Tungaloy and OSG Agree on Alliance
July 26, 2006

Tungaloy Corporation announced today it has signed a business alliance with OSG Corporation to enhance its position within the global cutting tool industry.

Since its departure from Toshiba in 2004, Tungaloy’s focus on strategic growth has proven successful. In order to remain competitive, however, Tungaloy recognizes the need to form alliances to position itself globally, especially in relation to the BRICs (Brazil, Russia, India & China).

In the common objective of business growth and maintaining a competitive edge, Tungaloy and OSG intend to expand their product lines, develop special products and enhance their global customer support network. To this end, both companies acknowledge the need for concerted investment and cooperation.

In seeking a partner, one objective was maintaining the independence of each company's management while striving together to become world leaders in the cutting tool business. In that regard, OSG is considered to be the best partner for this alliance. The “OSG Tungaloy Global Alliance” will achieve synergies as follows:

1. Mutually complementing and enhancing product lines
2. Offering the best possible customer service
3. Cooperating in sales promotions
4. Making mutually effective use of management resources

The content of agreement is as follows:

1. Domestic Sales Network
a) Due consideration will be given to past practice in the retail sales channels
b) Sales to direct customers will follow a comprehensive sales expansion policy (sharing information      on clients, full turnkey operations)

2. Overseas Sales Network
a) Product is supplemented mutually to expand both businesses
b) Sharing of sales network
c) Joint establishment of sales subsidiaries in new regions
d) Sharing of facilities

3. R&D
a) Sharing of knowledge to develop new products

4. Manufacturing
a) Sharing of manufacturing resource to avoid investment risk

OSG will acquire 6,750 shares of Tungaloy common stock owned by Nomura Principal Finance, or about 19.18% of total issued shares, on August 18, 2006.

Tungaloy became independent from Toshiba Group through “MBO, Management Buy-out” in 2004, having financial support from Nomura Principal Finance. This alliance is one of the actions to re-list on the stock market.

We continually strive toward “Keeping the Customer First” and grow with our customers to become the top in the world.

Sincerely,

James Mizuno
President, Tungaloy America