5) different
Interest Periods. LIBOR Portions shall be included within the definition of LIBOR Current Asset Portions
or LIBOR Real Estate Portions as determined by the definitions of such terms.</FONT></P></TD></TR></TABLE>
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<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>9</FONT></P>
<HR color=gray noShade SIZE=5>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>3.1.8<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Conversion of Base Rate Portions</U>. Provided that as of both the date of the LIBOR Request and the first day of the Interest Period,
no Default or Event of Default exists, Borrowers may, on any Business Day, convert any Base Rate
Portion into a LIBOR Portion. If Borrowers desire to convert a Base Rate Portion, MFRI, on its own
behalf and on behalf of all other Borrowers, shall give Agent a LIBOR Request no later then 11:00&nbsp;a.m.
(Chicago, Illinois time) on the third Business Day prior to the requested conversion date. After
giving effect to any conversion of Base Rate Portions to LIBOR Portions, Borrowers shall not be permitted
to have outstanding at any one time LIBOR Portions with more than five (5) different Interest Periods.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>3.1.9<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Continuation of LIBOR Portions</U>. Provided that as of both the date of the LIBOR Request and the first day of the Interest Period,
no Default or Event of Default exists, Borrowers may, on any Business Day, continue any LIBOR Portions
into a subsequent Interest Period of the same or a different permitted duration. If Borrowers desire
to continue a LIBOR Portion, MFRI, on its own behalf and on behalf of all other Borrowers, shall
give Agent a LIBOR Request no later than 11:00&nbsp;a.m. (Chicago, Illinois time) on the third Business
Day prior to the requested continuation date. After giving effect to any continuation of LIBOR Portions,
Borrowers shall not be permitted to have outstanding at any one time LIBOR Portions with more than
five (5) different Interest Periods. If MFRI shall fail to give timely notice of its election to
continue any LIBOR Portion or portion thereof as provided above, or if such continuation shall not
be permitted, such LIBOR Portion or portion thereof, unless such LIBOR Portion shall be repaid, shall
automatically be converted into a Base Rate Portion at the end of the Interest Period then in effect
with respect to such LIBOR Portion.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>3.1.10<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Inability to Make LIBOR Portions</U>. Notwithstanding any other provision hereof, if any applicable law, treaty, regulation or directive,
or any change therein or in the interpretation or application thereof, shall make it unlawful for
any Lender (for purposes of this subsection&nbsp;3.1.10, the term &#147;Lender&#148; shall include
the office or branch where such Lender or any corporation or bank then controlling such Lender makes
or maintains any LIBOR Portions) to make or maintain its LIBOR Portions, or if with respect to any
Interest Period, Agent is unable to determine the LIBOR relating thereto, or adverse or unusual conditions
in, or changes in applicable law relating to, the London interbank market make it, in the reasonable
judgment of Agent, impracticable to fund therein any of the LIBOR Portions, or make the projected
LIBOR unreflective of the actual costs of funds therefor to any Lender, the obligation of Agent and
Lenders to make or continue LIBOR Portions or convert Base Rate Portions to LIBOR Portions hereunder
shall forthwith be suspended during the pendency of such circumstances and Borrowers shall, if any
affected LIBOR Portions are then outstanding, promptly upon request from Agent, convert such affected
LIBOR Portions into Base Rate Portions.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="a19"></a></FONT><FONT face="Times New Roman, Times, Serif" size=2>3.2<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Payments</U>. Except where evidenced by notes or other instruments issued or made by Borrowers to any Lender and
accepted by such Lender specifically containing payment instructions that are in conflict with this
Section&nbsp;3.2 (in which case the conflicting provisions of said notes or other instruments shall
govern and control), the Obligations shall be payable as follows:</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>3.2.1<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Principal; Revolving Credit Loans</U>. Principal on account of Revolving Credit Loans shall be payable by Borrowers to Agent for the ratable
benefit of Lenders immediately upon the earliest of (i)&nbsp;the receipt by Agent or any Borrower
of any proceeds of any </FONT></P></TD></TR></TABLE>
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<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>10</FONT></P>
<HR color=gray noShade SIZE=5>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>of the Collateral (except as otherwise provided herein), including without limitation pursuant to subsections&nbsp;3.3.1
and 6.2.4, to the extent of said proceeds, subject to Borrowers&#146; rights to reborrow such amounts
in compliance with subsection&nbsp;1.1.1 hereof; (ii) the occurrence of an Event of Default in consequence
of which Agent or Majority Lenders elect to accelerate the maturity and payment of the Obligations,
or (iii)&nbsp;termination of this Agreement pursuant to Section&nbsp;4 hereof; <U>provided</U>, <U>however</U>, that, if an Overadvance shall exist at any time, Borrowers shall, on demand, repay the Overadvance.
Each payment (including principal prepayment) by Borrowers on account of principal of the Revolving
Credit Loans shall be applied <U>first</U> to the Base Rate Portion, and <U>second</U> to LIBOR Portions.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>3.2.2<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Interest</U>.</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
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<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(i)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Base Rate Portion</U>. Interest accrued on the Base Rate Portion shall be due and payable on the earliest of (1)&nbsp;the
  first calendar day of each month (for the immediately preceding month), computed through the last
  calendar day of the preceding month, (2)&nbsp;the occurrence of an Event of Default in consequence
  of which Agent or Majority Lenders elect to accelerate the maturity and payment of the Obligations
  or (3)&nbsp;termination of this Agreement pursuant to Section&nbsp;4 hereof.</FONT></p></TD>
</TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(ii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>LIBOR Portion</U>. Interest accrued on each LIBOR Portion shall be due and payable on each LIBOR Interest Payment Date
  and on the earlier of (1)&nbsp;the occurrence of an Event of Default in consequence of which Agent
  or Majority Lenders elect to accelerate the maturity and payment of the Obligations or (2)&nbsp;termination
  of this Agreement pursuant to Section&nbsp;4 hereof.</FONT></p></TD>
</TR></TABLE>
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<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>3.2.3<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Costs, Fees and Charges</U>. Costs, fees and charges payable pursuant to this Agreement shall be payable by Borrowers to Agent,
as and when provided in Section&nbsp;2 or Section&nbsp;3 hereof, as applicable to Agent or a Lender,
as applicable, or to any other Person designated by Agent or such Lender in writing.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>3.2.4<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Other Obligations</U>. The balance of the Obligations requiring the payment of money, if any, shall be payable by Borrowers
to Agent for distribution to Lenders, as appropriate, as and when provided in this Agreement, the
Other Agreements or the Security Documents, or on demand, whichever is later.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>3.2.5<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Prepayment of/Failure to Borrow LIBOR Portions</U>. Borrowers may prepay a LIBOR Portion only upon at least three (3)&nbsp;Business Days prior written
notice to Agent (which notice shall be irrevocable). Borrowers shall pay to each Lender, upon request
of such Lender, such amount or amounts as shall be sufficient (in the reasonable opinion of such
Lender) to compensate such Lender for any loss, cost, or expense incurred as a result of:&nbsp;(i)&nbsp;any
payment of a LIBOR Portion on a date other than the last day of the Interest Period for such LIBOR
Portion; (ii)&nbsp;any failure by Borrowers to borrow a LIBOR Portion on the date specified by Borrowers&#146;
LIBOR Request; or (iii)&nbsp;any failure by Borrowers to pay a LIBOR Portion on the date for payment
specified in Borrowers&#146; written notice. Without limiting the foregoing, Borrowers shall pay
to each Lender a &#147;yield maintenance fee&#148; in an amount computed as follows:&nbsp;the current
rate for United States Treasury securities (bills on a discounted basis shall be converted to a bond
equivalent) with a maturity date closest to the Interest Period chosen </FONT></P></TD></TR></TABLE>
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<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>11</FONT></P>
<HR color=gray noShade SIZE=5>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>pursuant to the LIBOR Portion as to which the prepayment is made, shall be subtracted from the LIBOR
in effect at the time of prepayment. If the result is zero or a negative number, there shall be no
yield maintenance fee. If the result is a positive number, then the resulting percentage shall be
multiplied by the amount of the principal balance being prepaid. The resulting amount shall be divided
by 360 and multiplied by the number of days remaining in the Interest Period chosen pursuant to the
LIBOR Portion as to which the prepayment is made. Said amount shall be reduced to present value calculated
by using the above referenced United States Treasury securities rate and the number of days remaining
in the term chosen pursuant to the LIBOR Portion as to which prepayment is made. The resulting amount
shall be the yield maintenance fee due to the applicable Lender upon the prepayment of a LIBOR Portion.
If by reason of an Event of Default, Agent or Majority Lenders elect to declare the Obligations to
be immediately due and payable, then any yield maintenance fee with respect to a LIBOR Portion shall
become due and payable in the same manner as though Borrowers had exercised such right of prepayment.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="a20"></a>&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>3.3<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Mandatory and Optional Prepayments</U>.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>3.3.1<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Proceeds of Sale, Loss, Destruction or Condemnation of Collateral</U>. Except as provided in subsections&nbsp;6.4.2 and 8.2.9, if any Borrower or any of its Subsidiaries
sells any of the Collateral or if any of the Collateral is lost or destroyed or taken by condemnation,
the applicable Borrower shall, unless otherwise agreed by Majority Lenders, pay to Agent for the
ratable benefit of Lenders as and when received by such Borrower or such Subsidiary and as a mandatory
prepayment of the Loans, as herein provided, a sum equal to the proceeds (including insurance payments
but net of costs and taxes incurred in connection with such sale or event) received by such Borrower
or such Subsidiary from such sale, loss, destruction or condemnation. Any Revolving Credit Loans
repaid pursuant to this Section 3.3.1 shall be subject to Borrowers&#146; right to reborrow such
amounts as provided in Section 1.1.1.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>3.3.2<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Proceeds from Issuance of Additional Indebtedness or Equity</U>. If, after the Closing Date, any Borrower issues any additional Indebtedness or obtains any additional
equity in a manner permitted under this Agreement, then, except as otherwise provided in Section&nbsp;8.2.6,
such Borrower shall pay to Agent for the ratable benefit of Lenders, when and as received by such
Borrower and as a mandatory prepayment of the Obligations, a sum equal to one hundred percent (100%)
of the net proceeds to such Borrower of the issuance of such Indebtedness or equity. Any such prepayment
shall be applied to the Loans in the manner specified in the second sentence of subsection&nbsp;3.3.1
until payment thereof in full. Any Revolving Credit repaid pursuant to this Section 3.3.2 shall be
subject to Borrowers&#146; right to reborrow such funds pursuant to Section 1.1.1.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>3.3.3<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>LIBOR Portions</U>. If the application of any payment made in accordance with the provisions of this Section&nbsp;3.3
at a time when no Event of Default has occurred and is continuing would result in termination of
a LIBOR Portion prior to the last day of the Interest Period for such LIBOR Portion, the amount of
such prepayment shall not be applied to such LIBOR Portion, but will, at Borrowers&#146; option,
be held by Agent in a non-interest bearing account at a Lender or another bank satisfactory to Agent
in its discretion, which account is in the name of Agent and from which account only Agent can make
any withdrawal, in each case to be applied as such amount would otherwise have been applied under
this Section&nbsp;3.3 at the </FONT></P></TD></TR></TABLE>
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<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>12</FONT></P>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>earlier to occur of (i)&nbsp;the last day of the relevant Interest Period or (ii)&nbsp;the occurrence
of a Default or an Event of Default.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="a21"></a></FONT><FONT face="Times New Roman, Times, Serif" size=2>3.4<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Application of Payments and Collections</U>.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>3.4.1<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Collections</U>. All items of payment received by Agent by 12:00 noon, Chicago, Illinois, time, on any Business Day
shall be deemed received on that Business Day. All items of payment received after 12:00 noon, Chicago,
Illinois, time, on any Business Day shall be deemed received on the following Business Day. If as
the result of collections of Accounts as authorized by subsection&nbsp;6.2.4 hereof or otherwise,
a credit balance exists in the Loan Account, such credit balance shall not accrue interest in favor
of Borrowers, but shall be disbursed to Borrowers or otherwise at MFRI&#146;s direction in the manner
set forth in subsection&nbsp;3.1.2, upon Borrowers&#146; request at any time, so long as no Default
or Event of Default then exists. Agent may at its option, offset such credit balance against any
of the Obligations upon and during the continuance of an Event of Default.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>3.4.2<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Apportionment, Application and Reversal of Payments</U>. Principal and interest payments shall be apportioned ratably among Lenders (according to the unpaid
principal balance of the Loans to which such payments relate held by each Lender). All payments shall
be remitted to Agent and all such payments not relating to principal or interest of specific Loans,
or not constituting payment of specific fees, and all proceeds of Accounts, or, except as provided
in subsection&nbsp;3.3.1, other Collateral received by Agent, shall be applied, ratably, subject
to the provisions of this Agreement, <U>first</U>, to pay any fees, indemnities, or expense reimbursements (other than amounts related to Product Obligations)
then due to Agent or Lenders from Borrowers; <U>second</U>, to pay interest due from Borrowers in respect of all Loans, including Agent Loans; <U>third</U>, to pay or prepay principal of Agent Loans; <U>fourth</U>, to pay or prepay principal of the Revolving Credit Loans (other than Agent Loans) and unpaid reimbursement
obligations in respect of Letters of Credit; <U>fifth</U>, to pay an amount to Agent equal to all outstanding Letter of Credit Obligations to be held as cash
Collateral for such Obligations; <U>sixth</U>, to the payment of any other Obligation (other than amounts related to Product Obligations) due to
Agent or any Lender by Borrowers; and <U>seventh</U>, to pay any fees, indemnities or expense reimbursements related to Product Obligations. After the
occurrence and during the continuance of an Event of Default, Agent shall have the continuing exclusive
right to apply and reapply any and all such payments and collections received at any time or times
hereafter by Agent or its agent against the Obligations, in such manner as Agent may deem advisable,
notwithstanding any entry by Agent or any Lender upon any of its books and records.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="a22"></a>&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>3.5<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>All Loans to Constitute One Obligation</U>. The Loans and LC Guarantees shall constitute one general Obligation of Borrowers, and shall be secured
by Agent&#146;s Lien upon all of the Collateral.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="a23"></a></FONT><FONT face="Times New Roman, Times, Serif" size=2>3.6<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Loan Account</U>. Agent shall enter all Loans as debits to a loan account (the &#147;Loan Account&#148;) and shall
also record in the Loan Account all payments made by any Borrower on any Obligations and all proceeds
of Collateral which are finally paid to Agent, and may record therein, in accordance with customary
accounting practice, other debits and credits, including interest and all charges and expenses properly
chargeable to Borrowers.</FONT></P></TD></TR></TABLE>
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<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>13</FONT></P>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><a name="a24"></a>3.7<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Statements of Account</U>. Agent will account to Borrowers monthly with a statement of Loans, charges and payments made pursuant
to this Agreement during the immediately preceding month, and such account rendered by Agent shall
be deemed final, binding and conclusive upon Borrowers absent demonstrable error unless Agent is
notified by MFRI, on its own behalf and on behalf of all other Borrowers, in writing to the contrary
within 30 days of the date each accounting is received by Borrowers. Such notice shall only be deemed
an objection to those items specifically objected to therein.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><a name="a25"></a>3.8<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Increased Costs</U>. If any law or any governmental or quasi-governmental rule, regulation, policy, guideline or directive
(whether or not having the force of law) adopted or implemented after the date of this Agreement
and having general applicability to all banks or finance companies within the jurisdiction in which
any Lender operates (excluding, for the avoidance of doubt, the effect of and phasing in of capital
requirements or other regulations or guidelines passed prior to the date of this Agreement), or any
interpretation or application thereof by any governmental authority charged with the interpretation
or application thereof, or the compliance of such Lender therewith, shall:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(i)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT>(1)&nbsp;subject such Lender to any tax with respect to this Agreement (other than (a)&nbsp;any tax
  based on or measured by net income or otherwise in the nature of a net income tax, including, without
  limitation, any franchise tax or any similar tax based on capital, net worth or comparable basis
  for measurement and (b)&nbsp;any tax collected by a withholding on payments and which neither is
  computed by reference to the net income of the payee nor is in the nature of an advance collection
  of a tax based on or measured by the net income of the payee) or (2)&nbsp;change the basis of taxation
  of payments to such Lender of principal, fees, interest or any other amount payable hereunder or
  under any Loan Documents (other than in respect of (a)&nbsp;any tax based on or measured by net income
  or otherwise in the nature of a net income tax, including, without limitation, any franchise tax
  or any similar tax based on capital, net worth or comparable basis for measurement and (b)&nbsp;any
  tax collected by a withholding on payments and which neither is computed by reference to the net
  income of the payee nor is in the nature of an advance collection of a tax based on or measured by
  the net income of the payee);</FONT></p></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(ii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> impose, modify or hold applicable any reserve (except any reserve taken into account in the determination
  of the applicable LIBOR), special deposit, assessment or similar requirement against assets held
  by, or deposits in or for the account of, advances or loans by, or other credit extended by, any
  office of such Lender, including (without limitation) pursuant to Regulation D of the Board of Governors
  of the Federal Reserve System; or</FONT></p></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(iii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> impose on such Lender or the London interbank market any other condition with respect to any Loan
  Document;</FONT></p></TD></TR></TABLE>
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<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
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<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>and the result of any of the foregoing is to increase the cost to such Lender of making, renewing or
maintaining Loans hereunder or the result of any of the foregoing is to reduce the rate of return
on such Lender&#146;s capital as a consequence of its obligations hereunder, or the result of any
of the foregoing is to reduce the amount of any payment (whether of principal, interest or otherwise)
in respect of any of the Loans, then, in any such case, Borrowers shall pay such </FONT></P></TD></TR></TABLE>
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<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>14</FONT></P>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Lender, upon demand and certification not later than sixty (60) days following its receipt of notice
of the imposition of such increased costs, such additional amount as will compensate such Lender
for such additional cost or such reduction, as the case may be, to the extent such Lender has not
otherwise been compensated, with respect to a particular Loan, for such increased cost as a result
of an increase in the Base Rate or the LIBOR. An officer of the applicable Lender shall determine
the amount of such additional cost or reduced amount using reasonable averaging and attribution methods
and shall certify the amount of such additional cost or reduced amount to Borrowers, which certification
shall include a written explanation of such additional cost or reduction to Borrowers. Such certification
shall be conclusive absent manifest error. If a Lender claims any additional cost or reduced amount
pursuant to this Section&nbsp;3.8, then such Lender shall use reasonable efforts (consistent with
legal and regulatory restrictions) to designate a different lending office or to file any certificate
or document reasonably requested by Borrowers if the making of such designation or filing would avoid
the need for, or reduce the amount of, any such additional cost or reduced amount and would not,
in the sole discretion of such Lender, be otherwise disadvantageous to such Lender.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><a name="a26" id="a26"></a>3.9<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Basis for Determining Interest Rate Inadequate</U>. In the event that Agent or any Lender shall have determined that:</FONT></P></TD></TR>
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<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(i)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> reasonable means do not exist for ascertaining the LIBOR for any Interest Period; or</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(ii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Dollar deposits in the relevant amount and for the relevant maturity are not available in the London
interbank market with respect to a proposed LIBOR Portion, or a proposed conversion of a Base Rate
Portion into a LIBOR Portion; then</FONT></TD></TR></TABLE>
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<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Agent or such Lender shall give Borrowers prompt written, telephonic or electronic notice of the determination
of such effect. If such notice is given, (i)&nbsp;any such requested LIBOR Portion shall be made
as a Base Rate Portion, unless MFRI, on its own behalf and on behalf of all other Borrowers, shall
notify Agent no later than 10:00&nbsp;a.m. (Chicago, Illinois time) three (3)&nbsp;Business Days
prior to the date of such proposed borrowing that the request for such borrowing shall be canceled
or made as an unaffected type of LIBOR Portion, and (ii)&nbsp;any Base Rate Portion which was to
have been converted to an affected type of LIBOR Portion shall be continued as or converted into
a Base Rate Portion, or, if MFRI, on its own behalf and on behalf of all other Borrowers, shall notify
Agent, no later than 10:00&nbsp;a.m. (Chicago, Illinois time) three (3) Business Days prior to the
proposed conversion, shall be maintained as an unaffected type of LIBOR Portion.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="a27"></a></FONT><FONT face="Times New Roman, Times, Serif" size=2>3.10<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Sharing of Payments, Etc</U>. If any Lender shall obtain any payment (whether voluntary, involuntary, through the exercise of any
right of set-off, or otherwise) on account of any Loan made by it in excess of its ratable share
of payments on account of Loans made by all Lenders, such Lender shall forthwith purchase from each
other Lender such participation in such Loan as shall be necessary to cause such purchasing Lender
to share the excess payment ratably with each other Lender; <U>provided</U>, that if all or any portion of such excess payment is thereafter recovered from such purchasing Lender,
such purchase from each Lender shall be rescinded and such Lender shall repay to the purchasing Lenders
the purchase price to the extent of such </FONT></P></TD></TR></TABLE>
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<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>15</FONT></P>
<HR color=gray noShade SIZE=5>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>recovery, together with an amount equal to such Lender&#146;s ratable share (according to the proportion
of (i)&nbsp;the amount of such Lender&#146;s required repayment to (ii)&nbsp;the total amount so
recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing
Lender in respect of the total amount so recovered. Borrowers agree that any Lender so purchasing
a participation from another Lender pursuant to this Section&nbsp;3.10 may, to the fullest extent
permitted by law, exercise all its rights of payment (including the right of set-off) with respect
to such participation as fully as if such Lender were the direct creditor of Borrowers in the amount
of such participation. Notwithstanding anything to the contrary contained herein, all purchases and
repayments to be made under this Section&nbsp;3.10 shall be made through Agent.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B><a name="a28"></a>SECTION&nbsp;4. &nbsp;TERM AND TERMINATION</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="a29"></a></FONT><FONT face="Times New Roman, Times, Serif" size=2>4.1<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Term of Agreement</U>. Subject to the right of Lenders to cease making Loans to Borrowers during the continuance of any
Default or Event of Default, this Agreement shall be in effect for a period of three (3) years from
the date hereof, through and including July 10, 2005 (the &#147;Term&#148;), unless terminated as
provided in Section&nbsp;4.2 hereof.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><a name="a30"></a>4.2<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Termination</U>.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>4.2.1<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Termination by Lenders</U>. Agent may, and at the direction of Majority Lenders shall, terminate this Agreement without notice
upon or after the occurrence and during the continuance of an Event of Default.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>4.2.2<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Termination by Borrowers</U>. Upon at least thirty (30) days prior written notice to Agent and Lenders, Borrowers may, at their
option, terminate this Agreement; <U>provided</U>, <U>however</U>, no such termination shall be effective until Borrowers have paid or collateralized to Agent&#146;s
satisfaction all of the Obligations in immediately available funds, all Letters of Credit and LC
Guaranties have expired, terminated or have been cash collateralized to Agent&#146;s satisfaction
and Borrowers have complied with Section&nbsp;2.6 and subsection&nbsp;3.2.5. Any notice of termination
given by Borrowers shall be irrevocable unless all Lenders otherwise agree in writing and no Lender
shall have any obligation to make any Loans or issue or procure any Letters of Credit or LC Guaranties
on or after the termination date stated in such notice. Borrowers may elect to terminate this Agreement
in its entirety only. No section of this Agreement or type of Loan available hereunder may be terminated
singly.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>4.2.3<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Effect of Termination</U>. All of the Obligations shall be immediately due and payable upon the termination date stated in any
notice of termination of this Agreement. All undertakings, agreements, covenants, warranties and
representations of Borrowers contained in the Loan Documents shall survive any such termination and
Agent shall retain its Liens in the Collateral and Agent and each Lender shall retain all of its
rights and remedies under the Loan Documents notwithstanding such termination until all Obligations
have been discharged or paid, in full, in immediately available funds, including, without limitation,
all Obligations under Section&nbsp;2.6 and subsection&nbsp;3.2.5 resulting from such termination.
Notwithstanding the foregoing or the payment in full of the Obligations, Agent shall not be required
to terminate its Liens in the Collateral unless, with respect to any loss or damage Agent may incur
as a result of dishonored checks or other items of payment received by Agent from any Borrower or
any Account Debtor and applied to the Obligations, Agent shall, at its option, (i)&nbsp;have received
a written agreement </FONT></P></TD></TR></TABLE>
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<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>16</FONT></P>
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<TD>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>satisfactory to Agent, executed by Borrowers and by any Person whose loans or other advances to Borrowers
are used in whole or in part to satisfy the Obligations, indemnifying Agent and each Lender from
any such loss or damage or (ii)&nbsp;have retained cash Collateral or other Collateral for such period
of time as Agent, in its discretion, may deem necessary to protect Agent and each Lender from any
such loss or damage.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B><a name="a31"></a>SECTION&nbsp;5. &nbsp;SECURITY INTERESTS</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><a name="a32"></a>5.1<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Security Interest in Collateral</U>. To secure the prompt payment and performance to Agent and each Lender of the Obligations, each Borrower
hereby grants to Agent for the benefit of itself and each Lender a continuing Lien upon all of each
such Borrower&#146;s assets, including all of the following Property and interests in Property of
each such Borrower, whether now owned or existing or hereafter created, acquired or arising and wheresoever
located:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(i)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Accounts;</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(ii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Certificated Securities;</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(iii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Chattel Paper;</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(iv)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Computer Hardware and Software and all rights with respect thereto, including, any and all licenses,
  options, warranties, service contracts, program services, test rights, maintenance rights, support
  rights, improvement rights, renewal rights and indemnifications, and any substitutions, replacements,
  additions or model conversions of any of the foregoing;</FONT></p></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(v)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Contract Rights;</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(vi)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Deposit Accounts;</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(vii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Documents;</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(viii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Equipment;</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(ix)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Financial Assets;</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(x)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Fixtures, other than Fixtures which secure Existing Mortgage Indebtedness;</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(xi)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> General Intangibles, including Payment Intangibles and Software;</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(xii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Goods (including all of its Equipment, Fixtures and Inventory), and all accessions, additions, attachments,
improvements, substitutions and replacements thereto and therefor;</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(xiii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Instruments;</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(xiv)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Intellectual Property;</FONT></TD></TR>
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<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>17</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
  <TD vAlign=top>&nbsp;</TD>
  <TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(xv)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Inventory;</FONT></TD>
</TR>
<TR>
  <TD vAlign=top>&nbsp;</TD>
  <TD vAlign=top>&nbsp;</TD>
</TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(xvi)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Investment Property;</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(xvii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> money (of every jurisdiction whatsoever);</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(xviii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Letter-of-Credit Rights;</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(xix)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Payment Intangibles;</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(xx)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Security Entitlements;</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(xxi)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Software;</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(xxii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Supporting Obligations;</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(xxiii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Uncertificated Securities; and</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(xxiv)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> to the extent not included in the foregoing, all other personal property of any kind or description;</FONT></div></TD></TR></TABLE>
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<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
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<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>together with all books, records, writings, data bases, information and other property relating to,
used or useful in connection with, or evidencing, embodying, incorporating or referring to any of
the foregoing, and all Proceeds, products, offspring, rents, issues, profits and returns of and from
any of the foregoing; <U>provided</U> that to the extent that the provisions of any lease or license of Computer Hardware and Software or
Intellectual Property expressly prohibit (which prohibition is enforceable under applicable law)
any assignment thereof, and the grant of a security interest therein, Agent will not enforce its
security interest in any Borrower&#146;s rights under such lease or license (other than in respect
of the Proceeds thereof) for so long as such prohibition continues, it being understood that upon
request of Agent, the applicable Borrower will in good faith use reasonable efforts to obtain consent
for the creation of a security interest in favor of Agent (and to Agent&#146;s enforcement of such
security interest) in Agent&#146;s rights under such lease or license.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="a33"></a></FONT><FONT face="Times New Roman, Times, Serif" size=2>5.2<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Other Collateral</U>.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>5.2.1<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Commercial Tort Claims</U>. Borrowers shall promptly notify Agent in writing upon any Borrower incurring or otherwise obtaining
a Commercial Tort Claim after the Closing Date against any third party and, upon request of Agent,
promptly enter into an amendment to this Agreement and do such other acts or things deemed appropriate
by Agent to give Agent a security interest in any such Commercial Tort Claim. Borrowers represent
and warrant that as of the date of this Agreement, to their knowledge, no Borrower possesses any
Commercial Tort Claims.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>5.2.2<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Other Collateral</U>. Borrowers shall promptly notify Agent in writing upon any Borrower acquiring or otherwise obtaining
any Collateral after the date hereof consisting of Deposit Accounts, Investment Property, Letter-of-Credit
Rights or Electronic Chattel Paper and, upon the request of Agent, promptly execute such other documents,
and do such other acts or things deemed appropriate by Agent to deliver to Agent control with respect
to such Collateral; </FONT></P></TD></TR></TABLE>
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<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>18</FONT></P>
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<TD>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>promptly notify Agent in writing upon acquiring or otherwise obtaining any Collateral after the date
hereof consisting of Documents or Instruments and, upon the request of Agent, will promptly execute
such other documents, and do such other acts or things deemed appropriate by Agent to deliver to
Agent possession of such Documents which are negotiable and Instruments, and, with respect to nonnegotiable
Documents, to have such nonnegotiable Documents issued in the name of Agent; and with respect to
Collateral in the possession of a third party, other than Certificated Securities and Goods covered
by a Document, obtain an acknowledgement from the third party that it is holding the Collateral for
the benefit of Agent.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="a34"></a></FONT><FONT face="Times New Roman, Times, Serif" size=2>5.3<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Lien Perfection; Further Assurances</U>. Each Borrower shall execute such UCC-1 financing statements as are required by the UCC and such other
instruments, assignments or documents as are necessary to perfect Agent&#146;s Lien upon any of the
Collateral and shall take such other action as may be required to perfect or to continue the perfection
of Agent&#146;s Lien upon the Collateral. Unless prohibited by applicable law, each Borrower hereby
authorizes Agent to execute and file any such financing statement, including, without limitation,
financing statements that indicate the Collateral (i)&nbsp;as all assets of such Borrower or words
of similar effect, or (ii)&nbsp;as being of an equal or lesser scope, or with greater or lesser detail,
than as set forth in Section&nbsp;5.1, on such Borrower&#146;s behalf. Each Borrower also hereby
ratifies its authorization for Agent to have filed in any jurisdiction any like financing statements
or amendments thereto if filed prior to the date hereof. The parties agree that a carbon, photographic
or other reproduction of this Agreement shall be sufficient as a financing statement and may be filed
in any appropriate office in lieu thereof. At Agent&#146;s request, each Borrower shall also promptly
execute or cause to be executed and shall deliver to Agent any and all documents, instruments and
agreements deemed necessary by Agent, to give effect to or carry out the terms or intent of the Loan Documents.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="a35"></a>&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>5.4<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Lien on Realty</U>. The due and punctual payment and performance of the Obligations shall also be secured by the Lien
created by the Mortgage upon all real Property of Perma-Pipe described therein. If any Borrower shall
acquire at any time or times hereafter any fee simple interest in other real Property (other than
leasehold interests in sales offices or warehouses), such Borrower agrees promptly to execute and
deliver to Agent, for its benefit and the ratable benefit of Lenders, as additional security and
Collateral for the Obligations, deeds of trust, security deeds, mortgages or other collateral assignments
reasonably satisfactory in form and substance to Agent and its counsel (herein collectively referred
to as &#147;New Mortgages&#148;) covering such real Property. The Mortgages and each New Mortgage
shall be duly recorded (at Borrowers&#146; expense) in each office where such recording is required
to constitute a valid Lien on the real Property covered thereby. In respect to any Mortgage or any
New Mortgage, the applicable Borrower shall deliver to Agent, at Borrowers&#146; expense, mortgagee
title insurance policies issued by a title insurance company reasonably satisfactory to Agent, which
policies shall be in form and substance reasonably satisfactory to Agent and shall insure a valid
Lien in favor of Agent for the benefit of itself and each Lender on the Property covered thereby,
subject only to Permitted Liens and those other exceptions reasonably acceptable to Agent and its
counsel. Borrowers shall also deliver to Agent such other usual and customary documents, including,
without limitation, ALTA Surveys of the real Property described in the Mortgage or any New Mortgage,
as Agent and its counsel may reasonably request relating to the real Property subject to the Mortgage or the New Mortgages.</FONT></P></TD></TR></TABLE>
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<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>19</FONT></P>
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<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B><a name="a36"></a>SECTION&nbsp;6. &nbsp;COLLATERAL ADMINISTRATION</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="a37"></a>&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>6.1<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>General</U>.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>6.1.1<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Location of Collateral</U>. All Collateral, other than Inventory in transit, motor vehicles and Collateral having an aggregate
value of not more than Five Hundred Thousand Dollars ($500,000), will at all times be kept by Borrowers
and their Subsidiaries at one or more of the business locations set forth in <U>Exhibit&nbsp;6.1.1</U> hereto, as updated by Borrowers providing prior written notice to Agent of any new location.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>6.1.2<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Insurance of Collateral</U>. Borrowers shall maintain and pay for insurance upon all Collateral wherever located and with respect
to the business of Borrowers and each of their Subsidiaries, covering casualty, hazard, public liability,
workers&#146; compensation and such other risks in such amounts and with such insurance companies
as are reasonably satisfactory to Agent. Borrowers shall deliver certified copies of such policies
to Agent as promptly as practicable, with satisfactory lender&#146;s loss payable endorsements, naming
Agent as a loss payee, assignee or additional insured, as appropriate, as its interest may appear,
and showing only such other loss payees, assignees and additional insureds as are satisfactory to
Agent. Each policy of insurance or endorsement shall contain a clause requiring the insurer to give
not less than 10 days&#146; prior written notice to Agent in the event of cancellation of the policy
for nonpayment of premium and not less than 30 days&#146; prior written notice to Agent in the event
of cancellation of the policy for any other reason whatsoever and a clause specifying that the interest
of Agent shall not be impaired or invalidated by any act or neglect of any Borrower, any of its Subsidiaries
or the owner of the Property or by the occupation of the premises for purposes more hazardous than
are permitted by said policy. Borrowers agree to deliver to Agent, promptly as rendered, true copies
of all reports made in any reporting forms to insurance companies. All proceeds of business interruption
insurance (if any) of any Borrower and its Subsidiaries shall be remitted to Agent for application
to the outstanding balance of the Revolving Credit Loans.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>Unless Borrowers provide Agent with evidence of the insurance coverage required by this Agreement,
Agent may purchase insurance at Borrowers&#146; expense to protect Agent&#146;s interests in the
Properties of Borrowers and their Subsidiaries. This insurance may, but need not, protect the interests
of Borrowers and their Subsidiaries. The coverage that Agent purchases may not pay any claim that
any Borrower or any Subsidiary makes or any claim that is made against any Borrower or any such Subsidiary
in connection with said Property. Borrowers may later cancel any insurance purchased by Agent, but
only after providing Agent with evidence that Borrowers and their Subsidiaries have obtained insurance
as required by this Agreement. If Agent purchases insurance, Borrowers will be responsible for the
costs of that insurance, including interest and any other charges Agent may impose in connection
with the placement of insurance, until the effective date of the cancellation or expiration of the
insurance. The costs of the insurance may be added to the Obligations. The costs of the insurance
may be more than the cost of insurance that Borrowers and their Subsidiaries may be able to obtain on their own.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>6.1.3<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Protection of Collateral</U>. Neither Agent nor any Lender shall be liable or responsible in any way for the safekeeping of any
of the Collateral or for any loss or damage thereto (except for reasonable care in the custody thereof
while any Collateral is in Agent&#146;s or </FONT></P></TD></TR></TABLE>
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<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>20</FONT></P>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>any Lender&#146;s actual possession) or for any diminution in the value thereof, or for any act or
default of any warehouseman, carrier, forwarding agency, or other person whomsoever, but the same
shall be at Borrowers&#146; sole risk.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="a38"></a></FONT><FONT face="Times New Roman, Times, Serif" size=2>6.2<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Administration of Accounts</U>.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>6.2.1<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Records, Schedules and Assignments of Accounts</U>. Borrowers shall keep accurate and complete records of their Accounts and all payments and collections
thereon and shall submit to Agent on such periodic basis as Agent shall request a sales and collections
report for the preceding period, in form acceptable to Agent. Concurrently with the delivery of each
Borrowing Case Certificate described in subsection&nbsp;8.1.4, or more frequently as requested by
Agent, from and after the date hereof, Borrowers shall deliver to Agent a detailed aged trial balance
of all of their Accounts, specifying the names, addresses, face values, dates of invoices and due
dates for each Account Debtor obligated on an Account so listed (&#147;Schedule&nbsp;of Accounts&#148;),
and upon Agent&#146;s request therefor, copies of proof of delivery and the original copy of all
documents, including, without limitation, repayment histories and present status reports relating
to the Accounts so scheduled and such other matters and information relating to the status of then
existing Accounts as Agent shall request. If requested by Agent, Borrowers shall execute and deliver
to Agent formal written assignments of all of their Accounts weekly or daily, which shall include
all Accounts that have been created since the date of the last assignment, together with copies of
invoices or invoice registers related thereto.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>6.2.2<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Discounts, Allowances, Disputes</U>. If any Borrower grants any discounts, allowances or credits that are not shown on the face of the
invoice for the Account involved, Borrowers shall report such discounts, allowances or credits, as
the case may be, to Agent as part of the next required Schedule&nbsp;of Accounts.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>6.2.3<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Account Verification</U>. Any of Agent&#146;s officers, employees or agents shall have the right, at any time or times hereafter,
in the name of Agent, any designee of Agent or any Borrower, to verify the validity, amount or any
other matter relating to any Accounts by mail, telephone, electronic communication or otherwise.
Each Borrower shall cooperate fully with Agent in an effort to facilitate and promptly conclude any
such verification process.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>6.2.4<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Maintenance of Dominion Account</U>. Borrowers shall maintain a Dominion Account or Accounts pursuant to lockbox and blocked account arrangements
acceptable to Agent with Bank. Borrowers shall issue to Bank an irrevocable letter of instruction
directing Bank to deposit all payments or other remittances received in the lockbox and blocked accounts
to the Dominion Account for application on account of the Obligations as provided in subsection&nbsp;3.2.1.
All funds deposited in any Dominion Account shall immediately become the property of Agent, for the
ratable benefit of Lenders, and Borrowers shall obtain the agreement by Bank in favor of Agent to
waive any recoupment, setoff rights, and any security interest in, or against, the funds so deposited.
Agent assumes no responsibility for such lockbox and blocked account arrangements, including, without
limitation, any claim of accord and satisfaction or release with respect to deposits accepted by
any bank thereunder.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>6.2.5<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Collection of Accounts, Proceeds of Collateral</U>. Each Borrower agrees that all invoices rendered and other requests made by any Borrower for payment
in respect of </FONT></P></TD></TR></TABLE>
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<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>21</FONT></P>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Accounts shall contain a written statement directing payment in respect of such Accounts to be paid
to a lockbox established pursuant to subsection&nbsp;6.2.4. To expedite collection, each Borrower
shall endeavor in the first instance to make collection of its Accounts for Agent. All remittances
received by any Borrower on account of Accounts, together with the proceeds of any other Collateral,
shall be held as Agent&#146;s property, for its benefit and the benefit of Lenders, by such Borrower
as trustee of an express trust for Agent&#146;s benefit and each Borrower shall immediately deposit
same in kind in the Dominion Account. Agent retains the right at all times after the occurrence and
during the continuance of a Default or an Event of Default to notify Account Debtors that any Borrower&#146;s
Accounts have been assigned to Agent and to collect Borrowers&#146; Accounts directly in its own
name, or in the name of Agent&#146;s agent, and to charge the collection costs and expenses, including
attorneys&#146; fees, to Borrowers.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>6.2.6<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Taxes</U>. If an Account includes a charge for any tax payable to any governmental taxing authority, Agent is
authorized, in its sole discretion, to pay the amount thereof to the proper taxing authority for
the account of Borrowers and to charge Borrowers therefor, except for taxes that (i)&nbsp;are being
actively contested in good faith and by appropriate proceedings and with respect to which Borrowers
maintain reasonable reserves on their books therefor and (ii)&nbsp;would not reasonably be expected
to result in any Lien other than a Permitted Lien. In no event shall Agent or any Lender be liable
for any taxes to any governmental taxing authority that may be due by any Borrower.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="a39"></a></FONT><FONT face="Times New Roman, Times, Serif" size=2>6.3<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Administration of Inventory</U>. Each Borrower shall keep records of its Inventory which records shall be complete and accurate in
all material respects. Borrowers shall furnish to Agent Inventory reports concurrently with the delivery
of each Borrowing Base Certificate described in subsection&nbsp;8.1.4 or more frequently as requested
by Agent, which reports will be in such other format and detail as Agent shall request and shall
include a current list of all locations of each Borrower&#146;s Inventory. Borrowers shall conduct
a physical inventory no less frequently than annually and shall provide to Agent a report based on
each such physical inventory promptly thereafter, together with such supporting information as Agent
shall reasonably request.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="a40"></a></FONT><FONT face="Times New Roman, Times, Serif" size=2>6.4<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Administration of Equipment</U>.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>6.4.1<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Records and Schedules of Equipment</U>. Each Borrower shall keep records of its Equipment which shall be complete and accurate in all material
respects itemizing and describing the kind, type, quality, quantity and book value of its Equipment
and all dispositions made in accordance with subsection&nbsp;6.4.2 hereof, and Borrowers shall, and
shall cause each of their Subsidiaries to, furnish Agent with a current schedule containing the foregoing
information on at least an annual basis and more often if requested by Agent. Promptly after the
request therefor by Agent, Borrowers shall deliver to Agent any and all evidence of ownership, if
any, of any of their Equipment.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>6.4.2<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Dispositions of Equipment</U>. Borrowers shall not, and shall not permit any of their Subsidiaries to, sell, lease or otherwise
dispose of or transfer any of their respective Equipment or other fixed assets or any part thereof
without the prior written consent of Agent; <U>provided</U>, however, that the foregoing restriction shall not apply, for so long as no Default or Event of Default
exists and is continuing, to (i)&nbsp;dispositions of Equipment and other fixed assets </FONT></P></TD></TR></TABLE>
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<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>22</FONT></P>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>which, in the aggregate during any consecutive twelve-month period, have a fair market value or a book
value, whichever is less, of One Million ($1,000,000) or less, <U>provided</U> that all proceeds thereof are remitted to Agent for application to the Loans as provided in subsection&nbsp;3.3.1
or the holders of the Indebtedness outstanding under the Term Loan Documents in accordance with the
terms of such Term Loan Documents, or (ii)&nbsp;replacements of Equipment or other fixed assets that
are substantially worn, damaged or obsolete with Equipment or other fixed assets of like kind, function
and value which are useful in the business of any Borrower or one of its Subsidiaries, <U>provided</U> that the replacement Equipment or other fixed assets shall be acquired within ninety (90) days after
any disposition of the Equipment or other fixed assets that are to be replaced and the replacement
Equipment or other fixed assets shall be free and clear of Liens other than Permitted Liens that
are not Purchase Money Liens.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="a41"></a>&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>6.5<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Payment of Charges</U>. All amounts chargeable to Borrowers under Section&nbsp;6 hereof shall be Obligations secured by all
of the Collateral, shall be payable on demand and shall bear interest from the date such advance
was made until paid in full at the rate applicable to Base Rate Revolving Portions from time to time.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B><a name="a42"></a>SECTION&nbsp;7. &nbsp;REPRESENTATIONS AND WARRANTIES</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><a name="a43"></a>7.1<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>General Representations and Warranties</U>. To induce Agent and each Lender to enter into this Agreement and to make advances hereunder, Borrowers
warrant, represent and covenant to Agent and each Lender, on a joint and several basis, that:</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>7.1.1<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Qualification</U>. Each Borrower and each of its Subsidiaries is a corporation, limited partnership or limited liability
company duly organized, validly existing and in good standing under the laws of the jurisdiction
of its incorporation or organization. Each Borrower and each of its Subsidiaries is duly qualified
and is authorized to do business and is in good standing as a foreign limited liability company,
limited partnership or corporation, as applicable, in each state or jurisdiction listed on <U>Exhibit&nbsp;7.1.1</U> hereto and in all other states and jurisdictions in which the failure of any Borrower or any of its
Subsidiaries to be so qualified could reasonably be expected to have a Material Adverse Effect.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>7.1.2<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Power and Authority</U>. Each Borrower and each of its Subsidiaries executing this Agreement is duly authorized and empowered
to enter into, execute, deliver and perform this Agreement and each of the other Loan Documents to
which it is a party. The execution, delivery and performance of this Agreement and each of the other
Loan Documents have been duly authorized by all necessary corporate or other relevant action and
do not and will not:&nbsp;(i)&nbsp;require any consent or approval of the shareholders or members
of any Borrower or any of the shareholders, partners or members, as the case may be, of any Subsidiary
of any Borrower; (ii)&nbsp;contravene any Borrower&#146;s or any of its Subsidiaries&#146; charter,
articles or certificate of incorporation, partnership agreement, certificate of formation, by-laws,
limited liability agreement, operating agreement or other organizational documents (as the case may
be); (iii)&nbsp;violate, or cause any Borrower or any of its Subsidiaries to be in default under,
any provision of any law, rule, regulation, order, writ, judgment, injunction, decree, determination
or award in effect having applicability to any Borrower or any of its Subsidiaries, the violation
of which could reasonably be expected to have a Material Adverse Effect; (iv)&nbsp;result in a breach
of or constitute a default under any indenture or loan or credit agreement or any other agreement, </FONT></P></TD></TR></TABLE>
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<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>23</FONT></P>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>lease or instrument to which any Borrower or any of its Subsidiaries is a party or by which it or its
Properties may be bound or affected, the breach of or default under which could reasonably be expected
to have a Material Adverse Effect; or (v)&nbsp;result in, or require, the creation or imposition
of any Lien (other than Permitted Liens) upon or with respect to any of the Properties now owned
or hereafter acquired by any Borrower or any of its Subsidiaries.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>7.1.3<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Legally Enforceable Agreement</U>. This Agreement is, and each of the other Loan Documents when delivered under this Agreement will
be, a legal, valid and binding obligation of each Borrower and each of its Subsidiaries party thereto,
enforceable against it in accordance with its respective terms.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>7.1.4<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Capital Structure</U>. <U>Exhibit&nbsp;7.1.4</U> hereto states, as of the date hereof, (i)&nbsp;the correct name of each of the Subsidiaries of each
Borrower, its jurisdiction of incorporation or organization and the percentage of its Voting Stock
owned by each Borrower, (ii)&nbsp;the name of each Borrower&#146;s and each of its Subsidiaries&#146;
corporate or joint venture relationships and the nature of the relationship, (iii)&nbsp;the number,
nature and holder of all outstanding Securities of each Borrower and the holder of Securities of
each Subsidiary of each Borrower (other than MFRI) and (iv)&nbsp;the number of authorized, issued
and treasury Securities of each Borrower. Each Borrower has good title to all of the Securities it
purports to own of each of such Subsidiaries, free and clear in each case of any Lien other than
Permitted Liens. All such Securities have been duly issued and are fully paid and non-assessable.
As of the date hereof, there are no outstanding options to purchase, or any rights or warrants to
subscribe for, or any commitments or agreements to issue or sell, any Securities or obligations convertible
into, or any powers of attorney relating to, any Securities of any Borrower or any of its Subsidiaries.
Except as set forth on <U>Exhibit&nbsp;7.1.4</U>, as of the date hereof, there are no outstanding agreements or instruments binding upon any of any
Borrower&#146;s or any of its Subsidiaries&#146; partners, members or shareholders, as the case may
be, relating to the ownership of its Securities.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>7.1.5<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Names; Organization</U>. Since June&nbsp;1, 1997, neither any Borrower nor any of its Subsidiaries has been known as or has
used any legal, fictitious or trade names except those listed on <U>Exhibit&nbsp;7.1.5</U> hereto. Except as set forth on <U>Exhibit&nbsp;7.1.5</U>, neither any Borrower nor any of its Subsidiaries has been the surviving entity of a merger or consolidation
or has acquired all or substantially all of the assets of any Person since June&nbsp;1, 1997. Each
of each Borrower&#146;s and each of its Subsidiaries&#146; state(s) of incorporation or organization,
Type of Organization and Organizational I.D. Number is set forth on <U>Exhibit&nbsp;7.1.5</U>. The exact legal name of each Borrower and each of its Subsidiaries is set forth on <U>Exhibit&nbsp;7.1.5</U>.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>7.1.6<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Business Locations; Agent for Process</U>. Each of each Borrower&#146;s and each of its Subsidiary&#146;s chief executive office, location of
books and records and other places of business are as listed on <U>Exhibit&nbsp;6.1.1</U> hereto, as updated from time to time by Borrowers in accordance with the provisions of subsection&nbsp;6.1.1.
During the preceding one-year period, neither any Borrower nor any of its Subsidiaries has had an
office, place of business or agent for service of process, other than as listed on <U>Exhibit&nbsp;6.1.1</U>. All tangible Collateral is and will at all times be kept by Borrowers and their Subsidiaries in accordance
with subsection&nbsp;6.1.1. Except as shown on <U>Exhibit&nbsp;6.1.1</U>, as of the date hereof, no Inventory is stored with a bailee, distributor, warehouseman or similar
party, nor is any Inventory consigned to any Person.</FONT></P></TD></TR></TABLE>
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<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>24</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
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<TD>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>7.1.7<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Title to Properties; Priority of Liens</U>. Each Borrower and each of its Subsidiaries has good, indefeasible and marketable title to and fee
simple ownership of, or valid and subsisting leasehold interests in, all of its real Property, and
good title to all of the Collateral and all of its other Property, in each case, free and clear of
all Liens except Permitted Liens. Each Borrower and each of its Subsidiaries has paid or discharged
all lawful claims which, if unpaid, might become a Lien against any of any Borrower&#146;s or such
Subsidiary&#146;s Properties that is not a Permitted Lien. The Liens granted to Agent under Section&nbsp;5
hereof are first priority Liens, subject only to Permitted Liens.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>7.1.8<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Accounts</U>. Agent may rely, in determining which Accounts are Eligible Accounts, on all statements and representations
made by any Borrower with respect to any Account or Accounts. With respect to each of each Borrower&#146;s
Accounts, whether or not such Account is an Eligible Account, unless otherwise disclosed to Agent
in writing:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(i)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> It is genuine and in all respects what it purports to be, and it is not evidenced by a judgment;</FONT></p></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(ii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> It arises out of a completed, <U>bona</U> <U>fide</U> sale and delivery of goods or rendition of services by a Borrower, in the ordinary course of its business
  and in accordance with the terms and conditions of all purchase orders, contracts or other documents
  relating thereto and forming a part of the contract between such Borrower and the Account Debtor;</FONT></p></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(iii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> It is for a liquidated amount maturing as stated in the duplicate invoice covering such sale or rendition
  of services, a copy of which has been furnished or is available to Agent;</FONT></p></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(iv)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> There are no facts, events or occurrences which in any way impair the validity or enforceability of
  any Accounts or tend to materially reduce the amount payable thereunder from the face amount of the
  invoice and statements delivered or made available to Agent with respect thereto;</FONT></p></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(v)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> To the best of each Borrower&#146;s knowledge, the Account Debtor thereunder (1)&nbsp;had the capacity
  to contract at the time any contract or other document giving rise to the Account was executed and
  (2)&nbsp;such Account Debtor is Solvent; and</FONT></p></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(vi)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> To the best of each Borrower&#146;s knowledge, there are no proceedings or actions which are threatened
  or pending against the Account Debtor thereunder which might result in any material adverse change
  in such Account Debtor&#146;s financial condition or the collectibility of such Account.</FONT></p></TD></TR></TABLE>
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<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>7.1.9<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Equipment</U>. The Equipment of Borrowers and their Subsidiaries is in good operating condition and repair, and
all necessary replacements of and repairs thereto shall be made so that the operating efficiency
thereof shall be maintained and preserved, reasonable wear and tear excepted. Neither any Borrower
nor any of its Subsidiaries will permit any Equipment to become affixed to any real Property leased
to any Borrower or any of its Subsidiaries so that an interest arises therein under the real estate
laws of the applicable jurisdiction unless the landlord of such real Property has executed a landlord
waiver or leasehold </FONT></P></TD></TR></TABLE>
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<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>25</FONT></P>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>mortgage in favor of and in form reasonably acceptable to Agent, and no Borrower will permit any of
the Equipment of any Borrower or any of its Subsidiaries to become an accession to any personal Property
other than Equipment that is subject to first priority (except for Permitted Liens) Liens in favor
of Agent.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>7.1.10<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Financial Statements; Fiscal Year</U>. The Consolidated and consolidating balance sheets of MFRI and its Subsidiaries (including the accounts
of all Subsidiaries of MFRI and their respective Subsidiaries for the respective periods during which
a Subsidiary relationship existed) as of April&nbsp;30, 2002, and the related statements of income,
changes in shareholder&#146;s equity, and changes in financial position for the periods ended on
such dates, have been prepared in accordance with GAAP, and present fairly in all material respects
the financial positions of MFRI and such Persons, taken as a whole, at such dates and the results
of MFRI&#146;s and such Persons&#146; operations, taken as a whole, for such periods. As of the date
hereof, since February 28, 2002, there has been no material adverse change in the financial position
of MFRI and such other Persons, taken as a whole, as reflected in the Consolidated balance sheet
as of such date. Agent has received a copy of MFRI&#146;s quarterly report on Form&nbsp;10-Q for
the fiscal quarter ended April 30, 2002, which discloses certain changes with respect to the operating
results and certain write-offs to be taken by MFRI. As of the date hereof, the fiscal year of MFRI
and each of its Subsidiaries ends on January&nbsp;31 of each year.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>7.1.11<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Full Disclosure</U>. The financial statements referred to in subsection&nbsp;7.1.10 hereof do not, nor does this Agreement
or any other written statement of any Borrower to Agent or any Lender contain any untrue statement
of a material fact or omit a material fact necessary to make the statements contained therein or
herein not misleading. There is no fact which any Borrower has failed to disclose to Agent or any
Lender in writing which could reasonably be expected to have a Material Adverse Effect.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>7.1.12<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Solvent Financial Condition</U>. Each Borrower and each of its Subsidiaries, is now and, after giving effect to the initial Loans
to be made and the initial Letters of Credit and LC Guaranties to be issued hereunder and all related
transactions, will be, Solvent.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>7.1.13<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Surety Obligations</U>. Except as set forth on <U>Exhibit&nbsp;7.1.13</U>, as of the date hereof, neither any Borrower nor any of its Subsidiaries is obligated as surety or
indemnitor under any surety or similar bond or other contract or has issued or entered into any agreement
to assure payment, performance or completion of performance of any undertaking or obligation of any
Person.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>7.1.14<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Taxes</U>. MFRI&#146;s federal tax identification number is 36-3922969. The federal tax identification number
of each Subsidiary of MFRI is shown on <U>Exhibit&nbsp;7.1.14</U> hereto. Each Borrower and each of its Subsidiaries has filed all federal, state and local tax returns
and other reports relating to taxes it is required by law to file, and has paid, or made provision
for the payment of, all taxes, assessments, fees, levies and other governmental charges upon it,
its income and Properties as and when such taxes, assessments, fees, levies and charges are due and
payable, unless and to the extent any thereof are being actively contested in good faith and by appropriate
proceedings and each Borrower and each of its Subsidiaries maintains reasonable reserves on its books
therefor. The provision for taxes on the books of each Borrower and its </FONT></P></TD></TR></TABLE>
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<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>26</FONT></P>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Subsidiaries is adequate for all years not closed by applicable statutes, and for the current fiscal
year.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>7.1.15<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Brokers</U>. Except as shown on <U>Exhibit&nbsp;7.1.15</U> hereto, there are no claims for brokerage commissions, finder&#146;s fees or investment banking fees
in connection with the transactions contemplated by this Agreement.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>7.1.16<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Patents,&nbsp;Trademarks,&nbsp;Copyrights&nbsp;and&nbsp;Licenses</U>. Each Borrower and each of its Subsidiaries owns, possesses or licenses or has the right to use all
the patents, trademarks, service marks, trade names, copyrights, licenses and other Intellectual
Property necessary for the present and planned future conduct of its business without any known conflict
with the rights of others, except for such conflicts as could not reasonably be expected to have
a Material Adverse Effect. All such patents, trademarks, service marks, trade names, copyrights,
licenses, and other similar rights are listed on <U>Exhibit&nbsp;7.1.16</U> hereto. No claim has been asserted to any Borrower or any of its Subsidiaries which is currently pending
that their use of their Intellectual Property or the conduct of their business does or may infringe
upon the Intellectual Property rights of any third party. To the knowledge of Borrowers and except
as set forth on <U>Exhibit&nbsp;7.1.16</U> hereto, as of the date hereof, no Person is engaging in any activity that infringes in any material
respect upon any Borrower&#146;s or any of its Subsidiaries&#146; material Intellectual Property.
Except as set forth on <U>Exhibit&nbsp;7.1.16</U>, each Borrower&#146;s and each of its Subsidiaries&#146; (i)&nbsp;material trademarks, service marks,
and copyrights are registered with the U.S. Patent and Trademark Office or in the U.S. Copyright
Office, as applicable and (ii)&nbsp;material license agreements and similar arrangements relating
to its Inventory (1)&nbsp;permits, and does not restrict, the assignment by any Borrower or any of
its Subsidiaries to Agent, or any other Person designated by Agent, of all of any Borrower&#146;s
or such Subsidiary&#146;s, as applicable, rights, title and interest pertaining to such license agreement
or such similar arrangement and (2)&nbsp;would permit the continued use by any Borrower or such Subsidiary,
or Agent or its assignee, of such license agreement or such similar arrangement and the right to
sell Inventory subject to such license agreement for a period of no less than 6 months after a default
or breach of such agreement or arrangement. The consummation and performance of the transactions
and actions contemplated by this Agreement and the other Loan Document, including without limitation,
the exercise by Agent of any of its rights or remedies under Section&nbsp;10, will not result in
the termination or impairment of any of any Borrower&#146;s or any of its Subsidiaries&#146; ownership
or rights relating to its Intellectual Property, except for such Intellectual Property rights the
loss or impairment of which could not reasonably be expected to have a Material Adverse Effect. Except as listed on <U>Exhibit&nbsp;7.1.16</U> and except as could not reasonably be expected to have a Material Adverse Effect, (i)&nbsp;neither
any Borrower nor any of its Subsidiaries is in breach of, or default under, any term of any license
or sublicense with respect to any of its Intellectual Property and (ii)&nbsp;to the knowledge of
any Borrower, no other party to such license or sublicense is in breach thereof or default thereunder,
and such license is valid and enforceable.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>7.1.17<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Governmental Consents</U>. Each Borrower and each of its Subsidiaries has, and is in good standing with respect to, all governmental
consents, approvals, licenses, authorizations, permits, certificates, inspections and franchises
necessary to continue to conduct its business as heretofore or proposed to be conducted by it and
to own or lease and operate its Properties as now owned or leased by it, except where the failure
to possess or so maintain such rights could not reasonably be expected to have a Material Adverse
Effect.</FONT></P></TD></TR></TABLE>
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<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>27</FONT></P>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>7.1.18<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Compliance with Laws</U>. Each Borrower and each of its Subsidiaries has duly complied, and its Properties, business operations
and leaseholds are in compliance with, the provisions of all federal, state and local laws, rules
and regulations applicable to such Borrower or such Subsidiary, as applicable, its Properties or
the conduct of its business, except for such non-compliance as could not reasonably be expected to
have a Material Adverse Effect, and there have been no citations, notices or orders of noncompliance
issued to any Borrower or any of its Subsidiaries under any such law, rule or regulation, except
where such noncompliance could not reasonably be expected to have a Material Adverse Effect. Each
Borrower and each of its Subsidiaries has established and maintains an adequate monitoring system
to insure that it remains in compliance in all material respects with all federal, state and local
rules, laws and regulations applicable to it. No Inventory has been produced in violation of the
Fair Labor Standards Act (29&nbsp;U.S.C. &#167;201 <U>et</U> <U>seq</U>.), as amended.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>7.1.19<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Restrictions</U>. Neither any Borrower nor any of its Subsidiaries is a party or subject to any contract or agreement
which restricts its right or ability to incur Indebtedness, other than as set forth on <U>Exhibit&nbsp;7.1.19</U> hereto, none of which prohibit the execution of or compliance with this Agreement or the other Loan
Documents by any Borrower or any of its Subsidiaries, as applicable.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>7.1.20<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Litigation</U>. Except as set forth on <U>Exhibit&nbsp;7.1.20</U> hereto, there are no actions, suits, proceedings or investigations pending, or to the knowledge of
any Borrower, threatened, against or affecting any Borrower or any of its Subsidiaries, or the business,
operations, Properties, prospects, profits or condition of any Borrower or any of its Subsidiaries
which, singly or in the aggregate, could reasonably be expected to have a Material Adverse Effect.
Neither any Borrower nor any of its Subsidiaries is in default with respect to any order, writ, injunction,
judgment, decree or rule of any court, governmental authority or arbitration board or tribunal, which,
singly or in the aggregate, could reasonably be expected to have a Material Adverse Effect.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>7.1.21<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>No Defaults</U>. Except as set forth on <U>Exhibit&nbsp;7.1.21</U> attached hereto, no event has occurred and no condition exists which would, upon or after the execution
and delivery of this Agreement or any Borrower&#146;s performance hereunder, constitute a Default
or an Event of Default. Neither any Borrower nor any of its Subsidiaries is in default in (and no
event has occurred and no condition exists which constitutes, or which the passage of time or the
giving of notice or both would constitute, a default in) the payment of any Indebtedness to any Person
for Money Borrowed in excess of One Million Dollars ($1,000,000).</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>7.1.22<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Leases</U>. <U>Exhibit&nbsp;7.1.22</U> hereto is a complete listing of all capitalized and operating personal property leases of each Borrower
and its Subsidiaries and all real property leases of each Borrower and its Subsidiaries. Each Borrower
and each of its Subsidiaries is in full compliance with all of the terms of each of its respective
capitalized and operating leases, except where the failure to so comply could not reasonably be expected
to have a Material Adverse Effect.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>7.1.23<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Pension Plans</U>. Except as disclosed on <U>Exhibit&nbsp;7.1.23</U> hereto, neither any Borrower nor any of its Subsidiaries has any Plan. Each Borrower and each of its
Subsidiaries is in compliance with the requirements of ERISA and the regulations promulgated thereunder
with </FONT></P></TD></TR></TABLE>
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<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>28</FONT></P>
<HR color=gray noShade SIZE=5>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>respect to each Plan, except where the failure to so comply could not reasonably be expected to have
a Material Adverse Effect. No fact or situation that could reasonably be expected to result in a
material adverse change in the financial condition of any Borrower and its Subsidiaries exists in
connection with any Plan. Neither any Borrower nor any of its Subsidiaries has any withdrawal liability
in connection with a Multiemployer Plan.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>7.1.24<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Trade Relations</U>. There exists no actual or, to any Borrower&#146;s knowledge, threatened termination, cancellation
or limitation of, or any modification or change in, the business relationship between any Borrower
or any of its Subsidiaries and any customer or any group of customers whose purchases individually
or in the aggregate are material to the business of any Borrower and its Subsidiaries, or with any
material supplier, except in each case, where the same could not reasonably be expected to have a
Material Adverse Effect, and there exists no present condition or state of facts or circumstances
which would prevent any Borrower or any of its Subsidiaries from conducting such business after the
consummation of the transactions contemplated by this Agreement in substantially the same manner
in which it has heretofore been conducted.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>7.1.25<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Labor Relations</U>. Except as described on <U>Exhibit&nbsp;7.1.25</U> hereto, as of the date hereof, neither any Borrower nor any of its Subsidiaries is a party to any
collective bargaining agreement. There are no material grievances, disputes or controversies with
any union or any other organization of any Borrower&#146;s or any of its Subsidiaries&#146; employees,
or threats of strikes, work stoppages or any asserted pending demands for collective bargaining by
any union or organization, except those that could not reasonably be expected to have a Material
Adverse Effect.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="a44"></a></FONT><FONT face="Times New Roman, Times, Serif" size=2>7.2<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Continuous Nature of Representations and Warranties</U>. Each representation and warranty contained in this Agreement and the other Loan Documents shall be
continuous in nature and shall remain accurate, complete and not misleading at all times during the
term of this Agreement, except for changes in the nature of any Borrower&#146;s or one of Borrower&#146;s
Subsidiary&#146;s business or operations that would render the information in any exhibit attached
hereto or to any other Loan Document either inaccurate, incomplete or misleading, so long as Majority
Lenders have consented to such changes or such changes are expressly permitted by this Agreement.
Without limiting the generality of the foregoing, each Loan request made or deemed made pursuant
to subsection&nbsp;3.1.1 hereof shall constitute Borrowers&#146; reaffirmation, as of the date of
each such loan request, of each representation, warranty or other statement made or furnished to
Agent or any Lender by or on behalf of any Borrower, any Subsidiary of any Borrower, or any Guarantor
in this Agreement, any of the other Loan Documents, or any instrument, certificate or financial statement
furnished in compliance with or in reference thereto.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="a45"></a>&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>7.3<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Survival of Representations and Warranties</U>. All representations and warranties of Borrowers contained in this Agreement or any of the other Loan
Documents shall survive the execution, delivery and acceptance thereof by Agent and each Lender and
the parties thereto and the closing of the transactions described therein or related thereto.</FONT></P></TD></TR></TABLE>
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<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>29</FONT></P>
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<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B><a name="a46"></a>SECTION&nbsp;8. &nbsp;COVENANTS AND CONTINUING AGREEMENTS</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="a47"></a>&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>8.1<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Affirmative Covenants</U>. During the Term, and thereafter for so long as there are any Obligations outstanding, Borrowers covenant
that, unless otherwise consented to by Majority Lenders, in writing, they shall:</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>8.1.1<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Visits and Inspections; Lender Meeting</U>. Permit (i)&nbsp;representatives of Agent, and during the continuation of any Default or Event of
Default any Lender, from time to time, as often as may be reasonably requested, but only during normal
business hours, to visit and inspect the Properties of each Borrower and each of its Subsidiaries,
inspect, audit and make extracts from its books and records, and discuss with its officers, its employees
and its independent accountants, each Borrower&#146;s and each of its Subsidiaries&#146; business,
assets, liabilities, financial condition, business prospects and results of operations and (ii)&nbsp;appraisers
engaged pursuant to Section&nbsp;2.10 (whether or not personnel of Agent), from time to time, as
often as may be reasonably requested, but only during normal business hours, to visit and inspect
the Properties of each Borrower and each of its Subsidiaries, for the purpose of completing appraisals
pursuant to Section&nbsp;2.10. Agent, if no Default or Event of Default then exists, shall give Borrowers
reasonable prior notice of any such inspection or audit. Without limiting the foregoing, Borrowers
will participate and will cause their key management personnel to participate in a meeting with Agent
and Lenders periodically during each year (except that during the continuation of an Event of Default
such meetings may be held more frequently as requested by Agent or Majority Lenders), which meeting(s)
shall be held at such times and such places as may be reasonably requested by Agent.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>8.1.2<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Notices</U>. Promptly notify Agent in writing of the occurrence of any event or the existence of any fact which
renders any representation or warranty in this Agreement or any of the other Loan Documents inaccurate,
incomplete or misleading in any material respect as of the date made or remade. In addition, each
Borrower agrees to provide Agent with prompt written notice of any change in the information disclosed
in any Exhibit hereto, in each case after giving effect to the materiality limits and Material Adverse
Effect qualifications contained therein.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>8.1.3<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Financial Statements</U>. Keep, and cause each of its Subsidiaries to keep, adequate records and books of account with respect
to its business activities in which proper entries are made in accordance with customary accounting
practices reflecting all its financial transactions; and cause to be prepared and furnished to Agent
and each Lender, the following, all to be prepared in accordance with GAAP applied on a consistent
basis, unless MFRI&#146;s certified public accountants concur in any change therein and such change
is disclosed to Agent and is consistent with GAAP:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
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<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(i)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> not later than 90 days after the close of each fiscal year of MFRI, unqualified (except for a qualification
  for a change in accounting principles with which the accountant concurs) audited financial statements
  of MFRI and its Subsidiaries as of the end of such year, on a Consolidated and consolidating basis,
  certified by a firm of independent certified public accountants of recognized standing selected by
  MFRI but acceptable to Agent and, within a reasonable time thereafter permit Agent to review a copy
  of any management letter issued in connection therewith;</FONT></div></TD></TR></TABLE>
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<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>30</FONT></P>
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<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(ii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> not later than 30 days (40 days with respect to each January and February within the Term and the
  months of May through December, 2002) after the end of each month hereafter, including the last month
  of MFRI&#146;s fiscal year, unaudited interim financial statements of MFRI and its Subsidiaries as
  of the end of such month and of the portion of the fiscal year then elapsed, on a Consolidated and
  consolidating basis, certified by the principal financial officer of MFRI as prepared in accordance
  with GAAP and fairly presenting in all material respects the financial position and results of operations
  of MFRI and its Subsidiaries for such month and period subject only to changes from audit and year-end
  adjustments and except that such statements need not contain notes; not later than 30 days after
  the end of the months of May through December, 2002, unaudited unconsolidated interim financial statements
  of MFRI and its Subsidiaries as of the end of such month and of the portion of the fiscal year then
  elapsed, certified by the principal financial officer of MFRI as prepared in accordance with GAAP
  and fairly presenting in all material respects the financial position and results of operation of
  MFRI and its Subsidiaries for such month and period subject only to changes in audit and year-end
  adjustments and Consolidations and other non-material adjustments and except that such statements need not contain notes;</FONT></p></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(iii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> together with each delivery of financial statements pursuant to clauses&nbsp;(i) and (ii) of this
  subsection&nbsp;8.1.3, a management report (1)&nbsp;setting forth in comparative form the corresponding
  figures for the corresponding periods of the previous fiscal year and the corresponding figures from
  the most recent Projections for the current fiscal year delivered pursuant to subsection&nbsp;8.1.7
  and (2)&nbsp;identifying the reasons for any significant variations. The information above shall
  be presented in reasonable detail and shall be certified by the chief financial officer of MFRI to
  the effect that such information fairly presents in all material respects the results of operation
  and financial condition of MFRI and its Subsidiaries as at the dates and for the periods indicated;</FONT></p></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(iv)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> promptly after the sending or filing thereof, as the case may be, copies of any proxy statements,
  financial statements or reports which MFRI has made available to its Securities holders and copies
  of any regular, periodic and special reports or registration statements which MFRI or any of its
  Subsidiaries files with the Securities and Exchange Commission or any governmental authority which
  may be substituted therefor, or any national securities exchange;</FONT></p></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(v)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> upon request of Agent, copies of any annual report to be filed with ERISA in connection with each
  Plan;</FONT></p></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(vi)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> within forty-five (45) days after the end of each fiscal quarter hereafter, a certificate in form
  and substance reasonably acceptable to Agent, evidencing that Borrowers are in compliance with the
  financial covenants contained in the Term Loan Documents; and</FONT></p></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(vii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> such other data and information (financial and otherwise) as Agent or any Lender, from time to time,
  may reasonably request, bearing upon or related to the Collateral or any Borrower&#146;s or any of
  its Subsidiaries&#146; financial condition or results of operations.</FONT></p></TD></TR></TABLE>
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<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>31</FONT></P>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>Promptly after the receipt of the financial statements by MFRI described in clause&nbsp;(i)&nbsp;of
this subsection&nbsp;8.1.3, MFRI shall permit Agent to review the accountants&#146; letter to MFRI&#146;s
management that is prepared in connection with such financial statements and also shall cause to
be prepared and shall furnish to Agent a certificate of the aforesaid certified public accountants
certifying to Agent that, based upon their examination of the financial statements of MFRI and its
Subsidiaries performed in connection with their examination of said financial statements, they are
not aware of any Default or Event of Default, or, if they are aware of such Default or Event of Default,
specifying the nature thereof. Concurrently with the delivery of the financial statements described
in paragraph&nbsp;(i) and (ii) of this subsection&nbsp;8.1.3, or more frequently if reasonably requested
by Agent, MFRI shall cause to be prepared and furnished to Agent a Compliance Certificate in the form of <U>Exhibit&nbsp;8.1.3</U> hereto executed by the Chief Financial Officer of MFRI (a &#147;Compliance Certificate&#148;).</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>8.1.4<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Borrowing Base Certificates</U>. On or before the third Business Day of each week from and after the date hereof, Borrowers shall
deliver to Agent, in form acceptable to Agent, a Borrowing Base Certificate (on a Consolidated and
consolidating basis) as of the last day of the immediately preceding week, with such supporting materials
as Agent shall reasonably request. If Borrowers deem it advisable, or Agent shall request, Borrowers
shall execute and deliver to Agent Borrowing Base Certificates more frequently than weekly.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>8.1.5<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Landlord, Processor and Storage Agreements</U>. Provide Agent with copies of all agreements between any Borrower or any of its Subsidiaries and any
landlord, warehouseman, processor, distributor or consignee which owns or is the lessee of any premises
at which any Collateral may, from time to time, be kept. With respect to any lease (other than leases
for sales offices), warehousing agreement or any processing agreement in any case entered into after
the Closing Date, Borrowers shall provide Agent with landlord waivers, bailee letters or processor
letters with respect to such premises. Such landlord waivers, bailee letters or processor letters
shall be in a form supplied by Agent to Borrowers with such reasonable revisions as are customarily
accepted by Agent or by similar financial institutions in similar financial transactions.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>8.1.6<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Projections</U>. No later than the first day of each fiscal year of MFRI, deliver to Agent projections of sales and
gross margins of MFRI and each of its Subsidiaries for such fiscal year, month by month. No later
than February 28 of each fiscal year of MFRI, deliver to Agent Projections of MFRI and each of its
Subsidiaries for the then current fiscal year month by month with respect to income statements and
quarter by quarter with respect to balance sheets and statements of cash flows.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>8.1.7<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Subsidiaries</U>. Cause each Subsidiary of each Borrower that is not a Borrower, whether now or hereafter in existence,
promptly upon Agent&#146;s request therefor, to execute and deliver to Agent a Guaranty Agreement
and a security agreement pursuant to which such Subsidiary guaranties the payment of all Obligations
and grants to Agent a first priority Lien (subject only to Permitted Liens) on all of its Properties
of the types described in Section&nbsp;5.1; <U>provided</U>, <U>however</U>, that with respect to existing Subsidiaries, no such Guaranty Agreement and/or security agreement
shall be required to be executed or delivered by any such Subsidiary if such Subsidiary is prohibited
from executing any such document or agreement by the terms of any statute, law, contract, agreement,
instrument or document existing as of the </FONT></P></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>32</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Closing Date evidencing such Subsidiary&#146;s Money Borrowed. Additionally, the applicable Borrower
shall execute and deliver to Agent a pledge agreement pursuant to which such Borrower grants to Agent
a first priority Lien (subject only to Permitted Liens) with respect to all of the issued and outstanding
Securities of each such Subsidiary.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>8.1.8<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Deposit and Brokerage Accounts</U>. For each deposit account or brokerage account that any Borrower at any time opens or maintains, such
Borrower shall, at Agent&#146;s request and option, pursuant to an agreement in form and substance
reasonably satisfactory to Agent, cause the depository bank or securities intermediary, as applicable,
to agree to comply at any time with instructions from Agent to such depository bank or securities
intermediary, as applicable, directing the disposition of funds from time to time credited to such
deposit or brokerage account, without further consent of the applicable Borrower.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>8.1.9<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Cash Management Services</U>. Prior to the date which is sixty (60) days after the Closing Date, Borrower shall enter into mutually
agreeable cash management agreements with Bank, to the extent Bank offers such services at competitive
rates.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><a name="a48"></a>8.2<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Negative Covenants</U>. During the Term, and thereafter for so long as there are any Obligations outstanding, Borrowers covenant
that, unless otherwise consented to by Majority Lenders, in writing, it shall not:</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>8.2.1<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Mergers; Consolidations; Acquisitions; Structural Changes</U>. Merge or consolidate, or permit any Subsidiary of any Borrower to merge or consolidate, with any
Person; nor change its or any of its Subsidiaries&#146; state of incorporation or organization, Type
of Organization or Organizational I.D. Number; nor change its or any of its Subsidiaries&#146; legal
name; nor acquire, nor permit any of its Subsidiaries to acquire, all or any substantial part of
the Properties of any Person, except for:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(i)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> mergers of any Subsidiary of any Borrower into another Borrower or another wholly-owned Subsidiary
  of another Borrower; and</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(ii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> acquisitions of assets consisting of fixed assets or real property that constitute Capital Expenditures
  permitted under subsection&nbsp;8.2.8.</FONT></div></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>8.2.2<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Loans</U>. Make, or permit any Subsidiary of any Borrower to make, any loans or other advances of money to any
Person, other than (i)&nbsp;for salary, travel advances, advances against commissions and other similar
advances to employees in the ordinary course of business, (ii)&nbsp;extensions of trade credit in
the ordinary course of business, (iii)&nbsp;deposits with financial institutions permitted under
this Agreement, (iv) intercompany advances (and repayments thereof) in the ordinary course of business
by MFRI to its Subsidiaries for such Subsidiaries&#146; working capital needs and (v)&nbsp;prepaid
expenses.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>8.2.3<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Total Indebtedness</U>. Create, incur, assume, or suffer to exist, or permit any Subsidiary of any Borrower to create, incur
or suffer to exist, any Indebtedness, except:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(i)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Obligations owing to Agent or any Lender under this Agreement or any of the other Loan Documents;</FONT></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>33</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(ii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Indebtedness, including without limitation Subordinated Debt, existing on the date of this Agreement
and listed on <U>Exhibit&nbsp;8.2.3</U>;</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(iii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Permitted Purchase Money Indebtedness;</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(iv)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> contingent liabilities arising out of endorsements of checks and other negotiable instruments for
  deposit or collection in the ordinary course of business;</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(v)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Guaranties of any Indebtedness permitted hereunder;</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(vi)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Indebtedness in respect of intercompany advances permitted by Section 8.2.2(iv);</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(vii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> obligations to pay Rentals permitted by subsection&nbsp;8.2.18;</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(viii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Indebtedness outstanding pursuant to the Term Loan Documents;</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(ix)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> IRB Indebtedness;</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(x)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Existing Mortgage Indebtedness;</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(xi)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Money Borrowed (either as an operating loan or a real estate mortgage loan) in a principal amount
  not to exceed Seven Hundred Fifty Thousand Dollars ($750,000) invested by Midwesco&#146;s Danish
  Subsidiaries and guaranteed by Midwesco and/or MFRI;</FONT></p></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(xii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Indebtedness incurred in connection with the Lebanon Refinancing;</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(xiii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> to the extent not included above, trade payables, accruals and accounts payable in the ordinary course
  of business (in each case to the extent not overdue) not for Money Borrowed; and</FONT></p></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(xiv)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Indebtedness not included in paragraphs&nbsp;(i) through (xiii) above which does not exceed at any
  time, in the aggregate, the sum of One Million Dollars ($1,000,000).</FONT></p></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>8.2.4<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Affiliate Transactions</U>. Enter into, or be a party to, or permit any Subsidiary of any Borrower to enter into or be a party
to, any transaction with any Affiliate of any Borrower or any holder of any Securities of any Borrower
or any Subsidiary of any Borrower, including without limitation any management, consulting or similar
fees, except in the ordinary course of and pursuant to the reasonable requirements of the applicable
Borrower&#146;s or such Subsidiary&#146;s business and upon fair and reasonable terms which are fully
disclosed to Agent and are no less favorable to such Borrower or such Subsidiary than would be obtained
in a comparable arms-length transaction with a Person not an Affiliate or Security holder of Borrower.
Agent acknowledges the Management Services Agreement dated December&nbsp;30, 1996 between MFRI, Inc.
and Midwesco Illinois, Inc., as amended prior to the Closing Date, meets the requirements of, and
is permissible under, this Section 8.2.4. Borrowers covenant that true and </FONT></P></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>34</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>correct copies of such Services Agreement and all amendments thereto have been delivered to Agent.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>8.2.5<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Limitation on Liens</U>. Create or suffer to exist, or permit any Subsidiary of any Borrower to create or suffer to exist,
any Lien upon any of its Property, income or profits, whether now owned or hereafter acquired, except:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(i)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Liens at any time granted in favor of Agent for the benefit of Lenders;</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(ii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Liens for taxes, assessments or governmental charges (excluding any Lien imposed pursuant to any of
  the provisions of ERISA) not yet due, or being contested in the manner described in subsection&nbsp;7.1.14
  hereto, but only if in Agent&#146;s judgment such Lien would not reasonably be expected to adversely
  effect Agent&#146;s rights or the priority of Agent&#146;s lien on any Collateral;</FONT></p></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(iii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Liens arising in the ordinary course of the business of any Borrower or any of its Subsidiaries by
  operation of law or regulation, but only if payment in respect of any such Lien is not at the time
  required and such Liens do not, in the aggregate, materially detract from the value of the Property
  of any Borrower or any of its Subsidiaries or materially impair the use thereof in the operation
  of the business of any Borrower or any of its Subsidiaries;</FONT></p></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(iv)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Purchase Money Liens securing Permitted Purchase Money Indebtedness; </FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(v)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> such other Liens as appear on <U>Exhibit&nbsp;8.2.5</U> hereto; </FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(vi)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Liens incurred or deposits made in the ordinary course of business in connection with (1)&nbsp;worker&#146;s
  compensation, social security, unemployment insurance and other like laws or (2)&nbsp;sales contracts,
  leases, statutory obligations, work in progress advances and other similar obligations not incurred
  in connection with the borrowing of money or the payment of the deferred purchase price of property;</FONT></p></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(vii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> reservations, covenants, zoning and other land use regulations, title exceptions or encumbrances granted
  in the ordinary course of business, affecting real Property owned or leased by any Borrower or one
  of its Subsidiaries; <U>provided</U> that such exceptions do not in the aggregate materially interfere with the use of such Property in
  the ordinary course of such Borrower&#146;s or such Subsidiary&#146;s business;</FONT></p></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(viii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> judgment Liens that do not give rise to an Event of Default under subsection&nbsp;10.1.15;</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(ix)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Liens securing Indebtedness outstanding under the Term Loan Documents;</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(x)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Liens securing the IRB Indebtedness;</FONT></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>35</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(xi)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Liens on a Borrower&#146;s or Guarantor&#146;s real Property, improvements, and Fixtures securing
  the Existing Mortgage Indebtedness;</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(xii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Liens on the real Property of Midwesco&#146;s Danish Subsidiaries securing Money Borrowed of such
  Danish Subsidiaries;</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(xiii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Liens securing the Lebanon Refinancing;</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(xiv)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Liens incurred in connection with the Computer Sale and Leaseback; and</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(xv)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> such other Liens as Majority Lenders may hereafter approve in writing.</FONT></div></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>8.2.6<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Payments and Amendments of Certain Debt</U>.</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(i)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Except as otherwise provided for in subsection 8.2.6(ii) below, (a)&nbsp;make or permit any Subsidiary
  of any Borrower to prepay or repurchase, directly or indirectly, any portion of (x) the Indebtedness
  evidenced by the Term Loan Documents, (y) the Existing Mortgage Indebtedness, (z) any Indebtedness
  incurred in connection with the Lebanon Refinancing, or (aa) the IRB Indebtedness or (b) amend or
  modify (x) any agreement, instrument, or document evidencing or relating to Existing Mortgage Indebtedness,
  (y) the provisions of the Term Loan Documents relating to interest rates, principal amortizations
  and financial covenants, (z) any agreement, instrument or document evidencing or relating to the
  Lebanon Refinancing, or (aa) any agreement, instrument or document relating to the IRB Indebtedness,
  in any case in a manner materially adverse to Borrowers or Agent and Lenders.</FONT></p></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(ii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> The foregoing notwithstanding, (x) upon the closing of the Lebanon Refinancing, Borrowers may prepay
  the Indebtedness outstanding under the Term Loan Documents in an amount equal to the excess, if any,
  of the proceeds from the Lebanon Refinancing over One Million Dollars ($1,000,000); (y) after the
  closing of the Lebanon Refinancing, Borrowers may prepay the Indebtedness outstanding under the Term
  Loan Documents in an amount not to exceed the excess, if any, of the principal amount of Indebtedness
  outstanding under the Term Loan Documents over Five Million Dollars ($5,000,000) if, after giving
  effect to any such prepayment, Availability equals or exceeds Two Million Five Hundred Thousand Dollars
  ($2,500,000) and no Event of Default exists and is continuing; and (z) Borrowers may make any other
  mandatory payment required under the terms and conditions of the Note Purchase Agreements (as such
  terms and conditions exist as of the Closing Date).</FONT></p></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>8.2.7<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Distributions</U>. Except as otherwise provided for in Section 8.2.6, declare or make, or permit any Subsidiary of any
Borrower to declare or make, any Distributions, except for:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(i)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Distributions by any Subsidiary of a Borrower to another Borrower;</FONT></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>36</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(ii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Distributions paid solely in Securities of a Borrower or any of its Subsidiaries;</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(iii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Distributions by MFRI in amounts necessary to permit MFRI to repurchase Securities of MFRI from employees
  of MFRI or any of its Subsidiaries upon the termination of their employment, so long as no Default
  or Event of Default exists at the time of or would be caused by the making of such Distributions
  and the aggregate cash amount of such Distributions, measured at the time when made, does not exceed
  Fifty Thousand Dollars ($50,000) in any fiscal year of MFRI; </FONT></p></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(iv)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> (x)&nbsp;Upon the closing of the Lebanon Refinancing, Borrowers may prepay the Indebtedness outstanding
  under the Term Loan Documents in an amount equal to the excess, if any, of the proceeds from the
  Lebanon Refinancing over One Million Dollars ($1,000,000); (y)&nbsp;after the closing of the Lebanon
  Refinancing, Borrowers may prepay the Indebtedness outstanding under the Term Loan Documents, in
  an amount not to exceed the excess, if any, of the principal amount of the Indebtedness outstanding
  under the Term Loan Documents over Five Million Dollars ($5,000,000) if, after giving effect to any
  such prepayment, Availability equals or exceeds Two Million Five Hundred Thousand Dollars ($2,500,000)
  and no Event of Default exists and is continuing; and </FONT></p></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(v)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Repurchases by MFRI of outstanding shares of its publicly owned common stock <U>provided</U> that after giving effect to any such repurchase, each of the following conditions precedent is satisfied:&nbsp;(1)&nbsp;no
  Default of Event of Default has occurred and is continuing; (2)&nbsp;Availability equals or exceeds
  Five Million Dollars ($5,000,000); and (3) such repurchase is made after the first anniversary date
  of the Closing Date.</FONT></p></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>8.2.8<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Capital Expenditures</U>. Make Capital Expenditures (including, without limitation, by way of capitalized leases) which, in
the aggregate, as to MFRI and all of its Subsidiaries, exceed during any fiscal year of Borrowers
the amount of Four Million Dollars ($4,000,000).</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>8.2.9<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Disposition of Assets</U>. Sell, lease or otherwise dispose of any of, or permit any Subsidiary of any Borrower to sell, lease
or otherwise dispose of any of, its Properties, including any disposition of Property as part of
a sale and leaseback transaction, to or in favor of any Person, except for:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(i)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> sales of Inventory in the ordinary course of business;</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(ii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> transfers of Property to a Borrower by a Subsidiary of a Borrower;</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(iii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> dispositions of Property that is substantially worn, damaged, uneconomic or obsolete (subject to subsection&nbsp;6.4.2
  hereof);</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(iv)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> dispositions of investments described in paragraphs&nbsp;(iv), (v), (vi) and (vii) of the definition
  of the term &#147;Restricted Investments&#148;; and</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(v)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> other dispositions expressly authorized by this Agreement.</FONT></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>37</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>8.2.10<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Securities of Subsidiaries</U>. Permit any Subsidiaries of any Borrower to issue any additional Securities except to a Borrower and
except for director&#146;s qualifying Securities.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>8.2.11<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Bill-and-Hold Sales, Etc</U>. Make, or permit any Subsidiary of any Borrower to make, a sale to any customer on a bill-and-hold,
guaranteed sale, sale and return, sale on approval, repurchase or return or consignment basis; <U>provided</U>, that Borrowers shall be permitted to make bill and hold sales if so requested by a customer in writing
which writing shall contain an acknowledgement that such customer is obligated to pay for the Inventory
subject to the bill and hold sale. Borrowers, upon request by Agent, shall deliver to Agent copies
of any such written requests and acknowledgements.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>8.2.12<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Restricted Investment</U>. Make or have, or permit any Subsidiary of any Borrower to make or have, any Restricted Investment.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>8.2.13<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Subsidiaries and Joint Ventures</U>. Create, acquire or otherwise suffer to exist, or permit any Subsidiary of any Borrower to create,
acquire or otherwise suffer to exist, any Subsidiary or joint venture arrangement not in existence
as of the date hereof.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>8.2.14<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Tax Consolidation</U>. File or consent to the filing of any consolidated income tax return with any Person other than Borrowers&#146;
Subsidiaries.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>8.2.15<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Organizational Documents</U>. Agree to, or suffer to occur, any amendment, supplement or addition to its or any of its Subsidiaries&#146;
charter, articles or certificate of incorporation, certificate of formation, limited partnership
agreement, bylaws, limited liability agreement, operating agreement or other organizational documents
(as the case may be), that would reasonably be expected to have a Material Adverse Effect.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>8.2.16<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Fiscal Year End</U>. Change, or permit any Subsidiary of any Borrower to change, its fiscal year end.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>8.2.17<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Negative Pledges</U>. Enter into any agreement limiting the ability of any Borrower or any of its Subsidiaries to voluntarily
create Liens upon any of its Property.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>8.2.18<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Leases</U>. Become, or permit any of its Subsidiaries to become, a lessee under any operating lease (other than
a lease under which any Borrower or any of its Subsidiaries is lessor) of Property if the aggregate
Rentals payable during any current or future period of twelve (12) consecutive months under the lease
in question and all other leases under which Borrowers or any of their Subsidiaries is then lessee
would exceed Two Million Two Hundred Thousand Dollars ($2,200,000). The term &#147;Rentals&#148;
means, as of the date of determination, all payments which the lessee is required to make by the
terms of any lease.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="a49"></a>&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>8.3<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Specific Financial Covenants</U>.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>During the Term, and thereafter for so long as there are any Obligations outstanding, Borrowers covenant
that, unless otherwise consented to by Majority Lenders, in writing, they shall comply with all of
the financial covenants set forth in <U>Exhibit&nbsp;8.3</U> hereto. If at any time MFRI shall, in its reasonable judgment and after consulting with its independent
certified </FONT></P></TD></TR></TABLE>
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<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>38</FONT></P>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>accountants, determine that a change in GAAP shall have occurred after the Closing Date and that such
change will have a Material Adverse Effect on the ability of Borrowers to comply with any one or
more of the financial covenants in this Agreement, Agent will, upon the written request of MFRI,
negotiate in good faith with Borrowers, to attempt to reach agreement within a reasonable period
of time as to the terms of one or more mutually agreeable amendments, in accordance with Section
11.10, with respect to such financial covenants (or the definitions utilized therein) such that the
Material Adverse Effect of such change in GAAP on the ability of Borrowers to comply with such financial
covenants is fairly and equitably adjustment for, taking into account the nature of such change and
the original purpose of such financial covenants (or the definitions utilized therein). Each written
request by MFRI pursuant to the second sentence of this Section 8.3 shall be accompanied by (i) a
statement from the independent certified public accountants of MFRI describing the applicable change
in GAAP and demonstrating, on a pro forma basis and in reasonable detail, the effect that such change
would have in respect of the computations or statements, as the case may be, required by the applicable
covenants herein if such change had been effective throughout the financial year of MFRI then most
recently ended and (ii) a statement of one or more specific amendment provisions then proposed by
MFRI in connection with such change in GAAP. Unless and until such mutually agreeable amendments
shall have become effective in accordance with Section 11.10, such financial covenants (and the definitions
used therein) shall remain unchanged and in full force and effect.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B><a name="a50"></a>SECTION&nbsp;9. &nbsp;CONDITIONS PRECEDENT</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>Notwithstanding any other provision of this Agreement or any of the other Loan Documents, and without
affecting in any manner the rights of Agent or any Lender under the other sections of this Agreement,
no Lender shall be required to make any Loan, nor shall Agent be required to or issue or procure
any Letter of Credit or LC Guaranty unless and until each of the following conditions has been and
continues to be satisfied:</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="a51" id="a51"></a>&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>9.1<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Documentation</U>.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>Agent shall have received, in form and substance satisfactory to Agent and its counsel, a duly executed
copy of this Agreement and the other Loan Documents, together with such additional documents, instruments,
opinions and certificates as Agent and its counsel shall require in connection therewith from time
to time, all in form and substance satisfactory to Agent and its counsel.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="a52" id="a52"></a>&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>9.2<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>No Default</U>.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>No Default or Event of Default shall exist.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><a name="a53"></a>9.3<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Other Conditions</U>.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>Each of the conditions precedent set forth in the Loan Documents shall have been satisfied.</FONT></P></TD></TR></TABLE>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="a54"></a>&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>9.4<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Availability</U>.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>Agent shall have determined that immediately after Lenders have made the initial Loans and after Agent
has issued or procured the initial Letters of Credit and LC Guaranties contemplated hereby, and Borrowers
have paid (or, if accrued, treated as paid), all closing costs incurred in connection with the transactions
contemplated hereby and have reserved an appropriate amount necessary to pay all trade payables greater
than 60 days past due, Availability shall not be less than Two Million Five Hundred Thousand Dollars
($2,500,000).</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="a55"></a>&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>9.5<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>No Litigation</U>.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>No action, proceeding, investigation, regulation or legislation shall have been instituted, threatened
or proposed before any court, governmental agency or legislative body to enjoin, restrain or prohibit,
or to obtain damages in respect of, or which is related to or arises out of this Agreement or the
consummation of the transactions contemplated hereby.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="a56"></a></FONT><FONT face="Times New Roman, Times, Serif" size=2>9.6<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Material Adverse Effect</U>.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>As of the Closing Date, except as disclosed herein, since February 28, 2002, there has not been any
material adverse change in its business, assets, financial condition, income or prospects and no
event or condition exists which would be reasonably likely to result in any Material Adverse Effect.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="a57"></a></FONT><FONT face="Times New Roman, Times, Serif" size=2>9.7<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Term Loan</U>. Borrowers and the holders of the Indebtedness outstanding under the Term Loan Documents shall have
entered into such amendments and modifications to the Term Loan Documents as are acceptable to Agent
in its sole discretion and the holders of the Indebtedness outstanding under the Term Loan Documents
shall have entered into the Intercreditor Agreement, which Intercreditor Agreement shall be in form
and substance acceptable to Agent.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="a58"></a>&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>9.8<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Consultant</U>. Agent shall have reviewed the work performed for Borrowers by Silverman Consulting and shall have
been satisfied with the scope and content of such work.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B><a name="a59"></a>SECTION&nbsp;10. &nbsp;EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><a name="a60"></a>10.1<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Events of Default</U>.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>The occurrence of one or more of the following events shall constitute an &#147;Event of Default&#148;:</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>10.1.1<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Payment of Obligations</U>. Borrowers shall fail to pay any of the Obligations hereunder or under any Note on the due date thereof
(whether due at stated maturity, on demand, upon acceleration or otherwise).</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>10.1.2<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Misrepresentations</U>. Any representation, warranty or other statement made or furnished to Agent or any Lender by or on
behalf of any Borrower, any Subsidiary of any Borrower or any Guarantor in this Agreement, any of
the other Loan Documents or any instrument, certificate or financial statement furnished in compliance
with or in reference thereto </FONT></P></TD></TR></TABLE>
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<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>40</FONT></P>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>proves to have been false or misleading in any material respect when made, furnished or reaffirmed
pursuant to Section&nbsp;7.2 hereof.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>10.1.3<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Breach of Specific Covenants</U>. Any Borrower shall fail or neglect to perform, keep or observe any covenant contained in Section&nbsp;or
subsection&nbsp;5.2, 5.3, 6.1.2, 6.2.4, 6.2.5, 8.1.1, 8.1.2, 8.1.4, 8.1.8, 8.2 or 8.3 hereof on the
date that any Borrower is required to perform, keep or observe such covenant or shall fail or neglect
to perform, keep or observe any covenant contained in Section&nbsp;6.1.1, 8.1.3 or 8.1.7 hereof within
5 days following the date on which such Borrower is required to perform, keep or observe such covenant.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>10.1.4<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Breach of Other Covenants</U>. Any Borrower shall fail or neglect to perform, keep or observe any covenant contained in this Agreement
(other than a covenant which is dealt with specifically elsewhere in Section&nbsp;10.1 hereof) and
the breach of such other covenant is not cured to Agent&#146;s satisfaction within 30 days after
the sooner to occur of such Borrower&#146;s receipt of notice of such breach from Agent or the date
on which such failure or neglect first becomes known to any officer of any Borrower.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>10.1.5<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Default Under Security Documents or Other Agreements</U>. Any event of default shall occur under, or any Borrower, any of its Subsidiaries or any other Guarantor
shall default in the performance or observance of any term, covenant, condition or agreement contained
in, any of the Security Documents or the Other Agreements and such default shall continue beyond
any applicable grace period.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>10.1.6<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Other Defaults</U>. There shall occur any default or event of default on the part of any Borrower, any Subsidiary of
any Borrower or any other Guarantor under any agreement, document or instrument to which any Borrower,
such Subsidiary of any Borrower or such Guarantor is a party or by which any Borrower, such Subsidiary
of any Borrower or such Guarantor or any of its Property is bound, evidencing or relating to any
Indebtedness (other than the Obligations) with an outstanding principal balance in excess of One
Million Dollars ($1,000,000), if the payment or maturity of such Indebtedness is or could be accelerated
in consequence of such event of default or demand for payment of such Indebtedness is made or could
be made in accordance with the terms thereof.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>10.1.7<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Uninsured Losses</U>. Any material loss, theft, damage or destruction of any portion of the Collateral having a fair market
value of One Hundred Thousand ($100,000), in the aggregate, if not fully covered (subject to such
deductibles and self-insurance retentions as Agent shall have permitted) by insurance.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>10.1.8<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Insolvency and Related Proceedings</U>. Any Borrower, any Subsidiary of any Borrower or any other Guarantor shall cease to be Solvent or
shall suffer the appointment of a receiver, trustee, custodian or similar fiduciary, or shall make
an assignment for the benefit of creditors, or any petition for an order for relief shall be filed
by or against any Borrower, any Subsidiary of any Borrower or any other Guarantor under U.S. federal
bankruptcy laws (if against Borrower, any Subsidiary of any Borrower or any other Guarantor the continuation
of such proceeding for more than 60 days), or any Borrower, any Subsidiary of any Borrower or any
other Guarantor shall make any offer of settlement, extension or composition to their respective
unsecured creditors generally.</FONT></P></TD></TR></TABLE>
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<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>41</FONT></P>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>10.1.9<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Business Disruption; Condemnation</U>. There shall occur a cessation of a substantial part of the business of any Borrower, any Subsidiary
of any Borrower or any other Guarantor which could reasonably be expected to have a Material Adverse
Effect, or any Borrower, any Subsidiary of any Borrower or any other Guarantor shall suffer the loss
or revocation of any material license or permit now held or hereafter acquired by such Borrower,
any Subsidiary of any Borrower or any other Guarantor which is necessary to the continued or lawful
operation of its business; or any Borrower, any Subsidiary of any Borrower or any other Guarantor
shall be enjoined, restrained or in any way prevented by court, governmental or administrative order
from conducting all or any material part of its business affairs; or any material lease or agreement
pursuant to which any Borrower, any Subsidiary of any Borrower or any other Guarantor leases, uses
or occupies any Property shall be canceled or terminated prior to the expiration of its stated term,
except any such lease or agreement the cancellation or termination of which could not reasonably
be expected to have a Material Adverse Effect; or any material portion of the Collateral shall be
taken through condemnation or the value of such Property shall be impaired through condemnation.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>10.1.10<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;</FONT> <U>Change of Ownership</U>. (a)&nbsp;A Change of Control shall have occurred or (b)&nbsp;MFRI shall cease to own and control,
beneficially and of record (directly or indirectly), one hundred percent (100%) of the issued and
outstanding Securities and Voting Stock of each other Borrower and each of their other Subsidiaries.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>10.1.11<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;</FONT> <U>ERISA</U>. &nbsp;A Reportable Event shall occur which, in Agent&#146;s determination, constitutes grounds for
the termination by the Pension Benefit Guaranty Corporation of any Plan or for the appointment by
the appropriate United States district court of a trustee for any Plan, or any Plan shall be terminated
or any such trustee shall be requested or appointed, or if any Borrower, any Subsidiary of any Borrower
or any other Guarantor is in &#147;default&#148; (as defined in Section&nbsp;4219(c)(5) of ERISA)
with respect to payments to a Multiemployer Plan resulting from any such Borrower&#146;s, such Subsidiary&#146;s
or such Guarantor&#146;s complete or partial withdrawal from such Plan and any such event could reasonably
be expected to have a Material Adverse Effect.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>10.1.12<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;</FONT> <U>Challenge to Agreement</U>. Any Borrower, any Subsidiary of any Borrower or any other Guarantor, or any Affiliate of any of them,
shall challenge or contest in any action, suit or proceeding the validity or enforceability of this
Agreement or any of the other Loan Documents, the legality or enforceability of any of the Obligations
or the perfection or priority of any Lien granted to Agent.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>10.1.13<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;</FONT> <U>Repudiation of or Default Under Guaranty Agreement</U>. Any Guarantor shall revoke or attempt to revoke the Guaranty Agreement signed by such Guarantor,
or shall repudiate such Guarantor&#146;s liability thereunder or shall be in default under the terms
thereof.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>10.1.14<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;</FONT> <U>Criminal Forfeiture</U>. Any Borrower, any Subsidiary of any Borrower or any other Guarantor shall be criminally indicted
or convicted under any law that could lead to a forfeiture of any Property of any Borrower, any Subsidiary
of any Borrower or any other Guarantor.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>10.1.15<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;</FONT> <U>Judgments</U>. Any money judgments, writ of attachment or similar processes (collectively, &#147;Judgments&#148;)
are issued or rendered against any Borrower, any </FONT></P></TD></TR></TABLE>
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<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>42</FONT></P>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Subsidiary of any Borrower or any other Guarantor, or any of their respective Property (i)&nbsp;in
the case of money judgments, in an amount of One Hundred Thousand Dollars ($100,000) or more for
any single judgment, attachment or process or Three Hundred Thousand Dollars ($300,000) or more for
all such judgments, attachments or processes in the aggregate, in each case in excess of any applicable
insurance with respect to which the insurer has admitted liability, and (ii)&nbsp;in the case of
non-monetary Judgments, such Judgment or Judgments (in the aggregate) could reasonably be expected
to have a Material Adverse Effect, in each case which Judgment is not stayed, released or discharged
within 30 days.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>10.1.16<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;</FONT> <U>Material Adverse Effect</U>. Any event occurs which would reasonably be expected to have a Material Adverse Effect.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><a name="a61"></a>10.2<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Acceleration of the Obligations</U>.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>Upon or at any time after the occurrence and during the continuance of an Event of Default, (i)&nbsp;the
Revolving Loan Commitments shall, at the option of Agent or Majority Lenders be terminated and/or
(ii)&nbsp;Agent or Majority Lenders may declare all or any portion of the Obligations at once due
and payable without presentment, demand protest or further notice by Agent or any Lender, and Borrowers
shall forthwith pay to Agent, the full amount of such Obligations, <U>provided</U>, that upon the occurrence of an Event of Default specified in subsection&nbsp;10.1.8 hereof, the Revolving
Loan Commitments shall automatically be terminated and all of the Obligations shall become automatically
due and payable, in each case without declaration, notice or demand by Agent or any Lender.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><a name="a62"></a>10.3<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Other Remedies</U>.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>Upon the occurrence and during the continuance of an Event of Default, Agent shall have and may exercise
from time to time the following other rights and remedies:</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>10.3.1<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> All of the rights and remedies of a secured party under the UCC or under other applicable law, and
all other legal and equitable rights to which Agent or Lenders may be entitled, all of which rights
and remedies shall be cumulative and shall be in addition to any other rights or remedies contained
in this Agreement or any of the other Loan Documents, and none of which shall be exclusive.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>10.3.2<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> The right to take immediate possession of the Collateral, and to (i)&nbsp;require each Borrower and
each of its Subsidiaries to assemble the Collateral, at Borrowers&#146; expense, and make it available
to Agent at a place designated by Agent which is reasonably convenient to both parties, and (ii)&nbsp;enter
any premises where any of the Collateral shall be located and to keep and store the Collateral on
said premises until sold (and if said premises be the Property of a Borrower or any Subsidiary of
a Borrower, such Borrower agrees not to charge, or permit any of its Subsidiaries to charge, Agent
for storage thereof).</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>10.3.3<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> The right to sell or otherwise dispose of all or any Collateral in its then condition, or after any
further manufacturing or processing thereof, at public or private sale or sales, with such notice
as may be required by law, in lots or in bulk, for cash or on credit, all as Agent, in its sole discretion,
may deem advisable. Agent may, at Agent&#146;s option, disclaim any and all warranties regarding
the Collateral in connection with any such sale. Each Borrower </FONT></P></TD></TR></TABLE>
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<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>43</FONT></P>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>agrees that 10 days&#146; written notice to Borrowers or any of their Subsidiaries of any public or
private sale or other disposition of Collateral shall be reasonable notice thereof, and such sale
shall be at such locations as Agent may designate in said notice. Agent shall have the right to conduct
such sales on any Borrower&#146;s or any of their Subsidiaries&#146; premises, without charge therefor,
and such sales may be adjourned from time to time in accordance with applicable law. Agent shall
have the right to sell, lease or otherwise dispose of the Collateral, or any part thereof, for cash,
credit or any combination thereof, and Agent, on behalf of Lenders, may purchase all or any part
of the Collateral at public or, if permitted by law, private sale and, in lieu of actual payment
of such purchase price, may set off the amount of such price against the Obligations. The proceeds
realized from the sale of any Collateral may be applied, after allowing two (2) Business Days for
collection, first to the costs, expenses and attorneys&#146; fees incurred by Agent in collecting
the Obligations, in enforcing the rights of Agent and Lenders under the Loan Documents and in collecting,
retaking, completing, protecting, removing, storing, advertising for sale, selling and delivering
any Collateral, second to the interest due upon any of the Obligations; and third, to the principal
of the Obligations. If any deficiency shall arise, each Borrower and each Guarantor shall remain
jointly and severally liable to Agent and Lenders therefor.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>10.3.4<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Agent is hereby granted a license or other right to use, without charge, each Borrower&#146;s and
each of its Subsidiary&#146;s labels, patents, copyrights, licenses, rights of use of any name, trade
secrets, trade names, trademarks and advertising matter, or any Property of a similar nature, as
it pertains to the Collateral, in completing, advertising for sale and selling any Collateral and
each Borrower&#146;s and each of its Subsidiary&#146;s rights under all licenses and all franchise
agreements shall inure to Agent&#146;s benefit.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>10.3.5<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Agent may, at its option, require Borrowers to deposit with Agent funds equal to the LC Amount and,
if Borrowers fail to promptly make such deposit, Agent may advance such amount as a Revolving Credit
Loan (whether or not an Overadvance is created thereby). Each such Revolving Credit Loan shall be
secured by all of the Collateral and shall constitute a Base Rate Portion. Any such deposit or advance
shall be held by Agent as a reserve to fund future payments on such LC Guaranties and future drawings
against such Letters of Credit. At such time as all LC Guaranties have been paid or terminated and
all Letters of Credit have been drawn upon or expired, any amounts remaining in such reserve shall
be applied against any outstanding Obligations, or, if all Obligations have been indefeasibly paid
in full, returned to Borrowers.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><a name="a63"></a>10.4<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Set Off and Sharing of Payments</U>.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>In addition to any rights now or hereafter granted under applicable law and not by way of limitation
of any such rights, during the continuance of any Event of Default, each Lender is hereby authorized
by Borrowers at any time or from time to time, with prior written consent of Agent and with reasonably
prompt subsequent notice to Borrowers (any prior or contemporaneous notice to Borrowers being hereby
expressly waived) to set off and to appropriate and to apply any and all (i)&nbsp;balances held by
such Lender at any of its offices for the account of any Borrower or any of its Subsidiaries (regardless
of whether such balances are then due to such Borrowers or its Subsidiaries), and (ii)&nbsp;other
property at any time held or owing by such Lender to or for the credit or for the account of any
Borrower or any of its Subsidiaries, against and on account of any of the Obligations. Any Lender
exercising a right to set off shall, </FONT></P></TD></TR></TABLE>
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<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>44</FONT></P>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>to the extent the amount of any such set off exceeds its Revolving Loan Percentage of the amount set
off, purchase for cash (and the other Lenders shall sell) interests in each such other Lender&#146;s
pro rata share of the Obligations as would be necessary to cause such Lender to share such excess
with each other Lender in accordance with their respective Revolving Loan Percentages. Borrowers
agree, to the fullest extent permitted by law, that any Lender may exercise its right to set off
with respect to amounts in excess of its pro rata share of the Obligations and upon doing so shall
deliver such excess to Agent for the benefit of all Lenders in accordance with the Revolving Loan
Percentages.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="a64"></a></FONT><FONT face="Times New Roman, Times, Serif" size=2>10.5<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Remedies Cumulative; No Waiver</U>.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>All covenants, conditions, provisions, warranties, guaranties, indemnities, and other undertakings
of Borrowers contained in this Agreement and the other Loan Documents, or in any document referred
to herein or contained in any agreement supplementary hereto or in any schedule or in any Guaranty
Agreement given to Agent or any Lender or contained in any other agreement between any Lender and
any Borrower or between Agent and any Borrower heretofore, concurrently, or hereafter entered into,
shall be deemed cumulative to and not in derogation or substitution of any of the terms, covenants,
conditions, or agreements of Borrowers herein contained. The failure or delay of Agent or any Lender
to require strict performance by Borrowers of any provision of this Agreement or to exercise or enforce
any rights, Liens, powers, or remedies hereunder or under any of the aforesaid agreements or other
documents or security or Collateral shall not operate as a waiver of such performance, Liens, rights,
powers and remedies, but all such requirements, Liens, rights, powers, and remedies shall continue
in full force and effect until all Loans and other Obligations owing or to become owing from Borrowers
to Agent and each Lender have been fully satisfied. None of the undertakings, agreements, warranties,
covenants and representations of Borrowers contained in this Agreement or any of the other Loan Documents
and no Default or Event of Default by Borrowers under this Agreement or any other Loan Documents
shall be deemed to have been suspended or waived by Lenders, unless such suspension or waiver is
by an instrument in writing specifying such suspension or waiver and is signed by a duly authorized
representative of Agent and directed to Borrowers.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B><a name="a65"></a>SECTION&nbsp;11. &nbsp;AGENT</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><a name="a66"></a>11.1<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Authorization and Action</U>.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>Each Lender hereby appoints and authorizes Agent to take such action on its behalf and to exercise
such powers under this Agreement and the other Loan Documents as are delegated to Agent by the terms
hereof and thereof, together with such powers as are reasonably incidental thereto. Each Lender hereby
acknowledges that Agent shall not have by reason of this Agreement assumed a fiduciary relationship
in respect of any Lender. In performing its functions and duties under this Agreement, Agent shall
act solely as agent of Lenders and shall not assume, or be deemed to have assumed, any obligation
toward, or relationship of agency or trust with or for, any Borrower. As to any matters not expressly
provided for by this Agreement and the other Loan Documents (including without limitation enforcement
and collection of the Notes), Agent may, but shall not be required to, exercise any discretion or
take any action, but shall be required to act or to refrain from acting (and shall be fully protected
in so acting or </FONT></P></TD></TR></TABLE>
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<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>45</FONT></P>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>refraining from acting) upon the instructions of the Majority Lenders, whenever such instruction shall
be requested by Agent or required hereunder, or a greater or lesser number of Lenders if so required
hereunder, and such instructions shall be binding upon all Lenders; <U>provided</U>, that Agent shall be fully justified in failing or refusing to take any action which exposes Agent
to any liability or which is contrary to this Agreement, the other Loan Documents or applicable law,
unless Agent is indemnified to its satisfaction by the other Lenders against any and all liability
and expense which it may incur by reason of taking or continuing to take any such action. If Agent
seeks the consent or approval of the Majority Lenders (or a greater or lesser number of Lenders as
required in this Agreement), with respect to any action hereunder, Agent shall send notice thereof
to each Lender and shall notify each Lender at any time that the Majority Lenders (or such greater
or lesser number of Lenders) have instructed Agent to act or refrain from acting pursuant hereto.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="a67"></a></FONT><FONT face="Times New Roman, Times, Serif" size=2>11.2<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Agent&#146;s Reliance, Etc</U>.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>Neither Agent, any Affiliate of Agent, nor any of their respective directors, officers, agents or employees
shall be liable for any action taken or omitted to be taken by it or them under or in connection
with this Agreement or the other Loan Documents, except for its or their own gross negligence or
willful misconduct. Without limitation of the generality of the foregoing, Agent:&nbsp;(i)&nbsp;may
treat each Lender party hereto as the holder of Obligations until Agent receives written notice of
the assignment or transfer or such lender&#146;s portion of the Obligations signed by such Lender
and in form reasonably satisfactory to Agent; (ii)&nbsp;may consult with legal counsel, independent
public accountants and other experts selected by it and shall not be liable for any action taken
or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants
or experts, (iii)&nbsp;makes no warranties or representations to any Lender and shall not be responsible
to any Lender for any recitals, statements, warranties or representations made in or in connection
with this Agreement or any other Loan Documents; (iv)&nbsp;shall not have any duty beyond Agent&#146;s
customary practices in respect of loans in which Agent is the only lender, to ascertain or to inquire
as to the performance or observance of any of the terms, covenants or conditions of this Agreement
or the other Loan Documents on the part of Borrower, to inspect the property (including the books
and records) of any Borrower, to monitor the financial condition of Borrowers or to ascertain the
existence or possible existence or continuation of any Default or Event of Default; (v)&nbsp;shall
not be responsible to any Lender for the due execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or the other Loan Documents or any other instrument or document
furnished pursuant hereto or thereto; (vi)&nbsp;shall not be liable to any Lender for any action
taken, or inaction, by Agent upon the instructions of Majority Lenders pursuant to Section&nbsp;11.1
hereof or refraining to take any action pending such instructions; (vii)&nbsp;shall not be liable
for any apportionment or distributions of payments made by it in good faith pursuant to Section&nbsp;3
hereof; (viii)&nbsp;shall incur no liability under or in respect of this Agreement or the other Loan
Documents by acting upon any notice, consent, certificate, message or other instrument or writing
(which may be by telephone, facsimile, telegram, cable or telex) believed in good faith by it to
be genuine and signed or sent by the proper party or parties; and (ix)&nbsp;may assume that no Event
of Default has occurred and is continuing, unless Agent has actual knowledge of the Event of Default,
has received notice from any Borrower or Borrowers&#146; independent certified public accounts stating
the nature of the Event of Default, or has received notice from a Lender stating the nature of the
Event of Default and that such Lender considers the Event of Default to have occurred and to be </FONT></P></TD></TR></TABLE>
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<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>46</FONT></P>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>continuing. &nbsp;In the event any apportionment or distribution described in clause&nbsp;(vii)&nbsp;above
is determined to have been made in error, the sole recourse of any Person to whom payment was due
but not made shall be to recover from the recipients of such payments any payment in excess of the
amount to which they are determined to have been entitled.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="a68"></a></FONT><FONT face="Times New Roman, Times, Serif" size=2>11.3<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Fleet and Affiliates</U>.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>With respect to its commitment hereunder to make Loans, Fleet shall have the same rights and powers
under this Agreement and the other Loan Documents as any other Lender and may exercise the same as
though it were not Agent; and the terms &#147;Lender,&#148; &#147;Lenders&#148; or &#147;Majority
Lenders&#148; shall, unless otherwise expressly indicated, include Fleet in its individual capacity
as a Lender. Fleet and its Affiliates may lend money to, and generally engage in any kind of business
with, Borrowers, and any Person who may do business with or own Securities of any Borrower all as
if Fleet were not Agent and without any duty to account therefor to any other Lender.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><a name="a69"></a>11.4<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Lender Credit Decision</U>.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>Each Lender acknowledges that it has, independently and without reliance upon Agent or any other Lender
and based on the financial statements referred to herein and such other documents and information
as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement.
Each Lender also acknowledges that it will, independently and without reliance upon Agent or any
other Lender and based on such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under this Agreement. Agent
shall not have any duty or responsibility, either initially or on an ongoing basis, to provide any
Lender with any credit or other similar information regarding Borrowers.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><a name="a70"></a>11.5<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Indemnification</U>.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>Lenders agree to indemnify Agent (to the extent not reimbursed by any Borrower), in accordance with
their respective Aggregate Percentages, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by, or asserted against Agent in any way relating to
or arising out of this Agreement or any other Loan Document or any action taken or omitted by Agent
under this Agreement; <U>provided</U> that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting from Agent&#146;s
gross negligence or willful misconduct. Without limitation of the foregoing, each Lender agrees to
reimburse Agent promptly upon demand for its ratable share, as set forth above, of any out-of-pocket
expenses (including attorneys&#146; fees) incurred by Agent in connection with the preparation, execution,
delivery, administration, modification, amendment or enforcement (whether through negotiation, legal
proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this
Agreement and each other Loan Document, to the extent that Agent is not reimbursed for such expenses
by Borrowers. The obligations of Lenders under this Section&nbsp;11.5 shall survive the payment in
full of all Obligations and the termination of this Agreement. If after payment and distribution
of any amount by Agent to Lenders, any Lender or </FONT></P></TD></TR></TABLE>
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<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>47</FONT></P>
<HR color=gray noShade SIZE=5>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>any other Person, including any Borrower, any creditor of any Borrower, a liquidator, administrator
or trustee in bankruptcy, recovers from Agent any amount found to have been wrongfully paid to Agent
or disbursed by Agent to Lenders, then Lenders, in accordance with their respective Aggregate Percentages,
shall reimburse Agent for all such amounts.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="a71"></a></FONT><FONT face="Times New Roman, Times, Serif" size=2>11.6<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Rights and Remedies to be Exercised by Agent Only</U>.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>Each Lender agrees that, except as set forth in Section&nbsp;10.4, no Lender shall have any right individually
(i)&nbsp;to realize upon the security created by this Agreement or any other Loan Document, (ii)&nbsp;to
enforce any provision of this Agreement or any other Loan Document, or (iii)&nbsp;to make demand
under this Agreement or any other Loan Document.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="a72"></a></FONT><FONT face="Times New Roman, Times, Serif" size=2>11.7<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Agency Provisions Relating to Collateral</U>.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>Each Lender authorizes and ratifies Agent&#146;s entry into this Agreement and the Security Documents
for the benefit of Lenders. Each Lender agrees that any action taken by Agent with respect to the
Collateral in accordance with the provisions of this Agreement or the Security Documents, and the
exercise by Agent of the powers set forth herein or therein, together with such other powers as are
reasonably incidental thereto, shall be authorized and binding upon all Lenders. Agent is hereby
authorized on behalf of all Lenders, without the necessity of any notice to or further consent from
any Lender to take any action with respect to any Collateral or the Loan Documents which may be necessary
to perfect and maintain perfected Agent&#146;s Liens upon the Collateral, for its benefit and the
ratable benefit of Lenders. Lenders hereby irrevocably authorize Agent, at its option and in its
discretion, to release any Lien granted to or held by Agent upon any Collateral (i)&nbsp;upon termination
of the Agreement and payment and satisfaction of all Obligations; or (ii)&nbsp;constituting property
being sold or disposed of if Borrowers certify to Agent that the sale or disposition is made in compliance
with subsection&nbsp;8.2.9 hereof (and Agent may rely conclusively on any such certificate, without
further inquiry); or (iii)&nbsp;constituting property in which any Borrower owned no interest at
the time the Lien was granted or at any time thereafter; or (iv)&nbsp;in connection with any foreclosure
sale or other disposition of Collateral after the occurrence and during the continuation of an Event
of Default or (v)&nbsp;if approved, authorized or ratified in writing by Agent at the direction of
all Lenders. Upon request by Agent at any time, Lenders will confirm in writing Agent&#146;s authority
to release particular types or items of Collateral pursuant hereto. Agent shall have no obligation
whatsoever to any Lender or to any other Person to assure that the Collateral exists or is owned
by any Borrower or is cared for, protected or insured or has been encumbered or that the Liens granted
to Agent herein or pursuant to the Security Documents have been properly or sufficiently or lawfully
created, perfected, protected or enforced or are entitled to any particular priority, or to exercise
at all or in any particular manner or under any duty of care, disclosure or fidelity, or to continue
exercising, any of its rights, authorities and powers granted or available to Agent in this Section&nbsp;11.7
or in any of the Loan Documents, it being understood and agreed that in respect of the Collateral,
or any act, omission or event related thereto, Agent may act in any manner it may deem appropriate,
in its sole discretion, but consistent with the provisions of this Agreement, including given Agent&#146;s
own interest in the Collateral as a Lender and that Agent shall have no duty or liability whatsoever to any Lender.</FONT></P></TD></TR></TABLE>
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<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>48</FONT></P>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="a73" id="a73"></a></FONT><FONT face="Times New Roman, Times, Serif" size=2>11.8<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Agent&#146;s Right to Purchase Commitments</U>.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>Agent shall have the right, but shall not be obligated, at any time upon written notice to any Lender
and with the consent of such Lender, which may be granted or withheld in such Lender&#146;s sole
discretion, to purchase for Agent&#146;s own account all of such Lender&#146;s interests in this
Agreement, the other Loan Documents and the Obligations, for the face amount of the outstanding Obligations
owed to such Lender, including without limitation all accrued and unpaid interest and fees.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="a74"></a>&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>11.9<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Right of Sale, Assignment, Participations</U>.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>Borrowers hereby consent to any Lender&#146;s participation, sale, assignment, transfer or other disposition,
at any time or times hereafter, of this Agreement and any of the other Loan Documents, or of any
portion hereof or thereof, including, without limitation, such Lender&#146;s rights, title, interests,
remedies, powers, and duties hereunder or thereunder subject to the terms and conditions set forth
below:</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>11.9.1<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Sales, Assignments</U>. Each Lender hereby agrees that, with respect to any sale or assignment (i)&nbsp;no such sale or assignment
shall be for an amount of less than $5,000,000, (ii)&nbsp;each such sale or assignment shall be made
on terms and conditions which are customary in the industry at the time of the transaction, (iii)&nbsp;Agent
and, in the absence of a Default or Event of Default, MFRI, must consent, such consent not to be
unreasonably withheld, to each such assignment to a Person that is not an original signatory to this
Agreement, (iv)&nbsp;the assigning Lender shall pay to Agent a processing and recordation fee of
$3,500 and any out-of-pocket attorneys&#146; fees and expenses incurred by Agent in connection with
any such sale or assignment and (v)&nbsp;Agent, the assigning Lender and the assignee Lender shall
each have executed and delivered an Assignment and Acceptance Agreement. After such sale or assignment
has been consummated (x)&nbsp;the assignee Lender thereupon shall become a &#147;Lender&#148; for
all purposes of this Agreement and (y)&nbsp;the assigning Lender shall have no further liability
for funding the portion of Revolving Loan Commitments assumed by such other Lender.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>11.9.2<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Participations</U>. Any Lender may grant participations in its extensions of credit hereunder to any other Lender or
other lending institution (a &#147;Participant&#148;), <U>provided</U> that (i)&nbsp;no such participation shall be for an amount of less than $5,000,000, (ii)&nbsp;no Participant
shall thereby acquire any direct rights under this Agreement, (iii)&nbsp;no Participant shall be
granted any right to consent to any amendment, except to the extent any of the same pertain to (1)&nbsp;reducing
the aggregate principal amount of, or interest rate on, or fees applicable to, any Loan or (2)&nbsp;extending
the final stated maturity of any Loan or the stated maturity of any portion of any payment of principal
of, or interest or fees applicable to, any of the Loans; <U>provided</U>, that the rights described in this subclause&nbsp;(2) shall not be deemed to include the right to
consent to any amendment with respect to or which has the effect of requiring any mandatory prepayment
of any portion of any Loan or any amendment or waiver of any Default or Event of Default, (iv)&nbsp;no
sale of a participation in extensions of credit shall in any manner relieve the originating Lender
of its obligations hereunder, (v)&nbsp;the originating Lender shall remain solely responsible for
the performance of such obligations, (vi)&nbsp;Borrowers and Agent shall continue to deal solely
and directly with the originating Lender in connection with the originating Lender&#146;s rights
and obligations under this Agreement and the other Loan Documents, (vii)&nbsp;in no event shall any </FONT></P></TD></TR></TABLE>
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<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>49</FONT></P>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>financial institution purchasing the participation grant a participation in its participation interest
in the Loans without the prior written consent of Agent, and, in the absence of a Default or an Event
of Default, MFRI, which consents shall not unreasonably be withheld and (viii)&nbsp;all amounts payable
by Borrowers hereunder shall be determined as if the originating Lender had not sold any such participation.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>11.9.3<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Certain Agreements of Borrowers</U>. Borrowers agree that (i)&nbsp;each of them will use its best efforts to assist and cooperate with
each Lender in any manner reasonably requested by such Lender to effect the sale of participation
in or assignments of any of the Loan Documents or any portion thereof or interest therein, including,
without limitation, assisting in the preparation of appropriate disclosure documents and making members
of management available at reasonable times to meet with and answer questions of potential assignees
and Participants; and (ii)&nbsp;subject to the provisions of Section&nbsp;12.14 hereof, such Lender
may disclose credit information regarding Borrowers to any potential Participant or assignee.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>11.9.4<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Non U.S. Resident Transferees</U>. If, pursuant to this Section&nbsp;11.9, any interest in this Agreement or any Loans is transferred
to any transferee which is organized under the laws of any jurisdiction other than the United States
or any state thereof, the transferor Lender shall cause such transferee (other than any Participant),
and may cause any Participant, concurrently with and as a condition precedent to the effectiveness
of such transfer, to (i)&nbsp;represent to the transferor Lender (for the benefit of the transferor
Lender, Agent, and Borrowers) that under applicable law and treaties no taxes will be required to
be withheld by Agent, Borrowers or the transferor Lender with respect to any payments to be made
to such transferee in respect of the interest so transferred, (ii)&nbsp;furnish to the transferor
Lender, Agent and MFRI either United States Internal Revenue Service Form W-8BEN or United States
Internal Revenue Service Form W-8ECI (wherein such transferee claims entitlement to complete exemption
from United States federal withholding tax on all interest payments hereunder), and (iii)&nbsp;agree
(for the benefit of the transferor Lender, Agent and Borrowers) to provide the transferor Lender,
Agent and MFRI a new Form W-8BEN or Form W-8ECI upon the obsolescence of any previously delivered
form and comparable statements in accordance with applicable United States laws and regulations and
amendments duly executed and completed by such transferee, and to comply from time to time with all
applicable United States laws and regulations with regard to such withholding tax exemption.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="a75"></a></FONT><FONT face="Times New Roman, Times, Serif" size=2>11.10<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Amendment</U>.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>No amendment or waiver of any provision of this Agreement or any other Loan Document (including without
limitation any Note), nor consent to any departure by Borrowers therefrom, shall in any event be
effective unless the same shall be in writing and signed by the Majority Lenders and Borrowers, and
then such waiver or consent shall be effective only in the specific instance and for the specific
purpose for which given; <U>provided</U>, that no amendment, waiver or consent shall be effective, unless (i)&nbsp;in writing and signed by
each Lender, do any of the following:&nbsp;(1)&nbsp;increase or decrease the aggregate Loan Commitments,
or any Lender&#146;s Revolving Loan Commitment, (2)&nbsp;reduce the principal of, or interest on,
any amount payable hereunder or under any Note, other than those payable only to Fleet in its capacity
as Agent, which may be reduced by Fleet unilaterally, (3)&nbsp;increase or decrease any interest
rate payable hereunder, (4)&nbsp;postpone any date fixed for any payment of principal of, or interest
on, any </FONT></P></TD></TR></TABLE>
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<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>50</FONT></P>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>amounts payable hereunder or under any Note, other than those payable only to Fleet in its capacity
as Agent, which may be postponed by Fleet unilaterally, (5)&nbsp;increase any advance percentage
contained in the definition of the term <U>Borrowing Base</U>, (6)&nbsp;reduce the number of Lenders that shall be required for Lenders or any of them to take any
action hereunder, (7)&nbsp;release or discharge any Person liable for the performance of any obligations
of Borrowers hereunder or under any of the Loan Documents, (8)&nbsp;amend any provision of this Agreement
that requires the consent of all Lenders or consent to or waive any breach thereof, (9)&nbsp;amend
the definition of the term &#147;Majority Lenders&#148;, (10)&nbsp;amend this Section&nbsp;11.10
or (11)&nbsp;release any substantial portion of the Collateral, unless otherwise permitted pursuant
to Section&nbsp;11.7 hereof; or (ii)&nbsp;in writing and signed by Agent in addition to the Lenders
required above to affect the rights or duties of Agent under this Agreement, any Note or any other
Loan Document.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="a76"></a></FONT><FONT face="Times New Roman, Times, Serif" size=2>11.11<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Resignation of Agent; Appointment of Successor</U>.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>Agent may resign as Agent by giving not less than thirty (30) days&#146; prior written notice to Lenders
and Borrowers. If Agent shall resign under this Agreement, then, (i)&nbsp;subject to the consent
of MFRI (which consent shall not be unreasonably withheld and which consent shall not be required
during any period in which a Default or an Event of Default exists), Majority Lenders shall appoint
from among Lenders a successor agent for Lenders or (ii)&nbsp;if a successor agent shall not be so
appointed and approved within the thirty (30) day period following Agent&#146;s notice to Lenders
and Borrowers of its resignation, then Agent shall appoint a successor agent who shall serve as Agent
until such time as Majority Lenders appoint a successor agent, subject to MFRI&#146;s consent as
set forth above. Upon its appointment, such successor agent shall succeed to the rights, powers and
duties of Agent and the term &#147;Agent&#148; shall mean such successor effective upon its appointment,
and the former Agent&#146;s rights, powers and duties as Agent shall be terminated without any other
or further act or deed on the part of such former Agent or any of the parties to this Agreement.
After the resignation of any Agent hereunder, the provisions of this Section&nbsp;11 shall inure
to the benefit of such former Agent and such former Agent shall not by reason of such resignation
be deemed to be released from liability for any actions taken or not taken by it while it was an
Agent under this Agreement.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><a name="a77"></a>11.12<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Audit and Examination Reports; Disclaimer by Lenders</U>.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>By signing this Agreement, each Lender:</FONT></P></TD></TR>
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<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
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<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(a)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> is deemed to have requested that Agent furnish such Lender, promptly after it becomes available, a
  copy of each audit or examination report (each a &#147;Report&#148; and collectively, &#147;Reports&#148;)
  prepared by or on behalf of Agent;</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(b)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> expressly agrees and acknowledges that Agent (i)&nbsp;does not make any representation or warranty
  as to the accuracy of any Report, and (ii)&nbsp;shall not be liable for any information contained
  in any Report;</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(c)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> expressly agrees and acknowledges that the Reports are not comprehensive audits or examinations, that
  Agent or other party performing any audit or examination will inspect only specific information regarding
  Borrowers and will rely </FONT></div></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>51</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
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<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>significantly upon Borrowers&#146; books and records, as well as on representations of Borrowers&#146; personnel;</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(d)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> agrees to keep all Reports confidential and strictly for its internal use, and not to distribute except
  to its participants, or use any Report in any other manner, in accordance with the provisions of
  Section&nbsp;12.14; and</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(e)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> without limiting the generality of any other indemnification provision contained in this Agreement,
  agrees:&nbsp;(i)&nbsp;to hold Agent and any such other Lender preparing a Report harmless from any
  action the indemnifying Lender may take or conclusion the indemnifying Lender may reach or draw from
  any Report in connection with any loans or other credit accommodations that the indemnifying Lender
  has made or may make to Borrowers, or the indemnifying Lender&#146;s participation in, or the indemnifying
  Lender&#146;s purchase of, a loan or loans of Borrowers; and (ii)&nbsp;to pay and protect, and indemnify,
  defend and hold Agent and any such other Lender preparing a Report harmless from and against, the
  claims, actions, proceedings, damages, costs, expenses and other amounts (including attorney&#146;s
  fees and expenses) incurred by Agent and any such other Lender preparing a Report as the direct or
  indirect result of any third parties who might obtain all or part of any Report through the indemnifying Lender.</FONT></p></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B><a name="a78"></a>SECTION&nbsp;12. &nbsp;MISCELLANEOUS</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="a79"></a></FONT><FONT face="Times New Roman, Times, Serif" size=2>12.1<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Power of Attorney</U>.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>Each Borrower hereby irrevocably designates, makes, constitutes and appoints Agent (and all Persons
designated by Agent) as each such Borrower&#146;s true and lawful attorney (and agent-in-fact), solely
with respect to the matters set forth in this Section&nbsp;12.1, and Agent, or Agent&#146;s agent,
may, without notice to any Borrower and in any Borrower&#146;s or Agent&#146;s name, but at the cost
and expense of Borrowers:</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>12.1.1<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> At such time or times as Agent or said agent, in its sole discretion, may determine, endorse any Borrower&#146;s
name on any checks, notes, acceptances, drafts, money orders or any other evidence of payment or
proceeds of the Collateral which come into the possession of Agent or under Agent&#146;s control.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>12.1.2<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> At such time or times upon or after the occurrence and during the continuance of an Event of Default
(provided that the occurrence of an Event of Default shall not be required with respect to clauses&nbsp;(iv),
(vi), (viii) and (ix) below), as Agent or its agent in its sole discretion may determine: (i)&nbsp;demand
payment of the Accounts from the Account Debtors, enforce payment of the Accounts by legal proceedings
or otherwise, and generally exercise all of any Borrower&#146;s rights and remedies with respect
to the collection of the Accounts; (ii)&nbsp;settle, adjust, compromise, discharge or release any
of the Accounts or other Collateral or any legal proceedings brought to collect any of the Accounts
or other Collateral; (iii)&nbsp;sell or assign any of the Accounts and other Collateral upon such
terms, for such amounts and at such time or times as Agent deems advisable, and at Agent&#146;s option,
with all warranties regarding the Collateral disclaimed; (iv)&nbsp;take control, in any manner, of
any item of payment or proceeds relating to any Collateral; (v)&nbsp;prepare, file and sign any Borrower&#146;s
name to a proof of claim in bankruptcy or </FONT></P></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>52</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
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<TR>
<TD>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>similar document against any Account Debtor or to any notice of lien, assignment or satisfaction of
lien or similar document in connection with any of the Collateral; (vi)&nbsp;receive, open and dispose
of all mail addressed to any Borrower and notify postal authorities to change the address for delivery
thereof to such address as Agent may designate; (vii)&nbsp;endorse the name of any Borrower upon
any of the items of payment or proceeds relating to any Collateral and deposit the same to the account
of Agent on account of the Obligations; (viii)&nbsp;endorse the name of any Borrower upon any chattel
paper, document, instrument, invoice, freight bill, bill of lading or similar document or agreement
relating to the Accounts, Inventory and any other Collateral; (ix)&nbsp;use any Borrower&#146;s stationery
and sign the name of any Borrower to verifications of the Accounts and notices thereof to Account
Debtors; (x)&nbsp;use the information recorded on or contained in any data processing equipment and
Computer Hardware and Software relating to the Accounts, Inventory, Equipment and any other Collateral;
(xi)&nbsp;make and adjust claims under policies of insurance; and (xii)&nbsp;do all other acts and
things necessary, in Agent&#146;s determination, to fulfill any Borrower&#146;s obligations under this Agreement.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>The power of attorney granted hereby shall constitute a power coupled with an interest and shall be
irrevocable.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><a name="a80"></a>12.2<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Indemnity</U>.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>Each Borrower hereby agrees to indemnify Agent and each Lender (and each of their Affiliates) and hold
Agent and each Lender (and each of their Affiliates) harmless from and against any liability, loss,
damage, suit, action or proceeding ever suffered or incurred by any such Person (including reasonable
attorneys fees and legal expenses) as the result of any Borrower&#146;s failure to observe, perform
or discharge any Borrower&#146;s duties hereunder. In addition, Borrowers shall defend Agent and
each Lender (and each of their Affiliates) against and save it harmless from all claims of any Person
with respect to the Collateral (except those resulting from the gross negligence or intentional misconduct
of any such Person). Without limiting the generality of the foregoing, these indemnities shall extend
to any claims asserted against Agent or any Lender (and each of their Affiliates) by any Person under
any Environmental Laws by reason of any Borrower&#146;s or any other Person&#146;s failure to comply
with laws applicable to solid or hazardous waste materials or other toxic substances. Notwithstanding
any contrary provision in this Agreement, the obligation of any Borrower under this Section&nbsp;12.2
shall survive the payment in full of the Obligations and the termination of this Agreement.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="a81"></a></FONT><FONT face="Times New Roman, Times, Serif" size=2>12.3<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Sale of Interest</U>.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>No Borrower may sell, assign or transfer any interest in this Agreement, any of the other Loan Documents,
or any of the Obligations, or any portion thereof, including, without limitation, any Borrower&#146;s
rights, title, interests, remedies, powers, and duties hereunder or thereunder.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><a name="a82"></a>12.4<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Severability</U>.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective
and valid under applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the </FONT></P></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>53</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
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<TR>
<TD>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>extent of such prohibition or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="a83"></a></FONT><FONT face="Times New Roman, Times, Serif" size=2>12.5<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Successors and Assigns</U>.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>This Agreement, the Other Agreements and the Security Documents shall be binding upon and inure to
the benefit of the successors and assigns of each Borrower, Agent and each Lender permitted under
Section&nbsp;11.9 hereof.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><a name="a84"></a>12.6<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Cumulative Effect; Conflict of Terms</U>.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>The provisions of the Other Agreements and the Security Documents are hereby made cumulative with the
provisions of this Agreement. Except as otherwise provided in any of the other Loan Documents by
specific reference to the applicable provision of this Agreement, if any provision contained in this
Agreement is in direct conflict with, or inconsistent with, any provision in any of the other Loan
Documents, the provision contained in this Agreement shall govern and control.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><a name="a85"></a>12.7<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Execution in Counterparts</U>.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>This Agreement may be executed in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be an original and
all of which counterparts taken together shall constitute but one and the same instrument.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="a86"></a></FONT><FONT face="Times New Roman, Times, Serif" size=2>12.8<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Notice</U>.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>Except as otherwise provided herein, all notices, requests and demands to or upon a party hereto, to
be effective, shall be in writing, and shall be sent by certified or registered mail, return receipt
requested, by personal delivery against receipt, by overnight courier or by facsimile and, unless
otherwise expressly provided herein, shall be deemed to have been validly served, given, delivered
or received immediately when delivered against receipt, three (3) Business Days after deposit in
the mail, postage prepaid, one (1) Business Day after deposit with an overnight courier or, in the
case of facsimile notice, when sent, with receipt confirmed, addressed as follows:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<table width="600" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="50%" valign="top"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><font size="2" face="Times New Roman, Times, serif">If to Agent:</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Fleet Capital Corporation<br>
      One South Wacker Drive<br>
      Suite 1400<br>
      Chicago, Illinois&nbsp;60606<br>
      Attention:&nbsp;Loan Administration Manager<br>
    Facsimile No.:&nbsp;(312)&nbsp;827-4222</font></td>
  </tr>
</table>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>54</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>
<table width="600" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="50%" valign="top"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><font size="2" face="Times New Roman, Times, serif">With a copy to:</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Vedder, Price, Kaufman &amp; Kammholz<br>
    222 North LaSalle Street<br>
    Suite 2600<br>
    Chicago, Illinois&nbsp; 60601<br>
    Attention:&nbsp; John T. McEnroe<br>
    Facsimile No.:&nbsp; (312) 609-5005</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><font size="2" face="Times New Roman, Times, serif">If to Borrowers</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">c/o MFRI, Inc.<br>
      7720 North Lehigh Avenue<br>
      Niles, Illinois 60714<br>
      Attention:&nbsp;David Unger<br>
    Facsimile No.:&nbsp;(847) 929-1310</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><font size="2" face="Times New Roman, Times, serif">With a copy to:</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Piper Rudnick <br>
      203 N. LaSalle Street<br>
      Suite 1800<br>
      Chicago, Illinois 60601<br>
      Attention:&nbsp;Hal M. Brown<br>
    Facsimile No.:&nbsp;(312) 236-7516</font></td>
  </tr>
</table>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>or to such other address as each party may designate for itself by notice given in accordance with
this Section&nbsp;12.8; <U>provided</U>, <U>however</U>, that any notice, request or demand to or upon Agent or a Lender pursuant to subsection&nbsp;3.1.1
or 4.2.2 hereof shall not be effective until received by Agent or such Lender.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><a name="a87"></a>12.9<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Consent</U>.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>Whenever Agent&#146;s, Majority Lenders&#146; or all Lenders&#146; consent is required to be obtained
under this Agreement, any of the Other Agreements or any of the Security Documents as a condition
to any action, inaction, condition or event, except as otherwise specifically provided herein, Agent,
Majority Lenders or all Lenders, as applicable, shall be authorized to give or withhold such consent
in their sole and absolute discretion and to condition its consent upon the giving of additional
Collateral security for the Obligations, the payment of money or any other matter.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="a88"></a></FONT><FONT face="Times New Roman, Times, Serif" size=2>12.10<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Credit Inquiries</U>.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>Borrowers hereby authorize and permit Agent and each Lender to respond to usual and customary credit
inquiries from third parties concerning any Borrower or any of its Subsidiaries.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="a89"></a></FONT><FONT face="Times New Roman, Times, Serif" size=2>12.11<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Time of Essence</U>.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>Time is of the essence of this Agreement, the Other Agreements and the Security Documents.</FONT></P></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>55</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="a90"></a></FONT><FONT face="Times New Roman, Times, Serif" size=2>12.12<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Entire Agreement</U>.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>This Agreement and the other Loan Documents, together with all other instruments, agreements and certificates
executed by the parties in connection therewith or with reference thereto, embody the entire understanding
and agreement between the parties hereto and thereto with respect to the subject matter hereof and
thereof and supersede all prior agreements, understandings and inducements, whether express or implied,
oral or written.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="a91"></a></FONT><FONT face="Times New Roman, Times, Serif" size=2>12.13<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Interpretation</U>.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>No provision of this Agreement or any of the other Loan Documents shall be construed against or interpreted
to the disadvantage of any party hereto by any court or other governmental or judicial authority
by reason of such party having or being deemed to have structured or dictated such provision.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><a name="a92"></a>12.14<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Confidentiality</U>.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>Agent and each Lender shall hold all nonpublic information obtained pursuant to the requirements of
this Agreement in accordance with Agent&#146;s and such Lender&#146;s customary procedures for handling
confidential information of this nature and in accordance with safe and sound banking practices and
in any event may make disclosure reasonably required by a prospective participant or assignee in
connection with the contemplated participation or assignment or as required or requested by any governmental
authority or representative thereof or pursuant to legal process and shall require any such participant
or assignee to agree to comply with this Section&nbsp;12.14.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<a name="a93"></a></FONT><FONT face="Times New Roman, Times, Serif" size=2>12.15<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <B><U>GOVERNING LAW; CONSENT TO FORUM</U></B> <B>.</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><B>THIS AGREEMENT HAS BEEN NEGOTIATED, EXECUTED AND DELIVERED IN AND SHALL BE DEEMED TO HAVE BEEN MADE
IN CHICAGO, ILLINOIS. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF ILLINOIS; <U>PROVIDED</U>, <U>HOWEVER</U>, THAT IF ANY OF THE COLLATERAL SHALL BE LOCATED IN ANY JURISDICTION OTHER THAN ILLINOIS, THE LAWS
OF SUCH JURISDICTION SHALL GOVERN THE METHOD, MANNER AND PROCEDURE FOR FORECLOSURE OF AGENT&#146;S
LIEN UPON SUCH COLLATERAL AND THE ENFORCEMENT OF AGENT&#146;S OTHER REMEDIES IN RESPECT OF SUCH COLLATERAL
TO THE EXTENT THAT THE LAWS OF SUCH JURISDICTION ARE DIFFERENT FROM OR INCONSISTENT WITH THE LAWS
OF ILLINOIS. AS PART OF THE CONSIDERATION FOR NEW VALUE RECEIVED, AND REGARDLESS OF ANY PRESENT OR
FUTURE DOMICILE OR PRINCIPAL PLACE OF BUSINESS OF ANY BORROWER, AGENT OR ANY LENDER, EACH BORROWER
HEREBY CONSENTS AND AGREES THAT THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS, OR, AT AGENT&#146;S OPTION,
THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS, EASTERN DIVISION, SHALL HAVE
EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN ANY BORROWER ON THE ONE
HAND AND AGENT OR </B></FONT></P></TD></TR></TABLE>
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<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>56</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
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<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B>ANY LENDER ON THE OTHER HAND PERTAINING TO THIS AGREEMENT OR TO ANY MATTER ARISING OUT OF OR RELATED
TO THIS AGREEMENT. EACH BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN
ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH BORROWER HEREBY WAIVES ANY OBJECTION WHICH
SUCH BORROWER MAY&nbsp;HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR <U>FORUM</U> <U>NON</U> <U>CONVENIENS</U> AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY
SUCH COURT. EACH BORROWER HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS
ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS
MAY&nbsp;BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH BORROWER AT THE ADDRESS SET FORTH
IN THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF SUCH BORROWER&#146;S
ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.
NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO AFFECT THE RIGHT OF AGENT OR ANY LENDER TO
SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW, OR TO PRECLUDE THE ENFORCEMENT BY AGENT
OR ANY LENDER OF ANY JUDGMENT OR ORDER OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS
AGREEMENT TO ENFORCE SAME IN ANY OTHER APPROPRIATE FORUM OR JURISDICTION.</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><a name="a94"></a>12.16<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <B><U>WAIVERS BY BORROWERS</U></B> <B>.</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><B>EACH BORROWER WAIVES (i)&nbsp;THE RIGHT TO TRIAL BY JURY (WHICH AGENT AND EACH LENDER HEREBY ALSO WAIVE)
IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO ANY OF THE
LOAN DOCUMENTS, THE OBLIGATIONS OR THE COLLATERAL; (ii)&nbsp;PRESENTMENT, DEMAND AND PROTEST AND
NOTICE OF PRESENTMENT, PROTEST, DEFAULT, NON PAYMENT, MATURITY, RELEASE, COMPROMISE, SETTLEMENT,
EXTENSION OR RENEWAL OF ANY OR ALL COMMERCIAL PAPER, ACCOUNTS, CONTRACT RIGHTS, DOCUMENTS, INSTRUMENTS
, CHATTEL PAPER AND GUARANTIES AT ANY TIME HELD BY AGENT OR ANY LENDER ON WHICH SUCH BORROWER MAY&nbsp;IN
ANY WAY BE LIABLE AND HEREBY RATIFIES AND CONFIRMS WHATEVER AGENT OR ANY LENDER MAY&nbsp;DO IN THIS
REGARD; (iii)&nbsp;NOTICE PRIOR TO AGENT&#146;S TAKING POSSESSION OR CONTROL OF THE COLLATERAL OR
ANY BOND OR SECURITY WHICH MIGHT BE REQUIRED BY ANY COURT PRIOR TO ALLOWING AGENT TO EXERCISE ANY
OF AGENT&#146;S REMEDIES; (iv)&nbsp;THE BENEFIT OF ALL VALUATION, APPRAISEMENT AND EXEMPTION LAWS;
(v)&nbsp;NOTICE OF ACCEPTANCE HEREOF AND (vi)&nbsp;EXCEPT AS PROHIBITED BY LAW, ANY RIGHT TO CLAIM
OR RECOVER ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR
IN ADDITION TO, ACTUAL DAMAGES. EACH BORROWER ACKNOWLEDGES THAT THE FOREGOING WAIVERS ARE A MATERIAL
INDUCEMENT TO AGENT&#146;S AND </B></FONT></P> </TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>57</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
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<TR>
<TD>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><B>EACH LENDER&#146;S ENTERING INTO THIS AGREEMENT AND THAT AGENT AND EACH LENDER IS RELYING UPON THE
FOREGOING WAIVERS IN ITS FUTURE DEALINGS WITH BORROWERS. EACH BORROWER WARRANTS AND REPRESENTS THAT
IT HAS REVIEWED THE FOREGOING WAIVERS WITH ITS LEGAL COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY WAIVED
ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, THIS
AGREEMENT MAY&nbsp;BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><a name="a95"></a>12.17<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Advertisement</U>.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>Each Borrower hereby authorizes Agent to publish the name of any Borrower and the amount of the credit
facility provided hereunder in any &#147;tombstone&#148; or comparable advertisement which Agent
elects to publish.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><a name="a96"></a>12.18<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Reimbursement</U>.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>The undertaking by Borrowers to repay the Obligations and each representation, warranty or covenant
of each Borrower are and shall be joint and several. To the extent that any Borrower shall be required
to pay a portion of the Obligations which shall exceed the amount of loans, advances or other extensions
of credit received by such Borrower and all interest, costs, fees and expenses attributable to such
loans, advances or other extensions of credit, then such Borrower shall be reimbursed by the other
Borrowers for the amount of such excess. This Section&nbsp;12.18 is intended only to define the relative
rights of Borrowers, and nothing set forth in Section&nbsp;12.18 is intended or shall impair the
obligations of each Borrower, jointly and severally, to pay to Agent and Lenders the Obligations
as and when the same shall become due and payable in accordance with the terms hereof.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B><I>(Signature Page Follows) </I></B></FONT></P>
</TD></TR>
</TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>58</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>
<table width="600" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td><p align=center><font face="Times New Roman, Times, Serif" size=2><b><i>(Signature Page to Loan and Security Agreement)</i></b></font></p>
        <P align=justify><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font><font face="Times New Roman, Times, Serif" size=2><b>IN WITNESS WHEREOF</b>, this Agreement has been duly executed on the day and year specified at the beginning of this Agreement.</font></p></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
  </tr>
</table>
<table width="600" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td width="50%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif"><b>MFRI, INC.</b> </font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">By: ______________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="7%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name: ______________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title: _______________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif"><B>MIDWESCO FILTER RESOURCES, INC.</B></font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">By: ______________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name: ______________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title: _______________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif"><B>PERMA-PIPE, INC.</B></font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">By: ______________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name: ______________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title: _______________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif"><B>THERMAL CARE, INC.</B></font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">By: ______________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name: ______________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title: _______________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif"><B>TDC FILTER MANUFACTURING, INC.</B></font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">By: ______________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name: ______________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title: _______________________________</font></td>
  </tr>
</table>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>59</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>
<table width="600" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td width="50%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif"><B>FLEET CAPITAL CORPORATION</B>, as Agent and as a Lender</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">By: ______________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="7%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name: ______________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title: _______________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><font size="2" face="Times New Roman, Times, serif">Revolving Loan Commitment: $28,000,000</font></td>
  </tr>
</table>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>60</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B>APPENDIX A</B></FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2>GENERAL DEFINITIONS</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>When used in the Loan and Security Agreement dated as of July&nbsp;11, 2002, by and among Fleet Capital
Corporation, individually and as Agent, the other financial institutions which are or become parties
thereto and MFRI, INC., MIDWESCO FILTER RESOURCES, INC., PERMA-PIPE, INC., THERMAL CARE, INC., and
TDC FILTER MANUFACTURING, INC., (a)&nbsp;the terms <U>Account</U>, <U>Certificated Security</U>, <U>Chattel Paper</U>, <U>Commercial Tort Claims</U>, <U>Deposit Account</U>, <U>Document</U>, <U>Electronic Chattel Paper</U>, <U>Equipment</U>, <U>Financial Asset</U>, <U>Fixture</U>, <U>General Intangibles</U>, <U>Goods</U>, <U>Instruments</U>, <U>Inventory</U>, <U>Investment Property</U>, <U>Letter-of-Credit Rights</U>, <U>Payment Intangibles</U>, <U>Proceeds</U>, <U>Security</U>, <U>Security Entitlement</U>, <U>Software</U>, <U>Supporting Obligations</U>, <U>Tangible Chattel Paper</U> and <U>Uncertificated Security</U> have the respective meanings assigned thereto under the UCC; (b)&nbsp;all terms reflecting Collateral
having the meanings assigned thereto under the UCC shall be deemed to mean such Property, whether
now owned or hereafter created or acquired by any Borrower or in which any Borrower now has or hereafter
acquires any interest; (c)&nbsp;capitalized terms which are not otherwise defined have the respective
meanings assigned thereto in said Loan and Security Agreement; and (d)&nbsp;the following terms shall
have the following meanings (terms defined in the singular to have the same meaning when used in
the plural and vice versa):</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Account Debtor</U>  &#150; any Person who is or may become obligated under or on account of any Account, Contract
Right, Chattel Paper or General Intangible.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Affiliate</U>  &#150; a Person (other than a Subsidiary): (i)&nbsp;which directly or indirectly through one
or more intermediaries controls, or is controlled by, or is under common control with, a Person;
(ii)&nbsp;which beneficially owns or holds 5% or more of any class of the Voting Stock of a Person;
or (iii)&nbsp;5% or more of the Voting Stock (or in the case of a Person which is not a corporation,
5% or more of the equity interest) of which is beneficially owned or held by a Person or a Subsidiary
of a Person.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Agent</U>  &#150; Fleet Capital Corporation in its capacity as agent for the Lenders under the Agreement
and any successor in that capacity appointed pursuant to subsection&nbsp;11.11 of the Agreement.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Agent Loans&nbsp;</U>&#150; as defined in subsection&nbsp;1.1.4 of the Agreement.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Aggregate Percentage</U>  &#150; with respect to each Lender, the percentage equal to the quotient of (i)&nbsp;such Lender&#146;s
Loan Commitment <U>divided</U> by (ii)&nbsp;the aggregate of all Loan Commitments.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Agreement</U>  &#150; the Loan and Security Agreement referred to in the first sentence of this Appendix&nbsp;A,
all Exhibits and Schedules thereto and this Appendix&nbsp;A, as each of the same may be amended from
time to time.</FONT></P></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>A-1</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Applicable Margin (Current Asset)</U>  &#150; from the Closing Date to, but not including, the first Adjustment Date (as hereinafter
defined) the percentages set forth below with respect to the Base Rate Current Asset Revolving Portion,
the LIBOR Current Asset Revolving Portion and the Unused Line Fee:</FONT></P></TD></TR>
</TABLE>
<table width="600" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="25%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td width="8%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Base Rate Current Asset Revolving Portion</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">1.0%</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">LIBOR Current Asset Revolving Portion</font></td>

    <td><font size="2" face="Times New Roman, Times, serif">3.0%</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Unused Line Fee</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">0.375%</font></td>
  </tr>
</table>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>The percentages set forth above will be adjusted on the first day of the month following delivery by
Borrowers to Agent of the financial statements required to be delivered pursuant to subsection&nbsp;8.1.3(ii)&nbsp;of
the Agreement for each April&nbsp;30, July&nbsp;31, October&nbsp;31 and January&nbsp;31 during the
Term, commencing with the month ending July&nbsp;31, 2003 (each such date an &#147;Adjustment Date&#148;),
effective prospectively, by reference to the applicable &#147;Financial Measurement&#148; (as defined
below) for the four quarters most recently ending in accordance with the following:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
  <TR VALIGN=Bottom>
    <TH align="left" nowrap><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Financial Measurement</FONT></TH>
    <TH align="left" nowrap>&nbsp;</TH>
    <TH COLSPAN=2 align="left" nowrap><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Base Rate Current<BR>
      Asset Revolving<BR>
    Portion</FONT></TH>
    <TH nowrap>&nbsp;</TH>
    <TH COLSPAN=2 align="left" nowrap><FONT FACE="Times New Roman, Times, Serif" SIZE=1>LIBOR Current Asset<BR>
    Revolving Portion</FONT></TH>
    <TH nowrap>&nbsp;</TH>
    <TH COLSPAN=2 align="left" nowrap><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Unused Line <br>
    Fee</FONT></TH>
    <TH nowrap>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TH align="left"><hr size="1" noshade></TH>
    <TH align="left">&nbsp;</TH>
    <TH COLSPAN=2 align="left"><hr size="1" noshade></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2 align="left"><hr size="1" noshade></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2 align="left"><hr size="1" noshade></TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=2><u>&lt;</u> 2.25 to 1</FONT></TD>
    <TD WIDTH=2% ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH=8% ALIGN=left><FONT FACE="Times New Roman, Times, serif" SIZE=2>1.25%</FONT></TD>
    <TD WIDTH=3% ALIGN=left><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH=5% ALIGN=left><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH=8% ALIGN=left><FONT FACE="Times New Roman, Times, serif" SIZE=2>3.25%</FONT></TD>
    <TD WIDTH=5% ALIGN=left><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH=5% ALIGN=left><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH=8% ALIGN=left><FONT FACE="Times New Roman, Times, serif" SIZE=2>0.50%</FONT></TD>
    <TD WIDTH=2% ALIGN=left><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH=2% ALIGN=left><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=2>> 2.25 to 1, but <u>&lt;</u> 2.75 to 1</FONT></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=left><FONT FACE="Times New Roman, Times, serif" SIZE=2>1.00%</FONT></TD>
    <TD ALIGN=left><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=left><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=left><FONT FACE="Times New Roman, Times, serif" SIZE=2>3.00%</FONT></TD>
    <TD ALIGN=left><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=left><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=left><FONT FACE="Times New Roman, Times, serif" SIZE=2>0.375%</FONT></TD>
    <TD ALIGN=left><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=left><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=2>> 2.75 to 1, but <u>&lt;</u> 3.25 to 1</FONT></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=left><FONT FACE="Times New Roman, Times, serif" SIZE=2>0.75%</FONT></TD>
    <TD ALIGN=left><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=left><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=left><FONT FACE="Times New Roman, Times, serif" SIZE=2>2.75%</FONT></TD>
    <TD ALIGN=left><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=left><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=left><FONT FACE="Times New Roman, Times, serif" SIZE=2>0.375%</FONT></TD>
    <TD ALIGN=left><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=left><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=2>> 3.25 to 1, but <u>&lt;</u> 3.75 to 1</FONT></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=left><FONT FACE="Times New Roman, Times, serif" SIZE=2>0.50%</FONT></TD>
    <TD ALIGN=left><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=left><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=left><FONT FACE="Times New Roman, Times, serif" SIZE=2>2.50%</FONT></TD>
    <TD ALIGN=left><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=left><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=left><FONT FACE="Times New Roman, Times, serif" SIZE=2>0.375%</FONT></TD>
    <TD ALIGN=left><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=left><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=2>>3.75 to 1</FONT></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=left><FONT FACE="Times New Roman, Times, serif" SIZE=2>0.00%</FONT></TD>
    <TD ALIGN=left><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=left><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=left><FONT FACE="Times New Roman, Times, serif" SIZE=2>2.00%</FONT></TD>
    <TD ALIGN=left><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=left><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=left><FONT FACE="Times New Roman, Times, serif" SIZE=2>0.25%</FONT></TD>
    <TD ALIGN=left><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=left><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
</TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2><U>provided</U> &nbsp;that, (i)&nbsp;if MFRI&#146;s audited financial statements for any fiscal year delivered pursuant
to subsection&nbsp;8.1.3(i) of the Agreement reflect a Financial Measurement that yields a higher
Applicable Margin (Current Asset) than that yielded by the monthly financial statements previously
delivered pursuant to subsection&nbsp;8.1.3(ii) of the Agreement for the last month of such fiscal
year, the Applicable Margin (Current Asset) shall be readjusted retroactively for the period that
was incorrectly calculated and (ii)&nbsp;if Borrowers fail to deliver the financial statements required
to be delivered pursuant to subsection&nbsp;8.1.3(i) or subsection&nbsp;8.1.3(ii) of the Agreement
on or before the due date thereof, including any applicable grace period, the interest rate shall
automatically adjust to the highest interest rate set forth above, effective prospectively from such
due date until the next Adjustment Date. For purposes hereof, &#147;Financial Measurement&#148; shall
mean the Interest Coverage Ratio (as such term is defined in <U>Exhibit 8.3</U> to the Agreement).</FONT></P></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>A-2</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Applicable Margin (Real Estate)</U>  &#150; for any period within the Term hereof, the percentage set forth opposite such period
in the following schedule:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE CELLPADDING=0 CELLSPACING=0 BORDER=0 WIDTH=600>
  <TR VALIGN=Bottom>
    <TH COLSPAN=2 align="left"><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Period</FONT></TH>
    <TH COLSPAN=2 align="left" nowrap><FONT FACE="Times New Roman, Times, Serif" SIZE=1>Base Rate Real Estate<BR>
      Portion</FONT></TH>
    <TH nowrap>&nbsp;</TH>
    <TH COLSPAN=2 align="left" nowrap><FONT FACE="Times New Roman, Times, Serif" SIZE=1>LIBOR Real Estate<br>
      Portion </FONT></TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TH align="left"><hr size="1" noshade></TH>
    <TH align="left">&nbsp;</TH>
    <TH COLSPAN=2 align="left"><hr size="1" noshade></TH>
    <TH>&nbsp;</TH>
    <TH COLSPAN=2 align="left"><hr size="1" noshade></TH>
    <TH>&nbsp;</TH>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=RIGHT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=left><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=2>Closing Date to October 31, 2002</FONT></TD>
    <TD WIDTH=4% ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=2>&nbsp;</FONT></TD>
    <TD WIDTH=8% ALIGN=left><FONT FACE="Times New Roman, Times, serif" SIZE=2>1.50%</FONT></TD>
    <TD WIDTH=11% ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH=8% ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH=6% ALIGN=left><FONT FACE="Times New Roman, Times, serif" SIZE=2>3.50%</FONT></TD>
    <TD WIDTH=9% ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD WIDTH=2% ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=left><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=left><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=2>November 1, 2002 to January 31, 2002</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=left><FONT FACE="Times New Roman, Times, serif" SIZE=2>1.75%</FONT></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=left><FONT FACE="Times New Roman, Times, serif" SIZE=2>3.75%</FONT></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=left><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=left><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=2>February 1, 2003 to April 30, 2003</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=left><FONT FACE="Times New Roman, Times, serif" SIZE=2>2.00%</FONT></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=left><FONT FACE="Times New Roman, Times, serif" SIZE=2>4.00%</FONT></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=left><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=left><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=2>May 1, 2003 to July 31, 2003</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=left><FONT FACE="Times New Roman, Times, serif" SIZE=2>2.25%</FONT></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=left><FONT FACE="Times New Roman, Times, serif" SIZE=2>4.25%</FONT></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=left><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=left><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=2>August 1, 2003 to October 31, 2003</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=left><FONT FACE="Times New Roman, Times, serif" SIZE=2>2.50%</FONT></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=left><FONT FACE="Times New Roman, Times, serif" SIZE=2>4.50%</FONT></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=left><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=left><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=2>November 1, 2003 to January 31, 2003</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=left><FONT FACE="Times New Roman, Times, serif" SIZE=2>2.75%</FONT></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=left><FONT FACE="Times New Roman, Times, serif" SIZE=2>4.75%</FONT></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=left><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=left><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
  <TR VALIGN=Bottom bgcolor="#eaf9e8">
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=2>February 1, 2004 and each date thereafter</FONT></TD>
    <TD ALIGN=LEFT><FONT FACE="Times New Roman, Times, serif" SIZE=2>&nbsp;</FONT></TD>
    <TD ALIGN=left><FONT FACE="Times New Roman, Times, serif" SIZE=2>3.00%</FONT></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=left><FONT FACE="Times New Roman, Times, serif" SIZE=2>5.00%</FONT></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
    <TD ALIGN=LEFT><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></TD>
  </TR>
</TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Assignment and Acceptance Agreement&nbsp;</U>&#150; an assignment and acceptance agreement in form and content reasonably acceptable to Agent pursuant
to which a Lender assigns to another Lender all or any portion of any of such Lender&#146;s Revolving
Loan Commitment, as permitted pursuant to the terms of this Agreement.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Availability</U>  &#150; the amount of additional money which Borrowers are entitled to borrow from time to time
as Revolving Credit Loans, such amount being the difference derived when the sum of the principal
amount of Revolving Credit Loans then outstanding (including any amounts which Agent or any Lender
may have paid for the account of any Borrower pursuant to any of the Loan Documents and which have
not been reimbursed by any Borrower), the LC Amount and any reserves is subtracted from the Borrowing
Base. If the amount outstanding is equal to or greater than the Borrowing Base, Availability is 0.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Bank</U>  &#150; Fleet National Bank.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Base Rate</U>  &#150; the rate of interest announced or quoted by Bank from time to time as its prime rate
for commercial loans, whether or not such rate is the lowest rate charged by Bank to its most preferred
borrowers; and, if such prime rate for commercial loans is discontinued by Bank as a standard, a
comparable reference rate designated by Bank as a substitute therefor shall be the Base Rate.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Base Rate Current Asset Revolving Portion</U>  &#150; as of any date, the excess, if any, of (x) the amount of the Base Rate Portion over (y)
the Base Rate Real Estate Portion.</FONT></P></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>A-3</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Base Rate Portion</U>  &#150; that portion of the Revolving Credit Loans not subject to a LIBOR Option, including the
Base Rate Current Asset Portion and the Base Rate Real Estate Portion.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Base Rate Real Estate Portion</U>  &#150; as of any date, that part of the Base Rate Portion in an amount equal to the excess,
if any, of (x) the amount of the Real Estate Component as of such date over (y) the amount of the
LIBOR Real Estate Portion.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Borrowing Base</U>  &#150; as at any date of determination thereof, an amount equal to the lesser of:</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(i)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> the Revolving Credit Maximum Amount; or</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(ii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> an amount equal to the sum of</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(a)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> eighty-five percent (85%) of the net amount of Eligible Accounts (other than Eligible Accounts arising
from Short Term Projects) outstanding at such date; <U>plus</U> </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(b)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> the lesser of One Million Five Hundred Thousand Dollars ($1,500,000) or eighty-five percent (85%)
of the next amount of Eligible Accounts arising from Short Term Projects outstanding at such date;
<U>plus</U></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(c)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> the lesser of (1)&nbsp;Eleven Million Dollars ($11,000,000) or (2)&nbsp;fifty-five percent (55%) of
the value of Eligible Inventory at such date; <U>plus</U></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(d)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> the Real Estate Component.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>The limitations set forth in the immediately preceding sentence and each of the advance rates set forth
above may be adjusted downward by Agent, as Agent shall deem necessary or appropriate in its reasonable
credit judgment. For purposes hereof, (1)&nbsp;the net amount of Eligible Accounts at any time shall
be the face amount of such Eligible Accounts less any and all returns, rebates, discounts (which
may, at Agent&#146;s option, be calculated on shortest terms), credits, allowances or excise taxes
of any nature at any time issued, owing, claimed by Account Debtors, granted, outstanding or payable
in connection with such Accounts at such time and (2)&nbsp;the amount of Eligible Inventory shall
be determined on a first-in, first-out, lower of cost or market basis in accordance with GAAP.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Borrowing Base Certificate</U>  &#150; a certificate by a responsible officer of MFRI, substantially in the form of <U>Exhibit&nbsp;8.1.4</U> (or another form acceptable to Agent) setting forth the calculation of the Borrowing Base, including
a calculation of each component thereof, all in such detail as shall be satisfactory to Agent. All
calculations of the Borrowing Base in connection with the preparation of any Borrowing Base Certificate
shall originally be made by MFRI and certified to Agent; <U>provided</U>, that Agent shall have the right to review and adjust, in the exercise of its sole judgment, any such
calculation after giving notice thereof to MFRI, (1)&nbsp;to reflect its reasonable estimate of declines
in value of any of the Collateral described therein, and (2)&nbsp;to the extent that Agent determines
that such calculation is not in accordance with this Agreement.</FONT></P></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>A-4</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Business Day</U>  &#150; any day excluding Saturday, Sunday and any day which is a legal holiday under the laws
of the State of Wisconsin or the State of Illinois or is a day on which banking institutions located
in either of such states are closed.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Capital Expenditures</U>  &#150; expenditures made or liabilities incurred for the acquisition of any fixed assets or
improvements, replacements, substitutions or additions thereto which have a useful life of more than
one year, including the total principal portion of Capitalized Lease Obligations.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Capitalized Lease Obligation</U>  &#150; any Indebtedness represented by obligations under a lease that is required to be capitalized
for financial reporting purposes in accordance with GAAP.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Change of Control</U> &nbsp;- means the occurrence of any of the following events:&nbsp;(i) any &#147;person&#148; (as such
term is used in Sections 13(d) and 14(d) of the Exchange Act), other than one or more Permitted Holders,
is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except
that a person shall be deemed to have &#147;beneficial ownership&#148; of all shares that any such
person has the right to acquire, whether such right is exercisable immediately or only after the
passage of time), directly or indirectly, of more than thirty percent (30%) of the total voting power
of the Voting Stock of MFRI (or its successor by merger, consolidated or purchase of all or substantially
all of its assets); and the Permitted Holders &#147;beneficially own&#148; (as defined in Rules 13d-3
and 13d-5 under the Exchange Act), directly or indirectly, in the aggregate a lesser percentage of
the total voting power of the Voting Stock of MFRI (or its successor by merger, consolidated or purchase
of all or substantially all of its assets) than such other person and do not have the right or ability
by voting power, contract or otherwise to elect or designate for election a majority; of the board
of directors of MFRI or such successor; or (ii) during any period of two consecutive years, individuals
who at the beginning of such period constituted the Board of Directors of MFRI (together with any
new directors whose election by such Board of Directors or whose nomination for election by the shareholders
of MFRI was approved by a vote of at least a majority of the directors of MFRI then still in office
who were either directors at the beginning of such period or whose election or nomination for election
was previously so approved or is a designee of the Permitted Holders or was nominated or elected
by such Permitted Holders or any of their designees) cease for any reason to constitute a majority
of the Board of Directors of MFRI then in office; or (iii) the sale, lease, transfer, conveyance
or other disposition (other than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of MFRI and the other Borrowers taken as
a whole; or (iv) the adoption by the stockholders of MFRI of a plan for the liquidation or dissolution of MFRI.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Closing Date</U>  &#150; the date on which all of the conditions precedent in Section&nbsp;9 of the Agreement
are satisfied or waived and the initial Loan is made or the initial Letter of Credit or LC Guaranty
is issued under the Agreement.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Collateral</U>  &#150; all of the Property and interests in Property described in Section&nbsp;5 of the Agreement,
and all other Property and interests in Property that now or hereafter secure the payment and performance
of any of the Obligations.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Compliance Certificate</U>  &#150; as defined in subsection&nbsp;8.1.3 of the Agreement.</FONT></P></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>A-5</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Computer Hardware and Software&nbsp;</U>&#150; all of any Borrower&#146;s rights (including rights as licensee and lessee) with respect to
(i)&nbsp;computer and other electronic data processing hardware, including all integrated computer
systems, central processing units, memory units, display terminals, printers, computer elements,
card readers, tape drives, hard and soft disk drives, cables, electrical supply hardware, generators,
power equalizers, accessories, peripheral devices and other related computer hardware; (ii)&nbsp;all
Software and all software programs designed for use on the computers and electronic data processing
hardware described in clause&nbsp;(i) above, including all operating system software, utilities and
application programs in any form (source code and object code in magnetic tape, disk or hard copy
format or any other listings whatsoever); (iii)&nbsp;any firmware associated with any of the foregoing;
and (iv)&nbsp;any documentation for hardware, Software and firmware described in clauses&nbsp;(i),
(ii) and (iii) above, including flow charts, logic diagrams, manuals, specifications, training materials,
charts and pseudo codes.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Computer Sale and Leaseback</U>  &#150; a sale and leaseback transaction pursuant to which Borrowers shall sell and lease back
certain of their computer Equipment; provided that the terms and conditions of such sale and leaseback
transaction, including without limitation, the computer Equipment subject thereto and rental rates
thereon, are acceptable to Agent in its discretion.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Consolidated</U>  &#150; the consolidation in accordance with GAAP of the accounts or other items as to which
such term applies.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Contract Right</U>  &#150; any right of any Borrower to payment under a contract for the sale or lease of goods
or the rendering of services, which right is at the time not yet earned by performance.</FONT></P>

<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Current Assets</U>  &#150; at any date means the amount at which all of the current assets of a Person would be
properly classified as current assets shown on a balance sheet at such date in accordance with GAAP.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Current Asset Borrowing Base</U>  &#150; as of any date, the remainder of (x) the Borrowing Base <U>minus</U> (y) the Real Estate Component.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Default</U>  &#150; an event or condition the occurrence of which would, with the lapse of time or the giving
of notice, or both, become an Event of Default.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Default Rate</U>  &#150; as defined in subsection&nbsp;2.1.2 of the Agreement.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Derivative Obligations</U>  &#150; every obligation of a Person under any forward contract, futures contract, exchange contract,
swap, option or other financing agreement or arrangement (including, without limitation, caps, floors,
collars and similar agreement), the value of which is dependent upon interest rates, currency exchange
rates, commodities or other indices.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Distribution</U>  &#150; in respect of any Person means and includes: (i)&nbsp;the payment of any dividends or
other distributions on Securities (except distributions in such Securities) and (ii)&nbsp;the redemption
or acquisition of Securities of such Person, as the case may be, unless made contemporaneously from
the net proceeds of the sale of Securities.</FONT></P></TD></TR></TABLE>
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<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>A-6</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
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<TR>
<TD>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Dominion Account</U>  &#150; a special bank account or accounts of Agent established by Borrowers or any one of them
pursuant to subsection&nbsp;6.2.4 of the Agreement at banks selected by MFRI, but acceptable to Agent
in its sole discretion, and over which Agent shall have sole and exclusive access and control for
withdrawal purposes.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Eligible Account</U>  &#150; an Account arising in the ordinary course of the business of any Borrower from the sale
of goods or rendition of services which Agent, in its sole judgment, exercised in a commercially
reasonable manner, deems to be an Eligible Account. Without limiting the generality of the foregoing,
no Account shall be an Eligible Account if:</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(i)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT>it arises out of a sale made or services rendered by a Borrower to a Subsidiary of any Borrower or
an Affiliate of any Borrower or to a Person controlled by an Affiliate of any Borrower; or</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(ii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> it remains unpaid more than 90 days after the original invoice date shown on the invoice; or</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(iii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> the total unpaid Accounts of the Account Debtor exceed 20% of the net amount of all Eligible Accounts,
but only to the extent of such excess; or</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(iv)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> any covenant, representation or warranty contained in the Agreement with respect to such Account has
been breached; or</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(v)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> the Account Debtor is also a creditor or supplier of a Borrower or any Subsidiary of any Borrower,
or the Account Debtor has disputed liability with respect to such Account, or the Account Debtor
has made any claim with respect to any other Account due from such Account Debtor to any Borrower
or any Subsidiary of any Borrower, or the Account otherwise is or may become subject to right of
setoff by the Account Debtor, <U>provided</U>, that any such Account shall be eligible to the extent such amount thereof exceeds such contract,
dispute, claim, setoff or similar right; or</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(vi)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> the Account Debtor has commenced a voluntary case under the federal bankruptcy laws, as now constituted
or hereafter amended, or made an assignment for the benefit of creditors, or a decree or order for
relief has been entered by a court having jurisdiction in the premises in respect of the Account
Debtor in an involuntary case under the federal bankruptcy laws, as now constituted or hereafter
amended, or any other petition or other application for relief under the federal bankruptcy laws,
as now constituted or hereafter amended, has been filed against the Account Debtor, or if the Account
Debtor has failed, suspended business, ceased to be Solvent, or consented to or suffered a receiver,
trustee, liquidator or custodian to be appointed for it or for all or a significant portion of its
assets or affairs; or</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(vii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> it arises from a sale made or services rendered to an Account Debtor outside the United States, unless the sale is either (1)&nbsp;to an Account Debtor located in Ontario or any other province of Canada in which the Personal Property Security Act has been adopted in substantially the same form as currently in effect in Ontario or (2)&nbsp;on letter of credit, foreign credit insurance (assigned to Agent), guaranty or acceptance terms, in each case acceptable to Agent in its sole judgment, exercised in a commercially reasonable manner; or</FONT></P></TD></TR></TABLE>
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<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>A-7</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(viii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT>(1) it arises from a sale to the Account Debtor on a guaranteed sale, sale-or-return, sale-on-approval,
consignment, or any other repurchase or return basis; (2)&nbsp;it is subject to a reserve established
by any Borrower for potential returns or refunds, to the extent of such reserve; or (3) it arises
from a sale to the Account Debtor on a bill-and-hold basis unless (x) such Account Debtor has requested
in writing that such sale be on a bill-and-hold basis, which writing shall contain an acknowledgement
by such Account Debtor that it is obligated to pay for the subject Inventory, (y) such Inventory
is delivered to the Account Debtor not later than 30 days after the original invoice date and (z)
the aggregate of all such Accounts arising from bill-and-hold sales by all Borrowers, at any point
in time, does not exceed One Million Five Hundred Thousand Dollars ($1,500,000); or</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(ix)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> the Account Debtor is the United States of America or any department, agency or instrumentality thereof,
unless Borrower assigns its right to payment of such Account to Agent, in a manner satisfactory to
Agent, in its sole judgment, so as to comply with the Assignment of Claims Act of 1940 (31&nbsp;U.S.C.
&#167;203 <U>et</U> &nbsp;<U>seq.</U>, as amended); or</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(x)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> it is not at all times subject to Agent&#146;s duly perfected, first priority security interest or

is subject to a Lien that is not a Permitted Lien; or</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(xi)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> the goods giving rise to such Account have not been delivered to and accepted by the Account Debtor
or the services giving rise to such Account have not been performed by the applicable Borrower and
accepted by the Account Debtor or the Account otherwise does not represent a final sale; or</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(xii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> the Account is evidenced by chattel paper or an instrument of any kind, or has been reduced to judgment;
or</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(xiii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> any Borrower or a Subsidiary of any Borrower has made any agreement with the Account Debtor for any
extension, compromise, settlement or modification of the Account or deduction therefrom, except for
discounts or allowances which are made in the ordinary course of business for prompt payment and
which discounts or allowances are reflected in the calculation of the face value of each invoice
related to such Account; or</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(xiv)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT>25% or more of the Accounts owing from the Account Debtor are not Eligible Accounts hereunder; or</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(xv)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> any Borrower has made an agreement with the Account Debtor to extend the time of payment thereof;
or</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(xvi)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> it represents service charges, late fees or similar charges; or</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(xvii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> it is an Account of Perma-Pipe and such Account is not a Final Billings Account or an Account arising
out of a Short-Term Project; or</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(xviii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Accounts which represent retention payments; or</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(xix)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> it is not otherwise acceptable to Agent in its sole judgment, exercised in a commercially reasonable

manner.</FONT></P></TD></TR></TABLE>
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<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>A-8</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Eligible Inventory</U>  &#150; Inventory of any Borrower (other than work-in-process, packaging materials and supplies,
tooling, samples and literature) which Agent, in its sole judgment, exercised in a commercially reasonable
manner, deems to be Eligible Inventory. Without limiting the generality of the foregoing, no Inventory
shall be Eligible Inventory if:</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(i)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> it is not raw materials or finished goods which meet the specifications of the purchase order or contract
for such Inventory, if any; or</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(ii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> it is not in good, new and saleable condition; or</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(iii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> it is slow-moving, obsolete or unmerchantable; or</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(iv)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> it does not meet all standards imposed by any governmental agency or authority; or</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(v)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> it does not conform in all respects to any covenants, warranties and representations set forth in
the Agreement; or</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(vi)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> it is not at all times subject to Agent&#146;s duly perfected, first priority security interest or

is subject to a Lien that is not a Permitted Lien; or</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(vii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> it is not situated at a location in compliance with the Agreement, <U>provided</U> that Inventory situated at a location not owned by a Borrower will be Eligible Inventory only if Agent
has received a satisfactory landlord&#146;s agreement or bailee letter, as applicable, with respect
to such location; or</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(viii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> it is in transit; or</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(ix)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> it is not otherwise acceptable to Agent in its sole judgment, exercised in a commercially reasonable

manner.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Environmental Laws</U>  &#150; all federal, state and local laws, rules, regulations, ordinances, orders and consent
decrees relating to health, safety and environmental matters.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>ERISA</U>  &#150; the Employee Retirement Income Security Act of 1974, as amended, and any successor statute,
and all rules and regulations from time to time promulgated thereunder.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Event of Default</U>  &#150; as defined in Section&nbsp;10.1 of the Agreement.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Existing Mortgage Indebtedness</U>  &#150; money borrowed owed by Borrowers in the aggregate principal amount of Seven Million One
Hundred Six Thousand Dollars ($7,106,000) as of the Closing Date.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Fee Letter</U>  &#150; as defined in Section&nbsp;2.3 of the Agreement.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Final Billings Accounts</U>  &#150; Accounts owed to Perma-Pipe if arising out of projects for which ninety-five percent
(95%) or more of billings to be made on such project have occurred.</FONT></P></TD></TR></TABLE>
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<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>A-9</FONT></P>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>GAAP</U>  &#150; generally accepted accounting principles in the United States of America in effect from
time to time.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Indebtedness</U>  &#150; as applied to a Person means, without duplication:</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(i)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> all items which in accordance with GAAP would be included in determining total liabilities as shown
on the liability side of a balance sheet of such Person as at the date as of which Indebtedness is
to be determined, including, without limitation, Capitalized Lease Obligations;</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(ii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> all obligations of other Persons which such Person has guaranteed;</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(iii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> all reimbursement obligations in connection with letters of credit or letter of credit guaranties
issued for the account of such Person;</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(iv)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Derivative Obligations; and</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(v)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> in the case of Borrowers (without duplication), the Obligations.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Intellectual Property</U> &nbsp;- means:&nbsp;all past, present and future:&nbsp;trade secrets, know-how and other proprietary
information; trademarks, internet domain names, service marks, trade dress, trade names, business
names, designs, logos, slogans (and all translations, adaptations, derivations and combinations of
the foregoing) indicia and other source and/or business identifiers, and the goodwill of the business
relating thereto and all registrations or applications for registrations which have heretofore been
or may hereafter be issued thereon throughout the world; copyrights (including copyrights for computer
programs) and copyright registrations or applications for registrations which have heretofore been
or may hereafter be issued throughout the world and all tangible property embodying the copyrights,
unpatented inventions (whether or not patentable); patent applications and patents; industrial design
applications and registered industrial designs; license agreements related to any of the foregoing
and income therefrom; books, records, writings, computer tapes or disks, flow diagrams, specification
sheets, computer software, source codes, object codes, executable code, data, databases and other
physical manifestations, embodiments or incorporations of any of the foregoing; the right to sue
for all past, present and future infringements of any of the foregoing; all other intellectual property;
and all common law and other rights throughout the world in and to all of the foregoing.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Intercreditor Agreement</U>  &#150; that certain Intercreditor Agreement of even date hereof by and between Agent and the
holders of the Term Notes, as the same may be amended or modified from time to time.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Interest Period</U>  &#150; as applicable to any LIBOR Portion, a period commencing on the date such LIBOR Portion
is advanced, continued or converted, and ending on the date which is one (1) month, two (2) months,
three (3) months, or six (6) months later, as may then be requested by MFRI, on its own behalf and
on behalf of all other Borrowers; <U>provided</U> that (i)&nbsp;any Interest Period which would otherwise end on a day which is not a Business Day shall
end in the next preceding or succeeding Business Day as is Agent&#146;s custom in the market to which
such LIBOR Portion relates; (ii)&nbsp;there remains a minimum of one (1) month, two (2) months, three
(3) months or six (6) months (depending upon which Interest Period MFRI selects) in the Term, unless </FONT></P></TD></TR></TABLE>
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<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>A-10</FONT></P>
<HR color=gray noShade SIZE=5>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>Borrowers and Lenders have agreed to an extension of the Term beyond the expiration of the Interest
Period in question; and (iii)&nbsp;all Interest Periods of the same duration which commence on the
same date shall end on the same date.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>IRB Indebtedness</U>  &#150; shall mean all Indebtedness outstanding with respect to (x)&nbsp;(i)&nbsp;those certain
Industrial Revenue Bonds Series 1995 (Perma-Pipe) issued by the Industrial Board of Wilson County,
Tennessee in the initial amount of Three Million One Hundred Fifty Thousand Dollars ($3,150,000)
(ii)&nbsp;that certain Trust Indenture dated September&nbsp;1, 1995 by and between The Industrial
Board of Wilson County, Tennessee and Perma-Pipe and (iii)&nbsp;all indentures, mortgages, security
agreements, notes, loan agreements, schedules, exhibits, amendments, modifications and other documents
related thereto (collectively, the &#147;Tennessee IRB Indebtedness&#148;) and (y)&nbsp;(i)&nbsp;those
certain Industrial Revenue Bonds issued by the Industrial Development Authority for the City of Winchester,
Virginia in the initial principal amount of Three Million One Hundred Fifty Thousand Dollars ($3,150,000),
(ii)&nbsp;that certain Trust Indenture dated September 1, 1995 by and between the Industrial Development
Authority for the City of Winchester, Virginia and Midwesco and (iii)&nbsp;all indentures, mortgages,
security agreements, notes, loan agreements, schedules, exhibits, amendments, modifications and documents
those related thereto (collectively the &#147;Virginia IRB Indebtedness&#148;).</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Lebanon Refinancing</U>  &#150; any Money Borrowed incurred by Borrowers secured by a Lien on Perma-Pipe&#146;s real
property located at 1310 Quarles Drive, Lebanon, Tennessee; <U>provided</U> that the terms and conditions of such Money Borrowed, including without limitation, interest rates,
amortization schedules, and collateral therefor are acceptable to Agent in its sole discretion and
if the proceeds of any such Money Borrowed are used to repay outstanding Revolving Credit Loans (subject
to Borrowers&#146; rights to reborrow such amounts in accordance with the terms of this Agreement)
and the Indebtedness outstanding under the Term Loan Documents (as permitted by Section 8.2.7 of
the Agreement).</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>LC Amount</U>  &#150; at any time, the aggregate undrawn face amount of all Letters of Credit and LC Guaranties
then outstanding.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>LC Guaranty</U>  &#150; any guaranty pursuant to which Agent or any Affiliate of Agent shall guaranty the payment
or performance by Borrowers of their reimbursement obligation under any letter of credit.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>LC Obligations</U>  &#150; Any Obligations that arise from any draw against any Letter of Credit or against any
Letter of Credit supported by an LC Guaranty.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Letter of Credit</U>  &#150; any standby or documentary letter of credit issued by Agent or any Affiliate of Agent
for the account of any Borrower.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>LIBOR</U>  &#150; as applicable to any LIBOR Portion, for the applicable Interest Period, the rate per
annum (rounded upward, if necessary, to the nearest 1/8 of one percent) as determined on the basis
of the offered rates for deposits in U.S. dollars, for a period of time comparable to such Interest
Period which appears on the Telerate page&nbsp;3750 as of 11:00&nbsp;a.m. (London time) on the day
that is two (2) London Banking Days preceding the first day of such Interest Period; <U>provided</U>, <U>however</U>, if the rate described above does not appear on the Telerate System on any </FONT></P></TD></TR></TABLE>
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<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>A-11</FONT></P>
<HR color=gray noShade SIZE=5>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>applicable interest determination date, the LIBOR shall be the rate (rounded upwards as described above,
if necessary) for deposits in U.S. dollars for a period substantially equal to the Interest Period
on the Reuters Page&nbsp;&#147;LIBO&#148; (or such other page as may replace the LIBO Page on that
service for the purpose of displaying such rates), as of 11:00&nbsp;a.m. (London Time), on the day
that is two (2) London Banking Days prior to the first day of such Interest Period. If both the Telerate
and Reuters systems are unavailable, then the rate for that date will be determined on the basis
of the offered rates for deposits in U.S. dollars for a period of time comparable to such Interest
Period which are offered by four (4) major banks in the London interbank market at approximately
11:00&nbsp;a.m. (London time), on the day that is two (2) London Banking Days preceding the first
day of such Interest Period as selected by Agent. The principal London office of each of the major
London banks so selected will be requested to provide a quotation of its U.S. dollar deposit offered
rate. If at least two (2) such quotations are provided, the rate for that date will be the arithmetic
mean of the quotations. If fewer than two quotations are provided as requested, the rate for that
date will be determined on the basis of the rates quoted for loans in U.S. dollars to leading European
banks for a period of time comparable to such Interest Period offered by major banks in New York
City at approximately 11:00&nbsp;a.m. (New York City time), on the day that is two (2) London Banking
Days preceding the first day of such Interest Period. In the event that Agent is unable to obtain
any such quotation as provided above, it will be determined that LIBOR pursuant to a Interest Period
cannot be determined. In the event that the Board of Governors of the Federal Reserve System shall
impose a Reserve Percentage with respect to LIBOR deposits of Bank then for any period during which
such Reserve Percentage shall apply, LIBOR shall be equal to the amount determined above divided
by an amount equal to 1 minus the Reserve Percentage.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>LIBOR Current Asset Portion</U>  &#150; as of any date, the excess, if any, of (x) the aggregate amount of all outstanding LIBOR
Portions over (y) the LIBOR Real Estate Portion.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>LIBOR Interest Payment Date</U>  &#150; the first day of each calendar month during and immediately following the applicable
Interest Period.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>LIBOR Option</U>  &#150; the option granted pursuant to Section&nbsp;3.1 of the Agreement to have the interest
on all or any portion of the principal amount of the Revolving Credit Loans based on the LIBOR.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>LIBOR Portion</U>  &#150; that portion of the Revolving Credit Loans specified in a LIBOR Request (including any
portion of Revolving Credit Loans which is being borrowed by Borrower concurrently with such LIBOR
Request) which, as of the date of the LIBOR Request specifying such LIBOR Revolving Portion, has
met the conditions for basing interest on the LIBOR in Section&nbsp;3.1 of the Agreement and the
Interest Period of which has not terminated.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>LIBOR Real Estate Portion</U>  &#150; as of any date, the aggregate amount of all outstanding LIBOR Portions up to the amount
of the Real Estate Component as of such date.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>LIBOR Request</U>  &#150; a notice in writing (or by telephone confirmed electronically or by telecopy or other
facsimile transmission on the same day as the telephone request) from MFRI, on its own behalf and
on behalf of all other Borrowers, to Agent requesting that interest on a Revolving Credit Loan be
based on the LIBOR, specifying: (i)&nbsp;the first day of the Interest Period </FONT></P></TD></TR></TABLE>
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<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>A-12</FONT></P>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>(which shall be a Business Day); (ii)&nbsp;the length of the Interest Period; (iii)&nbsp;whether the
LIBOR Portion is a new Loan, a conversion of a Base Rate Portion, or a continuation of a LIBOR Portion,
and (iv)&nbsp;the dollar amount of the LIBOR Revolving Portion, which shall be in an amount not less
than One Million Dollars ($1,000,000) or an integral multiple of One Hundred Thousand Dollars ($100,000)
in excess thereof.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Lien</U>  &#150; any interest in Property securing an obligation owed to, or a claim by, a Person other
than the owner of the Property, whether such interest is based on common law, statute or contract.
The term &#147;Lien&#148; shall also include rights of seller under conditional sales contracts or
title retention agreements, reservations, exceptions, encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases and other title exceptions and encumbrances affecting Property.
For the purpose of the Agreement, a Borrower shall be deemed to be the owner of any Property which
it has acquired or holds subject to a conditional sale agreement or other arrangement pursuant to
which title to the Property has been retained by or vested in some other Person for security purposes.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Loan Account</U>  &#150; the loan account established on the books of Agent pursuant to Section&nbsp;3.6 of the
Agreement.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Loan Commitment</U>  &#150; with respect to any Lender, the amount of such Lender&#146;s Revolving Loan Commitment.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Loan Documents</U>  &#150; the Agreement, the Other Agreements and the Security Documents.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Loans</U>  &#150; all loans and advances of any kind made by Agent, any Lender, or any Affiliate of Agent
or any Lender, pursuant to the Agreement.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>London Banking Day</U>  &#150; any date on which commercial banks are open for business in London, England.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Majority Lenders</U>  &#150; as of any date, Lenders holding 51% of Revolving Loan Commitments determined on a combined
basis and following the termination of the Revolving Loan Commitments, Lenders holding 51% or more
of the outstanding Loans, LC Amounts and LC Obligations not yet reimbursed by Borrowers or funded
with a Revolving Credit Loan; <U>provided</U>, that (i)&nbsp;in each case, if there are 2 or more Lenders with outstanding Loans, LC Amounts, unfunded
and unreimbursed LC Obligations or Revolving Loan Commitments, at least 2 Lenders shall be required
to constitute Majority Lenders; and (ii)&nbsp;prior to termination of the Revolving Loan Commitments,
if any Lender breaches its obligation to fund any requested Revolving Credit Loan, for so long as
such breach exists, its voting rights hereunder shall be calculated with reference to its outstanding
Loans, LC Amounts and unfunded and unreimbursed LC Obligations, rather than its Revolving Loan Commitment.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Material Adverse Effect</U>  &#150; (i)&nbsp;a material adverse effect on the business, financial condition, operation, performance
or properties of Borrowers and their Subsidiaries taken as a whole, (ii)&nbsp;a material adverse
effect on the rights and remedies of Agent or Lenders under the Loan Documents, or (iii)&nbsp;the
material impairment of the ability of Borrowers or any of their Subsidiaries to perform their obligations
hereunder or under any Loan Document.</FONT></P></TD></TR></TABLE>
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<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>A-13</FONT></P>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Money Borrowed</U>  &#150; means, (i)&nbsp;Indebtedness arising from the lending of money by any Person to any Borrower
or any of its Subsidiaries; (ii)&nbsp;Indebtedness, whether or not in any such case arising from
the lending by any Person of money to any Borrower or any of its Subsidiaries, (1)&nbsp;which is
represented by notes payable or drafts accepted that evidence extensions of credit, (2)&nbsp;which
constitutes obligations evidenced by bonds, debentures, notes or similar instruments, or (3)&nbsp;upon
which interest charges are customarily paid (other than accounts payable) or that was issued or assumed
as full or partial payment for Property; (iii)&nbsp;Indebtedness that constitutes a Capitalized Lease
Obligation; (iv)&nbsp;reimbursement obligations with respect to letters of credit or guaranties of
letters of credit and (v)&nbsp;Indebtedness of any Borrower or any of its Subsidiaries under any
guaranty of obligations that would constitute Indebtedness for Money Borrowed under clauses&nbsp;(i)
through (iii) hereof, if owed directly by such Borrower or any of its Subsidiaries. Money Borrowed
shall not include trade payables or accrued expenses.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Mortgage</U>  &#150; the deed of trust executed by Perma-Pipe on or about the Closing Date in favor of Agent,
for the benefit of itself and Lenders, by which Perma-Pipe has granted to Agent, as security for
the Obligations, a Lien upon the real Property of Perma-Pipe located at 1310 Quarles Drive, Lebanon,
Tennessee, together with all mortgages, deeds of trust and comparable documents now or at any time
hereafter securing the whole or any part of the Obligations.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Multiemployer Plan</U>  &#150; has the meaning set forth in Section&nbsp;4001(a)(3) of ERISA.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>New Mortgages</U>  &#150; as defined in Section 5.4 of the Agreement.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Note Purchase Agreements</U>  &#150; those certain Note Purchase Agreements, each dated as of even date herewith and as may
be amended from time to time, pursuant to which MFRI issued and sold Six Million Dollars ($6,000,000)
in aggregate principal amount of Reset Rate Senior Secured Notes due June 30, 2007 to the purchasers
named in Schedule A thereto which Note Purchase Agreements provide for, inter alia:&nbsp;(i) an initial
principal amount of such Notes of at least Six Million Dollars ($6,000,000); (ii) quarterly amortization
principal payments of not more than One Hundred Eighty-Seven Thousand Five Hundred Dollars ($187,500);
(iii) a per annum interest rate of not more than twelve percent (12%) if either (a) the principal
amount of the Term Notes outstanding is greater than Five Million Dollars ($5,000,000) or (b) any
amount due under the Term Notes remains outstanding as of July 10, 2006 (including but not limited
to principal, interest or Make-Whole Amount (as defined in the Note Purchase Agreements)); (iv) a
non-default interest rate of ten percent (10%) per annum if the outstanding principal amount of the
Term Notes outstanding is Five Million Dollars ($5,000,000) or less and such interest rate is being
determined for any period prior to July 10, 2006; and (v) additional principal payments based on
an excess cash flow formula, which formula shall provide that no such principal payments otherwise
due by application of any such excess cash flow formula shall be required if, after giving effect
to any such principal payment, Availability (computed on a basis consistent with the manner in which
Availability is computed on the Closing Date) would be less than One Million Five Hundred Thousand Dollars ($1,500,000).</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Notes</U>  &#150; the Revolving Notes.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Obligations</U>  &#150; all Loans, all LC Obligations and all other advances, debts, liabilities, obligations,
covenants and duties, together with all interest, fees and other charges thereon, </FONT></P></TD></TR></TABLE>
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<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>A-14</FONT></P>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>owing, arising, due or payable from any Borrower to Agent, for its own benefit, from any Borrower to
Agent for the benefit of any Lender, from any Borrower to any Lender or from any Borrower to Bank
or any other Affiliate of Agent, of any kind or nature, present or future, whether or not evidenced
by any note, guaranty or other instrument, whether arising under the Agreement or any of the other
Loan Documents or otherwise, whether direct or indirect (including those acquired by assignment),
absolute or contingent, primary or secondary, due or to become due, now existing or hereafter arising
and however acquired, including without limitation any Product Obligations owing to Agent, any Lender,
Bank or any Affiliate of Bank or Agent.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Organizational I.D. Number</U>  &#150; with respect to any Person, the organizational identification number assigned to such
Person by the applicable governmental unit or agency of the jurisdiction of organization of such
Person.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Other Agreements</U>  &#150; any and all agreements, instruments and documents (other than the Agreement and the Security
Documents), heretofore, now or hereafter executed by any Borrower, any Subsidiary of any Borrower
or any other third party and delivered to Agent or any Lender in respect of the transactions contemplated
by the Agreement.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Overadvance</U>  &#150; as defined in subsection&nbsp;1.1.2 of the Agreement.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Patent Security Agreement</U>  &#150; the Patent and Security Agreement executed by Borrowers on or about the Closing Date
in favor of Agent for its benefit and the ratable benefit of Lenders, as such Patent and License
Agreement has been or will be amended from time to time.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Permitted Holders</U>  &#150; any Person, who as of the Closing Date, beneficially owns five percent (5%) or more (on
a fully diluted basis) of the outstanding common stock of MFRI.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Permitted Liens</U>  &#150; any Lien of a kind specified in subsection&nbsp;8.2.5 of the Agreement.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Permitted Purchase Money Indebtedness</U>  &#150; Purchase Money Indebtedness of Borrowers incurred after the date hereof which is secured
by a Purchase Money Lien and the principal amount of which, when aggregated with the principal amount
of all other such Indebtedness and Capitalized Lease Obligations of Borrowers and their Subsidiaries
at the time outstanding, does not exceed One Million Five Hundred Thousand Dollars ($1,500,000).
For the purposes of this definition, the principal amount of any Purchase Money Indebtedness consisting
of capitalized leases (as opposed to operating leases) shall be computed as a Capitalized Lease Obligation.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Person</U>  &#150; an individual, partnership, corporation, limited liability company, joint stock company,
land trust, business trust, or unincorporated organization, or a government or agency or political
subdivision thereof.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Plan</U>  &#150; an employee benefit plan now or hereafter maintained for employees of any Borrower or
any of its Subsidiaries that is covered by Title IV of ERISA.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Pledge Agreement</U>  &#150; the Stock Pledge Agreement executed by MFRI on or about the Closing Date in favor of
Agent for its benefit and the ratable benefit of Lenders, as such Stock Pledge Agreement has or will
be amended from time to time.</FONT></P></TD></TR></TABLE>
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<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>A-15</FONT></P>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Pledge Agreement (Subsidiaries)</U>  &#150; the Stock Pledge Agreement executed by Midwesco on or about the Closing Date in favor
of Agent for its benefit and the ratable benefit of Lenders, as such Stock Pledge Agreement has been
or will be amended from time to time.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Product Obligations</U>  &#150; every obligation of any Borrower under and in respect of any one or more of the following
types of services or facilities extended to any Borrower by Bank, Agent, any Lender or any Affiliate
of Bank or Agent:&nbsp;(i)&nbsp;credit cards, (ii)&nbsp;cash management or related services including
the automatic clearing house transfer of funds for the account of any Borrower pursuant to agreement
or overdraft, (iii)&nbsp;cash management, including controlled disbursement services and (iv)&nbsp;Derivative
Obligations.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Projections</U>  &#150;MFRI&#146;s projected Consolidated and consolidating (i)&nbsp;balance sheets, (ii)&nbsp;profit
and loss statements, (iii)&nbsp;cash flow statements, and (iv)&nbsp;capitalization statements, all
prepared on a consistent basis with the historical financial statements of MFRI and its Subsidiaries,
together with appropriate supporting details and a statement of underlying assumptions.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Property</U>  &#150; any interest in any kind of property or asset, whether real, personal or mixed, or tangible
or intangible.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Purchase Money Indebtedness</U>  &#150; means and includes (i)&nbsp;Indebtedness (other than the Obligations) for the payment
of all or any part of the purchase price of any fixed assets, (ii)&nbsp;any Indebtedness (other than
the Obligations) incurred at the time of or within 10 days prior to or after the acquisition of any
fixed assets for the purpose of financing all or any part of the purchase price thereof, and (iii)&nbsp;any
renewals, extensions or refinancings thereof, but not any increases in the principal amounts thereof
outstanding at the time.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Purchase Money Lien</U>  &#150; a Lien upon fixed assets which secures Purchase Money Indebtedness, but only if such
Lien shall at all times be confined solely to the fixed assets the purchase price of which was financed
through the incurrence of the Purchase Money Indebtedness secured by such Lien.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Real Estate Component</U>  &#150; as of any date of the lesser of (1) One Million Dollars ($1,000,000) multiplied by the
Real Estate Percentage or (2) the product of fifty percent (50%) of the fair market value of Perma-Pipe&#146;s
Real Property located at 1310 Quarles Drive, Lebanon, Tennessee, less liquidation expenses (as estimated
by Agent) multiplied by the Real Estate Percentage. For purposes of this definition, the fair market
value of Perma-Pipe&#146;s Real Property located at 1310 Quarles Drive, Lebanon, Tennessee shall
be established by Agent in the reasonable exercise of its discretion on the Closing Date. After the
Closing Date, Agent, in the reasonable exercise of its discretion, may adjust the fair market value
of Perma-Pipe&#146;s Real Property located at 1310 Quarles Drive, Lebanon, Tennessee, to reflect
increases or decreases in either such value. To that end, Borrowers agree that Agent, in the reasonable
exercise of its discretion, may, on an annual basis, or more frequently as requested by Agent, if
an Event of Default exists, obtain or require Borrowers to obtain appraisals of such Real Property
to evidence the fair market value of such Real Property. If no Default or Event of Default exists,
Agent shall notify Borrowers prior to obtaining or authorizing any such appraisal. The cost of any
such appraisal shall be paid by Borrowers pursuant to Section 2.6 of the Agreement. The foregoing </FONT></P></TD></TR></TABLE>
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<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>A-16</FONT></P>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>notwithstanding, upon and after the consummation of the Lebanon Refinancing, the Real Estate Component
will equal Zero Dollars ($0).</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Real Estate Percentage</U>  &#150; one hundred percent (100%) until October&nbsp;31, 2002. On and after November&nbsp;1,
2002, the Real Estate Percentage shall mean as of any such date, the percentage equal to (x) one
hundred percent (100%) <U>minus</U> (y) the percentage obtained by dividing the number of full calendar months elapsed since September&nbsp;30,
2002 by sixty (60).</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Rentals</U>  &#150; as defined in subsection&nbsp;8.2.18 of the Agreement.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Reportable Event</U>  &#150; any of the events set forth in Section&nbsp;4043(c) of ERISA.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Reserve Percentage</U>  &#150; the maximum aggregate reserve requirement (including all basic, supplemental, marginal
and other reserves) which is imposed on member banks of the Federal Reserve System against &#147;Euro-currency
Liabilities&#148; as defined in Regulation&nbsp;D.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Restricted Investment</U>  &#150; any investment made in cash or by delivery of Property to any Person, whether by acquisition
of stock, Indebtedness or other obligation or Security, or by loan, advance or capital contribution,
or otherwise, or in any Property except the following:</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(i)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> investments by any Borrower, to the extent existing on the Closing Date, in one or more Subsidiaries
of such Borrower;</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(ii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Property to be used in the ordinary course of business;</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(iii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Current Assets arising from the sale of goods and services in the ordinary course of business of any
Borrower or any of its Subsidiaries;</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(iv)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> investments in direct obligations of the United States of America, or any agency thereof or obligations
guaranteed by the United States of America, <U>provided</U> that such obligations mature within one year from the date of acquisition thereof;</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(v)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> investments in certificates of deposit maturing within one year from the date of acquisition and fully
insured by the Federal Deposit Insurance Corporation;</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(vi)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> investments in commercial paper given the highest rating by a national credit rating agency and maturing
not more than 270 days from the date of creation thereof; </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(vii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> investments in money market, mutual or similar funds having assets in excess of $100,000,000 and the
investments of which are limited to investment grade securities;</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(viii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> intercompany advances permitted under Section 8.2.2(v) of the Agreement;</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(ix)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> investments existing on the date hereof and listed on Exhibit&nbsp;8.2.12 hereto; and</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(x)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> investments otherwise expressly permitted pursuant to the Agreement.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Revolving Credit Loan</U>  &#150; a Loan made by any Lender pursuant to Section&nbsp;1.1 of the Agreement.</FONT></P></TD></TR></TABLE>
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<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>A-17</FONT></P>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Revolving Credit Maximum Amount</U>  &#150; Twenty-Eight Million Dollars ($28,000,000); <U>provided</U>, that upon the closing of the Lebanon Refinancing, the Revolving Credit Maximum Amount shall be reduced
to Twenty-Seven Million Dollars ($27,000,000); and <U>provided</U>, <U>further</U>, that upon three (3) Business Days&#146; notice, Borrowers may reduce the Revolving Credit Maximum
Amount by amounts not exceeding Two Million Dollars ($2,000,000) within any calendar year. Any such
reduction shall be in a minimum amount of One Million Dollars ($1,000,000) and shall be an integral
multiple of One Million Dollars ($1,000,000). The Maximum Revolving Loan Maximum Amount may not,
however, be reduced below Twenty-Three Million Dollars ($23,000,000). Once the Maximum Revolving
Loan has been so reduced, it may not be subsequently increased.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Revolving Loan Commitment</U>  &#150; with respect to any Lender, the amount of such Lender&#146;s Revolving Loan Commitment
pursuant to subsection&nbsp;1.1.1 of the Agreement, as set forth below such Lender&#146;s name on
the signature page hereof or any Assignment and Acceptance Agreement executed by such Lender.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Revolving Loan Percentage</U>  &#150; with respect to each Lender, the percentage equal to the quotient of such Lender&#146;s
Revolving Loan Commitment <U>divided</U> <U>by</U> the aggregate of all Revolving Loan Commitments.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Revolving Notes</U>  &#150; the Secured Promissory Notes to be executed by Borrowers on or about the Closing Date
in favor of each Lender to evidence the Revolving Credit Loans, which shall be in the form of <U>Exhibit&nbsp;1.1</U> to the Agreement, together with any replacement or successor notes therefor.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Security</U>  &#150; all shares of stock, partnership interests, membership interests, membership units or
other ownership interests in any other Person and all warrants, options or other rights to acquire
the same.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Security Documents</U>  &#150;the Guaranty Agreements, the Mortgages, any New Mortgage, the Patent Security Agreement,
the Pledge Agreement, the Pledge Agreement (Subsidiaries), the Trademark Security Agreement, instruments
and agreements now or at any time hereafter securing the whole or any part of the Obligations.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Short Term Projects</U>  &#150; projects of Perma-Pipe which are estimated by Borrower in good faith to be one month
or less from ninety-five percent (95%) completion, which estimates shall be consistent with the purchase
orders evidencing such projects.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Solvent</U>  &#150; as to any Person, that such Person (i)&nbsp;owns Property whose fair saleable value is
greater than the amount required to pay all of such Person&#146;s Indebtedness (including contingent
debts), (ii)&nbsp;is able to pay all of its Indebtedness as such Indebtedness matures and (iii)&nbsp;has
capital sufficient to carry on its business and transactions and all business and transactions in
which it is about to engage.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Subordinated Debt</U>  &#150; Indebtedness of any Borrower or any Subsidiary of any Borrower that is subordinated to
the Obligations in a manner satisfactory to Agent, and contains terms, including without limitation,
payment terms, satisfactory to Agent.</FONT></P></TD></TR></TABLE>
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<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>A-18</FONT></P>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Subsidiary</U>  &#150; any Person of which another Person owns, directly or indirectly through one or more intermediaries,
more than 50% of the Voting Stock at the time of determination.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Tennessee IRB Indebtedness</U>  &#150; as defined in the definition of IRB Indebtedness.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Term</U>  &#150; as defined in Section&nbsp;4.1 of the Agreement.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Term Loan Documents</U>  &#150; the Term Notes, the Note Purchase Agreements and all other documents, agreements and
exhibits and schedules executed and delivered in connection therewith.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Term Notes</U>  &#150; those certain notes issued by MFRI pursuant to the Note Purchase Agreements.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Term Noteholders</U>  &#150; the holders of the Term Notes.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Total Credit Facility</U>  &#150; Twenty-Eight Million Dollars ($28,000,000), as reduced from time to time pursuant to
the terms of the Agreement.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Trademark Security Agreement</U>  &#150; the Trademark and License Security Agreement executed by Borrowers on or about the Closing
Date in favor of Agent of its benefit and the ratable benefit of Lenders, as such Trademark and License
Security Agreement has been or will be amended from time to time.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Type of Organization</U>  &#150; with respect to any Person, the kind or type of entity by which such Person is organized,
such as a corporation or limited liability company.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>UCC</U>  &#150; the Uniform Commercial Code as in effect in the State of Illinois on the date of this
Agreement, as it may be amended or otherwise modified.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Unused Line Fee</U>  &#150; as defined in Section&nbsp;2.5 of the Agreement.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Virginia IRB Indebtedness</U>  &#150; as defined in the definition of IRB Indebtedness.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Voting Stock</U>  &#150; Securities of any class or classes of a corporation, limited partnership or limited liability
company or any other entity the holders of which are ordinarily, in the absence of contingencies,
entitled to vote with respect to the election of corporate directors (or Persons performing similar
functions).</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><B><U>Other Terms</U></B>. &nbsp;All other terms contained in the Agreement shall have, when the context so indicates, the meanings
provided for by the UCC to the extent the same are used or defined therein.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><B><U>Certain Matters of Construction</U></B>. The terms &#147;herein&#148;, &#147;hereof&#148; and &#147;hereunder&#148; and other words of similar
import refer to the Agreement as a whole and not to any particular section, paragraph or subdivision.
Any pronoun used shall be deemed to cover all genders. The section titles, table of contents and
list of exhibits appear as a matter of convenience only and shall not affect the interpretation of
the Agreement. All references to statutes and related regulations shall </FONT></P></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>A-19</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>
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<TR>
<TD>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>include any amendments of same and any successor statutes and regulations. All references to any of
the Loan Documents shall include any and all modifications thereto and any and all extensions or
renewals thereof.</FONT></P></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>A-20</FONT></P>
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</TD></TR></TABLE>
<PAGE>

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<TR>
  <TD align="right">&nbsp;</TD>
</TR>
<TR>
  <TD align="right"><font size="2" face="Times New Roman, Times, serif">10.21.02</font></TD>
</TR>
<TR>
  <TD>&nbsp;</TD>
</TR>
<TR>
<TD>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B>FIRST AMENDMENT TO<BR><U>LOAN AND SECURITY AGREEMENT</U></B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>THIS FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT (&#147;First Amendment&#148;) is made as of the
___ day of October, 2002 by and among MFRI, Inc., a Delaware corporation (&#147;MFRI&#148;), Midwesco
Filter Resources, Inc., a Delaware corporation (&#147;Midwesco&#148;), Perma-Pipe, Inc., a Delaware
corporation (&#147;Perma-Pipe&#148;), Thermal Care, Inc., a Delaware corporation (&#147;Thermal Care&#148;)
and TDC Filer Manufacturing, Inc., a Delaware corporation (&#147;TDC&#148;), the lenders who are
signatories hereto (&#147;Lenders&#148;), and Fleet Capital Corporation, a Rhode Island corporation
(&#147;FCC&#148;), as agent for Lenders hereunder (FCC, in such capacity, being &#147;Agent&#148;).
MFRI, Midwesco, Perma-Pipe, Thermal Care and TDC are sometimes hereinafter referred to individually
as a &#147;Borrower&#148; and collectively as &#147;Borrowers.&#148;</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><U>WITNESSETH</U>:</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>WHEREAS, Borrowers, Agent and Lenders entered into a certain Loan and Security Agreement dated as of
July 11, 2002 (said Loan and Security Agreement is hereinafter referred to as the &#147;Loan Agreement&#148;);
and</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>WHEREAS, Borrowers desire to amend and modify certain provisions of the Loan Agreement and, subject
to the terms hereof, Agent and Lenders are willing to agree to such amendments and modifications;</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>NOW THEREFORE, in consideration of the premises, the mutual covenants and agreements herein contained,
and any extension of credit heretofore, now or hereafter made by Agent and Lenders to Borrowers,
the parties hereto hereby agree as follows:</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>1.<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Definitions</U>. All capitalized terms used herein without definition shall have the meaning given to them in the
Loan Agreement.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>2.<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Total&nbsp;Indebtedness</U>. Clause (xi) of Section 8.2.3 of the Loan Agreement is hereby deleted and the following is inserted
in its stead:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&#147;8.2.3&nbsp;&nbsp;<U>Total&nbsp;Indebtedness</U>. Create, incur, assume, or suffer to exist, or permit any Subsidiary of any Borrower to create, incur
  or suffer to exist, any Indebtedness, except:</FONT></div></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2>*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top width=96>&nbsp;</TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>(xi)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Money Borrowed (either as an
  operating loan or a real estate mortgage loan) in a principal amount not to exceed One Million Seven
  Hundred Fifty Thousand Dollars ($1,750,000) incurred by Midwesco&#146;s Danish Subsidiaries and guaranteed
  by Midwesco and/or MFRI;&#148;</FONT></div></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2>*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *</FONT></P></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>

<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>
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<TR>
<TD>
<P align=right><FONT face="Times New Roman, Times, Serif" size=2>10.21.02</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>3.<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Definition&nbsp;of&nbsp;Cash&nbsp;Flow</U>. The definition of &#147;Cash Flow&#148; contained in Exhibit 8.3 to the Loan Agreement is hereby
deleted and the following is inserted in its stead:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&#147;<B><U>Cash&nbsp;Flow</U></B> &#150; with respect to any fiscal period, EBITDA for such period <U>minus</U> (i)&nbsp;Capital Expenditures (excluding, however, only Capital Expenditures that are financed by
  third party financing in connection with the construction by Midwesco Filter Resources Denmark A/S
  of a new facility) made within such period, (ii) income taxes paid in cash in such period, (iii)
  Interest Expense paid in cash within such period and (iv) principal payments on Money Borrowed (other
  than Revolving Credit Loans) made within such period.&#148;</FONT></div></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>4.<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Execution in Counterparts</U>. This First Amendment may be executed in any number of counterparts and by different parties hereto
in separate counterparts, each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>5.<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Continuing Effect</U>. Except as otherwise specifically set out herein, the provisions of the Loan Agreement shall remain
in full force and effect.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B><I>(Signature Page Follows)</I></B></FONT></P></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>

<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>

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<TR>
  <TD><P align=right><FONT face="Times New Roman, Times, Serif" size=2>10.21.02</FONT></P>
    <div align="center"><FONT face="Times New Roman, Times, Serif" size=2><B><I>(Signature Page to First Amendment to Loan Agreement)</I></B></FONT> </div></TD>
</TR>
<TR>
  <TD>&nbsp;</TD>
</TR>
<TR>
<TD>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>IN WITNESS WHEREOF, this First Amendment has been duly executed as of the day and year specified at
the beginning hereof.</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<table width="600" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td width="50%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">FLEET CAPITAL CORPORATION,</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">(&#147;Agent&#148; and a &#147;Lender&#148;)</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">By: ______________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="4%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name: ______________________________ </font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title: _______________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">MFRI, INC. (a &#147;Borrower&#148;)</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">By: ______________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name: ______________________________ </font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title: _______________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">MIDWESCO FILTER RESOURCES, INC.</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">(a &#147;Borrower&#148;)</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">By: ______________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name: ______________________________ </font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title: _______________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">PERMA-PIPE, INC. (a &#147;Borrower&#148;)</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">By: ______________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name: ______________________________ </font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title: _______________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">THERMAL CARE, INC. (a &#147;Borrower&#148;)</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">By: ______________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name: ______________________________ </font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title: _______________________________</font></td>
  </tr>
</table>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>

<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>

<table width="600" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td colspan="2" align="right"><FONT face="Times New Roman, Times, Serif" size=2>10.21.02</FONT></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan="2">&nbsp;</td>
  </tr>
  <tr>
    <td width="50%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">TDC FILTER MANUFACTURING, INC.</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">(a &#147;Borrower&#148;)</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">By: ______________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="4%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name: ______________________________ </font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title: _______________________________</font></td>
  </tr>
</table>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>

<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<PAGE>

<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
  <TD>&nbsp;</TD>
</TR>
<TR>
  <TD><p align=right><font face="Times New Roman, Times, Serif" size=2><b>12.12.02</b></font></p>
    <p align=center><font face="Times New Roman, Times, Serif" size=2><b>SECOND AMENDMENT TO<br>
            <u>LOAN AND SECURITY AGREEMENT</u></b></font></p></TD>
</TR>
<TR>
  <TD>&nbsp;</TD>
</TR>
<TR>
<TD>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>THIS SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT (&#147;Second Amendment&#148;) is made as of the
12<SUP>th</SUP> day of December, 2002 by and among MFRI, Inc., a Delaware corporation (&#147;MFRI&#148;), Midwesco
Filter Resources, Inc., a Delaware corporation (&#147;Midwesco&#148;), Perma-Pipe, Inc., a Delaware
corporation (&#147;Perma-Pipe&#148;), Thermal Care, Inc., a Delaware corporation (&#147;Thermal Care&#148;)
and TDC Filer Manufacturing, Inc., a Delaware corporation (&#147;TDC&#148;), the lenders who are
signatories hereto (&#147;Lenders&#148;), and Fleet Capital Corporation, a Rhode Island corporation
(&#147;FCC&#148;), as agent for Lenders hereunder (FCC, in such capacity, being &#147;Agent&#148;).
MFRI, Midwesco, Perma-Pipe, Thermal Care and TDC are sometimes hereinafter referred to individually
as a &#147;Borrower&#148; and collectively as &#147;Borrowers.&#148;</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><U>WITNESSETH</U>:</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>WHEREAS, Borrowers, Agent and Lenders entered into a certain Loan and Security Agreement dated as of
July 11, 2002 as amended by a certain First Amendment to Loan and Security Agreement dated as of
October 31, 2002 by and among Borrowers, Agent and Lenders (said Loan and Security Agreement, as
so amended, is hereinafter referred to as the &#147;Loan Agreement&#148;); and</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>WHEREAS, Borrowers desire to amend and modify certain provisions of the Loan Agreement and, subject
to the terms hereof, Agent and Lenders are willing to agree to such amendments and modifications;</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>NOW THEREFORE, in consideration of the premises, the mutual covenants and agreements herein contained,
and any extension of credit heretofore, now or hereafter made by Agent and Lenders to Borrowers,
the parties hereto hereby agree as follows:</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>1.<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Definitions</U>. All capitalized terms used herein without definition shall have the meaning given to them in the
Loan Agreement.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>2.<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Financial Covenants</U>. <U>Exhibit 8.3</U> to the Loan Agreement is hereby deleted and <U>Exhibit 8.3</U> attached hereto and incorporated herein is inserted in its stead:</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>3.<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Waiver</U>. Agent and Lenders hereby agree to waive any Events of Default resulting from Borrowers failing to
comply with the provisions of <U>Section 8.3</U> and <U>Exhibit 8.3</U> (Minimum EBITDA) (prior to their amendment by the terms hereof) for the fiscal period ended October
31, 2002. Such waiver shall not apply to any provision of the Loan Agreement other than <U>Section 8.3</U> and <U>Exhibit 8.3</U> (Minimum EBITDA) or any fiscal period other than the period ended October&nbsp;31, 2002.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>4.<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Fee</U>. In order to induce Agent and Lenders to enter into this Second Amendment, Borrowers agree to pay
to Agent for the ratable benefit of Lenders a fee in the amount of Thirty-Three Thousand Seven Hundred
Fifty Dollars ($33,750). Said fee shall be due and payable and fully earned by the date hereof.</FONT></P></TD></TR></TABLE>

<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>

<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>

<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>5.<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Execution in Counterparts</U>. This Second Amendment may be executed in any number of counterparts and by different parties hereto
in separate counterparts, each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>6.<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Continuing Effect</U>. Except as otherwise specifically set out herein, the provisions of the Loan Agreement shall remain
in full force and effect.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B><I>(Signature Page Follows)</I></B></FONT></P></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>

<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>

<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
  <TD><div align="center"><font face="Times New Roman, Times, Serif" size=2><b><i>(Signature Page to Second Amendment to Loan Agreement)</i></b></font> </div></TD>
</TR>
<TR>
  <TD>&nbsp;</TD>
</TR>
<TR>
<TD><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>IN WITNESS WHEREOF, this Second Amendment has been duly executed as of the day and year specified at
    the beginning hereof.</FONT></TD>
</TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<table width="600" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td width="50%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">FLEET CAPITAL CORPORATION,</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">(&#147;Agent&#148; and a &#147;Lender&#148;)</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">By: ______________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="4%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name: ______________________________ </font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title: _______________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">MFRI, INC. (a &#147;Borrower&#148;)</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">By: ______________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name: ______________________________ </font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title: _______________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">MIDWESCO FILTER RESOURCES, INC.</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">(a &#147;Borrower&#148;)</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">By: ______________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name: ______________________________ </font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title: _______________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">PERMA-PIPE, INC. (a &#147;Borrower&#148;)</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">By: ______________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name: ______________________________ </font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title: _______________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">THERMAL CARE, INC. (a &#147;Borrower&#148;)</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">By: ______________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name: ______________________________ </font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title: _______________________________</font></td>
  </tr>
</table>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>

<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>

<table width="600" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td width="50%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">TDC FILTER MANUFACTURING, INC.</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">(a &#147;Borrower&#148;)</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">By: ______________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="4%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name: ______________________________ </font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title: _______________________________</font></td>
  </tr>
</table>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>

<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>

<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD></TD></TR>
<TR>
<TD vAlign=top><div align="center"><font face="Times New Roman, Times, Serif" size=2><b>EXHIBIT&nbsp;8.3</b></font> </div>
  <p align=center><font face="Times New Roman, Times, Serif" size=2>FINANCIAL COVENANTS</font></p></TD>
</TR>
<TR>
  <TD vAlign=top>&nbsp;</TD>
</TR>
</TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD>
<FONT face="Times New Roman, Times, Serif" size=2><B>DEFINITIONS</B></FONT>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><B><U>Cash Flow</U></B> &nbsp;&#150; with respect to any fiscal period, EBITDA for such period <U>minus</U> (i)&nbsp;Capital Expenditures made within such period, (ii) income taxes paid in cash in such period,
(iii) Interest Expense paid in cash within such period and (iv) principal payments on Money Borrowed
(other than Revolving Credit Loans) made within such period.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><B><U>Consolidated Net Income (Loss)</U></B> &nbsp;- with respect to any fiscal period, the net income (or loss) of MFRI determined in accordance
with GAAP on a Consolidated basis; provided, however, Consolidated Net Income shall not include:&nbsp;(a)
the income (or loss) of any Person (other than a Subsidiary of any Borrower) in which a Borrower
or any of its wholly-owned subsidiaries has an ownership interest unless received in a cash distribution
or requiring the payment of cash; (b) the income (or loss) of any Person accrued prior to the date
it became a Subsidiary of a Borrower or is merged into or consolidated with a Borrower; (c) all amounts
included in determining net income (or loss) in respect of the write-up of assets on or after the
Closing Date, including the subsequent amortization or expensing of the written-up portion of the
assets; (d) extraordinary gains as defined under GAAP; and (e) gains from asset dispositions (other
than sales of inventory); and any increase or decrease in expenses resulting from the implementation of FASB 146.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><B><U>EBITDA</U></B> &nbsp;&#150; with respect to any period, the sum of Consolidated Net Income (Loss) before Interest
Expense, income taxes, depreciation and amortization for such period (but excluding any extraordinary
gains for such period), all as determined for Borrowers and their&nbsp;Subsidiaries on a Consolidated
basis and in accordance with GAAP.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><B><U>Interest Coverage Ratio</U></B> &nbsp;&#150; with respect to any period, the ratio of (i)&nbsp;EBITDA for such period to (ii)&nbsp;Interest
Expense paid in cash in such period, all as defined for MFRI and its subsidiaries on a consolidated
basis in accordance with GAAP.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><B><U>Interest Expense</U></B> &nbsp;- with respect to any period, interest expense paid or accrued for such period, including without
limitation the interest portion of Capitalized Lease Obligations, plus the Letter of Credit and LC
Guaranty fees owing for such period, all as determined for MFRI and its Subsidiaries on a Consolidated
basis and in accordance with GAAP.</FONT></P></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><font size="2" face="Times New Roman, Times, serif">Exhibit 8.3 &#150; Page 1 </font><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>&nbsp;</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>

<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD>
<P><FONT face="Times New Roman, Times, Serif" size=2><B>COVENANTS</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><B><U>Minimum EBITDA</U></B>. &nbsp;Borrowers shall not permit EBITDA for any period set forth below to be less than the amount
set forth below opposite such period:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<table width="600" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td bgcolor="#FFFFFF"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="center"><font size="1" face="Times New Roman, Times, serif"><b> Period </b></font></td>
    <td colspan="2" align="center"><font size="1" face="Times New Roman, Times, serif"><b> Amount </b></font></td>
    <td valign="top"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td valign="top" bgcolor="#FFFFFF"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td bgcolor="#FFFFFF"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="center"><hr align="center" width="30" size="1" noshade></td>
    <td colspan="2"><hr size="1" noshade></td>
    <td valign="top"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td valign="top" bgcolor="#FFFFFF"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td bgcolor="#FFFFFF"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td valign="top"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td valign="top" bgcolor="#FFFFFF"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr bgcolor="#eaf9e8">
    <td width="10%" bgcolor="#FFFFFF">&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">3 Months Ended 8/31/02 </font></td>
    <td width="1%" align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td width="10%" align="right"><font size="2" face="Times New Roman, Times, serif">2,100,000 </font></td>
    <td width="2%" valign="top">&nbsp;</td>
    <td width="10%" valign="top" bgcolor="#FFFFFF">&nbsp;</td>
  </tr>
  <tr>
    <td bgcolor="#FFFFFF">&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">4 Months Ended 9/30/02 </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">2,550,000 </font></td>
    <td valign="top">&nbsp;</td>
    <td valign="top" bgcolor="#FFFFFF">&nbsp;</td>
  </tr>
  <tr bgcolor="#eaf9e8">
    <td bgcolor="#FFFFFF">&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">5 Months Ended 10/31/02 </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">3,500,000 </font></td>
    <td valign="top">&nbsp;</td>
    <td valign="top" bgcolor="#FFFFFF">&nbsp;</td>
  </tr>
  <tr>
    <td bgcolor="#FFFFFF">&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">6 Months Ended 11/30/02 </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">3,800,000 </font></td>
    <td valign="top">&nbsp;</td>
    <td valign="top" bgcolor="#FFFFFF">&nbsp;</td>
  </tr>
  <tr bgcolor="#eaf9e8">
    <td bgcolor="#FFFFFF">&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">7 Months Ended 12/31/02 </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">4,100,000 </font></td>
    <td valign="top">&nbsp;</td>
    <td valign="top" bgcolor="#FFFFFF">&nbsp;</td>
  </tr>
  <tr>
    <td bgcolor="#FFFFFF">&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">8 Months Ended 1/31/03 </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">4,500,000 </font></td>
    <td valign="top">&nbsp;</td>
    <td valign="top" bgcolor="#FFFFFF">&nbsp;</td>
  </tr>
  <tr bgcolor="#eaf9e8">
    <td bgcolor="#FFFFFF">&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">9 Months Ended 2/28/03 </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">5,000,000 </font></td>
    <td valign="top">&nbsp;</td>
    <td valign="top" bgcolor="#FFFFFF">&nbsp;</td>
  </tr>
  <tr>
    <td bgcolor="#FFFFFF">&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">10 Months Ended 3/31/03 </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">5,600,0000 </font></td>
    <td valign="top">&nbsp;</td>
    <td valign="top" bgcolor="#FFFFFF">&nbsp;</td>
  </tr>
  <tr bgcolor="#eaf9e8">
    <td bgcolor="#FFFFFF">&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">11 Months Ended 4/30/03 </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">6,000,000 </font></td>
    <td valign="top">&nbsp;</td>
    <td valign="top" bgcolor="#FFFFFF">&nbsp;</td>
  </tr>
  <tr>
    <td bgcolor="#FFFFFF">&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">12 Months Ended 5/31/03 </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">6,400,000 </font></td>
    <td valign="top">&nbsp;</td>
    <td valign="top" bgcolor="#FFFFFF">&nbsp;</td>
  </tr>
  <tr bgcolor="#eaf9e8">
    <td bgcolor="#FFFFFF">&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">12 Months Ended 6/30/03 </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">6,475,000 </font></td>
    <td valign="top">&nbsp;</td>
    <td valign="top" bgcolor="#FFFFFF">&nbsp;</td>
  </tr>
  <tr>
    <td bgcolor="#FFFFFF">&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">12 Months Ended 7/31/03 </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">6,550,000 </font></td>
    <td valign="top">&nbsp;</td>
    <td valign="top" bgcolor="#FFFFFF">&nbsp;</td>
  </tr>
  <tr bgcolor="#eaf9e8">
    <td bgcolor="#FFFFFF">&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">12 Months Ended 8/31/03 </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">6,700,000 </font></td>
    <td valign="top">&nbsp;</td>
    <td valign="top" bgcolor="#FFFFFF">&nbsp;</td>
  </tr>
  <tr>
    <td bgcolor="#FFFFFF">&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">12 Months Ended 9/30/03 </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">6,800,000 </font></td>
    <td valign="top">&nbsp;</td>
    <td valign="top" bgcolor="#FFFFFF">&nbsp;</td>
  </tr>
  <tr bgcolor="#eaf9e8">
    <td bgcolor="#FFFFFF">&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">12 Months Ended 10/31/03 </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">6,900,000 </font></td>
    <td valign="top">&nbsp;</td>
    <td valign="top" bgcolor="#FFFFFF">&nbsp;</td>
  </tr>
  <tr>
    <td bgcolor="#FFFFFF">&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">12 Months Ended 11/30/03 </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">7,000,000 </font></td>
    <td valign="top">&nbsp;</td>
    <td valign="top" bgcolor="#FFFFFF">&nbsp;</td>
  </tr>
  <tr bgcolor="#eaf9e8">
    <td bgcolor="#FFFFFF">&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">12 Months Ended 12/31/03 and the last day of each month thereafter </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">7,100,000 </font></td>
    <td valign="top">&nbsp;</td>
    <td valign="top" bgcolor="#FFFFFF">&nbsp;</td>
  </tr>
</table>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><B><U>Minimum Cash Flow</U></B> &nbsp;&#150; Borrowers shall not permit Cash Flow for any period set forth below to be less than the
amount set forth below opposite such period:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<table width="600" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td bgcolor="#FFFFFF"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="center"><font size="1" face="Times New Roman, Times, serif"><b> Period</b></font></td>
    <td colspan="2" align="center"><font size="1" face="Times New Roman, Times, serif"><b> Amount</b></font></td>
    <td><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td bgcolor="#FFFFFF"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td bgcolor="#FFFFFF"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><hr align="center" width="30" size="1" noshade></td>
    <td colspan="2"><hr size="1" noshade></td>
    <td><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td bgcolor="#FFFFFF"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td bgcolor="#FFFFFF"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td bgcolor="#FFFFFF"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr bgcolor="#eaf9e8">
    <td width="10%" bgcolor="#FFFFFF">&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">3 Months Ended 8/31/02 </font></td>
    <td width="1%" align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td width="10%" align="right"><font size="2" face="Times New Roman, Times, serif">0 </font></td>
    <td width="2%">&nbsp;</td>
    <td width="10%" bgcolor="#FFFFFF">&nbsp;</td>
  </tr>
  <tr>
    <td bgcolor="#FFFFFF">&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">4 Months Ended 9/30/02 </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">0 </font></td>
    <td>&nbsp;</td>
    <td bgcolor="#FFFFFF">&nbsp;</td>
  </tr>
  <tr bgcolor="#eaf9e8">
    <td bgcolor="#FFFFFF">&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">5 Months Ended 10/31/02 </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">0 </font></td>
    <td>&nbsp;</td>
    <td bgcolor="#FFFFFF">&nbsp;</td>
  </tr>
  <tr>
    <td bgcolor="#FFFFFF">&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">6 Months Ended 11/30/02 </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">0 </font></td>
    <td>&nbsp;</td>
    <td bgcolor="#FFFFFF">&nbsp;</td>
  </tr>
  <tr bgcolor="#eaf9e8">
    <td bgcolor="#FFFFFF">&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">7 Months Ended 12/31/02 </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">0 </font></td>
    <td>&nbsp;</td>
    <td bgcolor="#FFFFFF">&nbsp;</td>
  </tr>
  <tr>
    <td bgcolor="#FFFFFF">&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">8 Months Ended 1/31/03 </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">0 </font></td>
    <td>&nbsp;</td>
    <td bgcolor="#FFFFFF">&nbsp;</td>
  </tr>
  <tr bgcolor="#eaf9e8">
    <td bgcolor="#FFFFFF">&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">9 Months Ended 2/28/03 </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">0 </font></td>
    <td>&nbsp;</td>
    <td bgcolor="#FFFFFF">&nbsp;</td>
  </tr>
  <tr>
    <td bgcolor="#FFFFFF">&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">10 Months Ended 3/31/03 </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">0 </font></td>
    <td>&nbsp;</td>
    <td bgcolor="#FFFFFF">&nbsp;</td>
  </tr>
  <tr bgcolor="#eaf9e8">
    <td bgcolor="#FFFFFF">&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">11 Months Ended 4/30/03 </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">0 </font></td>
    <td>&nbsp;</td>
    <td bgcolor="#FFFFFF">&nbsp;</td>
  </tr>
  <tr>
    <td bgcolor="#FFFFFF">&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">12 Months Ended 5/31/03 and the last day of each month thereafter </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">0 </font></td>
    <td>&nbsp;</td>
    <td bgcolor="#FFFFFF">&nbsp;</td>
  </tr>
</table>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>2&nbsp;</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<PAGE>

<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
  <TD>&nbsp;</TD>
</TR>
<TR>
<TD>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B>THIRD AMENDMENT TO<BR><U>LOAN AND SECURITY AGREEMENT</U></B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>THIS THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT (&#147;Third Amendment&#148;) is made as of the
30<SUP>th</SUP> day of April, 2003 by and among MFRI, Inc., a Delaware corporation (&#147;MFRI&#148;), Midwesco Filter
Resources, Inc., a Delaware corporation (&#147;Midwesco&#148;), Perma-Pipe, Inc., a Delaware corporation
(&#147;Perma-Pipe&#148;), Thermal Care, Inc., a Delaware corporation (&#147;Thermal Care&#148;) and
TDC Filer Manufacturing, Inc., a Delaware corporation (&#147;TDC&#148;), the lenders who are signatories
hereto (&#147;Lenders&#148;), and Fleet Capital Corporation, a Rhode Island corporation (&#147;FCC&#148;),
as agent for Lenders hereunder (FCC, in such capacity, being &#147;Agent&#148;). MFRI, Midwesco,
Perma-Pipe, Thermal Care and TDC are sometimes hereinafter referred to individually as a &#147;Borrower&#148;
and collectively as &#147;Borrowers.&#148;</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><U>WITNESSETH</U>:</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>WHEREAS, Borrowers, Agent and Lenders entered into a certain Loan and Security Agreement dated as of
July 11, 2002 as amended by a certain First Amendment to Loan and Security Agreement by and among
Borrowers, Agent and Lenders and dated October&nbsp;31, 2002, and a certain Second Amendment to Loan
and Security Agreement by and among Borrowers, Agent and Lenders dated December 12, 2002 (said Loan
and Security Agreement, as amended, is hereinafter referred to as the &#147;Loan Agreement&#148;); and</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>WHEREAS, Borrowers desire to amend and modify certain provisions of the Loan Agreement and, subject
to the terms hereof, Agent and Lenders are willing to agree to such amendments and modifications;</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>NOW THEREFORE, in consideration of the premises, the mutual covenants and agreements herein contained,
and any extension of credit heretofore, now or hereafter made by Agent and Lenders to Borrowers,
the parties hereto hereby agree as follows:</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>1.<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Definitions</U>. All capitalized terms used herein without definition shall have the meaning given to them in the
Loan Agreement.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>2.<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Waivers</U>. Upon the &#147;Third Amendment Effective Date&#148; (as defined below), Agent and Lenders, Agent
and Lenders shall be deemed to have waived any Event of Default resulting from the failure of Borrowers
to comply with the provisions of Section 8.3 regarding (x)&nbsp;Minimum EBITDA for the fiscal period
of seven months ending December 31, 2002 and (y)&nbsp;Minimum EBITDA and Minimum Cash Flow for the
fiscal period of eight months ending January 31, 2003. The waiver contained in this Section 2 of
this Second Amendment does not apply to any Section of the Loan Agreement other than Section 8.3
(Minimum EBITDA and Minimum Cash Flow) or to any other fiscal period other than the fiscal periods
of (x)&nbsp;seven months ending December 31, 2002 with regard to Minimum EBITDA and (y)&nbsp;eight
months ending January 31, 2003 with regard to Minimum EBITDA and Maximum Cash Flow.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>3.<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Financial Covenants</U>. Upon the Third Amendment Effective Date, Exhibit 8.3 to the Loan Agreement shall be hereby deleted
and Exhibit 8.3 attached to this Third Amendment and incorporated herein shall be inserted in its
stead.</FONT></P></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>4.<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Certain Events of Defaults</U>. From and after the Third Amendment Effective Date, so long as no Event of Default has occurred under
Section 8.3 of the Loan Agreement, Agent and Lenders agree that Agent and Lenders shall not exercise
their rights under Subsection 10.1.16 of the Loan Agreement to declare an Event of Default to have
occurred as a result of the occurrence of a Material Adverse Effect.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>5.<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Silverman &amp; Associates</U>. In order to induce Agent and Lenders to enter into this Third Amendment, Borrowers covenant to Agent
and Lenders that, on or prior to May 23, 2003, Borrowers shall retain Silverman Consulting (&#147;SC&#148;)
pursuant to an engagement letter reasonably acceptable to Agent to provide consulting services regarding:&nbsp;(i)
review and comment on the viability of the cash flow projections prepared by Borrower; (ii) review
and comment on the viability of the business plan prepared by Borrower with special attention to
the filter and chiller businesses; (iii) suggestions for profitability improvements that result from
items (i) and (ii); (iv) inventory analysis as to optimal levels for TDC and Thermal Care finished
goods and such other portions of the MFRI inventory as SC shall believe constructive; and (v)&nbsp;such
other matters as requested by Agent.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>6.<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Third Amendment Effective Date</U>. This Third Amendment shall become effective upon satisfaction of each of the following conditions:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></div></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(i)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Borrowers, Agent and Lenders shall have executed and delivered to each other this Third Amendment;
  and</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top><div align="justify">&nbsp;</div></TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(ii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Any and all defaults and/or events of default existing under or with respect to the Term Loan Documents,
  the IRB Indebtedness or the Existing Mortgage Indebtedness shall have been cured or waived to Agent&#146;s
  reasonable satisfaction.</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top><div align="justify">&nbsp;</div></TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>The date on which each of the foregoing conditions precedent is satisfied shall be referred to as the &#147;Third Amendment Effective Date.&#148;</FONT></div></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>7.<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Applicable Margin</U>. As of May 1, 2003 through the Adjustment Date occurring after the date on which the financial statements
for the period ended on July 31, 2003 are delivered to Agent pursuant to Section 8.1.3(ii) of the
Agreement, the Applicable Margin (Current Asset) shall be:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<table width="600" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td width="12%">&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">Base Rate Current Asset <br>
    </font></td>
    <td width="10%" align="right"><font size="2" face="Times New Roman, Times, serif">1.25&nbsp; </font></td>
    <td width="3%"><font size="2" face="Times New Roman, Times, serif">% </font></td>
    <td width="12%">&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">Revolving Portion &nbsp; </font></td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">LIBOR Current Asset</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">3.25 </font></td>
    <td><font size="2" face="Times New Roman, Times, serif">% </font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">Revolving Portion</font></td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">Unused Line Fee </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">0.50 </font></td>
    <td><font size="2" face="Times New Roman, Times, serif">% </font></td>
    <td>&nbsp;</td>
  </tr>
</table>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>8.<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Execution in Counterparts</U>. This Third Amendment may be executed in any number of counterparts and by different parties hereto
in separate counterparts, each of which</FONT></P></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>2</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>shall be deemed an original but all of which together shall constitute one and the same instrument.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>9.<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Continuing Effect</U>. Except as otherwise specifically set out herein, the provisions of the Loan Agreement shall remain
in full force and effect.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B><I>(Signature Page to Third Amendment to Loan Agreement)</I></B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>IN WITNESS WHEREOF, this Third Amendment has been duly executed as of the day and year specified at
the beginning hereof.</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<table width="600" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td width="50%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">FLEET CAPITAL CORPORATION,</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">(&#147;Agent&#148; and a &#147;Lender&#148;)</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">By: ______________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="4%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name: ______________________________ </font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title: _______________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">MFRI, INC. (a &#147;Borrower&#148;)</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">By: ______________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name: ______________________________ </font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title: _______________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">MIDWESCO FILTER RESOURCES, INC.</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">(a &#147;Borrower&#148;)</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">By: ______________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name: ______________________________ </font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title: _______________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">PERMA-PIPE, INC. (a &#147;Borrower&#148;)</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">By: ______________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name: ______________________________ </font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title: _______________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">THERMAL CARE, INC. (a &#147;Borrower&#148;)</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">By: ______________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name: ______________________________ </font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title: _______________________________</font></td>
  </tr>
</table>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>3</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>

<table width="600" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td width="50%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">TLC FILTER MANUFACTURING, INC.</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">(a &#147;Borrower&#148;)</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">By: ______________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="4%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name: ______________________________ </font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title: _______________________________</font></td>
  </tr>
</table>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>4</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
  <TD><div align="center"><FONT face="Times New Roman, Times, Serif" size=2><B>EXHIBIT 8.3</B></FONT> </div>
    <P align=center><FONT face="Times New Roman, Times, Serif" size=2>FINANCIAL COVENANTS</FONT></P></TD>
</TR>
<TR>
  <TD>&nbsp;</TD>
</TR>
<TR>
<TD><FONT face="Times New Roman, Times, Serif" size=2><B>DEFINITIONS</B></FONT>
  <P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><B><U>Cash Flow</U></B>&nbsp;&#150; with respect to any fiscal period, EBITDA for such period <U>minus </U>(i)&nbsp;Capital Expenditures (excluding, however, Capital Expenditures financed by third party financing)
made within such period, (ii) for fiscal periods ending on or prior to January&nbsp;31, 2004 the
excess, if any, of income taxes paid in cash in such period over refunds of income taxes received
in such period for tax years ending on or prior to January 31, 2003, (iii)&nbsp;for fiscal periods
ending after January 31, 2004, income taxes paid in cash in such period, (iv) Interest Expense paid
in cash within such period and (v) principal payments of Money Borrowed (other than Revolving Credit
Loans) made within such period.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><B><U>Consolidated Net Income (Loss)</U></B> &nbsp;&#150; with respect to any fiscal period, the net income (or loss) of MFRI determined in accordance
with GAAP on a Consolidated basis; provided, however, Consolidated Net Income shall not include:&nbsp;(a)
the income (or loss) of any Person (other than a Subsidiary of any Borrower) in which a Borrower
or any of its wholly-owned subsidiaries has an ownership interest unless received in a cash distribution
or requiring the payment of cash; (b) the income (or loss) of any Person accrued prior to the date
it became a Subsidiary of a Borrower or is merged into or consolidated with a Borrower; (c) all amounts
included in determining net income (or loss) in respect of the write-up of assets on or after the
Closing Date, including the subsequent amortization or expensing of the written-up portion of the
assets; (d) extraordinary gains as defined under GAAP; and (e) gains from asset dispositions (other
than sales of inventory); and any increase or decrease in expenses resulting from the implementation of FASB 146.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><B><U>EBITDA</U></B> &nbsp;&#150; with respect to any period, the sum of Consolidated Net Income (Loss) before Interest
Expense, income taxes, depreciation and amortization for such period (but excluding any extraordinary
gains for such period), all as determined for Borrowers and their Subsidiaries on a Consolidated
basis and in accordance with GAAP.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><B><U>Interest Coverage Ratio</U></B>&nbsp;&#150; with respect to any period, the ratio of (i) EBITDA for such period to (ii) Interest
Expense paid in cash in such period, all as defined for MFRI and its subsidiaries on a consolidated
basis in accordance with GAAP.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><B><U>Interest Expense</U></B>&nbsp;&#150; with respect to any period, interest expense paid or accrued for such period, including
without limitation the interest portion of Capitalized Lease Obligations, plus the Letter of Credit
and LC Guaranty fees owing for such period, all as determined for MFRI and its Subsidiaries on a
Consolidated basis and in accordance with GAAP.</FONT></P></TD></TR>
</TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>Exhibit 8.3 &#150; Page 1</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD>
<P><FONT face="Times New Roman, Times, Serif" size=2><B>COVENANTS</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><B><U>Minimum EBITDA</U></B>. &nbsp;Borrowers shall not permit EBITDA for any period set forth below to be less than the amount
set forth below opposite such period:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<table width="600" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font size="1" face="Times New Roman, Times, serif"><b> Period </b></font></td>
    <td colspan="2" align="center"><font size="1" face="Times New Roman, Times, serif"><b>Amount</b> </font></td>
    <td><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top"><hr align="left" width="30" size="1" noshade></td>
    <td colspan="2" valign="top"><hr size="1" noshade></td>
    <td valign="top"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr bgcolor="#eaf9e8">
    <td><font size="2" face="Times New Roman, Times, serif">3 Months Ended 4/30/03 </font></td>
    <td width="1%" align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td width="10%" align="right"><font size="2" face="Times New Roman, Times, serif">700,000 </font></td>
    <td width="2%" align="right">&nbsp;</td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">4 Months Ended 5/31/03 </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">1,600,000 </font></td>
    <td align="right">&nbsp;</td>
  </tr>
  <tr bgcolor="#eaf9e8">
    <td><font size="2" face="Times New Roman, Times, serif">5 Months Ended 6/30/03 </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">2,700,000 </font></td>
    <td align="right">&nbsp;</td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">6 Months Ended 7/31/03 </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">3,900,000 </font></td>
    <td align="right">&nbsp;</td>
  </tr>
  <tr bgcolor="#eaf9e8">
    <td><font size="2" face="Times New Roman, Times, serif">7 Months Ended 8/31/03 </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">4,900,000 </font></td>
    <td align="right">&nbsp;</td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">8 Months Ended 9/30/03 </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">5,800,000 </font></td>
    <td align="right">&nbsp;</td>
  </tr>
  <tr bgcolor="#eaf9e8">
    <td><font size="2" face="Times New Roman, Times, serif">9 Months Ended 10/31/03 </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">6,800,000 </font></td>
    <td align="right">&nbsp;</td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">10 Months Ended 11/30/03 </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">7,100,000 </font></td>
    <td align="right">&nbsp;</td>
  </tr>
  <tr bgcolor="#eaf9e8">
    <td><font size="2" face="Times New Roman, Times, serif">11 Months Ended 12/31/03 </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">7,100,000 </font></td>
    <td align="right">&nbsp;</td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">12 Months Ended 1/31/04 and the last day of each month thereafter </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">7,100,000 </font></td>
    <td align="right">&nbsp;</td>
  </tr>
</table>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><B><U>Minimum Cash Flow</U></B>. Borrowers shall not permit Cash Flow for any period set forth below to be less than the amount set
forth below opposite such period:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<table width="600" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font size="1" face="Times New Roman, Times, serif"><b> Period </b></font></td>
    <td colspan="2" align="center"><font size="1" face="Times New Roman, Times, serif"><b> Amount</b> </font></td>
    <td valign="top"><font size="1" face="Times New Roman, Times, serif">&nbsp;&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top"><hr align="left" width="30" size="1" noshade></td>
    <td colspan="2" valign="top"><hr size="1" noshade></td>
    <td valign="top"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr bgcolor="#eaf9e8">
    <td><font size="2" face="Times New Roman, Times, serif">5 Months Ended 6/30/03 </font></td>
    <td width="1%" align="right">&nbsp;</td>
    <td width="10%" align="right"><font size="2" face="Times New Roman, Times, serif">($100,000</font></td>
    <td width="2%"><font size="2" face="Times New Roman, Times, serif">) </font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">6 Months Ended 7/31/03 </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">0 </font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr bgcolor="#eaf9e8">
    <td><font size="2" face="Times New Roman, Times, serif">7 Months Ended 8/31/03 </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">0 </font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">8 Months Ended 9/30/03 </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">0 </font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr bgcolor="#eaf9e8">
    <td><font size="2" face="Times New Roman, Times, serif">9 Months Ended 10/31/03 </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">0 </font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">10 Months Ended 11/30/03 </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">0 </font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr bgcolor="#eaf9e8">
    <td><font size="2" face="Times New Roman, Times, serif">12 Months ended 1/31/04 and the last day of each month thereafter </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">0 </font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
</table>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>Exhibit 8.3 </FONT><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2> Page 2</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><B><U>Minimum Availability</U></B>. Maintain Availability all times during each of the following periods equal to or in excess of the
amount set forth opposite such period in the following schedule:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<table width="600" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font size="1" face="Times New Roman, Times, serif"><b>Period</b></font></td>
    <td><font size="1" face="Times New Roman, Times, serif">&nbsp;&nbsp;</font></td>
    <td colspan="2" align="center"><font size="1" face="Times New Roman, Times, serif"><b>Amount</b></font></td>
    <td><font size="1" face="Times New Roman, Times, serif">&nbsp;&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top"><hr align="left" width="30" size="1" noshade></td>
    <td valign="top"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td valign="top"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><hr size="1" noshade></td>
    <td><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr bgcolor="#eaf9e8">
    <td><font size="2" face="Times New Roman, Times, serif">May 1, 2003 through the date on which Borrowers receive </font></td>
    <td width="2%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="1%" align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td width="10%" align="right" bgcolor="#eaf9e8"><font size="2" face="Times New Roman, Times, serif">500,000 </font></td>
    <td width="2%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr bgcolor="#eaf9e8">
    <td><font size="2" face="Times New Roman, Times, serif">their federal income tax refund for tax year 2002 &nbsp; </font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">At all times after the date on which Borrowers receive their </font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">1,000,000 </font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">federal income tax refund for tax year 2002 </font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
</table>
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<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>Exhibit 8.3 </FONT><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2> Page 3</FONT></P>
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  <TD><p align=right><font face="Times New Roman, Times, Serif" size=2><b>10.29.03</b></font></p>
    <p align=center><font face="Times New Roman, Times, Serif" size=2><b>FOURTH AMENDMENT TO<br>
            <u>LOAN AND SECURITY AGREEMENT</u></b></font></p></TD>
</TR>
<TR>
  <TD>&nbsp;</TD>
</TR>
<TR>
<TD>

<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>THIS FOURTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (&#147;Fourth Amendment&#148;) is made as of the
___ day of October, 2003 by and among MFRI, Inc., a Delaware corporation (&#147;MFRI&#148;), Midwesco
Filter Resources, Inc., a Delaware corporation (&#147;Midwesco&#148;), Perma-Pipe, Inc., a Delaware
corporation (&#147;Perma-Pipe&#148;), Thermal Care, Inc., a Delaware corporation (&#147;Thermal Care&#148;)
and TDC Filter Manufacturing, Inc., a Delaware corporation (&#147;TDC&#148;), the lenders who are
signatories hereto (&#147;Lenders&#148;), and Fleet Capital Corporation, a Rhode Island corporation
(&#147;FCC&#148;), as agent for Lenders hereunder (FCC, in such capacity, being &#147;Agent&#148;).
MFRI, Midwesco, Perma-Pipe, Thermal Care and TDC are sometimes hereinafter referred to individually
as a &#147;Borrower&#148; and collectively as &#147;Borrowers.&#148;</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><U>WITNESSETH</U>:</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>WHEREAS, Borrowers, Agent and Lenders entered into a certain Loan and Security Agreement dated as of
July 11, 2002 as amended by a certain First Amendment to Loan and Security Agreement by and among
Borrowers, Agent and Lenders and dated October&nbsp;31, 2002 , a certain Second Amendment to Loan
and Security Agreement by and among Borrowers, Agent and Lenders dated December 12, 2002 and a certain
Third Amendment to Loan and Security Agreement by and among Borrowers, Agent and Lenders dated April
30, 2003 (said Loan and Security Agreement, as amended, is hereinafter referred to as the &#147;Loan
Agreement&#148;); and</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>WHEREAS, Borrowers desire to amend and modify certain provisions of the Loan Agreement and, subject
to the terms hereof, Agent and Lenders are willing to agree to such amendments and modifications;</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>NOW THEREFORE, in consideration of the premises, the mutual covenants and agreements herein contained,
and any extension of credit heretofore, now or hereafter made by Agent and Lenders to Borrowers,
the parties hereto hereby agree as follows:</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>1.<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Definitions</U>. All capitalized terms used herein without definition shall have the meaning given to them in the
Loan Agreement.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>2.<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Waivers</U>. Upon the &#147;Fourth Amendment Effective Date&#148; (as defined below), Agent and Lenders, Agent
and Lenders shall be deemed to have waived any Event of Default resulting from the failure of Borrowers
to comply with the provisions of Section 8.3 regarding (x)&nbsp;Minimum EBITDA for fiscal periods
ending on or prior to September 30, 2003 and (y)&nbsp;Minimum EBITDA and Minimum Cash Flow for fiscal
periods ending on or prior to September 30, 2003. The waiver contained in this Section 2 of this
Fourth Amendment does not apply to any Section of the Loan Agreement other than Section 8.3 (Minimum
EBITDA and Minimum Cash Flow) or to any other fiscal period other than the fiscal periods ending
on or prior to September 30, 2003.</FONT></P></TD></TR></TABLE>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>3.<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><U>Financial Covenants</U>. Upon the Fourth Amendment Effective Date, Exhibit 8.3 to the Loan Agreement shall be hereby deleted
and Exhibit 8.3 attached to this Fourth Amendment and incorporated herein shall be inserted in its
stead.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>4.<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Inventory Appraisals</U>. In order to induce Agent and Lenders to enter into this Fourth Amendment, Borrowers agree that Agent,
at Borrowers&#146; expense, may obtain appraisals of Borrowers&#146; Inventory (such appraisals shall
be conducted not more often than annually unless a Default or Event of Default has occurred and is
continuing). Agent&#146;s and Lender&#146;s rights under this Section 4 of the Fourth Amendment are
in addition to and not in lieu of Agent&#146;s and Lender&#146;s rights under Section 2.10 of the
Loan Agreement.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>5.<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Capital Expenditures</U>. Section 8.2.8 of the Loan Agreement is hereby deleted and the following is inserted in its stead:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
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<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>&#147;8.2.8&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Capital Expenditures</U>. Make Capital Expenditures (including, without limitation, by way of capitalized leases) which, in
  the aggregate, as to MFRI and all of its Subsidiaries, exceed during any fiscal year of Borrowers
  the amount of Three Million Dollars ($3,000,000).&#148;</FONT></div></TD></TR></TABLE>
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<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>6.<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Fourth Amendment Effective Date</U>. This Fourth Amendment shall become effective upon satisfaction of each of the following conditions:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
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<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(i)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Borrowers, Agent and Lenders shall have executed and delivered to each other this Fourth Amendment;
  and</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(ii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Any and all defaults and/or events of default existing under or with respect to the Term Loan Documents,
  the IRB Indebtedness or the Existing Mortgage Indebtedness shall have been cured or waived to Agent&#146;s
  reasonable satisfaction.</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>The date on which each of the foregoing conditions precedent is satisfied shall be referred to as the &#147;Fourth Amendment Effective Date.&#148;</FONT></div></TD></TR></TABLE>
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<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>7.<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Execution in Counterparts</U>. This Fourth Amendment may be executed in any number of counterparts and by different parties hereto
in separate counterparts, each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.</FONT></P></TD></TR></TABLE>
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<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>2</FONT></P>
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<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>8.<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Continuing Effect</U>. Except as otherwise specifically set out herein, the provisions of the Loan Agreement shall remain
in full force and effect.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B><I>(Signature Page Follows)</I></B></FONT></P></TD></TR></TABLE>
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<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>3</FONT></P>
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<P align=center><i><b><FONT face="Times New Roman, Times, Serif" size=2>(Signature Page to Fourth Amendment to Loan Agreement)</FONT></b></i></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>IN WITNESS WHEREOF, this Fourth Amendment has been duly executed as of the day and year specified at
the beginning hereof.</FONT></P></TD></TR>
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<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<table width="600" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td width="50%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">FLEET CAPITAL CORPORATION,</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">(&#147;Agent&#148; and a &#147;Lender&#148;)</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">By: ______________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="4%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name: ______________________________ </font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title: _______________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">MFRI, INC. (a &#147;Borrower&#148;)</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">By: ______________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name: ______________________________ </font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title: _______________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">MIDWESCO FILTER RESOURCES, INC.</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">(a &#147;Borrower&#148;)</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">By: ______________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name: ______________________________ </font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title: _______________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">PERMA-PIPE, INC. (a &#147;Borrower&#148;)</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">By: ______________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name: ______________________________ </font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title: _______________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">THERMAL CARE, INC. (a &#147;Borrower&#148;)</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">By: ______________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name: ______________________________ </font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title: _______________________________</font></td>
  </tr>
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</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>

<table width="600" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td width="50%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">TDC FILTER MANUFACTURING, INC.</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">(a &#147;Borrower&#148;)</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">By: ______________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="4%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name: ______________________________ </font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title: _______________________________</font></td>
  </tr>
</table>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>5</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
  <TD><p align=center><font face="Times New Roman, Times, Serif" size=2><b>EXHIBIT 8.3</b></font></p>
    </TD>
</TR>
<TR>
  <TD>&nbsp;</TD>
</TR>
<TR>
  <TD><div align="center"><font face="Times New Roman, Times, serif" size=2>FINANCIAL COVENANTS</font></div></TD>
</TR>
<TR>
  <TD>&nbsp;</TD>
</TR>
<TR>
<TD>
<FONT face="Times New Roman, Times, Serif" size=2><B>DEFINITIONS</B></FONT>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><B><U>Cash Flow</U></B> &nbsp;&#150; with respect to any fiscal period, EBITDA for such period <U>minus </U>(i)&nbsp;Capital Expenditures (excluding, however, Capital Expenditures financed by third party financing)
made within such period, (ii) for fiscal periods ending on or prior to January&nbsp;31, 2004 the
excess, if any, of income taxes paid in cash in such period over refunds of income taxes received
in such period for tax years ending on or prior to January 31, 2003, (iii)&nbsp;for fiscal periods
ending after January 31, 2004, income taxes paid in cash in such period, (iv) Interest Expense paid
in cash within such period and (v) principal payments of Money Borrowed (other than Revolving Credit
Loans) made within such period.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><B><U>Consolidated Net Income (Loss)</U></B> &nbsp;&#150; with respect to any fiscal period, the net income (or loss) of MFRI determined in accordance
with GAAP on a Consolidated basis; provided, however, Consolidated Net Income shall not include:&nbsp;(a)
the income (or loss) of any Person (other than a Subsidiary of any Borrower) in which a Borrower
or any of its wholly-owned subsidiaries has an ownership interest unless received in a cash distribution
or requiring the payment of cash; (b) the income (or loss) of any Person accrued prior to the date
it became a Subsidiary of a Borrower or is merged into or consolidated with a Borrower; (c) all amounts
included in determining net income (or loss) in respect of the write-up of assets on or after the
Closing Date, including the subsequent amortization or expensing of the written-up portion of the
assets; (d) extraordinary gains as defined under GAAP; and (e) gains from asset dispositions (other
than sales of inventory); and any increase or decrease in expenses resulting from the implementation of FASB 146.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><B><U>EBITDA</U></B> &nbsp;&#150; with respect to any period, the sum of Consolidated Net Income (Loss) before Interest
Expense, income taxes, depreciation and amortization for such period (but excluding any extraordinary
gains for such period), all as determined for Borrowers and their Subsidiaries on a Consolidated
basis and in accordance with GAAP.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><B><U>Interest Coverage Ratio</U></B> &nbsp;&#150; with respect to any period, the ratio of (i) EBITDA for such period to (ii) Interest
Expense paid in cash in such period, all as defined for MFRI and its subsidiaries on a consolidated
basis in accordance with GAAP.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><B><U>Interest Expense</U></B> &nbsp;&#150; with respect to any period, interest expense paid or accrued for such period, including
without limitation the interest portion of Capitalized Lease Obligations, plus the Letter of Credit
and LC Guaranty fees owing for such period, all as determined for MFRI and its Subsidiaries on a
Consolidated basis and in accordance with GAAP.</FONT></P></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">
<TR vAlign=top>
<TD width="600"><BR>
<P align=center><font size="2" face="Times New Roman, Times, serif">Exhibit 8.3 &#150; Page 1 </font><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2></FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
  <TD><font face="Times New Roman, Times, Serif" size=2><b>COVENANTS</b></font></TD>
</TR>
<TR>
  <TD>&nbsp;</TD>
</TR>
<TR>
<TD>

<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><B><U>Minimum EBITDA</U></B>. &nbsp;Borrowers shall not permit EBITDA for any period set forth below to be less than the amount
set forth below opposite such period:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<table width="600" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font size="1" face="Times New Roman, Times, serif"><b> Period </b></font></td>
    <td colspan="2" align="center"><font size="1" face="Times New Roman, Times, serif"><b> Amount</b> &nbsp; </font></td>
    <td><font size="1" face="Times New Roman, Times, serif">&nbsp;&nbsp;</font></td>
  </tr>
  <tr>
    <td><hr align="left" width="30" size="1" noshade></td>
    <td colspan="2"><hr align="left" size="1" noshade></td>
    <td><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr bgcolor="#eaf9e8">
    <td><font size="2" face="Times New Roman, Times, serif">6 Months Ended 10/31/03 </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">4,000,000 </font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">9 Months Ended 1/31/04 </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif"> 4,600,000 </font></td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#eaf9e8">
    <td><font size="2" face="Times New Roman, Times, serif">12 Months Ended 4/30/04 </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif"> 5,700,000 </font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">12 Months Ended 7/31/04 and the last day of each fiscal quarter thereafter </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif"> 6,300,000 </font></td>
    <td>&nbsp;</td>
  </tr>
</table>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><B><U>Minimum Cash Flow</U></B>. Borrowers shall not permit Cash Flow for any period set forth below to be less than the amount set
forth below opposite such period:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<table width="600" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font size="1" face="Times New Roman, Times, serif"><b> Period </b></font></td>
    <td colspan="2" align="center"><font size="1" face="Times New Roman, Times, serif"><b> Amount</b> &nbsp; </font></td>
    <td valign="top"><font size="1" face="Times New Roman, Times, serif">&nbsp;&nbsp;</font></td>
  </tr>
  <tr>
    <td><hr align="left" width="30" size="1" noshade></td>
    <td colspan="2"><hr align="left" size="1" noshade></td>
    <td valign="top"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td valign="top"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr bgcolor="#eaf9e8">
    <td><font size="2" face="Times New Roman, Times, serif">6 Months Ended 10/31/03 </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">1,000,000 </font></td>
    <td valign="top">&nbsp;</td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">9 Months Ended 1/31/04 </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">0 </font></td>
    <td valign="top">&nbsp;</td>
  </tr>
  <tr bgcolor="#eaf9e8">
    <td><font size="2" face="Times New Roman, Times, serif">12 Months Ended 4/30/04 </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">0 </font></td>
    <td valign="top">&nbsp;</td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">12 Months ended 7/31/04 and the last day of each fiscal quarter thereafter </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">300,000 </font></td>
    <td valign="top">&nbsp;</td>
  </tr>
</table>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><B><U>Minimum Availability</U></B>. Maintain Availability all times during each of the following periods equal to or in excess of the
amount set forth opposite such period in the following schedule:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<table width="600" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font size="1" face="Times New Roman, Times, serif"><b> Period </b></font></td>
    <td colspan="2" align="center"><font size="1" face="Times New Roman, Times, serif"><b> Amount</b> &nbsp; </font></td>
    <td valign="top"><font size="1" face="Times New Roman, Times, serif">&nbsp;&nbsp;</font></td>
  </tr>
  <tr>
    <td><hr align="left" width="30" size="1" noshade></td>
    <td colspan="2"><hr align="left" size="1" noshade></td>
    <td valign="top"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td valign="top"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr bgcolor="#eaf9e8">
    <td><font size="2" face="Times New Roman, Times, serif">May 1, 2003 through the date on which Borrowers receive </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">500,000 </font></td>
    <td valign="top"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr bgcolor="#eaf9e8">
    <td><font size="2" face="Times New Roman, Times, serif">their federal income tax refund for tax year 2002 &nbsp; </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td valign="top"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td valign="top"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">At all times after the date on which Borrowers receive</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">750,000 </font></td>
    <td valign="top"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif"> their federal income tax refund for tax year 2002 </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td valign="top"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
</table>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">
<TR vAlign=top>
<TD width="600"><BR>
<P align=center><font size="2" face="Times New Roman, Times, serif">Exhibit 8.3 &#150; Page 2</font><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2></FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<PAGE>

<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
  <TD>&nbsp;</TD>
</TR>
<TR>
<TD>
<P align=right><FONT face="Times New Roman, Times, Serif" size=2><B>EXECUTION COPY</B></FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B>FIFTH AMENDMENT TO<BR><U>LOAN AND SECURITY AGREEMENT</U></B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>THIS FIFTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (&#147;Fifth Amendment&#148;) is made as of the
1<SUP>st</SUP> day July, 2004 of by and among MFRI, Inc., a Delaware corporation (&#147;MFRI&#148;), Midwesco Filter
Resources, Inc., a Delaware corporation (&#147;Midwesco&#148;), Perma-Pipe, Inc., a Delaware corporation
(&#147;Perma-Pipe&#148;), Thermal Care, Inc., a Delaware corporation (&#147;Thermal Care&#148;) and
TDC Filter Manufacturing, Inc., a Delaware corporation (&#147;TDC&#148;), the lenders who are signatories
hereto (&#147;Lenders&#148;), and Fleet Capital Corporation, a Rhode Island corporation (&#147;FCC&#148;),
as agent for Lenders hereunder (FCC, in such capacity, being &#147;Agent&#148;). MFRI, Midwesco,
Perma-Pipe, Thermal Care and TDC are sometimes hereinafter referred to individually as a &#147;Borrower&#148;
and collectively as &#147;Borrowers.&#148;</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><U>WITNESSETH</U>:</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>WHEREAS, Borrowers, Agent and Lenders entered into a certain Loan and Security Agreement dated as of
July 11, 2002 as amended by a certain First Amendment to Loan and Security Agreement by and among
Borrowers, Agent and Lenders and dated October&nbsp;31, 2002 , a certain Second Amendment to Loan
and Security Agreement by and among Borrowers, Agent and Lenders dated December 12, 2002, a certain
Third Amendment to Loan and Security Agreement by and among Borrowers, Agent and Lenders dated April
30, 2003 and a certain Fourth Amendment to Loan and Security Agreement by and among Borrowers, Agent
and Lenders dated October 31, 2003 (said Loan and Security Agreement, as amended, is hereinafter
referred to as the &#147;Loan Agreement&#148;); and</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>WHEREAS, Borrowers desire to amend and modify certain provisions of the Loan Agreement and, subject
to the terms hereof, Agent and Lenders are willing to agree to such amendments and modifications;</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>NOW THEREFORE, in consideration of the premises, the mutual covenants and agreements herein contained,
and any extension of credit heretofore, now or hereafter made by Agent and Lenders to Borrowers,
the parties hereto hereby agree as follows:</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>1.<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Definitions</U>. All capitalized terms used herein without definition shall have the meaning given to them in the
Loan Agreement.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>2.<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Letters&nbsp;of&nbsp;Credit;&nbsp;LC&nbsp;Guaranties</U>. Section&nbsp;1.2 of the Loan Agreement is hereby deleted and the following is inserted in its stead:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>1.2&nbsp;&nbsp;<U>Letters&nbsp;of&nbsp;Credit:&nbsp;LC&nbsp;Guaranties</U>. Agent agrees, for so long as no Default or Event of Default exists and if requested by MFRI, on its
  own behalf and on behalf of all other Borrowers, to (i)&nbsp;issue its, or cause to be issued by
  Bank or another Affiliate of Agent, on the date requested by MFRI, on its own behalf and on behalf
  of all other Borrowers, Letters of Credit for the account of Borrowers or (ii)&nbsp;execute LC Guaranties
  by which Agent, Bank, or another Affiliate of Agent, on the date so requested by MFRI, shall guaranty
  the payment or performance by </FONT></p></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>Borrowers of their reimbursement obligations with respect to letters of credit; <U>provided</U> that the LC Amount shall not exceed Seven Million Five Hundred Thousand Dollars ($7,500,000) prior
  to the date on which the Virginia IRB Indebtedness is paid in full and Five Million Four Hundred
  Thousand Dollars ($5,400,000) thereafter. No Letter of Credit or LC Guaranty may have an expiration
  date after the last day of the Term. Notwithstanding anything to the contrary contained herein, Borrowers,
  Agent and Lenders hereby agree that all LC Obligations and all obligations of Borrowers relating
  thereto shall be satisfied by the prompt issuance of one or more Revolving Credit Loans that are
  Base Rate Portions, which Borrowers hereby acknowledge are requested and Lenders hereby agree to
  fund. In the event that Revolving Credit Loans are not, for any reason, promptly made to satisfy
  all then existing LC Obligations, each Lender hereby agrees to pay to Agent, on demand, an amount
  equal to such LC Obligations <U>multiplied&nbsp;by</U> such Lender&#146;s Revolving Loan Percentage, and until so paid, such amount shall be secured by the
  Collateral and shall bear interest and be payable at the same rate and in the same manner as Base
  Rate Portions. Immediately upon the issuance of a Letter of Credit or an LC Guaranty under this Agreement,
  each Lender shall be deemed to have irrevocably and unconditionally purchased and received from Agent,
  without recourse or warranty, an undivided interest and participation therein equal to such LC Obligations <U>multiplied</U> <U>by</U> such Lender&#146;s Revolving Loan Percentage.</FONT></p></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>3.<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Prepayment&nbsp;Fee</U>. Section 2.6 of the Loan Agreement is hereby deleted and the following is inserted in its stead:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>&#147;2.6&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Prepayment&nbsp;Fee</U>. At the effective date of termination of this Agreement for any reason, Borrowers shall pay to Agent,
  for the ratable benefit of Lenders (in addition to the then outstanding principal, accrued interest
  and other charges owing under the terms of this Agreement and any of the other Loan Documents) and
  any amounts owing pursuant to subsection 3.2.5, as liquidated damages for the loss of the bargain
  and not as a penalty, an amount equal to one percent (1%) of the Total Credit Facility if termination
  occurs during the first twelve-month period of the Term (July 11, 2002 through July 10, 2003); one-half
  of one percent (&#189;%) of the Total Credit Facility if termination occurs during the second or
  third 12-month period of the Term (July 11, 2003 through July 9, 2005); and one quarter of one percent
  (&#188;%) if termination occurs between July 10, 2005 and May 10, 2006. If termination occurs on
  or after May 11, 2006, no termination charge shall be payable.&#148;</FONT></p></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>4.<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Term</U>. Section 4.1 of the Loan Agreement is hereby deleted and the following is inserted in its stead:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>&#147;<B>SECTION 4. TERM AND TERMINATION</B></FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>4.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Term&nbsp;of&nbsp;Agreement</U>. Subject to the right of Lenders to cease making Loans to Borrowers during the continuance of any
  Default or Event of Default, this Agreement shall be in effect through and including July 10, 2006
  (the &#147;Term&#148;), unless terminated as provided in Section 4.2 hereof.&#148;</FONT></p></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>2</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>5.<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Waivers</U>. Upon the &#147;Fifth Amendment Effective Date&#148; (as defined below), Agent and Lenders, Agent
and Lenders shall be deemed to have waived any Event of Default resulting from the failure of Borrowers
to comply with the provisions of Section 8.3 regarding (x)&nbsp;Minimum EBITDA for fiscal periods
ending on or prior to April 30, 2004 and (y)&nbsp;Minimum Cash Flow for fiscal periods ending on
or prior to April 30, 2004. The waiver contained in this Section 6 of this Fifth Amendment does not
apply to any Section of the Loan Agreement other than Section 8.3 (Minimum EBITDA and Minimum Cash
Flow) or to any other fiscal period other than the fiscal periods ending on or prior to April 30, 2004.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>6.<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Financial&nbsp;Covenants</U>. Upon the Fifth Amendment Effective Date, Exhibit 8.3 to the Loan Agreement shall be hereby deleted
and Exhibit 8.3 attached to this Fourth Amendment and incorporated herein shall be inserted in its
stead.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>7.<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT>&nbsp;<U>Fifth&nbsp;Amendment&nbsp;Effective&nbsp;Date</U>. This Fifth Amendment shall become effective upon satisfaction of each of the following conditions:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(i)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Borrowers, Agent and Lenders shall have executed and delivered to each other this Fifth Amendment;
  and</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(ii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Any and all defaults and/or events of default existing under or with respect to the Term Loan Documents,
  the IRB Indebtedness or the Existing Mortgage Indebtedness shall have been cured or waived to Agent&#146;s
  reasonable satisfaction and the financial covenants contained in the Term Loan Documents or the agreements
  evidencing or relating to the Existing Mortgage Indebtedness shall have been amended in a manner
  reasonably satisfactory to Agent.</FONT></p></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>The date on which each of the foregoing conditions precedent is satisfied shall be referred to as the &#147;Fifth Amendment Effective Date.&#148;</FONT></p></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>8.<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Execution&nbsp;in&nbsp;Counterparts</U>. This Fifth Amendment may be executed in any number of counterparts and by different parties hereto
in separate counterparts, each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>9.<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Continuing&nbsp;Effect</U>. Except as otherwise specifically set out herein, the provisions of the Loan Agreement shall remain
in full force and effect.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B><I>(Signature Page Follows)</I></B></FONT></P></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>3</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B><I>(Signature Page to Fifth Amendment to Loan Agreement)</I></B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>IN WITNESS WHEREOF, this Fifth Amendment has been duly executed as of the day and year specified at
the beginning hereof.</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<table width="600" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td width="50%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">FLEET CAPITAL CORPORATION,</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">(&#147;Agent&#148; and a &#147;Lender&#148;)</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">By: ______________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="4%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name: ______________________________ </font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title: _______________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">MFRI, INC. (a &#147;Borrower&#148;)</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">By: ______________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name: ______________________________ </font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title: _______________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">MIDWESCO FILTER RESOURCES, INC.</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">(a &#147;Borrower&#148;)</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">By: ______________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name: ______________________________ </font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title: _______________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">PERMA-PIPE, INC. (a &#147;Borrower&#148;)</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">By: ______________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name: ______________________________ </font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title: _______________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">THERMAL CARE, INC. (a &#147;Borrower&#148;)</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">By: ______________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name: ______________________________ </font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title: _______________________________</font></td>
  </tr>
</table>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>

<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>
<table width="600" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td width="50%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">TDC FILTER MANUFACTURING, INC.</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">(a &#147;Borrower&#148;)</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">By: ______________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="7%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name: ______________________________ </font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title: _______________________________</font></td>
  </tr>
</table>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>5</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>

<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">
  <TR>
    <TD vAlign=top><P align=center><FONT face="Times New Roman, Times, Serif" size=2><B>EXHIBIT 8.3</B></FONT></P>
      <P align=center><FONT face="Times New Roman, Times, Serif" size=2>FINANCIAL COVENANTS</FONT></P></TD>
  </TR>
  <TR>
    <TD vAlign=top>&nbsp;</TD>
  </TR>
</TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD>
<P><FONT face="Times New Roman, Times, Serif" size=2><B>DEFINITIONS</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><B><U>Cash&nbsp;Flow</U></B>  &#150; with respect to any fiscal period, EBITDA for such period <U>minus </U>(i)&nbsp;Capital Expenditures (excluding, however, Capital Expenditures financed by third party financing)
made within such period, (ii) for fiscal periods ending on or prior to January&nbsp;31, 2004 the
excess, if any, of income taxes paid in cash in such period over refunds of income taxes received
in such period for tax years ending on or prior to January 31, 2003, (iii)&nbsp;for fiscal periods
ending after January 31, 2004, income taxes paid in cash in such period, (iv) Interest Expense paid
in cash within such period and (v) principal payments of Money Borrowed (other than Revolving Credit
Loans) made within such period.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><B><U>Consolidated&nbsp;Net Income (Loss)</U></B> &#150; with respect to any fiscal period, the net income (or loss) of MFRI determined in accordance
with GAAP on a Consolidated basis; provided, however, Consolidated Net Income shall not include:&nbsp;(a)
the income (or loss) of any Person (other than a Subsidiary of any Borrower) in which a Borrower
or any of its wholly-owned subsidiaries has an ownership interest unless received in a cash distribution
or requiring the payment of cash; (b) the income (or loss) of any Person accrued prior to the date
it became a Subsidiary of a Borrower or is merged into or consolidated with a Borrower; (c) all amounts
included in determining net income (or loss) in respect of the write-up of assets on or after the
Closing Date, including the subsequent amortization or expensing of the written-up portion of the
assets; (d) extraordinary gains as defined under GAAP; and (e) gains from asset dispositions (other
than sales of inventory); and any increase or decrease in expenses resulting from the implementation of FASB 146.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><B><U>EBITDA</U></B>  &#150; with respect to any period, the sum of Consolidated Net Income (Loss) before Interest
Expense, income taxes, depreciation and amortization for such period (but excluding any extraordinary
gains for such period), all as determined for Borrowers and their Subsidiaries on a Consolidated
basis and in accordance with GAAP.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><B><U>Interest&nbsp;Coverage&nbsp;Ratio</U></B> &#150; with respect to any period, the ratio of (i) EBITDA for such period to (ii) Interest
Expense paid in cash in such period, all as defined for MFRI and its subsidiaries on a consolidated
basis in accordance with GAAP.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><B><U>Interest&nbsp;Expense</U></B>  &#150; with respect to any period, interest expense paid or accrued for such period, including
without limitation the interest portion of Capitalized Lease Obligations, plus the Letter of Credit
and LC Guaranty fees owing for such period, all as determined for MFRI and its Subsidiaries on a
Consolidated basis and in accordance with GAAP.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>The foregoing notwithstanding, there shall be excluded from the calculations of Cash Flow, Consolidated
Net Income (Loss), EBITDA, Interest Coverage Ratio and Interest Expense, all amounts that would otherwise
be included in such items that are generated or incurred by, or result from the operations of, Midwesco
Filter Resources Denmark A/S, Nordic Air Filtration A/S and Boe-Therm A/S, Borrowers&#146; Danish
Subsidiaries.</FONT></P>
</TD></TR>
</TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>Exhibit 8.3</FONT><FONT face="Times New Roman, Times, Serif" size=2> &#150; </FONT><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>Page 1 </FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>
<table width="600" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td><p><font face="Times New Roman, Times, Serif" size=2><b>COVENANTS</b></font></p>
    <P align=justify><font face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font><font face="Times New Roman, Times, Serif" size=2><b><u>Minimum EBITDA</u></b>. &nbsp;Borrowers shall not permit EBITDA for any period set forth below to be less than the amount set forth below opposite such period:</font></p></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
  </tr>
</table>
<table width="600" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font size="1" face="Times New Roman, Times, serif"><b> Period </b></font></td>
    <td colspan="2" align="center"><font size="1" face="Times New Roman, Times, serif"><b> Amount</b> &nbsp; </font></td>
  </tr>
  <tr>
    <td><hr align="left" width="30" size="1" noshade></td>
    <td colspan="2"><hr align="left" size="1" noshade></td>
  </tr>
  <tr>
    <td><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr bgcolor="#eaf9e8">
    <td><font size="2" face="Times New Roman, Times, serif">6 Months Ended 7/31/04 </font></td>
    <td width="1%"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td width="12%" align="right"><font size="2" face="Times New Roman, Times, serif">2,500,000 </font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">9 Months Ended 10/31/04 </font></td>
    <td><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">4,400,000 </font></td>
  </tr>
  <tr bgcolor="#eaf9e8">
    <td><font size="2" face="Times New Roman, Times, serif">12 Months Ended 1/31/05 and the last day of each fiscal quarter thereafter </font></td>
    <td><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">5,450,000 </font></td>
  </tr>
</table>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><B><U>Minimum Cash Flow</U></B>. Borrowers shall not permit Cash Flow for any period set forth below to be less than the amount set
forth below opposite such period:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<table width="600" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font size="1" face="Times New Roman, Times, serif"><b> Period </b></font></td>
    <td colspan="2" align="center"><font size="1" face="Times New Roman, Times, serif"><b> Amount</b> &nbsp; </font></td>
    <td><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><hr align="left" width="30" size="1" noshade></td>
    <td colspan="2" align="center"><hr size="1" noshade></td>
    <td><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr bgcolor="#eaf9e8">
    <td><font size="2" face="Times New Roman, Times, serif">6 Months Ended 7/31/03 </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">(150,000</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">) </font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">9 Months Ended 10/31/04 </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif"> 500,000 </font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr bgcolor="#eaf9e8">
    <td><font size="2" face="Times New Roman, Times, serif">12 Months ended 1/31/05 and the last day of each fiscal quarter thereafter </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif"> 250,000 </font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
</table>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><B><U>Minimum Availability</U></B>. Maintain Availability at all times of at least $750,000.</FONT></P></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>Exhibit 8.3</FONT><FONT face="Times New Roman, Times, Serif" size=2> &#150; </FONT><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>Page 2 </FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<PAGE>


<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
  <TD><font size="2" face="Times New Roman, Times, serif">&nbsp;&nbsp; </font></TD>
</TR>
<TR>
<TD>
<P align=right><FONT face="Times New Roman, Times, Serif" size=2><B>EXECUTION COPY</B></FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B>SIXTH AMENDMENT TO<BR><U>LOAN AND SECURITY AGREEMENT</U></B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>THIS SIXTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (&#147;Sixth Amendment&#148;) is made as of the
___ day of March, 2005 by and among MFRI, Inc., a Delaware corporation (&#147;MFRI&#148;), Midwesco
Filter Resources, Inc., a Delaware corporation (&#147;Midwesco&#148;), Perma-Pipe, Inc., a Delaware
corporation (&#147;Perma-Pipe&#148;), Thermal Care, Inc., a Delaware corporation (&#147;Thermal Care&#148;)
and TDC Filter Manufacturing, Inc., a Delaware corporation (&#147;TDC&#148;), the lenders who are
signatories hereto (&#147;Lenders&#148;), and Fleet Capital Corporation, a Rhode Island corporation
(&#147;FCC&#148;), as agent for Lenders hereunder (FCC, in such capacity, being &#147;Agent&#148;).
MFRI, Midwesco, Perma-Pipe, Thermal Care and TDC are sometimes hereinafter referred to individually
as a &#147;Borrower&#148; and collectively as &#147;Borrowers.&#148;</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><U>WITNESSETH</U>:</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>WHEREAS, Borrowers, Agent and Lenders entered into a certain Loan and Security Agreement dated as of
July 11, 2002 as amended by a certain First Amendment to Loan and Security Agreement by and among
Borrowers, Agent and Lenders and dated October&nbsp;31, 2002 , a certain Second Amendment to Loan
and Security Agreement by and among Borrowers, Agent and Lenders dated December 12, 2002, a certain
Third Amendment to Loan and Security Agreement by and among Borrowers, Agent and Lenders dated April
30, 2003, a certain Fourth Amendment to Loan and Security Agreement by and among Borrowers, Agent
and Lenders dated October 31, 2003 and a certain Fifth Amendment to Loan and Security Agreement by
and among Borrowers, Agent and Lenders dated July 1, 2004 (said Loan and Security Agreement, as amended,
is hereinafter referred to as the &#147;Loan Agreement&#148;); and</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>WHEREAS, Borrowers desire to amend and modify certain provisions of the Loan Agreement and, subject
to the terms hereof, Agent and Lenders are willing to agree to such amendments and modifications;</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>NOW THEREFORE, in consideration of the premises, the mutual covenants and agreements herein contained,
and any extension of credit heretofore, now or hereafter made by Agent and Lenders to Borrowers,
the parties hereto hereby agree as follows:</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>1.<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Definitions</U>. All capitalized terms used herein without definition shall have the meaning given to them in the
Loan Agreement.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>2.<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Additional, Amended and Deleted Definitions</U>. The following definitions of &#147;Applicable Margin &#147;Base Rate Portion,&#148; &#147;Base Rate
Revolving Portion,&#148; &#147;Base Rate Term Portion,&#148; &#147;Fixed Charge Coverage Ratio,&#148;
&#147;LIBOR Portion,&#148; &#147;LIBOR Request,&#148; &#147;LIBOR Revolving Portion,&#148; &#147;LIBOR
Term Portion,&#148; &#147;Sixth Amendment,&#148; &#147;Sixth Amendment Effective Date,&#148; &#147;Term
Loan,&#148; &#147;Term Loan Commitment,&#148; &#147;Term Loan Notes&#148; and &#147;Term Loan Percentage&#148;
are hereinafter inserted into Appendix A to the Loan Agreement. The definition of &#147;Borrowing
Base&#148; contained in Appendix A to the Loan Agreement is hereby deleted and the following is inserted
in its stead. The definitions of &#147;Applicable Margin (Current Asset)&#148; and &#147;Applicable
Margin (Real Estate&#148;) are hereby deleted from the Loan Agreement.</FONT></P></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2></FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top>
  <div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>&#147;<U>Applicable Margin</U> - from the Sixth Amendment Effective Date to, but not including, the first Adjustment Date (as hereinafter
  defined) the percentages set forth below with respect to the Base Rate Revolving Portion, the Base
  Rate Term Portion, LIBOR Revolving Portions, the LIBOR Term Portion and the Unused Line Fee:</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR></TABLE>
<table width="600" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td width="8%">&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">Base Rate Revolving Portion </font></td>
    <td width="25%"><font size="2" face="Times New Roman, Times, serif">0% </font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">Base Rate Term Portion </font></td>
    <td><font size="2" face="Times New Roman, Times, serif">1.25% </font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">LIBOR Revolving Portions </font></td>
    <td><font size="2" face="Times New Roman, Times, serif">2.00% </font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">LIBOR Term Portions </font></td>
    <td><font size="2" face="Times New Roman, Times, serif">3.50% </font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td><font size="2" face="Times New Roman, Times, serif">Unused Line Fee </font></td>
    <td><font size="2" face="Times New Roman, Times, serif">0.25% </font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
</table>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top>
  <p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>The percentages set forth above with respect to the Base Rate Revolving Portion, LIBOR Revolving Portions
  and Unused Line Fee will be adjusted on the first day of the month following delivery by Borrowers
  to Agent of the financial statements required to be delivered pursuant to subsection&nbsp;8.1.3(ii)&nbsp;of
  the Agreement for each April&nbsp;30, July&nbsp;31, October&nbsp;31 and January&nbsp;31 during the
  Term, commencing with the month ending January&nbsp;31, 2005 (each such date an &#147;Adjustment
  Date&#148;), effective prospectively, by reference to the applicable &#147;Financial Measurement&#148;
  (as defined below) for the four quarters most recently ending in accordance with the following table.
  The percentages set forth above with respect to the Base Rate Term Portion and LIBOR Term Portions
  shall remain fixed until September 15, 2005. On September 16, 2005 such percentages shall be adjusted
  so that the percentages applicable to the Base Rate Term Portion and the LIBOR Term Portion shall
  be at the same Level set forth in the following Table as applicable to the Base Rate Revolving Portion,
  LIBOR Revolving Portions and Unused Line Fee. For example, if on September&nbsp;16, 2005, the percentages
  applicable to the Base Rate Revolving Portion, the LIBOR Revolving Portions and Unused Line Fee are
  at Level II, then on September 16, 2005, the percentages applicable to Base Rate Term Portion and
  LIBOR Term Portions shall also be set at Level II. Thereafter, the percentages applicable to the
  Base Rate Term Portion and LIBOR Term Portions shall be adjusted on each subsequent Adjustment Date,
  effective prospectively, by reference to the applicable Financial Measurement for the four quarters
  most recently ended in accordance with the following Table:</FONT></p></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR></TABLE>
<table width="600" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td valign="top"><font size="1" face="Times New Roman, Times, serif">&nbsp;&nbsp; </font></td>
    <td valign="bottom"><b><font size="1" face="Times New Roman, Times, serif"> Financial <br>
      Measurement </font></b></td>
    <td valign="bottom"><font size="1" face="Times New Roman, Times, serif">&nbsp;&nbsp;</font></td>
    <td valign="bottom"><b><font size="1" face="Times New Roman, Times, serif"> Base Rate <br>
      Revolving <br>
      Portion </font></b></td>
    <td valign="bottom"><font size="1" face="Times New Roman, Times, serif">&nbsp;&nbsp;</font></td>
    <td valign="bottom"><b><font size="1" face="Times New Roman, Times, serif"> Base <br>
      Rate <br>
      Term <br>
      Portion </font></b></td>
    <td valign="bottom"><font size="1" face="Times New Roman, Times, serif">&nbsp;&nbsp;</font></td>
    <td valign="bottom"><b><font size="1" face="Times New Roman, Times, serif"> LIBOR <br>
      Revolving <br>
      Portions </font></b></td>
    <td valign="bottom"><font size="1" face="Times New Roman, Times, serif">&nbsp;&nbsp;</font></td>
    <td valign="bottom"><b><font size="1" face="Times New Roman, Times, serif"> LIBOR <br>
      Term <br>
      Portions </font></b></td>
    <td valign="bottom"><font size="1" face="Times New Roman, Times, serif">&nbsp;&nbsp;</font></td>
    <td valign="bottom"><b><font size="1" face="Times New Roman, Times, serif"> Unused <br>
      Line Fee </font></b></td>
    <td valign="bottom"><font size="1" face="Times New Roman, Times, serif">&nbsp;&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td valign="bottom"><hr size="1" noshade></td>
    <td valign="bottom"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td valign="bottom"><hr size="1" noshade></td>
    <td valign="bottom"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td valign="bottom"><hr size="1" noshade></td>
    <td valign="bottom"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td valign="bottom"><hr size="1" noshade></td>
    <td valign="bottom"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td valign="bottom"><hr size="1" noshade></td>
    <td valign="bottom"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td valign="bottom"><hr size="1" noshade></td>
    <td valign="bottom"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td valign="top"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td valign="top"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="left"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="left"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="left"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="left"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="left"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr bgcolor="#eaf9e8">
    <td valign="top" bgcolor="#eaf9e8"><font size="2" face="Times New Roman, Times, serif">Level I </font></td>
    <td valign="top" bgcolor="#eaf9e8"><font size="2" face="Times New Roman, Times, serif"><u>&lt;</u> 1.25 to 1 </font></td>
    <td width="2%" valign="top" bgcolor="#eaf9e8"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="9%" align="left"><font size="2" face="Times New Roman, Times, serif">0.50% </font></td>
    <td width="3%" align="left">&nbsp;</td>
    <td width="9%" align="left"><font size="2" face="Times New Roman, Times, serif">0.75% </font></td>
    <td width="3%" align="left">&nbsp;</td>
    <td width="9%" align="left"><font size="2" face="Times New Roman, Times, serif">2.50% </font></td>
    <td width="3%" align="left">&nbsp;</td>
    <td width="9%" align="left"><font size="2" face="Times New Roman, Times, serif">2.75%</font></td>
    <td width="3%" align="left">&nbsp;</td>
    <td width="9%" align="left"><font size="2" face="Times New Roman, Times, serif">0.50%&nbsp; </font></td>
    <td width="2%" align="left">&nbsp;</td>
  </tr>
  <tr>
    <td valign="top"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td valign="top"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td valign="top"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="left"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="left"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="left"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="left"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="left"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="left"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="left"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="left"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="left"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="left"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top"><font size="2" face="Times New Roman, Times, serif">Level II </font></td>
    <td valign="top"><font size="2" face="Times New Roman, Times, serif">&gt; 1.25 to 1, but<br>
<u>&lt;</u>&nbsp;1.50 to 1 &nbsp; </font></td>
    <td valign="top"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="left"><font size="2" face="Times New Roman, Times, serif">0.25% </font></td>
    <td align="left">&nbsp;</td>
    <td align="left"><font size="2" face="Times New Roman, Times, serif">0.50% </font></td>
    <td align="left">&nbsp;</td>
    <td align="left"><font size="2" face="Times New Roman, Times, serif">2.25% </font></td>
    <td align="left">&nbsp;</td>
    <td align="left"><font size="2" face="Times New Roman, Times, serif">2.50% </font></td>
    <td align="left">&nbsp;</td>
    <td align="left"><font size="2" face="Times New Roman, Times, serif">0.375% </font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr>
    <td valign="top"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td valign="top"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td valign="top"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="left"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="left"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="left"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="left"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="left"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="left"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="left"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="left"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="left"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="left"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr bgcolor="#eaf9e8">
    <td valign="top" bgcolor="#eaf9e8"><font size="2" face="Times New Roman, Times, serif">Level III </font></td>
    <td valign="top" bgcolor="#eaf9e8"><font size="2" face="Times New Roman, Times, serif">&gt; 1.50 to 1 </font></td>
    <td valign="top" bgcolor="#eaf9e8"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="left"><font size="2" face="Times New Roman, Times, serif">0.00% </font></td>
    <td align="left">&nbsp;</td>
    <td align="left"><font size="2" face="Times New Roman, Times, serif">0.25% </font></td>
    <td align="left">&nbsp;</td>
    <td align="left"><font size="2" face="Times New Roman, Times, serif">2.00% </font></td>
    <td align="left">&nbsp;</td>
    <td align="left"><font size="2" face="Times New Roman, Times, serif">2.25% </font></td>
    <td align="left">&nbsp;</td>
    <td align="left"><font size="2" face="Times New Roman, Times, serif">0.25% </font></td>
    <td align="left">&nbsp;</td>
  </tr>
</table>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>2</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top>
  <p align="justify"><FONT face="Times New Roman, Times, Serif" size=2><U>provided</U> &nbsp;that, (i)&nbsp;if MFRI&#146;s audited financial statements for any fiscal year delivered pursuant
  to subsection&nbsp;8.1.3(i) of the Agreement reflect a Financial Measurement that yields a higher
  Applicable Margin than that yielded by the monthly financial statements previously delivered pursuant
  to subsection&nbsp;8.1.3(ii) of the Agreement for the last month of such fiscal year, the Applicable
  Margin shall be readjusted retroactively for the period that was incorrectly calculated and (ii)&nbsp;if
  Borrowers fail to deliver the financial statements required to be delivered pursuant to subsection&nbsp;8.1.3(i)
  or subsection&nbsp;8.1.3(ii) of the Agreement on or before the due date thereof, including any applicable
  grace period, the interest rate shall automatically adjust to the highest interest rate set forth
  above, effective prospectively from such due date until the next Adjustment Date. For purposes hereof,
&#147;Financial Measurement&#148; shall mean the Fixed Charge Coverage Ratio (as such term is defined in <U>Exhibit 8.3</U> to the Agreement).</FONT></p></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2>*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top>
<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Base Rate Portion</U>  &#150; a Base Rate Term Portion or a Base Rate Revolving Portion.</FONT></TD>
</TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>
</TD></TR>
<TR>
  <TD vAlign=top>&nbsp;</TD>
  <TD vAlign=top>&nbsp;</TD>
</TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top>
  <div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Base Rate Revolving Portion</U>  &#150; that portion of the Revolving Credit Loans that is not subject to a LIBOR Option.</FONT></div></TD>
</TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>
</TD></TR>
<TR>
  <TD vAlign=top>&nbsp;</TD>
  <TD vAlign=top>&nbsp;</TD>
</TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top>
  <div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Base Rate Term Portion</U>  &#150; that portion of the Term Loan that is not subject to a LIBOR Option.</FONT></div></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD colspan="2" vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD width="48" vAlign=top>
<P align=center>&nbsp;</P></TD>
<TD align="center" vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *</FONT></TD>
</TR>
<TR>
<TD colspan="2" vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top>
<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Borrowing Base</U>  &#150; as at any date of determination thereof, an amount equal to the lesser of:</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>
</TD></TR>
<TR>
  <TD vAlign=top>&nbsp;</TD>
  <TD vAlign=top>&nbsp;</TD>
</TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top>
  <div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(i)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> the Revolving Credit Maximum Amount <U>minus</U> the unpaid principal balance of the Term Loan; or</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>
</TD></TR>
<TR>
  <TD vAlign=top>&nbsp;</TD>
  <TD vAlign=top>&nbsp;</TD>
</TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top>
<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(ii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> an amount equal to:</FONT></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(x)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; the sum of:</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(a)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> eighty-five percent (85%) of the net amount of Eligible Accounts (other than Eligible Accounts arising
from Short Term Projects) outstanding at such date; <U>plus</U> </FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(b)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> the lesser of One Million Five Hundred Thousand Dollars ($1,500,000) or eighty-five percent (85%)
of the next amount of Eligible Accounts arising from Short Term Projects outstanding at such date;
<U>plus</U></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(c)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> the lesserof (1)&nbsp;Eleven Million Dollars ($11,000,000) or (2)&nbsp;fifty-five percent (55%) of
the value of Eligible Inventory at such date;</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>MINUS</U> &nbsp;(subtract from the sum of (a) <U>plus</U> (b) <U>plus</U> (c)),</FONT></P></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>3</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">
<TR>
<TD>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(y)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; $1,000,000.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>The limitations set forth in the immediately preceding sentence and each of the advance rates set forth
above may be adjusted downward by Agent, as Agent shall deem necessary or appropriate in its reasonable
credit judgment. For purposes hereof, (1)&nbsp;the net amount of Eligible Accounts at any time shall
be the face amount of such Eligible Accounts less any and all returns, rebates, discounts (which
may, at Agent&#146;s option, be calculated on shortest terms), credits, allowances or excise taxes
of any nature at any time issued, owing, claimed by Account Debtors, granted, outstanding or payable
in connection with such Accounts at such time and (2)&nbsp;the amount of Eligible Inventory shall
be determined on a first-in, first-out, lower of cost or market basis in accordance with GAAP.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2>*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Fixed Charge Coverage Ratio</U> &#150; as defined in <U>Exhibit 8.3</U>.</FONT></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2>*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>LIBOR Portion</U>  &#150; a LIBOR Revolving Portion or a LIBOR Term Portion.</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top>
  <p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>LIBOR Request</U> &#150; a notice in writing (or by telephone confirmed electronically or by telecopy or other facsimile
  transmission on the same day as the telephone request) from MFRI, on its own behalf and on behalf
  of all other Borrowers, to Agent requesting that interest on a Revolving Credit Loan or a portion
  of the Term Loan be based on LIBOR, specifying: (i) the first day of the Interest Period (which shall
  be a Business Day); (ii) the length of the Interest Period; (iii) whether the LIBOR Portion is a
  new Loan, a conversion of a Base Rate Portion, or a continuation of a LIBOR Portion, and (iv) the
  dollar amount of the LIBOR Revolving Portion or LIBOR Term Portion, which shall be in an amount not
  less than One Million Dollars ($1,000,000) or an integral multiple of One Hundred Thousand Dollars
  ($100,000) in excess thereof.</FONT></p></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top>
  <p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>LIBOR Revolving Portion</U>  &#150; that portion of the Revolving Credit Loans specified in a LIBOR Request (including any
  portion of Revolving Credit Loans which is being borrowed by Borrower concurrently with such LIBOR
  Request) which, as of the date of the LIBOR Request specifying such LIBOR Revolving Portion, has
  met the conditions for basing interest on the LIBOR in Section&nbsp;3.1 of the Agreement and the
  Interest Period of which has not terminated.</FONT></p></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>
</TD></TR>
<TR>
  <TD vAlign=top>&nbsp;</TD>
  <TD vAlign=top>&nbsp;</TD>
</TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top>
  <p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>LIBOR Term Portion</U>  &#150; that portion of the Term Loan specified in a LIBOR Request which, as of the date of the
  LIBOR Request specifying such LIBOR Term Portion, has met the conditions for basing interest on the
  LIBOR in Section&nbsp;3.1 of the Agreement and the Interest Period of which has not terminated.</FONT></p></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2>*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top>
<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Sixth Amendment</U>  &#150; that certain Sixth Amendment to Loan and Security Agreement dated as of March&nbsp;28,
2005 by and among Borrowers, Agent and Lenders.</FONT></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>4</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top>
<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Sixth Amendment Effective Date</U>  &#150; as defined in Section&nbsp;14 of the Sixth Amendment.</FONT></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2>*&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; *</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Term</U>  &#150; as defined in Section&nbsp;4.1 of the Agreement.</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>
</TD></TR>
<TR>
  <TD vAlign=top>&nbsp;</TD>
  <TD vAlign=top>&nbsp;</TD>
</TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top>
<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Term Loan</U>  &#150; the Loan described in subsection&nbsp;1.3.1 of the Agreement.</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>
</TD></TR>
<TR>
  <TD vAlign=top>&nbsp;</TD>
  <TD vAlign=top>&nbsp;</TD>
</TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top>
  <p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Term Loan Commitment</U>  &#150; with respect to any Lender, the amount of such Lender&#146;s Term Loan Commitment pursuant
  to subsection&nbsp;1.3.1 of the Agreement, as set forth below such Lender&#146;s name on the signature
  pages hereof or any Assignment and Acceptance Agreement executed by such Lender, minus all Term Loan
  payments paid to such Lender.</FONT></p></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Term Loan Notes</U>  &#150; the Secured Promissory Notes to be executed by Borrower on or about the Closing Date
  in favor of each applicable Lender to evidence its Term Loan, which shall be in the form of Exhibit&nbsp;1.3A
  to the Sixth Amendment, together with any replacement or successor notes therefor.</FONT></p></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top>
  <p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><U>Term Loan Percentage</U>  &#150; with respect to each Lender, the percentage equal to the quotient of such Lender&#146;s
  Term Loan Commitment <U>divided by</U> the aggregate of all Term Loan Commitment.&#148;</FONT></p></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Term Loan</U>. The following is inserted into the Loan Agreement as Section&nbsp;1.3:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top>
  <p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>&#147;1.3&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Term Loan</U>. Each Lender, severally and not jointly, agrees to make a term loan (collectively, the &#147;Term
  Loan&#148;) to Borrower on the Closing Date, in the aggregate principal amount of such Lender&#146;s
  Term Loan Commitment, which shall be repayable in accordance with the terms of the Term Loan Notes
  and shall be secured by all of the Collateral. The proceeds of the Term Loan shall be used solely
  for the repayment of Indebtedness outstanding under the Term Loan Documents and for the purposes
  for which the proceeds of the Revolving Credit Loans are authorized to be used.&#148;</FONT></p></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><U>Interest</U>. Section&nbsp;2.1 of the Loan Agreement is hereby deleted and the following is inserted in its stead:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top>
  <p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>&#147;2.1.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Rates of Interest</U>. Interest shall accrue on the principal amount of the Base Rate Revolving Portion outstanding at the
  end of each day at a fluctuating rate per annum equal to the Applicable Margin then in effect <U>plus</U> the Base Rate. Interest shall accrue on the principal amount of the Base Rate Term Portion outstanding
  at the end of each day at a fluctuating rate per annum equal to the Applicable Margin then in effect
  <U>plus</U> the Base Rate. Said rate of interest shall increase or decrease by an amount equal to any increase
  or decrease in the Base Rate, effective as of the opening of business on the day that any such change
  in the Base Rate occurs. If MFRI, on its own behalf and on behalf of all other Borrowers, exercises
  its LIBOR Option as provided in Section&nbsp;3.1, (i)&nbsp;interest shall accrue on the principal
  amount of the LIBOR Revolving Portions outstanding at the end of each day at a rate per annum equal
  to the Applicable Margin then in effect plus the </FONT></p></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>5</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top>
  <p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>LIBOR applicable to each LIBOR Portion for the corresponding Interest Period and (ii)&nbsp;interest
  shall accrue on the principal amount of the LIBOR Term Portions outstanding at the end of each day
  at a per annum rate equal to the Applicable Margin then in effect <U>plus</U> the LIBOR applicable to each LIBOR Portion for the corresponding Interest Period.&#148;&nbsp;</FONT></p></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Prepayment Fee</U>. Section&nbsp;2.6 of the Loan Agreement is hereby deleted and the following is inserted in its stead:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top>
  <p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>&#147;2.6&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Prepayment Fee</U>. At the effective date of termination of this Agreement for any reason, Borrowers shall pay to Agent,
  for the ratable benefit of Lenders (in addition to the then outstanding principal, accrued interest
  and other charges owing under the terms of this Agreement and any of the other Loan Documents) and
  any amounts owing pursuant to subsection 3.2.5, as liquidated damages for the loss of the bargain
  and not as a penalty, an amount equal to one percent (1%) of the Total Credit Facility if termination
  occurs prior to November&nbsp;30, 2005; one-half of one percent (&#189;%) of the Total Credit Facility
  if termination occurs during the period between December&nbsp;1, 2005 and November&nbsp;30, 2006;
  and one quarter of one percent (&#188;%) if termination occurs between December&nbsp;1, 2006 and
  August&nbsp;31, 2007. If termination occurs on or after September&nbsp;1, 2007 , no termination charge
  shall be payable.&#148;</FONT></p></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>LIBOR Portions</U>. Subsection&nbsp;3.1.7 of the Loan Agreement is hereby deleted from the Loan Agreement and the following
is inserted in its stead:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top>
  <p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>&#147;3.1.7&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>LIBOR Portions</U>. Provided that as of both the date of the LIBOR Request and the first day of the Interest Period,
  no Default or Event of Default exists, in the event Borrowers desire to obtain a LIBOR Portion, MFRI,
  on its own behalf and on behalf of all other Borrowers, shall give Agent a LIBOR Request no later
  than 11:00&nbsp;a.m. (Chicago, Illinois time) on the third Business Day prior to the requested borrowing
  date. Each LIBOR Request shall be irrevocable and binding on all Borrowers. In no event shall Borrowers
  be permitted to have outstanding at any one time LIBOR Portions with more than five (5) different
  Interest Periods. LIBOR Portions shall be included within the definition of LIBOR Revolving Credit
  Portion or LIBOR Term Portion as determined by the definitions of such terms.&#148;</FONT></p></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Optional Prepayments</U>. The following is inserted into the Loan Agreement as Section&nbsp;3.3.5:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top>
  <p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>&#147;3.3.5&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Optional Prepayments</U>. Borrowers may, at their option from time to time upon not less than 3 days prior written notice to
  Agent, prepay installments of the Term Notes; <U>provided</U> that the amount of any such prepayment is at least $500,000 and in integral multiples of $100,000
  above $500,000, that such prepayments are made ratably with respect to all Term Notes and that no
  such prepayment shall be made on or prior to September 15, 2005. Each such prepayment shall be applied
  to the installments of principal due under the Term Notes in the inverse order of maturity. Except
  for charges under Section 2.6 applicable to the termination of the Total Credit Facility, such prepayments
  shall be without premium or penalty.&#148;</FONT></p></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>6</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Term</U>. Section 4.1 of the Loan Agreement is hereby deleted and the following is inserted in its stead:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>&#147;<B>SECTION 4. TERM AND TERMINATION</B></FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top>
  <p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>4.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Term of Agreement</U>. Subject to the right of Lenders to cease making Loans to Borrowers during the continuance of any
  Default or Event of Default, this Agreement shall be in effect through and including November&nbsp;30,
  2007 (the &#147;Term&#148;), unless terminated as provided in Section 4.2 hereof.&#148;</FONT></p></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Total Indebtedness</U>. Subsection 8.2.3 of the Loan Agreement is hereby deleted and the following is inserted in its stead:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top>
<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>&#147;8.2.3&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<U>Total Indebtedness</U>. Create, incur, assume, or suffer to exist, or permit any Subsidiary of any Borrower to create, incur
or suffer to exist, any Indebtedness, except:</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>
</TD></TR>
<TR>
  <TD vAlign=top>&nbsp;</TD>
  <TD vAlign=top>&nbsp;</TD>
</TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top>
  <div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(i)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Obligations owing to Agent
  or any Lender under this Agreement or any of the other Loan Documents;</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>
</TD></TR>
<TR>
  <TD vAlign=top>&nbsp;</TD>
  <TD vAlign=top>&nbsp;</TD>
</TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top>
  <div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(ii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indebtedness, including without
  limitation Subordinated Debt, existing on the date of this Agreement and listed on Exhibit 8.2.3;</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>
</TD></TR>
<TR>
  <TD vAlign=top>&nbsp;</TD>
  <TD vAlign=top>&nbsp;</TD>
</TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top>
<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(iii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Permitted Purchase Money Indebtedness;</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>
</TD></TR>
<TR>
  <TD vAlign=top>&nbsp;</TD>
  <TD vAlign=top>&nbsp;</TD>
</TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top>
  <div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(iv)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;contingent liabilities arising out
    of endorsements of checks and other negotiable instruments for deposit or collection in the ordinary
    course of business;</FONT></div></TD>
</TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>
</TD></TR>
<TR>
  <TD vAlign=top>&nbsp;</TD>
  <TD vAlign=top>&nbsp;</TD>
</TR>
<TR>
<TD width=48>&nbsp;</TD>
<TD>
<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(v)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Guaranties of any Indebtedness
permitted hereunder;</FONT></TD></TR>
<TR>
<TD></TD>
<TD>
</TD></TR>
<TR>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
</TR>
<TR>
<TD width=48>&nbsp;</TD>
<TD>
<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(vi)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indebtedness in respect of intercompany
advances permitted by Section 8.2.2(iv);</FONT></TD></TR>
<TR>
<TD></TD>
<TD>
</TD></TR>
<TR>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
</TR>
<TR>
<TD width=48>&nbsp;</TD>
<TD>
<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(vii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;obligations to pay Rentals permitted by
subsection 8.2.18;</FONT></TD></TR>
<TR>
<TD></TD>
<TD>
</TD></TR>
<TR>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
</TR>
<TR>
<TD width=48>&nbsp;</TD>
<TD>
<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(viii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;Indebtedness outstanding pursuant to the Term
Loan Documents;</FONT></TD>
</TR>
<TR>
<TD></TD>
<TD>
</TD></TR>
<TR>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
</TR>
<TR>
<TD width=48>&nbsp;</TD>
<TD>
<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(ix)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; IRB Indebtedness;</FONT></TD></TR>
<TR>
<TD></TD>
<TD>
</TD></TR>
<TR>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
</TR>
<TR>
<TD width=48>&nbsp;</TD>
<TD>
<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(x)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Existing Mortgage Indebtedness;</FONT></TD></TR>
<TR>
<TD></TD>
<TD>
</TD></TR>
<TR>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
</TR>
<TR>
<TD width=48>&nbsp;</TD>
<TD>
  <p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(xi)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Money Borrowed (either as an
  operating loan or a real estate mortgage loan) in a principal amount not to exceed Two Million Four
  Hundred Fifty Thousand Dollars ($2,450,000) invested by Midwesco&#146;s Danish Subsidiaries and guaranteed
  by Midwesco and/or MFRI;</FONT></p></TD></TR>
<TR>
<TD></TD>
<TD>
</TD></TR>
<TR>
  <TD>&nbsp;</TD>
  <TD>&nbsp;</TD>
</TR>
<TR>
<TD width=48>&nbsp;</TD>
<TD>
<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(xii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indebtedness incurred in connection
with the Lebanon Refinancing;</FONT></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>7</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(xiii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;to the extent not included above, trade
  payables, accruals and accounts payable in the ordinary course of business (in each case to the extent
  not overdue) not for Money Borrowed; and</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(xiv)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indebtedness not included in paragraphs (i) through
  (xiii) above which does not exceed at any time, in the aggregate, the sum of One Million Dollars
  ($1,000,000).&#148;</FONT></div></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>10.<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Repayment of Indebtedness Outstanding Pursuant to the Term Loan Documents</U>. Upon the Sixth Amendment Effective Date, (i) Borrowers shall repay all Indebtedness outstanding under
the Term Loan Documents, (ii) Indebtedness outstanding pursuant to the Term Loan Documents shall
no longer be Permitted Indebtedness under subsection 8.2.3 of the Loan Agreement and (iii) Liens
securing the repayment of the Indebtedness outstanding under the Term Loan Documents shall no longer
be Liens permitted under subsection 8.2.5 of the Loan Agreement.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>11.<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Financial Covenants</U>. Upon the Sixth Amendment Effective Date, Exhibit 8.3 to the Loan Agreement shall be hereby deleted
and Exhibit&nbsp;8.3 attached to this Sixth Amendment and incorporated herein shall be inserted in
its stead.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>12.<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;</FONT> <U>Events of Default</U>. Section 10.1.16 of the Loan Agreement is hereby deleted.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>13.<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Amendment Fee</U>. In order to induce Agent and Lenders to enter into this Sixth Amendment, Borrowers agree to pay to
Agent, for the ratable benefit of Lenders, an amendment fee in the amount of $25,000. Said amendment
fee shall be payable and deemed fully earned and non-refundable on the Sixth Amendment Effective
Date.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>14.<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><U>Sixth Amendment Effective Date</U>. This Sixth Amendment shall become effective upon satisfaction of each of the following conditions:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(i)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT>Borrowers, Agent and Lenders shall have executed and delivered to each other this Sixth Amendment
  and the Term Note; </FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(ii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Borrower shall have delivered to Agent a properly executed Certificate of Secretary of Borrower together
  with a true and correct copy of the resolutions of Borrower&#146;s Board of Directors authorizing
  or ratifying the execution, delivery and performance of this Sixth Amendment and the Term Note referred
  to in (i)&nbsp;above, the names of the officers authorized to sign this Sixth Amendment and said
  Term Note and a sample of the true signature of each such officer;</FONT></p></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(iii)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Borrowers shall have paid to Agent for the ratable benefit of Lenders the amendment fee referred to
  in Section&nbsp;13 of this Sixth Amendment;</FONT></p></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(iv)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;</FONT> Borrowers shall have delivered to Agent a payoff letter from the holders of the Indebtedness outstanding
  under the Term Loan Documents, which payoff letter shall be in form and substance acceptable to Agent;</FONT></p></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>8</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><div align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(v)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> Agent shall have received Lien and UCC searches with respect to each Borrower and its assets, the
  results of which shall be satisfactory to Agent; and</FONT></div></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(vi)<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> No Default or Event of Default shall have occurred and be continuing.</FONT></TD></TR>
<TR>
<TD vAlign=top></TD>
<TD vAlign=top>&nbsp;</TD></TR>
<TR>
<TD vAlign=top width=48>&nbsp;</TD>
<TD vAlign=top><p align="justify"><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>The date on which each of the foregoing conditions precedent is satisfied shall be referred to as the &#147;Sixth Amendment Effective Date.&#148;</FONT></p></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>15.<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Execution in Counterparts</U>. This Sixth Amendment may be executed in any number of counterparts and by different parties hereto
in separate counterparts, each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>16.<FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT> <U>Continuing Effect</U>. Except as otherwise specifically set out herein, the provisions of the Loan Agreement shall remain
in full force and effect.</FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B><I>(Signature Page Follows)</I></B></FONT></P></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>9</FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">
<TR>
<TD>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B><I>(Signature Page to Sixth Amendment to Loan Agreement)</I></B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>IN WITNESS WHEREOF, this Sixth Amendment has been duly executed as of the day and year specified at
the beginning hereof.</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<table width="600" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td width="50%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">FLEET CAPITAL CORPORATION,</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">(&#147;Agent&#148; and a &#147;Lender&#148;)</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">Term Loan Commitment: $4,300,000</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">By: ______________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="4%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name: ______________________________ </font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title: _______________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">MFRI, INC. (a &#147;Borrower&#148;)</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">By: ______________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name: ______________________________ </font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title: _______________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">MIDWESCO FILTER RESOURCES, INC.</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">(a &#147;Borrower&#148;)</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">By: ______________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name: ______________________________ </font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title: _______________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">PERMA-PIPE, INC. (a &#147;Borrower&#148;)</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">By: ______________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name: ______________________________ </font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title: _______________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">THERMAL CARE, INC. (a &#147;Borrower&#148;)</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">By: ______________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name: ______________________________ </font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title: _______________________________</font></td>
  </tr>
</table>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>

<table width="600" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td width="50%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">TDC FILTER MANUFACTURING, INC.</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">(a &#147;Borrower&#148;)</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">By: ______________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="4%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name: ______________________________ </font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title: _______________________________</font></td>
  </tr>
</table>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>

<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B>EXHIBIT 8.3</B></FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2>FINANCIAL COVENANTS</FONT></P>
<P><FONT face="Times New Roman, Times, Serif" size=2><B>DEFINITIONS</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><B><U>Cash Flow</U></B>  &#150; with respect to any fiscal period, EBITDA for such period <U>minus </U>(i)&nbsp;Capital Expenditures (excluding, however, Capital Expenditures financed by third party financing)
made within such period, (ii) income taxes paid in cash in such period, (iii) Interest Expense paid
in cash within such period and (iv) principal payments of Money Borrowed (other than Revolving Credit
Loans) made within such period.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><B><U>Consolidated Net Income (Loss)</U></B>  &#150; with respect to any fiscal period, the net income (or loss) of MFRI determined in accordance
with GAAP on a Consolidated basis; provided, however, Consolidated Net Income shall not include:&nbsp;(a)
the income (or loss) of any Person (other than a Subsidiary of any Borrower) in which a Borrower
or any of its wholly-owned subsidiaries has an ownership interest unless received in a cash distribution
or requiring the payment of cash; (b) the income (or loss) of any Person accrued prior to the date
it became a Subsidiary of a Borrower or is merged into or consolidated with a Borrower; (c) all amounts
included in determining net income (or loss) in respect of the write-up of assets on or after the
Closing Date, including the subsequent amortization or expensing of the written-up portion of the
assets; (d) extraordinary gains as defined under GAAP; and (e) gains from asset dispositions (other
than sales of inventory); and any increase or decrease in expenses resulting from the implementation of FASB 146.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><B><U>EBITDA</U></B>  &#150; with respect to any fiscal period, the sum of Consolidated Net Income (Loss) before Interest
Expense, income taxes, depreciation and amortization for such period (but excluding any extraordinary
gains for such period), all as determined for Borrowers and their Subsidiaries on a Consolidated
basis and in accordance with GAAP.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><B><U>Fixed Charge Coverage Ratio</U></B>  &#150; with respect to any fiscal period, the ratio of (i)&nbsp;EBITDA for such period <U>minus</U> Capital Expenditures (excluding, however, Capital Expenditures financed by third party financing)
made within such period <U>minus</U> income taxes paid in cash in such period to (ii) the sum of Interest Expense paid in cash within such
period <U>plus</U> principal payments of Money Borrowed (other than Revolving Credit Loans) made within such period.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><B><U>Interest Coverage Ratio</U></B>  &#150; with respect to any fiscal period, the ratio of (i)&nbsp;EBITDA for such period to (ii)
Interest Expense paid in cash in such period, all as defined for MFRI and its subsidiaries on a consolidated
basis in accordance with GAAP.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><B><U>Interest Expense</U></B>  &#150; with respect to any fiscal period, interest expense paid or accrued for such period,
including without limitation the interest portion of Capitalized Lease Obligations, plus the Letter
of Credit and LC Guaranty fees owing for such period, all as determined for MFRI and its Subsidiaries
on a Consolidated basis and in accordance with GAAP.</FONT></P></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>Exhibit 8.3</FONT><FONT face="Times New Roman, Times, Serif" size=2> &#150;</FONT><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2> Page 1 </FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>The foregoing notwithstanding, there shall be excluded from the calculations of Cash Flow, Consolidated
Net Income (Loss), EBITDA, Fixed Charges, Interest Coverage Ratio and Interest Expense, all amounts
that would otherwise be included in such items that are generated or incurred by, or result from
the operations of, Midwesco Filter Resources Denmark A/S, Nordic Air Filtration A/S and Boe-Therm
A/S, Borrowers&#146; Danish Subsidiaries.</FONT></P>
<P><FONT face="Times New Roman, Times, Serif" size=2><B>COVENANTS</B></FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><B><U>Minimum EBITDA</U></B>. &nbsp;Borrowers shall not permit EBITDA for any period set forth below to be less than the amount
set forth below opposite such period:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<table width="600" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font size="1" face="Times New Roman, Times, serif"><b> Period </b></font></td>
    <td colspan="2" align="center"><font size="1" face="Times New Roman, Times, serif"><b> Amount</b> &nbsp; </font></td>
    <td width="14" valign="top"><font size="1" face="Times New Roman, Times, serif">&nbsp;&nbsp;</font></td>
  </tr>
  <tr>
    <td><hr align="left" width="30" size="1" noshade></td>
    <td colspan="2"><hr size="1" noshade></td>
    <td valign="top"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="1%" align="right"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="10%" align="right"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="2%" valign="top"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr bgcolor="#eaf9e8">
    <td><font size="2" face="Times New Roman, Times, serif">6 Months Ended 7/31/04 </font></td>
    <td width="10" align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td width="67" align="right"><font size="2" face="Times New Roman, Times, serif">2,500,000 </font></td>
    <td valign="top">&nbsp;</td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">9 Months Ended 10/31/04 </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">4,400,000 </font></td>
    <td valign="top">&nbsp;</td>
  </tr>
  <tr bgcolor="#eaf9e8">
    <td><font size="2" face="Times New Roman, Times, serif">12 Months Ended 1/31/05 and the last day of each fiscal quarter thereafter </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">5,450,000 </font></td>
    <td valign="top">&nbsp;</td>
  </tr>
</table>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><B><U>Minimum Cash Flow</U></B>. Borrowers shall not permit Cash Flow for any period set forth below to be less than the amount set
forth below opposite such period:</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<table width="600" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font size="1" face="Times New Roman, Times, serif"><b> Period </b></font></td>
    <td colspan="2" align="center"><font size="1" face="Times New Roman, Times, serif"><b> Amount</b> &nbsp; </font></td>
    <td valign="top"><font size="1" face="Times New Roman, Times, serif">&nbsp;&nbsp;</font></td>
  </tr>
  <tr>
    <td><hr align="left" width="30" size="1" noshade>        </td>
    <td colspan="2"><hr size="1" noshade>        </td>
    <td valign="top"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="1%" align="right"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="10%" align="right"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="2%" valign="top"><font size="1" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr bgcolor="#eaf9e8">
    <td><font size="2" face="Times New Roman, Times, serif">6 Months Ended 7/31/03 </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">(150,000</font></td>
    <td valign="top"><font size="2" face="Times New Roman, Times, serif">)</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">9 Months Ended 10/31/04 </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif"> 500,000 </font></td>
    <td valign="top">&nbsp;</td>
  </tr>
  <tr bgcolor="#eaf9e8">
    <td><font size="2" face="Times New Roman, Times, serif">12 Months ended 1/31/05 and the last day of each fiscal quarter thereafter </font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">$</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif"> 250,000 </font></td>
    <td valign="top">&nbsp;</td>
  </tr>
</table>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>Exhibit 8.3</FONT><FONT face="Times New Roman, Times, Serif" size=2> &#150;</FONT><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2> Page 2 </FONT></P>
<HR color=gray noShade SIZE=5>
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<TD>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B>EXHIBIT&nbsp;1.3A</B></FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B>FORM OF TERM LOAN NOTE</B></FONT></P>
<P align=center><FONT face="Times New Roman, Times, Serif" size=2><B>(SECURED PROMISSORY NOTE)</B></FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<table width="600" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">[Aggregate of $4,300,000]</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">______________&nbsp;__, 20__</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td align="right"><font size="2" face="Times New Roman, Times, serif">Chicago, Illinois</font></td>
  </tr>
</table>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR>
<TR>
<TD vAlign=top>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2><B>FOR VALUE RECEIVED</B>, the undersigned (&#147;<B>Borrowers</B>&#148;), hereby jointly and severally promises to pay to the order of _______________________, a ________________
corporation (hereinafter &#147;<B>Lender</B>&#148;), or its registered assigns at the office of Fleet Capital Corporation, as agent for such Lender,
or at such other place in the United States of America as the holder of this Note may designate from
time to time in writing, in lawful money of the United States, in immediately available funds, at
the time of payment, the principal sum of ______________________ Dollars ($_______________), together
with interest from and after the date hereof on the unpaid principal balance outstanding from time
to time.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>This Secured Promissory Note (the &#147;<B>Note</B>&#148;) is one of the Term Loan Notes referred to in, and is issued pursuant to, that certain Loan
and Security Agreement dated as of July 11, 2002, by and among Borrowers, the lender signatories
thereto (including Lender), and Fleet Capital Corporation (&#147;<B>FCC</B>&#148;) as Agent for said lenders (FCC in such capacity &#147;<B>Agent</B>&#148;) (hereinafter, as amended from time to time, the &#147;<B>Loan Agreement</B>&#148;), and is entitled to all of the benefits and security of the Loan Agreement. All of the terms,
covenants and conditions of the Loan Agreement and the Security Documents are hereby made a part
of this Note and are deemed incorporated herein in full. All capitalized terms used herein, unless
otherwise specifically defined in this Note, shall have the meanings ascribed to them in the Loan
Agreement.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>For so long as no Event of Default shall have occurred and be continuing, the principal amount and
accrued interest of this Note shall be due and payable on the dates and in the manner hereinafter
set forth:</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;interest on the unpaid principal
balance outstanding from time to time shall be paid at such interest rates and at such times as are
specified in the Loan Agreement;</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;principal shall be due and payable
quarterly commencing on <B>[June 1, 2005]</B> and continuing on each <B>[September 1, December 1, March 1 and June 1]</B> thereafter in installments equal to $________________ <B>[aggregate amount of quarterly installments to all Lenders equal to $215,000]</B>; and</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;the entire remaining principal
amount then outstanding, together with any and all other amounts due hereunder, shall be due and
payable on the last day of the Term.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>Notwithstanding the foregoing, the entire unpaid principal balance and accrued interest on this Note
shall be due and payable immediately upon any termination of the Loan Agreement pursuant to Section&nbsp;4
thereof.</FONT></P></TD></TR></TABLE>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>Exhibit 1.3A</FONT><FONT face="Times New Roman, Times, Serif" size=2> &#150;</FONT><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2> Page 1 </FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>
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<TD>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>This Note shall be subject to mandatory prepayment in accordance with the provisions of Section&nbsp;3.3
of the Loan Agreement. Borrowers may also prepay this Note in the manner provided in subsection&nbsp;3.3.5
or Section 4 of the Loan Agreement.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>Upon the occurrence, and during the continuation, of an Event of Default, this Note shall or may, as
provided in the Loan Agreement, become or be declared immediately due and payable.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>The right to receive principal of, and stated interest on, this Note may only be transferred in accordance
with the provisions of the Loan Agreement.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>Demand, presentment, protest and notice of nonpayment and protest are hereby waived by Borrowers.</FONT></P>
<P align=justify><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT face="Times New Roman, Times, Serif" size=2>This Note shall be governed by, and construed and enforced in accordance with, the laws of the State
of Illinois.</FONT></P></TD></TR>
<TR>
<TD vAlign=top><FONT face="Times New Roman, Times, Serif" size=2>&nbsp;</FONT></TD></TR></TABLE>
<table width="600" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td width="50%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">MFRI, INC. </font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">By: ______________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="4%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name: ______________________________ </font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title: _______________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">MIDWESCO FILTER RESOURCES, INC.</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">By: ______________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name: ______________________________ </font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title: _______________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">PERMA-PIPE, INC. </font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">By: ______________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name: ______________________________ </font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title: _______________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">THERMAL CARE, INC. </font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">By: ______________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name: ______________________________ </font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title: _______________________________</font></td>
  </tr>
</table>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>Exhibit 1.3A </FONT><FONT face="Times New Roman, Times, Serif" size=2>&#150; </FONT><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>Page 2 </FONT></P>
<HR color=gray noShade SIZE=5>
</TD></TR></TABLE>
<P style="PAGE-BREAK-AFTER: always"></P><PAGE><BR>

<table width="600" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td width="50%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">TDC FILTER MANUFACTURING, INC.</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td colspan="2"><font size="2" face="Times New Roman, Times, serif">By: ______________________________________</font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td width="4%"><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Name: ______________________________ </font></td>
  </tr>
  <tr>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">&nbsp;</font></td>
    <td><font size="2" face="Times New Roman, Times, serif">Title: _______________________________</font></td>
  </tr>
</table>
<TABLE cellSpacing="0" cellPadding="0" width="600" border="0">

<TR vAlign=top>
<TD width="600"><BR>
<P align=center><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>Exhibit 1.3A</FONT><FONT face="Times New Roman, Times, Serif" size=2>&#150;</FONT><FONT face="TIMES NEW ROMAN, TIMES, SERIF" size=2>Page 3 </FONT></P>
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`
end
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
