EXHIBIT 10.1

                      GRAHAM CORPORATION

                       OUTSIDE DIRECTORS'

                    LONG TERM INCENTIVE PLAN

                        Revised 10/31/02
                           and 3/3/05


1.   Share  Equivalent  Units ("SEUs") will be credited  to  each
     outside director's "LTIP Account" for each of the first five
     fiscal   years   in   which  Graham   Corporation   produces
     consolidated net income in an amount at least equal  to  the
     consolidated  net  income specified in the Company's  budget
     for  each  such fiscal year during each outside   director's
     service.   For purposes of this Plan, an "Outside  Director"
     is  a member of the Company's Board of Directors who is  not
     also an employee of the Company.

2.   For  purposes of the determining the number of  SEUs  to  be
     credited pursuant to Paragraph 3 hereof, the value  of  each
     SEU  will  be  the market value of 1 share of Graham  Common
     Stock  on  the  last  day of trading on the  American  Stock
     Exchange  of the first quarter following a fiscal  year  for
     which  SEUs  are to be credited ("Valuation Date"  and  such
     price the "Valuation Date Price").

3.   The  number  of  SEUs to be credited will be  determined  by
     dividing  the  value  of  1 SEU as  determined  pursuant  to
     Paragraph 2 above into 10,000.

          Example:  Stock  at $10.00 on Valuation Date.
                    Number  of  SEUs = 10,000 / 10  = 1,000.

4.   Upon  termination of a Director's service on the Board,  but
     not  before,  SEUs  will be  redeemable for  either:  (a)  a
     commensurate number of shares of Graham Common Stock; or (b)
     subject  to  the prior written consent of Graham Corporation
     acting  in  its sole discretion, cash in the amount  of  the
     Cash  Redemption  Value,  as  hereinafter  defined,  of  the
     director's  SEUs.   The Cash Redemption Value  of  each  SEU
     shall  be the market value of 1 share of Graham Common Stock
     at  the closing price on the American Stock Exchange on  the
     date of termination of service; provided, however, that  the
     cash value for each SEU shall not exceed the greater of  (a)
     the  Valuation  Date Price; or (b) sixteen dollars  ($16.00)
     per share.  A Director may elect to take shares (or cash, if
     consented to by Graham Corporation) at once or to  defer  it
     over a period not to exceed 10 years.  The lump sum, or  the
     first  installment if deferred, must be paid within 30  days
     of termination of service on the Board.

     (Tax  considerations require lump sum payout to  occur,  and
     deferred  payout  period  to  begin,  within  30   days   of
     termination of service.)


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5.   The  number  of SEUs credited to each LTIP Account  will  be
     adjusted pro rata in the event of any split in the Company's
     Common Stock.

6.   Each  outside  Director's  LTIP  Account  will  be  credited
     annually  for  dividends paid on the Company's Common  Stock
     during each fiscal year.  Dividend credit will be determined
     for  each  LTIP  Account by (a) multiplying  the  cumulative
     dividend for the fiscal year by the number of SEUs  held  in
     the  account  on the last day of the fiscal  year;  and  (b)
     dividing  the  value of 1 SEU as of the Valuation  Date,  as
     determined in accordance with paragraph 2 hereof,  into  the
     product of (a).

          Example:  Dividend  of  $.05/share  paid  for
                    each   quarter   of  fiscal   year.
                    Director holds 3,000 SEUs  on  last
                    day  of  fiscal  year.   Stock   at
                    $10.00 on Valuation Date.

                    (a)  3,000 x .20 = 600
                    (b)  Number of SEUs = 600 / 10 = 60