10-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

Mark One

þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]

For the fiscal year ended March 31, 2008

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

For the transition period from                      to                     

Commission file number 1-7872

BREEZE-EASTERN CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	95-4062211
(State or other jurisdiction of	(I.R.S. employer
incorporation or organization)	identification no.)
700 Liberty Avenue	07083
Union, New Jersey	(Zip Code)
(Address of principal executive offices)

Registrant’s telephone number, including area code: (908) 686-4000

Securities registered pursuant to Section 12(b) of the Act:

Common Stock, par value $0.01	American Stock Exchange
(Title of class)	(Name of Exchange on Which Registered)

Securities registered pursuant to Section 12(g) of the Act: NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o     No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o     Noþ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ      No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o	Accelerated filer þ	Non-accelerated filer o	Smaller reporting company o
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o     No þ

The aggregate market value of the voting common equity held by non-affiliates of the registrant on September 30, 2007 (the last business day of the registrant’s most recently completed second fiscal quarter), based on the closing price of the registrant’s common stock on the American Stock exchange on such date, was $60,916,598. Shares of common stock held by executive officers and directors have been excluded since such persons may be deemed affiliates. This determination of affiliate status is not a determination for any other purpose.

As of May 21, 2008, the registrant had 9,338,992 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

The registrant’s Proxy Statement for the 2008 Annual Meeting of Stockholders is incorporated by reference into Part III of this Annual Report on Form 10-K. With the exception of those portions that are specifically incorporated by reference in this Annual Report on Form 10-K, such Proxy Statement shall not be deemed filed as part of this Report or incorporated by reference herein.

BREEZE-EASTERN CORPORATION
INDEX TO ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED MARCH 31, 2008

PART I
Item 1.	Business
Item 1A.	Risk Factors
Item 1B.	Unresolved Staff Comments
Item 2.	Properties
Item 3.	Legal Proceedings
Item 4.	Submission of Matters to a Vote of Security Holders
Item 4A.	Executive Officers of the Registrant
PART II
Item 5.	Market for Registrant’s Common Equity and Related Stockholder Matters
Item 6.	Selected Financial Data
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk
Item 8.	Financial Statements and Supplementary Data
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A.	Disclosure Controls and Procedures
Item 9B.	Other Information
PART III
Item 10.	Directors and Executive Officers of the Registrant
Item 11.	Executive Compensation
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13.	Certain Relationships and Related Transactions, Director Independence
Item 14.	Principal Accountant Fees and Services
PART IV
Item 15.	Exhibits and Financial Statement Schedules
EX-3.2: BYLAWS
EX-10.25: NET LEASE AGREEMENT
EX-23.1: CONSENT OF MARGOLIS & COMPANY P.C.
EX-23.2: CONSENT OF DELOITTE & TOUCHE LLP
EX-31.1: CERTIFICATION
EX-31.2: CERTIFICATION
EX-32.1: CERTIFICATION

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PART I

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934:

Certain of the statements contained in the body of this Annual Report on Form 10-K for the fiscal year ended March 31, 2008 (“Report”) are forward-looking statements (rather than historical facts) that are subject to risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. In the preparation of this Report, where such forward-looking statements appear, the Company has sought to accompany such statements with meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those described in the forward-looking statements. A description of the principal risks and uncertainties inherent in the Company’s business is included herein under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Readers of this Report are encouraged to read these cautionary statements carefully.

ITEM 1. BUSINESS

GENERAL

Breeze-Eastern Corporation, formerly TransTechnology Corporation, designs, develops, manufactures, sells and services sophisticated lifting equipment for specialty aerospace and defense applications. The Company was originally organized in 1962 as a California corporation and reincorporated in Delaware in 1986. Unless the context otherwise requires, references to the “Company” or the “Registrant” or “Breeze-Eastern” refer to Breeze-Eastern Corporation (including the California corporation prior to the reincorporation) and its consolidated subsidiaries. The Company’s fiscal year ends on March 31. Accordingly, all references to years in this Report refer to the fiscal year ended March 31 of the indicated year unless otherwise specified.

CORE BUSINESS

Breeze-Eastern’s core business is aerospace and defense products. Breeze-Eastern is the world’s leading designer, manufacturer, service provider, and supplier of performance-critical rescue hoists and cargo hook systems. Breeze-Eastern also manufactures weapons handling systems, cargo winches, and tie-down equipment. These products are sold primarily to military and civilian agencies and aerospace contractors. Our emphasis is on the engineering, assembly, and testing of our products. Further, we are at work on designing the next generation of rescue hoists in order to enable us to maintain our core business.

PRODUCTS

Breeze-Eastern has three operating segments which it aggregates into one reportable segment. The operating segments are Hoist and Winch, Cargo Hooks, and Weapons Handling. The nature of the production process (assemble, inspect, and test) is similar for each operating segment, as are the customers and the methods of distribution for the products. Breeze-Eastern’s weapons handling systems range from weapons handling equipment on fighting vehicles to hoisting weapons into position on carrier-based aircraft. Management believes that Breeze-Eastern is the industry market share leader in sales of personnel-rescue hoists and cargo hook equipment. As a pioneer of helicopter hoist technology, Breeze-Eastern continues to develop sophisticated helicopter hoist and winch systems, including systems for the current generation of Blackhawk, Seahawk, Osprey, Chinook, Ecureuil, Dolphin, Merlin/Cormorant, Super Stallion, Changhe Z-11, Agusta A109 Power, Agusta A119, and AgustaWestland AW139 helicopters. Breeze-Eastern also supplies equipment for the United States, Japanese and European Multiple-Launch Rocket Systems, and the United States High Mobility Artillery Rocket System (HIMARS), which uses specialized hoists to load and unload rocket pod containers. Breeze-Eastern’s external cargo hook systems are original equipment on most medium and heavy lift helicopters manufactured today. These hook systems range from small 1,000-pound capacity models up to the largest 36,000-pound capacity hooks employed on the Super Stallion helicopter. Breeze-Eastern also manufactures aircraft and cargo tie-downs.

Breeze-Eastern sells its products through internal marketing representatives and several independent sales representatives and distributors for all operating segments.

The Company’s product backlog varies substantially from time to time due to the size and timing of orders. At March 31, 2008, the

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backlog of unfilled orders was $124.3 million (of which $87.2 million is not expected to ship within fiscal 2009), compared to $119.2 million at March 31, 2007. The increase in the backlog is mainly attributable to a $3.7 million contract for the system design and development of a recovery winch for the Field Recovery and Maintenance Recovery Vehicle (FRMV) being developed for the U.S. Army under the Future Combat Systems (FCS) program. Also included in the backlog at March 31, 2008 are three orders totaling approximately $65.0 million related to the Airbus A400M aircraft. These three orders are scheduled to be shipped starting in late calendar 2009 and continuing through 2020.

MAJOR CUSTOMERS

Breeze-Eastern has two major customers, the U.S. Government and Finmeccanica SpA, representing 26% and 19%, respectively, of the total consolidated net sales for fiscal 2008.

COMPONENTS, RAW MATERIAL AND SEASONALITY

The various component parts and, to some extent, assembly of components and subsystems by subcontractors used by the Company to produce its products are generally available from more than one source. In those instances where only a single source for any material is available, such items can generally be redesigned to accommodate materials made by other suppliers, although this may lead to delays in meeting the requirements of our customers. In some cases, the Company stocks an adequate supply of the single source materials for use until a new supplier can be approved.

In recent years, our revenues in the second half of the fiscal year have generally exceeded revenues in the first half. The timing of U.S. Government awards, the availability of U.S. Government funding and product deliveries are among the factors affecting the periods in which revenues are recorded. We expect this trend to continue in fiscal 2009.

EMPLOYEES

At March 31, 2008, the Company had approximately 192 salaried and hourly employees. The United Auto Workers (UAW) represents certain hourly employees at our sole facility in Union, New Jersey. A five year labor agreement was reached with the UAW in October 2004. The Company considers its relationship with its employees to be good.

FOREIGN OPERATIONS AND SALES

The Company has no foreign-based operations. The Company had export sales of $34.5 million, $31.7 million, and $30.9 million in fiscal 2008, 2007, and 2006, respectively, representing 45%, 43%, and 48% of the Company’s consolidated net sales in each of those years, respectively. The risk and profitability attendant to these sales is generally comparable to similar products sold by the Company in the United States. Net export sales by geographic area and domicile of customers are set forth in Note 13 of “Notes to Consolidated Financial Statements” which is included elsewhere in this Report.

OTHER INFORMATION

Financial results, news, and other information about Breeze-Eastern can be accessed from the Company’s web site at
http://www.breeze-eastern.com. This site includes important information on products and services, financial reports, news releases, and career opportunities. The Company’s periodic and current reports, including exhibits and supplemental schedules filed herewith, and amendments to those reports, filed with the Securities and Exchange Commission (SEC) are available on the Company’s web site, free of charge, as soon as reasonably practicable after they are electronically filed with or furnished to the SEC. Information that can be accessed through the Company’s web site is not incorporated by reference in this Report and, accordingly, you should not consider that information part of this Report. The reports noted above may also be obtained at the SEC’s public reference room at 100 F Street, NE, Washington, DC 20549. The SEC also maintains a web site at www.sec.gov that contains reports, proxy statements, and information regarding SEC registrants, including Breeze-Eastern.

ITEM 1A. RISK FACTORS

You should carefully consider the risks described below and other information in this Annual Report on Form 10-K. Our business,

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financial condition, and results of operations could be materially and adversely impacted if any of these risks materialize. Additional risk factors not currently known to us or that we believe are immaterial also may impair our business, financial condition, and results of operations. The trading price of our common stock may also decline as a result of these risks.

We are subject to competition from entities which could have a substantial impact on our business.

The Company competes in some markets with entities that are larger and have substantially greater financial and technical resources than the Company. Generally, competitive factors include design capabilities, product performance, delivery and price. The Company’s ability to compete successfully in such markets will depend on its ability to develop and apply technological innovations and to expand its customer base and product lines. There can be no assurance that the Company will continue to successfully compete in any or all of the businesses discussed above. The failure of the Company to compete successfully could have a materially adverse effect on the Company’s profitability.

A substantial amount of our revenue is derived from U.S. Government contracts.

Approximately 26% of our consolidated net sales in 2008, as compared to 33% and 29% in 2007 and 2006, respectively, were derived from sales to the U.S. Government, principally the military services of the Department of Defense, and are therefore affected by, among other things, the federal budget authorization and appropriation processes. These contracts typically contain precise performance specifications and are subject to customary provisions which give the U.S. Government the contractual right of termination for convenience. In the event of termination for convenience, we are typically protected by provisions allowing reimbursement for costs incurred as well as payment of any applicable fees or profits. A decrease in the U.S. Government defense spending, changes in spending allocation or the termination, postponement, or failure by the U.S. Government to fund one or more significant contracts could have a material adverse effect on the Company’s results of operations.

Cancellations of purchase orders or reductions of product quantity requirements in existing contracts could materially reduce our backlog.

A discussion of the risks associated with the Company’s backlog is set forth in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” which is included elsewhere in this Report.

Our potential tax benefits from net operating loss carry forwards are subject to a number of risks.

A discussion of the risks attendant to realization of the tax benefit from net operating losses is set forth in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” which is included elsewhere in this Report.

We may be liable for all or a portion of the environmental clean-up costs at sites previously owned or leased by the Company (or by corporations acquired by the Company).

Due primarily to federal and state legislation which imposes liability, regardless of fault, upon commercial product manufacturers for environmental impact caused by chemicals, processes, and practices that were commonly and lawfully used prior to the enactment of such legislation, the Company may be liable for all or a portion of the environmental clean-up costs at sites previously owned or leased by the Company (or by corporations acquired or sold by the Company). The Company’s contingencies associated with environmental matters are described in Note 12 of “Notes to Consolidated Financial Statements” which is included elsewhere in this Report.

Our liquidity requirements and capital resources depend on a number of factors, some of which are beyond our control.

A discussion of the Company’s liquidity requirements and attendant risks is set forth in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” which is included elsewhere in this Form 10-K.

Our common stock is thinly traded and subject to volatility.

Although our common stock is traded on the American Stock Exchange (“AMEX”), it may remain relatively illiquid, or “thinly traded,” which can enhance volatility in the share price and make it difficult for investors to buy or sell shares in the public market without materially affecting the quoted share price. Further, investors seeking to buy or sell a certain quantity of our shares in the public market may be unable to do so within one or more trading days. If limited trading in our stock continues, it may be difficult for holders to sell their shares in the public market at any given time at prevailing prices.

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     The prevailing market price of our common stock may fluctuate significantly in response to a number of factors, some of which are beyond our control, including the following:

• Actual or anticipated fluctuations in our operating results;

• Changes in market valuations of other similarly situated companies;

• Announcements by us or our competitors of significant technical innovations, contracts, acquisitions, strategic partnerships, joint ventures, or capital commitments;

• Additions or departures of key personnel;

• Future sales of common stock;

• Any deviations in net revenues or in losses from levels expected by the investment community; and

• Trading volume fluctuations.

We depend on component availability, subcontractor performance and our key suppliers to manufacture and deliver our products and services.

We are dependent upon the delivery of component parts by suppliers and, to some extent, the assembly of components and subsystems used by us in the manufacture of our products in a timely and satisfactory manner and in full compliance with applicable terms and conditions. We are generally subject to specific procurement requirements, which may, in effect, limit the suppliers and subcontractors we may utilize. In some instances, we are dependent on sole-source suppliers. If any of these suppliers or subcontractors fails to meet our needs, the development of alternatives could cause delays in meeting the requirements of our customers. While we enter into long-term or volume purchase agreements with certain suppliers and take other actions to ensure the availability of needed materials, components and subsystems, we cannot be sure that such items will be available in the quantities we require, if at all. If we experience a material supplier or subcontractor problem, our ability to satisfactorily and timely complete our customer obligations could be negatively impacted which could result in reduced sales, termination of contracts and damage to our reputation and relationships with our customers. We could also incur additional costs in addressing such a problem. Any of these events could have a negative impact on our results of operations and financial condition.

Our profitability could be negatively affected if we fail to maintain satisfactory labor relations.

The United Auto Workers (UAW) represents certain hourly employees at our sole facility in Union, New Jersey. A five year labor agreement was reached with the UAW in October 2004. If the collective bargaining agreement relating to our unionized employees is not successfully renegotiated prior to its expiration, we could face work stoppages or labor strikes.

ITEM 1B. UNRESOLVED STAFF COMMENTS

     None.

ITEM 2. PROPERTIES

The following table sets forth certain information concerning the Company’s principal facilities:

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Location	Use of Premises	Owned or Leased	Sq. Ft
Union, New Jersey	Executive offices, Breeze-Eastern offices, and manufacturing plant	Leased	188,000

In February 2008, the Company completed the sale of its headquarters facility and plant located in Union, New Jersey. As provided in the sale agreement, the Company can lease the facility for up to two years after closing, pending the Company’s relocation to a new site, yet to be selected, that will be better suited to its current and expected needs. The Company believes that it will be able to enter into a lease for an alternative location at market terms. The Company continues to own property that it no longer needs in its operations. These properties are located in Pennsylvania, New York, and New Jersey. In some instances, the properties are under contract for sale or are being prepared for sale.

ITEM 3. LEGAL PROCEEDINGS

The information required has been included in Note 12 of “Notes to Consolidated Financial Statements” which is included elsewhere in this Report.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of the Company’s security holders during the three-month period ended March 31, 2008.

ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT

Name	Position with the Company	Age
Robert L. G. White	Director, Chief Executive Officer and President		66
Joseph F. Spanier	Executive Vice President, Chief Financial Officer and Treasurer		61
Gerald C. Harvey	Executive Vice President, General Counsel and Secretary		58

Robert L.G. White has served as a Director of Breeze-Eastern Corporation since 2003 and has been the Company’s President and Chief Executive Officer since February 2003. He was President of the Company’s Aerospace Group from 1998 to 2003 and was President of the Company’s Breeze-Eastern division from 1994 until October 2006.

Joseph F. Spanier has served as Executive Vice President, Chief Financial Officer, and Treasurer of the Company since October 2006, having formerly served as Vice President, Chief Financial Officer, and Treasurer of the Company since January 1997.

Gerald C. Harvey has served as Executive Vice President, General Counsel, and Secretary of the Company since October 2006, having formerly served as Vice President, Secretary, and General Counsel of the Company since February 1996.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

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Since August 14, 2006, the Company’s common stock, par value $0.01, has been traded on the AMEX under the trading symbol BZC. For the period January 21, 2005 through August 13, 2006, the Company’s common stock was traded in the over-the-counter (OTC) market under the symbol TTLG.

	High		Low
Fiscal 2007
First Quarter	$	10.75	$	8.95
Second Quarter		12.45		10.25
Third Quarter		12.40		10.29
Fourth Quarter		10.65		9.88
Fiscal 2008
First Quarter	$	14.50	$	10.20
Second Quarter		14.50		10.20
Third Quarter		12.08		10.95
Fourth Quarter		12.17		10.11

As of May 21, 2008, the number of stockholders of record of the Company’s common stock was 1,377. On May 21, 2008, the closing sales price of a share of common stock was $11.72 per share.

Our Senior Credit Facility prohibits the payment of dividends (see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Senior Credit Facility,” below).

Stock Performance Graph

The following Stock Performance Graph shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or Securities Exchange Act of 1934, each as amended, except to the extent that the Company specifically incorporates it by reference to such a filing.

This stock performance graph compares the Company’s total cumulative stockholder return on its common stock during the period from April 1, 2003 through March 31, 2008, with the cumulative return on a Peer Issuer Group Index. The peer group consists of the companies identified below, which were selected on the basis of the similar nature of their business. The graph assumes that $100 was invested on
April 1, 2003.

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Companies in the New Peer Group include Curtiss-Wright Corp., Ducommun Inc., HEICO Corp., Ladish Co. Inc., Moog Inc., SIFCO Industries Inc., and Triumph Group, Inc..

Companies in the Old Peer Group include those listed in the New Peer Group, EDO Corporation and United Industrial Corporation, both of which were acquired and are no longer publicly traded.

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ITEM 6. SELECTED FINANCIAL DATA

	Years ended March 31,
(In thousands, except per share amounts)	2008			2007		2006		2005			2004
Results from Operations
Net sales	$	75,974		$	73,339	$	64,418	$	62,932		$	64,606
Gross profit	$	32,517		$	32,486	$	27,961	$	26,755		$	28,103
Interest expense	$	3,311		$	4,231	$	9,320	$	10,469		$	10,431
Gain on sale of facility	$	(6,811	)	$	—	$	—	$	—		$	—
Loss on extinguishment of debt	$	—		$	1,331	$	396	$	2,185		$	—
Net income (loss)	$	9,442		$	3,961	$	1,292	$	(2,776	)	$	1,744
Net income (loss) per share
Basic	$	1.01		$	0.43	$	0.18	$	(0.42	)	$	0.26
Diluted:	$	1.00		$	0.42	$	0.18	$	(0.42	)	$	0.26
Shares outstanding at year-end		9,339			9,275		9,229		6,697			6,498
Financial Position
Total assets	$	76,190		$	80,471	$	81,945	$	76,438		$	77,209
Working Capital	$	28,544		$	23,140	$	17,100	$	16,356		$	22,173
Long-term debt	$	19,849		$	32,750	$	39,415	$	57,868		$	56,472
Stockholders’ equity (deficit)	$	26,892		$	16,899	$	12,328	$	(6,359	)	$	(3,787	)
Book value per share outstanding at year end	$	2.88		$	1.82	$	1.34	$	(0.95	)	$	(0.58	)
Ratios
Current Ratio		2.48			2.06		1.80		2.15			2.59

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

Certain statements in this Annual Report on Form 10-K constitute “forward-looking statements” within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended (the “Acts”). Any statements contained herein that are not statements of historical fact are deemed to be forward-looking statements.

This Annual Report on Form 10-K and the information we are incorporating herein by reference contain forward-looking statements within the meaning of the federal securities laws, including information regarding our fiscal 2009 financial outlook, future plans, objectives, business prospects and anticipated financial performance. These forward-looking statements are not statements of historical facts and represent only our current expectations regarding such matters. These statements inherently involve a wide range of known and unknown uncertainties. Our actual actions and results could differ materially from what is expressed or implied by these statements. Specific factors that could cause such a difference include, but are not limited to, those set forth below and other important factors disclosed previously and from time to time in our other filings with the Securities and Exchange Commission. Given these factors, as well as other variables that may affect our operating results, you should not rely on forward-looking statements, assume that past financial performance will be a reliable indicator of future performance, nor use historical trends to anticipate results or trends in future periods. We expressly disclaim any obligation or intention to provide updates to the forward-looking statements and the estimates and assumptions associated with them. Forward-looking statements are subject to the safe harbors created in the Acts.

Any number of factors could affect future operations and results, including, without limitation, competition from other companies; changes in applicable laws, rules, and regulations affecting the Company in the locations in which it conducts its business; the availability of equity and/or debt financing in the amounts and on the terms necessary to support the Company’s future business;

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interest rate trends; a decrease in the United States Government defense spending, changes in spending allocation or the termination, postponement, or failure to fund one or more significant contracts by the United States Government; determination by the Company to dispose of or acquire additional assets; general industry and economic conditions; events impacting the U.S. and world financial markets and economies; and those specific risks that are discussed elsewhere in this Annual Report on Form 10-K.

The Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information or future events.

GENERAL

We design, develop, manufacture, sell and service sophisticated lifting equipment for specialty aerospace and defense applications. With over 50% of the global market, we have long been recognized as the world’s leading designer, manufacturer, service provider and supplier of performance-critical rescue hoists and cargo hook systems. We also manufacture weapons-handling systems, cargo winches, and tie-down equipment. Our products are designed to be efficient and reliable in extreme operating conditions and are used to complete rescue operations and military insertion/extraction operations, move and transport cargo, and load weapons onto aircraft and ground-based launching systems. We have three operating segments which we aggregate into one reportable segment. The operating segments are Hoist and Winch, Cargo Hooks, and Weapons Handling. The nature of the production process (assemble, inspect, and test) is similar for each operating segment, as are the customers and the methods of distribution for the products.

All references to years in this Management’s Discussion and Analysis of Financial Condition and Results of Operations refer to the fiscal year ended March 31 of the indicated year unless otherwise specified.

CRITICAL ACCOUNTING POLICIES

The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates, judgments, and assumptions. We believe that the estimates, judgments, and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments, and assumptions are made. These estimates, judgments, and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenues and expenses during the periods presented. To the extent there are material differences between these estimates, judgments, or assumptions and actual results, our financial statements will be affected. We believe the following critical accounting policies are affected by significant estimates, assumptions, and judgments used in the preparation of our consolidated financial statements.

Inventory. We purchase parts and materials to assemble and manufacture components for use in our products and for use by our engineering and repair and overhaul departments. Our decision to purchase a set quantity of a particular material is influenced by several factors including current and projected cost, future estimated availability, lead time for production of our products, existing and projected contracts to produce certain items, and the estimated needs for our repair and overhaul business.

We value our inventories using the lower of cost or market on a first-in, first-out (FIFO) basis. We reduce the carrying amount of these inventories to net realizable value based on our assessment of inventory that is considered excess or obsolete based on our full backlog of sales orders and historical usage. Since all of our products are produced to meet specific customer requirements, our focus for reserves is on purchased and manufactured parts.

Environmental Reserves. We provide for environmental reserves when, after consultation with our internal and external counsel and other environmental consultants, we determine that a liability is both probable and estimable. In many cases, we do not fix or cap the liability for a particular site when we first record it. Factors that affect the recorded amount of the liability in future years include our participation percentage due to a settlement by, or bankruptcy of, other potentially responsible parties, a change in the environmental laws resulting in more stringent requirements, a change in the estimate of future costs that will be incurred to remediate the site, changes in technology related to environmental remediation, and the application of appropriate discount factors to reflect the net present value of expected expenditures.

We discuss current estimated exposures related to environmental claims under the caption “Environmental Matters” below.

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Deferred Tax Asset. This asset, against which a valuation allowance for a portion of the noncurrent state taxes has been established, represents income tax benefits expected to be realized in the future, primarily as a result of the use of net operating loss carry forwards. In fiscal 2008, the valuation allowance was decreased by approximately $0.3 million to reflect the utilization of a portion of the state net operating loss carry forwards from the sale of our headquarters facility and plant in February, 2008. Because we expect to generate adequate amounts of taxable income prior to the expiration of the federal and state net operating loss carry forwards in 2022 through 2025 and 2009 through 2012 respectively, no additional valuation allowance was considered necessary. If we do not generate adequate taxable earnings, some or all of our deferred tax assets may not be realized. Additionally, changes to the federal and state income tax laws also could impact our ability to use the net operating loss carry forwards. In such cases, we may need to increase the valuation allowance established related to deferred tax assets for state tax purposes.

Stock-Based Compensation. The Company adopted the provisions of Financial Accounting Standards Board (“FASB”) Statement No. 123R, “Share-Based Payment”, on April 1, 2006, using the modified prospective transition method. FASB Statement No. 123R requires the measurement and recognition of compensation expense for all stock-based payment awards made to employees and directors based on estimated fair values. The Company’s consolidated financial statements for the years ended March 31, 2008 and March 31, 2007, reflect the impact of FASB Statement No. 123R. In accordance with the modified prospective transition method, the Company’s consolidated financial statements for prior periods have not been restated to reflect, and do not include, the impact of FASB Statement No. 123R. Stock-based compensation expense recognized under FASB Statement No. 123R for the years ended March 31, 2008 and March 31, 2007, was $0.4 million, net of tax.

The Company estimates the fair value of stock-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in the Company’s consolidated statement of earnings. Prior to the adoption of FASB Statement No. 123R, the Company accounted for stock-based awards to employees and directors using the intrinsic value method related to stock options in accordance with Accounting Principles Board (APB) Opinion No. 25 as allowed under FASB Statement No. 123, “Accounting for Stock-Based Compensation”.

Prior to 2006, the Company applied APB Opinion No. 25 and did not recognize compensation expense for stock options granted as the exercise price of the options on the date of grant was equal to their fair market value as of that date. However, for grants of restricted stock, the Company recognized compensation expense on a straight-line basis over the period that the restrictions expired. The fair value of the options granted during fiscal 2008, 2007 and 2006 was estimated as $6.80 per common share, $6.83 per common share, and $4.12 per common share, respectively. See Note 8 of “Notes to the Consolidated Financial Statements” for further discussion related to stock-based compensation.

RESULTS OF OPERATIONS

Fiscal 2008 Compared to Fiscal 2007

	Fiscal Year Ended					Increase
	March 31,			March 31,		(decrease)
(In thousands)	2008			2007		$			%
New Equipment	$	44,739		$	33,379	$	11,360			34.0
Spare Parts		15,127			24,001		(8,874	)		(37.0	)
Overhaul and Repair		15,109			15,492		(383	)		(2.5	)
Engineering Services		999			467		532			113.9
Net Sales		75,974			73,339		2,635			3.6
Cost of Sales		43,457			40,853		2,604			6.4
Gross Profit		32,517			32,486		31			0.1
General, administrative, and selling expenses		19,574			19,890		(316	)		(1.6	)
Interest expense		3,311			4,231		(920	)		(21.7	)
Gain on sale of facility		(6,811	)		—		6,811			100.0
Loss on extinguishment of debt		—			1,331		(1,331	)		(100.0	)
Net income	$	9,442		$	3,961	$	5,481			138.4

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Net Sales. Our net sales increased to $76.0 million for fiscal 2008, an increase of $2.6 million from net sales of $73.3 million in fiscal 2007. During fiscal 2008 we experienced a shift in product mix whereby sales of new equipment accounted for 59% of total net sales as compared to 46% for fiscal 2007. The $11.4 million increase in net sales of new equipment in fiscal 2008 as compared to fiscal 2007, was driven by $7.9 million higher shipments in the hoist and winch operating segment and approximately $3.0 million and $0.5 million higher shipments in the weapons handling and cargo hook operating segments, respectively. Overhaul and repair net sales, mainly in the cargo hook operating segment, had an overall decrease of approximately $0.4 million in fiscal 2008 as compared to the same period last year. During fiscal 2008 as compared to fiscal 2007, spare parts sales decreased approximately $8.9 million with shipments in the hoist and winch operating segment accounting for approximately $7.1 million of the decrease and lower shipments of spare parts in the weapons handling and cargo hook operating segments accounting for $1.0 million and $0.8 million, respectively. The demand for spare parts remained weak due primarily, we believe, to the delay in passage of the 2008 U.S. Government defense budget, which was authorized by legislation that became effective in late January 2008. The decline in hoist and winch-related spare part sales had the biggest impact on the shift in our product sales mix during fiscal 2008. In recent years, our sales in the second half of the fiscal year have generally exceeded sales in the first half. The timing of U.S. Government awards, the availability of U.S. Government funding and product delivery schedules are among the factors affecting the periods in which sales are recorded.

Cost of Sales. The three operating segments of hoist and winch, cargo hooks, and weapons handling equipment have generated sales in three components: new equipment, overhaul and repair, and spare parts, each of which has progressively better margins. Accordingly, cost of sales as a percentage of sales will be affected by the weighting of these components to the total sales volume. In fiscal 2008, the $43.5 million cost of sales as a percent of sales was approximately 57%. In fiscal 2007, the $40.9 million cost of sales as a percentage of sales was approximately 56%. The 1% increase was mainly due to the higher level of new equipment activity in the hoist and winch and weapons handling operating segments.

Gross Profit. As discussed in the “Cost of Sales” section above, the three components of sales in each of the operating segments have margins reflective of the market. During the last four fiscal years, the gross profit margin on new equipment has been generally in the range of 31% to 35%, with overhaul and repair ranging from 27% to 43% and spare parts ranging from 64% to 71%. The balance or mix of this activity, in turn, will have an impact on overall gross profit and overall gross profit margins. The gross margin of 43% for fiscal 2008 as compared to 44% for fiscal 2007 reflects the shift in sales more heavily weighted toward new equipment. While we had better performance, both in cost and pricing in the production of new equipment, spare parts and overhaul and repair sales, for fiscal 2008, the extended delay in certain appropriations associated with the 2008 U.S. Government defense budget, which was authorized by legislation that became effective in late January 2008, presented an obstacle to achieving overall better operating performance, especially in regard to gross margins due to spare part sales having significantly higher gross profit margins than sales of new equipment.

General, Administrative, and Selling Expenses. General, administrative, and selling expenses were approximately $19.6 million in fiscal 2008 compared to approximately $19.9 million in fiscal 2007, a decrease of approximately $0.3 million. This decrease was primarily due to lower costs related to the implementation of the Section 404 internal control requirements of the Sarbanes-Oxley Act of 2002, and also decreased expenses for marketing and recruiting efforts. These decreases in general, administrative and selling expenses for fiscal 2008 as compared to fiscal 2007 were partially offset by increased expenses relating to the initial phase of the development of a new generation of hoists and expenses associated with a threatened proxy contest which was settled during second quarter of fiscal 2008.

Interest Expense. Required principal payments and strong cash flow allowed us to reduce our Senior Credit Facility during fiscal 2008 by approximately $15.0 million, including the $9.8 million of net proceeds received from the sale of our headquarters facility and plant, as discussed in the “Gain on Sale of Facility” section below. The overall rate of interest we paid on our outstanding Senior

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Credit Facility declined approximately 2% during fiscal 2008. The reduction of debt coupled with the decline in interest rate is reflected in the $0.9 million decrease in interest expense during fiscal 2008 as compared to fiscal 2007. We are also in the process of negotiating a new senior credit facility. Through this facility, and assuming stable interest rates, we expect to lower the annualized interest expense on our debt in fiscal 2009 by an amount in excess of $1.0 million.

Gain on Sale of Facility. In February 2008, we completed the transaction for the sale of our headquarters facility and plant in Union, New Jersey, for $10.5 million, before selling expenses. The net cash proceeds received at closing of approximately $9.8 million were used to pay down the term portion of our Senior Credit Facility (as defined below). The transaction resulted in a realized pre-tax gain, net of sale expenses, of approximately $6.8 million, and a deferred gain of approximately $1.7 million. See Note 11 of “Notes to the Consolidated Financial Statements” for further discussion related to the sale of the facility. As part of the sale agreement we have entered into a lease back of the facility for up to two years after closing. We are currently in the process of selecting a new site which will be better suited to our current and expected needs. We believe we will be able to enter into a lease for an alternative location at market terms.

Loss on Extinguishment of Debt. In May 2006, we refinanced and paid in full the former senior credit facility with a new five year, $50.0 million Senior Credit Facility consisting of a $10.0 million revolving credit facility, and two term loans of $20.0 million. As a result of this refinancing, in the first quarter of fiscal 2007 we recorded a pretax charge of $1.3 million consisting of $0.9 million for the write-off of unamortized debt issue costs and $0.4 million for the payment of prepayment premiums.

Net Income. We reported net income of $9.4 million in fiscal 2008, which included a pretax gain of $6.8 million from the sale of our headquarters facility and plant versus net income of $4.0 million in fiscal 2007, which included a pretax charge of $1.3 million related to the refinancing of the Company’s debt. This increase in net income resulted from the reasons discussed above. In response to the order patterns mentioned below, in the beginning of the second quarter of fiscal 2008, we initiated certain cost cutting measures in an effort to improve operating results for fiscal 2008. These measures involved a net reduction in our headcount of 14 people or about 7% of our work force. The personnel reductions were carefully considered and we believe that the headcount reductions did not inhibit our ability to meet the sales volume in fiscal 2008.

New Orders. New orders received during fiscal 2008 totaled $81.1 million as compared to $101.5 million of new orders received during fiscal 2007. In fiscal 2007, new orders related to the A400M military transport aircraft totaled $21.5 million representing an order from AAR Cargo Systems to develop and manufacture a retrieval winch system. Excluding the new order related to the A400M military transport aircraft, orders of new equipment in the hoist and winch operating segment increased approximately $7.3 million in fiscal 2008 as compared to fiscal 2007. This increase was offset by a decline in orders for new equipment in the cargo hook operating segment of approximately $2.9 million, notwithstanding the award of a $3.2 million firm-fixed price contract for one hundred and forty (140) C-160 Cargo Hooks for the CH-47 Aircraft. Orders of new equipment in the weapons handling operating segment had a slight increase of approximately $0.1 million in fiscal 2008 as compared to fiscal 2007 and was attributable to the award of a $5.2 million contract for the manufacture and support of the High Mobility Artillery Rocket System (HIMARS) rocket pod loading hoists for the U.S. Army.

New orders for overhaul and repair decreased approximately $5.4 million in fiscal 2008 as compared to fiscal 2007 with $4.5 million due to decreased orders in the hoist and winch operating segment and $0.9 million of decreased orders in the cargo hook operating segment.

New orders for engineering in the weapons handling operating segment were approximately $6.3 million in fiscal 2008, as compared to $0.1 million in fiscal 2007. This increase was the direct result of a $3.7 million contract for the system design and development of a recovery winch for the Field Recovery and Maintenance Recovery Vehicle (FRMV) being developed for the U.S. Army under the Future Combat Systems (FCS) program.

During fiscal 2008, as compared to the prior fiscal year, orders for spare parts in the hoist and winch operating segment declined approximately $4.5 million and orders for spare parts in the cargo hook operating segment declined by approximately $1.0 million. The demand for spare parts was weak during fiscal 2008, we believe, due to a delay associated with the approval of the 2008 U.S. Government Defense budget, which was authorized by legislation that became effective in late January 2008. This is reflected in the booking of new orders for spare parts totaling approximately $16.3 million, which was $5.1 million less than the amount booked in fiscal 2007.

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Backlog. Backlog at March 31, 2008 was $124.3 million, an increase of $5.1 million from the $119.2 million at March 31, 2007. The increase in the backlog is mainly attributable to a $3.7 million contract for the system design and development of a recovery winch for the Field Recovery and Maintenance Recovery Vehicle (FRMV) being developed for the U.S. Army under the Future Combat Systems (FCS) program. Also included in the backlog at March 31, 2008 are three orders totaling approximately $65.0 million related to the Airbus A400M aircraft. These three orders are scheduled to be shipped starting in late calendar 2009 and continuing through 2020. The product backlog varies substantially from time to time due to the size and timing of orders. We measure backlog by the amount of products or services that our customers have committed by contract to purchase from us as of a given date. Approximately $37.1 million of backlog at March 31, 2008 is scheduled for shipment during the next 12 months. The book-to-bill ratio is computed by dividing the new orders received during the period by the sales for the period. A book-to-bill ratio in excess of 1.0 is potentially indicative of continued overall growth in our sales. Our book-to-bill ratio for fiscal 2008 was 1.1 as compared to 1.4 for fiscal 2007. The decrease in the book-to-bill ratio was directly related to the higher order intake related to the A400M military transport aircraft totaling $21.5 million in fiscal 2007. Cancellations of purchase orders or reductions of product quantities in existing contracts, although seldom occurring, could substantially and materially reduce our backlog. Therefore, our backlog may not represent the actual amount of shipments or sales for any future period.

Fiscal 2007 Compared to Fiscal 2006

	Fiscal Year Ended				Increase
	March 31,		March 31,		(decrease)
(In thousands)	2007		2006		$			%
New Equipment	$	33,379	$	28,644	$	4,735			16.5
Spare Parts		24,001		18,834		5,167			27.4
Overhaul and Repair		15,492		15,736		(244	)		(1.6	)
Engineering Services		467		1,204		(737	)		(61.2	)
Net Sales		73,339		64,418		8,921			13.8
Cost of Sales		40,853		36,457		4,396			12.1
Gross Profit		32,486		27,961		4,525			16.2
General, administrative, and selling expenses		19,890		15,789		4,101			26.0
Interest expense		4,231		9,320		(5,089	)		(54.6	)
Loss on extinguishment of debt		1,331		396		935			236.1
Net income	$	3,961	$	1,292	$	2,669			206.6

Net Sales. Our net sales increased to $73.3 million for fiscal 2007, a 14% increase from net sales of $64.4 million in fiscal 2006. This increase in sales was driven by new equipment and spare parts sales. Increases in sales of approximately $3.3 million in the cargo hook operating segment and approximately $1.4 million in the hoist and winch operating segments accounted for the new equipment sales increase of $4.7 million. Sales growth in the hoist and winch operating segment accounted for virtually all of the 27% increase in spare parts sales. Shipments in the cargo hook operating segment of overhaul and repair increased by approximately $1.4 million, but were offset by approximately $1.7 million of decreased shipments in the hoist and winch operating segment of overhaul and repair.

Cost of Sales. The three operating segments of hoist and winch, cargo hooks, and weapons handling equipment have generated sales in three components: new equipment, overhaul and repair, and spare parts, each of which has progressively better margins. Accordingly, cost of sales as a percent of sales will be affected by the weighting of these components to the total sales volume. In fiscal 2007, the $40.9 million cost of sales as a percent of sales was approximately 56%. In fiscal 2006, the $36.5 million cost of sales

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as a percentage of sales was approximately 57%. The 1% decrease was mainly due to the mix of new equipment and spare parts activity in the hoist and winch and cargo hook operating segments.

Gross Profit. As discussed in the “Cost of Sales” section above, the three components of sales in each of the operating segments have margins reflective of the market. During the last four fiscal years, the gross profit margin on new equipment has been generally in the range of 31% to 35%, with overhaul and repair ranging from 27% to 37% and spare parts ranging from 64% to 68%. The balance or mix of this activity, in turn, will have an impact on overall gross profit and overall gross profit margins. While we saw a significant increase in new equipment sales in the hoist and winch and cargo hook operating segments during fiscal 2007, as compared to fiscal 2006, the overall gross margin was higher by approximately 1% because we also had sales increases in the hoist and winch operating segment for spare parts which carry higher gross margins.

General, Administrative, and Selling Expenses. General, administrative, and selling expenses increased 26% to $19.9 million for fiscal 2007, as compared to $15.8 million for fiscal 2006. This increase was primarily due to higher planned engineering costs of $2.4 million related to the Company’s contracts for the Airbus A400M Military Transport Aircraft. The remainder of the increase mainly involves increased spending for marketing efforts and costs related to the implementation of the Section 404 internal control requirements of the Sarbanes-Oxley Act of 2002. These three items accounted for approximately 85% of the $4.1 million increase in general, administrative, and selling expenses.

Loss on Extinguishment of Debt. In May 2006, we refinanced and paid in full our former senior credit facility with a new five year, $50.0 million Senior Credit Facility consisting of a $10.0 million revolving credit facility, and two term loans of $20.0 million. As a result of this refinancing, in the first quarter of fiscal 2007 we recorded a pretax charge of $1.3 million consisting of $0.9 million for the write-off of unamortized debt issue costs and $0.4 million for the payment of prepayment premiums. In the fourth quarter of fiscal 2006, we completed the private placement of 2.5 million shares of common stock which allowed us to pay down approximately $17.2 million of our former senior credit facility. The loss on extinguishment of debt in fiscal 2006 of $0.4 million represents the write-off of unamortized debt issue costs related to the debt retired.

Interest Expense. The decrease in interest expense of $5.1 million during fiscal 2007 as compared to fiscal 2006 was the result of the Company’s pay down of debt using the proceeds from the issuance of common stock and the lower weighted average interest rate resulting from the refinancing of our former senior credit facility. (See discussion at “Loss on Extinguishment of Debt” above.)

Net Income. We reported net income of $4.0 million in fiscal 2007 versus net income of $1.3 million in fiscal 2006. This increase in net income resulted from the reasons discussed above.

New Orders. New orders received during fiscal 2007 totaled $101.5 million, a decrease of $19.3 million, as compared with $120.8 million of new orders received during fiscal 2006. Overall, orders for new equipment decreased approximately $11.4 million in fiscal 2007 as compared to fiscal 2006, due to decreased orders in the hoist and winch operating segment. Orders were higher in this operating segment during fiscal 2006 as compared to fiscal 2007 mainly due to the award of a contract worth approximately $45.0 million from Airbus Deutschland GmbH to develop and manufacture cargo winches and cargo cranes for its new A400M military transport aircraft. In fiscal 2007, new orders related to A400M military transport aircraft totaled $21.5 million representing an order from AAR Cargo Systems to develop and manufacture a retrieval winch system. The decrease in orders for new equipment in the hoist and winch operating segment was partially offset by increases in orders for new equipment of $6.9 million in the cargo hook operating segment and $2.1 million in the weapons handling operating segment. New orders received in overhaul and repair decreased approximately $7.7 million in fiscal 2007 as compared to fiscal 2006, the majority of which was related to the cargo hook operating segment.

Backlog. Backlog at March 31, 2007 was $119.2 million, an increase of $28.0 million from the $91.2 million at March 31, 2006. The product backlog varies substantially from time to time due to the size and timing of orders. The increase in the backlog is mainly attributable to a $21.5 million order from AAR Cargo Systems to develop and manufacture a retrieval winch system for the Airbus A400M military transport aircraft. This order, plus approximately $45.0 million in orders received in fiscal 2006 directly from Airbus Deutschland GmbH for cargo winches and cargo cranes for the same aircraft will be shipped starting in calendar 2009 and continuing through 2020. We measure backlog by the amount of products or services that our customers have committed by contract to purchase from us as of a given date. Approximately $34.2 million of backlog at March 31, 2007 is scheduled for shipment during the next

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12 months. The book-to-bill ratio is computed by dividing the new orders received during the period by the sales for the period. A book-to-bill ratio in excess of 1.0 is potentially indicative of continued overall growth in our sales. Our book-to-bill ratio for fiscal 2007 was 1.4 as compared to 1.9 for fiscal 2006. The decrease in the book-to-bill ratio was directly related to the higher order intake related to the Airbus A400M Military transport aircraft during fiscal 2006. Cancellations of purchase orders or reductions of product quantities in existing contracts, although seldom occurring, could substantially and materially reduce our backlog. Therefore, our backlog may not represent the actual amount of shipments or sales for any future period.

Liquidity and Capital Resources

Our principal sources of liquidity are cash on hand, cash generated from operations, and our Senior Credit Facility, as defined below. Our liquidity requirements depend on a number of factors, many of which are beyond our control, including the timing of production under our contracts with the U.S. Government. Our working capital needs fluctuate between periods as a result of changes in program status and the timing of payments by program. Additionally, as our sales are generally made on the basis of individual purchase orders, our liquidity requirements vary based on the timing and volume of orders. Based on cash on hand, future cash expected to be generated from operations and the Senior Credit Facility, we expect to have sufficient cash to meet our requirements for at least the next twelve months.

Borrowings and availability under the revolving portion of our Senior Credit Facility at March 31, 2008 were $2.9 million and $5.6 million, respectively, which included a $1.5 million outstanding letter of credit. See discussion below for the terms related to our Senior Credit Facility. We are also in the process of negotiating a new senior credit facility. Through this facility, and assuming stable interest rates, we expect to lower the annualized interest expense on our debt in fiscal 2009 by an amount in excess of $1.0 million.

In February, 2008, we completed the sale of our headquarters facility and plant in Union, New Jersey. The sales price for the facility was $10.5 million and net proceeds at closing from the sale of the facility of $9.8 million were applied to reduce our Senior Credit Facility. The agreement of sale permits us to lease the facility for up to two years after closing, pending our relocation to a new site, yet to be selected, that will be better suited to our current and expected needs. Accordingly, we are currently leasing the facility. See Note 11 of “Notes to Consolidated Financial Statements” which is included elsewhere in this Report.

Our common stock is listed on the AMEX under the trading symbol BZC.

Working Capital

Our working capital at March 31, 2008 was $28.5 million compared to $23.1 million at the beginning of fiscal 2008. The ratio of current assets to current liabilities was 2.5 to 1.0 at March 31, 2008, compared to 2.1 to 1.0 at the beginning of fiscal 2008.

The major working capital changes during fiscal 2008 resulted from an increase in accounts receivable of $5.0 million, a decrease in inventory of $2.3 million, a decrease in accounts payable of $1.1 million, a decrease in accrued compensation of $0.5 million, and an increase in other current liabilities of $1.6 million. In addition, the revolving portion of our Senior Credit Facility decreased $0.4 million, and the current portion of the term loans under the Senior Credit Facility decreased $2.0 million.

The increase in accounts receivable reflects the high volume of shipments that occurred in the fourth quarter of fiscal 2008, which were 19% higher than shipments made in the fourth quarter of fiscal 2007. The decreases in inventory and accounts payable are reflective of our current shipment pattern, as we work down the inventory levels that were previously built up to accommodate a product sales mix more heavily weighted toward new equipment sales which requires a longer lead time. The decrease in accrued compensation was primarily due to incentive payments made in the first quarter of fiscal 2008. The decrease in the revolving portion of the Senior Credit Facility reflects the working capital demands of the Company. The decrease in the current portion of our Senior Credit Facility is due to the mandatory prepayment for fiscal 2007 of approximately $2.0 million, as discussed below, which was paid in July 2007. The increase in other current liabilities is predominantly due to the current portion of the deferred gain on the sale of the headquarters facility and plant in Union, New Jersey, and the adoption of the provisions of FIN No. 48, “Accounting for Uncertainty in Income Taxes”.

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The number of days that sales were outstanding in accounts receivable increased to 67.3 days at
March 31, 2008, from 52.2 days at March 31, 2007. The increase in days was attributable to the 48% higher shipments made in March of fiscal 2008 as compared to March of fiscal 2007. Inventory turnover increased to 2.24 turns from 2.12 turns at March 31, 2007. The increase in the inventory turns is reflective of the lower inventory levels as discussed above.

Capital Expenditures

Cash paid for additions to property, plant and equipment was $1.0 million and $1.1 million for fiscal 2008 and fiscal 2007, respectively.

Senior Credit Facility

On May 1, 2006, we refinanced and paid in full our former senior credit facility with a new five year $50.0 million senior credit facility (the “Senior Credit Facility”) consisting of a $10.0 million revolving credit facility, and two term loans of $20.0 million each, which had a blended interest rate of 6.82% at March 31, 2008. As a result of this refinancing, in the first quarter of fiscal 2007, we recorded a pretax charge of $1.3 million, consisting of $0.9 million for the write-off of unamortized debt issue costs and $0.4 million for the payment of prepayment premiums. The term loans require monthly principal payments of $0.2 million, an additional quarterly principal payment of $50,000, and a mandatory prepayment for fiscal 2007 of approximately $2.0 million, as discussed below, which was paid in July 2007. We will not have a mandatory prepayment for fiscal 2008 due to the pay down of principal made from the net proceeds received from the sale of our headquarters facility and plant in Union, NJ, which was completed in February 2008. The remaining payments under the term loans are due at maturity. Accordingly, the balance sheet reflects $3.1 million of current maturities due under term loans of the Senior Credit Facility as of
March 31, 2008.

The Senior Credit Facility contains certain mandatory prepayment provisions in the event of extraordinary income, the issuance of equity in the Company, or items which are linked to cash flow. The cash flow provision requires prepayment of the Senior Credit Facility in an amount equal to 50% of earnings before interest, taxes, depreciation, and amortization (EBITDA) less principal payments, interest payments, tax payments, capital expenditures and, with respect to our fiscal year 2007, certain environmental remediation payments and the final payment to the U.S. Government pursuant to a settlement with the government concluded September 8, 2005. Each such prepayment is applied first to the outstanding principal of one of the term loans up to a certain recapture amount, then ratably to the outstanding principal of all of the term loans until paid in full, and then to the outstanding principal of the revolving credit facility. A mandatory prepayment for fiscal 2007 of approximately $2.0 million was required under this provision and was paid in July, 2007. We will not have a mandatory prepayment for fiscal 2008 due to the pay down of principal made from the net proceeds received from the sale of our headquarters facility and plant in Union, NJ, which was completed in February 2008.

The Senior Credit Facility prohibits the payment of dividends and is secured by all our assets. The Senior Credit Facility allows us to issue letters of credit against the total borrowing capacity of the facility. At March 31, 2008, we were in compliance with the provisions of the Senior Credit Facility. At March 31, 2008, there was $2.9 million in outstanding borrowings, a $1.5 million outstanding letter of credit and $5.6 million in availability, under the revolving portion of the Senior Credit Facility.

Amortization of loan origination fees on the Senior Credit Facility and the former senior credit facility amounted to $0.1 million, $0.1 million, and $0.6 million in 2008, 2007, and 2006, respectively.

We have long-term debt maturities of $2.5 million, $0.2 million and $17.1 million in fiscal 2010, 2011 and 2012, respectively. These maturities reflect the payment terms of the Senior Credit Facility.

TAX BENEFITS FROM NET OPERATING LOSSES

At March 31, 2008, we have federal and state net operating loss carry forwards, or NOLs, of approximately $30.7 million and $69.0 million, respectively, which are due to expire in fiscal 2022 through fiscal 2025 and fiscal 2009 through fiscal 2012, respectively.

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The benefit of the state NOL due to expire in fiscal 2009 is approximately $4.5 million. These NOLs may be used to offset future taxable income through their respective expiration dates and thereby reduce or eliminate our federal and state income taxes otherwise payable. A corresponding valuation allowance of $5.6 million has been established relating to the state NOL, as it is our belief that it is more likely than not that a portion of the state NOLs are not realizable. Failure to achieve sufficient taxable income to utilize the NOLs would require the recording of an additional valuation allowance against the deferred tax assets.

The Internal Revenue Code of 1986, as amended (the “Code”), imposes significant limitations on the utilization of NOLs in the event of an “ownership change” as defined under section 382 of the Code (the “Section 382 Limitation”). The Section 382 Limitation is an annual limitation on the amount of pre-ownership NOLs that a corporation may use to offset its post-ownership change income. The Section 382 Limitation is calculated by multiplying the value of a corporation’s stock immediately before an ownership change by the long-term
tax-exempt rate (as published by the Internal Revenue Service). Generally, an ownership change occurs with respect to a corporation if the aggregate increase in the percentage of stock ownership by value of that corporation by one or more 5% shareholders (including specified groups of shareholders who, in the aggregate, own at least 5% of that corporation’s stock) exceeds 50 percentage points over a three-year testing period. We believe that we have not gone through an ownership change that would cause our NOLs to be subject to the Section 382 Limitation. However, given our current ownership structure, anyone contemplating an investment in our common stock which would create a new 5% shareholder should consult with their tax adviser when evaluating such an investment.

If we do not generate adequate taxable earnings, some or all of our deferred tax assets may not be realized. Additionally, changes to the federal and state income tax laws also could impact our ability to use the NOLs. In such cases, we may need to revise the valuation allowance established related to deferred tax assets for state tax purposes.

SUMMARY DISCLOSURE ABOUT CONTRACTUAL
OBLIGATIONS AND COMMERCIAL COMMITMENTS

The following table reflects a summary of our contractual cash obligations for the next several fiscal years (in thousands):

Payments Due By Period

			Less Than						More Than
	Total		1 Year		1-3 Years		3-5 Years		5 Years
Debt principal repayments (a)	$	22,906	$	3,057	$	2,702	$	17,147	$	—
Estimated interest payments on long-term debt (b)		4,019		1,469		2,453		97		—
Operating leases		1,206		964		218		24		—
Interpretation 48 obligation, including interest and penalties (c)		350		350		—		—		—
Total	$	28,481	$	5,840	$	5,373	$	17,268	$	—

(a)	Obligations for long-term debt reflect the requirements of the Term Loans under the Senior Credit Facility. See Note 6 of “Notes to Consolidated Financial Statements” which is included elsewhere in this Report.
(b)	Estimated interest payments on long-term debt reflect the scheduled interest payments of the Term Loans under the Senior Credit Facility and assume an effective weighted average interest rate of 6.82%, the Company’s blended interest rate at March 31, 2008.
(c)	The FIN 48 obligations shown in the table above represents unrecognized tax benefits. See Note 5 of “Notes to Consolidated Financial Statements” which is included elsewhere in this Report.

INFLATION

19

While neither inflation nor deflation has had, and we do not expect it to have, a material impact upon operating results, we cannot assure you that our business will not be affected by inflation or deflation in the future.

CONTINGENCIES

Environmental Matters — We evaluate the exposure to environmental liabilities using a financial risk assessment methodology, including a system of internal environmental audits and tests, and outside consultants. This risk assessment includes the identification of risk events/issues, including potential environmental contamination at Company and off-site facilities; characterizes risk issues in terms of likelihood, consequences and costs, including the year(s) when these costs could be incurred; analyzes risks using statistical techniques; and, constructs risk cost profiles for each site. Remediation cost estimates are prepared from this analysis and are taken into consideration in developing project budgets from third party contractors. Although we take great care in the development of these risk assessments and future cost estimates, the actual amount of the remediation costs may be different from those estimated as a result of a number of factors including: changes to government regulations or laws; changes in local construction costs and the availability of personnel and materials; unforeseen remediation requirements that are not apparent until the work actually commences; and other similar uncertainties. We do not include any unasserted claims that we might have against others in determining the liability for such costs, and, except as noted with regard to specific cost sharing arrangements, have no such arrangements, nor have we taken into consideration any future claims against insurance carriers that we might have in determining our environmental liabilities. In those situations where we are considered a de minimis participant in a remediation claim, the failure of the larger participants to meet their obligations could result in an increase in our liability with regard to such a site.

We continue to participate in environmental assessments and remediation work at eleven locations, including certain former facilities. Due to the nature of environmental remediation and monitoring work, such activities can extend for up to thirty years, depending upon the nature of the work, the substances involved, and the regulatory requirements associated with each site. In calculating the net present value (where appropriate) of those costs expected to be incurred in the future, we used a discount rate of 4.32%, which is the 20 year Treasury Bill rate at the end of the fiscal 2008 and represents the risk free rate for the 20 years those costs are expected to be paid. We believe that the application of this rate produces a result which approximates the amount that would hypothetically satisfy our liability in an arms-length transaction. Based on the above, we estimate the current range of undiscounted cost for remediation and monitoring to be between $5.4 million and $9.4 million with an undiscounted amount of $6.6 million to be most probable. Current estimates for expenditures, net of recoveries pursuant to cost sharing agreements, for each of the five succeeding fiscal years are $1.6 million, $0.6 million, $1.4 million, $0.8 million, and $0.6 million respectively, with $1.6 million payable thereafter. Of the total undiscounted costs, we estimate that approximately 50% will relate to remediation activities and that 50% will be associated with monitoring activities.

We estimate that the potential cost for implementing corrective action at nine of these sites will not exceed $0.5 million in the aggregate, payable over the next several years, and have provided for the estimated costs, without discounting for present value, in our accrual for environmental liabilities. In the first quarter of fiscal 2003, we entered into a consent order for a former facility in New York, which is currently subject to a contract for sale, pursuant to which we have developed a remediation plan for review and approval by the New York Department of Environmental Conservation. Based upon the characterization work performed to date, we have accrued estimated costs of approximately $1.7 million without discounting for present value. The amounts and timing of such payments are subject to the approved remediation plan.

The environmental cleanup plan we presented during the fourth quarter of fiscal 2000 for a portion of a site in Pennsylvania which continues to be owned, although the related business has been sold, was approved during the third quarter of fiscal 2004. This plan was submitted pursuant to the Consent Order and Agreement with the Pennsylvania Department of Environmental Protection (“PaDEP”) concluded in fiscal 1999. Pursuant to the Consent Order, upon its execution we paid $0.2 million for past costs, future oversight expenses and in full settlement of claims made by PaDEP related to the environmental remediation of the site with an additional $0.2 million paid in fiscal 2001. A second Consent Order was concluded with PaDEP in the third quarter of fiscal 2001 for another portion of the site, and a third Consent Order for the remainder of the site was concluded in the third quarter of fiscal 2003 (the “2003 Consent Order”). An environmental cleanup plan for the portion of the site covered by the 2003 Consent Order was

20

presented during the second quarter of fiscal 2004. We are also administering an agreed settlement with the Federal government, concluded in the first quarter of fiscal 2000, under which the government pays 50% of the direct and indirect environmental response costs associated with a portion of the site. We also concluded an agreement in the first quarter of fiscal 2006, under which the Federal government paid an amount equal to 45% of the estimated environmental response costs associated with another portion of the site. No future payments are due under this second agreement. At March 31, 2008, the cleanup reserve was $2.9 million based on the net present value of future expected cleanup and monitoring costs and is net of expected reimbursement by the Federal Government of $0.5 million. The aggregate undiscounted amount associated with the estimated environmental response costs for the site in Pennsylvania is $3.4 million. We expect that remediation at this site, which is subject to the oversight of the Pennsylvania authorities, will not be completed for several years, and that monitoring costs, although expected to be incurred over twenty years, could extend for up to thirty years.

At March 31, 2008, the aggregate amount of undiscounted costs associated with environmental assessments and remediation was $6.6 million. The total environmental liability as disclosed in Schedule II to this Report is $5.8 million which includes a discount of $0.8 million at 4.32%.

In addition, we have been named as a potentially responsible party in four environmental proceedings pending in several states in which it is alleged that we are a generator of waste that was sent to landfills and other treatment facilities. Such properties generally relate to businesses which have been sold or discontinued. We estimate that expected future costs, and the estimated proportional share of remedial work to be performed associated with these proceedings, will not exceed $0.1 million without discounting for present value and we have provided for these estimated costs in our accrual for environmental liabilities.

Litigation — We are also engaged in various other legal proceedings incidental to our business. It is the opinion of management that, after taking into consideration information furnished by our counsel, these matters will have no material effect on our consolidated financial position, results of our operations, or cash flows in future periods.

RECENTLY ISSUED ACCOUNTING STANDARDS

In March 2007, FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 161, “Disclosures about Derivative Instruments and Hedging Activities, An Amendment of FASB Statement No. 133,” SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”, does not provide adequate information about how derivative and hedging activities affect an entity’s financial position, financial performance, and cash flows. Accordingly, SFAS No. 161 requires enhanced disclosures about an entity’s derivative and hedging activities and thereby improves the transparency of financial reporting. SFAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008. The adoption of the provisions of SFAS 161 is not expected to have a material effect on our financial position, results of operations, or cash flows.

In December 2007, the FASB issued SFAS No. 141 (Revised 2007), “Business Combinations” (“SFAS 141R”). SFAS 141R will significantly change the accounting for business combinations in a number of areas including the treatment of contingent consideration, contingencies, acquisition costs, research and development assets and restructuring costs. In addition, under SFAS 141R, changes in deferred tax asset valuation allowances and acquired income tax uncertainties in a business combination after the measurement period will impact income taxes. SFAS 141R is effective for fiscal years beginning after December 15, 2008. The adoption of the provisions of SFAS 141R is not expected to have a material effect on our financial position, results of operations, or cash flows.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, An Amendment of ARB No. 51.” SFAS 160 amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It also amends certain of ARB 51’s consolidation procedures for consistency with the requirements of SFAS 141R. SFAS 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. The statement shall be applied prospectively as of the beginning of the fiscal year in which the statement is initially adopted. The adoption of the provisions of SFAS 160 is not expected to have a material effect on our financial position, results of operations, or cash flows.

In February 2007, FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities”, providing

21

companies with an option to report selected financial assets and liabilities at fair value. The objective of SFAS 159 is to reduce both complexity in accounting for financial instruments and the volatility in earnings caused by measuring related assets and liabilities differently. Generally accepted accounting principles have required different measurement attributes for different assets and liabilities that can create artificial volatility in earnings. SFAS 159 helps to mitigate this type of accounting-induced volatility by enabling companies to report related assets and liabilities at fair value, which would likely reduce the need for companies to comply with detailed rules for hedge accounting. SFAS 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. SFAS 159 requires companies to provide additional information that will help investors and other users of financial statements to more easily understand the effect of the Company’s choice to use fair value on its earnings. It also requires entities to display the fair value of those assets and liabilities for which the Company has chosen to use fair value on the face of the balance sheet. The effective date of SFAS 159 for our Company is April 1, 2008. The adoption of the provisions of SFAS 159 is not expected to have a material effect on our financial position, results of operations, or cash flows.

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 106, and 132(R).” SFAS 158 requires companies to recognize a net asset for a defined benefit postretirement pension or healthcare plan’s over funded status or a net liability for a plan’s under funded status in its balance sheet. SFAS 158 also requires companies to recognize changes in the funded status of a defined benefit postretirement plan in accumulated other comprehensive income in the year in which the changes occur. SFAS 158 was adopted on March 31, 2007. See Footnote 9 of “Notes to Consolidated Financial Statements” which is included elsewhere in this Report related to the adoption of SFAS 158. Additionally, SFAS 158 requires companies to measure plan assets and benefit obligations as of the date of our fiscal year end balance sheet, which is consistent with our current practice. This requirement is effective for fiscal years ending after December 15, 2008. The adoption of the provisions of SFAS 158 is not expected to have a material effect on the Company’s financial position, results of operations, or cash flows.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007. The adoption of the provisions of SFAS 157 is not expected to have a material effect on our financial position, results of operations, or cash flows.

In July 2006, the FASB issued FIN No. 48, “Accounting for Uncertainty in Income Taxes — An Interpretation of SFAS 109”. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS 109, “Accounting for Income Taxes.” FIN 48 also prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. In addition, FIN 48 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The provisions of FIN 48 are to be applied to all tax positions upon initial adoption of this standard. Only tax positions that meet the more-likely-than-not recognition threshold at the effective date may be recognized or continue to be recognized as an adjustment to the opening balance of retained earnings (or other appropriate components of equity) for that fiscal year. The provisions of FIN 48 are effective for fiscal years beginning after December 15, 2006. We adopted FIN 48 effective April 1, 2007. See Note 5 of Notes to Consolidated Financial Statements included elsewhere in this Report.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to various market risks, primarily changes in interest rates associated with the Senior Credit Facility. At March 31, 2008, $25.5 million of the Senior Credit Facility was tied to LIBOR and, as such, a 1% increase or decrease will have the effect of increasing or decreasing interest expense by approximately $0.3 million based on the amount outstanding under the facility at March 31, 2008.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Financial Statements:

23

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders
Breeze-Eastern Corporation
Union, New Jersey

We have audited the accompanying consolidated balance sheet of Breeze-Eastern Corporation and subsidiaries (the “Company”) as of March 31, 2008, and the related consolidated statements of operations, stockholders’ equity (deficit) and cash flows for the year then ended. Our audit also included the financial statement schedule listed in the Index at Item 15. We also have audited the Company’s internal control over financial reporting as of March 31, 2008, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying management’s report on internal control over financial reporting. Our responsibility is to express an opinion on these financial statements, and financial statement schedule, and an opinion on the Company’s internal control over financial reporting based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audit of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Breeze-Eastern Corporation and subsidiaries as of March 31, 2008, and the results of their operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 31, 2008, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

/s/ Margolis & Company P.C.

Bala Cynwyd, PA
May 15, 2008

24

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Breeze-Eastern Corporation
Union, New Jersey

We have audited the accompanying consolidated balance sheets of Breeze-Eastern Corporation and subsidiaries (the “Company”) as of March 31, 2007, and the related statements of consolidated operations, stockholders’ equity (deficit), and cash flows for each of the two years ended March 31, 2007. Our audits also included the financial statement schedule listed in the Index at Item 15. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. Our audit of financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of March 31, 2007, and the results of their operations and their cash flows for the two years ended March 31, 2007, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

As discussed in Note 8 to the consolidated financial statements, effective April 1, 2006, the Company adopted Statement of Financial Accounting Standards (“FASB Statement”) No. 123R — Share Based Payment.

/s/ Deloitte & Touche LLP

Parsippany, New Jersey
June 14, 2007

25

Consolidated Balance Sheets

(In thousands, except share data)

	MARCH 31,
ASSETS	2008			2007
CURRENT ASSETS:
Cash and cash equivalents	$	1,876		$	2,127
Accounts receivable (net of allowance for doubtful accounts of $101 and $72 in 2008 and 2007, respectively)		19,733			14,761
Inventories		18,227			20,517
Prepaid expenses and other current assets		410			369
Deferred income taxes		7,545			7,181
Total current assets		47,791			44,955
PROPERTY:
Land		—			534
Buildings		—			4,192
Machinery and equipment		4,893			4,555
Furniture, fixtures, and information systems		8,333			7,993
Total		13,226			17,274
Less accumulated depreciation and amortization		9,393			12,495
Property — net		3,833			4,779
OTHER ASSETS:
Deferred income taxes		13,819			20,808
Goodwill		402			402
Real estate held for sale		4,000			4,000
Other		6,345			5,527
Total other assets		24,566			30,737
TOTAL	$	76,190		$	80,471
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Revolving credit facility	$	2,920		$	3,289
Current portion of long-term debt		3,057			5,057
Accounts payable — trade		3,934			4,989
Accrued compensation		2,952			3,486
Accrued income taxes		353			447
Accrued interest		136			295
Other current liabilities		5,895			4,252
Total current liabilities		19,247			21,815
LONG-TERM DEBT PAYABLE TO BANKS		19,849			32,750
OTHER LONG-TERM LIABILITIES		10,202			9,007
COMMITMENTS AND CONTINGENCIES (Notes 11 and 12)
STOCKHOLDERS’ EQUITY
Preferred stock — authorized, 300,000 shares; none issued		—			—
Common stock — authorized, 14,700,000 shares of $.01 par value; issued, 9,751,315 and 9,670,566 shares in 2008 and 2007, respectively		97			97
Additional paid-in capital		93,090			92,111
Accumulated deficit		(59,580	)		(68,772	)
Accumulated other comprehensive loss		(16	)		(48	)
		33,591			23,388
Less treasury stock, at cost – 412,323 and 395,135 shares in 2008 and 2007, respectively		(6,699	)		(6,489	)
Total stockholders’ equity		26,892			16,899
TOTAL	$	76,190		$	80,471

See notes to consolidated financial statements.

26

Statements of Consolidated Operations

(In thousands, except share data)

	Years ended March 31,
	2008			2007		2006
Net sales	$	75,974		$	73,339	$	64,418
Cost of sales		43,457			40,853		36,457
Gross profit		32,517			32,486		27,961
General, administrative and selling expenses		19,574			19,890		15,789
Interest expense		3,311			4,231		9,320
Interest income and other expense — net		165			195		130
Gain on sale of facility		(6,811	)		—		—
Loss on extinguishment of debt		—			1,331		396
Income before income taxes		16,278			6,839		2,326
Income tax provision		6,836			2,878		1,034
Net income	$	9,442		$	3,961	$	1,292
Earnings per share:
Basic:
Net income per share:	$	1.01		$	0.43	$	0.18
Diluted:
Net income per share:	$	1.00		$	0.42	$	0.18
Weighted-average basic shares outstanding		9,314,000			9,258,000		7,006,000
Weighted-average diluted shares outstanding		9,396,000			9,354,000		7,042,000

See notes to consolidated financial statements.

27

Statements of Consolidated Cash Flows

(In thousands)

	Years ended March 31,
	2008			2007			2006
Cash flows from operating activities:
Net income	$	9,442		$	3,961		$	1,292
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on sale of property, plant and equipment		(8,547	)		—			—
Deferred gain on sale of property, plant & equipment		1,731			—			—
Write-off of unamortized loan fees		—			944			396
Depreciation and amortization		1,319			1,223			1,561
Noncash interest expense		106			100			1,122
Stock based compensation		630			608			—
Provision for losses on accounts receivable		81			47			10
Deferred taxes-net		6,625			2,452			709
Changes in assets and liabilities :
(Increase) decrease in accounts receivable and other receivables		(5,053	)		2,253			(6,335	)
Decrease (increase) in inventories		2,290			(2,482	)		(2,138	)
(Increase) decrease in other assets		(954	)		5			502
(Decrease) increase in accounts payable		(1,223	)		(2,537	)		4,111
(Decrease) increase in accrued compensation		(534	)		38			1,178
Increase (decrease) in income taxes payable		6			(316	)		111
Increase (decrease) in other liabilities		515			(322	)		(1,231	)
Net cash provided by operating activities		6,434			5,974			1,288
Cash flows from investing activities:
Capital expenditures		(979	)		(1,191	)		(1,313	)
Proceeds from sale of property, plant & equipment		10,505			—			—
Expenses related to the sale of property, plant & equipment		(1,086	)		—			—
Decrease in notes and other receivables		—			—			133
Decrease in restricted cash-net		6			499			8
Net cash provided by (used in) investing activities		8,446			(692	)		(1,172	)
Cash flows from financing activities:
Payments on long-term debt		(14,901	)		(43,867	)		(20,122	)
Proceeds from long-term debt and borrowings		—			40,000			—
(Repayments) borrowings of other debt		(369	)		920			1,904
Payment of debt issue costs		—			(419	)		—
Proceeds from private placement of common stock		—			—			18,725
Expenses related to the private placement of common stock		(5	)		(73	)		(1,540	)
Exercise of stock options		144			123			39
Net cash used in financing activities		(15,131	)		(3,316	)		(994	)
(Decrease) increase in cash		(251	)		1,966			(878	)
Cash at beginning of year		2,127			161			1,039
Cash at end of year	$	1,876		$	2,127		$	161
Supplemental information:
Interest payments	$	3,357		$	4,461		$	8,560
Income tax payments	$	230		$	857		$	213
Increase in senior subordinated note and term loans for paid-in-kind interest expense	$	—		$	—		$	863
Non-cash financing activity for stock option exercise	$	210		$	62		$	—
Non-cash investing activity for additions to property plant and equipment	$	174		$	6		$	121

28

Statements of Consolidated Stockholders’ Equity (Deficit)

(In thousands, except share data)

																	Accumulated
Years ended											Additional						Other			Total
March 31, 2008,	Common Stock				Treasury Stock						Paid-In			Accumulated			Comprehensive			Comprehensive
2007 and 2006	Shares		Amount		Shares			Amount			Capital			Deficit			Loss			Income (Loss)
BALANCE, MARCH 31, 2005		7,087,211	$	71		(390,135	)		($6,427	)	$	74,022			($74,025	)		—
Net income		—		—		—			—			—			1,292			—		$	1,292
Private placement of common stock, net of expenses		2,500,000		25		—			—			17,160			—			—			—
Issuance of stock under stock option plan		6,400		—		—			—			39			—			—			—
Issuance of stock under compensation and bonus plan		25,242										171			—			—			—
BALANCE, MARCH 31, 2006		9,618,853		96		(390,135	)		(6,427	)		91,392			(72,733	)		—			1,292
Net income		—		—		—			—			—			3,961			—		$	3,961
Expenses from private placement of common stock		—		—		—			—			(73	)		—			—			—
Issuance of stock under stock option plan		29,836		1		(5,000	)		(62	)		184			—			—			—
Issuance of stock under compensation and bonus plan		21,877		—		—			—			—			—			—			—
Stock based compensation expense		—		—		—			—			608			—			—			—
Initial adoption of SFAS No. 158—net of taxes		—		—		—			—			—			—			(48	)		(48	)
BALANCE, MARCH 31, 2007		9,670,566		97		(395,135	)		(6,489	)		92,111			(68,772	)		(48	)		3,913
Net income		—		—		—			—			—			9,442			—		$	9,442
Initial adoption of FIN 48		—		—		—			—			—			(250	)		—			—
Expenses from private placement of common stock		—		—		—			—			(5	)		—			—			—
Issuance of stock under stock option plan		56,418		—		(17,188	)		(210	)		354			—			—			—
Issuance of stock under compensation and bonus plan		24,331		—		—			—			—			—			—			—
Stock based compensation expense		—		—		—			—			630			—			—			—
Change in funded status of the defined benefit post retirement plan, net of taxes		—		—		—			—			—			—			32			32
BALANCE, MARCH 31, 2008		9,751,315	$	97		(412,323	)	$	(6,699	)	$	93,090		$	(59,580	)	$	(16	)	$	9,474

29

Notes To Consolidated Financial Statements

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business — The fiscal year for Breeze-Eastern Corporation (the“Company”) ends on March 31. Accordingly, all references to years in the Notes to Consolidated Financial Statements refer to the fiscal year ended March 31 of the indicated year unless otherwise specified.

The Company, which has one manufacturing facility in the United States, designs, develops, manufactures, sells, and services a complete line of sophisticated lifting and restraining products, principally performance-critical helicopter rescue hoist and cargo hook systems, winches, and hoists for aircraft and weapons systems.

Use of Estimates — The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates, judgments, and assumptions. The Company believes that the estimates, judgments, and assumptions upon which it relies are reasonable based upon information available to the Company at the time that these estimates, judgments, and assumptions are made. These estimates are based on historical experience and information that is available to management about current events and actions the Company may take in the future. These estimates, judgments, and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenues and expenses during the periods presented. Significant items subject to estimates and assumptions include the carrying value of long-lived assets; valuation allowances for receivables, inventories and deferred tax assets; environmental liabilities; litigation contingencies; and obligations related to employee benefit plans. To the extent there are material differences between these estimates, judgments, or assumptions and actual results, the Company’s financial statements will be affected.

Principles of Consolidation — The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Intercompany balances and transactions are eliminated in consolidation.

Revenue Recognition — Revenue related to equipment sales is recognized when title and risk of loss have been transferred, collectibility is reasonably assured, and pricing is fixed or determinable. Revenue related to repair and overhaul sales is recognized when the related repairs or overhaul are complete and the unit is shipped to the customer. Revenue related to contracts in which the Company is reimbursed for costs incurred plus an agreed upon profit are recorded as costs are incurred.

Cash and Cash Equivalents — Cash and cash equivalents include all cash balances and highly liquid short-term investments which mature within three months of purchase.

Inventories — Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out method. Cost includes material, labor, and manufacturing overhead costs.

Property, Plant and Equipment and Related Depreciation — Property is recorded at cost. Provisions for depreciation are made on a straight-line basis over the estimated useful lives of depreciable assets. Depreciation expense for the years ended March 31, 2008, 2007, and 2006 was $1.2 million, $1.1 million, and $0.8 million, respectively.

The Company has classified on the consolidated balance sheets a property currently under contract which it owns in Glen Head, New York as real estate held for sale. The sale of the property is expected to be concluded upon completion of municipal approvals and soil remediation pursuant to the remediation plan approved by the New York Department of Environmental Conservation. See note 12 for discussion of environmental matters related to this site.

Average useful lives for property, plant, and equipment are as follows:

Buildings	10 to 33 years
Machinery and equipment	3 to 10 years
Furniture and fixtures	3 to 10 years
Computer hardware and software	3 to 5 years

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Earnings Per Share (EPS) — The computation of basic earnings per share is based on the weighted-average number of common shares outstanding. The computation of diluted earnings per share assumes the foregoing and, in addition, the exercise of all dilutive stock options using the treasury stock method. The diluted loss per share is computed using the same weighted-average number of shares as the basic earnings per share computation.

The components of the denominator for basic earnings per common share and diluted earnings per common share are reconciled as follows:

	2008		2007		2006
Basic earnings per common share:
Weighted-average common shares outstanding		9,314,000		9,258,000		7,006,000
Diluted earnings per common share:
Weighted-average common shares outstanding		9,314,000		9,258,000		7,006,000
Stock options		82,000		96,000		36,000
Denominator for diluted earnings per common share		9,396,000		9,354,000		7,042,000

During the years ended March 31, 2008, 2007, and 2006, options to purchase 117,167 shares, 43,875 shares, and 229,250 shares of common stock, respectively, were not included in the computation of diluted EPS because the options exercise prices were greater than the average market price of the common shares.

Product Warranty Costs-Equipment has a one year warranty for which a reserve is established using historical averages and specific program contingencies when considered necessary. Changes in the carrying amount of accrued product warranty costs for the years ended March 31, 2007 and March 31, 2008, are summarized as follows (in thousands):

Balance at March 31, 2006	$	301
Warranty costs incurred		(383	)
Product warranty accrual		557
Balance at March 31, 2007		475
Warranty costs incurred		(311	)
Product warranty accrual		233
Balance at March 31, 2008	$	397

Research, Development, and Engineering Costs — Research and development costs and engineering costs, which are charged to expense when incurred, amounted to $5.3 million, $4.6 million, and $2.4 million in 2008, 2007, and 2006, respectively. Included in these amounts were expenditures of $1.3 million, $0.8 million, and $1.1 million in 2008, 2007, and 2006, respectively, which represent costs related to research and development activities.

Shipping and Handling Costs - Costs for shipping and handling incurred by the Company for third party shippers are included in general, administrative and selling expense. These expenses for the years ended March 31, 2008, 2007, and 2006, were $0.2 million, $0.1 million, and $0.1 million, respectively.

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Income Taxes — The Company applies SFAS No. 109, Accounting for Income Taxes (“SFAS No. 109”). Under the asset and liability method of SFAS No. 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases. The Company periodically assesses recoverability of deferred tax assets and provisions for valuation allowances are made as required.

The Company adopted the provisions of FASB Interpretation (“FIN”) No. 48, “Accounting for Uncertainty in Income Taxes”, on April 1, 2007. As required by FIN No. 48, which clarifies SFAS No. 109, the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50percent likelihood of being realized upon ultimate settlement with the relevant tax authority.

Financial Instruments — The Company does not hold or issue financial instruments for trading purposes.

Stock-Based Compensation — The Company adopted the provisions of FASB Statement No.123R, “Accounting for Stock-Based Compensation”, on April1, 2006, using the modified prospective method. Under that transition method, compensation cost is recognized for all awards granted after the effective date, and for all awards modified, repurchased, or cancelled after that date. In addition, compensation cost is recognized on or after the effective date for the portion of outstanding awards, for which the requisite service has not yet been rendered, based on the grant date fair value of those awards previously calculated and reported in the pro forma disclosures under FASB Statement No.123, “Accounting for Stock-based Compensation”. Net income for the years ended March 31, 2008 and 2007 includes $ 0.4 million net of tax, of stock-based compensation expense. Stock-based compensation expense was recorded in general, administrative and selling expense. In accordance with the modified prospective adoption method of FASB Statement 123R, financial results for the prior periods have not been restated. Additional compensation cost will be recognized as new options are awarded. The Company has not made any material modifications to its stock-based compensation plans as the result of the issuance of FASB Statement 123R.

Prior to April 1, 2006, the Company had accounted for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion (“APB”) No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. Accordingly, the Company recorded an expense in an amount equal to the excess, if any, of the quoted market price on the grant date over the option price.

The following table includes as reported and proforma information required by FASB Statement No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure”. Proforma information is based on the fair value method under FASB Statement 123 (in thousands, except per share data).

	2006
Net income as reported	$	1,292
Add: Stock-based employee compensation expense included in reported net income, net of related tax effects		85
Deduct: Total stock-based employee compensation expense determined under fair value-based method for all awards, net of related tax effects		(218	)
Proforma net income	$	1,159
Basic earnings per share:
Basic and diluted-as reported	$	0.18
Basic and diluted-proforma	$	0.16

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Impairment of Goodwill and Other Long-Lived Assets — Long-lived assets and certain identifiable intangibles to be held and used are reviewed by the Company for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Impairment reviews for goodwill are performed by comparing the fair value to the reported carrying amount. If the carrying amount exceeds fair value, an impairment loss is recognized. Fair value is determined using quoted market prices when available or present value techniques. At March 31, 2008, the Company tested its goodwill for impairment and determined that it did not have an impairment.

New Accounting Standards - In March 2007, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities, An Amendment of FASB Statement No. 133.” SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”, does not provide adequate information about how derivative and hedging activities affect an entity’s financial position, financial performance, and cash flows. Accordingly, SFAS 161 requires enhanced disclosures about an entity’s derivative and hedging activities and thereby improves the transparency of financial reporting. SFAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008. The adoption of the provisions of SFAS 161 is not expected to have a material effect on the Company’s financial position, results of operations, or cash flows

In December 2007, the FASB issued SFAS No. 141 (Revised 2007), “Business Combinations” (“SFAS 141R”). SFAS 141R will significantly change the accounting for business combinations in a number of areas including the treatment of contingent consideration, contingencies, acquisition costs, research and development assets and restructuring costs. In addition, under SFAS 141R, changes in deferred tax asset valuation allowances and acquired income tax uncertainties in a business combination after the measurement period will impact income taxes. SFAS 141R is effective for fiscal years beginning after December 15, 2008. The adoption of the provisions of SFAS 141R is not expected to have a material effect on the Company’s financial position, results of operations, or cash flows.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, An Amendment of ARB No. 51.” SFAS 160 amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It also amends certain of ARB 51’s consolidation procedures for consistency with the requirements of SFAS 141R. SFAS 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. The statement shall be applied prospectively as of the beginning of the fiscal year in which the statement is initially adopted. The adoption of the provisions of SFAS 160 is not expected to have a material effect on the Company’s financial position, results of operations, or cash flows.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities”, providing companies with an option to report selected financial assets and liabilities at fair value. The Standard’s objective is to reduce both complexity in accounting for financial instruments and the volatility in earnings caused by measuring related assets and liabilities differently. Generally accepted accounting principles have required different measurement attributes for different assets and liabilities that can create artificial volatility in earnings. SFAS 159 helps to mitigate this type of accounting-induced volatility by enabling companies to report related assets and liabilities at fair value, which would likely reduce the need for companies to comply with detailed rules for hedge accounting. SFAS 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities. The Standard requires companies to provide additional information that will help investors and other users of financial statements to more easily understand the effect of the Company’s choice to use fair value on its earnings. It also requires entities to display the fair value of those assets and liabilities for which the Company has chosen to use fair value on the face of the balance sheet. The effective date of SFAS 159 for our Company is April 1, 2008. The adoption of the provisions of SFAS 159 is not expected

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to have a material effect on the Company’s financial position, results of operations, or cash flows.

In September2006, the FASB issued SFAS No.158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No.87, 106, and 132(R).” SFAS 158 requires companies to recognize a net asset for a defined benefit postretirement pension or healthcare plan’s over funded status or a net liability for a plan’s under funded status in its balance sheet. SFAS 158 also requires companies to recognize changes in the funded status of a defined benefit postretirement plan in accumulated other comprehensive income in the year in which the changes occur. SFAS 158 was adopted on March 31, 2007. See Footnote 9 of “Notes to Consolidated Financial Statements” which is included elsewhere in this Report related to the adoption of SFAS 158. Additionally, SFAS 158 requires companies to measure plan assets and benefit obligations as of the date of the fiscal year end balance sheet, which is consistent with the Company’s current practice. This requirement is effective for fiscal years ending after December15, 2008. The adoption of the provisions of SFAS 158 is not expected to have a material effect on the Company’s financial position, results of operations, or cash flows.

In September2006, the FASB issued SFAS Statement No.157, “Fair Value Measurements”. SFAS 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value measurements. SFAS 157 is effective for fiscal years beginning after November15, 2007. The adoption of the provisions of SFAS 157 is not expected to have a material effect on the Company’s financial position, results of operations, or cash flows.

In July 2006, the FASB issued FIN No. 48, “Accounting for Uncertainty in Income Taxes — An Interpretation of SFAS 109”. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS 109, “Accounting for Income Taxes”. FIN48 also prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. In addition, FIN 48 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The provisions of FIN 48 are to be applied to all tax positions upon initial adoption of this standard.Only tax positions that meet the more-likely-than-not recognition threshold at the effective date may be recognized or continue to be recognized as an adjustment to the opening balance of retained earnings (or other appropriate components of equity) for that fiscal year.The provisions of FIN 48 are effective for fiscal years beginning after December 15, 2006.The Company adopted FIN 48 effective April 1, 2007.See Note 5, Income Taxes, for further discussion.

2. INVENTORIES

Inventories at March 31 consisted of the following (in thousands):

	2008		2007
Work in process	$	3,782	$	2,139
Purchased and manufactured parts		14,445		18,378
Total	$	18,227	$	20,517

3. OTHER ASSETS

Other assets at March 31 consisted of the following (in thousands):

	2008		2007
Obligation due from divestiture (a)	$	4,166	$	3,936
Other		2,179		1,591
Total	$	6,345	$	5,527

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(a) Obligation due from divestiture represents the indemnification in favor of the Company relative to a pension plan for a discontinued
      operation. See Note 9.

4. OTHER CURRENT LIABILITIES

Other current liabilities at March 31 consisted of the following (in thousands):

	2008		2007
Accrued medical benefits cost	$	894	$	822
Environmental reserves		1,594		1,626
Other		3,407		1,804
	$	5,895	$	4,252

5. INCOME TAXES

The provision for income taxes is summarized below (in thousands):

	2008			2007		2006
Current expense (credit) :
Federal	$	17		$	345	$	38
Foreign		—			—		120
State		(54	)		81		166
		(37	)		426		324
Deferred		7,173			2,452		761
Change in valuation allowance		( 300	)		—		(51	)
		6,873			2,452		710
Total	$	6,836		$	2,878	$	1,034

The consolidated effective tax rates differ from the federal statutory rates as follows (in thousands):

	2008			2007			2006
Statutory federal rate		35.0	%		35.0	%		35.0	%
State income taxes after federal income tax		7.3			7.0			6.2
Foreign income taxes		—			—			5.2
Valuation allowance		(1.2	)		—			(2.2	)
Other		0.9			0.1			0.3
Consolidated effective tax rate		42.0	%		42.1	%		44.5	%

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The following is an analysis of accumulated deferred income taxes (in thousands):

	2008			2007
Assets:
Current:
Bad debts	$	1,108		$	1,095
Employee benefit accruals		304			351
Inventory		770			785
Net operating loss carry forward		4,427			4,427
Other		936			523
Total current		7,545			7,181
Noncurrent:
Employee benefit accruals		523			563
Environmental		1,436			1,267
Net operating loss carry forward		13,675			22,881
Other		1,793			1,153
Property		1,987			839
Valuation allowance		(5,595	)		(5,895	)
Total noncurrent		13,819			20,808
Total net assets	$	21,364		$	27,989

The Company has federal and state net operating loss carry forwards, or NOLs, of approximately $30.7 million and $69.0 million, respectively, which are due to expire in fiscal 2022 through fiscal 2025 and fiscal 2009 through fiscal 2012, respectively. The benefit of the state NOL due to expire in fiscal 2009 is approximately $4.5 million. These NOLs may be used to offset future taxable income through their respective expiration dates and thereby reduce or eliminate our federal and state income taxes otherwise payable. A corresponding valuation allowance of $5.6 million has been established relating to the state net operating loss, as it is management’s belief that it is more likely than not that a portion of the state NOLs are not realizable. Failure to achieve sufficient taxable income to utilize the NOLs would require the recording of an additional valuation allowance against the deferred tax assets.

If the Company does not generate adequate taxable earnings, some or all of our deferred tax assets may not be realized. Additionally, changes to the federal and state income tax laws also could impact its ability to use the NOLs. In such cases, the Company may need to revise the valuation allowance established related to deferred tax assets for state purposes.

The Internal Revenue Code of 1986, as amended (the “Code”), imposes significant limitations on the utilization of NOLs in the event of an “ownership change” as defined under section 382 of the Code (the “Section 382 Limitation”). The Section 382 Limitation is an annual limitation on the amount of pre-ownership NOLs that a corporation may use to offset its post-ownership change income. The Section 382 Limitation is calculated by multiplying the value of a corporation’s stock immediately before an ownership change by the long-term tax-exempt rate (as published by the Internal Revenue Service). Generally, an ownership change occurs with respect to a corporation if the aggregate increase in the percentage of stock ownership by value of that corporation by one or more 5% shareholders (including specified groups of shareholders who, in the aggregate, own at least 5% of that corporation’s stock) exceeds 50 percentage points over a three-year testing period. The Company believes that it has not gone through an ownership change that would cause its NOLs to be subject to the Section 382 Limitation. However, given the Company’s current ownership structure, anyone contemplating an investment in the Company’s common stock which would create a new 5% shareholder should consult with their tax adviser when evaluating such an investment.

     The Company adopted the provisions of FIN No. 48, “Accounting for Uncertainty in Income Taxes”, on April 1, 2007. As required

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by FIN No. 48, which clarifies SFAS No. 109, “Accounting for Income Taxes”, the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50percent likelihood of being realized upon ultimate settlement with the relevant tax authority. At the adoption date, the Company applied FIN No. 48 to all tax positions for which the statute of limitations remained open. As a result of the implementation of FIN No. 48, the Company recognized an increase of$250,000 in the liability for unrecognized tax benefits, which was accounted for as a reduction to the April 1, 2007 balance of retained earnings.

The Company recognizes interest and penalties related to unrecognized tax benefits within the income tax expense line in the accompanying consolidated statement of operations. Accrued interest and penalties are included within the related tax liability line in the consolidated balance sheet.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

Unrecognized tax benefit at April 1, 2007	$	520
Gross increases for tax positions related to prior years		—
Gross decreases for tax positions relates to prior years		—
Gross increases for tax positions related to current year		—
Settlements		(170	)
Lapses in statutes of limitations		—
Unrecognized tax benefit at March 31, 2008	$	350

The Company recognizes interest accrued related to unrecognized tax benefits and penalties as income tax expense. Related to the unrecognized tax benefits noted above, the Company accrued approximately $110,000 for the payment of interest and penalties through March 31, 2008.

The Company is subject to taxation in the United States and various states and foreign jurisdictions. The Company’s tax years for 2004, 2005, and 2006 are subject to examination by the tax authorities. With few exceptions, the Company is no longer subject to United States federal, state, local or foreign examinations by tax authorities for years before 2004. During the fourth quarter of fiscal 2008, the Company received notification from the relevant tax authority that the audit, for which the FIN 48 reserve had been established, had been settled, pending final notification. The Company anticipates that the resolution of the remainder of the unrecognized tax benefits will occur within the next twelve months due to the settlement of the audit.

6. LONG-TERM DEBT PAYABLE TO BANKS

Long-term debt payable to banks, including current maturities consisted of the following (in thousands):

	2008		2007
Senior Credit Facility	$	25,826	$	41,096
Less current maturities		5,977		8,346
Total long-term debt		19,849	$	32,750

Senior Credit Facility — On May 1, 2006, the Company refinanced and paid in full its former senior credit facility with a new five year $50.0 million Senior Credit Facility consisting of a $10.0 million revolving credit facility, and two term loans of $20.0 million each, which had a blended interest rate of 6.82% at March 31, 2008 (the “Senior Credit Facility”). As a result of this refinancing, in the first

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quarter of fiscal 2007 the Company recorded a pretax charge of $1.3 million consisting of $0.9 million for the write-off of unamortized debt issue costs and $0.4 million for the payment of prepayment premiums. The term loans require monthly principal payments of $0.2 million, an additional quarterly principal payment of $50,000, and a mandatory prepayment for fiscal 2007 of approximately $2.0 million, as discussed below, which was paid in July 2007. The Company will not have a mandatory prepayment for fiscal 2008 due to the pay down of principal made from the net proceeds received from the sale of the Company’s headquarters facility and plant in Union, New Jersey, which was completed in February 2008. The remaining payments under the term loans are due at maturity. Accordingly, the balance sheet reflects $3.1 million of current maturities due under term loans of the Senior Credit Facility as of March 31, 2008.

The Senior Credit Facility contains certain mandatory prepayment provisions in the event of extraordinary income, the issuance of equity in the Company or items which are linked to cash flow. The cash flow provision requires prepayment of the Senior Credit Facility in an amount equal to 50% of earnings before interest, taxes, depreciation and amortization (EBITDA) less principal payments, interest payments, tax payments, capital expenditures and, with respect to our fiscal year 2007, certain environmental remediation payments and the final payment to the U.S. Government pursuant to a settlement with the government concluded September8,2005. Each such prepayment is applied first to the outstanding principal of one of the term loans up to a certain recapture amount, then ratably to the outstanding principal of all of the term loans until paid in full, and then to the outstanding principal of the revolver in the credit facility. A mandatory prepayment for fiscal 2007 of approximately $2.0 million was required under this provision and was paid in July 2007. The Company will not have a mandatory prepayment for fiscal 2008 due to the pay down of principal made from the net proceeds received from the sale of the Company’s headquarters facility and plant in Union, New Jersey, which was completed in February 2008.

The Senior Credit Facility prohibits the payment of dividends and is secured by all of the assets of the Company. The Senior Credit Facility allows the Company to issue letters of credit against the total borrowing capacity of the facility. At March 31, 2008, the Company was in compliance with the provisions of the Senior Credit Facility. At March 31, 2008, there was $2.9 million in outstanding borrowings, a $1.5 million outstanding letter of credit and $5.6 million in availability under the revolving portion of the Senior Credit Facility.

Amortization of loan origination fees on the Senior Credit Facility and the former senior credit facility amounted to $0.1 million, $0.1 million and $0.6 million in 2008, 2007 and 2006, respectively.

The Company has long-term debt maturities of $2.5 million, $0.2 million and $17.1 million in fiscal 2010, 2011, and 2012, respectively. These maturities reflect the payment terms of the Senior Credit Facility.

7. OTHER LIABILITIES

Other liabilities at March 31 consisted of the following (in thousands):

	2008		2007
Environmental reserves	$	4,225	$	3,761
Obligation from divestiture (a)		4,166		3,936
Other		1,811		1,310
Total	$	10,202	$	9,007

(a) Obligation from divestiture represents the legal liability of the Company relative to a pension plan for a discontinued operation. See Note 9.

8. STOCK-BASED COMPENSATION

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The Company adopted the provisions of FASB Statement No. 123R, “Share-Based Payment”, on April1, 2006, using the modified prospective method. Under that transition method, compensation cost is recognized for all awards granted after the effective date, and for all awards modified, repurchased, or cancelled after that date. In addition, compensation cost is recognized on or after the effective date for the portion of outstanding awards, for which the requisite service has not yet been rendered, based on the grant date fair value of those awards previously calculated and reported in the pro forma disclosures under FASB Statement 123, “Accounting for Stock-Based Compensation”. Net income for the periods ended March 31, 2008 and March 31, 2007, includes $0.4 million, net of tax, of stock-based compensation expense. Stock-based compensation expense was recorded in general, administrative, and selling expense. In accordance with the modified prospective adoption method of FASB Statement 123R, financial results for the prior periods have not been restated. Additional compensation cost will be recognized as new options are awarded. The Company has not made any material modifications to its stock-based compensation plans as the result of the issuance of FASB Statement 123R.

The Company maintains the Amended and Restated 1992 Long-Term Incentive Plan (the “1992 Plan”), the Amended and Restated 1998 Non-Employee Directors Stock Option Plan (the “1998 Plan”), the 1999 Long Term Incentive Plan (the “1999 Plan”), the 2004 Long-Term Incentive Plan (the “2004 Plan”), and the 2006 Long-Term Incentive Plan (the “2006 Plan”).

Under the terms of the 2006 Plan, 500,000 shares of the Company’s common stock may be granted as stock options or awarded as restricted stock to officers, non-employee directors and certain employees of the Company through July 2016. Under the terms of the 2004 Plan, 200,000 of the Company’s common shares may be granted as stock options or awarded as restricted stock to officers, non-employee directors, and certain employees of the Company through September 2014. Under the terms of the 1999 Plan, 300,000 of the Company’s common shares may be granted as stock options or awarded as restricted stock to officers, non-employee directors, and certain employees of the Company through July 2009. Under the terms of the 1998 Plan, 250,000 of the Company’s common shares may be granted as stock options to non-employee directors of the Company through July 2008. The 1992 Plan expired in September 2002 and no grants or awards may be made thereafter under the 1992 Plan; however, there remain outstanding unexercised options granted in fiscal year 2000 and in fiscal year 2002 under the 1992 Plan.

Under each of the 1992, 1998, 1999, 2004, and 2006 Plans, option exercise prices equal the fair market value of the common shares at the respective grant dates. Options granted prior to May 1999 to officers and employees, and all options granted to non-employee directors, expire if not exercised on or before five years after the date of the grant. Options granted beginning in May 1999 to officers and employees expire no later than 10 years after the date of the grant. Options granted to directors, officers, and employees vest ratably over three years beginning one year after the date of the grant. In the event of the occurrence of certain circumstances, including a change of control of the Company as defined in the various Plans, vesting of options may be accelerated.

The weighted-average Black-Scholes value per option granted in fiscal 2008 and fiscal 2007 was $6.80 and $6.83, respectively. The following assumptions were used in the Black-Scholes option pricing model for options granted in fiscal 2008 and fiscal 2007. Expected volatilities are based on historical volatility of the Company’s stock and other factors. The Company uses historical data to estimate the expected term of the options granted. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of the grant. The Company has assumed no forfeitures due to the limited number of employees at the executive and senior management level who receive stock options, past employment history, and current stock price projections.

	2008			2007
Dividend yield		0.0	%		0.0	%
Volatility		48.9	%		51.0	%
Risk-free interest rate		4.7	%		5.1	%
Expected term of options (in years)		7.0			7.0

The following table summarizes stock option activity under all plans:

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				Aggregate		Approximate		Weighted-
				Intrinsic		Remaining		Average
	Number			Value		Contractual		Exercise
	of			(in		Term		Price
	Shares			thousands)		(Years)
Outstanding at March 31, 2007		364,996		$	814		7	$	8.91
Granted		75,000			—		—	$	12.04
Exercised		(56,418	)		—		—	$	6.28
Canceled or expired		( 2,667	)		—		—	$	10.50
Outstanding at March 31, 2008		380,911		$	738		6	$	9.90
Options exercisable at March 31, 2008		238,079		$	656		5	$	9.15
Unvested options expected to become exercisable after March 31, 2008		142,832		$	83		9	$	11.16
Shares available for future option grants at March 31, 2008 (a)		642,804

(a) May be decreased by restricted stock grants.

The aggregate intrinsic value of options exercised during the fiscal years ended March 31, 2008, 2007 and 2006 was approximately $328,000, $181,000 and $13,000, respectively. The intrinsic value of stock options is the amount by which the market price of the stock on the day of the exercise exceeded the market price of stock on the date of the grant. Cash received from stock option exercises during fiscal 2008, fiscal 2007 and 2006 was approximately $144,000, $123,000 and $39,000, respectively. In lieu of a cash payment for stock option exercises in fiscal 2008, the Company received 17,188 shares of common stock, which were retired into treasury, valued at the price of the common stock on the transaction date. There was no tax benefit generated to the Company from options granted prior to April 1, 2006, and exercised during fiscal 2008 and fiscal 2007.

As noted above, stock options granted to non-employee directors, officers, and employees vest ratably over three years beginning one year after the date of the grant. During fiscal 2008 and fiscal 2007, compensation expense associated with stock options was $0.4 million and $0.3 million, respectively, before taxes of approximately $0.2 million and $0.1 million, respectively, and was recorded in general, administrative, and selling expense. As of March 31, 2008, there was approximately $0.6 million of unrecognized compensation cost related to stock options granted but not yet vested that are expected to become exercisable, which cost is expected to be recognized over a weighted-average period of 1.7 years.

It is the policy of the Company that the stock underlying option grants consist of authorized and unissued shares available for distribution under the applicable Plan. Under the 1992, 1999 and 2004 and 2006 Plans, the Incentive and Compensation Committee of the Board of Directors (made up of independent directors) may at any time offer to repurchase a stock option that is exercisable and has not expired. The Company is prohibited by its Senior Credit Facility from repurchasing shares on the open market to satisfy option exercises.

A summary of restricted stock award activity under all plans is as follows:

				Weighted -
				Average Grant
	Number of			Date
	Shares			Fair Value
Nonvested at March 31, 2007		24,305		$	10.93
Granted		24,331		$	12.40
Vested		(21,737	)	$	11.04
Cancelled		—			—
Non-vested at March 31, 2008		26,899		$	12.17

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Restricted stock awards are utilized both for director compensation and awards to officers and employees. Restricted stock awards are distributed in a single grant of shares, which shares are subject to forfeiture prior to vesting and have voting and dividend rights from the date of distribution. With respect to restricted stock awards to officers and employees, forfeiture and transfer restrictions lapse ratably over three years beginning one year after the date of the award. With respect to restricted stock awards granted to non-employee directors, the possibility of forfeiture lapses after one year and transfer restrictions lapse on the date which is six months after the director ceases to be a member of the board of directors. In the event of the occurrence of certain circumstances, including a change of control of the Company as defined in the various Plans, the lapse of restrictions on restricted stock may be accelerated.

The fair value of restricted stock awards is based on the market price of the stock at the grant date and compensation cost is amortized to expense on a straight-line basis over the requisite service period as stated above. The Company expects no forfeitures during the vesting period with respect to unvested restricted stock awards granted. As of March 31, 2008, there was approximately $0.2 million of unrecognized compensation cost related to non-vested restricted stock awards, which is expected to be recognized over a period of approximately one year.

9. EMPLOYEE BENEFIT PLANS

The Company has a defined contribution plan covering all eligible employees. Contributions are based on certain percentages of an employee’s eligible compensation. Expenses related to this plan were $0.8 million, $0.7 million and $0.7 million in 2008, 2007, and 2006, respectively.

The Company provides postretirement benefits to certain union employees. The Company funds these benefits on a pay-as-you-go basis. The measurement date is March 31.

In February 2002, the Company’s subsidiary, Seeger-Orbis GmbH & Co. OHG now known as TransTechnology Germany GmbH (the “Selling Company”) sold its retaining ring business in Germany to Barnes Group Inc. (“Barnes”). As German law prohibits the transfer of unfunded pension obligations which have vested for retired and former employees, the legal responsibility for the pension plan that related to the business (the “Pension Plan”) remained with the Selling Company. At the time of the sale and subsequent to the sale, that pension liability was recorded based on the projected benefit obligation since future compensation levels will not affect the level of pension benefits. The relevant information for the Pension Plan is shown below under the caption Pension Plan. The measurement date is December 31. Barnes has entered into an agreement with the Company and its subsidiary, the Selling Company, whereby Barnes is obligated to administer and discharge the pension obligation as well as indemnify and hold the Selling Company and the Company harmless from these pension obligations. Accordingly, the Company has recorded an asset equal to the benefit obligation for the Pension Plan of $4.2 million and $3.9 million as of March 31, 2008 and 2007, respectively- see Notes 3 and 7. This asset is included in other long-term assets and it is restricted in use to satisfy the legal liability associated with the Pension Plan.

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The following table sets forth the Pension Plan’s funded status and amounts recognized in the consolidated financial statements as of March 31 (in thousands):

	Postretirement Benefits						Pension Plan
	2008			2007			2008			2007
Change in benefit obligation
Benefit obligation at beginning of year	$	970		$	799		$	3,936		$	3,577
Service cost		—			—			—			—
Interest cost		53			41			185			137
Actuarial (gain)/loss		(54	)		235			(288	)		154
Foreign currency exchange rate changes		—			—			676			373
Benefits paid		(101	)		(105	)		(343	)		(305	)
Benefit obligation at end of year	$	868		$	970		$	4,166		$	3,936
Change in plan assets
Fair value of plan assets at beginning of year		—			—			—			—
Employer contributions		101			105			—			—
Benefits paid		(101	)		(105	)		—			—
Fair value of plan assets at end of year		—			—			—			—
Under funded status at end of year	$	(868	)	$	( 970	)	$	(4,166	)	$	(3,936	)

Amounts recognized in the consolidated balance sheets consist of (in thousands):

	Postretirement Benefits				Pension Plan
	2008		2007		2008		2007
Current liabilities	$	124		—		—		—
Noncurrent liabilities	$	744	$	970	$	4,166	$	3,936
Total Liabilities	$	868	$	970	$	4,166	$	3,936

Amounts recognized in accumulated other comprehensive loss consist of (in thousands):

	Postretirement Benefits				Pension Plan
	2008		2007		2008		2007
Net loss	$	29	$	83	$	—	$	—

The accumulated benefit obligation for the postretirement plan was $0.9 million at March 31, 2008 and 2007.

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans” (“FAS 158”). This statement requires companies to recognize a net liability or asset to report the funded status of their defined benefit pension and other postretirement benefit plans, with the offsetting adjustment recorded to Accumulated Other Comprehensive Income, net of tax. The financial statements as of March 31, 2007 reflect the initial recognition of the funded status of the postretirement benefit plan and include the effects of the transition to FAS 158. The following table is a summary of the effects of the transition to FAS 158 (in thousands) as reflected in the Consolidated Balance Sheet at March 31, 2007:

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	Balances
	Before
	Adoption of				Balances After
	FASB				Adoption of
	Statement				FASB
Statement of Financial Position Caption	158		Adjustments		Statement 158
Deferred income taxes -long term	$	20,773	$	35	$	20,808
Post-Retirement and Pension Plan Obligations (a)	$	4,823	$	83	$	4,906
Accumulated Other Comprehensive Loss	$	—	$	48	$	48

(a) Included in Other Liabilities on the Consolidated Balance Sheet.

The following table provides the components of the net periodic benefit cost (in thousands):

	Postretirement Benefits					Pension Plan
	2008		2007			2008		2007
Net Periodic Benefit Cost
Interest cost	$	52	$	41		$	184	$	137
Amortization of net (gain) loss		—		(41	)		—		—
Net periodic benefit cost	$	52	$	—		$	184	$	137

The estimated net loss, prior service cost, and transition obligation for the postretirement benefit plan that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year are $0.1 million, $0, and $0 respectively.

	Postretirement Benefits				Pension Plan
	2008		2007		2008		2007
Increase in minimum liability included in other comprehensive income	$	29	$	83	$	—	$	—

Weighted-average assumptions used to determine benefit obligations at March 31:

	Postretirement Benefits						Pension Plan
	2008			2007			2008			2007
Discount rate		5.60	%		5.79	%		5.60	%		4.60	%

Assumed health care cost trend rates for the postretirement benefit plan at March 31:

	2008			2007
Health care cost trend rate assumed for next year		10	%		11	%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)		6	%		6	%
Year that the rate reaches the ultimate trend rate		2014			2013

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Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage-point change in assumed health care cost trend rates would have the following effects on the postretirement benefit plan (in thousands):

	1-Percentage-		1-Percentage-
	Point Increase		Point Decrease
Effect on total of service and interest cost	$	56	$	50
Effect on postretirement benefit obligation	$	915	$	825

The Company expects to contribute $0.1 million to its postretirement benefit plan in fiscal 2009.

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid (in thousands):

	Postretirement		Pension
	Benefits		Plan
2009	$	124	$	387
2010		121		382
2011		100		373
2012		93		362
2013		86		351
Years 2014-2018		327		1,441

10. FINANCIAL INSTRUMENTS

Cash and Cash Equivalents, Accounts Receivable, Current Debt, Accounts Payable, and Other Liabilities - The carrying amounts of these items approximate their fair value because of their short term nature.

Concentration of Credit Risk - The Company is subject to concentration of credit risk primarily with its trade and notes receivable. The Company grants credit to certain customers who meet pre-established credit requirements, and generally requires no collateral from its customers. Estimates of potential credit losses are provided for in the Company’s consolidated financial statements and are within management’s expectations. As of March 31, 2008, the Company had no other significant concentrations of risk.

11. SALE AND LEASEBACK TRANSACTION AND OTHER LEASES

On February 8, 2008, the Company completed the transaction for the sale of its headquarters facility and plant in Union, New Jersey, for $10.5 million in cash, before selling expenses. The net proceeds at closing from the sale of the facility of $9.8 million were applied to reduce the Senior Credit Facility. As provided in the sale agreement, the Company can lease the facility for a period of up to two years after closing, pending the Company’s relocation to a new site, yet to be selected, that will be better suited to its current and expected needs. The lease has been accounted for as an operating lease. The transaction resulted in a realized pre-tax gain, net of sale expenses, of approximately $6.8 million, and a deferred gain of approximately $1.7 million. The deferred gain represented the present

44

value of the minimum lease payments over the term of the lease. At March 31, 2008 the Company has a deferred gain of approximately $1.6 million which will be amortized as a reduction to rent expense over the lease term.

Future amortization of the deferred gain is as follows (in thousands):

2009	$	883
2010		718
Total	$	1,601

The Company and its subsidiaries have minimum rental commitments under non-cancelable operating leases as follows (in thousands):

2009	$	964
2010		145
2011		73
2012		24
Total	$	1,206

The following is a summary of net rent expense under operating leases for the years ended March 31, 2008, 2007, and 2006 (in thousands):

			Amortization			Net
	Minimum		of Deferred			Rent
	Rentals		Gain			Expense
2008	$	284	$	(131	)	$	153
2007	$	313	$	—		$	313
2006	$	296	$	—		$	296

12. CONTINGENCIES

Environmental Matters — The Company evaluates the exposure to environmental liabilities using a financial risk assessment methodology, including a system of internal environmental audits and tests, and outside consultants. This risk assessment includes the identification of risk events/issues, including potential environmental contamination at Company and off-site facilities; characterizes risk issues in terms of likelihood, consequences and costs, including the year(s) when these costs could be incurred; analyzes risks using statistical techniques; and, constructs risk cost profiles for each site. Remediation cost estimates are prepared from this analysis and are taken into consideration in developing project budgets from third party contractors. Although the Company takes great care in the development of these risk assessments and future cost estimates, the actual amount of the remediation costs may be different from those estimated as a result of a number of factors including: changes to government regulations or laws; changes in local construction costs and the availability of personnel and materials; unforeseen remediation requirements that are not apparent until the work actually commences; and other similar uncertainties. The Company does not include any unasserted claims that it might have against others in determining the liability for such costs, and, except as noted with regard to specific cost sharing arrangements, has no such arrangements, nor has the Company taken into consideration any future claims against insurance carriers that it might have in determining its environmental liabilities. In those situations where the Company is considered a de minimis participant in a

45

remediation claim, the failure of the larger participants to meet their obligations could result in an increase in the Company’s liability with regard to such a site.

The Company continues to participate in environmental assessments and remediation work at eleven locations, including certain former facilities. Due to the nature of environmental remediation and monitoring work, such activities can extend for up to 30 years, depending upon the nature of the work, the substances involved, and the regulatory requirements associated with each site. In calculating the net present value (where appropriate) of those costs expected to be incurred in the future, the Company used a discount rate of 4.32%, which is the 20 year Treasury Bill rate at the end of the fiscal 2008 and represents the risk free rate for the 20 years those costs are expected to be paid. The Company believes that the application of this rate produces a result which approximates the amount that would hypothetically satisfy the Company’s liability in an arms-length transaction. Based on the above, the Company estimates the current range of undiscounted cost for remediation and monitoring to be between $5.4 million and $9.4 million with an undiscounted amount of $6.6 million to be most probable. Current estimates for expenditures, net of recoveries pursuant to cost sharing agreements, for each of the five succeeding fiscal years are $1.6 million, $0.6 million, $1.4 million, $0.8 million, and $0.6 million respectively, with $1.6 million payable thereafter. Of the total undiscounted costs, the Company estimates that approximately 50% will relate to remediation activities and that 50% will be associated with monitoring activities.

The Company estimates that the potential cost for implementing corrective action at nine of these sites will not exceed $0.5 million in the aggregate, payable over the next several years, and has provided for the estimated costs, without discounting for present value, in the Company’s accrual for environmental liabilities. In the first quarter of fiscal 2003, the Company entered into a consent order for a former facility in New York, which is currently subject to a contract for sale, pursuant to which the Company has developed a remediation plan for review and approval by the New York Department of Environmental Conservation. Based upon the characterization work performed to date, the Company has accrued estimated costs of approximately $1.7 million without discounting for present value. The amounts and timing of such payments are subject to the approved remediation plan.

The environmental cleanup plan the Company presented during the fourth quarter of fiscal 2000 for a portion of a site in Pennsylvania which continues to be owned by the Company, although the related business has been sold, was approved during the third quarter of fiscal 2004. This plan was submitted pursuant to the Consent Order and Agreement with the Pennsylvania Department of Environmental Protection (“PaDEP”) concluded in fiscal 1999. Pursuant to the Consent Order, upon its execution the Company paid $0.2 million for past costs, future oversight expenses and in full settlement of claims made by PaDEP related to the environmental remediation of the site with an additional $0.2 million paid in fiscal 2001. A second Consent Order was concluded with PaDEP in the third quarter of fiscal 2001 for another portion of the site, and a third Consent Order for the remainder of the site was concluded in the third quarter of fiscal 2003 (the “2003 Consent Order”). An environmental cleanup plan for the portion of the site covered by the 2003 Consent Order was presented during the second quarter of fiscal 2004. The Company is also administering an agreed settlement with the Federal government, concluded in the first quarter of fiscal 2000, under which the government pays 50% of the direct and indirect environmental response costs associated with a portion of the site. The Company also concluded an agreement in the first quarter of fiscal 2006, under which the Federal government paid an amount equal to 45% of the estimated environmental response costs associated with another portion of the site. No future payments are due under this second agreement. At March 31, 2008, the cleanup reserve was $2.9 million based on the net present value of future expected cleanup and monitoring costs and is net of expected reimbursement by the Federal Government of $0.5 million. The aggregate undiscounted amount associated with the estimated environmental response costs for the site in Pennsylvania is $3.4 million. The Company expects that remediation at this site, which is subject to the oversight of the Pennsylvania authorities, will not be completed for several years, and that monitoring costs, although expected to be incurred over twenty years, could extend for up to thirty years.

In addition, the Company has been named as a potentially responsible party in four environmental proceedings pending in several states in which it is alleged that the Company is a generator of waste that was sent to landfills and other treatment facilities. Such properties generally relate to businesses which have been sold or discontinued. The Company estimates that expected future costs, and the estimated proportional share of remedial work to be performed associated with these proceedings, will not exceed $0.1 million without discounting for present value and has provided for these estimated costs in the Company’s accrual for environmental liabilities.

At March 31, 2008, the aggregate amount of undiscounted costs associated with environmental assessments and remediation was $6.6 million. The total environmental liability as disclosed in Schedule II to this Report is $5.8 million which includes a discount of $0.8 million at 4.32%.

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In addition, the Company has been named as a potentially responsible party in four environmental proceedings pending in several states in which it is alleged that the Company is a generator of waste that was sent to landfills and other treatment facilities. Such properties generally relate to businesses which have been sold or discontinued. The Company estimates that expected future costs, and the estimated proportional share of remedial work to be performed associated with these proceedings, will not exceed $0.1 million without discounting for present value and has provided for these estimated costs in the Company’s accrual for environmental liabilities.

Asset Sale — The Company sold the assets of its Breeze Industrial Products division (the “Division”) in July 2001 to Breeze Industrial Products Corporation (“BIP”). As part of that transaction, the Company sold the land and building occupied by the Division in Saltsburg, Pennsylvania, to the Indiana County (PA) Development Corporation (ICDC) for $2.0 million. ICDC, in turn, entered into a lease of the facility in September 2001 with BIP as lessee for an initial term of five years and up to four additional five-year optional renewal terms. The lease contained an option for BIP to purchase the property from ICDC at the end of the first term for $1.5 million (the appraised value of the property in July 2001). Under the sale documents, in the event that BIP did not exercise the purchase option or the renewal option at the end of the initial term, ICDC, upon proper notification, given no later than August 9, 2006, could require the Company to repurchase the property for $1.0 million, of which $0.5 million had been contractually required to be placed in escrow with banks located in Indiana County, Pennsylvania. No such notice was received from ICDC by August 9, 2006, and pursuant to the escrow agreement, the $0.5 million was returned to the Company in the third quarter of fiscal 2007, together with the interest accrued thereon.

Litigation — The Company is also engaged in various other legal proceedings incidental to its business. It is the opinion of management that, after taking into consideration information furnished by its counsel, these matters will have no material effect on the Company’s consolidated financial position or the results of operations or cash flows in future periods.

13. SEGMENT AND GEOGRAPHIC INFORMATION

The Company has three operating segments which it aggregates into one reportable segment; sophisticated lifting equipment for specialty aerospace and defense applications. The operating segments are Hoist and Winch, Cargo Hooks, and Weapons Handling. The nature of the production process (assemble, inspect, and test) is similar for each operating segment, as are the customers and the methods of distribution for the products.

Revenues from the three operating segments for the year ended March 31 are summarized as follows (in thousands):

	2008		2007		2006
Hoist and Winch	$	52,433	$	51,567	$	47,314
Cargo Hooks		15,631		15,681		11,037
Weapons Handling		6,391		4,258		4,265
Other Sales		1,519		1,833		1,802
Total	$	75,974	$	73,339	$	64,418

Net sales greater than 10% of total revenues derived from one customer are summarized as follows (in thousands):

	2008		2007		2006
U.S.Government	$	20,103	$	24,415	$	18,625
Finmeccanica SpA	$	14,231	$	15,746	$	10,902

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Net sales below show the geographic location of customers (in thousands):

Location	2008		2007		2006
United States	$	41,483	$	41,633	$	33,553
England		3,735		7,677		5,027
Italy		9,344		9,417		9,919
Other European Countries		6,551		5,284		4,518
Pacific and Far East		5,433		4,346		5,567
United Arab Emirates		3,428		120		184
Other non-United States		6,000		4,862		5,650
Total	$	75,974	$	73,339	$	64,418

14. UNAUDITED QUARTERLY FINANCIAL DATA (in thousands except per share data)

	First		Second		Third		Fourth
2008	Quarter		Quarter		Quarter		Quarter			Total
Net sales	$	16,255	$	17,240	$	18,061	$	24,418		$	75,974
Gross profit		6,417		7,234		8,142		10,724			32,517
Net income		641		801		1,526		6,474	(a)		9,442
Basic earnings per share:	$	0.07	$	0.09	$	0.16	$	0.69		$	1.01
Diluted earnings per share:	$	0.07	$	0.09	$	0.16	$	0.69		$	1.00

	First			Second		Third		Fourth
2007	Quarter			Quarter		Quarter		Quarter		Total
Net sales	$	16,242		$	17,682	$	18,894	$	20,521	$	73,339
Gross profit		7,425			7,174		8,815		9,072		32,486
Net income		18	(b)		923		1,622		1,398		3,961
Basic earnings per share:	$	0.00		$	0.10	$	0.17	$	0.15	$	0.43
Diluted earnings per share:	$	0.00		$	0.10	$	0.17	$	0.15	$	0.42

(a)	Includes a pretax gain of $6.8 million from the sale of the facility.
(b)	Includes a pretax charge of $1.3 million for a loss on extinguishment of debt.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

On July 2, 2007, Deloitte & Touche LLP (“Deloitte”) was dismissed as the Company’s independent public accountants. The decision to dismiss Deloitte was recommended and approved by the Audit Committee of the Company’s Board of Directors.

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Deloitte’s reports on the Company’s financial statements for the two fiscal years ended March 31, 2007 and 2006 did not contain an adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope, or accounting principle, except that Deloitte’s report for the fiscal year ended March 31, 2007 contained an emphasis of matter paragraph related to the Company’s adoption, effective April 1, 2006, of Statement of Financial Accounting Standards (“FASB Statement”) No. 123R — Share Based Payment .

In connection with the audits of the Company’s financial statements for each of the last two fiscal years ended December 31, 2007 and 2006, and through July 2, 2007, there were no disagreements between the Company and Deloitte on any matter of accounting principles or practices, financial statement disclosures, or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of Deloitte, would have caused them to make a reference thereto in connection with their report on the financial statements. During the two most recent fiscal years audited by Deloitte and through July 2, 2007, there have been no reportable events as defined in Regulation S-K, Item 304(a)(1)(v).

On July 3, 2007, the Company engaged Margolis & Company P.C. (“Margolis”), as its new independent public accountants to audit the Company’s financial statements for the fiscal year ended March 31, 2008. The decision to engage Margolis was recommended and approved by the Audit Committee of the Company’s Board of Directors. The Company had authorized Deloitte to respond fully to inquiries by the Company’s new auditors.

During the last two fiscal years audited by Deloitte and through July 2, 2007, the Company did not consult with Margolis regarding the application of accounting principles to a specific transaction, whether completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements, or any matter which was the subject of any disagreement, or any reportable event that would be required to be reported in the Report on Form 8-K filed July 9,2007.

The Company had requested Margolis to review the disclosure in the Report on Form 8-K before filing with the Securities and Exchange Commission on July 9, 2007, and had provided Margolis the opportunity to furnish the Company with a letter addressed to the Commission containing any new information, clarification of the Company’s statements, or the respects in which it does not agree with the statements made in the Report on Form 8-K. Margolis had informed the Company that it has reviewed the disclosures and did not intend to furnish the Company with such a letter.

The Company had also provided Deloitte a copy of the disclosures set forth above and has requested Deloitte to furnish the Company with a letter addressed to the Securities and Exchange Commission stating whether Deloitte agrees with the statements made by the Company in the report. A copy of the letter furnished in response to that request was reported in the Company’s Form 8-K filed on July 9, 2007.

ITEM 9A. CONTROLS AND PROCEDURES

     Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As of March 31, 2008, the Company carried out an evaluation under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and the Company’s Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on the forgoing, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective. There have been no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15f under the

49

Securities Exchange Act of 1934, as amended) during the fourth quarter of the fiscal year to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

     Management’s Report on Internal Control Over Financial Reporting

The management of Breeze-Eastern Corporation is responsible for establishing and maintaining adequate internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. As defined by the Securities and Exchange Commission, internal control over financial reporting is a process designed by, or under the supervision of the Company’s principal executive and financial officers and effected by the Board of Directors, management, and other personnel to provide reasonable assurance to the Company’s management and Board of Directors regarding the reliability of financial reporting and the preparation and fair presentation of published financial statements.

The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the company’s transactions and dispositions of its assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of the consolidated financial statements in accordance with generally accepted accounting principles and that the Company’s receipts and expenditures are being made only in accordance with authorization of management and the Board of Directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material adverse effect on the consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of March 31, 2008. In making this assessment, the Company’s management used the criteria established by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework.

Management believes that, as of March 31, 2008, the Company’s internal control over financial reporting is effective based on the established criteria.

ITEM 9B. OTHER INFORMATION

     None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this item is contained in the Registrant’s Proxy Statement for the 2008 Annual Meeting of Stockholders and is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this item is contained in the Registrant’s Proxy Statement for the 2008 Annual Meeting of Stockholders and is incorporated herein by reference.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

SECURITIES AUTHORIZED/ISSUED UNDER EQUITY COMPENSATION PLANS

	Number of Securities to		Weighted Average
	be Issued Upon Exercise		Exercise Price of		Number of Securities
Plan Category	Warrants and Rights		Warrants and Rights		for Future Issuance
Equity Compensation Plans Approved by Security Holders		380,911	$	9.90		642,804
Equity Compensation Plans Not Approved by Security Holders(1)		—		—		—
Total		380,911	$	9.90		642,804

(1) Each of the Company’s compensation plans has been previously approved by security holders.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS; DIRECTOR INDEPENDENCE

The information required by this item is contained in the Registrant’s Proxy Statement for the 2008 Annual Meeting of Stockholders and is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this item is contained in the Registrant’s Proxy Statement for the 2008 Annual Meeting of Stockholders and is incorporated herein by reference.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Financial Statements, Schedules, and Exhibits:

1. Financial Statements:

Consolidated Balance Sheets at March 31, 2008 and 2007

Statements of Consolidated Operations for the years ended March 31, 2008, 2007, and 2006

Statements of Consolidated Cash Flows for the years ended March 31, 2008, 2007, and 2006

Statements of Consolidated Stockholders’ Equity (Deficit) for the years ended March 31, 2008, 2007, and 2006

Notes to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm for the year ended March 31, 2008

Report of Independent Registered Public Accounting Firm for the years ended March 31, 2007 and 2006

2. Financial Statement Schedules

         Schedule II — Consolidated Valuation and Qualifying Accounts for the years ended March 31, 2008, 2007, and 2006

         All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.

     3. Exhibits:

        The exhibits listed on the accompanying Index to Exhibits are filed as part of this report.

51

BREEZE-EASTERN CORPORATION SCHEDULE II
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
FOR YEARS ENDED MARCH 31, 2008, 2007 AND 2006

	Balance		Charged		Charged				Balance
	at		to		to				At
	Beginning of		Costs and		Other				End of
Description	Period		Expenses		Accounts		Deductions		Period
	(In thousands)
2008
Allowances for doubtful accounts and sales returns	$	72	$	81	$	—	$	52	$	101
Inventory reserves	$	1,721	$	256	$	—	$	289	$	1,688
Environmental reserves	$	5,387	$	490	$	250	$	308	$	5,819
Allowance for tax loss valuation	$	5,895	$	—	$	—	$	300	$	5,595
2007
Allowances for doubtful accounts and sales returns	$	25	$	47	$	—	$	—	$	72
Inventory reserves	$	1,472	$	249	$	—	$	—	$	1,721
Environmental reserves	$	5,134	$	431	$	317	$	495	$	5,387
Allowance for tax loss valuation	$	5,895	$	—	$	—	$	—	$	5,895
2006
Allowances for doubtful accounts and sales returns	$	16	$	17	$	—	$	8	$	25
Inventory reserves	$	1,387	$	85	$	—	$	—	$	1,472
Environmental reserves	$	5,775	$	297	$	—	$	938	$	5,134
Allowance for tax loss valuation	$	5,946	$	—	$	—	$	51	$	5,895

52

3. Exhibits:

3.1	Certificate of Incorporation of the Company, as amended. (1) (12)
3.2	Bylaws of the Company Amended and Restated as of October 18, 2006.
10.1	Amended and Restated 1992 Long Term Incentive Plan of the Company. (2)
10.2	Form of Incentive Stock Option Agreement. (2)
10.3	Form of Director Stock Option Agreement. (3)
10.4	1998 Non-Employee Directors’ Stock Option Plan of the Company. (4)
10.5	Form of Stock Option Agreement used under the Company’s 1998 Non-Employee Directors’ Stock Option Plan. (4)
10.6	1999 Long Term Incentive Plan of the Company. (4)
10.7	Form of Stock Option Agreement used under the Company’s 1999 Long Term Incentive Plan. (5)
10.8	Form of Restricted Stock Award Agreement used under the Company’s 1999 Long Term Incentive Plan. (5)
10.9	Employment Agreement dated as of January 19, 2006, by and between Joseph F. Spanier and the Company. (10)
10.10	Executive Severance Agreement as of February 10, 2004, by and between Robert L. G. White and the Company. (6)
10.11	Amendment No. 1 dated as of January 27, 2006, to Executive Severance Agreement as of February 10, 2004, by and between Robert L. G. White and the Company. (10)
10.12	Executive Severance Agreement as of February 10, 2004, by and between Gerald C. Harvey and the Company. (6)
10.13	Amendment No. 1 dated as of January 27, 2006, to Executive Severance Agreement as of February 10, 2004, by and between Gerald C. Harvey and the Company. (10)
10.14	2004 Long Term Incentive Plan of the Company. (7)
10.15	Form of Stock Option Agreement used under the Company’s 2004 Long Term Incentive Plan. (10)
10.16	Form of Restricted Stock Award Agreement used under the Company’s 2004 Long Term Incentive Plan. (10)
10.17	Stock Purchase Agreement by and among the Company and Tinicum Capital Partners II, L.P. and Tinicum Capital Partners II Parallel Fund, L.P. dated as of February 15, 2006, including Exhibit 4 thereto. (8)
10.18	Stock Purchase Agreement by and among the Company and Wynnefield Partners Small Cap Value, L.P., Wynnefield Partners Small Cap Value, L.P. I and Wynnefield Small Cap Value Offshore Fund, Ltd. dated as of February 15, 2006. (8)
10.19	Stock Purchase Agreement by and between the Company and Terrier Partners LP dated as of February 15, 2006. (8)
10.20	Registration Rights Agreement by and among the Company and the parties named therein dated as of February 17, 2006. (8)

53

10.21	Amended and Restated Confidentiality Agreement by and among the Company, Tinicum, Inc., Tinicum Capital Partners II, L.P. and Tinicum Capital Partners II Parallel Fund, L.P. dated as of February 17, 2006. (10)
10.22	Amended and Restated Credit Agreement (the “Credit Agreement”) by and among TransTechnology Corporation, as Borrower, the Lenders that are Signatories thereto, as the Lenders, Wells Fargo Foothill, Inc., as Co-Lead Arranger and Administrative Agent and AC Finance LLC, as Co-Lead Arranger, dated as of May 1, 2006. (9)
10.23	Schedule 1.1 to the Credit Agreement dated as of May 1, 2006. (9)
10.24	Schedule 3.1 to the Credit Agreement dated as of May 1, 2006. (9)
10.25	Schedule 5.2 to the Credit Agreement dated as of May 1, 2006. (9)
10.26	Schedule 5.3 to the Credit Agreement dated as of May 1, 2006. (9)
10.27	2006 Long Term Incentive Plan of the Company. (11)
10.28	Form of Stock Option Agreement used under the Company’s 2006 Long Term Incentive Plan. (14)
10.29	Form of Restricted Stock Award Agreement used under the Company’s 2006 Long Term Incentive Plan. (14)
10.30	Amendment Agreement dated as of April 25, 2007, by and among the Company, Tinicum Capital Partners, II, L.P., Tinicum Capital Partners Parallel Fund II, L.P., and Tinicum, Inc. (13) 10.31 Settlement Agreement dated as of July 31, 2007, by and among Breeze-Eastern Corporation, Tinicum Capital Partners II, L.P., Tinicum Capital Partners II Parallel Fund, L.P., Wynnefield Partners Small Cap Value, L.P., Wynnefield Partners Small Cap Value, L.P. I, Wynnefield Small Cap Value Offshore Fund, Ltd., Wynnefield Capital Management, LLC, Stockholder Capital, Inc., Channel Partnership II, L.P., Nelson Obus, Joshua H. Landes, Goldsmith & Harris Incorporated, Goldsmith & Harris Asset Management, LLC, Goldsmith & Harris Capital Appreciation, Philip W. Goldsmith, Jay R. Harris and Armand B. Erpf. (15)
10.32	Waiver Under Credit Agreement dated as of September 6, 2007. (16)
10.33	Waiver Under Credit Agreement dated as of October 17, 2007. (17)
10.34	Agreement of Sale between Breeze-Eastern Corporation and Bed Bath & Beyond Inc., dated as of November 28, 2007. (18)
10.35	Net Lease Agreement between Breeze-Eastern Corporation and Bed Bath & Beyond Inc. dated as of February 8, 2008.
21.1	List of Subsidiaries of the Company. (11)
23.1	Consent of Independent Registered Public Accounting Firm- Margolis & Company P.C.
23.2	Consent of Independent Registered Public Accounting Firm- Deloitte & Touche LLP.
31.1	Certification of Chief Executive Officer pursuant to Sarbanes-Oxley Act of 2002 Section 302.
31.2	Certification of Chief Financial Officer pursuant to Sarbanes-Oxley Act of 2002 Section 302.
32.1	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Sarbanes Oxley Act of 2002 Section 906.

54

1.	Incorporated by reference from the Company’s Quarterly Report on Form 10-Q for the Quarter ended December 25, 2005.
2.	Incorporated by reference from the Company’s Registration Statement on Form S-8 No. 333-45059 dated January 28, 1998.
3.	Incorporated by reference from the Company’s Annual Report on Form 10-K for the Fiscal Year ended March 31, 1995.
4.	Incorporated by reference from the Company’s Annual Report on Form 10-K for the Fiscal Year ended March 31, 1999.
5.	Incorporated by reference from the Company’s Annual Report on Form 10-K for the Fiscal Year ended March 31, 2000.
6.	Incorporated by reference from the Company’s Annual Report on Form 10-K for the Fiscal Year ended March 31, 2004.
7.	Incorporated by reference from the Company’s Proxy Statement for its 2004 Annual Meeting of Stockholders dated September 2, 2004.
8.	Incorporated by reference from the Company’s Current Report on Form 8-K filed on February 21, 2006.
9.	Incorporated by reference from the Company’s Current Report on Form 8-K filed on May 3, 2006.
10.	Incorporated by reference from the Company’s Annual Report on Form 10-K for the Fiscal Year ended March 31, 2006
11.	Incorporated by reference from the Company’s Proxy Statement for its 2006 Annual Meeting of Stockholders dated June 16, 2006.
12.	Incorporated by reference from the Company’s Current Report on Form 8-K filed on October 13, 2006.
13.	Incorporated by reference from the Company’s Current Report on Form 8-K filed on April 30, 2007
14.	Incorporated by reference from the Company’s Annual Report on Form 10-K for the Fiscal Year ended March 31, 2007
15.	Incorporated by reference from the Company’s Current Report on Form 8-K filed on July 31, 2007.
16.	Incorporated by reference from the Company’s Quarterly Report on Form 10-Q for the Quarter ended September 30, 2007 filed on November 7, 2007.
17.	Incorporated by reference from the Company’s Quarterly Report on Form 10-Q for the Quarter ended December 30, 2007 filed on February 6, 2008.
18.	Incorporated by reference from the Company’s Current Report on Form 8-K filed on November 30, 2007.

55

SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

     BREEZE-EASTERN CORPORATION

By:	/s/ Charles W. Grigg
	Charles W. Grigg
	Chairman of the Board of Directors
	/s/ Robert L.G. White
	Robert L.G. White
	President and Chief Executive Officer

Date: June 4, 2008

     Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ Charles W. Grigg	Chairman of the Board of Directors	June 4, 2008
Charles W. Grigg
/s/ Joseph F. Spanier	Executive Vice President, Chief Financial
Joseph F. Spanier	Officer and Treasurer (Principal
	Financial and Accounting Officer)
/s/ Robert L.G. White	President and Chief Executive Officer	June 4, 2008
Robert L.G. White	(Principal Executive Officer)
	Director
/s/ William H. Alderman	Director	June 4, 2008
William H. Alderman
/s/ Jay R. Harris	Director	June 4, 2008
Jay R. Harris
/s/ William J. Recker	Director	June 4, 2008
William J. Recker
/s/ Russell M. Sarachek	Director	June 4, 2008
Russell M. Sarachek
/s/ William M. Shockley	Director	June 4, 2008
William M. Shockley
/s/ Frederick Wasserman	Director	June 4, 2008
Frederick Wasserman

56

EX-3.2

Exhibit 3.2

AMENDED AND RESTATED BYLAWS

OF

BREEZE-EASTERN CORPORATION
(A Delaware Corporation)

EFFECTIVE: October 18, 2006

ARTICLE I
Offices

     Section 1.01. REGISTERED OFFICE. The registered office of Breeze-Eastern Corporation (the “Corporation”) in the State of Delaware shall be at Corporation Trust Center, 100 West Tenth Street, in the City of Wilmington, County of New Castle, State of Delaware, and the name of the registered agent at that address shall be The Corporation Trust Company.

     Section 1.02. PRINCIPAL EXECUTIVE OFFICE. The principal executive address of the Corporation shall be located at 700 Liberty Avenue, Union, New Jersey 07083. The Board of Directors of the Corporation (the “Board”) may change the location of said principal executive office.

     Section 1.03. OTHER OFFICES. The Corporation may also have an office or offices at such other place or places, either within or without the State of Delaware, as the Board may from time to time determine or as the business of the Corporation may require.

ARTICLE II
Meetings of Stockholders

     Section 2.01. ANNUAL MEETINGS. The annual meeting of stockholders of the Corporation shall be held on such date and at such time as the Board shall determine. At each annual meeting of stockholders, directors shall be elected in accordance with the provisions of Section 3.03 and any other proper business may be transacted.

     Section 2.02. SPECIAL MEETINGS. Special meetings of stockholders for any purpose may be called at any time by a majority of the Board, the chairman of the Board, the president or the secretary. Special meetings may not be called by any other person. Each special meeting shall be held at such date and time as is requested by the person or persons calling the meeting, within the limits fixed by law.

     Section 2.03. PLACE OF MEETINGS. Each annual or special meeting of stockholders shall be held at such location as may be determined by the Board or, if no such determination is made, at such place as may be determined by the chairman of the Board. If no location is so determined, any annual or special meeting shall be held at the principal executive office of the Corporation.

BYLAWS-Page 1

     Section 2.04. NOTICE OF MEETINGS. Except as otherwise required by law, notice of each meeting of the stockholders, whether annual or special, shall be given not less than 10 nor more than 60 days before the date of the meeting to each stockholder of record entitled to vote at such meeting by delivering a typewritten or printed notice thereof to him personally, or by depositing such notice in the United States mail, in a postage prepaid envelope, directed to him at his post-office address furnished by him to the secretary for such purpose or, if he shall not have furnished to the secretary his address for such purpose, then at his post-office address last known to the secretary, or by transmitting a notice thereof to him at such address by facsimile.

     Except as otherwise expressly required by law, the notice shall state the place, date and hour of the meeting, and, in the case of a special meeting, shall also state the purpose for which the meeting is called. Notice of any meeting of stockholders shall not be required to be given to any stockholder to whom notice may be omitted pursuant to applicable Delaware law or who shall have waived such notice and such notice shall be deemed waived by any stockholder who shall attend such meeting in person or by proxy, except a stockholder who shall attend such meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Except as otherwise expressly required by law, notice of any adjourned meeting of the stockholders need not be given if the time and place thereof are announced at the meeting at which the adjournment is taken. If adjournment of the meeting is for a period exceeding 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

     Section 2.05. CONDUCT OF MEETINGS. All annual and special meetings of stockholders shall be conducted in accordance with such rules and procedures as the Board may determine subject to the requirements of applicable law and, as to matters not governed by such rules and procedures, as the chairman of such meeting shall determine. The chairman of any annual or special meeting of stockholders shall be the chairman of the Board if he is willing, and if not, then the president. The secretary, or in the absence of the secretary, a person designated by the chairman of the Board or president, as the case may be, shall act as secretary of the meeting.

     Section 2.06. QUORUM. At any meeting of stockholders, the presence, in person or by proxy, of the holders of record of a majority of shares then issued and outstanding and entitled to vote at the meeting shall constitute a quorum for the transaction of business; provided, however, that this Section 2.06 shall not affect any different requirement which may exist under statute, pursuant to the rights of any authorized class or series of stock, or under the Certificate of Incorporation of the Corporation (the “Certificate”) for the vote necessary for the adoption of any measure governed thereby. In the absence of a quorum, the stockholders present in person or by proxy, by majority vote and without further notice, may adjourn the meeting from time to time until a quorum is attained. At any reconvened meeting following such an adjournment at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting as originally notified.

     Section 2.07. VOTES REQUIRED. A majority of the votes cast at a duly called meeting of stockholders, at which a quorum is present, shall be sufficient to take or authorize action upon any matter which may properly come before the meeting, unless the vote of a greater or different number thereof is required by statute, by the rights of any authorized class of stock or by the Certificate. Unless the Certificate or a resolution of the Board of Directors adopted in connection with the issuance of shares of any class or series of stock provides for a greater or lesser number of

BYLAWS-Page 2

votes per share, or limits or denies voting rights, each outstanding share of stock, regardless of class, shall be entitled to one vote on each matter submitted to a vote at a meeting of stockholders.

     Section 2.08. PROXIES. A stockholder may vote the shares owned of record by him either in person or by proxy executed in writing (which shall include writings sent by telex, facsimile or other electronic transmission) by the stockholder himself or by his duly authorized attorney-in-fact. No proxy shall be valid after 3 years from its date, unless the proxy provides for a longer period. Each proxy shall be in writing, subscribed by the stockholder or his duly authorized attorney-in-fact, and dated, but it need not be sealed, witnessed or acknowledged.

     Section 2.09. LIST OF STOCKHOLDERS. The secretary of the Corporation shall prepare and make (or cause to be prepared and made), at least 10 days before every meeting of stockholders, a complete list of stockholders entitled to vote at the meeting, arranged in alphabetical order and showing the address of, and the number of shares registered in the name of, each stockholder. The secretary of the Corporation is not required to include electronic mail addresses or other electronic contact information on the list. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, for a period of at least 10 days prior to the meeting, (i) during ordinary business hours at the principal place of business of the Corporation, or (ii) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting. If the Corporation makes the list available on an electronic network, the Corporation may take reasonable steps to ensure that such information is available only to stockholders of the Corporation. The list shall also be produced and kept at the time and place of the meeting during the duration thereof, and may be inspected by any stockholder who is present.

     Section 2.10. INSPECTORS OF ELECTION. In advance of any meeting of stockholders, the Board may appoint Inspectors of Election to act at such meeting or at any adjournments thereof. If such Inspectors are not so appointed or fail or refuse to act, the chairman of any such meeting may (and, upon the demand of any stockholder or stockholder’s proxy, shall) make such an appointment.

     The number of Inspectors of Election shall be one (1) or three (3). If there are three (3) Inspectors of Election, the decision, act or certificate of a majority shall be effective and shall represent the decision, act or certificate of all. No such Inspector need be a stockholder of the Corporation.

     The Inspectors of Election shall determine the number of shares outstanding, the voting power of each, the shares represented at the meeting, the existence of a quorum and the authenticity, validity and effect of proxies; they shall receive votes, ballots or consents, hear and determine all challenges and questions in any way arising in connection with the right to vote, count and tabulate all votes or consents, determine when the polls shall close and determine the result; and finally, they shall do such acts as may be proper to conduct the election or vote with fairness to all stockholders. On request, the Inspectors shall make a report in writing to the secretary of the meeting concerning any challenge, question or other matter as may have been determined by them and shall execute and deliver to such secretary a certificate of any fact found by them.

ARTICLE III
Directors

BYLAWS-Page 3

     Section 3.01. GENERAL POWERS. Subject to any requirements in the Certificate or the Bylaws, and of applicable law as to action which must be authorized or approved by the stockholders, any and all corporate powers shall be exercised by or under the authority of, and the business and affairs of the Corporation shall be under the direction of, the Board to the fullest extent permitted by law. Without limiting the generality of the foregoing, it is hereby expressly declared that the directors shall have the following powers, to wit:

First — To select and remove all the officers, agents and employees of the Corporation, prescribe such powers and duties for them as may not be inconsistent with law, with the Certificate or the Bylaws and fix their compensation.

Second — To conduct, manage and control the affairs and business of the Corporation, and to make such rules and regulations therefor not inconsistent with law, or with the Certificate or the Bylaws, as they may deem best.

Third — To change the location of the registered office of the Corporation in Section 1.01; to change the principal executive office for the transaction of the business of the Corporation from one location to another as provided in Section 1.02; to fix and locate, from time to time, one or more subsidiary offices of the Corporation within or without the State of Delaware as provided in Section 1.03; to designate any place within or without the State of Delaware for the holding of any stockholders’ meeting; and to adopt, make and use a corporate seal, and to prescribe the forms of certificates of stock, and to alter the form of such seal and of such certificates, from time to time, and in their judgment as they may deem best; provided, however, that such seal and such certificates shall at all times comply with the law.

Fourth — To authorize the issuance of shares of stock of the Corporation, from time to time, upon such terms and for such considerations as may be lawful.

Fifth — To borrow money and incur indebtedness for the purposes of the Corporation, and to cause to be executed and delivered therefor, in the corporate name, promissory notes, bonds, debentures, deeds of trust and securities therefor.

     Section 3.02. NUMBER AND TERM OF OFFICE. Effective as of February 28, 2006 the authorized number of directors of the Corporation shall be eight (8) until this section is amended by a resolution duly adopted by the Board or by the stockholders, in either case in accordance with the provisions of Article V of the Certificate. Directors need not be stockholders. Each of the directors shall hold office until his successor shall have been duly elected and shall qualify or until he shall resign or shall have been removed in the manner hereinafter provided.

     Section 3.03. ELECTION OF DIRECTORS. The directors shall be elected by the stockholders of the Corporation, and at each election the persons receiving the greater number of votes, up to the number of directors then to be elected, shall be the persons then elected. The election of directors is subject to any provisions contained in the Certificate relating thereto.

     Section 3.04. RESIGNATIONS. Any director may resign at any time by giving notice in writing or by electronic transmission to the Board or to the secretary. Any such resignation shall take effect at the time specified therein, or, if the time is not specified, it shall take effect immediately upon receipt; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

BYLAWS-Page 4

     Section 3.05. VACANCIES. Except as otherwise provided in the Certificate, any vacancy in the Board, whether because of death, resignation, disqualification, an increase in the number of directors, or any other cause, may be filled by vote of the majority of the remaining directors, although less than a quorum. Each director so chosen to fill a vacancy shall hold office until his successor shall have been elected and shall qualify or until he shall resign or shall have been removed.

     No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of his term of office.

     Section 3.06. PLACE OF MEETING, ETC. The Board or any committee thereof may hold any of its meetings at any place, within or without the State of Delaware, as the Board or such committee may, from time to time, by resolution designate or as shall be designated by the person or persons calling the meeting or in the notice or a waiver of notice of any such meeting. Directors may participate in any regular or special meeting of the Board or any committee thereof by means of conference telephone or similar communications equipment pursuant to which all persons participating in the meeting of the Board or such committee can hear each other, and such participation shall constitute presence in person at such meeting.

     Section 3.07. FIRST MEETING. The Board shall meet as soon as practicable after each annual election of directors and notice of such first meeting shall not be required.

     Section 3.08. REGULAR MEETING. Regular meetings of the Board may be held at such times as the Board shall, from time to time, by resolution determine. If any date fixed for a regular meeting shall be a legal holiday at the place where the meeting is to be held, then the meeting shall be held at the same hour and place on the next succeeding business day not a legal holiday. Except as provided by law, notice of regular meetings need not be given.

     Section 3.09. SPECIAL MEETING. Special meetings of the Board for any purpose shall be called at any time by the chairman of the Board or, if he is absent or unable or refuses to act, by the president or, if he is absent or unable or refuses to act, by the secretary or by any two directors. Except as otherwise provided by law or by the Bylaws, written notice of the time and place of special meetings shall be delivered personally to each director, or sent to each director by mail or by other form of written communication, including electronic transmission, charges prepaid, addressed to him at his address as it is shown upon the records of the Corporation, or if it is not so shown on such records and is not readily ascertainable, at the place in which the meetings of the directors are regularly held. In case such notice is mailed, it shall be deposited in the United States mail at least forty-eight (48) hours prior to the time of the holding of the meeting. In case such notice is delivered personally, or by electronic transmission, as above provided, it shall be so delivered at least 24 hours prior to the time of the holding of the meeting. Such mailing, personal delivery or electronic transmission as above provided shall be due, legal and personal notice to such director. Except where otherwise required by law or by the Bylaws, notice of the purpose of a special meeting need not be given. Notice of any meeting of the Board shall not be required to be given to any director who is present at such meeting, except a director who shall attend such meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.

     Section 3.10. QUORUM AND MANNER OF ACTING. Except as otherwise provided in the Bylaws, the Certificate or by applicable law, the presence of a majority of the total number of

BYLAWS-Page 5

directors shall be required to constitute a quorum for the transaction of business at any meeting of the Board, and all matters shall be decided at any such meeting, a quorum being present, by the affirmative votes of a majority of the directors present. In the absence of a quorum, a majority of directors present at any meeting may adjourn the same, from time to time, until a quorum shall be present. Notice of any adjourned meeting need not be given. The directors shall act only as a Board, and the individual directors shall have no power as such.

     Section 3.11. ACTION BY CONSENT. Any action required or permitted to be taken at any meeting of the Board or of any committee thereof may be taken without a meeting if consent in writing or by electronic transmission is given thereto by all members of the Board or of such committee, as the case may be, and such consent is filed with the minutes of proceedings of the Board or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

     Section 3.12. COMPENSATION. Directors who are not employees of the Corporation or any of its subsidiaries may receive an annual fee for their services as directors in an amount fixed by resolution of the Board, and in addition, a fixed fee, with or without expenses of attendance, may be allowed by resolution of the Board for attendance at each meeting, including each meeting of a committee of the Board. Nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity as an officer, agent, employee, or otherwise, and receiving compensation therefor.

     Section 3.13. COMMITTEES. The Board may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of two or more of the directors of the Corporation. Any such committee, to the extent provided in the resolution of the Board and subject to any restrictions or limitations on the delegation of power and authority imposed by applicable law, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it. Any such committee may keep written minutes of its meetings and shall report on its meetings to the Board at the next regular meeting of the Board.

     Section 3.14 MEETINGS OF COMMITTEES. Each committee of the Board shall fix its own rules of procedure consist with the provisions of applicable law and of any resolutions of the Board governing such committee. Each committee shall meet as provided by such rules or such resolution of the Board. Unless otherwise provided by such rules or by such resolution, the provisions of the Bylaws under Article III entitled “Directors” relating to the place of holding meetings and the notice required for meetings of the Board of Directors shall govern the place of meetings and notice of meetings for committees of the Board. A majority of the members of each committee shall constitute a quorum thereof. In the absence of a quorum, a majority of the members present at the time and place of any meeting may adjourn the meeting from time to time until a quorum shall be present and the meeting may be held as adjourned without further notice or waiver. Except in cases where it is otherwise provided by the rules of such committee or by a resolution of the Board, the vote of a majority of the members present at a duly constituted meeting at which a quorum is present shall be sufficient to pass any measure by the committee.

ARTICLE IV
Officers

BYLAWS-Page 6

     Section 4.01 DESIGNATION, ELECTION AND TERM OF OFFICE. The Corporation shall have a chairman of the Board, a chief executive officer, a president, a chief financial officer, a treasurer and a secretary. These officers shall be elected annually by the Board at the organizational meeting immediately following the annual meeting of stockholders, and each such officer shall hold office until the corresponding meeting of the Board in the next year and until his successor shall have been elected and qualified or until his earlier resignation, death or removal. One person may, to the extent permitted by law, hold one or more office. In its discretion, the Board may leave unfilled for any period it may fix any office to the extent allowed by law. Any vacancy in any of the above offices may be filled for the unexpired portion of the term by the Board at any regular or special meeting.

     Section 4.02. CHAIRMAN OF THE BOARD. The chairman of the Board shall preside, if present and willing, at all stockholders and Board of Directors’ meetings. In addition, he shall have such other duties as may, from time-to-time, be assigned to him by the Board of Directors.

     Section 4.03. CHIEF EXECUTIVE OFFICER. Except to the extent that the Bylaws or the Board of Directors assign specific powers and duties to the chairman of the Board the chief executive officer shall be the Corporation’s General Manager and, subject to the control of the Board of Directors, shall have general charge, supervision and control over the Corporation’s assets, businesses, operations, officers and employees. He shall have the authority to create and fill such management positions as he deems appropriate to carry out his duties. The managerial powers and duties of the chief executive officer include, but are not limited to, all of the general powers and duties of management usually vested in the office of a chief executive officer, and the making of reports to the Board of Directors and stockholders.

     Section 4.04. PRESIDENT. The Board shall appoint a president, who shall be accountable to the chief executive officer. He shall perform such duties as may be assigned to him, from time to time, by the Board in its enabling resolution and by the chief executive officer.

     Section 4.05. CHIEF FINANCIAL OFFICER AND TREASURER. The chief financial officer of the Corporation shall report to the chief executive officer and be responsible for the management and supervision of all financial matters and for the financial growth and stability of the Corporation. In addition, he shall have the duties and hold the office of treasurer of the Corporation.

     Section 4.06. SECRETARY. The secretary shall keep the minutes of the meetings of the stockholders, the Board and all committee meetings. He shall be the custodian of the corporate seal and shall affix it to all documents which he is authorized by law or the Board to sign and seal. He also shall perform such other duties as may be assigned to him, from time to time, by the Board, the chairman of the Board or the chief executive officer.

     Section 4.07. OTHER OFFICERS. The Board may also elect one or more, assistant secretaries and assistant treasurers.

     Section 4.08. WHEN DUTIES OF AN OFFICER MAY BE DELEGATED. In the case of the absence or disability of an officer or for any other reason that may seem sufficient to the Board, the Board, or any officer designated by it, or the chairman of the Board may, for the time of the absence or disability, delegate such officer’s duties and powers to any other officer of the Corporation.

     Section 4.09. RESIGNATIONS. Any officer may resign at any time by giving written notice to the Board, to the chairman of the Board, to the chief executive officer, or to the secretary. Any

BYLAWS-Pag 7

such resignation shall take effect at the time specified therein unless otherwise determined by the Board. The acceptance of a resignation by the Corporation shall not be necessary to make it effective.

     Section 4.10. REMOVAL. Any officer of the Corporation may be removed, with or without cause, by the affirmative vote of a majority of the entire Board.

ARTICLE V
Contracts, Checks, Drafts, Bank Accounts, Etc.

     Section 5.01. EXECUTION OF CONTRACTS. The Board, except as otherwise provided in the Bylaws, may authorize any officer or officers, agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances; and unless so authorized by the Board or by the Bylaws, no officer, agent or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or in any amount.

     Section 5.02. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for payment of money, notes or other evidence of indebtedness, issued in the name of or payable to the Corporation, shall be signed or endorsed by such person or persons and in such manner as, from time to time, shall be determined by resolution of the Board. Each such officer, assistant, agent or attorney shall give such bond, if any, as the Board may require.

     Section 5.03. DEPOSITS. All funds of the Corporation not otherwise employed shall be deposited, from time to time, to the credit of the Corporation in such banks, trust companies or other depositaries as the Board may select, or as may be selected by any officer or officers, assistant or assistants, agent or agents, or attorney or attorneys of the Corporation to whom such powers shall have been delegated by the Board. For the purpose of deposit and for the purpose of collection for the account of the Corporation, the chief executive officer, the president, t or the chief financial officer (or any other officer or officers, assistant or assistants, agent or agents, or attorney or attorneys of the Corporation who shall from time to time be authorized by the Board) may endorse, sign and deliver checks, drafts and other orders for the payment of money which are payable to the order of the Corporation.

     Section 5.04. GENERAL AND SPECIAL BANK ACCOUNTS. The Board may, from time to time, authorize the opening and keeping of general and special bank accounts with such banks, trust companies or other depositaries as the Board may select or as may be selected by any officer, assistant or assistants, agent or agents, or attorney or attorneys of the Corporation to whom such power shall have been delegated by the Board. The Board may make such special rules and regulations with respect to such bank accounts, not inconsistent with the provisions of the By-laws as it may deem expedient.

ARTICLE VI
Indemnification

     To the maximum extent permitted by then applicable law, the Corporation (i) shall indemnify and hold harmless each person who was or is a party to, or is threatened to be made a party to, any threatened, pending or completed action, suit or proceeding, whether or not by or in the right of the Corporation, and whether civil, criminal, administrative, investigative or otherwise (any such action,

BYLAWS-Page 8

suit or proceeding being hereafter in this Article referred to as a “proceeding”), by reason of the fact that such person is or was a director or officer of the Corporation, is or was serving at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, or was a director or officer of a foreign or domestic corporation which was a predecessor corporation of the Corporation or of another enterprise at the request of such predecessor corporation; and (ii) may indemnify and hold harmless each person who was or is a party to, or is threatened to be made a party to, any such proceeding by reason of the fact that such person is or was an employee or agent of the Corporation, is or was serving at the request of the Corporation as an employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or was an employee or agent of a foreign or domestic corporation which was a predecessor corporation of the Corporation or of any enterprise at the request of such corporation (any such person being hereafter in the Article referred to as an “indemnifiable party”). Where required by law, the indemnification provided for in this Article shall be made only as authorized in the specific case upon a determination, in the manner provided by law, that the indemnification of the indemnifiable party is proper in the circumstances. The Corporation shall advance to indemnifiable parties expenses incurred in defending any proceeding prior to the final disposition thereof except to the extent prohibited by then applicable law, and upon receipt of an undertaking by or on behalf of such individual to repay such amount if it shall ultimately be determined that such person is not entitled to be indeminified by the Corporation. This Article shall create a right of indemnification for each such indemnifiable party whether or not the proceeding to which the indemnification relates arose in whole or in part prior to adoption of this Article (or the adoption of the comparable provisions of the Bylaws of the Corporation’s predecessor corporation) and, in the event of the death of an indemnifiable party, such right shall extend to such indemnifiable party’s legal representatives. The right of indemnification hereby given shall not be exclusive of any right such indemnifiable party may have, whether by law or under any agreement, insurance policy, vote of the Board or stockholders, or otherwise. The Corporation shall have power to purchase and maintain insurance on behalf of any indemnifiable party against any liability asserted against or incurred by the indemnifiable party in such capacity or arising out of the indemnifiable party’s status as such whether or not the Corporation would have the power to indemnify the indemnifiable party against such liability.

ARTICLE VII
Stock

     Section 7.01. CERTIFICATES. The shares of stock of the Corporation shall by represented by certificates, or shall be uncertificated shares that may be evidenced by a book-entry system maintained by the registrar of such stock, or a combination of both. To the extent that shares are represented by certificates, such certificates shall be signed in the name of the Corporation by the chairman of the Board and the president, together with the secretary. Any or all of the signatures on any certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were an officer, transfer agent or registrar at the date of issue.

     Section 7.02. TRANSFER OF SHARES. Shares of stock shall be transferable on the books of the Corporation only by the holder thereof or by his duly authorized attorney, and if such shares are represented by a certificate, upon the surrender of the certificate representing the shares to be transferred, properly endorsed, to the Corporation’s registrar if the Corporation has a registrar. The

BYLAWS-Page 9

Board shall have power and authority to make such other rules and regulations concerning the issue, transfer and registration of certificates of the Corporation’s stock as it may deem expedient.

     Section 7.03. TRANSFER AGENTS AND REGISTRARS. The Corporation may have one or more transfer agents and one or more registrars of its stock whose respective duties the Board or the Secretary may, from time to time, define. No certificate of stock shall be valid until countersigned by a transfer agent, if the Corporation has a transfer agent, or until registered by a registrar, if the Corporation has a registrar. The duties of transfer agent and registrar may be combined.

     Section 7.04. STOCK LEDGERS. Original or duplicate stock ledgers, containing the names and addresses of the stockholders of the Corporation and the number of shares of each class of stock held by them, shall be kept at the principal executive office of the Corporation or at the office of its transfer agent or registrar.

     Section 7.05. RECORD DATES. The Board shall fix, in advance, a date as the record date for the purpose of determining stockholders entitled to notice of, or to vote at, any meeting of stockholders or any adjournment thereof, or stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock, or in order to make a determination of stockholders for any other proper purpose. Such date in any case shall be not more than 60 days, and in case of a meeting of stockholders, not less than 10 days, prior to the date on which the particular action requiring such determination of stockholders is to be taken. Only those stockholders of record on the date so fixed shall be entitled to any of the foregoing rights, notwithstanding the transfer of any such stock on the books of the Corporation after any such record date fixed by the Board.

     Section 7.06. NEW CERTIFICATES. In case any certificate of stock is lost, stolen, mutilated or destroyed, the Board may authorize the issuance of a new certificate in place thereof upon such terms and conditions as it may deem advisable; or the Board may delegate such power to the secretary; but the Board or secretary or agents, in their discretion, may refuse to issue such a new certificate unless the Corporation is ordered to do so by a court of competent jurisdiction.

ARTICLE VIII
General Provisions

     Section 8.01. DIVIDENDS. Subject to limitations contained in Delaware Law and the Certificate, the Board may declare and pay dividends upon the shares of capital stock of the Corporation, which dividends may be paid either in cash, securities of the Corporation or other property.

     Section 8.02. VOTING OF STOCK IN OTHER CORPORATIONS. Any shares of stock in other corporations or associations which may, from time to time, be held by the Corporation, may be represented and voted at any of the stockholders’ meetings thereof by the chairman of the Board, the chief executive officer, the president or the secretary. The Board, however, may by resolution appoint some other person or persons to vote such shares, in which case such person or persons shall be entitled to vote such shares upon the production of a certified copy of such resolution.

     Section 8.03. AMENDMENTS. These Bylaws may be adopted, repealed, rescinded, altered or amended only as provided in the Certificate.

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     Section 8.04. MAINTENANCE OF RECORDS. Any records maintained by the Corporation in the regular course of business, including its stock ledger, books of account, and minute books, may be kept on, or by means of, or be in the form of, any information storage device or method, provided that the records so kept can be converted into clearly legible paper form within a reasonable time. The Corporation shall so convert any records so kept upon the request of any person entitled, by law, to inspect such records.

     Section 8.05. DEFINITION OF ELECTRONIC TRANSMISSION. For purposes of the Bylaws, “electronic transmission” means any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved, and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process.

BYLAWS-Page 11

EX-10.35

Exhibit 10.35

NET LEASE AGREEMENT

Between

BED BATH & BEYOND INC.

as Landlord

and

BREEZE-EASTERN CORPORATION

as Tenant

Dated as of February 8^th, 2008

TABLE OF CONTENTS

Article 1.	BASIC LEASE PROVISIONS	1
Article 2.	LEASE	3
Article 3.	TERM	3
Article 4.	NET RENT	4
Article 5.	REAL ESTATE TAXES	5
Article 6.	INSURANCE	6
Article 7.	ELECTRIC, WATER AND SEWER FEES	7
Article 8.	CARE, MAINTENANCE AND ALTERATIONS OF PREMISES	8
Article 9.	REPAIR AND MAINTENANCE	9
Article 10.	ASSIGNMENT AND SUBLETTING	11
Article 11.	COMPLIANCE WITH LAWS, RULES AND REGULATIONS	12
Article 12.	PERMITTED USE AND ENVIRONMENTAL MATTERS	13
Article 13.	DAMAGE AND DESTRUCTION	18
Article 14.	EMINENT DOMAIN	19
Article 15.	INSOLVENCY OF TENANT	19
Article 16.	LANDLORD’S REMEDIES ON DEFAULT	20
Article 17.	DEFICIENCY	20
Article 18.	ATTORNMENT	21
Article 19.	RIGHT TO CURE TENANT’S BREACH	21
Article 20.	CONSTRUCTION LIENS	21
Article 21.	RIGHT TO INSPECT AND REPAIR	21
Article 22.	INTERRUPTION OF SERVICES OR USE	22
Article 23.	ESTOPPEL	22
Article 24.	HOLDOVER TENANCY	22
Article 25.	RIGHT TO SHOW PREMISES	23
Article 26.	LATE CHARGE	23
Article 27.	NO OTHER REPRESENTATIONS	23
Article 28.	QUIET ENJOYMENT	23
Article 29.	INDEMNITY	23
Article 30.	ARTICLE HEADINGS	23
Article 31.	APPLICABILITY TO HEIRS AND ASSIGNS	23
Article 32.	WAIVER OF TRIAL BY JURY	24
Article 33.	LANDLORD’S LIABILITY FOR LOSS OF PROPERTY	24
Article 34.	PARTIAL INVALIDITY	24
Article 35.	BROKER	24
Article 36.	PERSONAL LIABILITY	24
Article 37.	FORCE MAJEURE	25
Article 38.	NOTICES	25
Article 39.	NO WAIVER	25
Article 40.	WRITING REQUIRED	26
Article 41.	COMPLETE AGREEMENT	26
Article 42.	SIGNS	26
Article 43.	NO RECORDATION	26
Article 44.	VALIDITY	26
Article 45.	MISCELLANEOUS	26

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THIS NET LEASE AGREEMENT, made as of February ___, 2008 between BED BATH & BEYOND INC., a New York corporation having its principal place of business at 650 Liberty Avenue, Union, NJ 07083
(referred to as “Landlord”)

And

BREEZE-EASTERN CORPORATION, with an address at 700 Liberty Avenue, Union, New Jersey 07083-8198
(referred to as “Tenant”).

WITNESSETH:

     Landlord, for and in consideration of the rents, covenants and agreements hereinafter reserved and contained on the part of Tenant to be paid, kept and performed, does hereby lease to Tenant, and Tenant does hereby hire from Landlord, the entire premises including the land (the “Land”) as more particularly described on Exhibit A attached hereto and made a part hereof, and building, together with all fixtures, equipment, improvements and installations attached thereto and improvements erected thereon (the “Building”) known as 700 Liberty Avenue, Union Township, Union County, New Jersey and a tax map reference of Lot 1.01, Block 3503 on the tax map of Union Township, together with all other improvements now or hereafter located thereon, and the parking areas immediately adjacent to the Building with unimpeded ingress and egress to the Building and parking areas, together with all and singular the appurtenances, rights, privileges and easements in anywise pertaining thereto: and together with all the right, title and interest, if any, of Landlord in and to any adjoining sidewalk, and in and to any adjoining street or alley to the center line thereon upon and subject to those terms, covenants and conditions herein, together with the right to use all appurtenances, rights, privileges and easements now or hereafter benefiting the Land or the land upon which the Building is situated. All of the aforementioned Land, Building, improvements, rights and easements are hereinafter collectively called the “Premises”.

     The use and occupancy by Tenant of the Premises are subject to (a) all zoning ordinances and regulations now or hereafter in force of any public authority or governmental agency or department having jurisdiction, and (b) all existing encumbrances, conditions, rights, covenants, restrictions and rights of way affecting the Premises or the land upon which the Premises is situated.

     To have and to hold the Premises for the term and at the rents and upon the terms, covenants and conditions hereinafter provided:

     Article 1. BASIC LEASE PROVISIONS. As further supplemented in the balance of this Lease and the preamble to this Lease, this Article 1 sets forth the basic terms of the Lease and, where appropriate, defines certain terms used in this Lease.

          (a) Premises: subject to the provisions of Article 2, the Premises consists of the Land and Building located at 700 Liberty Avenue, Union Township, Union County, New Jersey 07083.

          (b) Tenant’s Address: 700 Liberty Avenue, Union, New Jersey 07083.

          (c) Landlord’s Address (for notices): 650 Liberty Avenue, Union, New Jersey 07083.

          (d) Lease Term: Twenty-four months.

          (e) Commencement Date: The date hereof.

          (f) Expiration Date: The last day of the twenty-fourth (24th) full calendar month after the Commencement Date.

          (g) Net Rent: As provided in Article 4.

          (h) Payee of Rent: Landlord.

          (i) Address for Payment of Rent: 650 Liberty Avenue, Union, New Jersey 07083. Attention: Jeff Cohen.

          (j) Description of Premises: the Land and Buildings at the Premises containing about 1,76,600 gross square feet of space consisting of a two story office building (the “Office Building”) and a one story assembly plant and warehouse (the “Assembly Plant”.)

          (k) Security Deposit: NONE.

          (l) Tenant’s Use (set forth with specificity): assembly, warehousing and administrative offices in connection aircraft hoists, parts and related products and all lawful uses ancillary thereto.

          (m) Broker: None.

          (n) Tenant’s North American Industry Classification System Code (NAICS Code): 336413.

          (o) Payable upon execution:

               (i) First Month’s Net Monthly Rent of $81,824.67 prorated for the number of days in the first calendar month.

               (ii) Security Deposit in the amount of $ NONE.

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          (p) Landlord’s Work. None.

          (q) Tenant’s Work: None.

     Article 2. LEASE.

          (a) Landlord, for and in consideration of the rents herein reserved and of the covenants and agreements herein contained on the part of the Tenant to be performed, hereby leases to the Tenant, and the Tenant accepts from the Landlord, the Premises.

          (b) Tenant and Landlord acknowledge and agree that, (i) on or before the one (1) year anniversary of the Commencement Date, Tenant shall vacate and surrender to Landlord approximately ten thousand (10,000) contiguous square feet of floor area in the rear of the Assembly Plant and parking spaces for sixty (60) cars in the parking lot located at the Premises (the “Surrender Space”); (ii) Landlord and Tenant shall work together in good faith to mutually agree upon the space to be so vacated and surrendered by Tenant and the effective date of the surrender, and (iii) as of the date Tenant vacates and surrenders the Surrender Space to Landlord (the “Surrender Date”), the Premises shall no longer include the Surrender Space. Such Surrender Space shall have its own entrance from the parking area and Landlord will be responsible for the costs and expenses of a demising wall and all improvements in the Surrender Space. As of the Surrender Date, the Net Rent payable by Tenant hereunder shall be reduced (using the per square foot annual rate in Article 4(a)) to reflect the Surrender Space is no longer occupied by the Tenant and, subject to Landlord’s architect certifying the actual gross square footage of the Surrender Space, Tenant’s Additional Rent and other financial adjustments including Landlord’s pro rata share of the Real Estate Taxes, insurance and common area maintenance costs shall be equitably determined. The Landlord shall reimburse (or give Tenant a credit) or pay directly its pro rata share of Real Estate Taxes, insurance, costs for maintenance and repair of the common areas of the Premises and for all utility costs for the Surrender Space. Common area maintenance and repair costs shall include all maintenance and repair of the parking lot, exterior of the Assembly Plant, Assembly Plant roof, snow plowing, landscaping and similar items. Landlord will carry insurance on its contents and leasehold improvements in the Surrender Space. Any Real Estate Taxes resulting form an additional tax assessment due to the construction of the Surrender Space shall be allocated entirely to the Landlord.

     Article 3. TERM.

          (a) A period of time commencing as of the Commencement Date, and unless sooner terminated as herein provided, ending at noon on Expiration Date. Tenant shall have the right at any time following the twelve (12) month anniversary of the Commencement Date to terminate this Lease (the “Early Termination Option”). The Early Termination Option shall be exercisable by Tenant giving Landlord at least sixty (60) days’ notice of its intent to terminate this Lease as of the date specified in said notice. In the event Tenant elects to exercise the Early Termination Option, this Lease shall terminate on the date set forth in Tenant’s notice to Landlord as if such date were the Expiration Date hereunder and thereafter neither party shall have any further obligation or liability to the other except to the extent such obligation or liability would survive the Expiration Date originally set forth herein, including, but not limited to, those obligations and liabilities of Tenant set forth in Article 12.

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          (b) Tenant has certain service contracts in place which are listed on Exhibit C attached hereto. Tenant will terminate all such service contracts unless Landlord elects to assume one or more of such contracts by giving written notice to the Tenant at least forty five (45) days prior to the Expiration Date or earlier expiration if Tenant exercises the early termination option (the “Early Expiration Date.”) If Landlord so elects, on or prior to the Expiration Date or Early Expiration Date the Tenant will assign and Landlord will assume those service contracts that Landlord has elected to assume. Any service contracts that Landlord does not elect to assume will be terminated by Tenant at Tenant’s cost and expense, if any. Notwithstanding the foregoing, the Tenant retains the right to terminate any service contract on Exhibit C if Tenant decides the vendor is no longer performing satisfactorily or the cost is more than available elsewhere for comparable services. To the extent Tenant is required to have a service contract by the terms of this Lease, any terminated service contract will be replaced by a new vendor selected by Tenant.

     Article 4. NET RENT.

          (a) The Tenant shall pay to the Landlord at the Landlord’s Address (or at such other place as the Landlord may designate in writing from time to time), without offset or deduction, beginning on the date hereof and, thereafter, on the first day of each and every calendar month during the Lease Term, the sum of Eighty One Thousand Eight Hundred Twenty Four and 67/100 DOLLARS ($81,824.67) (the “Monthly Net Rent”) which is calculated on the basis of $5.56 per square foot per annum. The Monthly Net Rent is referred to as “Net Rent” herein. If the Term commences or ends during the middle of a calendar month, the Monthly Net Rent for such partial monthly period shall be adjusted on a per diem basis by dividing the Monthly Net Rent by the number of days in the month and multiplying the result by the number of days that the Tenant has occupancy of the Premises during such month. Landlord and Tenant acknowledge and agree that Tenant shall have no obligation to pay Net Rent on any portion of the Premises that have been surrendered to Landlord pursuant to the provisions of Article 2, therefore, the Net Rent payable with respect to any month during the Term following the date Tenant vacates and surrenders the Surrender Space to Landlord will be calculated based on the actual square footage of the Building occupied by Tenant as of the first day of such month.

          (b) All charges, costs and sums required to be paid by Tenant to Landlord or third parties for the benefit of the Premises under this Lease in addition to Net Rent shall be deemed “Additional Rent,” and Net Rent and Additional Rent shall hereinafter collectively be referred to as “Rent.” Tenant’s covenant to pay Rent shall be independent of every other covenant in this Lease.

          (c) Monthly Net Rent and any Additional Rent due the Landlord are payable on the first day of every calendar month in advance without notice, demand, setoff, counterclaim or deduction of any kind except as provided in this Lease. Additional Rent payable to third parties for the benefit of the Premises is due when such obligation is payable to such third party without the benefit of any grace period or late period.

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          (d) This is intended to be a “triple net lease” with the Net Rent payable to the Landlord, and the Tenant is also obligated to pay Real Estate Taxes (hereinafter defined) as hereinafter provided, and all charges and expenses incurred for the maintenance, and repair of the non-structural portions of the Premises, insurance, operating expenses for utilities, services, trash removal, and all other costs of operating the Premises as specified elsewhere in this Lease which costs shall be paid directly by Tenant or as Additional Rent excluding only the mortgage debts, land lease rents or other encumbrances on the Premises created by the Landlord. Subject to the specific provisions set forth in Article 8, it is the intention of the parties that the Tenant shall pay all the foregoing costs, expenses, repairs, maintenance, and operating costs during the term hereof no matter when such costs and expenses are incurred during the Term except for such costs and expenses which are expressly the obligation of the Landlord under this Lease. If Landlord pays any of such expenses, the Landlord shall bill Tenant for such expenses and Tenant shall pay Landlord such expenses as Additional Rent.

          (e) For all Additional Rent expenses, other than Real Estate Taxes (hereinafter defined) on the Premises, the Landlord agrees that the Tenant may pay such expenses directly to the vendor providing such services so long as Tenant is not in default under this Lease, Tenant provides evidence of payment of any expenses if Landlord requests evidence of payment and Tenant shall promptly provide to Landlord duplicate copies of the service contract on the heating and air conditioning systems and sprinkler inspection agreement upon Landlord’s written request. All Additional Rent which is not due and payable on a monthly basis during the Term, unless otherwise specified herein, shall be due and payable, (i) if payable to a third party, within the time permitted for payment without interest, penalty or default, (ii) if payable to Landlord without specific payment terms set forth herein, within twenty (20) days of delivery by Landlord to Tenant of notice to pay the same, and (iii) if payable to Landlord in a specific time or manner set forth herein, in accordance therewith.

     Article 5. REAL ESTATE TAXES.

          (a) As Additional Rent, Tenant shall reimburse Landlord the amount of the Real Estate Taxes applicable to the Premises during the term of this Lease. As used herein Real Estate Taxes shall mean the taxes and assessments now or hereafter imposed upon the Premises. If, due to a change in the method of taxation or assessment, any franchise, income, profit or other tax, however designated, shall be substituted by the applicable taxing authority in whole or in part, for the Real Estate Taxes now or hereafter imposed on the Premises, such franchise, income, profit or other tax shall be deemed to be included in the term “Real Estate Taxes” to the extent of such substitution.

          (b) Landlord shall provide Tenant with a copy of each invoice for Real Estate Taxes received by Landlord within thirty (30) days after Landlord receives same. Tenant shall pay to Landlord the amount of each payment of Real Estate Taxes no less than thirty (30) days before the due date for same. If Tenant shall pay such payment of Real Estate Taxes to Landlord at least thirty (30) days in advance of the due date of any payment, then Landlord shall make the payment of Real Estate Taxes before any interest or penalty is imposed for late payment and shall, upon

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receipt of proof of payment, provide Tenant with a copy of same. If Landlord shall not receive a payment of Real Estate Taxes at least thirty (30) days before its due date, then, in addition to the other rights and remedies available to Landlord as a result of such failure, Landlord shall have the right to either (A) delay the payment of such Real Estate Taxes until the later of such payment due date set forth above or ten (10) days following the payment of such amounts to Landlord by Tenant (and if such payment is made by check, the date of collection of same) in which event, all interest and penalties imposed shall be paid by Tenant as Additional Rent hereunder; or (B) pay such Real Estate Taxes from Landlord’s own funds.

          (c) If the Premises are assessed for any special assessments beneficial to the Tenant, Tenant shall pay all installments due during the Term of the Lease. Tenant shall pay directly all personal property taxes, water and sewer rents, and other governmental charges relating to Tenant’s use of the Premises, which may be assessed, levied, confirmed, imposed upon, or grow or become due and payable at any time during the term of this Lease (all such real estate taxes, assessments and personal property taxes, water and sewer rents, and other government charges which are payable by Tenant during the term of this Lease being deemed “Additional Rent”).

          (d) If Landlord shall receive any real estate tax refund or reimbursement of Real Estate Taxes or a sum in lieu thereof (“Tax Refund”) with respect to any year or portion thereof of which falls within the Term, then out of any balance remaining of the Tax Refund, after deducting Landlord’s expenses in obtaining the same being the actual expenses for legal fees and experts, Landlord shall pay to Tenant an amount equal to such Tax Refund (apportioned if such refund is for a calendar year a portion of which falls outside the Term); provided that in no event shall Tenant be entitled to receive more than the payments by Tenant for such calendar year or period.

          (e) Nothing herein contained shall require Tenant to pay state or federal income taxes assessed against Landlord, state or federal capital levy, estate, succession, inheritance or transfer taxes of Landlord.

     Article 6. INSURANCE.

          (a) Tenant shall continue to maintain on the Premises, together with its own policy of general liability insurance, the insurance coverage set forth on Exhibit B attached hereto. Such policy shall provide that it shall not be cancelable except on thirty (30) days prior written notice to the Landlord. The Landlord and its mortgagee (provided Landlord has provided to the Tenant prior written notice of the name of the mortgagee) shall be named additional insured under the liability policy. All such insurance shall be written by a good and solvent insurance carrier authorized to do business in the State of New Jersey.

          (b) Tenant’s personal property and fixtures and any other items which Tenant may bring to the Premises or which may be under Tenant’s care, custody and control which may be subject to any claim for damages or destruction due to Landlord’s negligence shall be fully insured by a policy of insurance covering all risks which policy, if available from such insurer, shall specifically provide for a waiver of subrogation against the Landlord without regard to whether or not same shall cost an additional premium and notwithstanding anything to the contrary contained

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in this Lease. Prior to the Commencement Date Tenant shall deliver to Landlord each policy or a certificate evidencing such policies of insurance required to be maintained by Tenant pursuant to the terms of this Lease. At least thirty (30) days prior to the expiration or termination date of any such policy, the Tenant shall deliver a renewal or replacement policy with proof of the payment of the premium therefore. Such policy shall provide that it shall not be cancelable except on thirty (30) days prior written notice to the Landlord.

          (c) Should Tenant fail to maintain all insurance required, or fail to name the Landlord or its mortgagee as an additional named insured under the liability policy, then Tenant shall be in default hereunder and shall be deemed to have breached its covenants as set forth herein.

          (d) Neither Landlord nor Tenant shall be liable to the other or to any insurance company insuring the other party (by way of subrogation or otherwise) for any loss or damage to any structure, building or other tangible property, or any resulting loss of income, even though such damage or loss might have been occasioned by the negligence of Landlord or Tenant or any of their agents or employees, if any such loss or damage is required to be covered by insurance (as set forth herein) benefiting the party suffering such loss or damage. To the extent that Landlord and Tenant have separate insurance policies, Landlord and Tenant shall each procure an appropriate clause in, or endorsement to, each of their insurance policies pursuant to which each insurance company waives it right of subrogation. Each insurance policy required to be maintained under this Lease shall state that with respect to the interest of Landlord the insurance maintained pursuant to each such policy shall not be invalidated by any action or inaction of Tenant and shall insure Landlord regardless of any breach or violation of any warranties, declarations, conditions or exclusions by Tenant.

          (e) Each insurance policy required to be maintained under this Lease shall state that all provisions of each such insurance policy, except for the limits of liability, shall operate in the same manner as if a separate policy had been issued to each person or entity insured there under.

          (f) Each insurance policy required to be maintained under this Lease shall state that the insurance provided thereunder is primary insurance without any right of contribution from any other insurance which may be carried by or for the benefit of Landlord.

          (g) Each insurance policy required to be maintained under this Lease shall recognize the indemnification set forth in Article 29 of this Lease.

     Article 7. ELECTRIC, WATER AND SEWER FEES.

          (a) Tenant shall pay for the costs of all electricity, gas, water, sewer and other utilities directly to the provider of such utilities to the Premises and the Building, interior and exterior. Any such items which are liens on the Premises shall be paid promptly and before any interest or penalties are due.

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          (b) In the event that any tax is imposed upon Landlord with respect to electric energy furnished to the Premises by any federal, state, county or municipal authority, Tenant shall pay to Landlord, on demand, such taxes so assessed against the Premises.

          (c) Landlord shall not be liable in any way to Tenant for any loss, damage or expense which the Tenant may sustain or incur if either the quantity or character of electric service or other utilities furnished to the Premises is changed or is no longer available or suitable for Tenant’s requirements.

     Article 8. CARE, MAINTENANCE AND ALTERATIONS OF PREMISES.

          (a) The Tenant shall commit no act of waste and shall maintain and take good care of the Premises and the fixtures and appurtenances therein at Tenant’s sole cost and expense and shall, in the use and occupancy of the Premises, conform to and comply with all laws, orders and regulations of the Federal, State and municipal governments. All of the aforesaid maintenance and repairs shall be consistent in quality with the condition of the Premises on the Commencement Date and in conformity with all fire and casualty insurance rating services and according to all applicable building codes and regulations. Further, in light of the Landlord’s plans to significantly renovate the Building upon termination of the Lease and short term nature of the Lease, Tenant need not make any repairs that are not essential to its continued use and occupancy of the Premises, except to the extent required pursuant to the provisions of Article l 1 below.

          (b) Not later than the last day of the Term, the Tenant shall remove all of the Tenant’s personal property and fixtures, including, but not limited to all cranes, lifts and shelving systems (the “Personal Property”). Tenant shall use commercially reasonable efforts not to cause any damage to the Premises by reason of Tenant’s removal of such fixtures, alterations, improvements and Personal Property and shall repair any injury to the building systems and structure done by or in connection with the installation or removal of said Tenant’s Personal Property, alterations, fixtures, personalty or improvements excluding any components or fixtures to be replaced by Landlord in its renovation of the Premises. Except as may be specifically provided herein, Tenant need not repair or fill any cracks nor pits in the floors left after the removal of its Personal Property or otherwise remedy any defect or condition in the Premises. Any Personal Property not removed by Tenant as required herein shall be deemed abandoned thirty (30) days after the expiration or earlier termination of the Lease, and may be stored, removed and disposed of by Landlord in its sole discretion, and Tenant waives all claims against Landlord for any damages resulting from Landlord’s retention or disposal of same. Tenant shall be entitled to no payment or offset for the value of any abandoned property (even if sold by Landlord) and Tenant shall pay on demand all costs incurred by Landlord in connection with such removal, disposal or storage. No retention, disposal or sale of such abandoned property shall limit remedies otherwise available to Landlord hereunder for a breach of this Agreement by Tenant. The provisions of this subparagraph, shall be considered an express agreement in lieu of the provisions of N.J.S.A. 2A:18-72 et seq. and shall in all cases govern the Landlord’s right to dispose of any Tenant’s Personal Property left in the Premises as provided herein. All obligations of Tenant hereunder not fully performed as of the termination or expiration of the Lease shall survive such termination or expiration, until they are performed.

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          (c) Tenant shall not, without first obtaining the written consent of the Landlord (which consent shall be in Landlord’s sole and absolute discretion), make any alterations or improvements in, to or about the Premises.

          (d) Tenant, at its expense, and with diligence and dispatch, shall procure the cancellation or discharge of all notices of violation arising from or otherwise connected with Tenant’s installation of any work performed by Tenant in the Premises (“Tenant’s Work”) that are issued by any public authority having or asserting jurisdiction. Tenant shall defend, indemnify and save harmless Landlord against any and all construction and other liens filed in connection with Tenant’s installation of the Tenant’s Work, including the liens of any security interest in, conditional sales of, or chattel mortgages upon, any material, fixtures or articles so installed in and constituting part of the Premises and, against all costs, expenses and liabilities incurred in connection with any such lien, security interest, conditional sale or chattel mortgage or any action or proceeding brought thereon. Tenant, at its expense, shall procure the satisfaction or discharge of all such liens within thirty (30) days after Landlord makes written demand therefor. However, nothing herein contained shall prevent Tenant from contesting, in good faith and at its own expense, any such notice of violation, provided such liens are bonded to the satisfaction of the Landlord and its mortgage lender.

          (e) All of Tenant’s Work shall be removed from the Premises by Tenant at the end of the term, unless otherwise agreed to in writing by Landlord. The provisions of this Article shall survive any termination of this Lease.

     Article 9. REPAIR AND MAINTENANCE.

          (a) As Additional Rent, Tenant shall furnish and pay for, maintain and repair the following services: heat, ventilation and air conditioning in the Building for which the Tenant shall obtain a service contract from a reputable contractor and deliver a copy thereof to Landlord; all plumbing and electrical fixtures; water for ordinary drinking and lavatory purposes, janitorial services; security services, removal of any of Tenant’s rubbish; light bulbs and ballasts and the repair of any interior of the Building and its decorations, floor and wall coverings, ceilings, lighting fixtures or other work within the Premises, exterminate all areas of the Premises; and snow removal, parking lot and landscaping of the exterior portion of the Premises. Notwithstanding the foregoing, subject to the provisions of Article 11, since Landlord intends to significantly renovate the Building and this is a short term Lease, the Tenant need not repair or maintain any systems or items that are not essential for its continued use and occupancy of the Premises (unless necessary to prevent waste to the Premises), and/or may affect a temporary repair of such systems or items provided further that for all mechanical systems and items that are less than five (5) years old, the Tenant shall maintain and repairs such systems and items in accordance with the manufacturer’s standards and specifications or customary industry standards.

          (b) Landlord shall not be responsible for any defect in workmanship or other problem that arises with respect to the Premises or installation of the Tenant’s Work by Tenant or Tenant’s contractors. Further, Landlord shall not be responsible to the Tenant for any condition in

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or about the Premises or the Building that is caused by any act or neglect of the Tenant or any agent, customer, invitee or licensee of the Tenant, and where any repair is made necessary by any such act or neglect, the Tenant shall pay directly for such repair.

          (c) The Landlord shall be responsible for the repair of the roof, floors (but not floor coverings), structural elements and parking lot not caused by neglectful maintenance or intentional conduct of the Tenant or its employees or invitees or damaged or required to be replaced by reason of Tenant’s compliance with its environmental obligations pursuant to this Lease Agreement. Any replacements or costs of a capital nature under generally accepted accounting principles consistently applied (referred to as “Capital Replacements”), including, but not limited to:

               (i) rentals and other related expenses incurred in leasing capital items such as air conditioning systems, elevators or other equipment that would not be considered normal maintenance, repair, management or operation expenses;

               (ii) alterations to and replacements of capital items such as the roof, structural components, sprinklers and the parking lot; or

               (iii) costs of equipment, tools and/or improvements not normally expensed in one year,

               (iv) roof and roofing, including flashing, gutters, downspouts, eaves and the like;

               (v) alterations to and replacements of capital items such as the structural components (i.e. exterior and load-bearing walls), and the parking lot;

               (vi) mechanical and electrical services incorporated in or beneath the structure of the Building including, without limitation, the HVAC system (excluding routine maintenance and repair which is the obligation of Tenant); and

               (vii) parking lots, driveways, sidewalks and walkways (excluding the obligation to keep same free from snow, ice and debris which are obligations of Tenant hereunder)

shall be paid for by Landlord, but since this is a short term Lease and Landlord plans to substantially renovate the Premises at the end of the term, Landlord may elect not to repair or replace any of the Capital Replacements in which event Tenant may elect either to (i) pay for a temporary repair to such Capital Replacement, or (ii) terminate this Lease by giving thirty (30) days written notice of termination (or such termination notice may be effective earlier if the Premises cannot be used by Tenant for its business due to the need for such Capital Replacement), whereupon this Lease shall terminate as if such date were the Expiration Date hereunder and thereafter neither party shall have any further obligation or liability to the other except to the extent such obligation or liability would survive the Expiration Date originally set forth herein, including, but not limited to, those obligations and liabilities of Tenant set forth in

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Article 12. Provided however, if the Tenant advises the Landlord in writing that such Capital Replacement is not essential for its continued use and occupancy, then Tenant may continue to occupy the Premises and need not reimburse the Landlord as provided herein. If Landlord’s election to not make such Capital Replacements will materially impair the use and enjoyment of only a portion of the Premises, the Tenant may elect to surrender such portion to the Landlord and the Net Rent, Real Estate Taxes and other financial obligations of the Tenant and Landlord shall be equitably adjusted as if such portion of the Premises were the Surrender Space.

     Article 10. ASSIGNMENT AND SUBLETTING.

          (a) Notwithstanding any other provisions of this Lease to the contrary, the Tenant covenants and agrees that it will not assign any of its rights under this Lease, delegate any of its duties hereunder nor sublet the whole or any part of the Premises; allow any transfer thereof or any lien upon Tenant’s interest by operation of law; sublet the Premises or any part thereof; or permit the occupancy of the Premises or any part thereof by anyone other than Tenant without, in each instance, having first received the express written consent of the Landlord (which consent with respect to a requested assignment or subleasing may be withheld, delayed or conditioned in the Landlord’s sole discretion). In the event that Tenant hereunder is a corporation, limited liability company or other legal entity, then any change in the ownership of the majority of the outstanding capital stock or beneficial ownership of the Tenant or any merger or consolidation or transfer of substantially all the assets of the Tenant, shall be deemed an assignment of this Lease. Any such request shall set forth, in detail reasonably satisfactory to the Landlord, the identification of the proposed assignee or subtenant, its financial condition and the terms on which the proposed assignment or subletting is to be made, including (without limitation) the rent and any other consideration to be paid in respect thereto. Notwithstanding the foregoing, however, Tenant may assign this Lease or participate in a transaction that is deemed to be an assignment of this Lease with at least twenty (20) days’ prior written notice to the Landlord (and without Landlord’s prior written consent) to any entity which is directly or indirectly controlled by or under common control with Tenant or to any entity which shall acquire all or substantially all of the stock or assets of Tenant, or participate in a merger or consolidation or a transaction where the majority of the beneficial interests are transferred, provided that the net worth of the assignee (or deemed assignee) is equal or greater than the net worth of the Tenant at the Commencement Date of this Lease and provided that the Tenant provides to the Landlord at least thirty (30) days prior to the effective date of such assignment in form satisfactory to Landlord a written agreement whereby such assignee assumes all the obligations under this Lease, agrees to bound by its terms, provides the evidence of its net worth and the insurance required hereunder with respect to the assignee or deemed assignee. Any and every such assignment, delegation, sublet, mortgage, transfer, lien or occupancy is expressly subject to the further requirements and limits provided in Article 12 below.

          (b) It shall be a condition of the validity of any such consented-to assignment or consented-to subletting that the assignee or subtenant agrees directly with the Landlord, in form satisfactory to the Landlord, to be bound by all the obligations of the Tenant hereunder, including (without limitation) the obligation to pay Net Rent, Additional Rent and other amounts provided under this Lease and the covenant against assignment or subletting; provided, however, the acceptance by Landlord of any Rent from any subtenant or assignee or the failure of Landlord to

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insist upon a strict performance of any of the terms, conditions and covenants herein from any assignee or subtenant shall not release Tenant herein, from any and all of the obligations herein during and for the entire Term of this Lease.

          (c) In the event the Tenant requests that the Landlord consents to an assignment or subleasing, then the Tenant shall provide the Landlord with a copy of the proposed sublease or assignment documents,

          (d) Unless otherwise agreed to in writing by Landlord, no assignment or subletting by Tenant shall reduce, diminish, or otherwise affect the liability of Tenant hereunder and the Tenant named herein shall remain fully liable for the obligations of the Tenant hereunder, including (without limitation) the obligation to pay Net Rent, Additional Rent and other amounts provided under this Lease.

     Article 11. COMPLIANCE WITH LAWS, RULES AND REGULATIONS.

          (a) Tenant shall promptly, at its own cost and expense, comply with all laws, ordinances, rules, regulations, requirements and directives of any federal, state, county and municipal governments or public authorities and of all their departments, bureaus and subdivisions, applicable to and affecting the Premises, its use and occupancy, and with all orders, regulations, requirements, rating clauses and reasonable directives of the Board of Fire Underwriters or similar authority which promulgates fire safety codes, or of any fire insurance rating company and of any insurance companies which have issued or are about to issue policies of insurance covering the Premises and its contents, for the prevention of fire or other casualty damage or injury. Compliance with laws includes all existing and future laws that come into existence and may be applicable to the Premises.

          (b) Tenant covenants that Tenant shall not do or permit any act or thing to be done in or to the Premises which is contrary to the Certificate of Occupancy that has been issued with respect to the Premises or is hereafter issued, or which may, in law, constitute a nuisance, public or private, or which will invalidate or be in conflict with public liability, fire or other policies of insurance at any time carried by or for the benefit of Tenant or Landlord with respect to the Premises or which shall or might subject Landlord to any liability or responsibility to any person or for property damage. Tenant acknowledges again that it is accepting the Premises “as is” and will be responsible for compliance with all applicable laws with respect thereto in connection with its or its subtenants’ operations at the Premises, excluding, from and after the Surrender Date, the Surrender Space.

          (c) Landlord covenants and agrees that it shall, at all times during the Term and at its sole cost and expense, promptly comply with all laws, ordinances, rules, regulations, requirements and directives of any federal, state, county and municipal governments or public authorities and all of their departments, bureaus and subdivisions, which may in any way be applicable to and affecting the Premises, except to the extent such compliance is required to be assumed by Tenant as provided in this Lease.

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     Article 12. PERMITTED USE AND ENVIRONMENTAL MATTERS.

          (a) Definitions:

               (i) The term “Hazardous Materials” as used in this Lease shall include, without limitation, gasoline, petroleum products, explosives, radioactive materials, hazardous materials, hazardous wastes, hazardous or toxic substances, polychlorinated biphenyls, or related similar materials, asbestos or any material containing asbestos, or any other substance or material as may be defined as a hazardous or toxic substance by any Environmental Laws and, shall include “Extraordinary Hazardous Material” as such term is defined in the Superfund Amendments and Reauthorization Act of 1986 (“SARA”), Public Law No. 99499, 100 Stat. 1613) and/or all such materials as are or may be listed on and described by the NJDEP’s lists of hazardous substances and/or extremely hazardous substances.

               (ii) The term “Environmental Laws” as used in this Lease shall mean, without limitation, and as in the future be amended (i) the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. 9601 et seq. (“CERCLA”); (ii) the Industrial Site Recovery Act, N.J.S.A. 13:1 K-6 et seq. (and including the Hazardous Discharge Site Remediation Site Act, N.J.S.A. 58:10B-1 et seq.) (collectively “ISRA”);(iii) the New Jersey Spill Compensation and Control Act, as amended, N.J.S.A. 58:10-23.11 et seq. (“Spill Act”); (iv) the Solid Waste Management Act, N.J.S.A. 13:1E-1 et seq. (“SWMA”); (v) the Resource Conservation and Recovery Act, as amended, 42 U.S.C. 6901 et seq.(“RCRA”); (vi) the Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. § 651 et seq. (“OSHA”); (vii) the New Jersey Underground Storage of Hazardous Substances Act, as amended, N.J.S.A. 58:10A-21 et seq. (the “Tank Act”); (viii) the New Jersey Water Pollution Control Act, as amended, N.J.S.A. 58:10A-1 et seq . (“WPCA”); (ix) the New Jersey Air Pollution Control Act, as amended, N.J.S.A. 26:2C-1 et seq. (“APCA”), (x) all regulations and rules promulgated pursuant to the aforesaid statutes; and (xi) any and all present and future guidance, orders, directives, and other laws, applicable to the Premises, that may provide authority to require the remediation of environmental contamination of the Premises.

               (iii) The term “Hazardous Discharge” as used in this Lease shall mean any event during the Term of this Lease at the Premises, involving an emission, spill, release or discharge into or upon (i) the air, (ii) soils or any improvements located thereon, (iii) surface water or ground water, or (iv) the sewer, septic system or waste treatment, storage or disposal system servicing the Premises, of any Hazardous Material, which event is not expressly permitted to occur in accordance with Environmental Law.

               (iv) The term “Environmental Complaint” as used in this Lease shall mean any complaint, order, directive, claim, citation or notice by any Governmental Authority (as hereafter defined) or any other person or entity with respect to (a) a Hazardous Discharge, (b) noise or odor emissions, (c) solid or liquid waste, or Hazardous Material, disposal, (d) the use, generation, storage, transportation or disposal of Hazardous Materials, or (e) other environmental, health or safety matters, as to which any of the foregoing apply to or by reason of,

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or affect, Tenant, the Premises, any improvements located thereon, or the use thereof, or the business or operations therein conducted by the Tenant during the Term of the Lease.

               (v) The term “Governmental Authority” as used in this Lease shall mean any and every federal, state, county or municipal government, or any department, agency, bureau or other similar type body obtaining authority therefrom or created pursuant to any applicable Law, and includes without limitation NJDEP and the United States Environmental Protection Agency (“USEPA”).

               (vi) The term “Occupant” as used in this Lease shall mean the Tenant or any agent, permitted subtenant, licensee, customer or invitee of Tenant.

          (b) In the event of Tenant’s failure to comply in full with the provisions of this Article within a reasonable period of time following notice to Tenant of such failure by Landlord or any Governmental Authority, Landlord may, at its option, perform any and all of Tenant’s obligations as aforesaid, and Landlord may enter onto the Premises and/or take any actions as it deems necessary or advisable to remediate, remove, resolve or minimize the impact of, or otherwise deal with, any Hazardous Discharge or Environmental Complaint upon Landlord’s receipt of any notice from any person or entity asserting the happening of a Hazardous Discharge or an Environmental Complaint on or pertaining to the Premises. All costs and expenses incurred by Landlord in exercise of this self-help right shall be deemed to be Additional Rent payable on demand.

          (c) Tenant agrees that Tenant’s use of the Premises shall be strictly limited to the use set forth in Article 1(1) for Tenant’s business and Tenant shall at no time use the Premises for any other use and shall not generate, manufacture, refine, transport, treat, store, handle, dispose. transfer, produce, process or in any manner deal with any “Hazardous Materials” in violation of applicable Environmental Laws. In no event shall the Tenant install any underground or above ground storage tanks for any Hazardous Materials or other substances. Tenant covenants that the NAICS Code in Article 1(n) is accurate with respect to the Tenant and Tenant agrees that it will not change it NAICS Code nor conduct operations at the Premises that are not consistent with such NAICS Code without notifying Landlord at least thirty (30) days prior to such event.

          (d) Compliance with ISRA/Environmental Laws.

               Tenant’s Compliance/Tenant Triggers ISRA

               (i) If Tenant believes that ISRA is not applicable to its operations at the Premises during the Term of this Lease for any such event or transaction that otherwise would require submission of a General Information Notice, then the Tenant shall, at Tenant’s sole cost and expense, seek and obtain a Letter of Non-Applicability or De Minimis Quantity Exemption or other exemption as may then be available under ISRA from NJDEP (an “ISRA Exemption”).

               (ii) If Tenant is unable to obtain an ISRA Exemption for any such transaction or event by Tenant, its assignees or subtenants, including any closing, terminating or transferring of ownership of or operations at the Premises, then Tenant shall be obligated to

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comply with ISRA. Except as expressly set forth herein, the provisions of the Agreement of Sale Between Tenant (there Seller) and Landlord (there Buyer) shall govern the scope and extent of Tenant’s and Landlord’s respective duties, obligations, and alternatives in connection with that required ISRA compliance.

               (iii) Tenant shall, at Tenant’s own expense, subject to the provisions herein, make all submissions to, provide all information to, and comply with all the requirements of, the NJDEP under and with respect to ISRA. Sixty (60) days prior to the occurrence of any event or circumstance obligating Tenant to comply with ISRA (or as soon thereafter as Tenant learns of such event), Tenant shall promptly, diligently and in good faith pursue issuance by NJDEP of a No Further Action letter with a covenant not to sue consistent with Tenant’s obligations under this Lease (an “ISRA NFA”) for the Premises, including, subject to the provisions of Section 12 (d)(vii), the Surrender Space. As to such event or circumstance, and except as set forth in Section 12 (d)(vii), Tenant will be solely liable to comply with ISRA by reason of same, and otherwise satisfy all obligations, duties and liabilities arising from same, at Tenant’s sole cost and expense without recourse to Landlord.

               (iv) Subject to Tenant’s obligation to commence and diligently proceed with ISRA compliance sixty (60) days prior to the occurrence of an event giving rise to such compliance requirement, Tenant’s obligation to comply with ISRA may be satisfied prior to the expiration or after the termination of this Lease; provided that to the extent any part of the Premises is not useable by Landlord upon expiration of the Term for Landlord’s intended purpose of general office or warehouse use, Tenant shall be deemed a holdover and shall pay rent with respect to such unusable portion in accordance with Article 24 of this Lease.

               (v) Tenant’s obligations with respect to ISRA, and all other applicable Environmental Laws shall be to proceed diligently and shall continue until NJDEP determines that ISRA and/or such applicable Environmental Laws has or have been fully complied with and until all remediation required of Tenant, whether under ISRA, those Environmental Laws and/or under other provisions of this Lease has or have been fully implemented and completed.

               (vi) Subject to Section 12(d)(vii), Tenant shall complete ISRA remedial requirements arising out of Hazardous Discharges occurring at the Premises during the Term of the Lease (or after the Term of the Lease if caused by Tenant or Tenant’s agents), if any are required, at the Premises to an unrestricted use standard and no Engineering or Institutional Controls (as defined at N.J.A.C. 7:26E-1.8) shall be permitted in connection with such remediation. This obligation applies only to the specific Hazardous Materials spilled or discharged (i) by Tenant or its assignees or subtenants or a third-party, other than the Landlord or its agents, at the Premises during the Term of the Lease, or (ii) by Tenant or its agents after the Term of the Lease. Otherwise, in accordance with the Agreement of Sale, Tenant is permitted to utilize Permissible Institutional Controls and Permissible Engineering Controls as those terms are defined in the Agreement of Sale.

               Landlord’s Compliance/Landlord Triggers ISRA

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               (vii) In the event Landlord triggers obligations arising under Environmental Laws, including ISRA, without material cost to Tenant, Tenant shall assist Landlord by providing and reasonably executing any documents, to the extent consistent with this Lease, including but not limited to any notices, applications, filings, affidavits, certifications, permit submissions, remedial action work plan(s), or other supporting documents, all as may be necessary or advisable for Landlord to comply with Environmental Laws or otherwise satisfy Landlord’s obligations pursuant to this Lease, including obtaining an ISRA NFA. It is Landlord’s obligation to file all forms and pay all filing fees associated with obtaining the ISRA NFA and complying with Environmental Laws. Notwithstanding the above, however, in the event any investigatory or remedial activities are necessitated due to Hazardous Discharges at the Premises (i) during the Term of this Lease which are caused by Tenant or its assignees or subtenants or a third-party, other than the Landlord or its agents, or (ii) after the Term of this Lease which are caused by Tenant or its agents, then Tenant shall be responsible to undertake and to pay for those investigatory and remedial activities. If Landlord is responsible for those Hazardous Discharges, however, then Landlord shall be responsible to undertake and to pay for those investigatory and remedial activities.

               (viii) Landlord shall promptly provide to Tenant true, accurate and complete copies of any and all documents, including without limitation, reports, submissions, applications, notices, orders, directives, findings and correspondence made by Landlord to, or received from, any Governmental Authority concerning any Hazardous Discharge or Environmental Complaint during the Term of this Lease. Landlord shall also promptly provide to Tenant true and complete copies of all investigation, sampling and test results and/or data, including maps, diagrams, charts and summaries pertaining to same as prepared by or for Landlord.

               (ix) Landlord has provided Tenant with access to the Premises to satisfy Tenant’s obligations pursuant to this Article 12 after the end of the Lease Term pursuant to an Environmental Access Agreement dated the same date as this Lease between Landlord and Tenant.

          (e) Tenant’s Covenants.

               (i) Tenant covenants that the Premises shall not be used to generate, manufacture, refine, transport, treat, store, handle, dispose, transfer, produce, process or in any manner deal with Hazardous Materials in violation of applicable Environmental Laws, and Tenant shall not cause or permit, as a result of any intentional or unintentional act or omission on the part of Tenant or any Occupant (as hereinafter defined), a Hazardous Discharge. Tenant shall comply with, and ensure compliance by all Occupants, if any, with all applicable Environmental Laws with respect to any Hazardous Materials.

               (ii) If Tenant receives any notice of the happening of a Hazardous Discharge or an Environmental Complaint during or after the Term of this Lease (until Tenant obtains the ISRA NFA or ISRA Exemption), then Tenant shall give immediate oral and written notice of same to Landlord, detailing all relevant facts and circumstances and if such Discharge

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or Complaint relates to an event or Discharge that occurred (i) during the Term of this Lease and was caused by Tenant or its agent or a third-party, other than the Landlord or its agents, or (ii) after the Term of this Lease and was caused by Tenant or its agent, then Tenant shall initiate and complete all steps and actions necessary or advisable to cleanup, remove, restore, resolve and minimize the impacts of the Hazardous Discharge or Environmental Complaint at or from the Premises in accordance with Section 12(d) hereof.

               (iii) Tenant shall promptly provide to Landlord true, accurate and complete copies of any and all documents, including without limitation, reports, submissions, applications, notices, orders, directives, findings and correspondence made by Tenant to, or received from, any Governmental Authority concerning any Hazardous Discharge or Environmental Complaint. Tenant shall also promptly provide to Landlord true and complete copies of all investigation, sampling and test results and/or data, including maps, diagrams, charts and summaries pertaining to same as prepared by or for Tenant.

          (f) The Tenant shall indemnify, defend and hold harmless the Landlord and its affiliates and their respective directors, shareholders, officers, employees, agents, consultants, attorneys-in-fact and other representatives (collectively, “Landlord’s Indemnitees”) and each mortgagee of the Premises from and against any and all liabilities, damages, suits, fines, claims, losses, judgments, causes of action, costs and expenses (including reasonable fees and expenses of counsel, including those incurred to successfully enforce this provision) of any kind which may be incurred by the Landlord, Landlord’s Indemnitees or any such mortgagee or threatened against the Landlord, Landlord’s Indemnitees or such mortgagee, arising out of or in any way connected with (a) any breach by Tenant of the undertakings set forth in this Article 12, (b) any Hazardous Discharge at or from the Premises (i) due to acts or omissions of Tenant or its agents or a third- party, other than the Landlord or its agents, during the Term of this Lease or (ii) due to acts or omissions of Tenant or its agents after the Term of this Lease, and (c) any Environmental Complaint at or by reason of the Premises (i) due to acts or omissions of Tenant or its agents, or a third-party, other than the Landlord or its agents, during the Term of this Lease, or (iii) due to acts or omissions of Tenant or its agents after the Term of this Lease. Provided such indemnity shall not apply in any instances that a Hazardous Discharge or Environmental Complaint was due to the acts or omissions of the Landlord, Landlord’s Indemnitees, or Landlord’s invitees at the Premises. Tenant’s agreement to indemnify shall survive any and every assignment, delegation, sublet, mortgage, transfer, lien or occupancy subject to the requirements of Article 10, expiration or sooner termination of this Lease.

          (g) The Landlord shall indemnify, defend and hold harmless the Tenant and its affiliates and their respective directors, shareholders, officers, employees, agents, consultants, attorneys-in-fact and other representatives (collectively, “Tenant’s Indemnitees”) from and against any and all liabilities, damages, suits, fines, claims, losses, judgments, causes of action, costs and expenses (including reasonable fees and expenses of counsel, including those incurred to successfully enforce this provision) of any kind which may be incurred by the Tenant, Tenant’s Indemnitees arising out of or in any way connected with (a) any breach by Landlord of its representations as set forth in this Article 12, and (b) any Hazardous Discharge at or from the Premises due to acts or omissions of Landlord or its agents including, but not limited to, from the

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Surrender Space (c) from a Hazardous Discharge at the Premises after the term of this Lease, and (d) any Environmental Complaint at or by reason of the Premises due to acts or omissions of Landlord or its agents, provided such indemnity shall not apply in any instances that a Hazardous Discharge or Environmental Complaint was due to the acts or omissions of the Tenant, Tenant’s Indemnitees, or invitees at the Premises. Landlord’s agreement to indemnify shall survive any and every assignment, delegation, sublet, transfer, lien or occupancy subject to the requirements of Article 10, expiration or sooner termination of this Lease.

          (h) Tenant shall promptly notify Landlord of any liens threatened or attached against the Premises pursuant to the Spill Act or any other Environmental Law. In the event that such a lien is filed against the Premises as a result of the act or omission of Tenant or any agent or invitee thereof, Tenant shall, within thirty (30) days from the date that the lien is placed against the Premises, and at any rate prior to the date any Governmental Authority commences proceedings to sell the Premises pursuant to the lien, either: (1) pay the claim and remove the lien from the Premises; or (2) deliver to Landlord either (i) a bond in an amount and with a surety satisfactory to Landlord, (ii) a cash deposit in the amount of the lien plus any interest that may accrue thereon, or (iii) other security satisfactory to Landlord in an amount sufficient to satisfy or discharge the claim out of which the lien arises.

          (i) The provisions of this Article shall survive any and every assignment, delegation, sublet, mortgage, transfer, lien or occupancy subject to the requirements of Article 10, as well as the expiration or earlier termination of this Lease.

     Article 13. DAMAGE AND DESTRUCTION. If the Premises is damaged or destroyed by reason of fire or any other cause to such extent that the cost of restoration, as reasonably estimated by the Landlord on the basis of a report by an architect or engineer designated by the Landlord, will equal or exceed twenty-five percent (25%) of the replacement value of the Premises (exclusive of foundations) just prior to the occurrence of the damage, then either party may, no later than the ninetieth (90th) day following such damage or destruction, give the other party a notice of election to terminate this Lease. In the event of such election, Tenant shall immediately initiate ISRA compliance consistent with this Lease, including for any Hazardous Discharge resulting from such casualty, and this Lease shall be deemed to terminate on the sixtieth (60th) day after the giving of said notice, and the Tenant shall surrender possession of the Premises upon such termination, and the Net Rent, and any Additional Rent, shall be apportioned as of the date of said surrender, and any Net Rent or Additional Rent already paid by the Tenant for any period beyond said date shall be returned to the Tenant. Absent such an election to terminate this Lease, the Tenant shall remediate any Hazardous Discharge to the extent such casualty caused such Hazardous Discharge and otherwise Landlord shall restore the damage with reasonable promptness, subject to Force Majeure (as such term is defined herein) and subject to the Landlord receiving sufficient insurance proceeds to accomplish the restoration. The Landlord need not restore any Personal Property, fixture or improvement owned by the Tenant and the Landlord need not restore the Premises or Building unless it has adequate insurance proceeds available to do so after any mortgagee deducts therefrom any amount due to it. In case of any damage that renders the Premises unusable in whole or in part, there shall be an appropriate abatement in Net Rent and Additional Rent payable hereunder, for the period for which the Premises or portion thereof are unusable to the

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extent Landlord receives any rent interruption insurance in lieu thereof. All Additional Rent obligations of the Tenant shall likewise continue except to the extent Landlord receives any rent interruption insurance in lieu thereof. Notwithstanding anything contained herein to the contrary, since this is a short term Lease and Landlord plans to substantially renovate the Premises at the end of the term, Landlord may elect not to repair or restore the Premises in which event Tenant may give thirty (30) days written notice of termination (or such termination notice may be effective earlier if the Premises cannot be used by Tenant for its business due to the need for such repair or restoration or Tenant may pay for a temporary repair to such damaged), whereupon this Lease shall terminate as if such date were the Expiration Date hereunder and thereafter neither party shall have any further obligation or liability to the other except to the extent such obligation or liability would survive the Expiration Date originally set forth herein, including, but not limited to, those obligations and liabilities of Tenant set forth in Article 12. Provided however, if the Tenant advises the Landlord in writing that such repair or restoration is not essential for its continued use and occupancy, then Tenant may continue to occupy the Premises and the Net Rent, Real Estate Taxes and other financial obligations of Tenant and Landlord will be equitably adjusted as if the portion of the Premises that Landlord has elected not to restore and as a result thereof is no longer usable by the Tenant were the Surrender Space.

     Article 14. EMINENT DOMAIN.

          (a) If the Tenant’s use of the Premises is substantially impaired, in the reasonable judgment of Tenant, due to the taking by eminent domain of all or more than twenty five percent (25%) of the Building (or conveyance in lieu of taking), this Lease shall terminate on the date when title vests pursuant to such taking or conveyance. The Net Rent, and any Additional Rent, shall be apportioned as of said termination date, any Net Rent or Additional Rent already paid by the Tenant for any period beyond said date shall be returned to the Tenant and the security deposit, if any, to the extent not applied by Landlord in accordance with the provisions of this Lease, shall be returned to Tenant without interest. The Tenant shall not be entitled to any part of the award for such taking or any payment in lieu thereof, but the Tenant may file a separate claim for moving and relocation expenses, provided the same shall in no way affect or diminish the Landlord’s award. Upon termination of the Lease, Tenant shall immediately initiate ISRA compliance consistent with this Lease, if any, as required.

          (b) In the event of a temporary condemnation or taking that renders part or all of the Premises unusable by the Tenant, the Net Rent and Additional Rent shall be equitably abated in the reasonable judgment of the Landlord during the pendency of such temporary condemnation or taking and any claim for compensation from the condemnation or taking authority shall belong solely to the Landlord except for Tenant’s temporary moving and relocation costs; however, but upon the cessation of such temporary taking or condemnation, the terms and conditions of the Lease shall apply for the balance of the term.

     Article 15. INSOLVENCY OF TENANT. The (a) appointment of a receiver to take possession of all or substantially all of the assets of the Tenant which appointment is not stayed or vacated in thirty (30) days, or (b) general assignment by the Tenant for the benefit of creditors, or (c) the initiation of a proceeding by or against the Tenant under any bankruptcy or

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insolvency law not vacated or stayed in thirty (30) days, or (d) the Tenant’s inability or failure to pay its creditors on a timely basis, shall constitute a default of this Lease by the Tenant, and the Landlord may terminate this Lease forthwith, and upon notice of such termination Tenant’s right to possession of the Premises shall cease, and the Tenant shall then quit and surrender the Premises to the Landlord, but the Tenant shall remain liable as provided in this Lease.

     Article 16. LANDLORD’S REMEDIES ON DEFAULT. If Tenant (a) defaults in any payment of Net Rent, Additional Rent or other amounts due hereunder for ten (10) days or more, or (b) defaults in the due keeping, observance or performance of any covenant, agreement, term, provision or condition of Article 6 and such default is not remedied by Tenant within 48 hours after Landlord gives to Tenant a notice specifying the same or more, or (c) defaults in the performance of any of the other covenants and conditions hereof following not less than thirty (30) days notice of default and the opportunity to cure (or if such default cannot be cured within such thirty (30) day period, if Tenant fails to continue to diligently prosecute such cure), or (d) permits the Premises to become deserted, abandoned or vacated for more than thirty (30) days without notifying the Landlord at least thirty (30) days prior thereto reconfirming Tenant’s obligation to pay all Rent and Additional Rent hereunder and provide security service for the Premises during the vacancy, then the Landlord shall have the right of re-entry and this Lease shall, at the option of the Landlord, terminate on fifteen (15) days notice, and the Tenant’s right to possession of the Premises shall cease, and the Tenant shall then immediately quit and surrender the Premises to the Landlord, but the Tenant shall remain liable notwithstanding such termination for all Net Rent, Additional Rent and all other sums due hereunder and for the observance and performance of any and all covenants, agreements, terms, provisions and conditions set forth in Article 12. If this Lease shall have so terminated, the Landlord may at any time thereafter resume possession of the Premises by any lawful means and remove the Tenant and any other occupants and their effects, at Tenant’s expense. In addition to any amount or Net or Additional Rent, the Tenant shall also pay to the Landlord as Additional Rent all of Landlord’s reasonable legal fees and costs in enforcing the Landlord’s rights under this Lease.

     Article 17. DEFICIENCY.

          (a) In any case where the Landlord has recovered (or has a right pursuant to the terms of this Lease to recover) possession of the Premises by reason of the Tenant’s default, the Landlord may, at the Landlord’s option but without any obligation to do so, occupy the Premises or cause the Premises to be redecorated, altered, divided, consolidated with other adjoining Premises, or otherwise change or prepare for reletting, and may relet the Premises or any part thereof as agent of the Tenant or otherwise, for a term or terms to expire prior to, at the same time as, or subsequent to, the original expiration date of the Term of this Lease, at the Landlord’s option, and receive the rent therefore. Rent so received shall be applied first to the payment of such reasonable expenses as Landlord may have incurred in connection with the recovery of possession, redecorating, altering, dividing, consolidating with other adjoining Premises, or otherwise changing or preparing for reletting, and the reletting, including brokerage and attorneys’ fees, and then to the payment of damages in amounts equal to the rent hereunder and to the costs and expenses of performance of the other covenants of the Tenant as herein provided. The Tenant agrees, in any such case, whether or not the Landlord has relet, to pay to the Landlord damages equal to the Net and Additional Rent

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and other sums herein agreed to be paid by the Tenant, less the net proceeds of the reletting, if any, as ascertained from time to time; and the same shall be payable by the Tenant at the time and in the manner specified above. The Tenant shall not be entitled to any surplus accruing as a result of any such reletting. In reletting the Premises as aforesaid, the Landlord may grant reasonable rent concessions, and the Tenant shall not be credited therewith. No such reletting shall constitute a surrender and acceptance or be deemed evidence thereof.

          (b) Tenant hereby waives all rights of redemption to which the Tenant might be entitled by any law now or hereafter in force.

          (c) Landlord’s remedies hereunder are in addition to any remedy allowed by law. Tenant agrees to pay, as Additional Rent, all reasonable attorneys’ fees and disbursements, and other expenses incurred by the Landlord in enforcing any of the obligations under this Lease, this covenant to survive the expiration or sooner termination of this Lease.

     Article 18. ATTORNMENT.

     Upon execution hereof and thereafter Landlord agrees to obtain from its current or any future mortgagee or ground lessor a subordination, non-disturbance and attornment agreement in writing providing in substance that so long as Tenant shall have entered into possession and occupancy of the Premises and commenced payment of Rent hereunder, and so long as Tenant is not in default in its obligations for the payment of Rent and in the performance of other terms, covenants and conditions to be performed on its part under the Lease, Tenant’s possession of the Premises will not be disturbed during the Term hereof, notwithstanding the foreclosure of any such mortgage or termination of such land lease, and Tenant will not be named as a party defendant in any foreclosure or other proceedings brought for the recovery of possession except as required by law.

     Article 19. RIGHT TO CURE TENANT’S BREACH. If the Tenant breaches any covenant or condition of this Lease and such breach is not cured in the applicable cure period, the Landlord may, on reasonable notice to the Tenant (except that no notice need be given in case of emergency), cure such breach at the expense of the Tenant and the reasonable amount of all expenses, including attorneys’ fees and expenses, incurred by the Landlord in so doing (whether paid by the Landlord or not) shall be deemed Additional Rent payable on demand. In addition, the Tenant shall pay to the Landlord as Additional Rent an administrative fee of ten percent (10%) of the amount Landlord advanced. In no way whatsoever shall the Landlord be obligated to effect such cure.

     Article 20. CONSTRUCTION LIENS. The Tenant shall, within thirty (30) days after it becomes aware thereof, discharge or satisfy by bonding or otherwise any construction lien for materials or labor claimed to have been furnished to the Premises on the Tenant’s behalf.

     Article 21. RIGHT TO INSPECT AND REPAIR. The Landlord may enter the Premises (but shall not be obligated to do so) at all reasonable times on reasonable advance notice to the Tenant (except that no notice need be given in case of emergency) for the purposes of inspection, or the making of such repairs, replacements or additions, in, to, on and about the

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Premises and Building, as are necessary or desirable. Provided that the Landlord shall have acted reasonably as contemplated herein, Landlord shall not be liable for any interruption of the Tenant’s business as a result of the making of any such repair, replacement or addition that is necessary, and in all events Landlord shall use commercially reasonable efforts to minimize the interruption of Tenant’s business.

     Article 22. INTERRUPTION OF SERVICES OR USE. Interruption or curtailment of any service maintained in the Building or use of the Premises shall not entitle the Tenant to any claim against the Landlord or to any abatement in rent, and shall not constitute a constructive or partial eviction except if caused by the gross negligence or willful misconduct of the Landlord.

     Article 23. ESTOPPEL. Each party shall, from time to time, on not less than fifteen (15) days prior written request by the other party, execute, acknowledge and deliver to the requesting party a written statement certifying on a form provided by the requesting party that the Lease is unmodified and in full force and effect, or that the Lease is in full force and effect as modified and listing the instruments of modification; the dates to which the rents and charges have been paid; whether or not the party is in default hereunder, and, if so, specifying the nature of such default; and, to the best of the party’s knowledge, whether or not other party is in default hereunder, and if so, specifying the nature of the default and such other matters that the requesting party may reasonably require. It is intended that any such statement delivered pursuant to this Article may be relied on by a prospective purchaser of the requesting party’s interest or a lender or mortgagee of the requesting party’s interest or assignee of any mortgagee of the requesting party’s interest.

     Article 24. HOLDOVER TENANCY. Unless agreed to otherwise by the parties in a writing signed by both parties, if the Tenant holds possession of the Premises after the expiration of the Term (and, unless the Landlord has agreed in writing to permit the Tenant to remain in possession thereafter), Tenant shall become a Tenant from month-to-month under the provisions herein provided. During the first three (3) calendar months of any such month to month tenancy the Monthly Net Rent payable hereunder shall be equal to one hundred seventy-five percent (175%) of the Monthly Net Rent installment and the Additional Rent (which includes all operating expenses, taxes, insurance and other costs of the Premises) payable immediately prior to the end of the Term, and thereafter the Monthly Net Rent installment and the Additional Rent shall be equal to two hundred percent (200%) of said amount, which amounts shall be payable in advance on the first day of each month or part thereof that the Tenant remains in occupancy and without the requirement for demand or notice by the Landlord to the Tenant demanding delivery of possession of the Premises. All other terms and conditions of this Lease shall apply during any such month to month holdover tenancy. Tenant agrees to indemnify and save Landlord harmless from and against all claims, losses, damages, liabilities, costs and expenses (including, without limitation, reasonable attorneys’ fees and disbursements) resulting from delay by Tenant in surrendering the Premises, including, without limitation, any claims, losses, damages, liabilities, costs and expenses incurred in connection with contractors and subcontractors hired to perform Landlord’s renovation of the Building for its intended use. Nothing herein contained shall be deemed to permit Tenant to retain possession of the Premises after the Expiration Date or to limit in any manner Landlord’s right to regain possession of the Premises through summary proceeding or otherwise, and no acceptance by

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Landlord of payments from Tenant after the Expiration Date shall be deemed to be other than on account of the amount to be paid by Tenant in accordance with the provisions of this Article 24.

     Article 25. RIGHT TO SHOW PREMISES. The Landlord may show the Premises to prospective purchasers, mortgagees and tenants, during normal business hours on reasonable advance, written notice to the Tenant.

     Article 26. LATE CHARGE. If any Net Rent, Additional Rent or other amount payable by the Tenant to the Landlord hereunder is not paid within seven (7) days of the date due (which seven (7) day period is inclusive of any applicable notice/cure period), the Tenant shall pay to the Landlord (as Additional Rent) a late fee of two percent (2%) of the late payment, and, if such payment is not paid within thirty (30) days of its due date, interest thereon at the rate of six percent (6%) per annum (but not more than the highest legal rate permissible), from the due date day until the same is paid in full.

     Article 27. NO OTHER REPRESENTATIONS. No representations or promise shall be binding on either party hereto except representations and promises contained in this Lease or in some future writing signed by the party making such representation(s) or promise(s).

     Article 28. QUIET ENJOYMENT. The Landlord covenants that if, and so long as, the Tenant pays the Net Rent and any Additional Rent as herein provided, and performs the other covenants required to be performed by the Tenant hereunder, the Landlord shall do nothing to affect the Tenant’s right peaceably and quietly to have, hold and enjoy the Premises for the term herein mentioned, subject to the provisions of this Lease,

     Article 29. INDEMNITY. The Tenant shall indemnify and save harmless and defend the Landlord and its agents and Landlord’s Indemnitees against and from (i) any and all claims arising from (x) the conduct by the Tenant, or any agent, customer, invitee or licensee of the Tenant or any other party that comes on the Premises during the Term of this Lease (“Tenant Invitee”), of any business in or about the Premises or any negligent or otherwise wrongful act of any of them and (y) any act or thing whatsoever done by Tenant or any Tenant Invitee, or any condition created in or about the Premises, during the Term of this Lease by Tenant or a Tenant Invitee, and (ii) all costs, expenses and liabilities incurred in or in connection with each such claim or action or proceeding brought thereon. In case any action or proceeding be brought against the Landlord or Landlord’s Indemnitees by reason of any such claim, the Tenant, upon notice from the Landlord or Landlord’s Indemnitees, shall resist and defend such action or proceeding with counsel satisfactory to the Landlord and such Landlord’s Indemnitees involved in such matter. The forgoing indemnity shall not apply to any events caused by the gross negligence or willful misconduct of the Landlord.

     Article 30. ARTICLE HEADINGS. The Article headings in this Lease and position of its provisions are intended for convenience only and shall not be taken into consideration in any construction or interpretation of this Lease or any of its provisions.

     Article 31. APPLICABILITY TO HEIRS AND ASSIGNS. The provisions of this Lease shall apply to, bind and inure to the benefit of the Landlord and the Tenant, and their

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respective heirs, successors, legal representatives to except that no violation of the provisions of Article 10 shall operate to vest any rights in any successor, assignee or legal representative of Tenant.

     Article 32. WAIVER OF TRIAL BY JURY. The parties hereby waive trial by jury in any action or proceeding brought in connection with this Lease or the Premises.

     Article 33. LANDLORD’S LIABILITY FOR LOSS OF PROPERTY. The Landlord shall not be liable for any loss of Tenant’s Property from any cause whatsoever, including but not limited to theft or burglary from the Premises, and Tenant agrees to make no claim against the Landlord for any such loss at any time, unless such loss is due to Landlord’s gross negligence or willful misconduct.

     Article 34. PARTIAL INVALIDITY. If any of the provisions of this Lease, or the application thereof to any person or circumstance, shall to any extent be invalid or unenforceable, the remainder of this Lease, or the application of such provision or provisions to persons or circumstances other than those as to whom or which it is held invalid or unenforceable, shall not be affected thereby, and every provision of this Lease shall be valid and enforceable to the fullest extent allowed by law.

     Article 35. BROKER. The Landlord and the Tenant represent and warrant to each other that no broker represented it in connection with this Lease. Each party agrees to indemnify and hold the other harmless from the payment of any brokerage commission and from any claim advanced by the other party or by any third party in breach of such representation hereunder, including any expenses, costs of suit and attorneys’ fees incurred by the non-breaching party in connection therewith. Tenant acknowledges that this Lease is being entered into by Landlord with Tenant as an accommodation to Tenant pursuant to Agreement of Sale between Tenant as Seller and Landlord as Buyer dated November 28, 2007. Accordingly, Tenant agrees to indemnify and hold Seller harmless from the payment of any brokerage commission and from any claim advanced by GVA Williams in connection with this Lease. This Article 35 shall survive the expiration or sooner termination of the Term.

     Article 36. PERSONAL LIABILITY. All obligations of Landlord under this Lease will be deemed binding upon Landlord only during the period of its ownership of the Premises and not thereafter. The term “Landlord” in this Lease shall mean only the owner, for the time being of the Premises, and in the event of the transfer by such owner of its interest in the Premises, such owner shall thereupon be released and discharged from all obligations of Landlord thereafter accruing (but not from defaults accruing during such Landlord’s ownership), but such obligations shall be binding during the Lease Term upon each new owner for the duration of such owner’s ownership. Landlord shall provide written notice to the Tenant of any such transfer within ten (10) days thereof. Tenant acknowledges and agrees that neither Landlord, nor any shareholder, officer, director, partner (general or limited), limited liability company member, tenant-in-common, venturer, trustee, trust beneficiary, grantor, trustee-grantor, or other individual or entity having an interest in Landlord shall have any personal liability for the performance of any of the terms, covenants, or conditions to be performed by Landlord under this Lease; rather, Tenant agrees to

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look solely to Landlord’s interest in the Premises and in no event shall any personal liability be asserted against such current Landlord in connection with this Lease nor shall any recourse be had to any other property or assets of such current Landlord.

     Article 37. FORCE MAJEURE. As used in this Lease, the term “Force Majeure” shall mean and include those situations beyond the Landlord’s or Tenant’s control, including by way of example and not by way of limitation, acts of God; accidents; strikes; shortages of labor, supplies or materials; inclement weather; or, where applicable, the passage of time while waiting for an adjustment of insurance proceeds governmental action, or lack thereof, or due to shortages of or unavailability of materials and/or supplies, labor disputes, strikes, slow downs, job actions, picketing, secondary boycotts, fire or other casualty, delays in transportation, acts of declared or undeclared war, public disorder, riot or civil commotion, or due to any other cause beyond the reasonable control of Landlord. Landlord shall in any or all such events be excused from its obligation to perform and comply with such provisions of this Lease for a period of time commensurate with any delay so caused, without any liability to the Tenant therefor whatsoever, and all time periods provided for herein for performance of any such obligations shall be extended for a period of time commensurate with any such delay, provided that nothing herein shall be deemed or construed to limit the Tenant’s right to terminate this Lease as provided in Article 3 above.

     Article 38. NOTICES. Any notice by either party to the other must be in writing and shall be deemed to have been duly given if delivered personally or sent by hand delivery, certified mail, return receipt requested, postage prepaid, or by a national courier service that obtains a signature on delivery, addressed, if to the Tenant, at the Premises; if to the Landlord, at the Landlord’s Address as set forth above; or, to either, at such other address as the Tenant or the Landlord may designate to the other in writing. Notice shall be deemed to have been duly given, if delivered personally or by courier, on delivery thereof, and if mailed, upon the second (2nd) business day after the mailing thereof.

     Article 39. NO WAIVER. Waiver by the Landlord of any breach by the Tenant of any covenant or condition herein contained, or failure by the Landlord to exercise any right or remedy in respect of any such breach, shall not constitute a waiver or relinquishment for the future of such covenant or condition or of any subsequent breach thereof, or bar any right or remedy of the Landlord in respect of any subsequent breach, nor shall the receipt by the Landlord of any rents or any portion thereof (regardless of any endorsement on any check or any statement in any letter accompanying any payment or rent) operate as an accord or satisfaction; or as a waiver of the right of the Landlord to enforce the payment of rents previously due or any other covenant of this Lease; or as a bar to the termination of this Lease or the recovery of the Premises by any lawful means. No payment by Tenant or receipt by Landlord of a lesser amount than the monthly Net Rent and Additional Rent herein stipulated shall be deemed to be other than on account of the earliest Net Rent or Additional Rent, nor shall any endorsement or statement on any check or any letter accompanying any check or payment as rent be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord’s right to recover the balance of such rent or pursue any other remedy in this Lease or at law provided.

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     Article 40. WRITING REQUIRED. No provision of this Lease may be changed or waived orally, but only by an instrument in writing signed by the party to be charged therewith. This Lease may be executed in counterparts and each such counterpart, when so executed by each party hereto, shall constitute but one instrument and agreement and shall be enforceable against the party whose signature is set thereon.

     Article 41. COMPLETE AGREEMENT. This Lease contains the entire agreement of the parties hereto with respect to the leasing of the Premises by the Landlord to the Tenant and supersedes completely all prior agreements and understandings, whether written or oral, and all contemporaneous oral agreements and understandings with respect to the leasing of the Premises by the Landlord to the Tenant.

     Article 42. SIGNS. The Tenant may place signs upon, in or about the Premises or any part thereof. Signs shall at all times conform with all municipal ordinances or other laws and regulations applicable thereto at Tenant’s expense, and Tenant shall obtain any required permits or licenses for the installation of such signs at Tenant’s expense.

     Article 43. NO RECORDATION. Tenant shall not record this Lease or any short form Memorandum thereof. Any such recordation by Tenant in violation of this prohibition shall be a default hereunder and Landlord, among Landlord’s rights upon default, may execute and record in Tenant’s name, place and stead, an instrument adequate and sufficient to discharge such document from the public records, and for such purposes, Tenant hereby grants an irrevocable power of attorney to Landlord.

     Article 44. VALIDITY. Tenant represents and warrants to Landlord that this Lease is valid, enforceable and binding upon Tenant, that no consent(s) are necessary to render this Lease valid, enforceable and binding and that the person whose signature is set forth below is authorized to execute and deliver this Lease on behalf of Tenant.

     Article 45. MISCELLANEOUS.

          (a) Without incurring any liability to Tenant, Landlord may permit access to the Premises and open the same, whether or not Tenant shall be present, upon demand of any receiver, trustee, assignee for the benefit of creditors, sheriff, marshal or court officer entitled to, or reasonably purporting to be entitled to, such access for the purpose of taking possession of, or removing, Tenant’s property or for any other lawful purpose (but this provision and any action by Landlord hereunder shall not be deemed a recognition by Landlord that the person or official making such demand has any right or interest in or to this Lease, or in or to the Premises), or upon demand of any representative of the fire, policy, building, sanitation or other department of the city, state or federal governments.

          (b) The terms “person” and “persons” as used in this Lease, shall be deemed to include natural persons, firms, corporations, associations and any other private or public entities.

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          (c) No receipt of moneys by Landlord from Tenant, after any reentry or after the cancellation or termination of this Lease in any lawful manner, shall reinstate the Lease; and after the service of notice to terminate this Lease, or after the commencement of any action, proceeding or other remedy, Landlord may demand, receive and collect any monies due, and apply them on account of Tenant’s obligations under this Lease but without affecting such notice, action, proceeding or remedy, except that if a money judgment is being sought in any such action or proceeding, the amount of such judgment shall be reduced by such payment.

          (d) If Tenant is in arrears in the payment of Net Rent or Additional Rent, Tenant waives its right, if any, to designate the items in arrears against which any payments made by Tenant are to be credited and Landlord may apply any of such payments to any such items in arrears as Landlord, in its sole discretion, shall determine, irrespective of any designation or request by Tenant as to the items against which such payments shall be credited.

          (e) Tenant agrees to provide for use by Landlord and its mortgagee or prospective mortgagee or purchaser, its annual report on Form l0-K as filed with the Securities and Exchange Commission.

          (f) Neither Tenant nor Landlord, nor any person who owns a controlling interest in or otherwise controls Tenant or Landlord, is (i) listed on the Specially Designated Nationals and Blocked Persons List or any other similar list maintained by the Office of Foreign Assets Control, Department of the Treasury, pursuant to any authorizing statute, Executive Order or regulation, (ii) a “specially designated global terrorist” or other person listed in Appendix A to Chapter V of 31 C.F.R., as the same has been from time to time updated and amended, or (iii) a person either (A) included within the term “designated national” as defined in the Cuban Assets Control Regulations, 31 C.F.R. Part 515 or (B) designated under Sections 1 (a), 1(b), 1 (c) or 1(d) of Executive Order No. 13224, 66 Fed. Reg. 49079 (published September 25, 2001) or a person similarly designated under any related enabling legislation or any other similar Executive Orders.

[Signatures appear on the next page; balance of this page left intentionally blank]

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     IN WITNESS WHEREOF the parties have caused this Lease Agreement to be executed by their duly authorized representatives as of the day and year first above written.

WITNESS:	LANDLORD: BED BATH & BEYOND INC.
	By:	Steven H. Temares
		Name:	Steven H. Temares
		Title:	Chief Executive Officer
	TENANT: BREEZE-EASTERN CORPORATION
	By:	Gerald C. Harvey
		Name:	Gerald C. Harvey
		Title:	Executive Vice President

     EXHIBIT A

All that certain tract, parcel and lot of land lying and being situate in the Township of Union, County of Union, State of New Jersey, being more particularly described as follows:

Beginning at a point formed by the intersection of the northwesterly right of way line of Liberty Avenue (60 feet wide) with the southwesterly line of Lot 2, Block 3503, said point being South 38 degrees 47 minutes 43 seconds West a distance of 100.13 feet from the intersection of the southwesterly right of way line of Hickory Road (50 feet wide) and the northwesterly right of way line of Liberty Avenue; thence

1.	Along the northwesterly right of way line of Liberty Avenue, South 40 degrees 16 minutes 13 seconds West a distance of 429.64 feet to a point on the northeasterly line of Lot 1, Block 200; thence
2.	Along the northeasterly line of Lot 1, Block 200, North 54 degrees 37 minutes 17 seconds West a distance of 858.83 feet to a point on the southeasterly line of Lot 1.02, Block 3503; thence
3.	Along the southeasterly line of Lot 1.02, Block 3503, North 35 degrees 22 minutes 43 seconds East a distance of 502.35 feet to a point on the rear line of the lots fronting Hickory Road; thence
4.	Along the rear line of the lots fronting Hickory Road, South 49 degrees 52 minutes 47 seconds East a distance of 898.54 feet to the point and place of Beginning.

Together with the benefits of that certain Declaration of Easements, Covenants and Restrictions made by TransTechnology Corporation, as successor by merger to Breeze Corporations, Inc. dated March 28, 2002, recorded April 12, 2002 in Deed Book 5255, Page 199.

Being in accordance with a survey prepared by P S & S, LLC, dated January 11, 2008, revised January 28, 2008, and last revised to February 6, 2008, Job No. 03239.001.

Being also known as Lot 1.01, Block 3503, on the Official Tax Map of the Township of Union, County of Union, State of New Jersey.

EXHIBIT B

TENANT’S INSURANCE COVERAGE

Provided by Tenant to Landlord.

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EXHIBIT C

SERVICE CONTRACTS

1.	A.D.T. (building alarm)
2.	Approved Fire Protection (fire protection systems)
3.	Brooksite Contractors (snow plowing services)
4.	Correct Temp (HVAC computer controls)
5.	Hatch Mott McDonald (sampling reporting and water flow meter calibration for the Joint Meeting of Essex and Union County)
6.	Jersey National Cleaning Service (office cleaning)
7.	M.C.M. Mechanical Corp (HVAC units for office area)
8.	Newark Carting (dumpster service)
9.	OTIS Elevator (elevator maintenance)
10.	Philip Services (waste pickup)
11.	Western Pest Service (pest control)

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EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of
Breeze-Eastern Corporation

We consent to the incorporation by reference in the Annual Report on Form 10-K of our report dated May 15, 2008, relating to the consolidated financial statements and financial statement schedule of Breeze-Eastern Corporation, and management’s report on internal control over financial reporting for the year ended March 31, 2008.

/s/ MARGOLIS & COMPANY P.C.

Bala Cynwyd, PA

June 4, 2008

EX-23.2

Exhibit 23.2

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in Registration Statement Nos. 333-75026, 333-93085, 333-124886, and 333-140368 on Form S-8 of our report dated June 14, 2007, relating to the consolidated financial statements and financial statement schedule of Breeze-Eastern Corporation (which report expressed an unqualified opinion and includes an explanatory paragraph relating to the adoption of the provisions of FASB Statement No. 123R, Share-Based Payments), appearing in this Annual Report on Form 10-K of Breeze-Eastern Corporation for the year ended March 31, 2008.

/s/ DELOITTE & TOUCHE LLP

Parsippany, New Jersey

June 4, 2008

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

I, Robert L.G. White, certify that:

     1. I have reviewed this annual report on Form 10-K of Breeze-Eastern Corporation;

     2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;

     4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:

     (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     (b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

     (c) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

     5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

     (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information;

     (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: June 4, 2008	/s/ Robert L.G. White
		Robert L. G. White
		President & Chief Executive Officer

EX-31.2

EXHIBIT 31.2

I, Joseph F. Spanier, certify that:

     1. I have reviewed this annual report on Form 10-K of Breeze-Eastern Corporation;

     2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;

     4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:

     (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     (b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

     (c) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;

     5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

     (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information;

     (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: June 4, 2008	/s/ Joseph F. Spanier
		Joseph F. Spanier
		Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

     The undersigned hereby certifies that the Form 10-K Annual Report of Breeze-Eastern Corporation (the Company) for the annual period ended March 31, 2008, filed with the Securities and Exchange Commission on the date hereof (the Report) fully complies with the requirements of Section 13(a) or 15(d) of the Securities and Exchange Act of 1934 and the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	June 4, 2008	/s/ Robert L.G. White
		Robert L.G. White,
		President & Chief Executive Officer
Date:	June 4, 2008	/s/ Joseph F. Spanier
		Joseph F. Spanier,
		Chief Financial Officer