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<SEC-DOCUMENT>0000914122-05-000030.txt : 20050611
<SEC-HEADER>0000914122-05-000030.hdr.sgml : 20050611
<ACCEPTANCE-DATETIME>20050601105925
ACCESSION NUMBER:		0000914122-05-000030
CONFORMED SUBMISSION TYPE:	DEF 14A
PUBLIC DOCUMENT COUNT:		3
CONFORMED PERIOD OF REPORT:	20050131
FILED AS OF DATE:		20050601
DATE AS OF CHANGE:		20050601
EFFECTIVENESS DATE:		20050601

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:		DEF 14A
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-18370
		FILM NUMBER:		05869424

	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>DEF 14A
<SEQUENCE>1
<FILENAME>mfriproxy2005.htm
<DESCRIPTION>MFRI PROXY STATEMENT
<TEXT>
<HTML>
<HEAD>
<TITLE> </TITLE>
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<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><b><font SIZE=2>UNITED STATES</font></b></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><b><font SIZE=2>SECURITIES AND EXCHANGE COMMISSION </font></b></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><b><font size=2>Washington, D.C. 20549</font></b></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><b><font SIZE=2>SCHEDULE 14A </font></b></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><b><font size=2>Proxy Statement Pursuant to Section</font></b><font size=2>&nbsp;</font><b><font size=2>14(a) of the Securities</font></b></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><b><font size=2>Exchange Act of 1934</font></b></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="241" style='border-collapse:collapse'>
    <tr >
        <td width="192" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>Filed by the Registrant</font></p> </td>
        <td width="49" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font face=Wingdings>x</font></p> </td> </tr></table>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="323" style='border-collapse:collapse'>
    <tr >
        <td width="288" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>Filed by a Party other than the Registrant</font></p> </td>
        <td width="35" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2><font face=Wingdings>o</font></font></p> </td> </tr></table>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>Check the appropriate box:</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="589" style='border-collapse:collapse'>
    <tr >
        <td width="48" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2><font face=Wingdings>o</font></font></p> </td>
        <td  colspan="2" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>Preliminary Proxy Statement</font></p> </td>
        <td   colspan="3">
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></td> </tr>
    <tr >
        <td width="48" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2><font face=Wingdings>o</font></font></p> </td>
        <td  colspan="5" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))</font></p> </td> </tr>
    <tr >
        <td width="48" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font face=Wingdings>x</font></p> </td>
        <td width="195" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>Definitive Proxy Statement</font></p> </td>
        <td   colspan="4">
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></td> </tr>
    <tr >
        <td width="48" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2><font face=Wingdings>o</font></font></p> </td>
        <td  colspan="3" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>Definitive Additional Materials</font></p> </td>
        <td   colspan="2">
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></td> </tr>
    <tr >
        <td width="48" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2><font face=Wingdings>o</font></font></p> </td>
        <td  colspan="4" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>Soliciting Material Pursuant to &sect; 240.14a-12</font></p> </td>
        <td  width="236">
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></td> </tr>
    <tr>
        <td width="56" ></td>

        <td width="227" ></td>

        <td width="12" ></td>

        <td width="19" ></td>

        <td width="98" ></td>

        <td width="275" ></td> </tr> </table>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="104" style='margin-left:210.0pt;border-collapse:collapse'>
    <tr >
        <td width="104" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><b><font SIZE=2>MFRI, INC.</font></b></p> </td> </tr></table>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>(name of registrant as specified in its charter)</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>_________________________________________</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>(name of person(s) filing proxy statement, if other than registrant)</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>Payment of Filing Fee (Check the appropriate box):</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="171" style='margin-left:.5in;border-collapse:collapse'>
    <tr >
        <td width="48" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font face=Wingdings>x</font></p> </td>
        <td width="123" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>No fee required.</font></p> </td> </tr></table>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>&nbsp;</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="555" style='margin-left:.5in;border-collapse:collapse'>
    <tr >
        <td width="48" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2><font face=Wingdings>o</font></font></p> </td>
        <td width="507" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>Fee computed on table below per Exchange Act Rules&nbsp;14a-6(i)(1) and 0-11.</font></p> </td> </tr></table>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:1.04in;text-align:justify;'><font size=2> (1)</font><font size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font><font size=2>Title of each class of securities to which transaction applies:</font><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:1in;text-align:justify;'><font size=2>(2)</font><font size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font><font size=2>Aggregate number of securities to which transaction applies:</font><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


<table  border="0" cellspacing=0 cellpadding=0 style='margin-left:1.0in;border-collapse:collapse'>
    <tr >
        <td width="48" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>(3)</font></p> </td>
        <td  valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule&nbsp;0-11:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></p> </td> </tr></table>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:1in;text-align:justify;'><font size=2>(4)</font><font size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font><font size=2>Proposed maximum aggregate value of transaction:</font><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:1in;text-align:justify;'><font size=2>(5)</font><font size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font><font size=2>Total fee paid:</font><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="367" style='margin-left:.5in;border-collapse:collapse'>
    <tr >
        <td width="48" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2><font face=Wingdings>o</font></font></p> </td>
        <td width="319" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>Fee paid previously with preliminary materials</font></p> </td> </tr></table>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:0.5in;text-align:justify;'><font size=2>&nbsp;</font></p>


<table  border="0" cellspacing=0 cellpadding=0 style='margin-left:.5in;border-collapse:collapse'>
    <tr >
        <td width="48" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2><font face=Wingdings>o</font></font></p> </td>
        <td  valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Check box if any part of the fee is offset as provided by Exchange Act Rule&nbsp;0-11(a)(2) and identify the filing for which the offsetting fee was paid previously.  Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.</font></p> </td> </tr></table>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:1.04in;text-align:justify;'><font size=2> (1)</font><font size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font><font size=2>Amount previously paid:</font><font size=2>$</font><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:1in;text-align:justify;'><font size=2>(2)</font><font size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font><font size=2>Form, Schedule or Registration Statement No.:</font><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:1in;text-align:justify;'><font size=2>(3)</font><font size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font><font size=2>Filing Party:</font><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:1in;text-align:justify;'><font size=2>(4)</font><font size=1>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font><font size=2>Date Filed:</font></p>


<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>
<br>
<HR noshade align="center" width="100%" size="2">
<p style='page-break-before:always'></p>
<pAGE>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:6pt; margin-top:0pt;text-align:center;'><img src="img2.gif"><br> </p>

<p style=' margin-bottom:3pt; margin-top:0pt;text-align:center;'><b><font size=2>7720 N. Lehigh Avenue</font></b></p>

<p style=' margin-bottom:24pt; margin-top:0pt;text-align:center;'><b><font size=2>Niles, Illinois 60714</font></b></p>

<p style=' margin-bottom:12pt; margin-top:0pt;text-align:right;'><font size=2>June 1, 2005</font></p>

<p style=' margin-bottom:12pt; margin-top:0pt;text-align:center;'><b><font SIZE=2>NOTICE OF ANNUAL MEETING OF STOCKHOLDERS</font></b></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>NOTICE IS HEREBY GIVEN that the annual meeting of stockholders of MFRI, Inc. (the &#147;Company&#148;) will be held at The Standard Club, 320 South Plymouth Court, Chicago, Illinois on Thursday, June 23, 2005, at 10:00 a.m., Chicago time, for the following purposes:</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="536" style='margin-left:.5in;border-collapse:collapse'>
    <tr >
        <td width="48" valign=top style='padding:0in 0in 12.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>1.</font></p> </td>
        <td width="157" valign=top style='padding:0in 0in 12.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>to elect directors; and</font></p> </td>
        <td   colspan="6">
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></td> </tr>
    <tr >
        <td width="48" valign=top style='padding:0in 0in 12.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>2.</font></p> </td>
        <td  colspan="7" valign=top style='padding:0in 0in 12.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>to transact such other business as may properly come before the meeting.</font></p> </td> </tr>
    <tr >
        <td   colspan="3">
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></td>
        <td  colspan="4" valign=top style='padding:0in 0in 24.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>By order of the Board of Directors,</font></p> </td>
        <td  width="4">
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></td> </tr>
    <tr >
        <td   colspan="4">
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></td>
        <td  colspan="2" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>Michael D. Bennett</font></p> </td>
        <td   colspan="2">
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></td> </tr>
    <tr >
        <td   colspan="4">
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></td>
        <td width="79" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>Secretary</font><i></i></p> </td>
        <td   colspan="3">
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></td> </tr>
    <tr>
        <td width="48" ></td>

        <td width="157" ></td>

        <td width="83" ></td>

        <td width="96" ></td>

        <td width="79" ></td>

        <td width="67" ></td>

        <td width="3" ></td>

        <td width="4" ></td> </tr> </table>

<p style=' margin-bottom:18pt; margin-top:18pt;text-align:center;'><font size=2>____________</font></p>

<p style=' margin-bottom:12pt; margin-top:0pt;text-align:center;'><b><font SIZE=2>PROXY STATEMENT</font></b></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>This Proxy Statement is furnished in connection with the solicitation of proxies on behalf of the Board of Directors of the Company for use at the annual meeting of stockholders to be held on June 23, 2005 and at any adjournment thereof.  This Proxy Statement and the form of proxy are first being mailed on June 1, 2005 to stockholders of the Company.  Only stockholders of record at the close of business on May 16, 2005 will be entitled to notice of and to vote at the meeting.  The Company had outstanding 5,228,808 shares of common stock as of the close of business on March 31, 2005.  There are no other voting securities.  Each stockholder is entitled to one vote per share for the election of directors, as well as on all other matters.  If the accompanying proxy form is signed and returned, the shares represented thereby will be voted; such shares will be voted in accordance with the
directions on the proxy form or, in the absence of direction as to any proposal, they will be voted for such proposal; and it is intended that they will be voted for the nominees named herein, except to the extent authority to vote is withheld.  The stockholder may revoke the proxy at any time prior to the voting thereof by giving written notice of such revocation to the Company, by executing and duly delivering a subsequent proxy or by attending the meeting and voting in person.</font></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>In case any nominee named herein for election as a director is not available when the election occurs, proxies in the accompanying form may be voted for a substitute as well as for </font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>
<br>
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<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:12pt; margin-top:0pt;text-align:justify;'><font size=2>the other persons named herein.  The Company expects all nominees to be available and knows of no matters to be brought before the meeting other than those referred to in the accompanying notice of annual meeting.  If, however, any other matters properly come before the meeting, it is intended that proxies in the accompanying form will be voted thereon in accordance with the judgment of the persons voting such proxies.</font></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>The presence at the annual meeting, in person or by proxy, of the holders of a majority of the outstanding shares of common stock of the Company (&#147;Common Stock&#148;) shall constitute a quorum.  Abstentions will be treated as shares that are present and entitled to vote for purposes of determining the presence of a quorum but as unvoted for purposes of determining the approval of any matter submitted to the stockholders for a vote.  If a broker indicates on the proxy that it does not have discretionary authority as to certain shares to vote on a particular matter, those shares will not be considered as present and entitled to vote with respect to that matter.</font></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>A plurality of the votes of the shares present in person or represented by proxy at the meeting will be required to elect the directors.  </font></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>In addition to the use of the mail, proxies may be solicited by directors, officers, or employees of the Company in person, by telegraph, by telephone or by other means.  The cost of the proxy solicitation will be paid by the Company.</font></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>The Company&#146;s fiscal year ends January 31.  Years described as 2004, 2003 and 2002 are the fiscal years ended January 31, 2005, 2004 and 2003, respectively.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'>
</p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="28" style='margin-left:231.0pt;border-collapse:collapse'>
    <tr >
        <td width="28" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>3</font></p> </td> </tr></table>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>
<br>
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<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:12pt; margin-top:0pt;text-align:center;'><b><font SIZE=2>PRINCIPAL STOCKHOLDERS AND SECURITY OWNERSHIP OF MANAGEMENT</font></b></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>The following table sets forth as of March 31, 2005, with respect to any person who is known to the Company to be the beneficial owner of more than 5% of the outstanding shares of Common Stock of the Company, the name and address of such owner, the number of shares of Common Stock beneficially owned, the nature of such ownership, and the percentage such ownership is of the outstanding shares of Common Stock:</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="596" style='margin-left:.5in;border-collapse:collapse'>
    <tr >
        <td  width="4">
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></td>
        <td  colspan="4" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><b><font size=2>Name and Address</font></b></p> </td>
        <td  colspan="3" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><b><font size=2>Amount and Nature</font></b></p> </td>
        <td  colspan="3" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><b><font size=2>Percent of</font></b></p> </td>
        <td  width="36">
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></td> </tr>
    <tr >
        <td  colspan="4" valign=top style='padding:0in 0in 12.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><u><b><font size=2>of Beneficial Owner</font></b></u></p> </td>
        <td  colspan="3" valign=top style='padding:0in 0in 12.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><u><b><font size=2>of Beneficial Ownership</font></b></u></p> </td>
        <td  colspan="5" valign=top style='padding:0in 0in 12.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><u><b><font size=2>Outstanding Shares</font></b></u></p> </td> </tr>
    <tr >
        <td  colspan="6" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>Heartland Advisors, Inc.</font></p> </td>
        <td  colspan="3" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>663,200</font><sup><font size=2>(1)</font></sup></p> </td>
        <td width="59" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>12.7%</font></p> </td>
        <td   colspan="2">
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></td> </tr>
    <tr >
        <td  colspan="3" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>789 North Water Street</font></p> </td>
        <td   colspan="9">
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></td> </tr>
    <tr >
        <td  colspan="2" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Milwaukee, WI 53202</font></p> </td>
        <td   colspan="10">
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></td> </tr>
    <tr>
        <td width="4" ></td>

        <td width="147" ></td>

        <td width="7" ></td>

        <td width="83" ></td>

        <td width="8" ></td>

        <td width="21" ></td>

        <td width="181" ></td>

        <td width="27" ></td>

        <td width="3" ></td>

        <td width="59" ></td>

        <td width="21" ></td>

        <td width="36" ></td> </tr> </table>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="539" style='margin-left:.5in;border-collapse:collapse'>
    <tr >
        <td  colspan="3" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>David Unger</font></p> </td>
        <td width="211" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>607,997</font><sup><font size=2>(2)</font></sup></p> </td>
        <td width="59" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>11.6%</font></p> </td> </tr>
    <tr >
        <td  colspan="2" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>7720 Lehigh Avenue</font></p> </td>
        <td   colspan="3">
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></td> </tr>
    <tr >
        <td width="112" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Niles, IL 60714</font></p> </td>
        <td   colspan="4">
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></td> </tr>
    <tr>
        <td width="112" ></td>

        <td width="32" ></td>

        <td width="125" ></td>

        <td width="211" ></td>

        <td width="59" ></td> </tr> </table>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="531" style='margin-left:.5in;border-collapse:collapse'>
    <tr >
        <td  colspan="2" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>Tontine Capital Partners, L.P.</font></p> </td>
        <td width="211" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>496,782</font><sup><font size=2>(3)</font></sup></p> </td>
        <td width="51" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>9.5%</font></p> </td> </tr>
    <tr >
        <td width="203" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>55 Railroad Avenue, 3rd Floor,</font></p> </td>
        <td   colspan="3">
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></td> </tr>
    <tr >
        <td width="203" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Greenwich, Connecticut 06830</font></p> </td>
        <td   colspan="3">
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></td> </tr>
    <tr>
        <td width="203" ></td>

        <td width="67" ></td>

        <td width="211" ></td>

        <td width="51" ></td> </tr> </table>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="531" style='margin-left:.5in;border-collapse:collapse'>
    <tr >
        <td  colspan="3" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>Henry M. Mautner</font></p> </td>
        <td width="211" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>490,094</font><sup><font size=2>(4)</font></sup></p> </td>
        <td width="51" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>9.4%</font></p> </td> </tr>
    <tr >
        <td  colspan="2" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>7720 Lehigh Avenue</font></p> </td>
        <td   colspan="3">
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></td> </tr>
    <tr >
        <td width="112" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Niles, IL 60714</font></p> </td>
        <td   colspan="4">
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></td> </tr>
    <tr>
        <td width="112" ></td>

        <td width="32" ></td>

        <td width="125" ></td>

        <td width="211" ></td>

        <td width="51" ></td> </tr> </table>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="531" style='margin-left:.5in;border-collapse:collapse'>
    <tr >
        <td  colspan="3" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>Edward W. Wedbush</font></p> </td>
        <td width="211" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>305,609</font><sup><font size=2>(5)</font></sup></p> </td>
        <td width="51" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>5.8%</font></p> </td> </tr>
    <tr >
        <td width="115" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>P.O. Box 30014</font></p> </td>
        <td   colspan="4">
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></td> </tr>
    <tr >
        <td  colspan="2" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Los Angeles, CA 90030-0014</font></p> </td>
        <td   colspan="3">
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></td> </tr>
    <tr>
        <td width="115" ></td>

        <td width="80" ></td>

        <td width="75" ></td>

        <td width="211" ></td>

        <td width="51" ></td> </tr> </table>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>________________</font></p>


<table  border="0" cellspacing=0 cellpadding=0 style='border-collapse:collapse'>
    <tr >
        <td width="48" valign=top style='padding:0in 0in 12.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>(1)</font></p> </td>
        <td  valign=top style='padding:0in 0in 12.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>According to a Schedule 13G/A dated January 19, 2005, such securities are held in investment advisory accounts of Heartland Advisors, Inc. (&#147;Heartland&#148;).  As a result, various persons have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the securities.  The interests of one such account, Heartland Value Fund, a series of Heartland Group, Inc., a registered investment company, relates to more than 5% of the class.  Mr. William J. Nasgovitz is an officer, director and principal shareholder of Heartland and, thus, may be deemed to be the beneficial owner of the Common Stock owned by Heartland.</font></p> </td> </tr>
    <tr >
        <td width="48" valign=top style='padding:0in 0in 12.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>2)</font></p> </td>
        <td  valign=top style='padding:0in 0in 12.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Includes 18,500 shares held in joint tenancy with Reporting Person&#146;s spouse, 9,250 of which the Reporting Person disclaims beneficial ownership of.  Includes 12,454 shares owned by the Reporting Person&#146;s spouse all of which the Reporting Person disclaims beneficial ownership of.  Also includes 35,125 shares that are subject to stock options granted by the Company that are exercisable on March 31, 2005 or which became exercisable within 60 days thereafter.</font></p> </td> </tr>
    <tr >
        <td width="48" valign=top style='padding:0in 0in 12.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>3)</font></p> </td>
        <td  valign=top style='padding:0in 0in 12.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>According to a Schedule 13G/A dated February 8, 2005, Tontine Capital Partners, L.P. (&#147;TCP&#148;) owns the 496,782 shares of Common Stock.  The General Partner of TCP is Tontine Capital Management, L.L.C (&#147;TCM&#148;), 55 Railroad Avenue, 3</font><sup><font size=2>rd</font></sup><font size=2> Floor, Greenwich, Connecticut  06830.  As general partner of TCP, TCM has the power to direct the affairs of TCP, including decisions respecting the disposition of the proceeds from the sale of the shares in the Company.  Jeffrey L. Gendell, 55 Railroad Avenue, 3</font><sup><font size=2>rd</font></sup><font size=2> Floor, Greenwich, Connecticut 06830, is the Managing Member of TCM and in that capacity directs its operations.  Thus, Mr. Gendell may be deemed the beneficial owner of the Common Stock owned by TCP.</font></p> </td> </tr>
    <tr >
        <td width="48" valign=top style='padding:0in 0in 12.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>(4)</font></p> </td>
        <td  valign=top style='padding:0in 0in 12.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Includes 47,253 shares held in joint tenancy with Reporting Person&#146;s spouse, 23,626.5 of which the Reporting Person disclaims beneficial ownership of.  Also includes 35,125 shares that are subject to stock options granted by the Company that are exercisable on March 31, 2005 or which became exercisable within 60 days thereafter.</font></p> </td> </tr></table>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="28" style='margin-left:231.0pt;border-collapse:collapse'>
    <tr >
        <td width="28" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>4</font></p> </td> </tr></table>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>
<br>
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<pAGE>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


<table  border="0" cellspacing=0 cellpadding=0 style='margin-left:2.25pt;border-collapse:collapse'>
    <tr >
        <td width="45" valign=top style='padding:0in 0in 12.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>(5)</font></p> </td>
        <td  valign=top style='padding:0in 0in 12.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>According to a Schedule 13G/A dated February 15, 2005 (the &#147;WI Schedule 13G&#148;), Wedbush, Inc. (&#147;WI&#148;), 1000 Wilshire Boulevard, Los Angeles, California  90017-2459, owns 242,709 shares of Common Stock, equaling 4.64% of the outstanding shares of Common Stock of the Company.  Edward W. Wedbush is the chairman of WI and owns a majority of the outstanding shares of WI and, thus, may be deemed the beneficial owner of the Common Stock owned by WI.  According to the WI Schedule 13G, Mr. Wedbush owns 62,600 shares of Common Stock, equaling 1.20% of the outstanding Common Stock of the Company, in his own name.</font></p> </td> </tr></table>

<p style=' margin-bottom:12pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth as of March 31, 2005, certain information concerning the ownership of securities of the Company of each director, nominee, business segment president and executive officer named in the Summary Compensation Table hereof (&#147;Named Executive Officers&#148;) and all directors and executive officers of the Company as a group:</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="100%" style='border-collapse:collapse'>
    <tr >
        <td width="213" valign=bottom style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><b><font size=2>Name of Beneficial Owner</font></b><b></b></p> </td>
        <td width="213" valign=bottom style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><b><font size=2>Amount and Nature</font></b><br> <b><font size=2>of Beneficial Ownership</font></b><b></b></p> </td>
        <td width="213" valign=bottom style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><b><font size=2>Percent of Outstanding Shares</font></b><b></b></p> </td> </tr>
    <tr >
        <td width="213" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p>
<p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>David Unger</font></p> </td>
        <td width="213" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:83.25pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p>
<p style='margin-left:0pt;text-indent:48.0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>607,997</font><sup><font size=2>(1)</font></sup></p> </td>
        <td width="213" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:76.5pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p>
<p style='margin-left:0pt;text-indent:66.0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>11.6%</font></p> </td> </tr>
    <tr >
        <td width="213" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Henry M. Mautner</font></p> </td>
        <td width="213" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:48.0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>490,094</font><sup><font size=2>(2)</font></sup></p> </td>
        <td width="213" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:71.25pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>9.4%</font></p> </td> </tr>
    <tr >
        <td width="213" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Bradley E. Mautner</font></p> </td>
        <td width="213" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:48.0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>156,405</font><sup><font size=2>(3)</font></sup></p> </td>
        <td width="213" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:71.25pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>3.0%</font></p> </td> </tr>
    <tr >
        <td width="213" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Gene K. Ogilvie</font></p> </td>
        <td width="213" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:.75in;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>60,377</font><sup><font size=2>(4)</font></sup></p> </td>
        <td width="213" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:71.25pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>1.2%</font></p> </td> </tr>
    <tr >
        <td width="213" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Fati A. Elgendy</font></p> </td>
        <td width="213" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:.75in;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>30,800</font><sup><font size=2>(5)</font></sup></p> </td>
        <td width="213" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:71.25pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>*</font></p> </td> </tr>
    <tr >
        <td width="213" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Don Gruenberg</font></p> </td>
        <td width="213" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:.75in;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>25,480</font><sup><font size=2>(6)</font></sup></p> </td>
        <td width="213" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:71.25pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>*</font></p> </td> </tr>
    <tr >
        <td width="213" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Arnold F. Brookstone</font></p> </td>
        <td width="213" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:.75in;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>24,526</font><sup><font size=2>(7)</font></sup></p> </td>
        <td width="213" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:71.25pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>*</font></p> </td> </tr>
    <tr >
        <td width="213" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Eugene Miller</font></p> </td>
        <td width="213" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:.75in;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>13,000</font><sup><font size=2>(8)</font></sup></p> </td>
        <td width="213" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:71.25pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>*</font></p> </td> </tr>
    <tr >
        <td width="213" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Dennis Kessler</font></p> </td>
        <td width="213" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:59.25pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>9,750</font><sup><font size=2>(9)</font></sup></p> </td>
        <td width="213" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:71.25pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>*</font></p> </td> </tr>
    <tr >
        <td width="213" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Stephen B. Schwartz</font></p> </td>
        <td width="213" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:59.25pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>8,375</font><sup><font size=2>(10)</font></sup></p> </td>
        <td width="213" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:71.25pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>*</font></p> </td> </tr>
    <tr >
        <td width="213" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:.15in;text-indent:-.15in;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Robert A. Maffei</font></p> </td>
        <td width="213" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:59.25pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>7,950</font><sup><font size=2>(11)</font></sup></p> </td>
        <td width="213" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:71.25pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>*</font></p> </td> </tr>
    <tr >
        <td width="213" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:.15in;text-indent:-.15in;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>All directors and executive </font><br> <font size=2>officers as a group (11 persons)</font></p>
<p style='margin-left:.25in;text-indent:-.25in;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td>
        <td width="213" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:39.75pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>1,438,168</font></p> </td>
        <td width="213" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:66.0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>27.5%</font></p> </td> </tr></table>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:0.5in; text-indent:-0.5in;text-align:justify;'><font size=2>*  Less than 1%.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:0.5in; text-indent:-0.5in;text-align:justify;'><font size=2>__________________</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:0.5in; text-indent:-0.5in;text-align:justify;'><font size=2>&nbsp;</font></p>


<table  border="0" cellspacing=0 cellpadding=0 style='border-collapse:collapse'>
    <tr >
        <td width="48" valign=top style='padding:0in 0in 12.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>(1)</font></p> </td>
        <td  valign=top style='padding:0in 0in 12.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Includes 18,500 shares held in joint tenancy with Reporting Person&#146;s spouse, 9,250 of which the Reporting Person disclaims beneficial ownership of.  Includes 12,454 shares owned by the Reporting Person&#146;s spouse all of which the Reporting Person disclaims beneficial ownership of. Also includes 35,125 shares that are subject to stock options granted by the Company that are exercisable on March 31, 2005 or which became exercisable within 60 days thereafter.</font></p> </td> </tr>
    <tr >
        <td width="48" valign=top style='padding:0in 0in 12.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>(2)</font></p> </td>
        <td  valign=top style='padding:0in 0in 12.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Includes 47,253 shares held in joint tenancy with Reporting Persons&#146; spouse, 23,626.5 of which the Reporting Person disclaims beneficial ownership of.  Also includes 35,125 shares that are subject to stock options granted by the Company that are exercisable on March 31, 2005 or which became exercisable within 60 days thereafter.</font></p> </td> </tr>
    <tr >
        <td width="48" valign=top style='padding:0in 0in 12.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>3)</font></p> </td>
        <td  valign=top style='padding:0in 0in 12.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Includes 200 shares held as custodian for the Reporting Person&#146;s children, all of which the Reporting Person disclaims beneficial ownership of.  </font></p> </td> </tr>
    <tr >
        <td width="48" valign=top style='padding:0in 0in 12.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>(4)</font></p> </td>
        <td  valign=top style='padding:0in 0in 12.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Includes 25,252 shares held in joint tenancy with the Reporting Person&#146;s spouse, 12,626 of which the Reporting Person disclaims beneficial ownership of.  Also includes 35,125 shares that are subject to stock options granted by the Company that are exercisable on March 31, 2005 or which became exercisable within 60 days thereafter.</font></p> </td> </tr>
    <tr >
        <td width="48" valign=top style='padding:0in 0in 12.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>(5)</font></p> </td>
        <td  valign=top style='padding:0in 0in 12.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Includes 30,800 shares that are subject to stock options granted by the Company that are exercisable on March 31, 2005 or which became exercisable within 60 days thereafter.</font></p> </td> </tr>
    <tr >
        <td width="48" valign=top style='padding:0in 0in 12.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>(6)</font></p> </td>
        <td  valign=top style='padding:0in 0in 12.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Includes 1,000 shares held in joint tenancy with Reporting Person&#146;s spouse, 500 of which the Reporting Person disclaims beneficial ownership of.  Also includes 6,000 shares that are subject to stock options </font></p> </td> </tr></table>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:0.5in;text-align:justify;'><font size=2>&nbsp;</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="28" style='margin-left:231.0pt;border-collapse:collapse'>
    <tr >
        <td width="28" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>5</font></p> </td> </tr></table>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:0.5in;text-align:justify;'><font size=2>&nbsp;</font></p>
<br>
<HR noshade align="center" width="100%" size="2">
<p style='page-break-before:always'></p>
<pAGE>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:12pt; margin-top:0pt; margin-left:0.5in;text-align:justify;'><font size=2>granted by the Company that are exercisable on March 31, 2005 or which became exercisable within 60 days thereafter.</font></p>


<table  border="0" cellspacing=0 cellpadding=0 style='border-collapse:collapse'>
    <tr >
        <td width="48" valign=top style='padding:0in 0in 12.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>(7)</font></p> </td>
        <td  valign=top style='padding:0in 0in 12.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Includes 15,526 shares held in a trust of which the Reporting Person is trustee.  Also includes 9,000 shares that are subject to stock options granted by the Company that are exercisable on March 31, 2005 or which became exercisable within 60 days thereafter.</font></p> </td> </tr>
    <tr >
        <td width="48" valign=top style='padding:0in 0in 12.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>(8)</font></p> </td>
        <td  valign=top style='padding:0in 0in 12.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Includes 4,000 shares held in a trust of which the Reporting Person is trustee.  Also includes 9,000 shares that are subject to stock options granted by the Company that are exercisable on March 31, 2005 or which became exercisable within 60 days thereafter.</font></p> </td> </tr>
    <tr >
        <td width="48" valign=top style='padding:0in 0in 12.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>(9)</font></p> </td>
        <td  valign=top style='padding:0in 0in 12.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Includes 9,750 shares that are subject to stock options granted by the Company that are exercisable on March 31, 2005 or which became exercisable within 60 days thereafter. </font></p> </td> </tr>
    <tr >
        <td width="48" valign=top style='padding:0in 0in 12.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>(10)</font></p> </td>
        <td  valign=top style='padding:0in 0in 12.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Includes 4,375 shares held in a trust of which the Reporting Person is trustee.  Also includes 4,000 shares that are subject to stock options granted by the Company that are exercisable on March 31, 2005 or which became exercisable within 60 days thereafter. </font></p> </td> </tr>
    <tr >
        <td width="48" valign=top style='padding:0in 0in 12.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>11)</font></p> </td>
        <td  valign=top style='padding:0in 0in 12.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Includes 6,950 shares that are subject to stock options granted by the Company that are exercisable on March 31, 2005 or which became exercisable within 60 days thereafter. </font></p> </td> </tr></table>

<p style=' margin-bottom:12pt; margin-top:0pt; margin-left:0.5in; text-indent:-0.5in;text-align:center;'><b><font SIZE=2>NOMINEES FOR ELECTION AS DIRECTORS</font></b></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>Seven directors are to be elected at the meeting to hold office until the annual meeting of stockholders in 2005 and until their respective successors are elected and qualified.  All of the nominees were previously elected directors by the stockholders.</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="100%" style='border-collapse:collapse'>
    <tr style='page-break-inside:avoid'>
        <td width="181" valign=bottom style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:center;margin-top:2.0pt;margin-bottom:2.0pt'><u><b><font size=2>Name</font></b></u><b><u></u></b></p>  </td>
        <td width="306" valign=bottom style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:center;margin-top:2.0pt;margin-bottom:2.0pt'><b><font size=2>Offices and Positions, if any,</font></b><br>  <u><b><font size=2>held with the Company; Age</font></b></u><b></b></p>  </td>
        <td width="151" valign=bottom style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:center;margin-top:2.0pt;margin-bottom:2.0pt'><b><font size=2>First Became a Director of the Company</font></b><br>  <u><b><font size=2>or a Predecessor</font></b></u><b></b></p>  </td> </tr>
    <tr style='page-break-inside:avoid'>
        <td width="181" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p>  </td>
        <td width="306" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p>  </td>
        <td width="151" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p>  </td> </tr>
    <tr style='page-break-inside:avoid'>
        <td width="181" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:left;margin-top:2.0pt;margin-bottom:2.0pt'><font size=2>David Unger</font></p> </td>
        <td width="306" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:left;margin-top:2.0pt;margin-bottom:2.0pt'><font size=2>Director, Chairman of the Board and Chief Executive Officer of the Company; Age 70</font></p> </td>
        <td width="151" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:center;margin-top:2.0pt;margin-bottom:2.0pt'><font size=2>1989</font></p> </td> </tr>
    <tr style='page-break-inside:avoid'>
        <td width="181" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:left;margin-top:2.0pt;margin-bottom:2.0pt'><font size=2>Henry M. Mautner</font></p> </td>
        <td width="306" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:left;margin-top:2.0pt;margin-bottom:2.0pt'><font size=2>Director and Vice Chairman of the Board of the Company; Age 78</font></p> </td>
        <td width="151" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:center;margin-top:2.0pt;margin-bottom:2.0pt'><font size=2>1989</font></p> </td> </tr>
    <tr style='page-break-inside:avoid'>
        <td width="181" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:left;margin-top:2.0pt;margin-bottom:2.0pt'><font size=2>Bradley E. Mautner</font></p> </td>
        <td width="306" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:left;margin-top:2.0pt;margin-bottom:2.0pt'><font size=2>Director, President and Chief Operating Officer of the Company; Age 49</font></p> </td>
        <td width="151" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:center;margin-top:2.0pt;margin-bottom:2.0pt'><font size=2>1995</font></p> </td> </tr>
    <tr style='page-break-inside:avoid'>
        <td width="181" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:left;margin-top:2.0pt;margin-bottom:2.0pt'><font size=2>Arnold F. Brookstone</font></p> </td>
        <td width="306" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:left;margin-top:2.0pt;margin-bottom:2.0pt'><font size=2>Director of the Company; Age 75</font></p> </td>
        <td width="151" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:center;margin-top:2.0pt;margin-bottom:2.0pt'><font size=2>1990</font></p> </td> </tr>
    <tr style='page-break-inside:avoid'>
        <td width="181" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:left;margin-top:2.0pt;margin-bottom:2.0pt'><font size=2>Eugene Miller</font></p> </td>
        <td width="306" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:left;margin-top:2.0pt;margin-bottom:2.0pt'><font size=2>Director of the Company; Age 79</font></p> </td>
        <td width="151" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:center;margin-top:2.0pt;margin-bottom:2.0pt'><font size=2>1990</font></p> </td> </tr>
    <tr style='page-break-inside:avoid'>
        <td width="181" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:left;margin-top:2.0pt;margin-bottom:2.0pt'><font size=2>Stephen B. Schwartz</font></p> </td>
        <td width="306" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:left;margin-top:2.0pt;margin-bottom:2.0pt'><font size=2>Director of the Company; Age 70</font></p> </td>
        <td width="151" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:center;margin-top:2.0pt;margin-bottom:2.0pt'><font size=2>1995</font></p> </td> </tr>
    <tr style='page-break-inside:avoid'>
        <td width="181" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:left;margin-top:2.0pt;margin-bottom:2.0pt'><font size=2>Dennis Kessler</font></p> </td>
        <td width="306" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:left;margin-top:2.0pt;margin-bottom:2.0pt'><font size=2>Director of the Company; Age 66</font></p> </td>
        <td width="151" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:center;margin-top:2.0pt;margin-bottom:2.0pt'><font size=2>1998</font></p> </td> </tr></table>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font 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 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 and Chief Executive Officer.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


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            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>6</font></p> </td> </tr></table>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>
<br>
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<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font 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 style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font 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. Since November 17, 2000, he served as Chief Executive Officer of New Midwesco.    Bradley E. Mautner is the son of Henry M. Mautner.</font></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>Arnold F. Brookstone served as Executive Vice President and Chief Financial and Planning Officer of Stone Container Corporation (subsequently merged into Smurfit - Stone Container Corporation) until his retirement on January 31, 1996.  During the past five years he has served as an independent director of a number of public and privately-held companies.  He currently serves as a director of a number of privately-held companies.</font></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>Eugene Miller served as Vice Chairman of the Board of Directors and Chief Financial Officer of USG Corporation, a building materials holding company, from March 1987 until his retirement as of May 31, 1991.  Mr. Miller is currently Executive-in-Residence and Adjunct Professor of Florida Atlantic University.  Mr. Miller serves as a director of several privately-held companies.</font></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>Stephen B. Schwartz served as a senior vice president of IBM Corporation from 1990 until his retirement in 1992.  From 1957 to 1990, Mr. Schwartz served in various capacities for IBM Corporation.  </font></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>Dennis Kessler has been President of Kessler Management Consulting, LLC since February 1998.  Prior to February 1998, Mr. Kessler was Co-President of Fel-Pro Incorporated, which manufactured and distributed gaskets, engine parts and industrial chemicals.  Mr. Kessler had served in various capacities with Fel-Pro since 1964.  Mr. Kessler is currently a director of Universal Automotive Industries, Inc., a manufacturer and distributor of brake rotors, drums, disc brake pads, relined brake shoes, wheel cylinders and brake hoses for the automotive aftermarket.  He also serves as a director of a privately held company.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:12pt; margin-top:12pt;text-align:center;'><b><font SIZE=2>CORPORATE GOVERNANCE AND THE BOARD OF DIRECTORS</font></b></p>

<p style=' margin-bottom:12pt; margin-top:0pt;text-align:justify;'><b><font size=2>Director Independence</font></b></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>The Company&#146;s Board of Directors consists of seven directors.  The Board of Directors has determined that four of the directors are &#147;independent directors&#148; within the meaning of the Nasdaq Stock Market rules.  The other three directors, David Unger, Henry&nbsp;M. Mautner and Bradley&nbsp;E. Mautner, are employees of the Company and do not meet the definition of &#147;independent&#148; under the Nasdaq rules.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


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            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>7</font></p> </td> </tr></table>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>
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<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:12pt; margin-top:0pt;text-align:justify;'><b><font size=2>Board of Directors&#146; Meetings and Committees</font></b></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>The Board of Directors held four meetings during 2004.  The Board of Directors has three standing committees:  the Committee of Independent Directors, the Compensation Committee and the Audit Committee.</font></p>

<p style=' margin-bottom:12pt; margin-top:0pt;text-align:justify;'><i><font size=2>Committee of Independent Directors</font></i></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>The Committee of Independent Directors is comprised of Eugene Miller (Chairman), Arnold&nbsp;F. Brookstone, Stephen&nbsp;B. Schwartz, and Dennis Kessler.  The Committee of Independent Directors did not hold a meeting during 2004.  Until 2004, the primary function of the Committee of Independent Directors was to determine grants under the Company&#146;s Stock Option Plan, which expired in 2003.</font></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>The Company does not have a standing nominating committee.  Historically, nominations for seats on the Board of Directors have been determined by the whole Board of Directors.  In 2004, however, the Board resolved that the Committee of Independent Directors shall perform the function of a nominating committee, as permitted by the Marketplace Rules of the Nasdaq Stock Market.  The Board believes that, in light of the size of the Company and the Board and the composition of the Board, creation of a committee solely for this purpose is neither necessary nor an efficient use of resources, and that vesting the nominating process in the Committee of Independent Directors achieves the same benefits as establishing a separate standing nominating committee.  The Committee of Independent Directors does not have a charter, but it has adopted resolutions addressing the nominations process and
related matters as required under the federal securities laws and the Marketplace Rules of the Nasdaq Stock Market.</font><b><font size=2> </font></b></p>

<p style=' margin-bottom:12pt; margin-top:0pt;text-align:justify;'><i><font size=2>Nominating Process and Stockholder Recommendations</font></i></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>The Committee of Independent Directors identifies the attributes of the Board&#146;s incumbent members believed to contribute to the work of the Board and its committees, including leadership, accomplishments, experience, skills, diversity, integrity and commitment to Board duties.  When a position on the Board of Directors becomes vacant, or if the number of the members of the Board of Directors is being increased, the Committee of Independent Directors will review these attributes of the incumbent members and determine the attributes that, if possessed by the new board member, would likely result in a significant contribution to the Board of Directors.  People then recommended to the Committee of Independent Directors for consideration as nominees for vacant or new Board positions will then be evaluated with respect to the attributes determined by the Committee of Independent Directors
to be optimal for the vacant or new position.  Following the evaluation, which may include interviews or such other procedures the Committee of Independent Directors deems advisable, the Committee of Independent Directors will make a recommendation to the Board regarding a candidate either to be nominated for election at the next annual meeting of stockholders or elected by the Board between such meetings.</font></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>Recommendations for potential nominees may come from many sources, including members of the Board, executive officers, stockholders, self-recommendations, members of the communities the Company serves or search firms.  All persons recommended to the Board or the Committee of Independent Directors for a vacant or new Board position will be given equal consideration regardless of the source of the recommendation. </font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


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            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>8</font></p> </td> </tr></table>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>
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<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>Any stockholder wishing to make a recommendation for a person to be considered by the Committee of Independent Directors pursuant to the process described above as a potential nominee to the Board of Directors should direct the recommendation to the Committee of Independent Directors in care of the Secretary of the Company at the following address:  Corporate Secretary, MFRI, Inc., 7720 Lehigh Avenue, Niles, Illinois 60714.</font></p>

<p style=' margin-bottom:12pt; margin-top:0pt;text-align:justify;'><i><font size=2>Compensation Committee</font></i></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>The Compensation Committee, consisting of Stephen B. Schwartz (Chairman), Arnold F. Brookstone, Eugene Miller, and Dennis Kessler, reviews the compensation paid to the officers of the Company, reports to the stockholders with respect to the compensation paid to the officers of the Company, approves material departures from the Company&#146;s past compensation policies, determines the optionees and grant amounts under the Company&#146;s 2004 Stock Incentive Plan and makes recommendations to the Board with respect to the Company&#146;s compensation policies.  All of the four members of the Compensation Committee are &#147;independent&#148; as defined in the Marketplace Rules of the Nasdaq Stock Market.  The Compensation Committee held two</font><b><font size=2> </font></b><font size=2>meetings during 2004.  </font></p>

<p style=' margin-bottom:12pt; margin-top:0pt;text-align:justify;'><i><font size=2>Audit Committee</font></i></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>The Audit Committee consists of Arnold F. Brookstone (Chairman), Dennis Kessler (Vice Chairman), Eugene Miller, and Stephen B. Schwartz. The Board of Directors has determined that all members of the Audit Committee are &#147;independent&#148; as that term is defined in the listing standards of the Nasdaq Stock Market.  The Board of Directors has also determined that at least one of the members of the Audit Committee, including its Chairman, Arnold&nbsp;F. Brookstone, qualify as &#147;audit committee financial experts&#148; as defined in Item&nbsp;401(h) of Regulation&nbsp;S-K.   During 2004, the Audit Committee held twelve meetings.  </font></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>The Board of Directors has adopted and approved a charter for the Audit Committee.  Under the charter, the Audit Committee&#146;s responsibilities include, among other things:</font></p>


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            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=4><b>&#149;</b></font></p> </td>
        <td  valign=top style='padding:0in 0in 6.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Selection and discharge of the independent auditors and approving the compensation of the independent auditors;</font></p> </td> </tr>
    <tr >
        <td width="48" valign=top style='padding:0in 0in 6.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=4><b>&#149;</b></font></p> </td>
        <td  valign=top style='padding:0in 0in 6.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Reviewing independence with the independent auditors periodically, no less frequently than annually, including confirmation that no prohibited services were provided by the independent auditors or their affiliates, and obtaining on an annual basis written confirmation of the independence of the independent auditors;</font></p> </td> </tr>
    <tr >
        <td width="48" valign=top style='padding:0in 0in 6.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=4><b>&#149;</b></font></p> </td>
        <td  valign=top style='padding:0in 0in 6.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Considering the results of the review of the interim financial statements by the independent auditors;</font></p> </td> </tr>
    <tr >
        <td width="48" valign=top style='padding:0in 0in 6.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=4><b>&#149;</b></font></p> </td>
        <td  valign=top style='padding:0in 0in 6.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Reviewing the Company&#146;s compliance with applicable accounting and financial reporting rules;</font></p> </td> </tr>
    <tr >
        <td width="48" valign=top style='padding:0in 0in 6.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=4><b>&#149;</b></font></p> </td>
        <td  valign=top style='padding:0in 0in 6.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Considering and reviewing with management and with the independent auditors the adequacy of the Company&#146;s internal controls, including computerized information system controls and security;</font></p> </td> </tr>
    <tr >
        <td width="48" valign=top style='padding:0in 0in 6.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=4><b>&#149;</b></font></p> </td>
        <td  valign=top style='padding:0in 0in 6.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Considering, in consultation with the independent auditors, the audit scope and plan of the independent auditors;</font></p> </td> </tr></table>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


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            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>9</font></p> </td> </tr></table>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>
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<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


<table  border="0" cellspacing=0 cellpadding=0 style='margin-left:.5in;border-collapse:collapse'>
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        <td width="48" valign=top style='padding:0in 0in 6.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=4><b>&#149;</b></font></p> </td>
        <td  valign=top style='padding:0in 0in 6.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Reviewing with management and the independent auditors the results of annual audits and related matters;</font></p> </td> </tr>
    <tr >
        <td width="48" valign=top style='padding:0in 0in 6.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=4><b>&#149;</b></font></p> </td>
        <td  valign=top style='padding:0in 0in 6.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Reviewing with the independent auditors any impending changes in accounting and financial reporting rules and the expected impact of such changes on the Company; and</font></p> </td> </tr>
    <tr >
        <td width="48" valign=top style='padding:0in 0in 6.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=4><b>&#149;</b></font></p> </td>
        <td  valign=top style='padding:0in 0in 6.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Conducting or authorizing investigations into any matters within the Audit Committee&#146;s scope of responsibilities.</font></p> </td> </tr></table>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>The Board of Directors of the Company adopted an Audit Committee Charter in 2000 and adopted amendments to it in 2002 and 2004.  A copy of the Second Amended and Restated Audit Committee Charter was included as Appendix A to the Proxy Statement for the Company&#146;s 2004 annual meeting of stockholders.</font></p>

<p style=' margin-bottom:12pt; margin-top:0pt;text-align:justify;'><b><font size=2>Compensation of Directors; Indemnification</font></b></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>Directors who are not employees of the Company or a parent or subsidiary of the Company are compensated by a quarterly fee of $2,500, a fee of $2,000 for each day of attendance at Board meetings, $1,000 for attendance at each Audit Committee meeting and a $200 fixed fee per hour for engagement in any other activity on behalf of the Company authorized by the Board of Directors and are reimbursed for expenses.  The Audit Committee Chairman also receives a quarterly fee of $750 in addition to the compensation described above.</font></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>Options under the Company&#146;s 2001 Independent Directors Stock Option Plan (the &#147;2001 Directors Plan&#148;) are to be granted as follows: (i)&nbsp;an option to purchase 10,000 shares will be granted upon an eligible director&#146;s first election as a director of the Company; (ii)&nbsp;an option to purchase 1,000 shares of the Company&#146;s common stock will be granted automatically to eligible directors upon each such date as such eligible director is re-elected as a director of the Company commencing with the annual meeting for the year 2002; (iii)&nbsp;an option to purchase 1,000 shares of the Company&#146;s Common Stock was granted to each eligible director on December 31, 2001; and (iv)&nbsp;the Board of Directors shall have the discretion to make additional option grants to eligible directors from time to time as the Board of Directors deems necessary or desirable.
Authority to grant such options expires on March 31, 2011. The aggregate number of shares which may be sold pursuant to the 2001 Directors Plan may not exceed 100,000.</font></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>The Company has entered into indemnification agreements with each person who is currently a member of the Board of Directors of the Company and expects to enter into such agreements with persons who may in the future become directors of the Company.  In general, such agreements provide for indemnification against any and all expenses incurred in connection with, as well as any and all judgments, fines, and amounts paid in settlement resulting from, any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative, by reason of the fact that such director is or was a director, officer, employee or agent of the Company, or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, or other enterprise.</font></p>

<p style=' margin-bottom:12pt; margin-top:0pt;text-align:justify;'><b><font size=2>Related-Party Transactions</font></b></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>The Company provides certain services and facilities to companies primarily owned by Messrs. Unger and H. Mautner and those companies provide certain services to the Company, each at cost, pursuant to a Services Agreement.  Any material change to the terms of the Services Agreement must be approved by a majority of the directors, including a majority of the </font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="36" style='margin-left:228.0pt;border-collapse:collapse'>
    <tr >
        <td width="36" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>10</font></p> </td> </tr></table>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>
<br>
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<pAGE>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:12pt; margin-top:0pt;text-align:justify;'><font size=2>independent directors.  During 2004, the Company received $140,000 and paid $147,000 under the Services Agreement.</font></p>

<p style=' margin-bottom:12pt; margin-top:0pt;text-align:justify;'><b><font size=2>Board Attendance at Annual Meetings</font></b></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>The Company desires, but does not require, that all directors attend the Company&#146;s annual meetings of stockholders.  All of the Company&#146;s directors attended the Company&#146;s annual meeting of stockholders held in June 2004.</font></p>

<p style=' margin-bottom:12pt; margin-top:0pt;text-align:justify;'><b><font size=2>Code of Conduct</font></b></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>The Company has adopted a Code of Conduct which is applicable to all employees of the Company, including the Chief Executive Officer and Chief Financial Officer, and to the Company&#146;s Board of Directors.  The Code of Conduct is publicly available on the Company&#146;s website at </font><i><font size=2>www.mfri.com</font></i><font size=2>.</font></p>

<p style=' margin-bottom:12pt; margin-top:0pt;text-align:justify;'><b><font size=2>Stockholder Communication with the Board of Directors</font></b></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>Stockholders may communicate with the Board by submitting their communications in writing, addressed to the Board as a whole or, at the election of the stockholder, to one or more specific directors, in care of the Secretary of the Company to:  Corporate Secretary, MFRI, Inc., 7720 Lehigh Avenue, Niles, Illinois 60714.  Stockholders also have the opportunity to communicate with Board members at the annual meeting.</font></p>

<p style=' margin-bottom:6pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>The Audit Committee of the Board of Directors has established procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls, or auditing matters.  Stockholders who wish to submit a complaint under these procedures should submit the complaint in writing to:  Ethics Compliance Officer, MFRI, Inc., 7720 Lehigh Avenue, Niles, Illinois 60714.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:12pt; margin-top:0pt;text-align:center;'><b><font SIZE=2>REPORT OF THE AUDIT COMMITTEE</font></b></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>Included in the Company&#146;s Annual Report on Form 10-K/A for the year ended January 31, 2005 are the consolidated balance sheets of the Company and its subsidiaries as of January 31, 2005 and 2004, and the related consolidated statements of earnings, stockholders&#146; equity and cash flows for each of the three years ended January 31, 2005.  The balance sheets and  statements for the year ended January 31, 2005 are the subject of a report by Grant Thornton LLP who were engaged in December 2004 as the Company&#146;s independent auditors for the year ended January 31, 2005.  The balance sheet as of January 31, 2004 and the related consolidated statements of earnings, stockholders&#146; equity and cash flows for the years ended January 31, 2004 and January 31, 2003 are the subject of a report by Deloitte &amp; Touche LLP, who served as the Company&#146;s independent registered public
accounting firm from the year ended January 31, 1992 until December 2004.  The Audit Committee will appoint independent auditors for the year ended January 31, 2006 at a meeting held after the 2005 annual meeting of stockholders.</font></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>The Audit Committee reviewed and discussed the Audited Financial Statements with the Company&#146;s management and with the independent registered public accounting firms prior to publication and filing.  The Audit Committee has discussed with the independent registered public accounting firms, among other matters, the matters required to be discussed by Statement of Auditing Standards No. 61.  The Audit Committee has received from the independent registered public accounting firms the written disclosures and letter required by Independence </font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="36" style='margin-left:228.0pt;border-collapse:collapse'>
    <tr >
        <td width="36" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>11</font></p> </td> </tr></table>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>
<br>
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<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:12pt; margin-top:0pt;text-align:justify;'><font size=2>Standards Board Standard No. 1, and it has discussed with the independent registered public accounting firms their independence with respect to the Company.</font></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>Based upon the review and discussions referred to above, the Audit Committee recommended to the Company&#146;s Board of Directors that the Audited Financial Statements be included in the Company&#146;s Annual Report on Form 10-K/A for the year ended January 31, 2005 for filing with the Securities and Exchange Commission.</font></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>This Report of the Audit Committee shall not be deemed incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically incorporates this information by reference, and shall not otherwise be deemed to be soliciting material or deemed filed under any such acts.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:3.5in;text-align:left;'><font size=2>Arnold F. Brookstone, Chairman</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:3.5in;text-align:left;'><font size=2>Dennis Kessler, Vice Chairman</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:3.5in;text-align:left;'><font size=2>Eugene Miller</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:3.5in;text-align:left;'><font size=2>Stephen B. Schwartz</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:3.5in;text-align:left;'><i><font size=2>Members of the Audit Committee</font></i></p>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:3.5in;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'>
</p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="36" style='margin-left:228.0pt;border-collapse:collapse'>
    <tr >
        <td width="36" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>12</font></p> </td> </tr></table>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>
<br>
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<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:12pt; margin-top:0pt;text-align:center;'><b><font SIZE=2>EXECUTIVE COMPENSATION</font></b></p>

<p style=' margin-bottom:6pt; margin-top:0pt;text-align:justify;'><b><font size=2>Summary Compensation Table</font></b></p>

<p style=' margin-bottom:6pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>The following table sets forth certain information regarding compensation paid by the Company during each of the Company&#146;s last three years ended January 31, 2005 to the Company&#146;s Chief Executive Officer and to each of the four other most highly compensated executive officers who was serving as an executive officer of the Company at the end of 2004 whose salary and incentive compensation for 2004 exceeded $100,000 (the &#147;Named Executive Officers&#148;).</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="111%" style='margin-left:0pt;border-collapse:collapse'>
    <tr style='page-break-inside:avoid'>
        <td width="168" rowspan=2 valign=bottom >
            <p style='margin-left:0in;text-indent:0pt;text-align:center;margin-top:2.0pt;margin-bottom:2.0pt'><u><b><font size=2>Name and Principal Position</font></b></u><b><u></u></b></p>  </td>
        <td width="48" valign=bottom >
            <p style='margin-left:0in;text-indent:0pt;text-align:center;margin-top:2.0pt;margin-bottom:2.0pt'><b>&nbsp;</b></p>  </td>
        <td  colspan="3" valign=bottom style='  border-bottom:solid black 1.0pt;  '>
            <p style='margin-left:0in;text-indent:0pt;text-align:center;margin-top:2.0pt;margin-bottom:2.0pt'><b><font size=2>Annual Compensation</font></b><b></b></p>  </td>
        <td width="72" valign=bottom >
            <p style='margin-left:0in;text-indent:0pt;text-align:center;margin-top:2.0pt;margin-bottom:2.0pt'><font size=1>&nbsp;</font></p>  </td>
        <td width="98" valign=bottom style='border-bottom:  solid black 1.0pt;  '>
            <p style='margin-left:0in;text-indent:0pt;text-align:center;margin-top:2.0pt;margin-bottom:2.0pt'><b><font size=2>Long-Term Compensation Awards</font></b><b></b></p>  </td>
        <td width="72" valign=bottom >
            <p style='margin-left:0in;text-indent:0pt;text-align:center;margin-top:2.0pt;margin-bottom:2.0pt'><b>&nbsp;</b></p>  </td> </tr>
    <tr style='page-break-inside:avoid'>
        <td width="48" valign=bottom >
            <p style='margin-left:0in;text-indent:0pt;text-align:center;margin-top:2.0pt;margin-bottom:2.0pt'><u><b><font size=2>Year</font></b></u><b><u></u></b></p>  </td>
        <td width="80" valign=bottom >
            <p style='margin-left:0in;text-indent:0pt;text-align:center;margin-top:2.0pt;margin-bottom:2.0pt'><u><b><font size=2>Salary</font></b></u><b><u></u></b></p>  </td>
        <td width="85" valign=bottom >
            <p style='margin-left:0in;text-indent:0pt;text-align:center;margin-top:2.0pt;margin-bottom:2.0pt'><b><font size=2>Incentive </font></b><u><b><font size=2>Compensation</font></b></u><b></b></p>  </td>
        <td width="75" valign=bottom >
            <p style='margin-left:0in;text-indent:0pt;text-align:center;margin-top:2.0pt;margin-bottom:2.0pt'><u><b><font size=2>Other</font><sup><font size=2>(1)</font></sup></b></u><b><u></u></b></p>  </td>
        <td width="72" valign=bottom >
            <p style='margin-left:0in;text-indent:0pt;text-align:center;margin-top:2.0pt;margin-bottom:2.0pt'><b><font size=2>Stock Options </font></b><u><b><font size=2>Exercised</font></b></u><b></b></p>  </td>
        <td width="98" valign=bottom >
            <p style='margin-left:0in;text-indent:0pt;text-align:center;margin-top:2.0pt;margin-bottom:2.0pt'><b><font size=2>Securities Underlying </font></b><u><b><font size=2>Options/SARs(#)</font></b></u><b></b></p>  </td>
        <td width="72" valign=bottom >
            <p style='margin-left:0in;text-indent:0pt;text-align:center;margin-top:2.0pt;margin-bottom:2.0pt'><b><font size=2>All Other </font></b><u><b><font size=2>Comp.</font><sup><font size=2>(2)</font></sup></b></u><b></b></p>  </td> </tr>
    <tr style='page-break-inside:avoid'>
        <td width="168" valign=top >
            <p style='margin-left:.15in;text-indent:-.15in;text-align:left;margin-top:3.0pt;margin-bottom:3.0pt'><font size=2>David Unger</font><br> <font size=2>Chairman and Chief Executive Officer</font></p> </td>
        <td width="48" valign=top >
            <p style='margin-left:0in;text-indent:0pt;text-align:center;margin-top:3.0pt;margin-bottom:3.0pt'><font size=2>2004</font><br> <font size=2>2003</font><br> <font size=2>2002</font></p> </td>
        <td width="80" valign=top >
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:3.0pt;margin-bottom:3.0pt'><font size=2>$240,000</font><br> <font size=2>230,000</font><br> <font size=2>215,000</font></p> </td>
        <td width="85" valign=top >
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:3.0pt;margin-bottom:3.0pt'><font size=2>$80,100</font><br> <font size=2>0</font><br> <font size=2>0</font></p> </td>
        <td width="75" valign=top >
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:3.0pt;margin-bottom:3.0pt'><font size=2>$30,900</font><br> <font size=2>30,200</font><br> <font size=2>3,200</font></p> </td>
        <td width="72" valign=top >
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:3.0pt;margin-bottom:3.0pt'><font size=2>$0</font><br> <font size=2>0</font><br> <font size=2>0</font></p> </td>
        <td width="98" valign=top >
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:3.0pt;margin-bottom:3.0pt'><font size=2>0</font><br> <font size=2>3,500</font><br> <font size=2>4,000</font></p> </td>
        <td width="72" valign=top >
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:3.0pt;margin-bottom:3.0pt'><font size=2>$          0</font><br> <font size=2>0</font><br> <font size=2>20,000</font></p> </td> </tr>
    <tr style='page-break-inside:avoid'>
        <td width="168" valign=top >
            <p style='margin-left:.15in;text-indent:-.15in;text-align:left;margin-top:3.0pt;margin-bottom:3.0pt'><font size=2>Henry M. Mautner</font><br> <font size=2>Vice Chairman</font></p> </td>
        <td width="48" valign=top >
            <p style='margin-left:0in;text-indent:0pt;text-align:center;margin-top:3.0pt;margin-bottom:3.0pt'><font size=2>2004</font><br> <font size=2>2003</font><br> <font size=2>2002</font></p> </td>
        <td width="80" valign=top >
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:3.0pt;margin-bottom:3.0pt'><font size=2>$180,000</font><br> <font size=2>172,500</font><br> <font size=2>161,250</font></p> </td>
        <td width="85" valign=top >
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:3.0pt;margin-bottom:3.0pt'><font size=2>$80,100</font><br> <font size=2>0</font><br> <font size=2>0</font></p> </td>
        <td width="75" valign=top >
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:3.0pt;margin-bottom:3.0pt'><font size=2>$50,000</font><br> <font size=2>23,200</font><br> <font size=2>3,200</font></p> </td>
        <td width="72" valign=top >
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:3.0pt;margin-bottom:3.0pt'><font size=2>$0</font><br> <font size=2>0</font><br> <font size=2>0</font></p> </td>
        <td width="98" valign=top >
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:3.0pt;margin-bottom:3.0pt'><font size=2>0</font><br> <font size=2>3,500</font><br> <font size=2>4,000</font></p> </td>
        <td width="72" valign=top >
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:3.0pt;margin-bottom:3.0pt'><font size=2>$          0</font><br> <font size=2>0</font><br> <font size=2>20,000</font></p> </td> </tr>
    <tr style='page-break-inside:avoid'>
        <td width="168" valign=top >
            <p style='margin-left:.15in;text-indent:-.15in;text-align:left;margin-top:3.0pt;margin-bottom:3.0pt'><font size=2>Fati A. Elgendy</font><br> <font size=2>Vice President,</font><br> <font size=2>President, Perma-Pipe, Inc.</font></p> </td>
        <td width="48" valign=top >
            <p style='margin-left:0in;text-indent:0pt;text-align:center;margin-top:3.0pt;margin-bottom:3.0pt'><font size=2>2004</font><br> <font size=2>2003</font><br> <font size=2>2002</font></p> </td>
        <td width="80" valign=top >
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:3.0pt;margin-bottom:3.0pt'><font size=2>$167,000</font><br> <font size=2>169,000</font><br> <font size=2>149,000</font></p> </td>
        <td width="85" valign=top >
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:3.0pt;margin-bottom:3.0pt'><font size=2>$213,500</font><br> <font size=2>75,000</font><br> <font size=2>201,873</font></p> </td>
        <td width="75" valign=top >
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:3.0pt;margin-bottom:3.0pt'><font size=2>$3,100</font><br> <font size=2>3,100</font><br> <font size=2>3,500</font></p> </td>
        <td width="72" valign=top >
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:3.0pt;margin-bottom:3.0pt'><font size=2>$92,595</font><br> <font size=2>0</font><br> <font size=2>0</font></p> </td>
        <td width="98" valign=top >
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:3.0pt;margin-bottom:3.0pt'><font size=2>0</font><br> <font size=2>3,500</font><br> <font size=2>4,000</font></p> </td>
        <td width="72" valign=top >
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:3.0pt;margin-bottom:3.0pt'><font size=2>$15,000</font><br> <font size=2>15,000</font><br> <font size=2>15,000</font></p> </td> </tr>
    <tr style='page-break-inside:avoid'>
        <td width="168" valign=top >
            <p style='margin-left:.15in;text-indent:-.15in;text-align:left;margin-top:3.0pt;margin-bottom:3.0pt'><font size=2>Robert A. Maffei </font><br> <font size=2>Vice President,</font><br> <font size=2>Vice President Sales, Perma-Pipe, Inc.</font></p> </td>
        <td width="48" valign=top >
            <p style='margin-left:0in;text-indent:0pt;text-align:center;margin-top:3.0pt;margin-bottom:3.0pt'><font size=2>2004</font><br> <font size=2>2003</font><br> <font size=2>2002</font></p> </td>
        <td width="80" valign=top >
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:3.0pt;margin-bottom:3.0pt'><font size=2>$110,000</font><br> <font size=2>110,000</font><br> <font size=2>110,000</font></p> </td>
        <td width="85" valign=top >
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:3.0pt;margin-bottom:3.0pt'><font size=2>$117,800</font><br> <font size=2>34,080</font><br> <font size=2>106,900</font></p> </td>
        <td width="75" valign=top >
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:3.0pt;margin-bottom:3.0pt'><font size=2>$3,070</font><br> <font size=2>3,380</font><br> <font size=2>3,150</font></p> </td>
        <td width="72" valign=top >
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:3.0pt;margin-bottom:3.0pt'><font size=2>$40,015</font><br> <font size=2>0</font><br> <font size=2>0</font></p> </td>
        <td width="98" valign=top >
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:3.0pt;margin-bottom:3.0pt'><font size=2>0</font><br> <font size=2>2,000</font><br> <font size=2>2,500</font></p> </td>
        <td width="72" valign=top >
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:3.0pt;margin-bottom:3.0pt'><font size=2>$10,000</font><br> <font size=2>10,000</font><br> <font size=2>10,000</font></p> </td> </tr>
    <tr style='page-break-inside:avoid'>
        <td width="168" valign=top >
            <p style='margin-left:.15in;text-indent:-.15in;text-align:left;margin-top:3.0pt;margin-bottom:3.0pt'><font size=2>Gene K. Ogilvie </font><br> <font size=2>Vice President</font><br> <font size=2>President, Midwesco Filter</font><br> <font size=2>Resources, Inc.</font></p> </td>
        <td width="48" valign=top >
            <p style='margin-left:0in;text-indent:0pt;text-align:center;margin-top:3.0pt;margin-bottom:3.0pt'><font size=2>2004</font><br> <font size=2>2003</font><br> <font size=2>2002</font></p> </td>
        <td width="80" valign=top >
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:3.0pt;margin-bottom:3.0pt'><font size=2>$167,000</font><br> <font size=2>159,000</font><br> <font size=2>149,000</font></p> </td>
        <td width="85" valign=top >
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:3.0pt;margin-bottom:3.0pt'><font size=2>$53,040</font><br> <font size=2>0</font><br> <font size=2>0</font></p> </td>
        <td width="75" valign=top >
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:3.0pt;margin-bottom:3.0pt'><font size=2>$3,400</font><br> <font size=2>3,100</font><br> <font size=2>1,300</font></p> </td>
        <td width="72" valign=top >
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:3.0pt;margin-bottom:3.0pt'><font size=2>$0</font><br> <font size=2>0</font><br> <font size=2>0</font></p> </td>
        <td width="98" valign=top >
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:3.0pt;margin-bottom:3.0pt'><font size=2>0</font><br> <font size=2>3,500</font><br> <font size=2>4,000</font></p> </td>
        <td width="72" valign=top >
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:3.0pt;margin-bottom:3.0pt'><font size=2>$15,000</font><br> <font size=2>15,000</font><br> <font size=2>15,000</font></p> </td> </tr></table>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


<table  border="0" cellspacing=0 cellpadding=0 style='border-collapse:collapse'>
    <tr >
        <td width="48" valign=top style='padding:0in 0in 12.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>(1)</font></p> </td>
        <td  valign=top style='padding:0in 0in 12.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Represents contributions made by the Company to the Named Executive Officer&#146;s account under the 401(k) Plan, current portion of non-qualified deferred compensation and medical payments.</font></p> </td> </tr></table>

<table border="0" cellspacing=0 cellpadding=0 width="355" style='border-collapse:collapse'>
    <tr >
        <td width="48" valign=top style='padding:0in 0in 12.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>(2)</font></p> </td>
        <td width="307" valign=top style='padding:0in 0in 12.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>Represents accrual of non-qualified deferred compensation.</font></p> </td> </tr></table>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:0.5in; text-indent:-0.5in;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:12pt; margin-top:6pt;text-align:left;'><b><font size=2>2004 Option Grants</font></b></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>No options were granted to the Named Executive Officers during 2004.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'>
</p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="36" style='margin-left:228.0pt;border-collapse:collapse'>
    <tr >
        <td width="36" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>13</font></p> </td> </tr></table>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>
<br>
<HR noshade align="center" width="100%" size="2">
<p style='page-break-before:always'></p>
<pAGE>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:6pt; margin-top:0pt;text-align:justify;'><b><font size=2>2004 Year-End Unexercised Stock Options</font></b></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>The following table sets forth information relating to stock options held by the Named Executive Officers as of January&nbsp;31, 2005.</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="89%" style='border-collapse:collapse'>
    <tr >
        <td width="154" style='padding:0in 6.95pt 0in 6.95pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:3.0pt'><b>&nbsp;</b></p> </td>
        <td  colspan="2" style='padding:0in 6.95pt 0in 6.95pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:3.0pt'><b><font size=2>Number of Securities Underlying Unexercised</font></b><br> <u><b><font size=2> Options at Fiscal Year End   </font></b></u><b></b></p> </td>
        <td  colspan="2" style='padding:0in 6.95pt 0in 6.95pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:3.0pt'><b><font size=2>Value of Unexercised</font></b><br> <b><font size=2>In-the-Money</font></b><br> <u><b><font size=2>  Options at Fiscal Year End </font></b></u><b></b></p> </td> </tr>
    <tr >
        <td width="154" valign=top style='padding:0in 6.95pt 0in 6.95pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt;line-height:10.26%'><font size=1>&nbsp;</font></p>
<p style='margin-left:0pt;text-indent:39.0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><u><b><font size=2>Name</font></b></u><b></b></p> </td>
        <td width="89" valign=top style='padding:0in 6.95pt 0in 6.95pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt;line-height:10.26%'><font size=1>&nbsp;</font></p>
<p style='margin-left:0pt;text-indent:2.25pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><u><b><font size=2>Exercisable</font></b></u><b></b></p> </td>
        <td width="100" valign=top style='padding:0in 6.95pt 0in 6.95pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt;line-height:10.26%'><font size=1>&nbsp;</font></p>
<p style='margin-left:0pt;text-indent:.75pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><u><b><font size=2>Unexercisable</font></b></u><b></b></p> </td>
        <td width="104" valign=top style='padding:0in 6.95pt 0in 6.95pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:0pt'><u><b><font size=2>Exercisable</font></b></u><b></b></p> </td>
        <td width="125" valign=top style='padding:0in 6.95pt 0in 6.95pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt;line-height:10.26%'><font size=1>&nbsp;</font></p>
<p style='margin-left:0pt;text-indent:10.5pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><u><b><font size=2>Unexercisable</font></b></u><b></b></p> </td> </tr>
    <tr >
        <td width="154" valign=top style='padding:0in 6.95pt 0in 6.95pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:left;margin-top:1.0pt;margin-bottom:1.0pt'><font size=2>David Unger</font></p> </td>
        <td width="89" valign=top style='padding:0in 6.95pt 0in 6.95pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:1.0pt;margin-bottom:1.0pt'><font size=2>35,125</font></p> </td>
        <td width="100" valign=top style='padding:0in 6.95pt 0in 6.95pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:1.0pt;margin-bottom:1.0pt'><font size=2>15,375</font></p> </td>
        <td width="104" valign=top style='padding:0in 6.95pt 0in 6.95pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:1.0pt;margin-bottom:1.0pt'><font size=2>$174,190</font></p> </td>
        <td width="125" valign=top style='padding:0in 6.95pt 0in 6.95pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:1.0pt;margin-bottom:1.0pt'><font size=2>$79,490</font></p> </td> </tr>
    <tr >
        <td width="154" valign=top style='padding:0in 6.95pt 0in 6.95pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:left;margin-top:1.0pt;margin-bottom:1.0pt'><font size=2>Henry M. Mautner</font></p> </td>
        <td width="89" valign=top style='padding:0in 6.95pt 0in 6.95pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:1.0pt;margin-bottom:1.0pt'><font size=2>35,125</font></p> </td>
        <td width="100" valign=top style='padding:0in 6.95pt 0in 6.95pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:1.0pt;margin-bottom:1.0pt'><font size=2>15,375</font></p> </td>
        <td width="104" valign=top style='padding:0in 6.95pt 0in 6.95pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:1.0pt;margin-bottom:1.0pt'><font size=2>174,190</font></p> </td>
        <td width="125" valign=top style='padding:0in 6.95pt 0in 6.95pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:1.0pt;margin-bottom:1.0pt'><font size=2>79,490</font></p> </td> </tr>
    <tr >
        <td width="154" valign=top style='padding:0in 6.95pt 0in 6.95pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:left;margin-top:1.0pt;margin-bottom:1.0pt'><font size=2>Fati A. Elgendy</font></p> </td>
        <td width="89" valign=top style='padding:0in 6.95pt 0in 6.95pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:1.0pt;margin-bottom:1.0pt'><font size=2>30,800</font></p> </td>
        <td width="100" valign=top style='padding:0in 6.95pt 0in 6.95pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:1.0pt;margin-bottom:1.0pt'><font size=2>20,000</font></p> </td>
        <td width="104" valign=top style='padding:0in 6.95pt 0in 6.95pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:1.0pt;margin-bottom:1.0pt'><font size=2>153,080</font></p> </td>
        <td width="125" valign=top style='padding:0in 6.95pt 0in 6.95pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:1.0pt;margin-bottom:1.0pt'><font size=2>102,060</font></p> </td> </tr>
    <tr >
        <td width="154" valign=top style='padding:0in 6.95pt 0in 6.95pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:left;margin-top:1.0pt;margin-bottom:1.0pt'><font size=2>Robert A. Maffei</font></p> </td>
        <td width="89" valign=top style='padding:0in 6.95pt 0in 6.95pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:1.0pt;margin-bottom:1.0pt'><font size=2>6,950</font></p> </td>
        <td width="100" valign=top style='padding:0in 6.95pt 0in 6.95pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:1.0pt;margin-bottom:1.0pt'><font size=2>7,950</font></p> </td>
        <td width="104" valign=top style='padding:0in 6.95pt 0in 6.95pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:1.0pt;margin-bottom:1.0pt'><font size=2>35,600</font></p> </td>
        <td width="125" valign=top style='padding:0in 6.95pt 0in 6.95pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:1.0pt;margin-bottom:1.0pt'><font size=2>41,450</font></p> </td> </tr>
    <tr >
        <td width="154" valign=top style='padding:0in 6.95pt 0in 6.95pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:left;margin-top:1.0pt;margin-bottom:1.0pt'><font size=2>Gene K. Ogilvie</font></p> </td>
        <td width="89" valign=top style='padding:0in 6.95pt 0in 6.95pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:1.0pt;margin-bottom:1.0pt'><font size=2>35,125</font></p> </td>
        <td width="100" valign=top style='padding:0in 6.95pt 0in 6.95pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:1.0pt;margin-bottom:1.0pt'><font size=2>15,375</font></p> </td>
        <td width="104" valign=top style='padding:0in 6.95pt 0in 6.95pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:1.0pt;margin-bottom:1.0pt'><font size=2>174,190</font></p> </td>
        <td width="125" valign=top style='padding:0in 6.95pt 0in 6.95pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:1.0pt;margin-bottom:1.0pt'><font size=2>79,490</font></p> </td> </tr></table>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><b><font size=2>Equity Compensation Plan Information</font></b></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:0.53in;text-align:justify;'><font size=2>The following table provides certain information regarding the number of shares of Common Stock to be issued upon exercise of outstanding options, warrants and rights under the Company&#146;s equity compensation plans and the weighted average exercise price and number of shares of Common Stock remaining available for issuance under those plans.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="98%" style='border-collapse:collapse'>
    <tr style='page-break-inside:avoid'>
        <td width="229" valign=bottom style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:center;margin-top:2.0pt;margin-bottom:2.0pt'><u><b><font  size=1>Plan  Category</font></b></u><b><u></u></b></p>  </td>
        <td width="136" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:center;margin-top:2.0pt;margin-bottom:2.0pt'><b><font  size=1>Number  of shares to be issued upon exercise of outstanding options, </font></b><u><b><font  size=1>warrants  and rights</font></b></u><b></b></p>  </td>
        <td width="128" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:center;margin-top:2.0pt;margin-bottom:2.0pt'><b><font  size=1>Weighted-average  exercise price of outstanding options, </font></b><u><b><font  size=1>warrants  and rights</font></b></u><b></b></p>  </td>
        <td width="138" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:center;margin-top:2.0pt;margin-bottom:2.0pt'><b><font  size=1>Number  of shares available for future issuance under equity </font></b><u><b><font  size=1>compensation  plans(1)</font></b></u><b></b></p>  </td> </tr>
    <tr style='page-break-inside:avoid'>
        <td width="229" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:left;margin-top:2.0pt;margin-bottom:2.0pt'><font size=2>Equity compensation plans approved by stockholders</font></p> </td>
        <td width="136" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:2.0pt;margin-bottom:2.0pt'><font size=2>688,380</font></p> </td>
        <td width="128" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:2.0pt;margin-bottom:2.0pt'><font size=2>$3.62</font></p> </td>
        <td width="138" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:2.0pt;margin-bottom:2.0pt'><font size=2>392,522</font></p> </td> </tr>
    <tr style='page-break-inside:avoid'>
        <td width="229" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:left;margin-top:2.0pt;margin-bottom:2.0pt'><font size=2>Equity compensation plans not approved by stockholders</font></p> </td>
        <td width="136" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:2.0pt;margin-bottom:2.0pt'><font size=2>0</font></p> </td>
        <td width="128" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:2.0pt;margin-bottom:2.0pt'><font SIZE=2>N/A</font></p> </td>
        <td width="138" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:2.0pt;margin-bottom:2.0pt'><font size=2>0</font></p> </td> </tr></table>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="419" style='border-collapse:collapse'>
    <tr >
        <td width="48" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>(1)</font></p> </td>
        <td width="371" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>This number excludes shares reflected in the second column of this table.</font></p> </td> </tr></table>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><b><font size=2>401(k) Plan</font></b></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:0.58in;text-align:justify;'><font size=2>The domestic employees of the Company, including the Named Executive Officers, are eligible to participate in the MFRI, Inc. Employee Savings and Protection Plan (the &#147;401(k) Plan&#148;), which is applicable to all employees except certain employees covered by collective bargaining agreement benefits. The 401(k) Plan allows employee pretax payroll contributions of up to 16% of total compensation.  The Company matches 50% of each participant's contribution, up to a maximum of 2% of each participant&#146;s salary.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><b><font size=2>Deferred Compensation Plans</font></b></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:0.58in;text-align:justify;'><font 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.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><b><font size=2>Compensation Committee Interlocks and Insider Participation</font></b></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>There are no matters related to Compensation Committee or insider participation that the Company is required to report. </font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="36" style='margin-left:228.0pt;border-collapse:collapse'>
    <tr >
        <td width="36" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>14</font></p> </td> </tr></table>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>
<br>
<HR noshade align="center" width="100%" size="2">
<p style='page-break-before:always'></p>
<pAGE>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><b><font SIZE=2>REPORT OF THE COMPENSATION COMMITTEE</font></b></p>

<p style=' margin-bottom:18pt; margin-top:0pt;text-align:center;'><b><font SIZE=2>ON EXECUTIVE COMPENSATION</font></b></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>The Company considers the following general guidelines in determining the compensation of its officers and key employees:</font></p>


<table  border="0" cellspacing=0 cellpadding=0 style='margin-left:.5in;border-collapse:collapse'>
    <tr >
        <td width="48" valign=top style='padding:0in 0in 12.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=4><b>&#149;</b></font></p> </td>
        <td  valign=top style='padding:0in 0in 12.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Salary set at levels sufficient to attract and retain employees capable of contributing materially to the Company&#146;s long-term success;</font></p> </td> </tr>
    <tr >
        <td width="48" valign=top style='padding:0in 0in 12.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=4><b>&#149;</b></font></p> </td>
        <td  valign=top style='padding:0in 0in 12.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Annual incentive compensation related to profit in excess of a threshold amount of the Company or of the Company&#146;s subsidiary in which the officer or key employee is employed;</font></p> </td> </tr></table>

<table border="0" cellspacing=0 cellpadding=0 width="311" style='margin-left:.5in;border-collapse:collapse'>
    <tr >
        <td width="48" valign=top style='padding:0in 0in 12.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=4><b>&#149;</b></font></p> </td>
        <td width="139" valign=top style='padding:0in 0in 12.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>Stock options; and</font></p> </td>
        <td  width="124">
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></td> </tr>
    <tr >
        <td width="48" valign=top style='padding:0in 0in 12.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=4><b>&#149;</b></font></p> </td>
        <td  colspan="2" valign=top style='padding:0in 0in 12.0pt 0in'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>Non-qualified deferred compensation.</font></p> </td> </tr></table>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>The Company also makes annual contributions to the accounts of eligible employees in the 401(k) Employee Savings and Protection Plan.</font></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>The Company&#146;s 2004 Stock Incentive Plan (the &#147;Plan&#148;) was adopted in order to provide officers and other key employees with long-term incentives in order to create an interest in the Company parallel to that of the Company&#146;s public stockholders and to replace previously existing stock option plans of the Company which had expired by their terms.  Option exercise prices for options granted under the Plan are no less than fair market value of the Common Stock on the date of grant.  Under the Plan, options can be granted to key employees (including officers, whether or not directors) of the Company, its subsidiaries, Midwesco, and its affiliates.  The options granted under the Plan can be exercised for periods of up to ten years from the date of grant.  Under the Plan, 250,000 shares of Common Stock of the Company are reserved for issuance upon the exercise of options
granted hereunder, which number shall be increased by the number equal to 2% of the aggregate number of shares of Common Stock outstanding as of the last day of the most recently ended fiscal year of the Company.  No shares have yet been issued pursuant to options granted under the Plan.  The Committee believes additional incentive compensation should be made available to officers and other key employees, which will increase the effectiveness of the Company&#146;s executive compensation program.</font></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>The Committee believes that the combination of salary, incentive compensation (which varies directly with the Company&#146;s operating profitability), and stock options (the ultimate value of which is determined by future share price growth), should constitute an executive compensation program which encourages enhancement of Company profitability and stockholder value.</font></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>The compensation of David Unger, Chairman of the Board and Chief Executive Officer of the Company, reflected in the Summary Compensation Table, was based on his contribution to the Company.  Mr. Unger received annual incentive compensation in 2004 as a result of the Company&#146;s pretax earnings for 2004.</font></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>The compensation of Henry M. Mautner, Vice Chairman of the Board of the Company, reflected in the Summary Compensation Table, was based on his contribution to the Company.  Mr. Mautner received annual incentive compensation in 2004 as a result of the Company&#146;s pretax earnings for 2004.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="36" style='margin-left:228.0pt;border-collapse:collapse'>
    <tr >
        <td width="36" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>15</font></p> </td> </tr></table>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>
<br>
<HR noshade align="center" width="100%" size="2">
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<pAGE>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>Fati A. Elgendy, Vice President of the Company and President of Perma-Pipe, receives annual compensation consisting of a base salary and incentive compensation.  Mr. Elgendy&#146;s incentive compensation is calculated on a basis similar to that of the Company&#146;s other officers.  Mr. Elgendy&#146;s annual incentive compensation increased in 2004 as a result of the application of the applicable incentive formulas to the actual operating results.</font></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>Robert A. Maffei, Vice President of the Company and Vice President Sales of Perma-Pipe, receives annual compensation consisting of a base salary and incentive compensation.  Mr. Maffei&#146;s incentive compensation is calculated on a basis similar to that of the Company&#146;s other officers.  Mr. Maffei&#146;s annual incentive compensation increased in 2004 as a result of the application of the applicable incentive formulas to the actual operating results.</font></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>Gene K. Ogilvie, Vice President of the Company and President of Midwesco Filter Resources, receives annual compensation consisting of a base salary and incentive compensation.  Mr. Ogilvie&#146;s incentive compensation is calculated on a basis similar to that of the Company&#146;s other officers.  Mr. Ogilvie&#146;s incentive compensation increased in 2004 as a result of the application of the applicable incentive formulas to the actual operating results.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:3.5in;text-align:left;'><font size=2>Stephen B. Schwartz, Chairman</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:3.5in;text-align:left;'><font size=2>Arnold F. Brookstone</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:3.5in;text-align:left;'><font size=2>Dennis Kessler</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:3.5in;text-align:left;'><font size=2>Eugene Miller</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:3.5in;text-align:left;'><i><font size=2>Members of the Compensation Committee</font></i></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'>
</p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="36" style='margin-left:228.0pt;border-collapse:collapse'>
    <tr >
        <td width="36" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>16</font></p> </td> </tr></table>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>
<br>
<HR noshade align="center" width="100%" size="2">
<p style='page-break-before:always'></p>
<pAGE>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:center;'><b><font SIZE=2>STOCK PRICE PERFORMANCE GRAPH</font></b></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>The Stock Price Performance Graph compares the yearly percentage change in the Company&#146;s cumulative total stockholder return on its Common Stock with the cumulative total returns of the Nasdaq Market Index (the &#147;Nasdaq Index&#148;) and the Russell 2000 Index.  The Company has selected the Russell 2000 Index, which is an index of companies with similar market capitalizations to the Company, as the most appropriate comparison because the Company has three distinctly different businesses and no industry &#147;peer&#148; group is comparable to the Company.  The comparison assumes $100.00 investments on January 31, 2000 in the Company&#146;s Common Stock, the Nasdaq Index and the Russell 2000 Index, and further assumes reinvestment of dividends.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:left;'><img src="img1.gif"><br> </p>


<table border="0" cellspacing=0 cellpadding=0 width="100%" style='border-collapse:collapse'>
    <tr style='page-break-inside:avoid'>
        <td width="157" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:1.0pt;margin-bottom:0pt;line-height:129.6%'><font size=1>&nbsp;</font></p> </td>
        <td  colspan="6" valign=top style=' border-bottom:solid black 1.0pt; padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:1.0pt;line-height:129.6%'><b><font size=2>January 31,</font></b><b></b></p> </td> </tr>
    <tr >
        <td width="157" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:2.0pt;line-height:129.6%'><font size=1>&nbsp;</font></p> </td>
        <td width="80" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:2.0pt;line-height:129.6%'><u><b><font size=2>2000</font></b></u><b><u></u></b></p> </td>
        <td width="80" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:2.0pt;line-height:129.6%'><u><b><font size=2>2001</font></b></u><b><u></u></b></p> </td>
        <td width="80" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:2.0pt;line-height:129.6%'><u><b><font size=2>2002</font></b></u><b><u></u></b></p> </td>
        <td width="80" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:2.0pt;line-height:129.6%'><u><b><font size=2>2003</font></b></u><b><u></u></b></p> </td>
        <td width="80" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:2.0pt;line-height:129.6%'><u><b><font size=2>2004</font></b></u><b><u></u></b></p> </td>
        <td width="80" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:center;margin-top:0pt;margin-bottom:2.0pt;line-height:129.6%'><u><b><font size=2>2005</font></b></u><b><u></u></b></p> </td> </tr>
    <tr >
        <td width="157" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:left;margin-top:1.0pt;margin-bottom:1.0pt;line-height:129.6%'><font size=2>MFRI, Inc.</font></p> </td>
        <td width="80" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:1.0pt;margin-bottom:1.0pt;line-height:129.6%'><font size=2>100.00</font></p> </td>
        <td width="80" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:1.0pt;margin-bottom:1.0pt;line-height:129.6%'><font size=2>61.36</font></p> </td>
        <td width="80" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:1.0pt;margin-bottom:1.0pt;line-height:129.6%'><font size=2>73.94</font></p> </td>
        <td width="80" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:1.0pt;margin-bottom:1.0pt;line-height:129.6%'><font size=2>40.48</font></p> </td>
        <td width="80" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:1.0pt;margin-bottom:1.0pt;line-height:129.6%'><font size=2>59.64</font></p> </td>
        <td width="80" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:1.0pt;margin-bottom:1.0pt;line-height:129.6%'><font size=2>193.94</font></p> </td> </tr>
    <tr >
        <td width="157" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:left;margin-top:1.0pt;margin-bottom:1.0pt;line-height:129.6%'><font size=2>Nasdaq Market Index</font></p> </td>
        <td width="80" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:1.0pt;margin-bottom:1.0pt;line-height:129.6%'><font size=2>100.00</font></p> </td>
        <td width="80" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:1.0pt;margin-bottom:1.0pt;line-height:129.6%'><font size=2>69.82</font></p> </td>
        <td width="80" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:1.0pt;margin-bottom:1.0pt;line-height:129.6%'><font size=2>44.22</font></p> </td>
        <td width="80" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:1.0pt;margin-bottom:1.0pt;line-height:129.6%'><font size=2>25.85</font></p> </td>
        <td width="80" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:1.0pt;margin-bottom:1.0pt;line-height:129.6%'><font size=2>40.80</font></p> </td>
        <td width="80" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:1.0pt;margin-bottom:1.0pt;line-height:129.6%'><font size=2>41.14</font></p> </td> </tr>
    <tr >
        <td width="157" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:left;margin-top:1.0pt;margin-bottom:1.0pt;line-height:129.6%'><font size=2>Russell 2000 Index</font></p> </td>
        <td width="80" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:1.0pt;margin-bottom:1.0pt;line-height:129.6%'><font size=2>100.00</font></p> </td>
        <td width="80" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:1.0pt;margin-bottom:1.0pt;line-height:129.6%'><font size=2>103.69</font></p> </td>
        <td width="80" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:1.0pt;margin-bottom:1.0pt;line-height:129.6%'><font size=2>99.96</font></p> </td>
        <td width="80" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:1.0pt;margin-bottom:1.0pt;line-height:129.6%'><font size=2>78.10</font></p> </td>
        <td width="80" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:1.0pt;margin-bottom:1.0pt;line-height:129.6%'><font size=2>123</font></p> </td>
        <td width="80" valign=top style='padding:0in 5.4pt 0in 5.4pt'>
            <p style='margin-left:0in;text-indent:0pt;text-align:right;margin-top:1.0pt;margin-bottom:1.0pt;line-height:129.6%'><font size=2>134.12</font></p> </td> </tr></table>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:12pt; margin-top:12pt;text-align:justify;'><b><font size=2>Section 16(a) Beneficial Ownership Reporting Compliance</font></b></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>Section 16(a) of the Securities Exchange Act of 1934 requires that the Company&#146;s directors and executive officers and persons who own more than 10% of the Company&#146;s </font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


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            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>17</font></p> </td> </tr></table>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>
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<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:12pt; margin-top:0pt;text-align:justify;'><font size=2>outstanding Common Stock report their beneficial ownership and changes in their beneficial ownership of the Company&#146;s Common Stock by filing reports with the Securities and Exchange Commission.  Based solely on the Company&#146;s review of reports filed with the Securities and Exchange Commission, no director, officer or owner of more than 10% of the Common Stock of the Company has failed to file on a timely basis a Statement of Beneficial Ownership of Securities on Form&nbsp;3, 4 or 5 during 2004.</font></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:center;'><b><font SIZE=2>INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</font></b></p>

<p style=' margin-bottom:6pt; margin-top:0pt;text-align:justify;'><b><font size=2>Change in Independent Registered Public Accounting Firm</font></b></p>

<p style=' margin-bottom:6pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>On December 16, 2004, the Company&#146;s Audit Committee dismissed Deloitte &amp; Touche LLP, the member firms of Deloitte Touche Tohmatsu, and their respective affiliates (&#147;Deloitte&#148;), as the Company&#146;s registered independent public accounting firm for its fiscal year ended January 31, 2005.  </font></p>

<p style=' margin-bottom:6pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>Deloitte&#146;s reports on the financial statements for the years ended January 31, 2004 and 2003 did not contain an adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty or audit scope In connection with their audits for the years ended January 31, 2004 and January 31, 2003 and through December 16, 2004, there were no disagreements with Deloitte on any matter of accounting principles or practices, financial statement disclosures, or auditing scope or procedure which disagreement if not resolved to Deloitte&#146;s satisfaction would have caused them to make reference to the subject matter of the disagreement in connection with their report on the Company&#146;s financial statements for such years, and there were no reportable events as defined in Item 304(a)(1)(v) of Regulation S-K promulgated by the Securities and Exchange Commission
(&#147;Regulation S-K&#148;). </font></p>

<p style=' margin-bottom:6pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>On December 2, 2004, the Company&#146;s Audit Committee engaged Grant Thornton LLP (&#147;Grant Thornton&#148;) to be the independent registered public accounting firm for the Company commencing with the audit for its fiscal year ended January 31, 2005.</font></p>

<p style=' margin-bottom:6pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>During the two fiscal years ended January 31, 2004 and January 31, 2003 and during the fiscal year ended January 31, 2005 prior to Grant Thornton&#146;s engagement, the Company did not consult Grant Thornton with respect to the application of accounting principles as to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company&#146;s financial statements, or any other matters or reportable events as set forth in Items 304(a)(2)(i) and (ii) of Regulation S-K.</font></p>

<p style=' margin-bottom:6pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>In accordance with the rules of the Securities and Exchange Commission, the Company provided a copy of the statements in this section to each of Deloitte and Grant Thornton in order to give them an opportunity to consider whether either believed that the statements made in this section with respect to them were incorrect or incomplete.  The Company did not receive from either Deloitte or Grant Thornton a statement expressing a belief that the statements made in this section with respect to such accounting firm were incorrect or incomplete.</font></p>

<p style=' margin-bottom:6pt; margin-top:0pt;text-align:justify;'><b><font size=2>Audit Fees</font></b></p>

<p style=' margin-bottom:6pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>The aggregate fees billed by Grant Thornton LLP, and their respective affiliates (&#147;Grant Thornton&#148;), for professional services rendered for the audit of the Company&#146;s annual consolidated financial statements for the fiscal year ended January 31, 2005 was $315,300.</font></p>

<p style=' margin-bottom:6pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>The aggregate fees billed by Deloitte, for professional services rendered for the audits of the Company&#146;s annual consolidated financial statements for the fiscal years ended January 31, 2005 and January 31, 2004 and for the reviews of the consolidated financial statements included in the Company&#146;s Quarterly Reports on Form 10-Q were $127,300 and $268,9007, respectively.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


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            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>18</font></p> </td> </tr></table>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>
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<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:6pt; margin-top:0pt;text-align:justify;'><b><font size=2>Audit-Related Fees</font></b></p>

<p style=' margin-bottom:6pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>There were no fees billed by Grant Thornton for assurance and related services that are reasonably related to the performance of the audit of the Company&#146;s financial statements for the fiscal year ended January&nbsp;31, 2005 which are not reported under the heading &#147;Audit Fees.&#148;</font></p>

<p style=' margin-bottom:6pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>The aggregate fees billed by Deloitte for assurance and related services that are reasonably related to the performance of the audit or the review of the Company&#146;s financial statements for the fiscal years ended January&nbsp;31, 2005 and January&nbsp;31, 2004 which are not reported under the heading &#147;Audit Fees&#148; above were $0 and $3,200, respectively.</font></p>

<p style=' margin-bottom:6pt; margin-top:0pt;text-align:justify;'><b><font size=2>Tax Fees</font></b></p>

<p style=' margin-bottom:6pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>The aggregate fees billed by Grant Thornton for professional services rendered for tax compliance, tax advice and tax planning for the fiscal year ended January&nbsp;31, 2005 was $48,200.</font></p>

<p style=' margin-bottom:6pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>The aggregate fees billed by Deloitte for professional services rendered for tax compliance, tax advice and tax planning for the fiscal years ended January&nbsp;31, 2005 and January&nbsp;31, 2004 were $79,600 and $95,600, respectively.</font></p>

<p style=' margin-bottom:6pt; margin-top:0pt;text-align:justify;'><b><font size=2>All Other Fees</font></b></p>

<p style=' margin-bottom:6pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>No fees were billed by Grant Thornton for professional services other than the services described above for the fiscal year ended January 31, 2005.</font></p>

<p style=' margin-bottom:6pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>No fees were billed by Deloitte for professional services other than the services described above for the fiscal years ended January 31, 2005 and January&nbsp;31, 2004.</font></p>

<p style=' margin-bottom:6pt; margin-top:0pt;text-align:justify;'><b><font size=2>Engagement</font></b></p>

<p style=' margin-bottom:6pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>Grant Thornton and Deloitte were engaged by the Audit Committee, and the Audit Committee approved in advance all audit and non-audit services rendered to the Company by those firms for 2004.</font></p>

<p style=' margin-bottom:6pt; margin-top:0pt;text-align:center;'><font size=2>____________</font></p>

<p style=' margin-bottom:6pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>Representatives of Grant Thornton are expected to be present at the meeting and will be available to respond to appropriate questions and may make a statement if they so desire.  The Audit Committee has considered whether the provision of non-audit services is compatible with maintaining the independence of Grant Thornton.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'>
</p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


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            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>19</font></p> </td> </tr></table>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>
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<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:6pt; margin-top:0pt; text-indent:0.5in;text-align:center;'><b><font SIZE=2>MULTIPLE STOCKHOLDERS SHARING AN ADDRESS</font></b></p>

<p style=' margin-bottom:6pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>The rules of the Securities and Exchange Commission permit companies to provide a single copy of an annual report and proxy statement to households in which more than one stockholder resides (&#147;Householding&#148;).  Stockholders who share an address and who have been previously notified that their broker, bank or other intermediary will be Householding their proxy materials will receive only one copy of the Company&#146;s Proxy Statement and 2004 Annual Report to Stockholders unless they have affirmatively objected to the Householding notice.</font></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>Stockholders sharing an address who received only one set of these materials may request a separate copy, which will be promptly sent at no cost, by contacting the Corporate Secretary of the Company orally or in writing.  For future annual meetings, a stockholder may request separate annual reports or proxy statements, or may request the Householding of such materials, by contacting the Company&#146;s Transfer Agent at the following address:</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>Continental Stock Transfer &amp; Trust Company</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>17 Battery Place</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>New York, New York 10004</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>(212) 509-4000 </font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:center;'><b><font SIZE=2>ANNUAL REPORT ON FORM 10-K</font></b></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.54in;text-align:justify;'><font size=2>A copy of the Company&#146;s Annual Report on Form 10-K for the year ended January 31, 2005 filed with the Securities and Exchange Commission accompanies this Proxy Statement.  </font><b><font size=2>Additional copies of the Annual Report on Form 10-K may be obtained, without charge, from the Company&#146;s website at </font></b><i><b><font size=2>www.mfri.com</font></b></i><b><font size=2> or by writing to the Company&#146;s Corporate Secretary at MFRI, Inc., 7720 Lehigh Avenue, Niles, Illinois  60714.</font></b></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:12pt; margin-top:0pt;text-align:center;'><b><font SIZE=2>STOCKHOLDER PROPOSALS FOR 2006</font></b></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>Any proposal which a stockholder intends to present at the annual meeting of stockholders in 2006 must be in writing, must be received by the Company at its principal executive offices in Niles, Illinois by February 1, 2006 and must satisfy the applicable rules and regulations of the Securities and Exchange Commission, in order to be eligible for inclusion in the proxy statement and proxy form relating to such meeting.  In addition, if any business should properly come before such annual meeting other than that which is stated in such proxy statement, then, if the Company does not receive notice of such matter by April 17, 2006, the persons designated in such proxy form will have discretionary authority to vote or refrain from voting on any such proposal.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:12pt; margin-top:0pt;text-align:center;'><b><font SIZE=2>IMPORTANT</font></b></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>All stockholders are cordially invited to attend the meeting in person.</font></p>

<p style=' margin-bottom:12pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>If you cannot be present at the meeting, please sign and date the enclosed Proxy and mail it PROMPTLY in the enclosed self-addressed envelope.  No postage need be affixed if mailed in the United States.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'>
</p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


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            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>20</font></p> </td> </tr></table>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>
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<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="532" style='margin-left:42.0pt;border-collapse:collapse'>
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            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></td>
        <td width="83" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><b><font SIZE=2>MFRI, INC.</font></b></p> </td>
        <td  width="224">
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></td> </tr>
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        <td  colspan="3" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><b><font SIZE=2>PLEASE MARK VOTE IN BOX IN THE FOLLOWING MANNER USING DARK INK ONLY.  </font></b><font size=2>/ /</font></p> </td> </tr>
    <tr>
        <td width="225" ></td>

        <td width="83" ></td>

        <td width="224" ></td> </tr> </table>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


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        <td   colspan="2">
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></td>
        <td  colspan="2" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>For</font></p> </td>
        <td  colspan="2" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>Withheld  </font></p> </td>
        <td  colspan="4" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>For All</font></p> </td>
        <td  width="3">
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></td> </tr>
    <tr >
        <td   colspan="7">
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></td>
        <td  colspan="4" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>Except</font></p> </td> </tr>
    <tr >
        <td width="48" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>1.</font></p> </td>
        <td  colspan="2" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>Election of Directors</font></p> </td>
        <td  colspan="2" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>/ /</font></p> </td>
        <td  colspan="3" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>/ /</font></p> </td>
        <td width="29" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>/ /</font></p> </td>
        <td   colspan="2">
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></td> </tr>
    <tr>
        <td width="48" ></td>

        <td width="375" ></td>

        <td width="9" ></td>

        <td width="42" ></td>

        <td width="18" ></td>

        <td width="74" ></td>

        <td width="4" ></td>

        <td width="13" ></td>

        <td width="29" ></td>

        <td width="8" ></td>

        <td width="3" ></td> </tr> </table>

<p style=' margin-bottom:0pt; margin-top:0pt; margin-left:0.5in;text-align:justify;'><font size=2>Nominees:  David Unger, Henry M. Mautner, </font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>Bradley E. Mautner, Arnold F. Brookstone, </font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>Eugene Miller, Stephen B. Schwartz and Dennis Kessler.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><b><font size=2>(INSTRUCTION:  To withhold authority to vote for any individual</font></b></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><b><font size=2>nominee, write that nominee's name in the space provided at the right</font></b></p>


<table border="0" cellspacing=0 cellpadding=0 width="589" style='margin-left:.5in;border-collapse:collapse'>
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        <td width="377" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><b><font size=2>and mark the oval "For All Nominees Except")  </font></b></p> </td>
        <td  colspan="3" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><b><font size=2>________________________________</font></b></p> </td> </tr>
    <tr >
        <td   colspan="2">
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></td>
        <td width="121" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>Nominee Exceptions</font></p> </td>
        <td  width="90">
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></td> </tr>
    <tr>
        <td width="377" ></td>

        <td width="1" ></td>

        <td width="121" ></td>

        <td width="90" ></td> </tr> </table>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="97%" style='margin-left:6.0pt;border-collapse:collapse'>
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            <p style='margin-left:30.0pt;text-indent:-30.0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>2..&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In accordance with their discretion upon all</font></p>
<p style='margin-left:30.0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>other matters that may properly come before</font></p>
<p style='margin-left:.5in;text-indent:-6.0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>said meeting and any adjournment thereof.</font></p> </td>
        <td width="312" valign=top style='padding:0in 6.0pt 0in 6.0pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Dated:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font>                                                               <font size=2>, 2005</font></p>
<p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>&nbsp;</font></p>
<p style='margin-left:0pt;text-indent:222.0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p>
<p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Signature</font></p>
<p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>&nbsp;</font></p>
<p style='margin-left:0pt;text-indent:222.0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p>
<p
style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=2>Signature</font></p>
<p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></p> </td> </tr>
    <tr >
        <td width="312" valign=top style='padding:0in 6.0pt 0in 6.0pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><b><font SIZE=2>THIS PROXY WILL BE VOTED IN ACCORDANCE</font></b></p>
<p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><b><font SIZE=2>WITH SPECIFICATIONS MADE.  IF NO CHOICES</font></b></p>
<p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><b><font SIZE=2>ARE INDICATED, THIS PROXY WILL BE VOTED</font></b></p>
<p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><u><b><font SIZE=2>FOR</font></b></u><b><font size=2> EACH OF THE NOMINEES LISTED UNDER</font></b></p>
<p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><b><font SIZE=2>ITEM 1.  </font></b></p> </td>
        <td width="312" valign=top style='padding:0in 6.0pt 0in 6.0pt'>
            <p style='margin-left:0pt;text-indent:0pt;text-align:left;margin-top:0pt;margin-bottom:0pt'><b><font size=2>NOTE:  Please sign exactly as name appears hereon.  For joint accounts, both owners should sign.  When signing as executor, administrator, attorney, trustee or guardian, </font></b><i><b><font size=2>etc.</font></b></i><b><font size=2>, please sign your full title.</font></b></p> </td> </tr></table>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><b><font size=2>The undersigned hereby revokes any proxy or proxies heretofore given to vote such shares at said meeting or at any adjournment thereof.</font></b></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'>
</p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="36" style='margin-left:228.0pt;border-collapse:collapse'>
    <tr >
        <td width="36" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>21</font></p> </td> </tr></table>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>
<br>
<HR noshade align="center" width="100%" size="2">
<p style='page-break-before:always'></p>
<pAGE>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="643" style='border-collapse:collapse'>
    <tr >
        <td  colspan="3" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><b><font SIZE=2>PROXY</font></b></p> </td>
        <td width="61" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><b><font SIZE=2>PROXY</font></b></p> </td> </tr>
    <tr >
        <td  width="281">
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></td>
        <td width="83" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><b><font SIZE=2>MFRI, INC.</font></b></p> </td>
        <td   colspan="2">
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></td> </tr>
    <tr>
        <td width="281" ></td>

        <td width="83" ></td>

        <td width="218" ></td>

        <td width="61" ></td> </tr> </table>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="429" style='margin-left:81.0pt;border-collapse:collapse'>
    <tr >
        <td  width="57">
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></td>
        <td width="315" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><b><font SIZE=2>FOR SHARES OF COMMON STOCK SOLICITED ON</font></b></p> </td>
        <td  width="58">
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=1>&nbsp;</font></td> </tr>
    <tr >
        <td  colspan="3" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><b><font SIZE=2>BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING</font></b></p> </td> </tr>
    <tr>
        <td width="57" ></td>

        <td width="315" ></td>

        <td width="58" ></td> </tr> </table>

<p style=' margin-bottom:12pt; margin-top:0pt;text-align:center;'><b><font SIZE=2>OF STOCKHOLDERS TO BE HELD ON JUNE 23, 2005</font></b></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>The undersigned hereby appoints DAVID UNGER, BRADLEY E. MAUTNER and MICHAEL D. BENNETT, and each of them, proxies with power of substitution and revocation, acting by majority of those present and voting, or if only one is present and voting then that one, to vote, as designated on the reverse side hereof, all of the shares of stock of MFRI, INC. which the undersigned is entitled to vote, at the annual meeting of stockholders to be held at The Standard Club, 320 South Plymouth Court, Chicago, Illinois on June 23, 2005 at 10:00 a.m. Chicago time, and at any adjournment thereof, with all the powers the undersigned would possess if present.</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><b><font SIZE=2>PLEASE VOTE, SIGN AND DATE ON REVERSE SIDE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.  NO POSTAGE NEED BE AFFIXED IF MAILED IN THE UNITED STATES.</font></b></p>

<p style=' margin-bottom:0pt; margin-top:0pt; text-indent:0.5in;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


<table border="0" cellspacing=0 cellpadding=0 width="36" style='margin-left:228.0pt;border-collapse:collapse'>
    <tr >
        <td width="36" valign=top >
            <p style='margin-left:0pt;text-indent:0pt;text-align:justify;margin-top:0pt;margin-bottom:0pt'><font size=2>22</font></p> </td> </tr></table>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>


<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>

<p style=' margin-bottom:0pt; margin-top:0pt;text-align:justify;'><font size=2>&nbsp;</font></p>



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