10-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For fiscal year ended June 30, 2005
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from           to

Commission File Number 1-5341

ElkCorp

(Exact name of Registrant as specified in its charter)

Delaware	75-1217920
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)
14911 Quorum Drive, Suite 600,	75254-1491
Dallas, Texas	(Zip Code)
(Address of principal executive offices)

Registrant’s telephone number, including area code

(972)851-0500

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

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock Par Value $1 Per Share	New York Stock Exchange
Rights to Purchase Series A Preferred Stock	New York Stock Exchange

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

None

(Title of Class)

     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 the 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 an accelerated filer (as defined in Exchange Act Rule 12b-2).     Yes þ           No o

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

      The aggregate market value of common stock held by nonaffiliates as of December 31, 2004 (the last business day of the Registrant’s most recently completed second quarter) was $658,775,000. This amount is based on the closing price of the Registrant’s Common Stock on the New York Stock Exchange on December 31, 2004. Shares of stock held by directors and officers of the Registrant as well as shares allocated to such persons under the Employee Stock Ownership Plan of the Registrant were not included in the above computation; however, the Registrant has made no determination that such entities are “Affiliates” within the meaning of Rule 405 under the Securities Act of 1933, as amended.

      As of the close of business on August 19, 2005, the Registrant had 20,288,782 shares of Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

      Certain portions of the Registrant’s definitive proxy statement for the annual meeting of shareholders to be held on October 25, 2005, are incorporated by reference into certain Items of Part III hereof. Except for those portions specifically incorporated herein by reference, such document shall not be deemed to be filed with the Securities and Exchange Commission as part of this report.

ElkCorp and Subsidiaries

Annual Report on Form 10-K

For Fiscal Year Ended June 30, 2005

TABLE OF CONTENTS

	Page
Part I.
Item 1. Business		1
Item 2. Properties		9
Item 3. Legal Proceedings		9
Item 4. Submission of Matters to a Vote of Security Holders		9
Item 4A. Executive Officers of the Registrant		10
Part II.
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		11
Item 6. Selected Financial Data		12
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations		13
Item 7A. Quantitative and Qualitative Disclosures about Market Risk		22
Item 8. Financial Statements and Supplementary Data		23
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		50
Item 9A. Controls and Procedures		50
Item 9B. Other Information		50
Part III.
Item 10. Directors and Executive Officers of the Registrant		51
Item 11. Executive Compensation		51
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		51
Item 13. Certain Relationships and Related Transactions		51
Item 14. Principal Accountant Fees and Services		51
Part IV.
Item 15. Exhibits and Financial Statement Schedules		52
Signatures		56
6th Amendment to Credit Agreement
7th Amendment to Credit Agreement
Asset Purchase Agreement
Purchase Agreement
Subsidiaries
Consent of Grant Thornton LLP
Consent of PricewaterhouseCoopers LLP
Certification of CEO Pursuant to Section 302
Certification of CFO Pursuant to Section 302
Certification of CEO Pursuant to Section 906
Certification of CFO Pursuant to Section 906

PART I

Item 1. Business

General

     ElkCorp, which is referred to as “we,” “our,” “the registrant,” “the company” and “Elk” in this report, is a Delaware corporation incorporated in 1965, having its principal executive offices in Dallas, Texas. Shares of ElkCorp’s common stock are traded on the New York Stock Exchange under the ticker symbol – ELK.

     We maintain an Internet website at http://www.elkcorp.com. In the Investor Relations section of the web site, we post the following filings as soon as reasonably practicable after they are electronically filed with or furnished to the Securities and Exchange Commission: Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. All such filings on the Investor Relations web page, which also includes Forms 3, 4 and 5 filed pursuant to Section 16(a) of the Securities Exchange Act of 1934, are available to be viewed on the web page free of charge. Additionally, our key committee charters, corporate governance guidelines and code of business conduct and ethics are available on our website and in print upon request. Information contained on the web site is not part of this Annual Report on Form 10-K or our other filings with the Securities and Exchange Commission. We assume no obligation to update or revise any forward-looking statements in this Annual Report on Form 10-K, whether as a result of new information, future events or otherwise. A copy of this Form 10-K is available without charge upon written request to Investor Relations, ElkCorp, 14911 Quorum Drive, Suite 600, Dallas, Texas 75254.

     In November 2004, our Chief Executive Officer executed the annual Section 303A.12 (a) CEO Certification required by the New York Stock Exchange (NYSE), certifying that he was not aware of any violation of the NYSE’s corporate governance listing standards by ElkCorp. Our Chief Executive Officer and Chief Financial Officer have executed the required Sarbanes-Oxley Act of 2002 Section 302 and 906 certifications on all fiscal 2005 Form 10-Qs, and the current certifications are filed as exhibits to this Annual Report on Form 10-K.

Financial Information About Industry Segments

     Financial information by industry segment is presented in Part II. Item 8. Financial Statements and Supplementary Data on page 44 of this report. In the past year, we have intensified the focus on our building products platforms, including selling or positioning for sale several of the various businesses that do not fit into this focus. Within the building products sector we now have two segments, Premium Roofing Products and Composite Building Products, a relatively new platform. Although now reported as separate operating segments, products from both segments are manufactured for and marketed primarily to the building products industry under the “Elk Premium Building Products” brand name. Previously, these two segments were combined and reported as the Building Products segment. The prior period financial information about industry segments included in this Annual Report on Form 10-K has been reclassified to reflect the change in our reporting of business segments. Products from both segments are sold primarily through the same wholesale distribution channels and the ultimate “customers” for both segments are professional installation contractors and homeowners. Together the two building products segments account for greater than 95% of consolidated sales and operating profit. The various businesses that are not building products companies are combined and reported as Other, Technologies.

Premium Roofing Products

     We manufacture premium laminated fiberglass asphalt shingles and accessory roofing products for steep slope applications at plants located in (1) Ennis, Texas, (2) Shafter, California, (3) Myerstown, Pennsylvania, and (4) from two adjacent manufacturing facilities in Tuscaloosa, Alabama. Construction and testing of the newest Tuscaloosa, Alabama facility was completed in the latter part of fiscal 2004 and placed in service at the beginning of fiscal 2005. This new plant increased company-wide capacity by approximately 25%, and was completed ahead of schedule and under budget.

     The primary products manufactured at Elk’s roofing plants are premium laminated fiberglass asphalt shingles. Premium roofing products have either a wood-shake or slate-like look. Elk’s shingle product line includes: the Prestique® Gallery Collection™, Prestique Plus High Definition®, Prestique I High Definition, Prestique High Definition, Raised Profile®, Capstone®, Domain® Winslow® and Prestique Grande™ High Definition. In fiscal 2005, we introduced Elk Cool Color Series shingles, which are composed of highly reflective granules that slow heat build-up for a more

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energy efficient home. Elk has also recently begun offering Prestique Xtra™ High Definition, an asphalt shingle that meets UL^â 2218 impact resistance standards and achieves a Class 4 insurance rating.

     The following table summarizes limited product warranty and limited wind warranty for the first five years for each product. Special high-wind application techniques are required for limited wind warranties of up to 90 miles per hour (mph) and higher.

		Standard Wind	Extended Wind
Product	Limited Warranty	Coverage	Coverage
Domain Winslow	50 years	80 mph	110 mph
Domain Winslow Cool Color Series	50 years	80 mph	110 mph
Prestique Gallery Collection	50 years	80 mph	110 mph
Prestique Plus High Definition	50 years	80 mph	110 mph
Capstone	40 years	80 mph	110 mph
Prestique Grandé High Definition	40 years	80 mph	90 mph
Prestique I High Definition	40 years	80 mph	90 mph
Prestique Cool Color Series	40 years	80 mph	90 mph
Prestique Xtra High Definition	40 years	80 mph	130 mph
Prestique High Definition	30 years	80 mph	Not Applicable
Raised Profile	30 years	70 mph	Not Applicable

     Elk also offers starter-strip products, Seal-a-Ridge®, Z® Ridge, RidgeCrest™, Highpoint™ hip and ridge products, a built-in StainGuard® treatment in some areas of the country, roof accessory paint for vent flashings and other accessories.

     Elk’s roofing products are sold by employee sales personnel primarily to roofing wholesale distributors, with delivery being made by rail, contract carrier, or by customer vehicles from the manufacturing plants or warehouses. Elk’s roofing products are distributed nationwide. On a short-term basis, demand for roofing products can be dictated by weather patterns, as it was for much of fiscal 2005, when the Southeast United States experienced four major hurricanes. Even without unusual weather events, longer-term industry growth rates have been very strong. Over the last five calendar years, the laminated asphalt shingle segment has grown at a compound annual growth rate of 12%. Industry shipments of laminated asphalt shingles are expected to continue to grow 6% to 10% annually for the remainder of the decade. Over 80% of all asphalt shingles are used in reroofing and remodeling and less than 20% are used in new construction. Approximately 70% of housing in the United States is over 20 years old, with the median age being approximately 32 years old. On average, steep-sloped roofs are replaced every 19 years. Approximately 89% of roof replacements are nondiscretionary and result from roof deterioration, age, leaks, or weather damage. Appearance upgrades account for the remaining 11% of roof replacements. Our ten largest customers account for approximately 50% of annual consolidated sales. One customer, ABC Supply Co., Inc., the largest roofing wholesale distributor in the United States, accounted for 19% of our consolidated sales in fiscal 2005, 19% of consolidated sales in fiscal 2004, and 18% of consolidated sales in fiscal 2003.

     Elk’s sales personnel devote considerable time and effort to the education of roofing installation contractors regarding the superior appearance, quality and ease of application of Elk’s roofing products. Elk believes that its effort to develop brand loyalty among roofing installation contractors is a significant marketing strategy, since the product recommendations of roofing installation contractors often have a significant influence upon the roofing product brand selections of homeowners. Elk has instituted the Peak Performance^SM Contractor Program to reward top performing contractors for their brand loyalty and quality of service.

     Even though the premium shingle manufacturing business is highly competitive, we believe that Elk is a leading manufacturer of premium laminated fiberglass asphalt shingles. Elk has been able to compete successfully with its competitors, some of which are larger in size and have greater financial resources. Elk’s target market for asphalt shingle sales is the laminated segment which accounts for approximately 60% of all asphalt shingle sales. We believe we are the only major roofing manufacturer that entirely focuses on this segment of the sloped roof market. Elk’s plants generally are among the most modern and efficient plants in the industry. Accordingly, we believe this provides us with a competitive advantage in developing and maintaining manufacturing efficiencies. We believe that many of our competitors have elective manufacturing capacity, allowing them to manufacture either commodity shingles or premium laminated shingles. Such elective capacity can affect the supply/demand balance in the premium laminated sector, which can influence the prices Elk charges its customers.

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     Also included in the Premium Roofing Products segment is our nonwoven fabrics operation. Elk’s nonwoven fabrics subsidiary is a leading manufacturer of nonwoven fiberglass shingle substrates and other products utilizing coated and uncoated nonwoven fabrics formed from fiberglass, polyester, cellulose and blended base fibers. Uncoated nonwoven fabrics form the core substrate of most residential asphalt shingles and commercial roofing membranes. Nonwoven fiberglass fabrics provide strength and fire-resistance to these products. Coated nonwoven fabrics have been developed by Elk for use in various building product applications, including roofing underlayment products, facer products and filtration products. Many of Elk’s coated nonwoven products utilize our proprietary VersaShield® fire barrier coatings. Nonwoven fabrics products are manufactured on two nonwoven mat lines that run in parallel at Elk’s Ennis, Texas facility.

     During fiscal 2005, the majority of nonwoven fabrics produced by Elk were used in the manufacture of residential and commercial roofing and accessory products, and, of those, approximately two-thirds were consumed internally in the manufacture of Elk’s asphalt shingle and accessory roofing products. A smaller amount of nonwoven fabrics produced by Elk were used for other direct applications in building and construction, filtration, floor coverings and other industries. Nonwoven fabrics not consumed internally are marketed to outside customers through our Specialty Fabric Technologies division. We conduct ongoing research and development activities targeted at expanding the market for our nonwoven fabrics manufacturing capability.

     Elk’s nonwoven fiberglass roofing mat facilities have the capacity to supply all of our internal fiberglass roofing mat needs. However, certain Elk roofing plants may be supplied nonwoven fiberglass roofing mats under buy/sell agreements of similar, but distinctly different, products with other manufacturers. Such agreements benefit each party by reducing freight costs to the manufacturing plants. These arrangements are generally not affected by changing market conditions. Nonwoven fabrics are sold by Elk sales personnel and shipped by contract carrier to its other roofing plants and to its customers’ locations.

     In its nonwoven fabrics business, Elk successfully competes with other manufacturers of nonwoven fabrics, some of which are larger in size and have greater financial resources. Elk believes that the quality and properties of its nonwoven fabrics make it a desirable supplier of nonwoven products to other manufacturers. In fiscal 2005, most external shipments of nonwoven fabrics were delivered to other manufacturers of asphalt shingles and commercial roofing membranes. Many of these customers purchased nonwoven fabrics from Elk in order to supplement their own internal nonwoven fabrics production capacity. As a result, changing business conditions may result in a proportionately larger change in Elk’s external nonwoven fabrics shipments than the proportionate change in overall market demand.

Composite Building Products

     Composite Building Products is a newly formed platform designed for rapidly growing markets using advanced composite technology, including decking, railing, marine dock, fencing and other OEM products. Composite wood products are sold under the CrossTimbers™ name and marketed as an alternative to treated wood. Unlike the products offered by many of our competitors, CrossTimbers contains no recycled polyethylene products, but consists of a combination of oak and polypropylene, which we believe provides performance advantages including strength, durability, lighter weight and less expansion or contraction, as compared to most other composite building products in the marketplace. Our current fence and decking products are primarily voided deck board products with embossed wood surfaces. Composite building products are manufactured in Lenexa, Kansas, sold by Elk sales personnel, and shipped by contract carrier. Our composite building products generally have limited product warranties for a twenty-year period.

     In fiscal 2005, we significantly expanded and consolidated our capacity at the current Lenexa facility. Expansion activities resulted in expenditures of approximately $23,900,000 in fiscal 2005, primarily for eight new extruders and related equipment for raw material handling, storage and support infrastructure. In addition, in March 2005, we completed the acquisition of Railwayz Inc. (Railwayz), a privately held composite railing company. Railwayz manufactures products under the Railways™ brand name and manufactures products that complement our CrossTimbers decking products. Our Railways product line includes the Traditional Series, a white product with a classic wood look, and the Old World Series, available in five colors and decorative, wrought iron work. Both product series are available with a new uni-ball connector that requires no drilling. These complementary products allow us to provide our distributors a more diverse decking and railing product line that improves the speed of installation.

     We believe that industry-wide sales of composite wood products currently account for approximately 15% of the estimated potential market for wood used in decking, fencing and railing applications. We anticipate that the high growth potential of this emerging market may attract numerous competitors. Current competitors include companies focusing on traditional wood products and companies offering wood alternative products. Some of these competitors are larger in size

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and have greater financial resources than we do. The current market is generally fragmented, although we believe one competitor may have more than a 30% market share. We believe that our established building products distribution channels will enhance our ability to compete successfully in this market.

Specialty Fabric Technologies

     Specialty Fabric Technologies is a marketing division developed to create brand awareness and promote increased sales of our nonwoven specialty fabrics products and VersaShield fire barrier technology. This division focuses on marketing nonwoven fabrics to other roofing manufacturers and to high-growth markets, such as air filtration and carpet tile. Nonwoven specialty fabrics are manufactured by our Ennis, Texas nonwoven fabrics subsidiary. As the majority of these sales are roofing related, the operating results of this portion of Specialty Fabric Technologies are reported in the Premium Roofing Products segment.

     Fire barrier products, which include fire retardant fabrics for mattresses, bed clothes and upholstered furniture, are manufactured through our Elk Technologies, Inc. subsidiary. While these activities are outside our focus on building products platforms, we believe that potentially significant demand for products utilizing this technology could result from trends toward more stringent flammability safety laws and regulations for mattresses and upholstered furniture. This new business has produced a limited amount of commercial sales to date. The operations of Elk Technologies, Inc. are included in Other, Technologies for segment reporting purposes.

Chromium

     Chromium does not fit into our focus on building products platforms and has been positioned for sale. However, if it is not sold, it will continue as one of our business platforms. Chromium’s operations are included in Other, Technologies for segment reporting purposes. Chromium is a leader in plating proprietary finishes for use in remanufacturing large diesel engine cylinder liners, pistons and valves for the railroad and marine industries. Chromium also manufactures wear plate products utilizing its proprietary CRODON® hard chrome finish. These wear plate products are designed to extend the service life of steel machinery components operating in abrasive environments for a number of industries, including roofing manufacturing, mining and public utility industries.

     We believe that Chromium is a leading remanufacturer of diesel engine cylinder liners and pistons for the railroad and marine transportation industries and is the primary supplier of hard chrome plated finishes for original equipment diesel engine cylinder liners to the major domestic locomotive manufacturers. We believe it has smaller competitors in the locomotive diesel engine cylinder liner market, but competes with larger, better capitalized manufacturers in certain markets. Chromium has achieved a leading position in remanufacturing markets through product performance, quality, service and price. In addition, technical innovations that enhance quality and performance are also increasing the value-added content per unit produced.

Discontinued Operations

     Cybershield, Inc., through subsidiaries (collectively Cybershield) was engaged in shielding plastic enclosures from electromagnetic and radio frequency interference. In fiscal 2004, we concluded that the risk and prospects for future success of Cybershield did not justify the additional investment of capital and other resources required to continue Cybershield’s operations. Accordingly, the decision was made to discontinue Cybershield and to sell its operations or its assets. We had previously decided to sell Cybershield’s Canton, Georgia facility. In the first quarter of fiscal 2005, we sold substantially all assets of Cybershield, excluding the Canton, Georgia facility, to the Cybershield management group. In the third quarter of fiscal 2005, we sold the Canton, Georgia facility and certain equipment to an unrelated party. The only remaining assets of the former Cybershield operation are immaterial amounts of equipment held for sale.

     Ortloff Engineers, LTD (Ortloff) was engaged in licensing proprietary technologies and providing related engineering services to the natural gas processing industries, with particular emphasis on the natural gas liquids recovery, sulfur recovery and liquefied natural gas segments. Although Ortloff had a long history of success and profitability, in fiscal 2005 we concluded that it did not fit into our focus on building products platforms and it was positioned for sale. In the fourth quarter of fiscal 2005, Ortloff was sold to a financial buyer for cash. We will not participate in Ortloff’s management or ongoing operation in any manner, although we retained $4,400,000 in long-term license receivables, which the purchaser will collect on our behalf for a service fee. In addition, we retained a portion of contingent license fees on certain projects that were in process at the date of sale. The maximum future benefit of contingent license fees is approximately $2,100,000, although there is no assurance that any of these contingent fees will ultimately be realized.

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Raw Materials

     For our building products platforms, the significant raw materials are ceramic coated granules, asphalt, glass fibers, resins, mineral filler, polypropylene, wood particles and various additives for product preservation. All of these materials are presently available from several sources and are in adequate supply. However, temporary shortages or disruption in supply of raw materials do result from time to time for a variety of reasons. Asphalt costs, which are a significant cost component of our roofing products, can be materially affected by trends in crude oil prices and our cost of sales can vary as a result of changes in the price and availability of asphalt. With the surge in the price of crude oil in fiscal 2005, asphalt costs have reached record levels. We have historically been able to pass some of the higher raw material costs through to the customer, but there is no assurance of being able to do so in the future.

     In Chromium’s business of hard chrome plating and remanufacturing diesel engine cylinder liners, chromic acid is a significant raw material and is presently available from a number of domestic suppliers. We believe these domestic suppliers obtain the ore for manufacturing chromic acid principally from sources outside the United States, some of which may be subject to political uncertainty. We believe our suppliers maintain substantial inventories of chromic acid in order to minimize the potential effects of foreign interruption in ore supply.

Transportation

     The majority of our building products are shipped by rail, common carrier, or by customer vehicles from our manufacturing plants or warehouses. Shipping costs are a significant component of cost of sales. Agreements with our common carriers typically allow for surcharges as a result of increasing fuel prices. Further, carriers are subject to the rules issued by the U.S. Department of Transportation which govern truck drivers’ hours of service that have and will continue to impact our shipping costs. Historically, we have been able to pass along some of our higher transportation costs through to the customer, but there is no assurance of being able to do so in the future.

Backlog

     Our backlog is generally not significant (less than one month of sales), nor is it material to our building products platforms. However, at June 30, 2005, our roofing backlog in the Southeast and Northeast United States was larger than normal due to continuing demand as a result of hurricane activity in these regions.

Patents

     We own a number of patents and trade secrets covering certain products and processes. We believe that the rights under our patents are important to our operations, but we do not consider any individual patent or group of patents related to a specific product or process to be material to our total business.

Research and Development

     Our research activities are primarily conducted at a technology center in Ennis, Texas. Our product development activities are conducted at the Ennis technology center and at each of our plant locations. Research and development costs are expensed as incurred and included in cost of sales. Expenses for research activities at the Ennis technology center were $3,348,000, $2,300,000 and $1,649,000 in fiscal 2005, 2004 and 2003, respectively. Development costs at plant locations are not separately identified.

Strategies

     We strive to be the brand of choice in every aspect of our building products platforms. To accomplish this goal, we strive to develop and manufacture premium products with consistent quality and provide excellent service to our customers.

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The key objectives of the building products platforms are summarized as follows:

• Strive to be the “Brand of Choice” to all of our customers.

• Improve raw material supply chain to achieve “best cost” in major raw material categories, including special emphasis on asphalt and granules.

• Improve yields and return on assets at all plants.

• Make infrastructure improvements, including developing systems and procedures to manage shipping activities at an optimal level.

• Launch key/new and/or increase market penetration of recently introduced shingle products and increase emphasis on accessory roofing products.

• Continue to expand the composite products business and to develop products of the highest quality consistent with Elk’s quality brand image.

• Acquire new building product platforms that can leverage the Elk brand, complement the existing distribution channel or reinforce and expand existing technology.

Extended Payment Terms

     Our building products platforms typically provide extended payment terms to certain customers for products shipped during the late winter and early spring months, with payment generally due during late spring or early summer. As of June 30, 2005, $2,810,000 in receivables relating to such shipments were outstanding. All such receivables are due in the first quarter of fiscal 2006.

Seasonal Business

     Except in years when unusual weather events disrupt normal cyclicality (as was the case in fiscal 2005 due to four hurricanes in the Southeast United States), our building products platforms are seasonal to the extent that cold, wet or icy weather conditions during the late fall and winter months in some of our marketing areas typically limit the installation of residential building products. This seasonality causes sales to be generally slower during such periods. Damage to roofs from extreme weather such as severe wind, hurricanes and hail storms can result in higher demand for periods up to eighteen to twenty-four months depending upon the extent of roof damage. Working capital requirements generally fluctuate during the year because of seasonality. Typically, working capital requirements and borrowings are higher in the spring and summer months, and lower in the fall and winter months. Related liquidity and/or borrowings increase or decrease during the year as a result of working capital fluctuations.

Environmental Matters

     ElkCorp and its subsidiaries are subject to federal, state and local requirements regulating the discharge of materials into the environment, the handling and disposal of solid and hazardous wastes, and protection of the public health and the environment generally (collectively, Environmental Laws). Certain facilities of our subsidiaries ship waste products to various waste management facilities for treatment or disposal. Governmental authorities have the power to require compliance with these Environmental Laws, and violators may be subject to civil or criminal penalties, injunctions or both. Third parties may also have the right to sue for damages and/or to enforce compliance and to require remediation of contamination. If there are releases or if these facilities do not operate in accordance with Environmental Laws, or their owners or operators become financially unstable or insolvent, our subsidiaries are subject to potential liability.

     We and our subsidiaries are also subject to Environmental Laws that impose liability for the costs of cleaning up contamination resulting from past spills, disposal, and other releases of hazardous substances. In particular, an entity may be subject to liability under the Federal Comprehensive Environmental Response, Compensation and Liability Act (CERCLA or Superfund) and similar state laws that impose liability — without a showing of fault, negligence, or regulatory violations — for the generation, transportation or disposal of hazardous substances that have caused, or may cause, environmental contamination. In addition, an entity could be liable for cleanup of property it owns or operates even if it did not contribute to the contamination of such property. From time to time, we or our subsidiaries, may incur such remediation and related costs at the company-owned plants and certain offsite locations maintained by other parties.

     Chromium has engaged in limited remediation activities at the site of its former plating operation in Lufkin, Texas. Soil sampling results from a pre-closing environmental evaluation of the site indicated the necessity of localized cleanup. Chromium has entered the property into the Texas Voluntary Cleanup Program (VCP). Under this program, the Texas Commission on Environmental Quality (TCEQ) reviews the voluntary clean-up plan the applicant submits, and,

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when the work is complete, issues a certificate of completion, evidencing cleanup to levels protective of human health and the environment and releasing prospective purchasers and lenders from liability to the state. Properties entered into the VCP are protected from TCEQ enforcement actions.

     In fiscal 2004, Chromium completed a supplemental groundwater and soil assessment at the Lufkin facility. The assessment further defined the horizontal and vertical extent of metals in soils, assessed the horizontal extent of metals in groundwater, and estimated the direction of groundwater movement. Chromium submitted its Affected Property Assessment Report (APAR) to the TCEQ. In June 2004, the TCEQ issued a letter accepting Chromium’s APAR in substantially all respects, indicating that no further assessment of the extent of contamination was necessary. Chromium is finalizing a proposed Remedial Action Plan (RAP) to the TCEQ in which it will propose activities and engineering controls to clean up the site under the VCP to a site specific risk-based clean-up standard as prescribed by the Texas Risk Reduction Program. The company believes that current findings indicate that remediation activities will be similar to a plan utilized at another Chromium plant. This assessment, in conjunction with projections developed in finalizing the proposed RAP that are site specific, resulted in the company recording an accrued liability of $700,000 in fiscal 2005. Certain other scenarios, none of which are reasonably expected at this time, could potentially result in material costs to the company.

     Our operations are subject to extensive Environmental Laws. Other than the possible costs associated with the previously described Chromium matter, we do not believe we will be required to expend amounts which will have a material adverse effect on our consolidated results of operations, financial position or liquidity. We establish and maintain reserves for such known or probable remediation activities in accordance with SFAS No. 5 and AICPA Statement of Position 96-1. Such environmental laws are frequently changed and could result in significantly increased cost of compliance. We anticipate that our subsidiaries will incur costs to comply with Environmental Laws, including remediating any existing non-compliance with such laws and achieving compliance with anticipated future standards for air emissions and reduction of waste streams. Such subsidiaries expend funds to minimize the discharge of materials into the environment and to comply with governmental regulations relating to the protection of the environment. Further, certain of our manufacturing operations utilize hazardous materials in their production processes. As a result, we incur costs for recycling or disposal of such materials and may incur costs for remediation activities at our facilities and off-site from time to time.

Persons Employed

     At June 30, 2005, we and our subsidiaries had 1,194 employees. Of this total, 818 were employed in the Premium Roofing Products segment, 116 were employed in the Composite Building Products segment, 87 were employed in the Other, Technologies segment, and 173 (including most sales personnel) were employed by the corporate office. Included in these totals are 219 employees who are represented by labor unions. RGM Products, Inc., acquired by ElkCorp on August 25, 2005, has 383 employees, none of which are represented by labor unions. We believe that we have good relations with our employees and the labor unions.

Risks Relating To The Company

     Competitive Conditions

     Our building products businesses can be affected by weather, the availability of customer and/or end-user financing, insurance claims-paying practices, and general economic conditions. In addition, our building products manufacturing businesses are highly competitive. Actions of competitors, including changes in pricing, or slowing demand for asphalt roofing products due to general or industry economic conditions or the amount of inclement weather could result in decreased demand for our products, lower prices received or reduced utilization of plant facilities. Further, changes in building and insurance codes and other standards from time to time can cause changes in demand, challenges in meeting refined product specifications, or increases in costs that may not be passed through to customers.

     Higher Raw Materials, Energy and Transportation Costs

     In our building products businesses, the significant raw materials are ceramic-coated granules, asphalt, glass fibers, resins, mineral filler, polypropylene, wood particles and various additives for product preservation. Increased costs of raw materials can result in reduced margins, as can higher energy, trucking and rail costs. Historically, we have been able to pass some of the higher raw material, energy and transportation costs through to the customer. Should we be unable to recover higher raw material, energy and/or transportation costs, including higher trucking costs resulting from

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regulatory changes in the trucking industry, through price increases of our products, operating results could be adversely affected and/or lower than projected.

     Temporary Shortages or Disruptions

     Temporary shortages or disruptions in the supply of raw materials or the availability of transportation do result from time to time from a variety of causes. If we experience temporary shortages or disruptions in the supply of raw materials or the availability of transportation, operating results could be lower than projected.

     Productivity of New Facilities

     We have been involved in a significant expansion plan over the past several years, including the construction of new facilities and the expansion of existing facilities. Progress in achieving anticipated operating efficiencies and financial results is difficult to predict for new and expanded plant facilities. If such progress is slower than anticipated, or if demand for products produced at new or expanded plants does not meet current expectations, operating results could be lower than projected.

Utilization of Hazardous Materials

     Certain facilities of our subsidiaries must utilize hazardous materials in their production process. As a result, we could incur costs for remediation activities at our facilities or off-site and other related exposures from time to time in excess of established reserves for such activities.

Litigation and Claims

     We are involved in various legal proceedings and claims, including claims arising in the ordinary course of business. Our litigation and claims are subject to inherent and case-specific uncertainty. The outcome of such litigation and claims depends on numerous interrelated factors, many of which cannot be predicted.

     Higher Interest Rates

     We currently anticipate that most of our needs for new capital in the near future will be met with current amounts of cash, cash equivalents and short-term investments, internally generated funds and borrowings under our available credit facilities. Significant increases in interest rates could substantially affect our borrowing costs or our cost of alternative sources of capital.

     Loss of Key Customers

     The majority of our sales are in the Premium Roofing Products and Composite Building Products segments, and our primary customers are building products distributors. The ten largest customers in these combined segments account for approximately 50% of annual consolidated sales and one customer accounts for 19% of consolidated sales. Our businesses each could suffer significant setbacks in revenues and operating income if we lost one or more of our largest customers, or if our customers’ plans and/or markets should change significantly.

     Physical Loss to Manufacturing Facilities

     Although we insure ourselves against physical loss to our manufacturing facilities, including business interruption losses, natural or other disasters and accidents, including but not limited to fire, earthquake, damaging winds, explosions and other casualties, operating results could be adversely affected if any of our manufacturing facilities became inoperable for an extended period of time due to these insured events or other non-insured events, including but not limited to acts of God, war or terrorism.

     Development of New Products

     Each of our businesses is actively involved in the development of new products, processes and services which are expected to contribute to our ongoing long-term growth and earnings. Consumer products using VersaShield fire retardant coatings have produced a limited amount of commercial sales to date. Its market potential may be dependent on the stringency of federal and state regulatory requirements, which are difficult to predict. Further, our composite building products operation is producing and selling a new generation of decking products. We believe that this new generation of

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products will allow this business to achieve sustained operating profitability. Our composite building products operation is also developing products for use in various industrial applications. If such developmental activities are not successful, regulatory requirements are less stringent than currently predicted, market demand is less than expected, we experience unanticipated product performance issues or delays in achieving target product specifications, or we cannot provide the requisite financial and other resources to successfully commercialize such developments, the growth of future sales and earnings may be adversely affected.

     Technological Changes

     Each of our businesses is subject to the risks of technological changes and competition that is based on technology improvement or labor savings. These factors could affect the demand for or the relative cost of our technology, products and services, or the method and profitability of distribution or delivery of such technology, products and services.

Item 2. Properties

     All manufacturing facilities, except for our Composite Building Products facility in Lenexa, Kansas (which is leased), are owned by ElkCorp and its subsidiaries and are not subject to any significant encumbrances. Our corporate headquarters is located in leased offices at 14911 Quorum Drive, Suite 600, Dallas, Texas 75254.

     Premium shingle products and accessories are manufactured at plants located in Ennis, Texas; Shafter, California; Myerstown, Pennsylvania; two adjacent plants in Tuscaloosa, Alabama; and since our August 25, 2005 acquisition of RGM Products, Inc., in Fresno, California. Fiberglass roofing mat, nonwoven industrial, reinforcement and filtration products are manufactured on two parallel production lines located in Ennis, Texas. Composite building products are manufactured at leased facilities in Lenexa, Kansas. As of June 30, 2005, remote leased warehouse storage locations were maintained in (1) Denver, Colorado, (2) Plant City, Florida, (3) Greenville, South Carolina, (4) Tacoma, Washington, (5) Edgerton, Wisconsin, and (6) Richmond, British Columbia, Canada. In addition, some of our roofing plants lease storage space near their operating locations.

     Corporate headquarters and administrative offices for Premium Roofing Products and Composite Building Products operations are located in the same leased facility as our corporate offices in Dallas, Texas.

     Chromium’s operating facilities are located in Cleveland, Ohio. Corporate headquarters and administrative offices for Chromium are located at the same leased facility as our corporate offices in Dallas, Texas.

     Elk Technologies operates out of administrative offices located at the same leased facility as our corporate offices in Dallas, Texas. It also maintains a leased storage warehouse location in Vernon, California.

     Cybershield’s operating facility in Lufkin, Texas was sold in the first quarter of fiscal 2005. Its Canton, Georgia facility was sold in the third quarter of fiscal 2005. Ortloff’s operations, which were sold in the fourth quarter of fiscal 2005, were located in leased offices in Midland, Texas. We have no remaining properties for these discontinued operations.

Item 3. Legal Proceedings

     There are various lawsuits and claims pending against ElkCorp and its subsidiaries. In the opinion of management, based in part on advice of counsel, none of these actions should have a material adverse effect on our consolidated results of operations, financial position, or liquidity.

Item 4. Submission of Matters to a Vote of Security Holders

     No matters were submitted to a vote of security holders during the fourth quarter of the year ended June 30, 2005.

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Item 4A. Executive Officers of the Registrant

     Certain information concerning our executive officers is set forth below:

		Period	Age as of
		Served	August 1,
Name	Title	As Officer	2005
Thomas D. Karol	Chairman of the Board and Chief Executive Officer of ElkCorp and each building products subsidiary; Officer and Director of all subsidiaries except one	4years		47
Richard A. Nowak	President and Chief Operating Officer of ElkCorp and each building products subsidiary; Officer and Director of all subsidiaries except one	4years		63
David G. Sisler	Senior Vice President, General Counsel and Secretary of ElkCorp; Officer of and Counsel to all subsidiaries except one; Director of one subsidiary	10years		47
James J. Waibel	Senior Vice President, Administration of ElkCorp	11years		61
Matti Kiik	Senior Vice President, Research and Development of ElkCorp	4years		63
Gregory J. Fisher	Senior Vice President, Chief Financial Officer and Controller of ElkCorp	4years		54
Curt A. Barker	Senior Vice President, Sales and Marketing of ElkCorp	1month		48
Leonard R. Harral	Vice President, Chief Accounting Officer and Treasurer of ElkCorp; Director of one subsidiary	11years		53

     All of the executive officers except Mr. Karol have been employed by ElkCorp or its subsidiaries in responsible management positions for more than the past five years. Mr. Nowak, Mr. Kiik, Mr. Fisher and Mr. Barker were employed in responsible management positions at an ElkCorp subsidiary company for more than the past five years.

     On February 5, 2001, Mr. Karol was elected by the Board of Directors as President and Chief Executive Officer of ElkCorp effective March 26, 2001. On March 31, 2002, Mr. Karol was elected by the Board of Directors as Chairman of the Board and Chief Executive Officer. From May 1991 until its purchase by Beaulieu of America in December 1999, Mr. Karol served as Chief Executive Officer of Pro Group Holdings, Inc., a privately owned manufacturer and distributor of carpet and flooring products. From December 1999 until January 2001, Mr. Karol was employed as President of the Brinkman Hard Surfaces Division of Beaulieu of America. Mr. Karol has served on ElkCorp’s Board of Directors since November 1998.

     Officers are elected annually by the Board of Directors following the Annual Meeting of Shareholders.

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PART II

     Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

     The principal market on which our common stock is traded is the New York Stock Exchange. Our common stock is also traded on the Boston, Midwest and Philadelphia Stock Exchanges. There were 913 holders of record and approximately 5,400 beneficial owners of ElkCorp’s common stock on July 31, 2005.

     The quarterly dividend declared per share and the high and low sale prices per share of our common stock for each quarter during fiscal year 2005 and fiscal year 2004 are set forth in the following table:

Period	Dividend		High		Low
Fiscal 2005
First Quarter	$	.05	$	28.22	$	20.17
Second Quarter	$	.05	$	35.00	$	25.70
Third Quarter	$	.05	$	41.30	$	31.75
Fourth Quarter	$	.05	$	39.00	$	26.25
Fiscal 2004
First Quarter	$	.05	$	26.54	$	21.80
Second Quarter	$	.05	$	28.00	$	23.35
Third Quarter	$	.05	$	30.00	$	26.11
Fourth Quarter	$	.05	$	29.75	$	21.50

     Subject to the limitations discussed below, we currently intend to continue to pay quarterly dividends for the foreseeable future. However, the final determination of the timing, amount and payment of dividends on our common stock is at the discretion of the Board of Directors and will depend on, among other things, our profitability, liquidity, financial condition and capital requirements.

     Limitations affecting the future payment of dividends are imposed as a part of our revolving credit facility. Total cumulative dividends and stock repurchased since November 30, 2000 are subject to a formula limitation based on cumulative consolidated net income during the term of our $125,000,000 Revolving Credit Facility, which extends through November 30, 2008. As of June 30, 2005, such limitation was $64,591,000 and actual cumulative expenditures for these items were $18,991,000.

Issuer Purchases of Equity Securities for Quarter Ended June 30, 2005:

					Total Number of		Maximum Number (or
	Total Number				Shares Purchased		Approximate Dollar Value) of
	of Shares		Average		as Part of Publicly		Shares That May Yet be
	Purchased		Price Paid		Announced Plans		Purchased Under the Plans or
Period	(Notes 1 & 2)		per Share		or Programs		Programs (Note 3)
April, 2005		15,528	$	36.88		—	$	10,600,000
May, 2005		32,160	$	35.32		—	$	10,600,000
June, 2005		—		—		—	$	10,600,000
Total		47,688	$	35.76		—

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(1)	Includes repurchase of 1,245 shares from officers and employees in connection with stock option exercises and repurchased restricted shares for income tax withholding payments.
(2)	As a result of participant diversification directives, the ElkCorp ESOP Trust accumulates a surplus of unallocated shares from time to time. In the quarter ended June 30, 2005, we purchased 46,443 shares from the ElkCorp ESOP Trust. The dollar value of this repurchase transaction is reflected in the consolidated statement of shareholders’ equity but has no impact on previously announced repurchase programs outlined in (3).
(3)	On September 28, 1998, the Board of Directors authorized the purchase of up to $10,000,000 of common stock from time to time on the open market to be used for general corporate purposes. On August 28, 2000, the Board of Directors authorized the repurchase of an additional $10,000,000 of common stock. No common stock was repurchased on the open market in fiscal 2005, and the most recent share repurchase under these authorizations was December 4, 2000. The authorizations did not specify an expiration date. Purchases may be increased, decreased or discontinued by the Board of Directors at any time without prior notice.

Item 6. Selected Financial Data

     The selected consolidated financial data set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and notes thereto included elsewhere in this report.

     FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA

($ In thousands, except per share data)			Year Ended June 30,
	2005		2004			2003		2002			2001
Sales	$	761,719	$	566,041		$	474,434	$	468,502		$	347,425
Income (Loss):
From continuing operations	$	42,696	$	30,066		$	21,206	$	18,050		$	8,191
From discontinued operations		4,171		(9,560	)		2,894		(2,957	)		571
Net Income	$	46,867	$	20,506		$	24,100	$	15,093		$	8,762
Income (Loss) Per Share — Basic:
From continuing operations	$	2.16	$	1.53		$	1.09	$	.93		$	.42
From discontinued operations		.21		(.48	)		.15		(.15	)		.03
Net Income Per Share — Basic	$	2.37	$	1.05		$	1.24	$	.78		$	.45
Income (Loss) Per Share — Diluted:
From continuing operations	$	2.11	$	1.51		$	1.08	$	.92		$	.42
From discontinued operations		.20		(.48	)		.15		(.15	)		.03
Net Income Per Share — Diluted	$	2.31	$	1.03		$	1.23	$	.77		$	.45
Total Assets	$	613,569	$	480,708		$	442,291	$	381,428		$	360,048
Long-Term Debt	$	200,146	$	156,858		$	152,526	$	119,718		$	123,300
Shareholders’ Equity	$	270,810	$	215,042		$	196,528	$	176,092		$	162,102
Cash Dividends Per Share	$	.20	$	.20		$	.20	$	.20		$	.20

     In the first quarter of fiscal 2005, we sold our Cybershield business and in the fourth quarter of fiscal 2005, we sold our Ortloff business. Our Five-Year Summary of Selected Financial Data reflects these two businesses as discontinued operations.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

Executive Overview

     ElkCorp, through its subsidiaries, is primarily a manufacturer of Elk premium roofing and composite building products. We strive to be the brand of choice in each of our businesses. In fiscal 2005, we intensified our focus on our building products platforms, including selling or positioning for sale several of the businesses that do not fit into this focus. Additionally, on August 25, 2005, we acquired RGM Products, Inc., a privately-held manufacturer of high-profile hip and ridge and other roofing related products based in Fresno, California, for approximately $24,300,000 in cash and the assumption of approximately $10,700,000 of indebtedness. This acquisition enhances our current roofing accessories business and allows us to offer the broadest ridge product line in the industry. RGM Products, Inc. posted 2004 revenues of approximately $57,000,000.

     Within the building products sector we have two segments, Premium Roofing Products, which manufactures premium laminated fiberglass asphalt shingles and accessory products, coated and uncoated nonwoven fabrics used in asphalt shingles and other applications, and Composite Building Products, a relatively new platform that manufactures composite wood decking, railing, marine dock, fencing and other OEM products. Although reported as separate operating segments, products from both segments are manufactured for and marketed primarily to the building products industry under the “Elk Premium Building Products” brand name and meet most of the aggregation criteria established by SFAS 131, “Disclosures about Segments of an Enterprise and Related Information.” Products from both segments are sold primarily through the same wholesale distribution channels and the ultimate “customers” for both segments are professional installation contractors and homeowners. Together these two building products segments account for greater than 95% of consolidated sales and operating profit. Previously, these two segments were combined and reported as the Building Products segment. Prior period financial information has been reclassified to reflect the change in our reporting of business segments.

     The focus of our businesses is innovative product development, manufacturing excellence and superior customer service. Fiscal 2005 was a year noteworthy for record demand for laminated shingles, particularly in the Southeast region and certain other areas of the United States that were affected by four hurricanes in the summer and early fall of calendar year 2004. Higher overall demand led to improved pricing in the majority of our markets throughout the country, but particularly in the Southeast United States. Our shingle shipments increased 24% compared to fiscal 2004 and average selling prices increased 9%.

     Higher transportation, energy and raw materials costs, particularly asphalt costs, presented a significant challenge throughout fiscal 2005. As a result of improved selling prices, we were able to maintain higher margins on shingle pricing over transportation, energy and raw material costs in fiscal 2005 compared to the prior fiscal year. We expect a continuation of strong roofing demand in fiscal 2006, fueled by longer than anticipated hurricane demand for our roofing products in Florida. Rising average selling prices should help to offset raw material, energy, and transportation costs that are being affected by record price levels for crude oil.

     We benefited significantly from the start-up of our new Tuscaloosa, Alabama facility at the beginning of fiscal 2005. Even though the new plant increased our operating costs, productivity was better than our expectations for this new facility for most of fiscal 2005. The plant achieved its initial rated capacity in the third quarter of fiscal 2005. At rated capacity, the new Tuscaloosa plant increased our overall capacity by about 25%. We expect this facility to continue to improve its production capabilities in the future, but at a slower rate than we experienced in fiscal 2005.

     Our composite building products business was a challenge in fiscal 2005, resulting in disappointing financial results. Customer specification modifications, internal formulation changes and refinements, inventory valuation adjustments and higher than expected costs associated with the ramp-up of this business platform all contributed to the current year loss in this platform. However, we believe in this new platform’s ability to meet its long-term goals, and we have made enhancements to its management structure, invested in new capacity and finalized new agreements for our non-decking products. We believe these changes will position us to take advantage of significant potential growth opportunities in this business platform.

     Our two dissimilar businesses are combined and reported as Other, Technologies, as neither individually meet the materiality criteria for separate segment reporting. These operations include (1) Chromium Corporation (Chromium), which is a leading provider of hard chrome and other surface finishes designed to extend the life of steel machinery components operating in abrasive environments, and (2) Elk Technologies, Inc., which develops and markets fabrics

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featuring VersaShield fire retardant coatings designed for use outside of traditional building products applications, including bedding, home furnishings and other consumer products.

     In fiscal 2004, we made the decision to discontinue Cybershield, Inc. (Cybershield) and to sell Cybershield or its assets. In the current fiscal year, we sold substantially all of the assets of Cybershield. Early in fiscal 2005, we concluded that Ortloff Engineers, LTD (Ortloff) and Chromium do not fit into our focus on building products platforms and positioned them for sale. In the fourth quarter of fiscal 2005, Ortloff was sold for cash to a financial buyer. Chromium remains positioned for sale but will remain as one of our business platforms if it is not sold.

Performance Data

     The following table and subsequent discussion set forth performance data from our continuing operations, expressed as a percentage of sales for the periods indicated. This data and the accompanying discussion and analysis should be read in conjunction with the Consolidated Financial Statements and Notes to Consolidated Financial Statements included elsewhere herein.

	Year Ended June 30,
	2005			2004			2003
Sales		100.0	%		100.0	%		100.0	%
Cost of sales		80.6			80.1			81.6
Gross margin		19.4			19.9			18.4
Selling, general and administrative		9.2			10.5			10.0
Operating income		10.2			9.4			8.4
Interest expense, net and other		1.3			0.9			1.2
Income from continuing operations before income taxes		8.9			8.5			7.2
Provision for income taxes		3.3			3.2			2.7
Income from continuing operations		5.6	%		5.3	%		4.5	%

Fiscal 2005 Compared to Fiscal 2004

Overall Performance

     Sales from continuing operations of $761,719,000 during the year ended June 30, 2005 were 34.6 % higher than $566,041,000 in fiscal 2004. During the year ended June 30, 2005, operating income from continuing operations of $77,848,000 was 45.9% higher than the $53,346,000 last year. Sales of premium roofing shingles and accessory products increased substantially in the current year compared to last year, due to a significant increase in shingle unit volume, which was aided by shipments from the new Tuscaloosa production facility, overall improvements in production performance, and higher average selling prices. The percentage of cost of sales to sales increased to 80.6% in the year ended June 30, 2005 compared to 80.1% last year. A higher than expected loss at the Lenexa, Kansas composite building products operation was the primary factor in the overall lower gross margin during fiscal 2005. Selling, general and administrative (S,G&A) costs of $69,946,000 in fiscal 2005 were 17.6% higher than $59,482,000 last year due primarily to increased selling expense and performance based compensation expense. However, due to substantially increased business activity and higher selling prices, S,G&A was only 9.2% of sales in fiscal 2005 compared to 10.5% in fiscal 2004.

     Interest expense was $10,571,000 in fiscal 2005 compared to $5,444,000 in fiscal 2004 due primarily to higher debt levels, increasing interest rates and less capitalized interest. For the year ended June 30, 2005, $754,000 of interest was capitalized related to the expansion of the Lenexa, Kansas facility and other significant capital projects. In fiscal 2004, $3,079,000 of interest was capitalized, much of which related to construction of the new roofing plant in Tuscaloosa, Alabama, which is now in service. Increased interest rates on variable rate debt accounted for an approximate $1,500,000 year-to-year increase in total interest cost. Average borrowings, net of cash, cash equivalents and short-term investments, were approximately $8,300,000 higher in fiscal 2005 compared to fiscal 2004. The average interest rate paid on indebtedness was 5.8% in fiscal 2005 compared to 5.0% in fiscal 2004 as a result of higher variable interest rates and an additional $50,000,000 in senior notes issued in November 2004 with a 6.28% fixed interest rate.

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     Our effective tax rate for income from continuing operations was 36.7% during fiscal 2005 compared to 37.4% in fiscal 2004. The lower current year rate was primarily attributable to lower state income taxes resulting from state investment tax credits from expansion programs.

     In fiscal 2004, we made the decision to exit Cybershield’s business. In fiscal 2005 both Cybershield and Ortloff were sold. Both Cybershield’s and Ortloff’s results for each period presented are reported as discontinued operations. In the year ended June 30, 2005, we reported pretax income from discontinued operations of $6,811,000. In fiscal 2004, we reported a $14,615,000 pretax loss from discontinued operations. The fiscal 2005 results included a $6,484,000 pretax gain on the disposal of Ortloff. Fiscal 2004 results included $12,346,000 of write-downs of Cybershield’s net assets to estimated market value.

Results of Business Segments

     Sales in the Premium Roofing Products segment increased 33.4% to $732,674,000 in fiscal 2005 compared to $549,052,000 last year. Compared to fiscal 2004, unit volume increased 24% in fiscal 2005. Shingle demand was extremely high for most of fiscal 2005 as a result of increased orders in most regions of the United States, led by the Southeast United States and other areas affected by four hurricanes in the summer and early fall of calendar 2004. We were able to benefit significantly from increased production capacity related to the new Tuscaloosa, Alabama roofing plant and productivity enhancements at all of our roofing facilities. Average shingle prices in the current year increased 9% compared to last year, primarily as a result of price increases that were consistent with industry trends. Approximately 30% of a price increase in June 2005 has been realized, and an additional 5%-7% price increase has been announced for September 1, 2005. These increases, if realized, should help offset rising asphalt and transportation costs. In fiscal 2005, external sales of performance nonwoven fabrics increased 24.5% to $41,037,000 compared to $32,974,000 last year, primarily as a result of sales of specialty fabrics products, such as roofing mat, facer and filtration products.

     Operating income for the Premium Roofing Products segment of $107,690,000 for the year ended June 30, 2005 increased 55.4% from $69,292,000 achieved in the prior fiscal year. This significant improvement in operating income was primarily attributable to the aforementioned increases in unit volume and average selling prices. We were able to improve margins on premium asphalt shingle products as a result of higher average sales prices despite continuing increases in asphalt, energy, and transportation costs. Asphalt costs increased approximately 9% in the year ended June 30, 2005 from fiscal 2004. Transportation costs have also continued to increase and were approximately 16% higher in the current year than in the prior fiscal year. The new Tuscaloosa, Alabama roofing plant reached its initial rated capacity in the quarter ended March 31, 2005. In the fourth quarter of fiscal 2005, the new Tuscaloosa facility experienced lower than expected volume due to unanticipated machine maintenance. The rate of progress in production has slowed at this plant as these maintenance issues are addressed. Also in the fourth quarter of fiscal 2005, we encountered a silo failure in the granule storage system at our Myerstown facility that reduced production to approximately 90% of capacity. The plant has been able to return to 100% capacity while repairs are being made, although there can be no assurance that this level of production will be sustainable throughout the repair process. Various engineering refinements designed to eliminate the problem areas at the Myerstown and Tuscaloosa plants are scheduled for completion during the first half of fiscal 2006.

     Sales of our Composite Building Products segment increased to $19,425,000 in fiscal 2005 compared to $8,524,000 in the prior fiscal year, as we continue to develop this business platform by improving and increasing our product line so that we are in a position to take advantage of better demand as consumers become more aware of the benefits of composite lumber compared to wood. We incurred an $11,822,000 operating loss in our composite lumber business in fiscal 2005 compared to a $2,262,000 operating loss for this business in the prior year. Approximately $3,900,000 of the current year loss was attributable to costs associated with inventory for products that did not meet our current formulations and customer specifications. We believe we have alleviated many of the problems surrounding the formulation and specifications issues through management changes and process control improvements made in the latter part of fiscal 2005. Additional fiscal 2005 losses of approximately $3,500,000 resulted from the expansion of operations at our new manufacturing facility in Lenexa, Kansas. Other factors contributing to the higher than expected fiscal 2005 loss were longer than anticipated code approval in various areas of the country, a slower than expected ramp up of new production, higher than anticipated raw material costs, and slower than projected initiation of new products for non-decking markets. In fiscal 2005, our composite distribution base increased more than 50% to approximately 100 distributors in the United States and Canada. We believe in this new platform’s ability to meet its long-term goals. The enhancements in the management structure, in combination with capacity additions and finalizing new agreements for our non-decking products are expected to allow us to take advantage of significant growth opportunities in this business platform.

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     In March 2005, the composite building products subsidiary completed the acquisition of Railwayz Inc. (Railwayz), a privately held composite railing company. Railwayz manufactures railing products that will complement our CrossTimbers decking products and allow us to offer our distributors a more diverse decking and railing product line. The total purchase price was approximately $1,625,000, plus contingent future earn-out payments based on revenues for the first five years after acquisition with a maximum potential payment of $375,000.

     The Other, Technologies companies reported combined sales of $9,620,000 in fiscal 2005 compared to $8,465,000 in fiscal 2004. Chromium’s sales were $9,209,000, or 10.4% higher in the current year compared to $8,339,000 in fiscal 2004 period as a result of slightly higher demand for plating and finishing services in existing locomotive and marine markets. The Other, Technologies companies had a combined operating loss of $1,231,000 in fiscal 2005, compared to a $100,000 operating loss last year. Chromium recorded an operating profit of $144,000 for the year ended June 30, 2005, which included a $700,000 reserve for estimated environmental clean-up at its former plating operation located in Lufkin, Texas and a $210,000 provision for bad debt expenses. This operating profit compares to a $598,000 operating profit achieved last year. Elk Technologies incurred an operating loss of $1,375,000 in the year ended June 30, 2005, compared to an operating loss of $698,000 in the same period last year. The current year operating loss included $582,000 in inventory write-downs.

Fiscal 2004 Compared to Fiscal 2003

Overall Performance

     Sales from continuing operations of $566,041,000 in fiscal 2004 were 19.3% higher than $474,434,000 in fiscal 2003. During fiscal 2004, income from continuing operations of $30,066,000 was 41.8% higher than $21,206,000 for the prior fiscal year. Included in income from continuing operations in fiscal 2003 was $3,496,000 of benefit, net of tax, from the reversal of noncash stock option compensation. Consolidated operating income from continuing operations of $53,346,000 in fiscal 2004 was 33.4% higher than $40,001,000 in fiscal 2003. Operating income from continuing operations in fiscal 2003 included a $5,378,000 pretax benefit as a result of the aforementioned noncash stock option compensation.

     Cost of sales was 80.1% of sales in fiscal 2004 compared to 81.6% in fiscal 2003. Higher asphalt and other raw material costs during much of fiscal 2004 were largely offset by better shingle pricing and increased shingle production, which reduced per unit manufacturing costs. Selling, general and administrative (SG&A) costs in fiscal 2004 were 25.3% higher than in the prior fiscal year, primarily as a result of increased business activity and higher marketing expenses. As a percentage of sales, SG&A costs were 10.5% of sales in fiscal 2004 compared to 10.0% in fiscal 2003.

     Interest expense, net, was $5,311,000 in fiscal 2004 compared to $5,977,000 in fiscal 2003. In fiscal 2004, interest expense of $3,079,000 was capitalized related to the construction of an additional shingle plant in Tuscaloosa, Alabama, and other significant capital projects. In fiscal 2003, $995,000 of interest was capitalized. The average interest rate paid on indebtedness was 5.0% in both fiscal 2004 and fiscal 2003.

     Our effective tax rate from continuing operations was 37.4% in fiscal 2004 and 37.7% in fiscal 2003. The decrease in the effective tax rate in fiscal 2004 is primarily due to state tax credits generated as a result of roofing plant production improvement initiatives.

     In December 2003, we made the decision to exit Cybershield’s business. Cybershield’s results for all periods presented are reported as discontinued operations. Discontinued operations for fiscal 2004 included a $4,831,000 pretax loss from operations at Cybershield, combined with pretax, noncash write-downs of $12,346,000 to reduce the book value of Cybershield’s assets to estimated market value. In fiscal 2003, Cybershield reported a $1,081,000 pretax operating loss, all from operating activities. Ortloff, which is also reported as a discontinued operation, had pretax income of approximately $2,600,000 in fiscal 2004, compared to approximately $5,800,000 in fiscal 2003.

Results of Business Segments

     Sales in the Premium Roofing Products segment increased 17.9% to $549,052,000 in fiscal 2004 compared to $465,762,000 in fiscal 2003. The significant year-to-year increase in sales is primarily the result of an $81,042,000, or 18.6%, increase in sales of premium shingles and accessory products. Compared to the same period in fiscal 2003, unit shingle shipments increased 14.2%, with most regions of the United States experiencing strong year-to-year growth. A significant portion of the unit volume increase, particularly during the early part of fiscal 2004, was attributable to strong roof replacement demand in hail-damaged Texas markets. Average shingle pricing increased about 2.8% compared to fiscal 2003. In fiscal 2004, external sales of performance nonwoven fabrics increased $2,248,000, or 7.3% to $32,974,000

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compared to $30,726,000 in fiscal 2003. Approximately two-thirds of roofing mat produced in both fiscal 2004 and fiscal 2003 was used for internal consumption. Internal sales of roofing mat are eliminated in consolidation.

     Operating income for the Premium Roofing Products segment of $69,292,000 for fiscal 2004 increased 42.4% compared to $48,669,000 achieved in fiscal 2003. Operating income gains attributable to higher unit sales and pricing were partially offset by increased manufacturing expenses, raw material price increases, higher transportation costs and unusually high developmental costs related to new product offerings in the roofing business.

     Sales of Composite Building Products were $8,524,000 in fiscal 2004. We entered the Composite Building Products business in the second quarter of fiscal 2003 and reported $1,240,000 in sales in fiscal 2003. We incurred an operating loss of $2,262,000 for the Composite Building Products business during fiscal 2004 compared to a $2,768,000 operating loss in fiscal 2003.

     The Other, Technologies companies reported combined sales of $8,465,000 in fiscal 2004 compared to $7,432,000 in fiscal 2003. Chromium’s sales were 12.4% higher in fiscal 2004 compared to fiscal 2003 as a result of increased demand for plating and finishing services in existing locomotive and marine markets, combined with increased hard-chrome wear plate sales. Elk Technologies had a nominal level of sales of fire retardant mattress fabrics during fiscal 2004. Other, Technologies companies had a combined operating loss of $100,000 in fiscal 2004, compared to an operating loss of $511,000 in fiscal 2003. The improvement was due primarily to higher sales activity levels at Chromium which recorded an operating profit of $598,000 in fiscal year 2004 compared to incurring a small operating loss in fiscal 2003.

Financial Condition

Overview

     Our liquidity needs generally arise principally from working capital requirements, capital expenditures, dividends, and interest payments. Our working capital requirements typically fluctuate significantly during the year because of seasonality in some market areas. Generally, working capital requirements are higher in the spring and summer months and lower in the fall and winter months. Due to unprecedented demand for roofing products caused by four hurricanes in the Southeast United States in early fiscal 2005, our business was less seasonal this year than normal. During the three years ended June 30, 2005, we relied primarily on internally generated funds and proceeds from the sale of senior unsecured notes to finance our capital expenditure requirements and other growth opportunities. We typically use our revolving credit facility (Facility) to finance higher working capital requirements. Due to strong cash flow in fiscal 2005 and the issuance of an additional $50,000,000 in senior unsecured notes on November 15, 2004, we used the Facility sparingly in fiscal 2005, and did not borrow under the Facility in the second half of the year. At June 30, 2005, we had $78,421,000 in cash, cash equivalents and short-term investments available to fund growth opportunities, capital expenditures and other cash requirements. Approximately $24,300,000 of available funds was utilized on August 25, 2005 in connection with the acquisition of RGM Products, Inc.

Operating Activities

     We generate cash flows from operating activities primarily from income from operations, after consideration of deferred taxes, stock based compensation, stock option income tax benefits, depreciation and amortization. Cash flows from operating activities also either increase or decrease by changes in working capital requirements. For the year ended June 30, 2005, we generated cash of $71,790,000 from operating activities, compared to $50,648,000 in fiscal 2004 and $23,072,000 in fiscal 2003.

     Trade receivables at June 30, 2005 were $39,114,000 higher than at June 30, 2004 due primarily to higher shipments of premium roofing products in the fourth quarter of the current fiscal year compared to the fourth quarter of fiscal 2004. In accordance with normal industry practices, extended payment terms are granted to certain customers for roofing products shipped during the late winter and early spring months, with payments generally due during the spring and early summer. At June 30, 2005, receivables from customer programs with extended due dates were $2,810,000 compared to $5,662,000 at June 30, 2004. Extended term receivables outstanding at June 30, 2005 are due in the first quarter of fiscal 2006. At June 30, 2005, manufactured inventories were $9,288,000 higher than at June 30, 2004. Much of the increase related to higher inventories at the new Tuscaloosa, Alabama facility, and at the composite building products business platform from increasing production capacity. Current liabilities were significantly higher in fiscal 2005, due primarily to cash management initiatives, increased compensation related accruals, and increased business activities. The current ratio was 3.5 to 1 at June 30, 2005 compared to 3.2 to 1 at June 30, 2004.

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Investing Activities

     Cash flows from investing activities primarily reflect our capital expenditure strategy, together with activity relating to short-term investments. Net cash used for investing activities was $107,195,000 in fiscal 2005 compared to $63,368,000 in fiscal 2004, and $51,749,000 in fiscal 2003. We purchased short-term investments (net of investment sales and redemptions of short-term investments) of $69,160,000 in fiscal 2005. These investments will be used to fund operations and growth opportunities, including acquisitions. Approximately $24,300,000 of these funds was used in our August 25, 2005, acquisition of RGM Products, Inc. Approximately $23,900,000 of fiscal 2005 capital expenditures relate to the expansion of our composite building products facility in Lenexa, Kansas. As previously discussed, the new Tuscaloosa, Alabama, roofing plant was completed and placed in service at the beginning of fiscal 2005. We also invested approximately $1,200,000 in fiscal 2005 relating to a major project to upgrade certain key information systems. This project was completed and the systems placed in service on November 1, 2004. Excluding major capacity initiatives such as the Lenexa expansion, consolidated capital expenditures are generally expected to be approximately $20,000,000 per year.

Financing Activities

     Cash flows from financing activities generally reflect changes in our borrowings, together with dividends paid on common stock, and exercises of stock options. Net cash generated from financing activities was $44,393,000 in fiscal 2005, compared to $7,937,000 in fiscal 2004, and $21,297,000 in fiscal 2003.

     In November 2004, we closed an agreement to issue an additional $50,000,000 in senior unsecured notes in a private placement transaction with a group of institutional investors. This transaction was initiated to provide funds for growth and expansion initiatives. We are continuing to evaluate possible acquisitions to extend our building products lines of business.

     At June 30, 2005, liquidity consisted of $9,261,000 of cash and cash equivalents, $69,160,000 of short-term investments, and $122,055,000 of available borrowings under the $125,000,000 committed line of credit facility. At June 30, 2005, the debt to capital ratio (after deducting cash, cash equivalents and short-term investments of $78,421,000 from $195,683,000 of long-term principal debt) was 30.2%.

     Our Board of Directors has authorized our repurchase of common stock from time to time on the open market. As of June 30, 2005, we have repurchase authority of approximately $10,600,000 remaining. We did not make any open market purchases of common stock in the year ended June 30, 2005. All purchases of equity securities in fiscal 2005 related to repurchases in connection with stock option exercises and restricted shares, and from the ElkCorp ESOP Trust as a result of participant diversification directives and account balance distributions.

Contractual Obligations

     The following table summarizes our future payments relating to contractual obligations at June 30, 2005:

	(In thousands)
	Payments Due by Period
			Less than						After 5
Contractual Obligations:	Total		1 year		1 – 3 years		4 – 5 years		years
Long-term Debt	$	195,000	$	—	$	25,000	$	60,000	$	110,000
Notes Payable, including Imputed Interest		1,146		417		729		—		—
Interest on Fixed Rate Debt		42,911		7,334		14,668		10,302		10,607
Operating Leases		40,509		3,836		7,676		7,659		21,338
Total Contractual Obligations	$	279,566	$	11,587	$	48,073	$	77,961	$	141,945

     At June 30, 2005, $85,000,000 of long-term debt was variable rate debt, at an average interest rate of 5.25%. Interest expense on variable rate debt is not included in the above table as it cannot be reasonably estimated.

     Our only other significant commercial commitment at June 30, 2005 is our $125,000,000 Revolving Credit Facility, the term of which extends through November 30, 2008. There was no outstanding balance on this Facility at June 30, 2005.

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Off-Balance Sheet Arrangements

     We have no off-balance sheet arrangements or transactions with unconsolidated, limited purpose entities.

Acquisition Subsequent to Year-End

     In August 2005, a subsidiary of the company acquired RGM Products, Inc. (RGM), a Fresno, California based privately-held manufacturer of ridge and roofing related products. RGM’s products enhance the company’s roofing product accessory business and broaden its ridge product line. The total purchase price was approximately $35,000,000. Existing cash resources of approximately $24,300,000 were used to fund the acquisition and approximately $10,700,000 of long-term debt and capital lease obligations were assumed.

Environmental

     Our operations are subject to extensive federal, state and local laws and regulations relating to environmental matters. Such environmental laws are frequently changed and could result in significantly increased cost of compliance. Certain of our manufacturing operations utilize hazardous materials in their production processes. As a result, we incur costs for remediation activities off-site and at our facilities from time to time. We establish and maintain reserves for such remediation activities, when appropriate. Current reserves established for known or probable remediation activities are not material to our financial position or results of operations.

Critical Accounting Policies

     Our consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States of America. As such, we are required to make certain estimates, judgments and assumptions we believe are reasonable based on the information available. The accounting policies which we believe are the most critical to fully understanding and evaluating our reported financial results include the following:

Collectibility of Accounts Receivable –

     The majority of our sales are in the Premium Roofing Products and Composite Building Products segments and our primary customers in both segments are building products distributors. Due to consolidation in the industry, credit risk is concentrated. Ten customers account for approximately 50% of consolidated sales. The balance in the reserve for doubtful accounts is evaluated on an ongoing basis based on a combination of factors such as customers’ past payment history, length of time the receivables are past due, the status of customers’ financial condition and ongoing credit evaluations.

Accruals for Loss Contingencies –

     Contingencies, or uncertainties, by their nature, require management to exercise judgment both in assessing the likelihood that a liability has been incurred as well as in estimating the amount of loss. Accruals are established for loss contingencies when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. Accrual balances are reviewed and adjusted periodically based on our judgment of changes in specific facts and circumstances for each loss accrual.

     Key loss accruals for the company include:

• Product warranties – Product warranties are estimated and recorded based on various factors such as an examination of submitted claims for potential exposure, claims paid history, independent data as to average length of time between asphalt roofing replacements and other factors.

• Litigation – Litigation reserves are determined on a case specific basis from evaluations by both management and outside counsel as to any probable exposure from litigation capable of reasonable estimation.

• Environmental exposure – Environmental exposure, primarily related to Chromium, is evaluated by management and our environmental consultants when known or anticipated exposure is identified and quantifiable.

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• Self-insurance reserves – We are partially insured against losses for both casualty and medical claims. Reserves are calculated and maintained based on historical experience and specifically identified losses.

Inventories –

     Inventories are stated at the lower of cost or market value. Cost is determined by the first-in, first-out method. We record adjustments to the value of inventories based on various factors. Adjustments may be made to inventory values based on the physical condition (e.g. age and quality) of the inventories. For the Other, Technologies            companies, inventory adjustments are generally based upon the forecasted plans to sell their products and the sales prices that are expected to be realized. Inventories are adjusted to the lower of cost or market or written off if unsaleable. These adjustments are estimates and can vary from actual requirements if inventories deteriorate, become otherwise damaged or obsolete, or if competitive conditions differ from expectations.

Revenue Recognition –

     We recognize revenue in accordance with SEC Staff Accounting Bulletin (SAB) No. 104, “Revenue Recognition”. The majority of sales are for manufactured products, where revenue is recognized at the time products are shipped to customers. Such revenues are subject to returns, discounts, volume rebates and other incentives, which are estimated and recorded based on sales activity and historical trends. Differences in revenues could result if actual experience differs from the historical trends used in management’s estimates. Revenue recognition may be subject to judgment and interpretation that the specific requirements of SAB 104 have been met.

Impairment of Long-Lived Assets –

     Long-lived assets, primarily plant, property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amounts of any such assets may not be recoverable. If the estimated sum of undiscounted cash flows is less than the carrying value of the assets being reviewed, we recognize an impairment loss, measured as the amount that the carrying value exceeds the fair value of the assets. The estimate of future cash flows is based upon, among other things, certain assumptions about expected future operating performance. Our estimates of undiscounted cash flows may differ from actual cash flow due to, among other things, changes in general economic conditions, industry conditions, customer requirements, technology or our business model.

Stock-Based Compensation –

     Included in our Stock-Based Compensation are Performance Stock Awards, which were granted for the first time in fiscal 2005. Compensation expense for Performance Stock Awards is based on our estimate of the number of shares that will be issued at the end of the performance period. The estimated number of shares that will be issued and the related compensation expense will be adjusted periodically based on our judgment of facts, circumstances and forecasted performance. Upon the adoption of SFAS 123R “Share-Based Payments,” in fiscal 2006, discussed below under “New Accounting Pronouncements,” variable accounting for performance stock will no longer be utilized. Rather, compensation expense will be determined based on the fair value of performance stock at the date of grant.

New Accounting Standards

     In October 2004, the American Jobs Creation Act of 2004 (the Act) was signed into law. The Act provides tax relief to U.S. domestic manufacturers. The Financial Accounting Standards Board (FASB) directed its staff to issue Financial Staff Position (FSP) FAS 109-1, “Application of FASB Statement No. 109, Accounting for Income Taxes, to the Tax Deduction on Qualified Production Activities Provided by the American Jobs Creation Act of 2004.” FSP FAS 109-1 states that a manufacturer’s deduction provided for under the Act should be accounted for as a special deduction in accordance with SFAS 109 and not as a tax rate reduction. The special deduction should be considered by a company in measuring deferred taxes when the company is subject to graduated tax rates, and assessing whether a valuation allowance is necessary as required by SFAS 109. The adoption of this FSP did not have a material impact on our results of operations or financial position for fiscal 2005. The company is currently evaluating the effect that the FSP will have on its financial position and results of operations in subsequent years and believes the effect of FSP FAS 109-1 will be to lower income tax expense beginning in fiscal 2006.

     In November 2004, the FASB issued SFAS No. 151, “Inventory Costs”, an amendment of Accounting Research Bulletin No. 43, “Inventory Pricing”. SFAS No. 151 requires all companies to recognize a current-period charge for abnormal amounts of idle facility expense, freight, handling costs and wasted materials. The statement also requires that

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the allocation of fixed production overhead to the costs of conversion be based on the normal capacity of the production facilities. This new standard will be effective for the company beginning in fiscal 2006. The company does not expect SFAS No. 151 to have a material impact on its results of operations or financial position.

     During December 2004, the FASB issued SFAS No. 123 (Revised 2004), “Share-Based Payments” (SFAS 123R), which amends SFAS No. 123, “Accounting for Stock-Based Compensation” and SFAS 95, “Statement of Cash Flows.” SFAS 123R requires all companies to measure compensation cost for all share-based payments (including employee stock options) at fair value, and will be effective for the company beginning in fiscal 2006. This new standard may be adopted in one of two ways – the modified prospective transition method or the modified retrospective transition method. The company believes the effect of the adoption of SFAS 123R will result in higher compensation expense in fiscal 2006. The current estimated cost of all elements of stock-based compensation, including stock options, is $8,300,000 in fiscal 2006.

Market Risks

     In addition to the risks inherent in our operations, we are exposed to financial, market, political and economic risks. The following discussion provides additional detail regarding our exposure to the risks of changing commodity prices and interest rates. We have no significant foreign exchange risk. Derivatives are held as part of a formally documented risk management program. Derivatives are held to mitigate uncertainty, volatility or to cover underlying exposures. No derivatives are held for trading purposes. We have entered into derivative transactions related to interest rate risk and our exposure to fluctuating prices of natural gas used in our manufacturing plants, as summarized in the following paragraphs.

     We are required to purchase natural gas for use in our manufacturing facilities. These purchases expose us to the risk of higher natural gas prices. To hedge this risk, we may enter into hedge transactions to fix the price on a portion of our projected natural gas usage. There were no natural gas hedge transactions in effect in fiscal 2005. However, it is anticipated that hedging strategies will likely be utilized in the future.

     We use interest rate swaps to help maintain a reasonable balance between fixed and floating rate debt. We have entered into two interest rate swaps to effectively convert the interest rate from fixed to floating on $85,000,000 of our outstanding debt at June 30, 2005. The net fair value of these swaps was $4,463,000 at June 30, 2005. Based on outstanding debt at June 30, 2005, our annual interest costs would increase or decrease $850,000 for each theoretical 1% increase or decrease in the floating interest rate.

Credit Risk

     We are subject to credit risks applicable to cash, cash equivalents, short-term investments, accounts receivable and derivative instruments. Cash and cash equivalents are maintained at financial institutions or in short-term investments with high credit quality. Short-term investments are primarily in tax-exempt vehicles of high credit quality, including closed-end municipal bonds and variable rate demand notes issued by municipalities. Concentrations of credit risk with respect to accounts receivable primarily relate to the large building products distributors that are our primary customers. We perform ongoing credit evaluations of our customers’ financial condition to determine the need for an allowance for doubtful accounts. We have not experienced significant credit losses for many years. Concentration of credit risk with respect to accounts receivable is limited to those customers to whom we make significant sales. Our largest customer accounted for 19% of consolidated sales in both fiscal 2005 and 2004. Derivative contracts are entered into with counterparties who are, in our opinion, creditworthy counterparties.

Inflation and Changing Prices

     Our primary financial statements are prepared in accordance with accounting principles generally accepted in the United States of America based on historical dollars. Accordingly, the financial statements do not portray the effects of inflation. In recent years, inflation in our key markets has been moderate, and cost controls and improving productivity have generally minimized the impact of inflation.

     The costs of manufacturing, transportation and key raw materials, including but not limited to ceramic coated granules, asphalt, glass fibers, resins, mineral filler, polypropylene, wood particles and various additives for product preservation, together with our ability to pass along higher costs are generally influenced by factors other than inflation. These factors include general economic and industry conditions, supply and demand, surpluses and shortages, and actions of key competitors.

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Forward-Looking Statements

     In an effort to give investors a well-rounded view of our current condition and future opportunities, Management’s Discussion and Analysis of Financial Condition and Results of Operations and other sections of this Form 10-K contain “forward-looking statements” that involve risks and uncertainties about our prospects for the future. The statements that are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements usually are accompanied by words such as “optimistic,” “vision,” “outlook,” “believe,” “estimate,” “potential,” “forecast,” “project,” “expect,” “anticipate,” “plan,” “predict,” “could,” “should,” “may,” “likely,” or similar words that convey the uncertainty of future events or outcomes. These statements are based on judgments we believe are reasonable; however, ElkCorp’s actual results could differ materially from those discussed in such forward-looking statements. Factors that could cause or contribute to such differences could include, but are not limited to, changes in demand, prices, raw material costs, transportation costs, changes in economic conditions of the various markets we serve, failure to achieve expected efficiencies in new operations, changes in the amount and severity of inclement weather, acts of God, war or terrorism, together with other risks detailed herein. Refer to Risks Relating to the Company on pages 7 through 9 of this Annual Report on Form 10-K for a more detailed description of these items. We undertake no obligation to update or revise publicly any forward-looking statements whether as a result of new information or future events.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

     In addition to the risks inherent in our operations, we are exposed to financial, market, political and economic risks. The following discussion provides additional detail regarding our exposure to the risks of changing commodity prices and interest rates. We have no significant foreign exchange risk. Derivatives are held as part of a formally documented risk management program. Derivatives are held to mitigate uncertainty, volatility or to cover underlying exposures. No derivatives are held for trading purposes. We have entered into derivative transactions related to interest rate risk and our exposure to fluctuating prices of natural gas used in our manufacturing plants, as summarized in the following paragraphs.

     We are required to purchase natural gas for use in our manufacturing facilities. These purchases expose us to the risk of higher natural gas prices. To hedge this risk, we may enter into hedge transactions to fix the price on a portion of our projected natural gas usage. There are no natural gas hedge transactions in effect at June 30, 2005. However, it is anticipated that hedging strategies will likely be utilized in the future.

     We use interest rate swaps to help maintain a reasonable balance between fixed and floating rate debt. We have entered into two interest rate swaps to effectively convert the interest rate from fixed to floating on $85,000,000 of our outstanding debt at June 30, 2005. The net fair value of these swaps was $4,463,000 at June 30, 2005. Based on outstanding debt at June 30, 2005, our interest costs would increase or decrease $850,000 for each theoretical 1% increase or decrease in the floating interest rate.

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Item 8. Financial Statements and Supplementary Data

Index to Financial Statements and Financial Statement Schedules

	Page
Financial Statements:
Management’s Annual Report on Internal Control over Financial Reporting		24
Reports of Independent Registered Public Accounting Firms		25
Consolidated Balance Sheets at June 30, 2005 and 2004		28
Consolidated Statements of Operations for the years ended June 30, 2005, 2004, and 2003		29
Consolidated Statements of Cash Flows for the years ended June 30, 2005, 2004, and 2003		30
Consolidated Statements of Shareholders’ Equity for the years ended June 30, 2005, 2004, and 2003		31
Summary of Significant Accounting Policies		32
Notes to Consolidated Financial Statements		37
Financial Statement Schedules:
Reports of Independent Registered Public Accounting Firms		47
Schedule II — Consolidated Valuation and Qualifying Accounts		49

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

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MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

     Our management, including the Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended. Our internal control system is 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. All internal control systems, no matter how well designed, have inherent limitations. A system of internal control may become inadequate over time because of changes in conditions, or deterioration in the degree of compliance with the policies or procedures. Therefore, even those systems determined to be effective, can provide only reasonable assurance with respect to financial statement preparation and presentation.

     Our management assessed the effectiveness of our internal control over financial reporting as of June 30, 2005 using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on this assessment, our management concluded that, as of June 30, 2005, our internal control over financial reporting was effective 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 based on such criteria.

     Grant Thornton LLP, our independent registered public accounting firm, has issued an audit report on our assessment of internal control over financial reporting. Their report appears on page 25.

/s/ ElkCorp     
ElkCorp

Dallas, Texas

August 30, 2005

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and
Shareholders of ElkCorp

     We have audited management’s assessment, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting, that ElkCorp and subsidiaries maintained effective internal control over financial reporting as of June 30, 2005, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). ElkCorp’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of ElkCorp’s internal control over financial reporting based on our audit.

     We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides 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, management’s assessment that ElkCorp and subsidiaries maintained effective internal control over financial reporting as of June 30, 2005, is fairly stated, in all material respects, based on criteria established in Internal Control — Integrated Framework issued by COSO. Also in our opinion, ElkCorp and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of June 30, 2005, based on criteria established in Internal Control — Integrated Framework issued by COSO.

     We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of ElkCorp and subsidiaries as of June 30, 2005, and the related consolidated statements of operations, shareholders’ equity and cash flows for the year then ended, and our report dated August 30, 2005 expressed an unqualified opinion on those financial statements.

/s/ Grant Thornton LLP
Grant Thornton LLP

Dallas, Texas
August 30, 2005

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and
Shareholders of ElkCorp

      We have audited the accompanying consolidated balance sheet of ElkCorp and subsidiaries as of June 30, 2005, and the related consolidated statements of operations, shareholders’ equity and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

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

     In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of ElkCorp and subsidiaries as of June 30, 2005, and the results of their consolidated operations and their consolidated cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

     We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of ElkCorp and subsidiaries’ internal control over financial reporting as of June 30, 2005, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated August 30, 2005, expressed an unqualified opinion on both management’s assessment of ElkCorp’s control over financial reporting and on the effectiveness of ElkCorp’s internal control.

/s/ Grant Thornton LLP
Grant Thornton LLP

Dallas, Texas
August 30, 2005

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors,
ElkCorp

     In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of operations, shareholders’ equity and cash flows present fairly, in all material respects, the financial position of ElkCorp and subsidiaries at June 30, 2004, and the results of their operations and their cash flows for each of the two years in the period ended June 30, 2004, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes 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.

/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP

Dallas, Texas
August 30, 2004, except for changes in
presentation as noted in footnotes titled
“Discontinued Operations” and “Financial
Information By Company Segments,” as
to which the date is August 30, 2005

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ELKCORP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

($ In thousands)	June 30,
	2005			2004
Assets
Current Assets
Cash and cash equivalents	$	9,261		$	273
Short-term investments		69,160			—
Trade receivables, less allowance of $695 and $605		148,928			109,814
Inventories		71,467			62,129
Prepaid expenses and other		8,223			8,520
Deferred income taxes		7,849			7,359
Discontinued operations		1,193			16,939
Total current assets		316,081			205,034
Property, Plant and Equipment
Land		5,229			5,171
Buildings and improvements		117,778			84,612
Machinery and equipment		314,115			233,787
Construction in progress		3,867			80,592
		440,989			404,162
Less — Accumulated depreciation		(156,901	)		(133,138	)
Property, plant and equipment, net		284,088			271,024
Discontinued Operations — Noncurrent		3,718			—
Other Assets		9,682			4,650
	$	613,569		$	480,708
Liabilities and Shareholders’ Equity
Current Liabilities
Accounts payable	$	56,742		$	36,929
Accrued liabilities		31,171			24,292
Current maturities on long-term debt		381			—
Discontinued operations		937			1,976
Total current liabilities		89,231			63,197
Long-Term Debt		200,146			156,858
Deferred Income Taxes		53,382			45,611
Commitments and Contingencies
Shareholders’ Equity
Common stock ($1 par, 20,297,905 and 19,988,078 shares issued)		20,298			19,988
Paid-in capital		70,412			57,852
Unearned compensation – stock based compensation		(5,620	)		(628	)
Retained earnings		186,388			143,540
		271,478			220,752
Less — Treasury stock (22,761 and 288,220 shares, at cost)		(668	)		(5,710	)
Total shareholders’ equity		270,810			215,042
	$	613,569		$	480,708

The Summary of Significant Accounting Policies and Notes to Consolidated Financial Statements are an integral part of these statements .

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ELKCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

($ In thousands, except per share data)	Year Ended June 30,
	2005			2004			2003
Sales	$	761,719		$	566,041		$	474,434
Costs and Expenses
Cost of goods sold		613,925			453,213			386,955
Selling, general and administrative		69,946			59,482			47,478
Operating Income from Continuing Operations		77,848			53,346			40,001
Other Income (Expense)
Interest expense		(10,571	)		(5,444	)		(6,184	)
Interest income		1,067			133			207
Other		(861	)		—			—
Income from Continuing Operations Before Income Taxes		67,483			48,035			34,024
Provision for income taxes		24,787			17,969			12,818
Income from Continuing Operations		42,696			30,066			21,206
Income (Loss) from Discontinued Operations, Net of Income Tax Provision (Benefit) of $2,640, ($5,055) and $1,798		4,171			(9,560	)		2,894
Net Income	$	46,867		$	20,506		$	24,100
Income (Loss) Per Common Share – Basic
Income from continuing operations	$	2.16		$	1.53		$	1.09
Discontinued operations		.21			(.48	)		.15
Net income per common share	$	2.37		$	1.05		$	1.24
Income (Loss) Per Common Share – Diluted
Income from continuing operations	$	2.11		$	1.51		$	1.08
Discontinued operations		.20			(.48	)		.15
Net income per common share	$	2.31		$	1.03		$	1.23

The Summary of Significant Accounting Policies and Notes to Consolidated Financial Statements are an integral part of these statements.

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ELKCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

($ In thousands)	Year Ended June 30,
	2005			2004			2003
Cash Flows From Operating Activities
Income from continuing operations	$	42,696		$	30,066		$	21,206
Adjustments to reconcile income from continuing operations to net cash from continuing operating activities:
Depreciation and amortization		23,859			18,050			17,223
Deferred income taxes		7,282			3,362			7,072
Stock-based compensation		2,544			96			(5,339	)
Stock option income tax benefits		1,662			275			—
Changes in assets and liabilities, net of acquisition:
Trade receivables		(39,114	)		(2,564	)		(17,581	)
Inventories		(9,288	)		(8,608	)		(8,409	)
Prepaid expenses and other		297			(1,872	)		2,832
Accounts payable		19,813			1,822			9,406
Accrued liabilities		6,879			7,536			(1,253	)
Net cash provided by continuing operations		56,630			48,163			25,157
Net cash provided by (used for) discontinued operations		15,160			2,485			(2,085	)
Net cash provided by operating activities		71,790			50,648			23,072
Cash Flows From Investing Activities
Additions to property, plant and equipment		(38,251	)		(62,884	)		(49,133	)
Purchases of short-term investments		(217,880	)		—			—
Sales and redemptions of short-term investments		148,720			—			—
Acquisition of business		(471	)		—			(2,224	)
Other, net		687			(484	)		(392	)
Net cash used for investing activities		(107,195	)		(63,368	)		(51,749	)
Cash Flows From Financing Activities
Proceeds from sale of Senior Notes		50,000			—			25,000
Borrowings (repayments) on Revolving Credit Facility, net		(10,300	)		10,300			—
Dividends paid on common stock		(4,019	)		(3,935	)		(3,903	)
Exercises of stock options		11,245			2,265			231
Purchases of common stock		(2,530	)		(693	)		—
Other		(3	)		—			(31	)
Net cash provided by financing activities		44,393			7,937			21,297
Net Increase (Decrease) in Cash and Cash Equivalents		8,988			(4,783	)		(7,380	)
Cash and Cash Equivalents at Beginning of Year		273			5,056			12,436
Cash and Cash Equivalents at End of Year	$	9,261		$	273		$	5,056

The Summary of Significant Accounting Policies and Notes to Consolidated Financial Statements are an integral part of these statements.

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ELKCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

($ In thousands, except per share data)
																		Accumulated
																		Other			Total
	Comprehensive			Common		Paid-in			Retained			Treasury			Unearned			Comprehensive			Shareholders’
	Income			Stock		Capital			Earnings			Stock			Compensation			Income			Equity
Balance, June 30 2002				$	19,988	$	58,419		$	106,772		$	(9,118	)	$	—		$	31		$	176,092
Comprehensive income:
Net income	$	24,100			—		—			24,100			—			—			—			24,100
Derivative transactions, net of tax		(31	)		—		—			—			—			—			(31	)		(31	)
Comprehensive income	$	24,069
Exercises of stock options, including tax benefit of $0					—		(925	)		—			1,156			—			—			231
Restricted stock grants					—		(163	)		—			587			(424	)		—			—
Restricted stock vesting					—		—			—			—			39			—			39
Dividends, $.20 per share					—		—			(3,903	)		—			—			—			(3,903	)
Balance, June 30, 2003					19,988		57,331			126,969			(7,375	)		(385	)		—			196,528
Comprehensive income:
Net income	$	20,506			—		—			20,506			—			—			—			20,506
Derivative transactions, net of tax		—			—		—			—			—			—			—			—
Comprehensive income	$	20,506
Exercises of stock options, including tax benefit of $275					—		352			—			2,188			—			—			2,540
Restricted stock grants					—		169			—			170			(339	)		—			—
Restricted stock vesting					—		—			—			—			96			—			96
Purchases of common stock from ESOP					—		—			—			(693	)		—			—			(693	)
Dividends, $.20 per share					—		—			(3,935	)		—			—			—			(3,935	)
Balance, June 30, 2004					19,988		57,852			143,540			(5,710	)		(628	)		—			215,042
Comprehensive income:
Net income	$	46,867			—		—			46,867			—			—			—			46,867
Derivative transactions, net of tax		—			—		—			—			—			—			—			—
Comprehensive income	$	46,867
Exercises of stock options, including tax benefit of $1,662					310		7,452			—			5,144			—			—			12,906
Restricted stock grants					—		1,122			—			2,428			(3,550	)		—			—
Restricted stock vesting					—		—			—			—			1,214			—			1,214
Performance stock grants, net of forfeitures					—		3,986			—			—			(3,986	)		—			—
Performance stock amortization					—		—			—			—			1,330			—			1,330
Purchases of treasury stock					—		—			—			(2,530	)		—			—			(2,530	)
Dividends, $.20 per share					—		—			(4,019	)		—			—			—			(4,019	)
Balance, June 30, 2005				$	20,298	$	70,412		$	186,388		$	(668	)	$	(5,620	)	$	—		$	270,810

The Summary of Significant Accounting Policies and Notes to Consolidated Financial Statements are an integral part of these statements.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

     ElkCorp’s strategic focus is on its building products platforms, which consist of Elk Premium Building Products, Inc. and its operating subsidiaries. Within the building products sector, the company operates two segments: (1) Premium Roofing Products, which manufactures premium laminated fiberglass asphalt shingles and accessory products, together with coated and uncoated nonwoven fabrics used in asphalt shingles and other applications in the building, construction, filtration, floor coverings and other industries, and (2) Composite Building Products, which manufactures composite wood decking, railing, marine dock, fencing and other OEM products. Previously, these two segments were combined and reported as the Building Products segment. Prior period segment information has been reclassified to reflect the change in segment presentation.

     Other, Technologies consists of the company’s other two companies. These dissimilar companies are combined, as neither individually meets the materiality criteria for separate segment reporting. Other, Technologies includes (1) Chromium Corporation (Chromium), which is a leading provider of hard chrome and other surface finishes designed to extend the life of steel machinery components operating in abrasive environments, and (2) Elk Technologies, Inc., which develops and markets fabrics featuring VersaShield fire retardant coatings designed for use outside of traditional building products applications, including bedding, home furnishings and other consumer products.

     In fiscal 2004, the company made the decision to discontinue Cybershield, Inc. and its subsidiaries (Cybershield). Substantially all of Cybershield’s assets were sold in fiscal 2005. Also in fiscal 2005, the company sold Ortloff Engineers, LTD (Ortloff) to a financial buyer. Both Cybershield and Ortloff had previously been included in Other, Technologies for segment reporting purposes. Prior periods have been reclassified to present Cybershield and Ortloff as discontinued operations in all periods presented.

Principles of Consolidation / Use of Estimates

     The consolidated financial statements include the accounts of the company and all subsidiaries after elimination of intercompany balances and transactions. The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America and require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements. They also affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates upon subsequent resolution of the identified matters.

Cash Equivalents and Short-term Investments

     Cash equivalents represent money market funds subject to daily redemption. Short-term investments consist of Auction Rate Securities (ARS) and Variable Rate Demand Notes (VRDN). The company’s ARS and VRDN investments are tax-exempt instruments of high credit quality. The primary objectives of both types of investments are safety, preservation of invested funds and liquidity sufficient to meet cash flow requirements. Both ARS and VRDN securities have variable rates tied to short-term interest rates. Interest rates on ARS securities reset through a modified Dutch auction process at predetermined short-term intervals, either every 7, 28, or 35 days. Interest rates on VRDN securities reset weekly and can be tendered for sale upon notice (of generally no longer than seven days) to the remarketing agent in the secondary market to other investors. Although both ARS and VRDN securities are issued and rated as long-term securities, they are priced and traded as short-term instruments. The company classifies these short-term investments as available for sale in accordance with SFAS No. 115, “Accounting for Certain Instruments in Debt and Equity Securities.” The investments are carried at cost or par value which approximates the fair market value.

Accounts Payable

     The company reflects disbursements as trade accounts payable until such time as payments are presented to the bank for payment. At June 30, 2005 and 2004, disbursements totaling approximately $23,000,000 and $11,000,000, respectively, had not been presented for payment to the bank.

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Accounts Receivable and Concentration of Credit Risk

     The majority of sales are in Premium Roofing Products and Composite Building Products segments. The company’s primary customers are building products distributors. Due to consolidation in the industry, credit risk is concentrated. The ten largest customers account for approximately 50% of consolidated sales. One customer accounted for 19%, 19%, and 18% of consolidated sales in fiscal years 2005, 2004 and 2003, respectively. The company could suffer significant setbacks in revenues and operating income if it lost one or more of its largest customers, or if customers’ plans and/or markets should change significantly. The balance in the reserve for doubtful accounts is evaluated on an ongoing basis, based on a combination of factors such as customers’ past payment history, length of time the receivables are past due, the status of customers’ financial condition and ongoing credit evaluations.

Revenue Recognition

     The majority of sales relate to manufactured products sold to building products distributors. Revenue is recognized at the time products are shipped to customers. All risks and rewards of ownership pass to the customer upon shipment. Sales volume rebates or contractual allowance payments are offered to customers based on their level of sales activity and regional, competitive market conditions. The effects of returns, discounts and other incentives are estimated and recorded at the time of shipment. Volume rebates and allowances are estimated and recorded as a reduction of sales.

Freight Costs

     Freight costs are included in cost of goods sold.

Inventories

     Inventories are stated at the lower of cost (including materials, direct labor, and applicable overhead) or market, using the first-in, first-out (FIFO) method. Adjustments may be made to inventory values based on the physical condition (e.g., age and quality) of the inventories. Inventories are adjusted to the lower of the cost or market, or written off as applicable. The cost of raw materials inventories is reduced for volume rebates from suppliers as applicable volume thresholds are met. Inventories are comprised of:

	(In thousands)
	June 30,
	2005		2004
Raw Materials	$	15,380	$	12,169
Work-In-Process		219		160
Finished Goods		55,868		49,800
	$	71,467	$	62,129

Property, Plant and Equipment

     Property, plant and equipment are stated at cost. Major renewals and improvements are capitalized, while maintenance and repairs are expensed when incurred. Leasehold improvements are amortized over the term of the lease or the estimated useful life of the improvement, whichever is the shorter period. Depreciation is computed over the estimated useful lives of depreciable assets using the straight-line method. Useful lives for property and equipment are as follows:

Buildings and improvements	10 – 40 years
Machinery and equipment	5 – 20 years
Computer equipment	3 – 6 years
Office furniture and equipment	5 – 12 years

     During 2005, 2004 and 2003, the company recorded to expense $23,819,000, $18,018,000 and $17,193,000, respectively, in depreciation expense.

     The cost and accumulated depreciation for property, plant and equipment sold, retired, or otherwise disposed of are relieved from the accounts, and resulting gains or losses are reflected in income. Interest is capitalized in connection with the construction of major projects. The capitalized interest is recorded as part of the asset to which it relates and is

- 33 -

amortized over the asset’s estimated useful life. In fiscal 2005, 2004 and 2003, $754,000, $3,079,000 and $995,000 of interest cost was capitalized, respectively.

Intangibles

     Goodwill and other intangibles with indefinite useful lives are not amortized but are tested at least annually for impairment. Other intangibles are amortized over their useful lives.

Advertising Costs

     Advertising costs are expensed as incurred. For fiscal years 2005, 2004 and 2003, advertising costs were $7,733,000, $8,894,000, and $7,042,000, respectively.

Research and Development

     Research and development expenses include wages, employee benefits and material costs used in (1) the search, design and development of new products and processes, and (2) the improvement and enhancement of existing products. Research activities are primarily conducted at a technology center in Ennis, Texas. Research and development costs are expensed as incurred and included in cost of sales. Expenses for research activities at the Ennis technology center were $3,348,000, $2,300,000 and $1,649,000 in fiscal 2005, 2004 and 2003, respectively. Development costs at plant locations are not separately identified.

Long-Lived Assets

     Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets is measured by comparing the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. These evaluations for impairment are significantly impacted by estimates of revenues, costs and expenses and other factors. If these assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of these assets exceeds the fair value of the assets.

Accounting for Stock-Based Compensation

     The company applies APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and its related interpretations to measure compensation expense for stock-based compensation plans. Refer to the Stock-Based Compensation footnote for a detailed description of the company’s application of APB No. 25. If compensation cost for stock-based compensation plans had been determined under SFAS No. 123, “Accounting for Stock-Based Compensation,” pro forma earnings, and basic and diluted earnings per common share for the fiscal years ended June 30, 2005, 2004 and 2003, respectively, would have been as follows (in thousands, except per share amounts):

	(In thousands)
	Year Ended June 30,
	2005			2004			2003
Net income, as reported	$	46,867		$	20,506		$	24,100
Add: Stock-based employee compensation expense included in reported net income under APB No. 25, net of related tax effects		865			—			(3,496	)
Deduct: Total stock-based compensation expense determined under fair value based method, net of related tax effects		(3,571	)		(2,519	)		(2,273	)
Pro forma earnings	$	44,161		$	17,987		$	18,331
Earnings per common share:
Basic – as reported	$	2.37		$	1.05		$	1.24
Basic – pro forma	$	2.23		$	.92		$	.94
Diluted – as reported	$	2.31		$	1.03		$	1.23
Diluted – pro forma	$	2.18		$	.90		$	.94

- 34 -

     The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions for fiscal 2005, 2004 and 2003; dividend yields of 0.9%, 1.0%, and 0.9%; risk-free interest rates of 4.6%, 3.7%, and 5.1%; expected market price volatility of .352, .435, and .489; and expected lives of options of 8.2 years in fiscal 2005 and 9.0 years in fiscal 2004 and 2003. Based on this model, the weighted average fair value of stock options granted in fiscal 2005, 2004 and 2003 was $10.63, $11.40, and $15.52, respectively, per share.

Income Taxes

     Deferred income taxes are provided to reflect temporary differences between the financial reporting basis and the tax basis of the company’s assets and liabilities using presently enacted tax rates.

Supplemental Cash Flows

     Supplemental cash flow amounts were as follows:

	(In thousands)
	Year Ended June 30,
	2005		2004		2003
Interest paid	$	10,884	$	8,250	$	7,256
Income taxes paid	$	16,204	$	10,871	$	5,415

     In conjunction with the acquisition of $1,625,000 of assets of Railwayz, Inc., in March 2005, a subsidiary of the company issued notes payable with a fair value of $1,154,000 at the date of acquisition.

Derivative Instruments and Hedging Activities

     Derivatives are held from time to time as part of a formally documented risk management program. No derivatives are held for trading purposes. The company measures hedge effectiveness by formally assessing, on a quarterly basis, the historical and probable future high correlation of changes in the fair value or expected future cash flows of the hedged item. The ineffective portions are recorded in other income or expense in the current period.

     The company is required to purchase natural gas for use in its manufacturing facilities. This purchase exposes the company to the risk of higher natural gas prices. In November 2001, the company adopted an Energy Risk Management Policy, and an Energy Committee was appointed to develop strategies to manage the company’s risks of adverse changes in the energy markets. The company entered into no hedge commitments on natural gas in fiscal 2005. However, it is anticipated that hedging strategies will likely be utilized in the future.

     The Board of Directors and company management determined that prudent interest rate strategy is to maintain a debt mix that is balanced between fixed rate debt and variable rate debt. In June 2002, the company entered into an interest rate swap to effectively convert the interest rate from fixed to floating on $60,000,000 of debt through June 2012. In July 2004, the company entered into an additional interest rate swap to effectively convert the interest rate from fixed to floating on $25,000,000 of debt through July 2007. For these fair value hedges, both the fair value of the derivative and the underlying hedged item are reported in the balance sheet. Changes in the fair value of the derivative and the underlying hedged item offset and are recorded each period in other income or expense, as applicable. However, since both interest rate swaps are 100% effective, as defined, there is no net effect on the company’s results of operations from marking the interest rate swaps to market.

     The company is exposed to credit loss in the event of nonperformance by counterparties on derivative instruments. Although nonperformance is possible, the company does not anticipate nonperformance on the interest rate swaps, as these contracts are, in management’s opinion, with creditworthy counterparties.

- 35 -

Fair Value of Financial Instruments

     The carrying amounts of the company’s cash and cash equivalents, short-term investments, trade receivables, accounts payable, long-term debt and derivative instruments approximate fair value.

Accruals for Loss Contingencies

     Contingencies, or uncertainties, by their nature, require management to exercise judgment both in assessing the likelihood that a liability has been incurred as well as in estimating the amount of loss. Accruals are established for loss contingencies when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. Accrual balances are reviewed and adjusted periodically based on management’s judgment of changes in specific facts and circumstances for each loss accrual. Key loss accruals for the company include product warranties, litigation, environmental exposures and self-insurance reserves.

New Accounting Standards

     In October 2004, the American Jobs Creation Act of 2004 (the “Act”) was signed into law. The Act provides tax relief to U.S. domestic manufacturers. The Financial Accounting Standards Board (FASB) directed its staff to issue Financial Staff Position (FSP) FAS 109-1, “Application of FASB Statement No. 109, Accounting for Income Taxes, to the Tax Deduction on Qualified Production Activities Provided by the American Jobs Creation Act of 2004.” FSP FAS 109-1 states that a manufacturer’s deduction provided for under the Act should be accounted for as a special deduction in accordance with SFAS 109 and not as a tax rate reduction. The special deduction should be considered by a company in measuring deferred taxes when the company is subject to graduated tax rates, and assessing whether a valuation allowance is necessary as required by SFAS 109. The adoption of this FSP did not have a material impact on our results of operations or financial position for fiscal 2005. The company believes that substantially all of its operations will qualify as “qualified production activities,” as defined, and is currently evaluating the effect that the FSP will have on its financial position and results of operations in subsequent years. The company believes the effect of FSP FAS 109-1 will be to lower income tax expense beginning in fiscal 2006.

     In November 2004, the FASB issued SFAS No. 151, “Inventory Costs”, an amendment of Accounting Research Bulletin No. 43, “Inventory Pricing”. SFAS No. 151 requires all companies to recognize a current-period charge for abnormal amounts of idle facility expense, freight, handling costs and wasted materials. The statement also requires that the allocation of fixed production overhead to the costs of conversion be based on the normal capacity of the production facilities. This new standard will be effective for the company beginning in fiscal 2006. The company does not expect SFAS No. 151 to have a material impact on its results of operations or financial position.

     During December 2004, the FASB issued SFAS No. 123 (Revised 2004), “Share-Based Payments” (SFAS 123R), which amends SFAS No. 123, “Accounting for Stock-Based Compensation” and SFAS 95, “Statement of Cash Flows.” SFAS 123R requires all companies to measure compensation cost for all share-based payments (including employee stock options) at fair value, and will be effective for the company beginning in fiscal 2006. This new standard may be adopted in one of two ways – the modified prospective transition method or the modified retrospective transition method. The company believes adoption of SFAS 123R will result in higher compensation expense beginning in fiscal 2006. The current estimated cost of all elements of stock-based compensation, including stock options, is $8,300,000 in fiscal 2006.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Earnings Per Share

     Basic earnings per share from continuing operations were computed by dividing income from continuing operations by the weighted average number of shares of common stock outstanding during the year. Dilutive earnings per share include outstanding stock options and restricted shares. In accordance with SFAS No. 128, “Earnings Per Share,” diluted earnings per share from discontinued operations presented in the Consolidated Statements of Operations were computed utilizing the same number of potential common shares used in computing the diluted per share amount for income from continuing operations, regardless of whether those amounts were anti-dilutive to their respective per share amounts. The reconciliation of basic earnings per share from continuing operations to diluted earnings per share from continuing operations is shown in the following table:

	{(In thousands, except per share data)
	Year Ended June 30,
	2005		2004		2003
Income from continuing operations	$	42,696	$	30,066	$	21,206
Denominator for basic earnings per share-weighted average shares outstanding		19,788		19,609		19,481
Effect of dilutive securities:
Restricted shares and employee stock options		466		316		119
Denominator for dilutive earnings per share – adjusted weighted average shares and assumed issuance of shares purchased under the incentive stock option plan and vesting of restricted shares using the treasury stock method		20,254		19,925		19,600
Basic earnings per share from continuing operations	$	2.16	$	1.53	$	1.09
Diluted earnings per share from continuing operations	$	2.11	$	1.51	$	1.08
Stock options excluded from computation of diluted earnings per share due to anti-dilutive effect		-0-		730,000		1,413,000

Long-Term Debt

	(In thousands)
	June 30,
	2005		2004
Senior Notes	$	195,000	$	145,000
Revolving Credit Facility		—		10,300
Fair Value of Notes Payable		1,064		—
Fair Value of Interest Rate Swaps		4,463		1,558
		200,527		156,858
Less: Current Maturities		381		—
	$	200,146	$	156,858

     The company has issued $195,000,000 of Senior Notes (Notes). Of the Notes, $25,000,000 mature in fiscal 2008 and carry a coupon rate of 4.69%, $60,000,000 mature in fiscal 2009 and carry a coupon rate of 6.99%, $60,000,000 mature in fiscal 2012 and carry a coupon rate of 7.49%, and $50,000,000 mature in fiscal 2015 and carry a coupon rate of 6.28%.

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     In June 2002, the company entered into an interest rate swap to effectively convert the interest rate from fixed to floating on $60,000,000 of Notes through June 15, 2012. For this fair value hedge, both the fair value of the derivative and the underlying hedged item are reported in the balance sheet. At June 30, 2005, the fair value of the derivative was $4,477,000 and this amount was included in other assets and as an increase in the carrying value of long-term debt. Changes in the fair value of the derivative and the underlying hedged item offset. In July 2004, the company entered into a second interest rate swap to effectively convert the interest rate from fixed to floating on $25,000,000 of Notes through July 15, 2007. This interest rate swap is also a fair value hedge with the same accounting and reporting as the aforementioned interest rate swap. At June 30, 2005, the fair value of the derivative was a liability of $14,000 and is recorded in accrued liabilities and as a decrease in the fair value of long-term debt.

     At June 30, 2005, the company had $125,000,000 of primary credit available under a Revolving Credit Facility (Facility), including up to a maximum of $10,000,000 in letters of credit through November 30, 2008. At June 30, 2005, there were no borrowings outstanding on the Facility and $2,945,000 of letters of credit were outstanding.

     In March 2005, the company issued $1,250,000 of notes payable in connection with an acquisition. The notes, which are payable in equal quarterly installments through March 2008 are non-interest bearing. The fair value of the notes at June 30, 2005 was $1,064,000.

     Both the Notes and the Facility require that the company maintain a specified minimum consolidated net worth and a maximum debt to capitalization ratio, based on terms defined in the respective agreements. The Facility also contains a minimum fixed charge coverage ratio and the Notes contain a minimum interest coverage ratio, also based on terms defined in the respective agreements. Dividend payments and stock repurchases are limited to certain specified levels by the Facility agreement. At June 30, 2005, the company was in compliance with all these requirements.

Shareholders’ Equity

     Authorized common stock, par value $1.00, is 100,000,000 shares, of which 20,297,905 shares were issued at June 30, 2005. The Board of Directors is authorized to issue up to 1,000,000 shares of preferred stock, without par value, in one or more series and to determine the rights, preferences, and restrictions applicable to each series. No preferred stock has been issued.

Shareholder Rights Plan

     On May 26, 1998, the company’s Board of Directors adopted a new Shareholder Rights Plan which took effect when the existing rights plan expired on July 8, 1998. Under the new plan, rights were constructively distributed as a dividend at the rate of one right for each share of common stock of the company held by the shareholders of record as of the close of business on July 8, 1998. Until the occurrence of certain events, the rights are represented by and trade in tandem with common stock. Each right will separate and entitle shareholders to buy stock upon an occurrence of certain takeover or stock accumulation events. Should any person or group (Related Person), other than certain bona fide institutional investors to whom a 20% threshold applies, acquire beneficial ownership of 15% or more of the company’s common stock, all rights not held by the Related Person become rights to purchase one one-hundredth of a share of preferred stock for $110 or $110 of ElkCorp common stock at a 50% discount. If after such an event the company merges, consolidates or engages in a similar transaction in which it does not survive, each holder has a “flip over” right to buy discounted stock in the surviving entity.

     Under certain circumstances, the rights are redeemable at a price of $0.01 per right. Further, upon defined stock accumulation events, the Board of Directors has the option to exchange one share of common stock per right. The rights will expire by their terms on July 8, 2008.

     Product Warranties

     The company provides its customers with limited warranties on certain products. Limited warranties generally range from 20 to 50 years. Warranty reserves are established based on known or probable claims, together with historical experience factors. During 2005, 2004 and 2003, the company recorded to expense $5,664,000, $3,313,000 and $2,853,000, respectively, in warranty claim settlements and reserves. The company periodically assesses the adequacy of its recorded warranty liability and adjusts the amount as necessary.

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     Changes in the company’s warranty liability during 2005 and 2004 were as follows:

	(In thousands)
	Year Ended June 30,
	2005			2004
Balance at beginning of year	$	3,103		$	2,675
Accrual for new warranties		2,954			1,725
Changes in estimates for pre-existing warranties		2,710			1,588
Warranty settlements during the year		(3,865	)		(2,885	)
Balance at end of year	$	4,902		$	3,103

Stock-Based Compensation

     In October 2004, shareholders approved the 2004 Amended and Restated ElkCorp Equity Incentive Compensation Plan (Equity Incentive Compensation Plan). This plan and its predecessor plan, the 2002 ElkCorp Equity Incentive Compensation Plan, provided for grants of restricted stock to employees of the company. Grantees generally have all rights of a shareholder except that unvested shares are held in escrow. Restricted shares granted in fiscal 2005 either vest 33 1/3% per year over a three-year restriction period or 20% per year over a five-year restriction period. Restricted shares granted in fiscal 2004 and 2003 generally vest 20% per year over a five-year restriction period. In fiscal 2005, 147,492 restricted shares were granted at market prices ranging from $23.21 to $39.60. In fiscal 2004, 12,320 restricted shares were granted at market prices ranging from $24.14 to $29.67. In fiscal 2003, 25,535 restricted shares were granted at market prices ranging from $15.45 to $20.40. At grant date, the value of restricted stock is reflected as unearned compensation in shareholders’ equity and is amortized over the applicable restriction period. In fiscal 2005, 2004 and 2003, compensation expense of $1,214,000, $96,000 and $39,000 was recognized relating to restricted stock awards, respectively. Compensation expense attributable to restricted shares is classified as selling, general and administrative expense.

     The company’s Equity Incentive Compensation Plan also provides for the granting of incentive and nonqualified stock options to directors, officers and key employees of the company for purchase of the company’s common stock. Stock options are generally granted for a ten-year term. Options granted to officers and key employees through fiscal 2005 generally vest ratably over three or five-year periods. Options granted to directors fully vest at grant date.

     Information relating to options is as follows:

									Weighted
	Number			Option Price					Average Option
	of Shares			Range per Share					Price per Share
Outstanding at June 30, 2002		1,701,646		$	7.56	—	$	34.25	$	20.16
Granted		362,450		$	15.45	—	$	27.93	$	27.16
Cancelled		(41,605	)	$	19.94	—	$	27.93	$	21.22
Exercised		(23,480	)	$	8.44	—	$	20.07	$	9.75
Outstanding at June 30, 2003		1,999,011		$	7.56	—	$	34.25	$	21.51
Granted		391,385		$	22.61	—	$	25.60	$	22.78
Cancelled		(24,596	)	$	10.72	—	$	28.04	$	24.75
Exercised		(218,988	)	$	8.33	—	$	28.04	$	15.20
Outstanding at June 30, 2004		2,146,812		$	7.56	—	$	34.25	$	22.35
Granted		81,023		$	23.21	—	$	27.72	$	24.03
Cancelled		(49,285	)	$	13.33	—	$	34.25	$	26.12
Exercised		(499,521	)	$	8.33	—	$	28.04	$	21.87
Outstanding at June 30, 2005		1,679,029		$	7.56	—	$	28.04	$	22.47

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     The following table summarizes information about options outstanding at June 30, 2005:

	Options Outstanding					Options Exercisable
			Weighted-Average					Weighted
Range of Exercise	Number		Remaining	Exercise		Number		Average
Prices	Outstanding		Contractual Life	Price		Exercisable		Exercise Price
$7.56 – $19.99		473,555	4.42 yrs.	$	17.31		416,355	$	17.09
$20.00 – $24.99		681,278	7.35 yrs.	$	21.88		254,119	$	21.35
$25.00 – $28.04		524,196	6.09 yrs.	$	27.88		345,951	$	27.86

     At June 30, 2005, 2004 and 2003, options for 1,016,425, 1,176,124, and 1,100,815 shares were exercisable, respectively. A total of 1,475,713, 1,060,098, and 1,463,803 shares were reserved for future grants of stock options and restricted stock at June 30, 2005, 2004 and 2003, respectively.

     In December 2004, the company entered into Performance Stock Award agreements (PSA Agreements) granting performance stock awards (PSAs) to certain of the company’s officers and other key employees under the Equity Incentive Compensation Plan. The PSAs consist of a contingent right to receive whole shares of the company’s common stock if the company meets specified performance criteria. For the initial performance period, which is for the three-year period ending June 30, 2007, the performance criteria for 70% of the total PSA is based on the company’s return on equity (ROE) measured against all New York Stock Exchange (NYSE) listed companies, and 30% of the total PSA is based on the company’s total shareholder return (TSR), or stock appreciation plus dividends, measured against all NYSE listed companies.

     If the company achieves a predefined “target” during the three-year performance period ending June 30, 2007, a total of 139,630 shares will be issued. The maximum number of shares that can be issued for this performance period is 209,445 shares. In fiscal 2005, the awards were accounted for using variable accounting as prescribed by APB No. 25, “Accounting for Stock Issued to Employees”, and related interpretations, and the disclosure-only provisions of SFAS No. 123, “Accounting for Stock-Based Compensation”. Under APB 25, performance shares are accounted for by charging a ratable portion of compensation expense during each accounting period based on the expected number of shares to be issued times the price of ElkCorp common stock at the end of each period. During fiscal 2005, $1,330,000 was charged to compensation expense (classified as selling, general and administrative expense) based on the estimated number of shares that will be issued at the end of the performance period ending June 30, 2007.

     The company’s 1998 Incentive Stock Option Plan contained a cashless exercise provision that permitted an optionee to relinquish vested options to the company in exchange for common shares having a current market value equal to the net exercised market value of the relinquished options. Under APB No. 25, the aforementioned cashless relinquishment feature can cause options issued under the 1998 Plan to be considered stock appreciation rights (SAR’s) in substance, if not in form, unless past experience and economic incentives indicate that optionees are more likely to exercise, rather than relinquish, the options. Under APB No. 25, SAR’s are accounted for using “variable” accounting whereby income is charged (or credited) during each accounting period to reflect any excess of the market value of shares underlying vested SAR’s, over the exercise price of vested SAR’s.

     It was never the company’s intention to issue SAR’s under the 1998 Plan. In keeping with the company’s original intent, effective August 13, 2002, the Compensation Committee of the Board of Directors terminated the availability of the relinquishment alternative under the 1998 Plan, thereby removing any question regarding the appropriateness of the accounting for these employee stock options thereafter. Based on this action, together with a decline in the company’s share price in early fiscal 2003, the company recorded a reversal of fiscal 2002 noncash stock option compensation expense of $5,378,000 ($3,496,000, net of tax, or $.18 per diluted share) in the first quarter of fiscal 2003.

Employee Benefit Plans

     The company’s Employee Stock Ownership Plan (ESOP) became effective January 1, 1981. Under the plan, the company may contribute a percentage of each participant’s annual compensation into a trust, either as treasury stock contributions or cash, which is then used to purchase ElkCorp common stock. Employees vest 20% after one year of employment and 20% per year thereafter, with the stock distributed to a participant at retirement, death, disability, or as authorized by the Plan Administrative Committee. Effective January 1, 1990, the company established an Employee Savings Plan under Internal Revenue Code section 401(k). Under the 401(k) Plan, the company may contribute a percentage of each participant’s annual compensation into the 401(k) Plan to be invested among various defined

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alternatives at the participants’ direction. Investment alternatives under the 401(k) Plan do not include ElkCorp common stock. Vesting of company contributions is in accordance with the same schedule as that of the ESOP. All full-time employees, except those covered by plans established through collective bargaining, are eligible for participation in the above plans after meeting minimum service requirements.

     Since 1998, the Board of Directors annually has authorized total contributions of 5.0%, including forfeitures, of each participant’s annual compensation, as defined, split equally between the ESOP and 401(k) Plans. In addition, the company contributes an additional $.50 for every $1.00 of employee contributions into the 401(k) Plan limited to a maximum matching company contribution of 2% of an employee’s compensation. Total contributions charged to expense for these plans were $3,985,000, $3,633,000, and $3,434,000, in 2005, 2004 and 2003, respectively.

     Under the company’s Stock/Loan Plan, which became effective July 1, 1975, approximately 200 employees have been granted loans, based on a percentage of their salaries and the performance of their operating units, for the purpose of purchasing the company’s common stock. Under the Stock/Loan Plan, a ratable portion of the loans, which are unsecured, and any accrued interest are forgiven and recognized as compensation expense over five years of continuing service with the company. If employment is terminated for any reason except death, disability or retirement, the balance of the loan becomes due and payable. Loans outstanding at June 30, 2005 and 2004 totaling $2,963,000 and $2,321,000, respectively, are included in other assets. In compliance with certain provisions of the Sarbanes – Oxley Act of 2002, no loans were granted to executive officers of ElkCorp in either fiscal 2005 or 2004. In lieu of stock loans, 16,915 and 12,320 shares of restricted stock were granted to executive officers under the Equity Incentive Compensation Plan in fiscal 2005 and 2004, respectively.

Commitments and Contingencies

     The company and its subsidiaries lease certain office space, facilities, and equipment under operating leases, expiring on various dates through 2019. Total rental expense was $5,081,000 in 2005, $3,993,000 in 2004, and $3,588,000 in 2003. At June 30, 2005, future minimum rental commitments under noncancelable operating leases, payable over the remaining lives of the leases, are:

	(In thousands)
	Minimum Rental
Fiscal Year	Commitments
2006	$	3,836
2007		4,039
2008		3,637
2009		3,725
2010		3,934
Thereafter		21,338
Total	$	40,509

     The company has no significant commitments for purchase orders or construction contracts at June 30, 2005.

     Chromium has engaged in limited remediation activities at the site of its former plating operation in Lufkin, Texas. Soil sampling results from a pre-closing environmental evaluation of the site indicated the necessity of localized cleanup. Chromium has entered the property into the Texas Voluntary Cleanup Program (VCP). Under this program, the Texas Commission on Environmental Quality (TCEQ) reviews the voluntary clean up plan the applicant submits, and, when the work is complete, issues a certificate of completion, evidencing clean-up to levels protective of human health and the environment and releasing prospective purchasers and lenders from liability to the state. Properties entered into the VCP are protected from TCEQ enforcement actions.

     Chromium completed a supplemental groundwater and soil assessment at the Lufkin facility. The assessment further defined the horizontal and vertical extent of metals in soils, assessed the horizontal extent of metals in groundwater, and estimated the direction of groundwater movement. Chromium submitted its Affected Property Assessment Report (APAR) to the TCEQ. In June 2004, the TCEQ issued a letter accepting Chromium’s APAR in substantially all respects, indicating that no further assessment of the extent of contamination was necessary. Chromium is finalizing a proposed Remedial Action Plan (RAP) to the TCEQ in which it will propose activities and engineering controls to clean up the site under the VCP to a site specific risk-based clean up standard as prescribed by the Texas Risk Reduction Program.

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     The company believes that current findings indicate that remediation activities will be similar to a plan utilized at another Chromium plant. This assessment, in conjunction with projections developed in finalizing the proposed RAP that are site specific, resulted in the company recording an accrued liability of $700,000 in fiscal 2005. Certain other scenarios, none of which are reasonably expected at this time, could potentially result in material costs to the company.

     The company’s operations are subject to extensive federal, state and local laws and regulations relating to environmental matters. Other than the possible costs associated with the previously described Chromium matter, the company does not believe it will be required to expend amounts which will have a material adverse effect on the company’s consolidated financial position or results of operations by reason of environmental laws and regulations. Such laws and regulations are frequently changed and could result in significantly increased cost of compliance. Further, certain of the company’s manufacturing operations utilize hazardous materials in their production processes. As a result, the company incurs costs for recycling or disposal of such materials and may incur costs for remediation activities at its facilities and off-site from time to time. The company establishes and maintains reserves for such known or probable remediation activities in accordance with SFAS No. 5 “Accounting for Contingencies” and AICPA Statement of Position 96-1.

     The company and its subsidiaries are involved in various other legal proceedings and claims, including claims arising in the ordinary course of business. Based on advice from legal counsel, management believes such litigation and claims will be resolved without material adverse effect on the consolidated financial statements.

Accrued Liabilities

     Accrued liabilities consist of the following:

	{(In thousands)
	June 30,
	2005		2004
Product warranty reserves	$	4,902	$	3,103
Self-insurance reserves		1,221		1,855
Compensation and employee benefits		14,488		9,437
All other		10,560		9,897
	$	31,171	$	24,292

Acquisitions

     On October 16, 2002, a newly formed, wholly owned subsidiary of the company purchased substantially all of the assets of Advanced Composites Technologies, L.L.C. (ACT), a start-up stage manufacturer of advanced composite building products. The total purchase price was $2,224,000, plus contingent future earn-out payments based upon the profitability above certain thresholds of Elk Composite Building Products, Inc. The acquisition provides that for five years, the contingent earn-out amount is unlimited in amount and is calculated using a defined formula. The company is currently unable to estimate an amount for maximum potential payment in the first five years. If in the first five years, the total contingent earn-out payments are less than $12,725,000, the acquisition agreement provides that the obligation continues indefinitely based on the defined formula, limited however, so that total contingent payments cannot exceed this amount. If in the first five years the total earn-out payments exceed $12,725,000 the payment obligation would terminate under the agreement at the end of such five year period and no further payments are due. As of June 30, 2005, no earn-out payments have been earned or paid. There is no minimum future earn-out payment requirement. Further, the company’s earn-out agreement is the subject of a dispute and current legal proceedings brought against a principal of ACT and former officer of Elk Composite Building Products, Inc. Existing cash resources were used to fund the acquisition. Assets acquired included trade receivables, inventory, other current assets, property and equipment, patents and other intangibles. The operating results attributable to the acquired assets have been included in the company’s consolidated financial statements since the date of acquisition. ACT’s sales were not significant in its most recent fiscal year prior to acquisition.

     In March 2005, a subsidiary of the company purchased the principal assets of Railwayz, Inc. (Railwayz), a privately-held composite railing company whose products are complementary to the company’s composite decking products. The total purchase price was approximately $1,625,000, plus contingent future earn-out payments based on revenues for the first five years after acquisition with a maximum potential payment of $375,000. There is no minimum future earn-out payment requirement. Existing cash resources of $471,000 and a three-year non-interest bearing note were used to finance the acquisition. The purchase price was allocated to the tangible and intangible assets acquired. The operating results attributable to the acquired assets have been included in the company’s consolidated financial statements since the date of acquisition. Sales of Railwayz products in its most recent fiscal year prior to acquisition were not significant in amount.

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     On August 25, 2005, a subsidiary of the company acquired RGM Products, Inc. (RGM), a Fresno, California based privately-held manufacturer of ridge and roofing related products. RGM’s products enhance the company’s roofing product accessory business and broaden its ridge product line. The total purchase price was approximately $35,000,000, which will be allocated to the tangible and intangible assets acquired. Existing cash resources of approximately $24,300,000 were used to fund the acquisition and approximately $10,700,000 of long-term debt and capital lease obligations were assumed. In its most recent fiscal year, RGM recorded $57,000,000 in sales. RGM’s operating results and financial position will be included in the company’s consolidated financial statements in fiscal 2006 as of the date of acquisition.

Discontinued Operations

     In fiscal 2004, company management and the Board of Directors concluded that the risk and prospects for future success of Cybershield did not justify the additional investment of capital and other resources that would be required to continue Cybershield’s operations. Accordingly, the decision was made to discontinue Cybershield and to sell its operations or its assets. The company had previously decided to sell Cybershield’s Canton, Georgia facility. In the first quarter of fiscal 2005, the company sold substantially all assets of Cybershield, excluding the Canton, Georgia facility, to the Cybershield management group for $1,293,000 in cash. The sale price approximated the carrying value of assets, net of assumed liabilities, at the date of sale. Also in the first quarter of fiscal 2005, the company recorded a pretax impairment charge of $651,000 on the remaining Canton assets. In the third quarter of fiscal 2005, the Canton land, building and certain equipment were sold for $2,750,000. The sales price approximated the carrying value of the assets sold.

     In early fiscal 2005 management and the Board of Directors concluded that Ortloff did not fit into the company’s focus on building products platforms and Ortloff was positioned for sale. In the fourth quarter of fiscal 2005, the company completed the sale of Ortloff to a financial buyer for approximately $13,600,000. The company will retain $4,400,000 in long-term license receivables and a portion of contingent license fees that could result in an additional $2,100,000 in future years. There is no assurance that any of the contingent license fees will be realized. ElkCorp will not participate in Ortloff’s management in any capacity. The purchaser will collect the retained long-term receivables on ElkCorp’s behalf for a service fee on all collected funds. The book value of receivables relating to Ortloff have been reduced to reflect the service fee to be paid and have been discounted to fair value at June 30, 2005. The effect of all financial matters relating to the disposal of Ortloff was a pretax gain of $6,484,000.

     In fiscal 2005, the company reported income from discontinued operations of $4,171,000, compared to a loss of $9,560,000 and income of $2,894,000, net of tax, in fiscal 2004 and 2003, respectively. Included in these amounts are write-downs of Cybershield’s net assets to estimated market value. In fiscal 2005, the aforementioned $651,000 write-down was recorded on the Canton, Georgia facility. In fiscal 2004, the pretax write-down of assets of Cybershield’s Lufkin facility totaled $10,496,000. A write-down of Cybershield’s Canton, Georgia assets of $1,850,000 was also recorded in fiscal 2004.

     Summary operating results of discontinued operations are as follows:

	(In thousands)
	Year Ended June 30,
	2005		2004			2003
Sales	$	5,386	$	15,101		$	31,712
Cost of sales		1,039		11,173			19,624
Selling, general and administrative		3,369		6,197			7,396
Write-down of assets		651		12,346			—
Operating income (loss)		327		(14,615	)		4,692
Gain on disposal		6,484		—			—
Income (loss) from discontinued operation		6,811		(14,615	)		4,692
Income tax provision (benefit)		2,640		(5,055	)		1,798
Net income (loss) from discontinued operations	$	4,171	$	(9,560	)	$	2,894

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Financial Information By Company Segments

	(In thousands)
	Year Ended June 30,
	2005			2004			2003
Sales
Premium Roofing Products	$	732,674		$	549,052		$	465,762
Composite Building Products		19,425			8,524			1,240
Other, Technologies		9,620			8,465			7,432
Corporate		—			—			—
	$	761,719		$	566,041		$	474,434
Income from Continuing Operations
Premium Roofing Products	$	107,690		$	69,292		$	48,669
Composite Building Products		(11,822	)		(2,262	)		(2,768	)
Other, Technologies		(1,231	)		(100	)		(511	)
Corporate		(16,789	)		(13,584	)		(5,389	)
		77,848			53,346			40,001
Interest expense, net and other		(10,365	)		(5,311	)		(5,977	)
Income from continuing operations before income taxes	$	67,483		$	48,035		$	34,024
Identifiable Assets
Premium Roofing Products	$	439,682		$	405,063		$	366,636
Composite Building Products		51,988			23,183			9,474
Other, Technologies		9,176			8,017			7,456
Corporate		107,812			27,506			28,039
Discontinued Operations		4,911			16,939			30,686
	$	613,569		$	480,708		$	442,291
Depreciation and Amortization
Premium Roofing Products	$	18,511		$	14,216		$	13,602
Composite Building Products		1,055			419			136
Other, Technologies		689			682			660
Corporate		3,604			2,733			2,825
	$	23,859		$	18,050		$	17,223
Capital Expenditures
Premium Roofing Products	$	11,753		$	52,043		$	43,718
Composite Building Products		24,482			3,836			3,810
Other, Technologies		272			260			193
Corporate		1,744			6,745			1,412
	$	38,251		$	62,884		$	49,133

Product Sales

     The following table summarizes sales from continuing operations by product category, excluding intercompany sales:

	(In thousands)
	Year Ended June 30,
	2005		2004		2003
Premium shingles and accessories	$	691,637	$	516,078	$	435,036
Performance nonwoven fabrics		41,037		32,974		30,726
Composite building products		19,425		8,524		1,240
Hard chrome and other surface finishes		9,209		8,339		7,417
Other		411		126		15
	$	761,719	$	566,041	$	474,434

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Income Taxes

     The company’s effective tax rate was 36.7% in 2005, 37.4% in 2004, and 37.7% in 2003. The difference between the federal statutory tax rate and the effective tax rate is reconciled as follows:

	Year Ended June 30,
	2005			2004			2003
Federal statutory tax rate		35.0	%		35.0	%		35.0	%
Change in tax rate resulting from:
State income taxes, net of federal tax effect		1.7	%		2.1	%		2.3	%
Miscellaneous items		—			.3	%		.4	%
		36.7	%		37.4	%		37.7	%

Components of the income tax provisions consist of the following:

	(In thousands)
	Year Ended June 30,
	2005		2004		2003
Federal:
Current	$	17,787	$	5,558	$	5,522
Deferred, net		5,812		11,340		6,382
State		1,188		1,071		914
	$	24,787	$	17,969	$	12,818

The significant components of the company’s deferred tax assets and liabilities are summarized below:

	(In thousands)
	Year Ended June 30,
	2005			2004			2003
Deferred tax assets:
Accrued liabilities, difference in expense recognition	$	3,759		$	2,967		$	2,648
Receivables, bad debt reserve		243			314			360
Inventories, difference in capitalization		2,009			2,318			1,179
Nonqualified deferred compensation plan		806			679			525
Asset impairment		123			4,030			861
Stock based compensation		897			46			—
Other		12			42			71
		7,849			10,396			5,644
Deferred tax liabilities:
Fixed assets, primarily depreciation method differences and deferred testing costs		(52,119	)		(45,611	)		(38,412	)
Deferred license fees		(1,263	)		(3,037	)		(2,122	)
		(53,382	)		(48,648	)		(40,534	)
Net deferred tax liability	$	(45,533	)	$	(38,252	)	$	(34,890	)

     In August 2003, the Internal Revenue Service (IRS) completed audits of the company’s consolidated tax returns through fiscal 2001. A notice of proposed adjustment disallowing the timing of certain deductions for tax years 1998 through 2001 was rendered in connection with these audits. In December 2003, the company reached a tentative agreement with the local office of the IRS. The tentative agreement had no impact on net income or earnings per share. The deferred tax balance and income tax receivable were each reduced by approximately $400,000 to reflect the tentative agreement. In the fourth quarter of fiscal 2005, the company received all income tax refunds due from the IRS relating to the tentative agreement. Although no final notice has been received from the IRS, the company believes that the receipt of all applicable refunds indicates that this matter is substantially closed.

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     The company has state net operating losses (NOL) at certain of its subsidiary companies. In some instances there is no assurance that the benefits of these NOL’s will be realized. Valuation reserves, which are immaterial in amount, are recorded for the state deferred tax assets pertaining to those subsidiaries.

Quarterly Summary of Operations

(Unaudited, in thousands, except per share amounts)

	First Quarter						Second Quarter					Third Quarter					Fourth Quarter
	2005			2004			2005		2004			2005		2004			2005		2004
Sales	$	163,012		$	159,289		$	194,099	$	120,771		$	201,871	$	130,137		$	202,737	$	155,844
Gross Profit		29,590			32,917			41,202		24,969			43,932		24,861			33,070		30,081
Income (Loss) from:
Continuing Operations		7,660			10,394			14,198		6,119			14,123		5,762			6,715		7,791
Discontinued Operations		(851	)		(1,257	)		128		(6,962	)		1,174		(1,704	)		3,720		363
Net Income (Loss)	$	6,809		$	9,137		$	14,326	$	(843	)	$	15,297	$	4,058		$	10,435	$	8,154
Net Income (Loss) Per Share:
Continuing Operations –
Basic	$	.39		$	.53		$	.72	$	.31		$	.71	$	.30		$	.34	$	.39
Diluted	$	.38		$	.52		$	.70	$	.31		$	.69	$	.29		$	.33	$	.39
Discontinued Operations –
Basic	$	(.04	)	$	(.06	)	$	.01	$	(.35	)	$	.06	$	(.09	)	$	.18	$	.02
Diluted	$	(.04	)	$	(.06	)	$	.01	$	(.35	)	$	.06	$	(.09	)	$	.18	$	.02
Net Income (Loss)																				–
Basic	$	.35		$	.47		$	.73	$	(.04	)	$	.77	$	.21		$	.52	$	.41
Diluted	$	.34		$	.46		$	.71	$	(.04	)	$	.75	$	.20		$	.51	$	.41

     In the fourth quarter of fiscal 2005, we sold Ortloff, a component of Other, Technologies. Consequently, the financial data related to Ortloff is classified as a discontinued operation in the consolidated financial statement for all periods presented in this Form 10-K and in the above quarterly data table. In our previously filed Form 10-Q for the quarters ended September 30, 2004, December 31, 2004 and March 31, 2005, Ortloff was not reported as a discontinued operation.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON FINANCIAL STATEMENT SCHEDULE

Board of Directors and
Shareholders of ElkCorp

     We have audited in accordance with the standards of the Public Company Accounting Oversight Board (United States) the consolidated financial statements of ElkCorp and subsidiaries referred to in our report dated August 30, 2005, which is included in this Annual Report on Form 10-K for the year ended June 30, 2005. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The Schedule II – Consolidated Valuation and Qualifying Accounts is presented for purposes of additional analysis and is not a required part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements take as a whole.

/s/ Grant Thornton LLP Grant Thornton LLP

Dallas, Texas
August 30, 2005

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON FINANCIAL STATEMENT SCHEDULE

To the Board of Directors
of ElkCorp:

     Our audits of the consolidated financial statements referred to in our report dated August 30, 2004, except for changes in presentation as noted in footnotes titled “Discontinued Operations” and “Financial Information by Company Segments,” as to which the date is August 30, 2005, appearing in the 2005 Annual Report on Form 10-K of ElkCorp also included an audit of the financial statement schedule for the years ended June 30, 2004 and 2003, listed in Item 15(a)(2) of this Form 10-K. In our opinion, this financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.

/s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP

Dallas, Texas
August 30, 2004

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ELKCORP AND SUBSIDIARIES

SCHEDULE II – CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS

FOR THE YEARS ENDED JUNE 30, 2005, 2004, AND 2003

	(Dollars in thousands)
Column A		Column B		Column C					Column D			Column E
				Additions					Deductions
		Balance at		Charged to					For Purposes For
		Beginning of		Costs and					Which Reserves			Balance at
Description		Period		Expenses		Other			Were Created			End of Period
Year Ended June 30, 2005
CONSOLIDATED:
Allowance for doubtful accounts		$	605	$	358	$	—		$	(268	)	$	695
Allowance for inventory obsolescence		$	262	$	—	$	—		$	—		$	262
Year Ended June 30, 2004
CONSOLIDATED:
Allowance for doubtful accounts		$	935	$	83	$	(175	)	$	(238	)	$	605
Allowance for inventory obsolescence		$	262	$	—	$	—		$	—		$	262
Year Ended June 30, 2003
CONSOLIDATED:
Allowance for doubtful accounts		$	690	$	282	$	—		$	(37	)	$	935
Allowance for inventory obsolescence		$	126	$	136	$	—		$	—		$	262

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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

               On September 13, 2004, we dismissed PricewaterhouseCoopers LLP as our independent registered public accounting firm. On the same date, Grant Thornton LLP was engaged to succeed PricewaterhouseCoopers LLP on matters of accounting and financial disclosure as reported on our Current Report on Form 8-K, which was filed on September 17, 2004.

Item 9A. Controls and Procedures

a)	Evaluation of Disclosure Controls and Procedures
	We completed an evaluation, under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures are effective to timely alert them to any material information relating to ElkCorp (including its consolidated subsidiaries) that must be included in our periodic SEC filings.
b)	Management’s Report on Internal Control Over Financial Reporting
	Management’s report on our internal control over financial reporting as of June 30, 2005, is presented on page 24 of this Annual Report on Form 10-K. The report of our independent registered public accounting firm, Grant Thornton LLP, with respect to management’s assessment of internal control over financial reporting is presented on page 25 of this Annual Report on Form 10-K.
c)	Changes in Internal Control over Financial Reporting
	There have been no changes in our internal control over financial reporting during the fiscal quarter ended June 30, 2005 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

None.

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PART III

Item 10. Directors and Executive Officers of the Registrant

     Information concerning our Directors required by this item is incorporated herein by reference to the material under the caption “Election of Directors” of our Proxy Statement (Proxy Statement) for the October 25, 2005 Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission. Information concerning our Audit Committee and determination by the Board of Directors that at least one member of the Audit Committee qualifies as an “Audit Committee Financial Expert” is incorporated herein by reference to the material under the caption “Audit Committee Report” of the Proxy Statement. Information concerning compliance with Section 16(a) of the Securities Exchange Act is incorporated herein by reference to the material under the caption “Section 16(a) Beneficial Ownership Reporting Compliance” of the Proxy Statement. Information concerning Executive Officers of ElkCorp is contained in Part 1 of this report in Item 4A, under the caption “Executive Officers of the Registrant.”

Code of Conduct and Ethics in Financial Reporting:

     Since May 1979, we have maintained General Policy D-2, a code of conduct requiring employees to comply with laws, conduct themselves ethically and avoid improper conflicts of interest. Annually, we require our employees to report to our internal auditor on their compliance with code of conduct. In September 2004, the Company adopted a new code of conduct for directors and employees. The current version of the code of conduct, which has been approved by our Board of Directors and Audit Committee, is published on our website at www.elkcorp.com.

     To supplement the code of conduct that binds each of our employees, we also have obtained a formal written commitment from each ElkCorp financial officer and its chief executive officer to abide by a code of ethics setting forth standards of ethical conduct for the preparation and review of the Company’s financial statements and reports. This code is published on our website at www.elkcorp.com, and has received the review and approval of our Board of Directors and Audit Committee.

     We also have retained an independent third party to maintain a toll-free confidential “hotline” for employees to report any accounting or auditing concerns they may have. Any such concerns are reported by the third-party agency directly to the Company’s General Counsel, without identifying the reporting employee and without screening any accounting or auditing concerns. In turn, the General Counsel is required to report any such concerns directly to the Chairman of the Audit Committee.

     We intend to disclose future amendments to, or waivers from, provisions of our codes of conduct and ethics on our website at www.elkcorp.com within four business days following the date of such amendment or waiver.

Item 11. Executive Compensation

     The information required by this item is incorporated herein by reference to the information under the captions “Executive Compensation,” “Compensation of Directors,” and “Compensation Committee Interlocks and Insider Participation” of the Proxy Statement.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

     The information required by this item is incorporated herein by reference to the information under the caption “ElkCorp Stock Ownership” and “Equity Compensation Plan Information” of the Proxy Statement.

Item 13. Certain Relationships and Related Transactions

     Information required by this item is incorporated herein by reference to the material under the captions “Compensation Committee Interlocks and Insider Participation,” “Change-in-Control (Severance) Agreements” and “Stock/Loan Balances” of the Proxy Statement.

Item 14. Principal Accountant Fees and Services

     The information required by this item is incorporated herein by reference to the information under the caption “Independent Registered Public Accounting Firm Fee Information” of the Proxy Statement.

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PART IV

Item 15. Exhibits and Financial Statement Schedules

(a)	1.	Financial Statements
		The following financial statements of the company are set forth in Item 8 of this Annual Report on Form 10-K:
		Management’s Annual Report on Internal Control over Financial Reporting Reports of Independent Registered Public Accounting Firms Consolidated Balance Sheets at June 30, 2005 and 2004 Consolidated Statements of Operations for the years ended June 30, 2005, 2004 and 2003 Consolidated Statements of Cash Flows for the years ended June 30, 2005, 2004 and 2003 Consolidated Statements of Shareholders’ Equity for the years ended June 30, 2005, 2004 and 2003 Summary of Significant Accounting Policies Notes to Consolidated Financial Statements
	2.	Financial Statement Schedules
		Reports of Independent Registered Public Accounting Firms Schedule II — Consolidated Valuation and Qualifying Accounts
		All other schedules are omitted because they are not required, are not applicable, or the information is included in the financial statements or notes thereto.
	3.	Executive Compensation Plans and Arrangements
		The following is a list of all executive compensation plans and arrangements required to be filed as an exhibit to this report:

1.	Amended and Restated Elcor Corporation Employee Stock/Loan Plan filed as Exhibit 10.2 hereto and incorporated by reference to Exhibit 10.2 in the Registrant’s Annual Report on Form 10-K for the year ended June 30, 1998 (File No. 1-5341).
2.	2004 ElkCorp Amended and Restated Equity Incentive Compensation Plan filed as Exhibit 10.4 hereto and incorporated by reference to Exhibit B in the Registrant’s Proxy Statement dated September 17, 2004 (File 1-5341).
3.	Deferred Compensation Plan filed as Exhibit 10.3 hereto and incorporated by reference to Exhibit 10.4 in the Registrant’s Annual Report on Form 10-K for the year ended June 30, 2000 (File No. 1-5341).
4.	Form of Executive Agreement filed as Exhibit 10.1 in the Registrant’s Annual Report on Form 10-K for the year ended June 30, 1998 (File No. 1-5341).

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Exhibits

**3.1	The Restated Certificate of Incorporation of the company, filed as Exhibit 3.1 to the company’s Annual Report on Form 10-K for the year ended June 30, 1994 (File No. 1-5341).
**3.2	Certificate of Amendment to Certificate of Incorporation dated December 2, 1998, filed as Exhibit 3.11 to the company’s Annual Report on Form 10-K for the year ended June 30, 1999 (File No. 1-5341).
**3.3	Bylaws of the company, as amended, filed as Exhibit 3.2 to the company’s Annual Report on Form 10-K for the year ended June 30, 2003 (File No. 1-5341).
**4.1	Form of Rights Agreement dated as of July 7, 1998, between the company and ChaseMellon Shareholder Services, L.L.C., as Rights Agent, which includes as Exhibits A and B thereto the Forms of Certificate of Designation, Preferences and Rights of Series A Participating Preferred Stock, Rights Certificate, filed as Exhibit 4.1 to the company’s Form 8-K dated May 26, 1998 (File No. 1-5341).
**4.2	Credit Agreement dated as of November 30, 2000 among the company, Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, Bank One, Texas, N.A., as Documentation Agent, First Union National Bank, as Syndication Agent, The Other Lenders Party Hereto, and Bank of America Securities LLC, as Sole Lead Arranger and Sole Book Manager, filed as Exhibit 4.12 in the company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2000 (File No. 1-5341).
**4.3	First Amendment to Credit Agreement dated as of March 31, 2001 among the company, Bank One, N.A., as Documentation Agent, First Union National Bank, as Syndication Agent, and Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, filed as Exhibit 4.13 in the company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2001 (File No. 1-5341).
**4.4	Note Purchase Agreement dated as of June 1, 2002 for the sale of $120,000,000 Aggregate Principal Amount of Senior Notes as filed as Exhibit 4.14 in the company’s Form 8-K dated June 10, 2002 (File No. 1-5341).
**4.5	Note Purchase Agreement dated as of March 1, 2003 for the sale of $25,000,000 Aggregate Principal Amount of Senior Notes, filed as Exhibit 4.15 to the company’s Form 8-K dated March 18, 2003 (File No. 1-5341).
**4.6	Second Amendment to Credit Agreement dated as of June 5, 2002 among the company, Bank One, N.A., as Documentation Agent, First Union National Bank, as Syndication Agent, and Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer filed as Exhibit 4.16 in to the company’s Quarterly Report on Form 10-Q in the quarter ended March 31, 2003 (File No. 1-5341).
**4.7	Third Amendment to Credit Agreement dated as of February 20, 2003 among the company, Bank One, N.A., as Documentation Agent, Wachovia Bank, N.A., as Syndication Agent, and Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, filed as Exhibit 4.17 in the company’s Quarterly Report on Form 10-Q in the quarter ended March 31, 2003 (File No. 1-5341).

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**4.8	Fourth Amendment to Credit Agreement dated as of March 7, 2003, among the company, Bank One, N.A., as Documentation Agent, and Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, filed as Exhibit 4.18 in the company’s Quarterly Report on Form 10-Q in the quarter ended March 31, 2003 (File No. 1-5341).
**4.9	Fifth Amendment to Credit Agreement dated as of December 5, 2003 among the company, Bank One, N.A. as Documentation Agent, and Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer and other lenders, filed as Exhibit 4.19 in the company’s Quarterly Report on Form 10-Q in the quarter ended December 31, 2003 (File No. 1-5341).
**4.10	Note Purchase Agreement dated as of June 15, 2004 for the sale of $50,000,000 Aggregate Principal Amount of Senior Notes, filed as Exhibit 4.19 in the Company’s Annual Report on Form 10-K for the year ended June 30, 2004 (File No. 1-5341).
*4.11	Sixth Amendment to Credit Agreement dated as of May 27, 2005 among the company, Bank One, N.A. as Documentation Agent, and Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer and other lenders.
*4.12	Seventh Amendment to Credit Agreement dated as of August 12, 2005 among the company, Bank One, N.A. as Documentation Agent, and Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer and other lenders.
**10.1	Form of Executive Agreement filed as Exhibit 10.1 in the company’s Annual Report on Form 10-K for the year ended June 30, 1998 (File No. 1-5341).
**10.2	Amended and Restated Elcor Corporation Employee Stock/Loan Plan filed as Exhibit 10.2 in the company’s Annual Report on Form 10-K for the year ended June 30, 1998 (File No. 1-5341).
**10.3	Deferred Compensation Plan filed as Exhibit 10.4 in the company’s Annual Report on Form 10-K for the year ended June 30, 2000 (File No. 1-5341).
**10.4	2004 Amended and Restated ElkCorp Equity Incentive Compensation Plan filed as Exhibit B in the company’s Proxy Statement dated September 17, 2004 (File 1-5341).
**10.5	Form of Performance Stock Award Agreement filed as Exhibit 10.1 to the company’s Form 8-K dated December 10, 2004 (File No. 1-5341).
*10.6	Asset Purchase Agreement dated May 31, 2005 by and among Elk Technology Group, Inc., OEL, Ltd., d.b.a. “Ortloff Engineers, Ltd.,” and Torgo Ltd.
*10.7	Purchase Agreement dated August 25, 2005 by and among Elk Premium Building Products, Inc. and Joseph and Susan Pressutti, both individually and as trustees of the Pressutti Family Trust.
** 16	PricewaterhouseCoopers’ Letter to the Commission dated September 17, 2004, filed as Exhibit 16.1 to the company’s Form 8-K dated September 13, 2004 (File No. 1-5341).
* 21	Subsidiaries of the Registrant.
* 23.1	Consent of Independent Registered Public Accounting Firm (Grant Thornton LLP).
* 23.2	Consent of Independent Registered Public Accounting Firm (PricewaterhouseCoopers LLP).

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* 31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
* 31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
* 32.1	Certificate of the Chief Executive Officer of ElkCorp Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
* 32.2	Certificate of the Chief Financial Officer of ElkCorp Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*	Filed with the Securities and Exchange Commission as a part of the 2005 Annual Report on Form 10-K.
**	Incorporated by reference.

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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.

	ElkCorp
Date September 6, 2005	By	/s/ Gregory J. Fisher
		Gregory J. Fisher
		Senior Vice President,
		Chief Financial Officer
		and Controller
	By	/s/ Leonard R. Harral
		Leonard R. Harral
		Vice President, Chief
		Accounting Officer
		and Treasurer

-56-

SIGNATURES

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

Signature	Title	Date
/s/ Thomas D. Karol      Thomas D. Karol	Chairman of the Board, Chief Executive Officer and Director (Principal Executive Officer)	September 6, 2005
/s/ Richard A. Nowak      Richard A. Nowak	President, Chief Operating Officer and Director	September 6, 2005
/s/ Gregory J. Fisher      Gregory J. Fisher	Senior Vice President, Chief Financial Officer and Controller (Principal Financial Officer)	September 6, 2005
/s/ Leonard R. Harral      Leonard R. Harral	Vice President, Chief Accounting Officer and Treasurer (Principal Accounting Officer)	September 6, 2005
/s/ James E. Hall      James E. Hall	Director	September 6, 2005
/s/ Dale V. Kesler      Dale V. Kesler	Director	September 6, 2005
/s/ Shauna R. King      Shauna R. King	Director	September 6, 2005
/s/ Michael L. McMahan      Michael L. McMahan	Director	September 6, 2005
/s/ David W. Quinn      David W. Quinn	Director	September 6, 2005

-57-

INDEX TO EXHIBITS

**3.1	The Restated Certificate of Incorporation of the company, filed as Exhibit 3.1 to the company’s Annual Report on Form 10-K for the year ended June 30, 1994 (File No. 1-5341).
**3.2	Certificate of Amendment to Certificate of Incorporation dated December 2, 1998 filed as Exhibit 3.11 to the company’s Annual Report on Form 10-K for the year ended June 30, 1999 (File No. 1-5341).
**3.3	Bylaws of the company, as amended, filed as Exhibit 3.2 to the company’s Annual Report on Form 10-K for the year ended June 30, 2003 (File No. 1-5341).
**4.1	Form of Rights Agreement dated as of July 7, 1998, between the company and ChaseMellon Shareholder Services, L.L.C., as Rights Agent, which includes as Exhibits A and B thereto the Forms of Certificate of Designation, Preferences and Rights of Series A Participating Preferred Stock, Rights Certificate, filed as Exhibit 4.1 to the company’s current Report on Form 8-K dated May 26, 1998 (File No. 1-5341).
**4. 2	Credit Agreement dated as of November 30, 2000 among the company, Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, Bank One, Texas, N.A., as Documentation Agent, First Union National Bank, as Syndication Agent, The Other Lenders Party Hereto, and Bank of America Securities LLC, as Sole Lead Arranger and Sole Book Manager, filed as Exhibit 4.12 in the company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2000 (File No. 1-5341).
**4.3	First Amendment to Credit Agreement dated as of March 31, 2001 among the company, Bank One, N.A., as Documentation Agent, First Union National Bank, as Syndication Agent, and Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, filed as Exhibit 4.13 in the company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2001 (File No. 1-5341).
**4.4	Note Purchase Agreement dated as of June 1, 2002 for the sale of $120,000,000 Aggregate Principal Amount of Senior Notes as filed as Exhibit 4.14 in the company’s Form 8-K dated June 10, 2002 (File No. 1-5341).
**4.5	Note Purchase Agreement dated as of March 1, 2003 for the sale of $25,000,000 Aggregate Principal Amount of Senior Notes, filed as Exhibit 4.15 to the company’s current Report on Form 8-K dated March 18, 2003 (File No. 1-5341).
**4.6	Second Amendment to Credit Agreement dated as of June 5, 2002 among the company, Bank One, N.A., as Documentation Agent, First Union National Bank, as Syndication Agent, and Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer filed as Exhibit 4.16 in to the company’s Quarterly Report on Form 10-Q in the quarter ended March 31, 2003 (File No. 1-5341).
**4.7	Third Amendment to Credit Agreement dated as of February 20, 2003 among the company, Bank One, N.A., as Documentation Agent, Wachovia Bank, N.A., as Syndication Agent, and Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, filed as Exhibit 4.17 in the company’s Quarterly Report on Form 10-Q in the quarter ended March 31, 2003 (File No. 1-5341).

**4.8	Fourth Amendment to Credit Agreement dated as of March 7, 2003, among the company, Bank One, N.A., as Documentation Agent, and Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, filed as Exhibit 4.18 in the company’s Quarterly Report on Form 10-Q in the quarter ended March 31, 2003 (File No. 1-5341).
**4.9	Fifth Amendment to Credit Agreement dated as of December 5, 2003 among the company, Bank One, N.A. as Documentation Agent, and Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer and other lenders, filed as Exhibit 4.19 in the company’s Quarterly Report on Form 10-Q in the quarter ended December 31, 2003 (File No. 1-5341).
**4.10	Note Purchase Agreement dated as of June 15, 2004 for the sale of $50,000,000 Aggregate Principal Amount of Senior Notes, filed as Exhibit 4.19 in the Company’s Annual Report on Form 10-K for the year ended June 30, 2004 (File No. 1-5341).
*4.11	Sixth Amendment to Credit Agreement dated as of May 27, 2005 among the company, Bank One, N.A. as Documentation Agent, and Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer and other lenders.
*4.12	Seventh Amendment to Credit Agreement dated as of August 12, 2005 among the company, Bank One, N.A. as Documentation Agent, and Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer and other lenders.
**10.1	Form of Executive Agreement filed as Exhibit 10.1 in the company’s Annual Report on Form 10-K for the year ended June 30, 1998 (File No. 1-5341).
**10.2	Amended and Restated Elcor Corporation Employee Stock/Loan Plan filed as Exhibit 10.2 in the company’s Annual Report on Form 10-K for the year ended June 30, 1998 (File No. 1-5341).
**10.3	Deferred Compensation Plan filed as Exhibit 10.4 in the company’s Annual Report on Form 10-K for the year ended June 30, 2000 (File No. 1-5341).
**10.4	2004 Amended and Restated ElkCorp Equity Incentive Compensation Plan filed as Exhibit B in the company’s Proxy Statement dated September 17, 2004 (File 1-5341).
**10.5	Form of Performance Stock Award Agreement filed as Exhibit 10.1 to the company’s Form 8-K dated December 10, 2004 (File No. 1-5341).
*10.6	Asset Purchase Agreement dated May 31, 2005 by and among Elk Technology Group, Inc., OEL, Ltd., d.b.a. “Ortloff Engineers, Ltd.,” and Torgo Ltd.
*10.7	Purchase Agreement dated August 25, 2005 by and among Elk Premium Building Products, Inc. and Joseph and Susan Pressutti, both individually and as trustees of the Pressutti Family Trust.
** 16	PricewaterhouseCoopers’ Letter to the Commission dated September 17, 2004, filed as Exhibit 16.1 to the company’s Form 8-K dated September 13, 2004 (File No. 1-5341).
* 21	Subsidiaries of the Registrant.
* 23.1	Consent of Independent Registered Public Accounting Firm (Grant Thornton LLP).
* 23.2	Consent of Independent Registered Public Accounting Firm (PricewaterhouseCoopers LLP).

* 31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
* 31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
* 32.1	Certificate of the Chief Executive Officer of ElkCorp Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
* 32.2	Certificate of the Chief Financial Officer of ElkCorp Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*	Filed with the Securities and Exchange Commission as a part of the 2005 Annual Report on Form 10-K.
**	Incorporated by reference.

EX-4.11

Exhibit 4.11

SIXTH AMENDMENT TO CREDIT AGREEMENT

     THIS SIXTH AMENDMENT TO CREDIT AGREEMENT (this “Sixth Amendment”), dated as of May 27, 2005, is entered into among ELKCORP (formerly known as Elcor Corporation), a Delaware corporation (the “Borrower”), the lenders listed on the signature pages hereof as Lenders (the “Lenders”), BANK ONE, N.A., as Documentation Agent, and BANK OF AMERICA, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer.

BACKGROUND

     A. The Borrower, certain of the Lenders, the Documentation Agent, the Syndication Agent, the Administrative Agent, the Swing Line lender and the L/C Issuer are parties to that certain Credit Agreement, dated as of November 30, 2000, as amended by that certain First Amendment to Credit Agreement, dated as of March 31, 2001, that certain Second Amendment to Credit Agreement, dated as of June 5, 2002, that certain Third Amendment to Credit Agreement, dated as of February 20, 2003, that certain Fourth Amendment to Credit Agreement, dated as of March 7, 2003, and that certain Fifth Amendment to Credit Agreement, dated as of December 5, 2003 (said Credit Agreement, as amended, the “Credit Agreement”). The terms defined in the Credit Agreement and not otherwise defined herein shall be used herein as defined in the Credit Agreement.

     B. The Borrower has requested certain amendments to the Credit Agreement.

     C. The Lenders, the Documentation Agent, the Administrative Agent, the Swing Line Lender and the L/C Issuer hereby agree to amend the Credit Agreement, subject to the terms and conditions set forth herein.

     NOW, THEREFORE, in consideration of the covenants, conditions and agreements hereafter set forth, and for other good and valuable consideration, the receipt and adequacy of which are all hereby acknowledged, the Borrower, the Lenders, the Swing Line Lender, the L/C Issuer and the Administrative Agent covenant and agree as follows:

     1. AMENDMENTS.

     (a) Section 5.17 of the Credit Agreement is hereby amended to read as follows:

     5.17 Businesses. The Borrower is engaged and may engage in the future, directly or through wholly-owned Subsidiaries, in the following businesses: (a) the manufacture of premium building materials, including (i) premium roofing products, including laminated fiberglass asphalt shingles and accessory products, (ii) performance non-woven fabrics, including coated and uncoated fiberglass mat, mat products, and other non-woven materials; (iii) composite building products, including decking, fencing, railing, building product structural components and accessories and (iv) and such other building products business platforms to extend its premium building products business; (b) the manufacturing, recycling and remanufacturing of diesel engine power assemblies, cylinder liners, heads, rods, waterjackets, valves, pistons and related

1

components, including hard chrome plating of cylinder bores, primarily for the railroad and marine industries; hard chrome plating of original equipment cylinder liners for major domestic locomotive manufacturers and stationary power equipment manufacturers, the electrolessplating of nonmetallic computer and other electronic enclosures to provide electromagnetic and radio frequency interference protection, and the development of new products for its proprietary nickel, tin, iron and hard chrome plated finishes; and (c) the sale of patent licenses with engineering support services and the sale of consulting engineering services to the oil and gas production, gas processing and sulfur recovery industries.

     (b) Section 7.03 of the Credit Agreement is hereby amended to add a new clause (c) thereto to read as follows:

     (c) the Borrower or any Subsidiary may make any Disposition permitted under Section 7.04.

     (c) Sections 7.04(d) and (e) of the Credit Agreement are hereby amended to read as follows:

     (d) Dispositions of capital stock or all or substantially all of the assets of any Subsidiary not engaged in the businesses described in Section 5.17(a)(i) or 5.17(a)(ii);

     (e) [Intentionally Omitted]; and

     (d) Section 7.04 of the Credit Agreement is hereby amended by adding a new clause (f) thereto to read as follows:

     (f) Dispositions of property by (i) any Subsidiary to the Borrower or to a Guarantor or (ii) the Borrower to any Guarantor;

     (e) Article IX of the Credit Agreement is hereby amended by adding a new Section 9.13 thereto to read as follows:

     9.13 Guaranty Matters. Effective automatically and immediately at the time that any Guarantor ceases to be a Subsidiary or all or substantially all of the assets of any Guarantor are Disposed of, in either case as a result of a transaction permitted hereunder and provided that such Guarantor is released from all Guaranty Obligations in respect of any other Indebtedness of the Borrower, such Guarantor shall be released from its Guaranty. Notwithstanding anything in Section 10.01 to the contrary, the Lenders and the L/C Issuer irrevocably authorize the Administrative Agent to evidence the release of any Guarantor from its obligations under any Guaranty as a result of either event set forth in the immediately preceding sentence.

2

     2. REPRESENTATIONS AND WARRANTIES TRUE; NO EVENT OF DEFAULT. By its execution and delivery hereof, the Borrower represents and warrants that, as of the date hereof:

     (a) the representations and warranties contained in the Credit Agreement and the other Loan Documents are true and correct on and as of the date hereof as made on and as of such date;

     (b) no event has occurred and is continuing which constitutes a Default or an Event of Default;

     (c) (i) the Borrower has full power and authority to execute and deliver this Sixth Amendment, (ii) this Sixth Amendment has been duly executed and delivered by the Borrower, and (iii) this Sixth Amendment and the Credit Agreement, as amended hereby, constitute the legal, valid and binding obligations of the Borrower, enforceable in accordance with their respective terms, except as enforceability may be limited by applicable debtor relief laws and by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law) and except as rights to indemnity may be limited by federal or state securities laws;

     (d) neither the execution, delivery and performance of this Sixth Amendment or the Credit Agreement, as amended hereby, nor the consummation of any transactions contemplated herein or therein, will conflict with any Law or Organization Documents of the Borrower, or any indenture, agreement or other instrument to which the Borrower or any of its property is subject; and

     (e) no authorization, approval, consent, or other action by, notice to, or filing with, any governmental authority or other Person not previously obtained is required for the execution, delivery or performance by the Borrower of this Sixth Amendment.

     3. CONDITIONS TO EFFECTIVENESS. This Sixth Amendment shall be effective upon satisfaction or completion of the following:

     (a) the Administrative Agent shall have received counterparts of this Sixth Amendment executed by the Required Lenders;

     (b) the Administrative Agent shall have received counterparts of this Sixth Amendment executed by the Borrower and acknowledged by each Guarantor; and

     (c) the Administrative Agent shall have received, in form and substance satisfactory to the Administrative Agent and its counsel, such other documents, certificates and instruments as the Administrative Agent shall require.

3

     4. REFERENCE TO THE CREDIT AGREEMENT.

     (a) Upon the effectiveness of this Sixth Amendment, each reference in the Credit Agreement to “this Agreement”, “hereunder”, or words of like import shall mean and be a reference to the Credit Agreement, as affected and amended hereby.

     (b) The Credit Agreement, as amended by the amendments referred to above, shall remain in full force and effect and is hereby ratified and confirmed.

     5. COSTS, EXPENSES AND TAXES. The Borrower agrees to pay on demand all costs and expenses of the Administrative Agent in connection with the preparation, reproduction, execution and delivery of this Sixth Amendment and the other instruments and documents to be delivered hereunder (including the reasonable fees and out-of-pocket expenses of counsel for the Administrative Agent with respect thereto).

     6. GUARANTOR’S ACKNOWLEDGMENT. By signing below, each Guarantor (a) acknowledges, consents and agrees to the execution, delivery and performance by the Borrower of this Sixth Amendment, (b) acknowledges and agrees that its obligations in respect of its Guaranty (i) are not released, diminished, waived, modified, impaired or affected in any manner by this Sixth Amendment or any of the provisions contemplated herein, (c) ratifies and confirms its obligations under its Guaranty, and (d) acknowledges and agrees that it has no claims or offsets against, or defenses or counterclaims to, its Guaranty, including the release of OEL, Ltd. from its obligation under any Guaranty.

     7. EXECUTION IN COUNTERPARTS. This Sixth Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which when taken together shall constitute but one and the same instrument. For purposes of this Sixth Amendment, a counterpart hereof (or signature page thereto) signed and transmitted by any Person party hereto to the Administrative Agent (or its counsel) by facsimile machine, telecopier or electronic mail is to be treated as an original. The signature of such Person thereon, for purposes hereof, is to be considered as an original signature, and the counterpart (or signature page thereto) so transmitted is to be considered to have the same binding effect as an original signature on an original document.

     8. GOVERNING LAW; BINDING EFFECT. This Sixth Amendment shall be governed by and construed in accordance with the laws of the State of Texas applicable to agreements made and to be performed entirely within such state, provided that each party shall retain all rights arising under federal law, and shall be binding upon the parties hereto and their respective successors and assigns.

     9. HEADINGS. Section headings in this Sixth Amendment are included herein for convenience of reference only and shall not constitute a part of this Sixth Amendment for any other purpose.

     10. ENTIRE AGREEMENT. THE CREDIT AGREEMENT, AS AMENDED BY THIS SIXTH AMENDMENT, AND THE OTHER LOAN DOCUMENTS REPRESENT THE

4

FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

REMAINDER OF PAGE LEFT INTENTIONALLY BLANK

5

     IN WITNESS WHEREOF, this Sixth Amendment is executed as of the date first set forth above.

ELKCORP
By:
	Name:
	Title:

6

BANK OF AMERICA, N.A., as Administrative
Agent
By:
	Name:
	Title:

7

BANK OF AMERICA, N.A., as a Lender, L/C
Issuer and Swing Line Lender
By:
	Name:
	Title:

8

JPMORGAN CHASE BANK, N.A., as a Lender
and Documentation Agent
By:
	Name:
	Title:

9

THE NORTHERN TRUST COMPANY, as a
Lender
By:
	Name:
	Title:

10

WELLS FARGO BANK, NATIONAL
ASSOCIATION, as a Lender
By:
	Name:
	Title:

11

COMPASS BANK, as a Lender
By:
	Name:
	Title:

12

HIBERNIA NATIONAL BANK, as a Lender
By:
	Name:
	Title:

13

BRANCH BANKING AND TRUST
COMPANY, as a Lender
By:
	Name:
	Title:

14

KEYBANK NATIONAL ASSOCIATION, as a
Lender
By:
	Name:
	Title:

15

ACKNOWLEDGED AND AGREED TO:

ELK PREMIUM BUILDING PRODUCTS, INC.

     (formerly known as Elk Corporation of Dallas)

ELK CORPORATION OF TEXAS
ELK CORPORATION OF AMERICA
ELK CORPORATION OF ARKANSAS
ELK CORPORATION OF ALABAMA
OEL, LTD.
CHROMIUM CORPORATION
ELK TECHNOLOGY GROUP, INC.
ELK TECHNOLOGIES, INC.
ELK PERFORMANCE NONWOVEN FABRICS, INC.
ELK COMPOSITE BUILDING PRODUCTS, INC.
LUFKIN PATH FORWARD, INC.

By:
	Name:
	Title:
NELPA, INC.
By:
	Name:
	Title:

16

ELK GROUP, L.P.
(formerly known as Elcor Service Limited Partnership)
By:	ELK GROUP, INC.
	(formerly known as Elcor Management Corporation),
	Its General Partner
By:
	Name:
	Title:
ELK GROUP, INC.
(formerly known as Elcor Management Corporation)
By:
	Name:
	Title:

17

EX-4.12

EXHIBIT 4.12

SEVENTH AMENDMENT TO CREDIT AGREEMENT

     THIS SEVENTH AMENDMENT TO CREDIT AGREEMENT (this “Seventh Amendment”), dated as of August 12, 2005, is entered into among ELKCORP (formerly known as Elcor Corporation), a Delaware corporation (the “Borrower”), the lenders listed on the signature pages hereof as Lenders (the “Lenders”), BANK ONE, N.A., as Documentation Agent, and BANK OF AMERICA, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer.

BACKGROUND

     A. The Borrower, certain of the Lenders, the Documentation Agent, the Syndication Agent, the Administrative Agent, the Swing Line lender and the L/C Issuer are parties to that certain Credit Agreement, dated as of November 30, 2000, as amended by that certain First Amendment to Credit Agreement, dated as of March 31, 2001, that certain Second Amendment to Credit Agreement, dated as of June 5, 2002, that certain Third Amendment to Credit Agreement, dated as of February 20, 2003, that certain Fourth Amendment to Credit Agreement, dated as of March 7, 2003, that certain Fifth Amendment to Credit Agreement, dated as of December 5, 2003, and that certain Sixth Amendment to Credit Agreement, dated as of May 27, 2005 (said Credit Agreement, as amended, the “Credit Agreement”). The terms defined in the Credit Agreement and not otherwise defined herein shall be used herein as defined in the Credit Agreement.

     B. The Borrower has requested certain amendments to the Credit Agreement.

     C. The Lenders, the Documentation Agent, the Administrative Agent, the Swing Line Lender and the L/C Issuer hereby agree to amend the Credit Agreement, subject to the terms and conditions set forth herein.

     NOW, THEREFORE, in consideration of the covenants, conditions and agreements hereafter set forth, and for other good and valuable consideration, the receipt and adequacy of which are all hereby acknowledged, the Borrower, the Lenders, the Swing Line Lender, the L/C Issuer and the Administrative Agent covenant and agree as follows:

     1. AMENDMENTS.

     (a) The definition of “Permitted Investment” set forth in Section 1.01 of the Credit Agreement is hereby amended by amending clause (h) thereof to read as follows:

     (h) Investments in any Guarantor, including any Person that simultaneously becomes a Guarantor at the time of the initial Investment therein;

     (b) Section 7.01 of the Credit Agreement is hereby amended by (i) deleting “and” after clause (g) thereof, (ii) deleting “.” after clause (h) thereof and inserting “; and” in lieu thereof and (iii) adding a new clause (i) thereto to read as follows:

1

     (i) Liens (i) securing Indebtedness in respect of capital leases and purchase money obligations for fixed or capital assets, provided that (A) such Liens do not at any time encumber any property other than the property financed by such Indebtedness and (B) the Indebtedness secured thereby does not exceed the cost or fair market value, whichever is lower, of the property being acquired on the date of acquisition and (ii) encumbering property acquired in a Permitted Investment, provided that (A) such Liens were already in existence prior to the date of such Permitted Investment and were not created in contemplation of or in connection with such Permitted Investment, (B) such Liens do not at any time encumber any property other than property theretofore encumbered by such Liens and (C) the Indebtedness secured thereby (other than interest accruing thereon in accordance with its terms) does not exceed the amount secured on the date of such Permitted Investment; provided further, however, the aggregate principal amount of Indebtedness secured by Liens permitted pursuant to both of clauses (i) and (ii) immediately preceding shall not exceed $25,000,000 at any time.

     (c) Exhibit E to the Credit Agreement, the Compliance Certificate, is hereby amended to be in the form of Exhibit E to this Seventh Amendment.

     2. REPRESENTATIONS AND WARRANTIES TRUE; NO EVENT OF DEFAULT. By its execution and delivery hereof, the Borrower represents and warrants that, as of the date hereof:

     (a) the representations and warranties contained in the Credit Agreement and the other Loan Documents are true and correct on and as of the date hereof as made on and as of such date;

     (b) no event has occurred and is continuing which constitutes a Default or an Event of Default;

     (c) (i) the Borrower has full power and authority to execute and deliver this Seventh Amendment, (ii) this Seventh Amendment has been duly executed and delivered by the Borrower, and (iii) this Seventh Amendment and the Credit Agreement, as amended hereby, constitute the legal, valid and binding obligations of the Borrower, enforceable in accordance with their respective terms, except as enforceability may be limited by applicable debtor relief laws and by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law) and except as rights to indemnity may be limited by federal or state securities laws;

     (d) neither the execution, delivery and performance of this Seventh Amendment or the Credit Agreement, as amended hereby, nor the consummation of any transactions contemplated herein or therein, will conflict with any Law or Organization Documents of the Borrower, or any indenture, agreement or other instrument to which the Borrower or any of its property is subject; and

2

     (e) no authorization, approval, consent, or other action by, notice to, or filing with, any governmental authority or other Person not previously obtained is required for the execution, delivery or performance by the Borrower of this Seventh Amendment.

     3. CONDITIONS TO EFFECTIVENESS. This Seventh Amendment shall be effective upon satisfaction or completion of the following:

     (a) the Administrative Agent shall have received counterparts of this Seventh Amendment executed by the Required Lenders;

     (b) the Administrative Agent shall have received counterparts of this Seventh Amendment executed by the Borrower and acknowledged by each Guarantor; and

     (c) the Administrative Agent shall have received, in form and substance satisfactory to the Administrative Agent and its counsel, such other documents, certificates and instruments as the Administrative Agent shall require.

     4. REFERENCE TO THE CREDIT AGREEMENT.

     (a) Upon the effectiveness of this Seventh Amendment, each reference in the Credit Agreement to “this Agreement”, “hereunder”, or words of like import shall mean and be a reference to the Credit Agreement, as affected and amended hereby.

     (b) The Credit Agreement, as amended by the amendments referred to above, shall remain in full force and effect and is hereby ratified and confirmed.

     5. COSTS, EXPENSES AND TAXES. The Borrower agrees to pay on demand all costs and expenses of the Administrative Agent in connection with the preparation, reproduction, execution and delivery of this Seventh Amendment and the other instruments and documents to be delivered hereunder (including the reasonable fees and out-of-pocket expenses of counsel for the Administrative Agent with respect thereto).

     6. GUARANTOR’S ACKNOWLEDGMENT. By signing below, each Guarantor (a) acknowledges, consents and agrees to the execution, delivery and performance by the Borrower of this Seventh Amendment, (b) acknowledges and agrees that its obligations in respect of its Guaranty (i) are not released, diminished, waived, modified, impaired or affected in any manner by this Seventh Amendment or any of the provisions contemplated herein, (c) ratifies and confirms its obligations under its Guaranty, and (d) acknowledges and agrees that it has no claims or offsets against, or defenses or counterclaims to, its Guaranty.

     7. EXECUTION IN COUNTERPARTS. This Seventh Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which when taken together shall constitute but one and the same instrument. For purposes of this Seventh Amendment, a counterpart hereof (or signature page thereto) signed and transmitted by any Person party hereto to the Administrative Agent (or its counsel) by facsimile machine, telecopier or electronic mail is to be treated as an original. The signature of such Person thereon,

3

for purposes hereof, is to be considered as an original signature, and the counterpart (or signature page thereto) so transmitted is to be considered to have the same binding effect as an original signature on an original document.

     8. GOVERNING LAW; BINDING EFFECT. This Seventh Amendment shall be governed by and construed in accordance with the laws of the State of Texas applicable to agreements made and to be performed entirely within such state, provided that each party shall retain all rights arising under federal law, and shall be binding upon the parties hereto and their respective successors and assigns.

     9. HEADINGS. Section headings in this Seventh Amendment are included herein for convenience of reference only and shall not constitute a part of this Seventh Amendment for any other purpose.

     10. ENTIRE AGREEMENT. THE CREDIT AGREEMENT, AS AMENDED BY THIS SEVENTH AMENDMENT, AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

REMAINDER OF PAGE LEFT INTENTIONALLY BLANK

4

     IN WITNESS WHEREOF, this Seventh Amendment is executed as of the date first set forth above.

ELKCORP
By:
	Gregory J. Fisher
	Senior Vice President, Chief Financial Officer and Controller

5

BANK OF AMERICA, N.A., as Administrative Agent
By:
	Name:
	Title:

6

BANK OF AMERICA, N.A., as a Lender, L/C Issuer and Swing Line Lender
By:
	Name:
	Title:

7

JPMORGAN CHASE BANK, N.A., as a Lender and Documentation Agent
By:
	Name:
	Title:

8

THE NORTHERN TRUST COMPANY, as a Lender
By:
	Name:
	Title:

9

WELLS FARGO BANK, NATIONAL ASSOCIATION, as a Lender
By:
	Name:
	Title:

10

COMPASS BANK, as a Lender
By:
	Name:
	Title:

11

HIBERNIA NATIONAL BANK, as a Lender
By:
	Name:
	Title:

12

BRANCH BANKING AND TRUST COMPANY, as a Lender
By:
	Name:
	Title:

13

KEYBANK NATIONAL ASSOCIATION, as a Lender
By:
	Name:
	Title:

14

ACKNOWLEDGED AND AGREED TO:

ELK PREMIUM BUILDING PRODUCTS, INC.
          (formerly known as Elk Corporation of Dallas)
ELK CORPORATION OF TEXAS
ELK CORPORATION OF AMERICA
ELK CORPORATION OF ARKANSAS
ELK CORPORATION OF ALABAMA
MIDLAND PATH FORWARD, INC.
          (formerly known as OEL, Ltd.)
CHROMIUM CORPORATION
ELK TECHNOLOGY GROUP, INC.
ELK TECHNOLOGIES, INC.
ELK PERFORMANCE NONWOVEN FABRICS, INC.
ELK COMPOSITE BUILDING PRODUCTS, INC.
LUFKIN PATH FORWARD, INC.

By:
	Gregory J. Fisher
	Vice President
NELPA, INC.
By:
	John Freshwater
	Vice President

15

ELK GROUP, L.P.
(formerly known as Elcor Service Limited Partnership)

By:	ELK GROUP, INC.
	(formerly known as Elcor Management Corporation),
	Its General Partner
	By:
		Gregory J. Fisher
		Senior Vice President, Chief Financial Officer and Controller

ELK GROUP, INC.
(formerly known as Elcor Management Corporation),
Its General Partner

By:
	Gregory J. Fisher
	Senior Vice President, Chief Financial Officer and Controller

16

EXHIBIT E

FORM OF COMPLIANCE CERTIFICATE

Financial Statement Date: _____________

To: Bank of America, N.A., as Administrative Agent

Ladies and Gentlemen:

     Reference is made to that certain Credit Agreement, dated as of November 30, 2000 (as amended, restated, extended, supplemented or otherwise modified in writing from time to time, the “Agreement;” the terms defined therein being used herein as therein defined), among ElkCorp (the “Borrower”), the Lenders from time to time party thereto, and Bank of America, N.A., as Administrative Agent, L/C Issuer and Swing Line Lender.

     The undersigned Responsible Officer hereby certifies as of the date hereof that he/she is the                                                             of the Borrower, and that, as such, he/she is authorized to execute and deliver this Certificate to the Administrative Agent on the behalf of the Borrower, and that:

[Use following for fiscal year-end financial statements]

     1. Attached hereto as Schedule 1 are the year-end audited financial statements required by Section 6.01(a) of the Agreement for the fiscal year of the Borrower ended as of the above date, together with the report and opinion of an independent certified public accountant required by such section.

[Use following for fiscal quarter-end financial statements]

     1. Attached hereto as Schedule 1 are the unaudited financial statements required by Section 6.01(b) of the Agreement for the fiscal quarter of the Borrower ended as of the above date. Such financial statements fairly present the financial condition, results of operations and cash flows of the Borrower and its Subsidiaries in accordance with GAAP as at such date and for such period, subject only to normal year-end audit adjustments and the absence of footnotes.

     2. The undersigned has reviewed and is familiar with the terms of the Agreement and has made, or has caused to be made under his/her supervision, a detailed review of the transactions and condition (financial or otherwise) of the Borrower during the accounting period covered by the attached financial statements.

     3. A review of the activities of the Borrower during such fiscal period has been made under the supervision of the undersigned with a view to determining whether during such fiscal period the Borrower performed and observed all its Obligations under the Loan Documents, and

[select one:]

Exhibit E - 1

     [to the best knowledge of the undersigned during such fiscal period, the Borrower performed and observed each covenant and condition of the Loan Documents applicable to it.]

—or—

     [the following covenants or conditions have not been performed or observed and the following is a list of each such Default or Event of Default and its nature and status:]

     4. The financial covenant analyses and information set forth on Schedule 2 attached hereto are true and accurate on and as of the date of this Certificate.

          IN WITNESS WHEREOF, the undersigned has executed this Certificate as of                     ,                     .

ELKCORP
By:
	Name:
	Title:

Exhibit E - 2

For the Quarter/Year ended ___________________(“Statement Date”)

SCHEDULE 2

to the Compliance Certificate

($ in 000’s)

I.	Leverage Ratio – For Determination of Applicable Rate
	A.	Consolidated EBITDA for four consecutive fiscal quarters ending on above date (“Subject Period”):
		1.	Consolidated Adjusted Net Income for Subject Period:	$
		2.	Consolidated Interest Expense for Subject Period:	$
		3.	Provision for income taxes for Subject Period:	$
		4.	Depreciation expenses and Amortization expenses for intangibles for Subject Period:	$
		5.	Trailing 4 fiscal quarters of Consolidated EBITDA of assets acquired during Subject Period:	$
		6.	Trailing 4 fiscal quarters of Consolidated EBITDA of assets disposed of during Subject Period:	$
		7.	Consolidated EBITDA (lines I.A 1 + 2 + 3 + 4 + 5 + 6):	$
	B.	Consolidated Funded Indebtedness at Statement Date:		$
	C.	Leverage Ratio (Line I.A.7 ¸ Line I.B.):		$
II.	Section 7.01(i) – Maximum Secured Indebtedness.
	A.	Aggregate amount of Indebtedness secured by capital leases and purchase money obligations		$
	B.	Aggregate amount of Indebtedness secured by Liens on property acquired in a Permitted Investment		$
	C.	Aggregate secured Indebtedness (Lines II.A. + II.B.)		$
	D.	Maximum permitted secured Indebtedness		$	25,000,000

Exhibit E - 1

	E.	Excess Available for secured Indebtedness (Line II.D. – II.C.)	$
III.	Section 7.05 – Restricted Payments.
	A.	Base:	$	15,000,000
	B.	35% of cumulative Consolidated Net Income (100% in case of a deficit) commencing July 1, 2000:	$
	C.	Amounnt received from sale or disposition of Capital Stock acquired in a Treasury Stock Purchase:	$
	D.	Amount Available for Restricted Payments (Lines III.A. + (or minus if a deficit) III.B. + III.C.):	$
	E.	Restricted Payments made during term of Agreement:	$
	F.	Excess Available for Restricted Payments (Line III.D. – III.E.):	$
IV.	Section 7.12(a) – Consolidated Net Worth.
	A.	Actual Consolidated Net Worth at Statement Date:	$
	B.	50% of Consolidated Net Income for each fiscal year ending after June 30, 2001 (no reduction for losses):	$
	C.	100% of increases in Shareholders’ Equity after date of Agreement from issuance and sale of capital stock (including from conversion of debt securities, but excluding treasury stock):	$
	D.	Minimum required Consolidated Net Worth (Lines IV.B + IV.C plus $130,000,000):	$
	E.	Excess (deficient) for covenant compliance (Line IV.A – IV.D):	$
V.	Section 7.13(b) – Fixed Charge Coverage Ratio.
	A.	Consolidated EBITDA for four consecutive fiscal quarters ending on above date (“Subject Period”) (Line I.A.7 above):	$

Exhibit E - 2

B.	Cash Taxes of Borrower and its Subsidiaries for Subject Period:		$
C.	Maintenance Capital Expenditures for Subject Period:		$	12,000,000
D.	Consolidated Interest Charges for Subject Period:		$
E.	Principal payments of Indebtedness of the Borrower and its Subsidiaries required to be paid during Subject Period:		$
F.	Fixed Charge Coverage Ratio (Lines V. A. – V.B. – V.C.) ¸ (Lines (V.D. + V.E.):	to 1
G.	Fixed Charge Coverage Ratio for immediately preceding two consecutive fiscal quarters	to 1
	Minimum required:	to 1

	Minimum Fixed
	Charge Coverage
	Ratio
Each fiscal quarter	1.50 to 1
For each fiscal quarter after Fixed Charge Coverage Ratio for the immediately preceding two consecutive fiscal quarters was less than 1.75 to 1	1.75 to 1

VI.	Section 7.13(c) – Capitalization Ratio.
	A.	Consolidated Funded Indebtedness at Statement Date:			$
	B.	Capitalization:
		1.	Consolidated Funded Indebtedness at Statement Date:		$
		2.	Consolidated Net Worth (Line IV.A. above)		$
		3.	Capitalization (Lines VI.B. 1 + 2):		$
	C.	Capitalization Ratio (Line VI.A) ¸ (Line VI.B.3):		_____ to 1

Exhibit E - 3

Maximum allowed:

	Maximum
	Capitalization
Any fiscal quarter	0.55 to 1

Exhibit E - 4

EX-10.6

Exhibit 10.6

ASSET PURCHASE AGREEMENT

     THIS ASSET PURCHASE AGREEMENT (this “Agreement”) is entered into as of May 31, 2005, by and among Torgo Ltd., a Texas limited partnership (the “Purchaser”), ELK TECHNOLOGY GROUP, INC., a Delaware corporation (the “Parent”), and OEL, Ltd., d.b.a. “Ortloff Engineers, Ltd.”, a Nevada corporation (the “Company”). Certain capitalized terms used in this Agreement are defined in the attached Exhibit A.

     The Parent owns all of the outstanding shares of capital stock (the “Shares”) of the Company. The Purchaser desires to purchase certain assets of the Company and to assume certain of the obligations and liabilities of the Company, and the Company desires to sell such assets to the Purchaser and to assign such obligations and liabilities to the Purchaser on the terms and conditions set forth in this Agreement (such sale, purchase, assignment and assumption, the “Transaction”).

     In consideration of the foregoing recitals, the mutual representations, warranties and covenants set forth in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which the parties acknowledge, the parties agree as follows:

ARTICLE 1

PURCHASE AND SALE

     1.1 Purchase and Sale of Assets. Subject to the terms and conditions of this Agreement, at the Closing, except as otherwise specifically provided in this Agreement, the Company will grant, sell, assign, transfer and deliver to the Purchaser, and the Purchaser will purchase and acquire from the Company, all right, title and interest of the Company in and to (a) the business of the Company as a going concern (the “Business”) and (b) all of the assets, properties and rights of the Company of every kind and description, real, personal and mixed, tangible and intangible, wherever situated other than the Excluded Assets including, but not limited to, those assets set forth on Schedule 1.1 (which Business, assets, properties and rights are collectively referred to in this Agreement as the “Assets”), free and clear of all mortgages, liens, pledges, security interests, charges, claims, restrictions and encumbrances of any nature whatsoever, except Assumed Liabilities and liens for taxes not yet due and payable. The Company and the Parent shall use commercially reasonable efforts to obtain consents, to the extent required pursuant to Sections 6.1(f) and 6.2(f), of other parties to the Contracts included in the Assets.

     1.2 Excluded Assets. Notwithstanding anything to the contrary set forth in this Agreement, the Assets will not include (a) if the Effective Date is the Closing Date, cash, cash equivalents and marketable securities, (b) the corporate charter, qualifications to conduct business as a foreign corporation, arrangements with registered agents relating to foreign qualifications, taxpayer and other identification numbers, seals, minute books, stock transfer books, blank stock certificates, and other documents relating to the organization, maintenance, and existence of the Company as a corporation, (c) the rights that accrue to the Company under this Agreement and any documents, instruments or agreements executed in connection herewith, (d) the Company Long Term Receivables, (e) 25% of the Scheduled Relationships Receivables, (f) prepaid Taxes, (g) prepaid insurance, (h) notes payable by the Company’s employees to ElkCorp or any of its Affiliates and (i) all accounts receivable owed by OGP/PGB in the approximate amount of $242,892 (collectively, the “Excluded Assets”).

     1.3 Assumed Liabilities. The Purchaser will assume, in connection with the Contemplated Transactions, the liabilities and obligations of the Company described on Schedule 1.3 (collectively, the “Assumed Liabilities”). To the extent that Parent or the Company pay any Assumed Liabilities after Closing, Purchaser shall promptly reimburse Purchaser or Company for the amount of such payment upon

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presentation of reasonably appropriate documentation. If any third-party’s consent or approval to the assignment or other transfer to the Purchaser of a contract to be transferred pursuant to this Agreement has not been obtained prior to the Closing, then as to the burdens, obligations, rights or benefits under or pursuant to such contracts (collectively, the “Rights”) not assignable to the Purchaser because such consent or approval has not been obtained: (a) Company or Parent, as the case may be, shall hold the Rights in trust for Purchaser, for the account and benefit of Purchaser; (b) after the Closing, (i) Company or Parent, as the case may be, shall take such reasonable actions and do all such things as shall be reasonably necessary or desirable in order that the value of the Rights shall be preserved and shall inure to the benefit of Purchaser and such that all benefits under the Rights may be received by Purchaser, and (ii) Purchaser shall perform the burdens and obligations under such Rights; and (c) after the Closing, Company, Parent and Purchaser shall continue to use their respective reasonable efforts to obtain such consent or approval. All liabilities of the Company other than the Assumed Liabilities shall remain the sole responsibility of and shall be retained, paid, performed and discharged solely by the Company. Purchaser is not assuming any debt, liability or obligation of the Company, whether known or unknown, fixed or contingent, except as herein specifically otherwise provided.

     1.4 Purchase Price. The cash purchase price (the “Purchase Price”) for the Assets is the sum of (a) $14,257,108 plus (b) the amount of the Purchase Price Adjustment calculated pursuant to Section 1.8 plus (c) if the Effective Date is May 1, 2005, the amount of the cash advances (including by way of loans) by the Parent to the Company subsequent to April 30, 2005 and prior to the Closing Date in the Ordinary Course of Business less the aggregate amounts of cash distributed (including by way of repayment of loans) by the Company to the Parent subsequent to April 30, 2005 and prior to the Closing Date. As of the date of this Agreement, the cash amount to be paid is $13,619,722. At the Closing, the Purchaser will pay to the Parent the Purchase Price by wire transfer of immediately available funds to an account designated by the Parent on the Closing Date. In addition, the Purchaser shall pay to the Parent the Company Long Term Receivables and Scheduled Relationship Receivables referred to in Section 1.2 pursuant to Section 9.5 promptly after Purchaser’s receipt of payment for such receivables.

     1.5 Allocation of Purchase Price. The parties hereto agree that the Purchase Price shall be allocated to the Assets in accordance with Schedule 1.5 hereto. The parties hereto acknowledge that such allocation is based on the fair market value of the Assets and shall be binding upon the parties hereto for Tax purposes. Each party covenants to report gain or loss or cost basis, as the case may be, in a manner consistent with Schedule 1.5 for Tax purposes. As soon as practicable following Closing, the parties shall exchange mutually acceptable and completed IRS Forms 8594 which they shall use to report the Contemplated Transactions to the Internal Revenue Service in accordance with such allocation.

     1.6 Closing. The parties agree to conduct the closing of the Transaction (“Closing”) at the offices of Baker & McKenzie LLP, counsel for the Parent, at 2300 Trammell Crow Center, 2001 Ross Avenue, Dallas, Texas 75201, on May 31, 2005, or, if all of the conditions set forth in Article 6 have not been satisfied or waived on such date, on such mutually agreeable later date as soon as practicable but in no event later than three (3) business days after satisfaction or waiver of such conditions, or at such other time and place as the Company, the Parent and the Purchaser may agree in writing (such date of the Closing, the “Closing Date”).

     1.7 Closing Deliveries. At the Closing:

          (a) the Parent and the Company will deliver to the Purchaser the various certificates, instruments, documents and agreements referred to in Section 6.2 of this Agreement; and

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          (b) the Purchaser will deliver to the Parent and the Company (i) the various certificates, instruments and documents referred to in Section 6.1 of this Agreement and (ii) the Purchase Price.

     1.8 Purchase Price Adjustment. If the Effective Date is May 1, 2005, the Purchase Price Adjustment described in Section 1.4 shall be $78,462, which is the difference, if any between the Initial Date Net Working Capital (as defined below) shown on the Initial Working Capital Detail and the net working capital as of April 30, 2005, as agreed between the parties. If the Effective Date is the Closing Date, the Purchase Price Adjustment described in Section 1.4 shall be calculated as follows:

          (a) The net working capital of the Company as of March 31, 2005 (“Initial Date Net Working Capital”) to be transferred as part of the Assets was calculated in accordance with GAAP and is defined as set forth on the Working Capital Detail attached as Schedule 1.8 and referred to in this Section 1.8 as “Initial Working Capital Detail.” Within 30 days after the Closing Date, the Parent shall deliver to the Purchaser a written calculation (“Closing Date Working Capital Detail”) of the net working capital of the Company as of the Closing Date (“Closing Date Net Working Capital”). The Closing Date Working Capital Detail shall be (i) prepared by the Company at the Company’s expense on a basis consistent with the Initial Working Capital Detail and with adjustments on the same basis as the adjustments set forth in the Initial Working Capital Detail and (ii) delivered to the Purchaser together with a written statement by the Company of the difference, if any between the Initial Date Net Working Capital shown on the Initial Working Capital Detail and the Closing Date Net Working Capital shown on the Closing Date Working Capital Detail, such difference, if any, to be referred to herein as the “Closing Date Adjustment”). The Parent shall consult with the Purchaser in good faith in connection with the preparation of the Closing Date Working Capital Detail and employees of the Parent shall be permitted to meet with employees of the Purchaser in connection with the preparation of the Closing Date Working Capital Detail.

          (b) The Purchaser shall have 30 days after delivery to the Purchaser of the Closing Date Working Capital Detail (the “Review Period”) to review the Closing Date Working Capital Detail and the Company’s calculation of the Closing Date Adjustment. The Purchaser shall notify the Company in writing prior to the expiration of the Review Period of the Purchaser’s acceptance of or disagreement with the Closing Date Working Capital Detail and the Closing Date Adjustment. Failure by the Purchaser to notify the Company of either acceptance of or disagreement with the Company’s calculation of the Closing Date Adjustment shall be deemed acceptance thereof. If the Purchaser disputes the Company’s determination of the Closing Date Adjustment, the Purchaser shall, prior to the expiration of the Review Period, notify the Company of the Purchaser’s objections and deliver with such notice the Purchaser’s proposed calculation of the Closing Date Adjustment. The Company shall have 20 days after delivery of the Purchaser’s proposed calculation of the Closing Date Adjustment to review the Purchaser’s proposed Closing Date Adjustment. If the Company disputes the Purchaser’s proposed Closing Date Adjustment, then the Purchaser and the Company shall engage an independent accounting firm of national reputation (other than the Purchaser’s CPA or the Company’s CPA) to resolve the dispute and determine the Closing Date Adjustment, which determination shall be final and binding upon the parties. The fees and expenses of such independent accounting firm shall be paid one-half by the Company and one-half by the Purchaser.

          (c) Upon the final determination of the Closing Date Adjustment, the Purchase Price shall be (i) decreased dollar-for-dollar to the extent that the Initial Date Net Working Capital shown on the Initial Working Capital Detail is greater than the Closing Date Net Working Capital shown on the Closing Date Working Capital Detail and (ii) increased dollar-for-dollar to the extent that the Initial Date Net Working Capital shown on the Initial Working Capital Detail is less than the Closing Date Net Working Capital shown on the Closing Date Working Capital Detail. The Company shall promptly pay to the Purchaser the amount of any such decrease in the Purchase Price in cash no later than 10 days after

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the date of determination of the Closing Date Adjustment, by wire transfer of immediately available funds to an account designated by the Purchaser. The Purchaser shall promptly pay to the Company the amount of any such increase in the Purchase Price in cash no later than 10 days after the date of determination of the Closing Date Adjustment, by wire transfer of immediately available funds to an account designated by the Company.

ARTICLE 2

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     Except as set forth on the disclosure schedule attached as Exhibit B-1 to this Agreement (the “Company Disclosure Schedule”) (it being agreed that an item included on a particular section of the Company Disclosure Schedule referenced in any Section or subsection of this Article 2 is deemed to relate to each other Section or subsection of this Article 2 to the extent such relationship is reasonably apparent), the Company represents and warrants to the Purchaser that the statements set forth in this Article 2 are true and complete. Notwithstanding any other provision of this Agreement, the Company will not be deemed to have breached the representations and warranties contained in this Article 2 (a) if the Company’s Senior Management has, on or before the Closing Date, knowledge of any fact, event or circumstance giving rise to the alleged breach or inaccuracy or (b) unless the fact, event or circumstance giving rise to the alleged breach or inaccuracy, individually or taken together with all other facts, events or circumstances inconsistent with any representation or warranty contained in this Article 2, has had or would reasonably be expected to have a Material Adverse Effect (whether or not any provisions of this Article 2 are qualified individually by any references to materiality).

     2.1 Corporate Organization.

          (a) The Company is a corporation duly organized, validly existing, and in good standing under the laws of the State of Nevada, and is duly qualified to conduct business and is in good standing under the laws of each jurisdiction in which any facts require qualification, except where the failure to so qualify would not result in a Material Adverse Effect. The Company has all corporate power and corporate authority it needs to carry on its operations and own its assets.

          (b) Section 2.1(b) of the Company Disclosure Schedule sets forth the corporate name and jurisdiction of incorporation of each Subsidiary.

     2.2 Capitalization. As of the date of this Agreement, the authorized capital stock of the Company consists of 1,000 shares of common stock, par value $0.01 per share, all of which have been duly authorized and are validly issued, fully paid and nonassessable. There are no outstanding or authorized options, warrants, rights, agreements or commitments to which the Company is a party or which are binding upon the Company providing for the issuance or redemption of any shares of the Company’s capital stock.

     2.3 Authorization. The Company has all corporate power and corporate authority it requires to execute, deliver and perform its obligations under this Agreement. The Company has obtained all approvals from its directors, and all other corporate approvals, if any, necessary for the due and valid authorization prior to the Closing Date of the Company’s execution, delivery and performance of this Agreement and the consummation by the Company of the Transaction and each of the other transactions contemplated by this Agreement (collectively, the “Contemplated Transactions”). The Company has duly and validly executed and delivered this Agreement. Assuming the due authorization, execution and delivery of this Agreement by the Purchaser, this Agreement is a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to (a) laws of general

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application relating to bankruptcy, insolvency, and the relief of debtors and (b) rules of law governing specific performance, injunctive relief and other equitable remedies.

     2.4 No Conflict. Except for the disclosures on Section 2.4 of the Company Disclosure Schedule, the requirements of the HSR Act and any antitrust or other competition law of jurisdictions outside the United States of America (if and to the extent any of the foregoing laws may apply), the Company’s execution, delivery, and performance of this Agreement and/or the consummation by the Company of the Contemplated Transactions do not (a) conflict with or violate any provision of the Company’s articles of incorporation or bylaws, (b) require the Company to make any filing with, or obtain any permit, authorization, consent or approval of, any Governmental Entity, (c) result in a breach or default under, create in any person the right to accelerate, terminate, modify or cancel, or require any notice, consent or waiver under, any Material Contract, material governmental permit, indebtedness, Security Interest or other material agreement or obligation to which the Company is a party or to which any of its assets is subject, in any case with or without due notice or lapse of time or both, (d) result in the imposition of any Security Interest upon any assets of the Company or (e) violate any law, order, writ, or injunction applicable to the Company or any of its assets; provided, however, that this Section 2.4 shall not apply with respect to those agreements, contracts, leases, licenses, and other arrangements described on Exhibit B to the Assignment and Assumption Agreement of even date herewith.

     2.5 Financial Matters.

          (a) Attached as Appendix A to the Company Disclosure Schedule is the balance sheet of the Company at March 31, 2005 (the “Most Recent Balance Sheet”), together with the related statement of operations for the eight-month period so ended, and the balance sheets of the Company at June 30, 2000, 2001, 2002, 2003 and 2004, together with related statements of operations for the twelve month periods so ended (collectively, the “Financial Statements”). The Financial Statements fairly present in all material respects the financial condition and results of operations of the Company as of the dates and periods stated.

          (b) Since the date of the Most Recent Balance Sheet, (i) there has not been any Material Adverse Change, nor has there occurred any event or development which would reasonably likely result in such a Material Adverse Change in the future, and (ii) neither the Company nor any Subsidiary has taken any of the actions set forth in paragraphs (i) through (ix) of Section 5.1(a) hereof.

     2.6 Tax Matters.

          (a) Each of the Company and each Subsidiary has filed all Tax Returns that it was required to file, and all such Tax Returns were complete and accurate, except for any errors or omissions that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. Each Affiliated Group has filed all Tax Returns that it was required to file with respect to any Affiliated Period, and all such Tax Returns were complete and accurate, except for any errors or omissions which are not, individually or in the aggregate, reasonably likely to have a Material Adverse Effect.

          (b) Each of the Company and each Subsidiary and each member of an Affiliated Group has paid all Taxes shown as due and payable on the Tax Returns referred to in Section 2.6(a) above, except for any failures to pay which are not, individually or in the aggregate, reasonably likely to have a Material Adverse Effect. Neither the Company nor any Subsidiary has any actual or overtly threatened liability for any Tax obligation of any taxpayer (including without limitation any Affiliated Group) other than the Company and the Subsidiaries, including any obligation under any Tax sharing agreement or under Treasury Regulations Section 1.1502-6 or any similar provision of law.

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          (c) All Taxes that the Company or any Subsidiary is or was required by law to withhold or collect have been duly withheld or collected and, to the extent required, have been paid to the proper Governmental Entity, except for any such Taxes with respect to which the failure to withhold, collect or pay would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

          (d) To the knowledge of the Company, no examination or audit of any Tax Return of the Company or any Subsidiary by any Governmental Entity is currently in progress or threatened. Neither the Company nor any Subsidiary has waived any statute of limitations with respect to Taxes or agreed to an extension of time with respect to a Tax assessment or deficiency affecting the Company or its Subsidiaries, which waiver or extension of time is currently outstanding. No Assets are subject to any lien arising in connection with any failure or alleged failure to pay any Tax.

     2.7 Assets Generally. Each of the Company and each Subsidiary owns or leases all tangible assets necessary for the conduct of its businesses as presently conducted and planned to be conducted. Each such tangible asset is free from defects, has been maintained in accordance with normal industry practice, is in good operating condition and repair (subject to normal wear and tear) and is suitable for the purposes for which it presently is used. No asset of the Company or any Subsidiary (tangible or intangible) is subject to any Security Interest.

     2.8 Intellectual Property.

          (a) Each of the Company and each Subsidiary owns, or has the right to use, or at the Closing will own or have the right to use, all Intellectual Property necessary for, or used in, the operation of its business as presently conducted (the “Company Intellectual Property”). The Company has taken reasonable measures to protect the proprietary nature of each item of Company Intellectual Property, except for any failure that would not reasonably be expected to have a Material Adverse Effect. To the knowledge of the Company, no other person is infringing, violating or misappropriating any of the Company Intellectual Property, except for any infringement, violation or misappropriation that would not reasonably be expected to have a Material Adverse Effect. Section 2.8(a) of the Company Disclosure Schedule lists each patent, patent application, copyright registration or application therefor, mask work registration or application therefor, and trademark, service mark and domain name registration or application therefor of the Company or any Subsidiary, including such registrations and applications to be transferred from the Parent to the Company pursuant to Section 5.2(c) and included in the Assets.

          (b) None of the activities or business presently conducted by the Company or any Subsidiary infringes or violates, or constitutes a misappropriation of, any Intellectual Property rights of any person, except for any infringement, violation or misappropriation that would not reasonably be expected to have a Material Adverse Effect.

          (c) The Company Intellectual Property constitutes all Intellectual Property necessary to conduct the business of the Company as currently conducted and as it will be conducted through the Closing Date and to conduct the business of the Company immediately after the Closing Date as it is being conducted as of the date hereof and as it will be conducted through the Closing Date.

     2.9 Owned Real Property. Neither the Company nor any Subsidiary owns any real property.

     2.10 Legal Compliance. Each of the Company and each Subsidiary, and the conduct and operations of its business, are and have been in compliance with each law, which (a) affects or relates to this Agreement or the consummation of any Contemplated Transaction or (b) is applicable to the

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Company or any Subsidiary or its respective business except where the failure to so comply would not have a Material Adverse Effect.

     2.11 Contracts.

          (a) Except for the contracts described in Section 2.11 of the Company Disclosure Schedule (collectively, the “Material Contracts”) or to which the Purchaser has consented (which consent shall not be unreasonably withheld, conditioned or delayed), the Company is not a party to or bound by the following:

               (i) any material distributor, sales, advertising or manufacturer’s representative contract that is not terminable within sixty (60) days by the Company and involving the payment by the Company of more than $100,000;

               (ii) any continuing contract for the purchase of materials, supplies, equipment or services involving payment by the Company of more than $100,000 over the life of the contract;

               (iii) any contract that expires, or may be renewed at the option of any person other than the Company so as to expire, more than one year from the date of this Agreement, and that involves payment by the Company of more than $100,000 over the remaining life of the contract;

               (iv) any trust indenture, mortgage, promissory note, loan agreement or other contract for the borrowing of money, any currency exchange, commodities or other hedging arrangement involving more than $100,000 or any material leasing transaction of the type required to be capitalized in accordance with GAAP;

               (v) any contract requiring capital expenditures by the Company in excess of $100,000 in the aggregate;

               (vi) any contract materially limiting the freedom of Company to engage in any line of business or to compete;

               (vii) any contract pursuant to which the Company is a lessor of any machinery, equipment, motor vehicles, office furniture, fixtures or other personal tangible property involving in the case of any such contract more than $100,000 in payments to the Company over the remaining life of the contract;

               (viii) any contract pursuant to which the Company has obtained a license to use the Intellectual Property of any other person and such use by the Company is material to the Company’s business;

               (ix) any material agreement of guarantee, support, indemnification, assumption or endorsement of, or any similar commitment to become liable for the obligations or other Liabilities of any other person in an amount in excess of $100,000 other than in connection with the license or sale of products in the Ordinary Course; or

               (x) any lease of (A) real property by the Company or (B) personal property used in the business of the Company and involving payment by the Company of more than $100,000.

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          (b) The Company has performed in all material respects all of the obligations required to be performed by it and is entitled to in accordance with the terms hereof all material benefits under each Material Contract, and has not received notice that it is in default in any material respect in respect of any Material Contract. Each of the Material Contracts is in full force and effect and has not been amended, and there exists no default or event of default or event, occurrence, condition or act, with respect to Company, or to Company’s knowledge with respect to the other contracting party, which, with the giving of notice, the lapse of time or the happening of any other event or conditions, would become a default or event of default under any Material Contract.

          (c) Notwithstanding the foregoing, this Section 2.11 shall not apply with respect to those agreements, contracts, leases, licenses, and other arrangements described on Exhibit B to the Assignment and Assumption Agreement of even date herewith.

     2.12 Powers of Attorney. There are no outstanding powers of attorney executed on behalf of the Company or any Subsidiary.

     2.13 Legal Proceedings. Except as described in Section 2.13 of the Company Disclosure Schedule, there is no Legal Proceeding pending or, to the Company’s knowledge, threatened against the Company, any Subsidiary or its assets. Neither the Company nor any Subsidiary is subject to any outstanding judgment, injunction or other order or ruling of, or settlement issued or approved by, any court or other Governmental Entity.

     2.14 Brokers’ Fees. Neither the Company nor any Subsidiary has any Liability to pay any fees or commissions to any broker, finder or agent with respect to the Contemplated Transactions.

     2.15 Licensees. Section 2.15 of the Company Disclosure Schedule sets forth an accurate and complete list of each licensee of the Company Intellectual Property and the amount of revenues accounted for by each such licensee through December 31, 2004.

     2.16 Insurance. Section 2.16 of the Company Disclosure Schedule lists each insurance policy (including fire, theft, casualty, general liability, workers’ compensation, business interruption, environmental, product liability and automobile insurance policies and bond and surety arrangements) to which the Company or any Subsidiary is a party, a named insured, or otherwise the beneficiary of coverage at any time within the past year. All premiums due and payable under those policies have been paid. Each of the Company and each Subsidiary is covered by insurance in scope and amount customary and reasonable for the businesses in which it is engaged.

     2.17 Employees. Section 2.17 of the Company Disclosure Schedule contains an accurate and complete list of (a) all current executive officers of the Company and each Subsidiary along with the position, date of hire or engagement, and the compensation and benefits of such individuals and (b) the aggregate number of employees and independent contractors in each division of the Company. To the knowledge of the Company, no employee or group of employees has any plans to terminate employment with the Company or enter into any business which would compete with or would be similar to the business of the Company. Neither the Company nor any Subsidiary is a party to or bound by any collective bargaining agreement, nor has the Company experienced any strikes, grievances, claims of unfair labor practices or other collective bargaining disputes. The Company has no knowledge of any organizational effort made or threatened, either currently or within the past two years, by or on behalf of any labor union with respect to employees of the Company or any Subsidiary.

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     2.18 Employee Benefits.

          (a) Section 2.18(a) of the Company Disclosure Schedule contains a complete and accurate list of all “employee pension benefit plans” (as defined in Section 3(2) of ERISA), all “employee welfare benefit plans” (as defined in Section 3(1) of ERISA), and any other plan, agreement or arrangement involving direct or indirect compensation, including without limitation insurance coverage, severance benefits, disability benefits, deferred compensation, bonuses, stock options, stock purchase, phantom stock, stock appreciation or other forms of incentive compensation or post-retirement compensation maintained by the Company or any Subsidiary for the benefit of any current or former employee, director or consultant of the Company or any Subsidiary and with respect to which the Company or any Subsidiary may have any Liability following the Closing Date (the “Employee Benefit Plans”). The Company does not have any commitment to establish any Employee Benefit Plans for the employees of the Company or any Subsidiary (except to the extent required by law). Each Employee Benefit Plan has been administered in all material respects in accordance with its terms and each of the Company and its Subsidiaries has in all material respects met its obligations with respect to those Employee Benefit Plan and has, in all material respects, made all required contributions thereto. Each Employee Benefit Plan has, in all material respects, been operated in compliance with the currently applicable provisions of ERISA and the Code and the regulations thereunder.

          (b) Any Employee Benefit Plan intended to be qualified under Section 401(a) of the Code and each trust intended to qualify under Section 501(a) of the Code has obtained a favorable determination, notification, advisory and/or opinion letter, as applicable, as to its tax-qualified status from the Internal Revenue Service.

          (c) Except as disclosed on Section 2.18(c) of the Company Disclosure Schedule, neither the Company nor any affiliate within the meaning of Section 414(b), (c), (m) or (o) of the Code and the regulations thereunder (“ERISA Affiliate”) has ever maintained an Employee Benefit Plan subject to Section 412 of the Code or Title IV of ERISA.

          (d) Except as disclosed on Section 2.18(d) of the Company Disclosure Schedule, at no time has the Company or any ERISA Affiliate been obligated to contribute to any “multiemployer plan” (as defined in Section 4001(a)(3) of ERISA).

          (e) No Employee Benefit Plan promises or provides retiree medical or other retiree life, disability or other insured benefits to any person, except as required by the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, or similar state law.

          (f) Section 2.18(f) of the Company Disclosure Schedule lists the following: (i) employment, severance and change of control agreement with any executive officer or other key employee of the Company or any Subsidiary (A) the benefits of which are contingent upon the occurrence of a transaction involving the Company or any Subsidiary of the nature of the Contemplated Transactions (either alone or upon termination of employment following such transactions) or (B) providing any term of employment or compensation guarantee; and (ii) agreement or plan binding the Company or any Subsidiary, including without limitation any stock option plan, stock appreciation right plan, restricted stock plan, stock purchase plan, severance benefit plan or Employee Benefit Plan, any of the benefits of which will be increased, or the vesting of the benefits of which will be accelerated, by the consummation of the Contemplated Transactions (either alone or upon the termination of employment following such transactions).

     2.19 Environmental Matters. Neither the Company nor any Subsidiary has released any hazardous materials or waste or other substances regulated by any Environmental law into the

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environment at any real property or other facility formerly or currently owned, leased, operated or controlled by the Company or any Subsidiary. Section 2.19 of the Company Disclosure Schedule lists all environmental reports, investigations and audits possessed or controlled by the Company that were obtained from, or conducted by or on behalf of the Company or any Subsidiary, any Governmental Entity, or any person during the past five (5) years and relating to premises currently or previously owned, leased, operated or controlled by the Company.

     2.20 Certain Business Relationships with Affiliates. Except for ElkCorp’s rights in Company Intellectual Property and the agreements described on Section 2.20(a) of the Company Disclosure Schedule, which are to be conveyed to the Company at or prior to Closing in accordance with Section 5.2(c) below, or as disclosed on Section 2.20(b) of the Company Disclosure Schedule, neither Parent nor, to the knowledge of the Company, any director, officer or Affiliate of the Company (a) owns any material tangible or intangible property or right which is used in the business of the Company, (b) has any claim or cause of action against the Company or (c) owes any money to the Company or is owed money by the Company (other than compensation and benefits owed to employees under agreements disclosed in the Company Disclosure Schedule).

     2.21 Relationship with UOP. The Parent and the Company have no knowledge that UOP expects or intends to materially reduce its business with the Business.

     2.22 Title to Assets. The Company has (or will have at Closing) good and valid title to all of its properties and assets which are included in the Assets, including, without limitation, the Company Intellectual Property described in Schedule 2.8(a), free and clear of all mortgages, liens, pledges, security interests, charges, claims, restrictions, and other encumbrances and defects of title of any nature whatsoever, except for liens for current ad valorem or similar taxes which are not yet due and payable and Assumed Liabilities.

     2.23 Absence of Certain Changes. Since December 31, 2004, there has not been (i) any amendment, termination or revocation, or threatened termination, revocation or modification of any license, permit or franchise required for the continued operation of the Business or the Assets, other than in the Ordinary Course of Business; (ii) any sale or transfer of the Assets other than in the Ordinary Course of Business; (iii) any pledge or subjection to lien, charge or encumbrances of any kind, of, on or affecting any of the Assets other than for taxes which are not yet due and payable; or (iv) any material damage, destruction or loss of or to the Assets, whether or not covered by insurance.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF THE PARENT

     Except as set forth on the disclosure schedule attached as Exhibit B-2 to this Agreement (the “Parent Disclosure Schedule”) (it being agreed that an item included on a particular section of the Parent Disclosure Schedule referenced in any Section or subsection of this Article 3 is deemed to relate to each other Section or subsection of this Article 3 to the extent such relationship is reasonably apparent), the Parent represents and warrants to the Purchaser that the statements contained in this Article 3 are true and complete.

     3.1 Corporate Organization. The Parent is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware.

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     3.2 Ownership of Capital Stock. Parent owns beneficially and of record all of the Shares, free and clear of any Claims. There are no agreements to which either the Parent is a party or is bound with respect to the voting (including voting trusts or proxies) of the Shares.

     3.3 Authorization. The Parent has all corporate power and corporate authority it requires to execute, deliver and perform its obligations under this Agreement. The Parent has obtained all corporate approvals necessary for the due and valid authorization prior to the Closing Date of the Parent’s execution, delivery and performance of this Agreement and the consummation by the Parent of the Contemplated Transactions. The Parent has duly and validly executed and delivered this Agreement. Assuming the due authorization, execution and delivery of this Agreement by the Purchaser, this Agreement is a valid and binding obligation of the Parent, enforceable against the Parent in accordance with its terms, subject to (a)laws of general application relating to bankruptcy, insolvency, and the relief of debtors and (b)rules of law governing specific performance, injunctive relief and other equitable remedies.

     3.4 No Conflict. Except for the requirements of the HSR Act and any antitrust or other competition law of jurisdictions outside the United States of America (if and to the extent any of the foregoing laws may apply) or as disclosed on Section 3.4 of the Parent Disclosure Schedule, the Parent’s execution, delivery, and performance of this Agreement and/or the consummation by the Parent of the Contemplated Transactions do not (a)conflict with or violate any provision of the Parent’s certificate of incorporation or bylaws, (b)require the Parent to make any filing with, or obtain any permit, authorization, consent or approval of, any Governmental Entity, (c)result in a breach or default under, create in any person the right to accelerate, terminate, modify or cancel, or require any notice, consent or waiver under any agreement or instrument to which the Parent is a party or (d)violate any law, order, writ, or injunction applicable to the Parent or any of its assets, except in any case that would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect.

     3.5 Brokers’ Fees. Except with respect to Texas Corporate Capital Advisors, the Parent has no Liability to pay any fees or commissions to any broker, finder or agent with respect to the Contemplated Transactions.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

     The Purchaser represents and warrants to the Parent and the Company that the statements contained in this Article 4 are true and complete.

     4.1 Organization and Good Standing. The Purchaser is a limited partnership duly organized and validly existing under the laws of Texas, and has full power and authority to carry on its business as now conducted.

     4.2 Authorization of Transaction. The Purchaser has all power and authority it requires to execute, deliver and perform its obligations under this Agreement. The Purchaser has obtained all approvals necessary for the due and valid authorization prior to the Closing Date of the Purchaser’s execution, delivery and performance of this Agreement and the consummation by the Purchaser of the Contemplated Transactions. The Purchaser has duly and validly executed and delivered this Agreement. Assuming the due authorization, execution and delivery of this Agreement by the Parent and the Company, this Agreement is a valid and binding obligation of the Purchaser, enforceable against the Purchaser in accordance with its terms, subject to (a)laws of general application relating to bankruptcy,

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insolvency, and the relief of debtors and (b)rules of law governing specific performance, injunctive relief and other equitable remedies.

     4.3 Noncontravention. Except for the requirements of the HSR Act and any antitrust or other competition law of jurisdictions outside the United States of America (if and to the extent any of the foregoing laws may apply), the Purchaser’s execution, delivery, and performance of this Agreement and/or the consummation by the Purchaser of the Contemplated Transactions do not (a)conflict with or violate any provision of the Purchaser’s agreement or certificate of limited partnership, (b)require the Purchaser to make any filing with, or obtain any permit, authorization, consent or approval of, any Governmental Entity, (c)result in a breach or default under, create in any person the right to accelerate, terminate, modify or cancel, or require any notice, consent or waiver under any agreement or instrument to which the Purchaser is a party or (d)violate any law, order, writ, injunction, or decree applicable to the Purchaser, except in any case that would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect.

     4.4 Litigation. There is no Legal Proceeding pending or, to the Purchaser’s knowledge, threatened against the Purchaser which questions or challenges the validity of this Agreement or the ability of the Purchaser to consummate the Contemplated Transactions.

     4.5 Brokers’ Fees. The Purchaser has no Liability to pay any fees or commissions to any broker, finder or agent with respect to the Contemplated Transactions for which the Parent or its Affiliates could become liable or obligated.

     4.6 Adequacy of Funds. The Purchaser has adequate financial resources to satisfy its monetary and other obligations under this Agreement including, without limitation, the payment of the Purchase Price in accordance herewith.

     4.7 Terms of Sale. The Purchaser has had the opportunity to inspect the Assets, visit with the Parent and the Company and meet with the Parent’s and the Company’s representatives to discuss the Business. The Purchaser acknowledges that EXCEPT AS OTHERWISE SPECIFICALLY SET FORTH IN THIS AGREEMENT, THE ASSETS ARE BEING SOLD TO THE PURCHASER ON AN “AS-IS, WHERE-IS” BASIS WITHOUT ANY REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED.

     4.8 No Knowledge of Inaccuracies. As of the date of this Agreement, the Purchaser has no knowledge of any inaccuracies in any representation or warranty made by the Parent or Company in this Agreement.

ARTICLE 5

PRECLOSING COVENANTS

     5.1 Covenants of the Parent and the Company.

          (a) Conduct of Business. Except as otherwise required by this Agreement, during the period from the date of this Agreement to the Closing Date, the Company and each Subsidiary will conduct its operations in the Ordinary Course. Without limiting the generality of the foregoing and except as required by this Agreement, prior to the Closing Date, the Company and each Subsidiary will not take or cause to be taken any of the following actions, without the prior written consent of the Purchaser (which shall not unreasonably be withheld):

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               (i) except for borrowings that will not be Assumed Liabilities or borrowings from the Parent or an Affiliate in the Ordinary Course of Business, borrow any money;

               (ii) voluntarily incur any Liability other than in the Ordinary Course or in connection with the performance or consummation of the Contemplated Transactions;

               (iii) incur or commit to incur any capital expenditures in excess of $100,000 other than capital expenditures and commitments which were made prior to the date of this Agreement;

               (iv) lease, license, sell, transfer, encumber or permit to be encumbered any asset, Intellectual Property or other property associated with the business of the Company or any Subsidiary (including sales or transfers to Affiliates of the Company), except for (A)licenses granted and property sold in the Ordinary Course and (B)cash applied in payment of Liabilities in the Ordinary Course;

               (v) dispose of any of its material assets;

               (vi) waive or release any material right or claim;

               (vii) (A)issue or sell any shares of capital stock of the Company or any Subsidiary, or issue or create any warrants, obligations, subscriptions, options, convertible securities, or other commitments to issue shares of capital stock of the Company or any Subsidiary or (B)merge, consolidate or reorganize with any person;

               (viii) make or change any election, change any annual accounting period, adopt or change any accounting method, file any amended Tax Return, enter into any closing agreement, settle any Tax claim or assessment relating to the Company or any Subsidiary, surrender any right to claim refund of Taxes, consent to any extension or waiver of the limitation period applicable to any Tax claim or assessment relating to the Company or any Subsidiary, or take any other action or omit to take any action, if any such election, adoption, change, amendment, agreement, settlement, surrender, consent or other action or omission would have the effect of increasing the Tax Liability of the Company or any Subsidiary;

               (ix) do anything that would cause there to be a Material Adverse Change; or

               (x) agree to do any of the things described in the preceding clauses(i) through (ix) of this Section 5.1(a).

          (b) Access to Information. Until the Closing, the Parent will allow the Purchaser, at its sole expense, and its legal, accounting and other representatives and agents free access upon reasonable notice and during normal working hours to the following information about the Company and each Subsidiary: files; books; records; and offices, including, without limitation, any and all information relating to Taxes, commitments, contracts, leases, licenses, and personal property and financial condition. Until the Closing, the Parent will cause the Company’s accountants, at the Purchaser’s sole expense, to cooperate with the Purchaser and its representatives and agents in making available the consolidated financial information and Tax information of the Company and each Subsidiary as reasonably requested, including, without limitation, the right to examine all working papers pertaining to all of the consolidated financial statements of the Company and the Subsidiaries prepared by such accountants.

          (c) Exclusivity. Between the date of this Agreement and the Closing or the date this Agreement is terminated pursuant to Article 7 hereof (the “Expiration Date”), each of the Parent and the

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Company will not take any action to solicit, initiate, seek, encourage or support any inquiry, proposal or offer from, furnish any information to, or participate in any negotiations with, any person (other than with the Purchaser) regarding an Acquisition. The Parent agrees that any such negotiations in progress as of the date of this Agreement will be terminated or suspended during such period.

     5.2 Mutual Covenants.

          (a) Confidentiality.

               (i) For purposes of securities law compliance, each party agrees not to issue any press release or make any other public announcement relating to this Agreement without the prior written approval of the other party, except that each of the Parent and the Purchaser reserves the right, without the other party’s prior consent, to make any public disclosure it believes in good faith is required by applicable securities laws or securities listing standards (in which case the disclosing party agrees to use reasonable efforts to advise the other party prior to making the disclosure).

               (ii) Each party agrees to continue to abide by that certain confidentiality letter agreement dated as of September 15, 2004 (the “Nondisclosure Agreement”), by and between the Parent and the Purchaser, the terms of which are incorporated by reference in this Agreement, and which terms will survive the Closing or the termination of this Agreement in accordance with its terms.

               (iii) Each party acknowledges that it has reviewed with its own tax advisers, to the extent it desired to do so, the Tax consequences of the Contemplated Transactions. Each party agrees that (A)it is not relying upon the other parties or the other parties’ professional advisers for any Tax advice relating to the Contemplated Transactions and (B)no party is making any representations to the other parties as to the particular Tax consequences that will or will not arise in connection with those transactions.

          (b) Regulatory Filings; Consents. Subject to the terms and conditions of this Agreement, the parties agree to use their respective Best Efforts to (A) make all necessary and appropriate filings with all applicable Governmental Entities and obtain required approvals and clearances with respect thereto, (B) obtain all consents, waivers, approvals, authorizations and orders required in connection with the authorization, execution and delivery of this Agreement and the consummation of the Transaction and (C) take, or cause to be taken, all appropriate action, and do, or cause to be done, all things necessary, proper or advisable to consummate and make effective the transactions contemplated hereby as promptly as practicable, with the objective of consummating the Transaction and completing the Closing no later than May 27, 2005.

          (c) Arrangements with the Parent. At or prior to the Closing, the Parent shall cause ElkCorp and its Affiliates (other than the Company and each Subsidiary) to transfer and assign to the Company any and all of their respective rights in and to (A) the Company Intellectual Property described on Section 5.2(c) of the Company Disclosure Schedule or otherwise exclusively used in connection with the business of the Company and (B) the agreements described on Section 2.20(a) of the Company Disclosure Schedule and the accounts receivable under such agreements, and cause the Company to assume any and all of ElkCorp and its Affiliates’ respective obligations thereunder.

          (d) Satisfaction of Conditions Precedent. Each party agrees to use its respective Best Efforts to satisfy or cause to be satisfied all the conditions precedent that are set forth in Article 6, and the parties will use their respective Best Efforts to cause the Contemplated Transactions to be consummated, and, without limiting the generality of the foregoing, to obtain all consents and authorizations of third

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parties and to make all filings with, and give all notices to, third parties which may be necessary or reasonably required on their part in order to effect the transactions contemplated hereby.

          (e) Further Assurances. Prior to and following the Closing, each party agrees to cooperate fully with the other parties and to execute such further instruments, documents and agreements, and to give such further written assurances, as may be reasonably requested by any other party to evidence and reflect better the transactions described and contemplated in this Agreement and to carry into effect the intents and purposes of this Agreement. This covenant to provide further assurances shall include without limitation the Company’s covenant to execute such further instruments, documents and agreements reasonably necessary to assign, and the Purchaser’s covenant to execute such further instruments, documents and agreements reasonably necessary to assume, the agreements, contracts, leases, licenses, and other arrangements referred to in the definition of Assets

          (f) Taxes. The Company and the Purchaser shall each pay 50% of any sales and transfer taxes arising out of or in connection with the sale and transfer of the Assets and Assumed Liabilities to the Purchaser pursuant to this Agreement. The Company shall pay all Taxes, file all Tax Returns and be responsible for all Tax Contests related to the Business and the Assets for any and all taxable periods ending on or before the Effective Date. The Purchaser shall pay all Taxes, file all Tax Returns and be responsible for all Tax Contests related to the Business, the Assets and the Assumed Liabilities for any and all taxable periods beginning after the Effective Date. For any taxable period beginning before and ending after the Effective Date (“Straddle Period”), the responsibility for the payment of ad valorem Taxes assessed with respect to any of the Assets (whether for real or personal property) will be prorated between the parties with the Parent being responsible for a proportional share based on the number of calendar days in the portion of the Straddle Period ending on the Effective Date and the Purchaser being responsible for a proportional share based on the number of calendar days in the portion of the Straddle Period beginning after the Effective Date. If the amount of such ad valorem Taxes incurred during a Straddle Period with respect to the Assets cannot be determined on or before the Closing Date, the Parties shall prorate ad valorem Taxes equal to the amount of such Taxes assessed for the prior equivalent period of time. In the event the actual amount of ad valorem Taxes payable with respect to the Straddle Period vary from the amount used pursuant to the preceding sentence, then the Company and the Purchaser shall prorate the difference within ten (10) days following a request by any Party based upon actual assessment of ad valorem Taxes.

ARTICLE 6

CONDITIONS PRECEDENT

     6.1 Conditions to the Obligations of the Parent and the Company. The obligations of the Parent and the Company to close the Contemplated Transactions are subject to the fulfillment or satisfaction on and as of the Closing of each of the following conditions (any one or more of which may be waived by the Parent and the Company, but only in a writing signed by the Parent and the Company).

          (a) Accuracy of Representations and Warranties. The representations and warranties of the Purchaser in Article 4 must be accurate in all material respects as of the Closing (except to the extent any such representation or warranty speaks as of the date of this Agreement or any other specific date, in which case such representation or warranty will have been accurate in all material respects as of such date), except that (i)any inaccuracies in such representations and warranties will be disregarded for purposes of this Section 6.1(a) if the Parent has specific knowledge of any such inaccuracies as of the date of this Agreement and (ii)any inaccuracies in such representations and warranties will be disregarded for purposes of this Section 6.1(a) if such inaccuracies (considered collectively) do not have a Material Adverse Effect as of the Closing Date.

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          (b) Covenants. The Purchaser must have performed or complied in all material respects with its agreements and covenants required to be performed or complied with under this Agreement as of or prior to the Closing Date.

          (c) Authorizations. The Parent and the Company must have received from the Purchaser written evidence that the execution, delivery and performance of the Purchaser’s obligations under this Agreement have been duly and validly approved and authorized and that all necessary partnership approvals of the Purchaser have been obtained.

          (d) No Litigation. No judgment, writ or order of any Governmental Entity or other legal restraint or prohibition may be in effect, and no Legal Proceeding may be pending or threatened, that in any case would (i)prevent the Contemplated Transactions or (ii)cause the Contemplated Transactions to be rescinded.

          (e) Government Approvals. All consents and approvals of any Governmental Entity required in connection with the consummation of the Contemplated Transactions must have been obtained.

          (f) Required Consents. The Parent and the Company must have obtained the consents to the Contemplated Transactions required under the contracts and agreements set forth on Section 6.1(f) of the Company Disclosure Schedule (such consents, the “Company Required Consents”) and have been released from any and all further liability and obligation under such contracts and agreements.

          (g) Ancillary Agreements. The Purchaser must have executed and delivered to the Parent and the Company (i) an Assignment and Assumption Agreement providing for the Company’s assignment and the Purchaser’s assumption of the Assumed Liabilities and (ii) Assignments of Patents and Trademarks, each in a form reasonably acceptable to the Parent and the Company.

          (h) Officer’s Certificate. The Purchaser must have delivered to the Parent and the Company a certificate signed by an officer of the Purchaser (without qualification as to knowledge or materiality or otherwise) to the effect that each of the conditions specified in this Agreement (insofar as Section 6.1(d) relates to Legal Proceedings involving the Purchaser) is satisfied in all respects.

     6.2 Conditions to the Purchaser’s Obligations. The obligations of the Purchaser are subject to the fulfillment or satisfaction on and as of the Closing of each of the following conditions (any one or more of which may be waived by the Purchaser, but only in a writing signed by the Purchaser):

          (a) Accuracy of Representations and Warranties. The representations and warranties of the Company in Article 2 and the Parent in Article 3 must be accurate in all material respects as of the Closing (except to the extent any such representation or warranty speaks as of the date of this Agreement or any other specific date, in which case such representation or warranty will have been accurate in all material respects as of such date), except that (i)any inaccuracies in such representations and warranties will be disregarded for purposes of this Section 6.2(a) if the Purchaser has specific knowledge of any such inaccuracies as of the date of this Agreement and (ii)any inaccuracies in such representations and warranties will be disregarded for purposes of this Section 6.2(a) to the extent that the Company’s Senior Management had knowledge of any fact, event or circumstance giving rise to the alleged inaccuracy as of the Closing Date.

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          (b) Covenants. The Parent and the Company must have performed or complied in all material respects with its agreements and covenants required to be performed or complied with under this Agreement as of or prior to the Closing Date.

          (c) Authorizations. The Purchaser must have received from each of the Parent and the Company written evidence that the execution, delivery and performance of its obligations under this Agreement have been duly and validly approved and authorized and that all necessary corporate approvals of the Parent and the Company have been obtained.

          (d) No Litigation. No judgment, writ or order of any Governmental Entity or other legal restraint or prohibition may be in effect, and no Legal Proceeding may be pending or threatened, that in any case would (i)prevent the Contemplated Transactions or (ii)cause the Contemplated Transactions to be rescinded.

          (e) Government Approvals. All material consents and approvals of any Governmental Entity required in connection with the consummation of the Contemplated Transactions must have been obtained.

          (f) Required Consents. The Parent and the Company must have obtained and delivered to the Purchaser all consents from each person necessary for the assignment and transfer of the Contracts and/or Assets listed on Schedule 6.2(f) to Purchaser, in each case without condition, qualification or limitation of any kind (the “Purchaser Required Consents”).

          (g) Other Documents. The Purchaser must have received such other certificates and instruments (including, without limitation, certificates of good standing of the Company and each Subsidiary in their jurisdictions of organization and the various foreign jurisdictions in which they are qualified, certified charter documents, certificates as to the incumbency of officers and the adoption of authorizing resolutions) as it may reasonably request at least ten(10) days prior to the Closing.

          (h) Ancillary Agreements. The Purchaser must have received from the Company (i) a Bill of Sale covering all of the Assets; (ii) an Assignment and Assumption Agreement providing for the Company’s assignment and the Purchaser’s assumption of the Assumed Liabilities and (iii) Assignments of Patents and Trademarks and Company Intellectual Property, each in form and substance reasonably acceptable to the Purchaser.

          (i) Officer’s Certificates.

               (i) The Parent must have delivered to the Purchaser a certificate signed by an officer of the Parent (without qualification as to knowledge or materiality or otherwise) to the effect that each of the conditions specified in this Agreement (insofar as Section 6.2(d) relates to Legal Proceedings involving the Parent) is satisfied in all respects.

               (ii) The Company must have delivered to the Purchaser a certificate signed by an officer of the Company (without qualification as to knowledge or materiality or otherwise) to the effect that each of the conditions specified in this Agreement (insofar as Section 6.2(d) relates to Legal Proceedings involving the Company) is satisfied in all respects.

          (j) No Conflict. Neither the consummation nor the performance of the Transaction by the Parent and the Company will, directly or indirectly (with or without notice or lapse of time), contravene or conflict with or result in a violation of any material agreement to which the Parent or the Company is a party or by which any of their respective properties or assets is bound.

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          (k) Material Adverse Change. No Material Adverse Change in the Business or in the Assets shall have occurred between the date hereof and the Closing Date.

ARTICLE 7

TERMINATION OF AGREEMENT

     7.1 Termination. This Agreement may be terminated at any time prior to the Closing:

          (a) By mutual consent of the Purchaser, the Company and the Parent;

          (b) By either the Purchaser, the Company or the Parent for any reason if the Closing has not occurred by the date that is sixty(60) days following the date of this Agreement, unless otherwise mutually agreed in writing by the parties, or such later date as the parties may agree in writing, provided that a party cannot terminate under this provision if the failure of the Closing to occur is the result of the failure on the part of such party to perform any of its obligations hereunder (except the failure on the part of such party to satisfy a closing condition over which such party has no control);

          (c) By either the Purchaser or the Parent at any time prior to the Closing in the event the other party (and, in the case of the Parent, the Company) has breached any material representation, warranty, or covenant contained in this Agreement in any material respect, the non-breaching party has notified the breaching party of the breach, and the breach has continued without cure for a period of fifteen(15) business days after the notice of breach; or

          (d) By either the Purchaser, the Company or the Parent if any Governmental Entity will have issued an order, injunction, decree or ruling or taken any other action permanently enjoining, restraining or otherwise prohibiting the Contemplated Transactions and such order, injunction, decree, ruling or other action will have become final and nonappealable.

Any termination of this Agreement under this Section 7.1 is effective by the delivery of written notice by the terminating party to the other parties.

     7.2 Effect of Termination. Upon termination of this Agreement pursuant to this Article 7, this Agreement and the rights and obligations of the parties under this Agreement automatically end without any Liability against any party or its Affiliates, except that nothing in this Section 7.2 relieves any party from Liability for the breach of any provisions of this Agreement prior to termination and the provisions of Section 5.2(a) “Confidentiality”, this Section 7.2, Section 7.3 “Certain Effects of Termination”, Section 10.1 “Governing Laws and Forum” and Section 10.6 “Expenses” will remain in force and survive any termination of this Agreement.

     7.3 Certain Effects of Termination. If the Purchaser or the Parent terminates this Agreement pursuant to this Article 7, each party shall comply with the Nondisclosure Agreement regarding the return and/or destruction of any documents furnished to the other parties in connection with this Agreement.

ARTICLE 8

INDEMNIFICATION

     8.1 Indemnification by the Parent. In the event the Closing occurs, and subject to the limitations expressly set forth in Section 8.4 hereof, the Parent will indemnify, defend and hold harmless the Purchaser and its partners, directors, officers, employees, agents and Affiliates (collectively, the

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“Purchaser Indemnitees”) from and against any and all Damages incurred or suffered by the Purchaser Indemnitees arising or resulting from, directly or indirectly, (a) any breach of (i) any representation or warranty set forth in Article 2 or Article 3 of this Agreement or in any certificate delivered by the Parent or the Company in connection with this Agreement to the extent a claim for indemnification against the Parent is made in accordance with Section 8.3 hereof during the Indemnification Period or (ii) any covenant of the Parent or the Company set forth in this Agreement, (b) any Taxes related to the Business or the Assets attributable to the Pre-Closing Period and (c)the Legal Proceedings described in Section 2.13 of the Company Disclosure Schedule. Additionally, the Parent agrees to indemnify and hold Purchaser harmless against all debts, claims, liabilities and obligations of the Company not expressly assumed by Purchaser hereunder, and to pay any and all reasonable attorneys’ fees and out of pocket legal costs incurred by Purchaser in connection therewith.

     8.2 Indemnification by the Purchaser. In the event the Closing occurs, and subject to the limitations expressly set forth in Section 8.4 hereof, the Purchaser will indemnify, defend and hold harmless the Parent and its stockholders, directors, officers, employees, agents and Affiliates (collectively, the “Parent Indemnitees”) from and against any and all Damages incurred or suffered by the Parent Indemnitees arising or resulting from, directly or indirectly, (a) any breach of (i)any representation or warranty set forth in Article 4 of this Agreement or in any certificate delivered by the Purchaser in connection with this Agreement to the extent a claim for indemnification against the Purchaser is made in accordance with Section 8.3 hereof during the Indemnification Period or (ii)any covenant of the Purchaser set forth in this Agreement, and (b) any Taxes related to the Business or the Assets attributable to the Post-Closing Period.

     8.3 Claim Procedure.

          (a) Claim Notice. A party which seeks indemnity under this Article 8 (an “Indemnified Party”) will give written notice (a “Claim Notice”) to the party from whom indemnification is sought (an “Indemnifying Party”), whether the Damages sought arise from matters solely between the parties or from third party claims described in Section 8.3(d). The Claim Notice must contain (i)a description and, if known, estimated amount (the “Claimed Amount”) of any Damages incurred or reasonably expected to be incurred by the Indemnified Party, (ii)a reasonable explanation of the basis for the Claim Notice to the extent of facts then known by the Indemnified Party and (iii)a demand for payment of those Damages.

          (b) Response to Notice of Claim. Within thirty(30) days after delivery of a Claim Notice, the Indemnifying Party will deliver to the Indemnified Party a written response (the “Response”) in which the Indemnifying Party will either:

               (i) agree that the Indemnified Party is entitled to receive all of the Claimed Amount and the Indemnifying Party will pay the Claimed Amount in accordance with a payment and distribution method reasonably acceptable to the Indemnified Party; or

               (ii) dispute that the Indemnified Party is entitled to receive any of the Claimed Amount (in such an event, the Response will be referred to as an “Objection Notice”). If no Response is delivered by the Indemnifying Party to the Indemnified Party within such 30-day period, the Indemnifying Party is deemed to have disputed that the Indemnified Party is entitled to receive any of the Claimed Amount.

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          (c) Contested Claims.

               (i) In the event that the Indemnifying Party disputes the Claimed Amount, as soon as practicable but in no event later than ten(10) days after the receipt of the Objection Notice or, if no Response is provided within the thirty (30) day period referred to in Section 8.3(b)(ii) above, as soon as practicable but in no even later than ten (10) days after the expiration of such thirty (30) day period, the parties will submit the matter to non-binding mediation by a mutually-acceptable mediator to be chosen within ten(10) days thereafter. Neither party may unreasonably withhold consent to the selection of the mediator. If the parties cannot resolve the dispute relating to the Claimed Amount within fifteen(15) days after the commencement of the mediation proceedings (the “Mediation Period”), the parties will submit the matter to binding arbitration in Dallas County, Texas. All claims will be settled by three(3) arbitrators in accordance with the Commercial Arbitration Rules then in effect of the American Arbitration Association (the “AAA Rules”). The Parent, on the one hand, and the Purchaser on the other hand, will each designate one(1) arbitrator within five(5) days after termination of the Mediation Period. The Parent and the Purchaser will cause such designated arbitrators to agree mutually upon and designate a third arbitrator within fifteen(15) days after termination of the Mediation Period. In the event that either party fails to timely designate an arbitrator or the so-designated arbitrators fail to timely designate a third arbitrator, then the resulting vacancy will be filled by an arbitrator appointed in accordance with the AAA Rules no later than twenty(20) days after termination of the Mediation Period. The Parent and the Purchaser will cause the arbitrators to decide the matter to be arbitrated pursuant hereto as soon as commercial practicable but in no event more than thirty(30) days after the appointment of the last arbitrator. The arbitrators’ decision will relate solely to whether the Indemnified Party is entitled to receive the Claimed Amount (or a portion thereof) pursuant to the applicable terms of this Article 8 and will not provide for any Damages or remedies that would not be available in a court of competent jurisdiction located in Texas hearing such matter. The costs and expenses incurred in connection with the arbitration will be shared evenly by the parties. The final decision of a majority of the arbitrators will be furnished to the Parent and the Purchaser in writing and will constitute a conclusive determination of the issue in question, binding upon the Parent and the Purchaser, and will not be contested by either party. Such decision may be used in a court of law only for the purpose of seeking enforcement of the arbitrators’ award.

               (ii) Upon receipt by the parties of the final award of the majority of the arbitrators, the Parent and the Purchaser will thereupon take such actions as are reasonably necessary to comply with such agreement or instructions.

          (d) Third Party Claims.

               (i) In the event that the Indemnified Party is entitled, or is seeking to assert rights, to indemnification under this Article 8 relating to a third party claim, the Indemnified Party will give written notification to the Indemnifying Party of the commencement of any Legal Proceeding relating to such third party claim. Such notification will be given within five(5) days after receipt by the Indemnified Party of notice of such suit or proceeding, will be accompanied by reasonable supporting documentation submitted by such third party (to the extent then in the possession of the Indemnified Party) and will describe in reasonable detail (to the extent known by the Indemnified Party) the facts constituting the basis for such suit or proceeding and the amount of the claimed damages; provided, however, that no delay or deficiency on the part of the Indemnified Party in so notifying the Indemnifying Party will relieve the Indemnifying Party of any Liability or obligation hereunder except to the extent of any Damage or Liability caused by or arising out of such failure. Within thirty (30) days after delivery of such notification, the Indemnifying Party may, upon written notice thereof to the Indemnified Party, assume control of the defense of such suit or proceeding with counsel reasonably satisfactory to the Indemnified Party; provided, however, that the Indemnifying Party may not assume control of the defense

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of a suit or proceeding involving criminal liability. If the Indemnifying Party does not so assume control of such defense, the Indemnified Party will control such defense.

               (ii) The party not controlling such defense (the “Non-controlling Party”) may participate therein at its own expense. The party controlling such defense (the “Controlling Party”) will keep the Non-controlling Party reasonably advised of the status of such suit or proceeding and the defense thereof and will consider in good faith recommendations made by the Non-controlling Party with respect thereto. The Non-controlling Party will furnish the Controlling Party with such information as it may have with respect to such suit or proceeding (including copies of any summons, complaint or other pleading which may have been served on such party and any written claim, demand, invoice, billing or other document evidencing or asserting the same) and will otherwise cooperate with and assist the Controlling Party in the defense of such suit or proceeding.

               (iii) The Indemnifying Party will not agree to any settlement of, or the entry of any judgment arising from, any such suit or proceeding without the prior written consent of the Indemnified Party, which will not be unreasonably withheld or delayed; provided, however, that the consent of the Indemnified Party will not be required if the Indemnifying Party agrees in writing to pay any amounts payable pursuant to such settlement or judgment and such settlement or judgment includes a full, complete and unconditional release of the Indemnified Party from further Liability. The Indemnified Party will not agree to any settlement of, or the entry of any judgment arising from, any such suit or proceeding without the prior written consent of the Indemnifying Party, which will not be unreasonably withheld or delayed.

          (e) Survival of Representations and Warranties. All representations and warranties contained in this Agreement and any certificate delivered pursuant to this Agreement (i)survive the Closing and any investigation at any time made by or on behalf of an Indemnified Party and (ii)expire on the three hundred sixty-sixth(366^th) day following the Closing Date (such period, the “Indemnification Period”). If an Indemnified Party delivers to an Indemnifying Party, before expiration of a representation or warranty, either a Claim Notice based upon a breach of such representation or warranty, or a notice that, as a result of a legal proceeding instituted by or claim made by a third party, the Indemnified Party reasonably expects to incur Damages (an “Expected Claim Notice”), then the applicable representation or warranty will survive until, but only for purposes of, the resolution of the matter covered by such notice. If the legal proceeding or written claim with respect to which an Expected Claim Notice has been given is definitively withdrawn or resolved in favor of the Indemnified Party, the Indemnified Party will promptly so notify the Indemnifying Party.

     8.4 Limitations.

          (a) Parent’s Liability.

               (i) In no event will the Parent’s Liability under this Agreement (whether under this Article 8 or otherwise) exceed $5,000,000, net of any valid claims that the Parent may have under other provisions of this Agreement or by law. Notwithstanding anything to the contrary in this Agreement, the Purchaser Indemnitees will not be entitled to assert any claims for indemnification under this Article 8 unless and until the aggregate Damages are in excess of $100,000 (the “Deductible”) and, in such event, only for amounts in excess of the Deductible.

               (ii) The parties acknowledge that (A)except as expressly provided in this Agreement or any certificate delivered by the Company or the Parent pursuant to this Agreement, neither the Parent nor the Company has made or is making any representations, warranties or commitments whatsoever regarding the subject matter of this Agreement, express or implied and (B)except as expressly

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provided in this Agreement or any certificate delivered by the Company or the Parent pursuant to this Agreement, the Purchaser is not relying and has not relied on, any representations, warranties or commitments whatsoever regarding the subject matter of this Agreement, express or implied.

               (iii) Without limiting the effect of any other limitation contained in this Article 8, for purposes hereof, no representation or warranty of the Company is deemed to be or to have been inaccurate if:

                    (A) on or prior to the date of this Agreement, the Purchaser had specific knowledge of the inaccuracy of such representation or warranty;

                    (B) following the date of this Agreement and prior to the Closing, (I)the Purchaser obtained specific knowledge of the inaccuracy of such representation or warranty, (II)such inaccuracy, considered together with all other inaccuracies of any representations or warranties of which the Purchaser had specific knowledge, was of a nature that would have caused the condition set forth in Section 6.2(a) not to be satisfied and (III)the Purchaser elected nonetheless to proceed with the Closing;

                    (C) following the Closing, as expressly stated in the introductory language to Article 2; or

                    (D) the Company’s Senior Management had knowledge of the inaccuracy of such representation or warranty.

          (b) Purchaser’s Liability.

               (i) In no event will the Purchaser’s Liability under this Agreement (whether under this Article 8 or otherwise) exceed $5,000,000, net of any valid claims that the Purchaser may have under other provisions of this Agreement or by law. Notwithstanding anything to the contrary in this Agreement, the Parent Indemnitees will not be entitled to assert any claims for indemnification under this Article 8 unless and until the aggregate Damages are in excess of $100,000 (the “Deductible”) and, in such event, only for amounts in excess of the Deductible.

               (ii) The parties acknowledge that (A)except as expressly provided in this Agreement any certificate delivered by the Purchaser pursuant to this Agreement, the Purchaser has not made and is not making any representations, warranties or commitments whatsoever regarding the subject matter of this Agreement, express or implied and (B)except as expressly provided in this Agreement or any certificate delivered by the Purchaser pursuant to this Agreement, neither the Parent nor the Company is relying and has not relied on, any representations, warranties or commitments whatsoever regarding the subject matter of this Agreement, express or implied.

               (iii) Without limiting the effect of any other limitation contained in this Article 8, for purposes hereof, no representation or warranty of the Purchaser is deemed to be or to have been inaccurate if:

                    (A) on or prior to the date of this Agreement, the Parent or the Company had specific knowledge of the inaccuracy of such representation or warranty; or

                    (B) following the date of this Agreement and prior to the Closing; (I)the Parent or the Company obtained specific knowledge of the inaccuracy of such representation or warranty, (II)such inaccuracy, considered together with all other inaccuracies of any representations or

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warranties of which the Parent or the Company had specific knowledge, was of a nature that would have caused the condition set forth in Section 6.1(a) not to be satisfied and (III)the Parent and the Company elected nonetheless to proceed with the Closing

          (c) No Limit for Fraud. Nothing in this Agreement will limit the Liability of any person to any other party for intentional fraud, willful misconduct or a breach of Article 9.

          (d) Other Benefits. The amount of any and all Damages for which indemnification is provided pursuant to this Article 8 will be net of any Tax benefit to which an Indemnified Party is entitled by reason of payment of such obligation or Liability (taking into account any tax cost or reduction in such Tax benefits by reason of receipt of the indemnification payment) and any amounts of any insurance proceeds, indemnification payments, contribution payments or reimbursements actually received or receivable by the Indemnified Party with respect to such Damages or any of the circumstances giving rise thereto.

     8.5 Exclusive Remedy. From and after the Closing, the sole and exclusive remedy of any Purchaser Indemnitee with respect to any and all Damages arising in connection with the Contemplated Transactions will be pursuant to the indemnification obligations set forth in Section 8.1. The Parent will not have any Liability under this Agreement except to the extent provided in Section 8.4(a)(i); provided, however, that the foregoing will not prohibit any Purchaser Indemnitee from bringing a claim for fraud against the Parent, subject in any event to Section 8.6.

     8.6 Exercise of Remedies by Purchaser Indemnitees Other than the Purchaser. No Purchaser Indemnitee (other than the Purchaser or any successor or assignee of the Purchaser) is entitled to assert any indemnification claim or exercise any other remedy under this Agreement unless the Purchaser (or any successor or assignee of the Purchaser) consents to the assertion of the indemnification claim or the exercise of the other remedy.

ARTICLE 9

OTHER AGREEMENTS

     9.1 Employee Benefits. As of the Closing, the Purchaser will offer employment to each individual employed by the Company (excluding independent contractors and Thomas D. Karol, Richard A. Nowak, Gregory J. Fischer, James. J. Waibel, David G. Sisler and Thomas W. Cave) on the Closing Date (the “Company Employees”) with job positions, compensation, vacation and benefit packages substantially similar to those provided to such employees immediately prior to the Closing Date but, with respect to benefits packages, only to the extent that the Purchaser is able to provide such benefits without unreasonable costs. The immediately preceding sentence does not limit the Purchaser’s ability to alter, amend, change or add to any benefit plans or policies as it deems prudent based on business needs after the Closing. Any Company Employees accepting the Purchaser’s offer of employment shall be referred to herein as the “Hired Employees.” Notwithstanding anything herein to the contrary, the Purchaser shall honor and be responsible for all vacation benefits that the Company Employees are entitled to as of the Closing Date. The Purchaser shall be responsible for any and all liabilities, obligations and claims of any kind arising out of employment (or termination of employment, whether actual or constructive) of the Company Employees after the Closing Date, including, but not limited to, any severance, termination pay, or similar obligations with respect to employees terminated after the Closing Date or resulting from the consummation of the Transaction or from the change in any benefits provided to the Hired Employees after the Closing Date. Purchaser shall not be responsible for the matters disclosed in Section 2.18(f) of the Company Disclosure Schedule. The Purchaser shall also be responsible for any and all liabilities, obligations and claims of any kind arising out of or relating to its offers of employment to the Company Employees. The

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Hired Employees shall be entitled to participate in all benefit plans and arrangements which are initially available or subsequently become available on the same basis as the Purchaser’s employees. For purposes of eligibility to participate and vesting requirements in the Purchaser’s employee benefit plans for which any Company Employee may be eligible upon hire by the Purchaser, to the extent permissible under the relevant plans, service by a Company Employee with the Company shall be deemed to have been in service with the Purchaser; provided, however, that no such service credit shall be made in connection with any stock option grants to be made by the Purchaser, if any, to such employees.

     9.2 Use of Parent’s Name.

          (a) Within fifteen (15) days after the Closing, the Purchaser and the Company agree to (i)remove “ElkCorp,” “Elcor Corporation,” “Elcor” or other similar marks and any other trademark, design or logo previously or currently used by the Parent or any of its Affiliates (the “Parent Marks”) from all buildings, signs and vehicles of the Company or any Subsidiary, and (ii)cease using the Parent Marks in electronic databases, web sites, product instructions, packaging and other materials, printed or otherwise (all such materials, together with buildings, signs and vehicles, the “Marked Assets”).

          (b) Immediately after the Closing, the Purchaser, the Company and each Subsidiary will cease using the Parent Marks in all invoices, letterhead, advertising and promotional materials, office forms and business cards.

          (c) From and after the Closing, the Purchaser, the Company and each Subsidiary will use reasonable best efforts to remove the Parent Marks from all assets of the Company and each Subsidiary (including all Marked Assets); provided, however, that in no event will the Purchaser, the Company or any Subsidiary use the Parent Marks after the three-month anniversary of the Closing Date.

          (d) The Purchaser and the Company acknowledge and agree that Parent is the owner of the Parent Marks and all goodwill attached thereto. This Agreement does not give the Purchaser, the Company or any Subsidiary the right to use the Parent Marks except in accordance with this Agreement. The Purchaser and the Company agree not to attempt to register the Parent Marks nor to register anywhere in the world a mark the same as or similar to the Parent Marks.

          (e) In no event will the Purchaser, the Company, the Subsidiary or any Affiliate of those persons advertise or hold itself out as Parent or any Affiliate of Parent after the Closing Date.

          (f) Within fifteen (15) days after the Closing, the Company will amend its organizational and governing instruments and take all other action necessary to change its name and cease using any reference to OEL, Ltd., Ortloff Engineers, Ltd. or any similar name.

          (g) Upon request by Purchaser from time to time after Closing, Parent, at its expense, will promptly arrange for the assignment to Purchaser, and recording in the name of Purchaser or its designee, of all Company Intellectual Property.

     9.3 Records Retention. The Purchaser will cause all books and records relating to the Company as of the Closing (the “Records”) to be retained for seven (7) years after the Closing. In addition, to the extent any books and records relating to the Company are retained by the Parent or the Company following the Closing (the “Retained Records”), the Parent or the Company will retain the Retained Records for seven (7) years after the Closing. During such term, each party shall allow the other parties and their representatives access to inspect or copy the Records and Retained Records, as appropriate, during normal business hours.

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     9.4 Litigation.

          (a) After the Closing Date, the Purchaser will cooperate, at its expense, with the Company, the Parent and their counsel in the contest or defense of, and make available its personnel and provide any testimony and access to its books and Records in connection with, any Legal Proceeding involving or relating to the Business, the Assets, the Excluded Assets and the Assumed Liabilities. Neither the Company or the Parent is waiving, and will not be deemed to have waived or diminished, any of their respective attorney work-product protections, attorney-client privileges or similar protections or privileges as a result of the disclosure of information to the Purchaser in connection with this Agreement and the Transaction. The Purchaser, the Company and the Parent (i)share a common legal and commercial interest in all of the information and communications that may subject to such protections and privileges, (ii) are or may become joint defendants in Legal Proceedings to which such protections and privileges may relate and (iii) intend that such protections and privileges remain intact should either party become subject to any actual or threatened Legal Proceeding to which such information or communications relate. The Purchaser agrees that it will have no right or power after the Closing Date to assert or waive any such protection or privilege included in the Assets. The Purchaser will take any actions reasonably requested by the Parent or the Company, at the sole cost and expense of the Parent or the Company in order to permit the Company or the Parent to preserve and assert any such protection or privilege included in the Assets.

          (b) After the Closing Date, Parent and the Company will cooperate, at their expense, with the Purchaser and its counsel in the contest or defense of, and make available its personnel and provide any testimony and access to its books and the Retained Records in connection with, any Legal Proceeding involving or relating to the Business, the Assets, the Excluded Assets and the Assumed Liabilities. Purchaser is not waiving, and will not be deemed to have waived or diminished any of its attorney work product protections, attorney-client privileges or similar protections or privileges as a result of disclosure of information to the Parent or the Company in connection with this Agreement and the Transaction. The Purchaser, the Company and the Parent (i) share a common legal and commercial interest in all of the information and communications that may subject to such protections and privileges, (ii) are or may become joint defendants in Legal Proceedings to which such protections and privileges may relate and (iii) intend that such protections and privileges remain intact should either party become subject to any actual or threatened Legal Proceeding to which such information or communications relate. Parent and the Company agree that they will have no right or power after the Closing Date to assert or waive Purchaser’s protection or privilege included in the Assets. Parent and the Company will take any actions reasonably requested by the Purchaser, at the sole cost and expense of the Purchaser in order to permit the Purchaser to preserve and assert any of Purchaser’s protection or privilege included in the Assets.

     9.5 Collection and Turnover of Company Long Term Receivables and Scheduled Relationship Receivables.

          (a) The Company appoints the Purchaser as its attorney in fact to collect and receive payment of any and all Company Long Term Receivables. The Purchaser shall, promptly upon receipt of payment (in whole or in part) of any Company Long Term Receivable, deliver to the Parent or its assignee all funds received, less a fee payable to the Purchaser in an amount equal to ten percent (10%) of the funds delivered to Parent or, if such funds are delivered directly to the Company or Parent and the Purchaser has not received such fee, the Company or Parent shall promptly pay such fee to the Purchaser. In the event that (i) the Company or the Parent in good faith determine that the Purchaser fails to use all reasonable efforts to collect the Company Long Term Receivables, and such failure continues for more than 30 days after the Company or the Parent gives notice to Purchaser of its determination, or (ii) any of the Company Long Term Receivables are more than 120 days past due, the Company or the Parent may

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terminate, at any time, the appointment of the Purchaser as the Company’s attorney in fact and, thereafter directly or indirectly, collect for its own account the Company Long Term Receivables without any further obligation to pay the Purchaser the ten percent (10%) fee referenced above. The Purchaser shall, subsequent to any such termination, cooperate, without compensation, with the Parent and the Company with respect to their efforts to collect any Company Long Term Receivable.

          (b) The Purchaser shall promptly notify the Company and the Parent of each agreement the Purchaser or its Affiliate enters into with respect to any of the Scheduled Relationships from the Closing Date until the expiration of four (4) years thereafter. An agreement, for the purposes of this Section 9.5(b) shall be deemed to have been entered into upon the earlier of (i) the execution of an agreement with respect to a Scheduled Relationship, (ii) the ordering of equipment for a prospective agreement with respect to a Scheduled Relationship or (iii) the date on which the Purchaser would be entitled to seek damages with respect to such Scheduled Relationship for a claim of infringement if the other party to the Scheduled Relationship failed to obtain a license or pay, when due, any compensation, fee or royalty. The Purchaser shall, promptly upon receipt of payment of any Scheduled Relationship Receivables, deliver to the Parent or its assignee twenty-five percent (25%) of all such funds received.

          (c) The Purchaser shall use its best efforts to collect all Company Long Term Receivables and Scheduled Relationship Receivables. Within thirty (30) days after the end of each calendar year, the Purchaser shall deliver to the Parent an accounting of all Company Long Term Receivables and Scheduled Relationship Receivables received by the Purchaser and its Affiliates and monies paid to the Company.

     9.6 Audit Rights of the Company; Parent and Purchaser.

          (a) The Purchaser shall, on a quarterly basis and at such other times as Parent may reasonably request, provide Parent with a listing of Company Long-Term Receivables and Scheduled Relationships Receivables earned, accrued or collected by the Purchaser since the date of this Agreement and the status of any of the Scheduled Relationships, each in reasonable detail and otherwise containing such information as Parent may reasonably request. Parent shall, on a quarterly basis and at such other times as Purchaser may reasonably request, provide the Purchaser with a listing of all Company Long-Term Receivables earned, accrued or collected by the Company or Parent since the date of this Agreement, in reasonable detail and otherwise containing such information as Purchaser may reasonably request.

          (b) The Company or the Parent will have the right to audit Purchaser’s books and records, including the Records, pertaining or relating to the Business, Assets, Company Long Term Receivables, Scheduled Relationships and Scheduled Relationship Receivables once every twelve (12) months. The Company or the Parent will give the Purchaser reasonable notice of its intent to audit, and the parties will attempt to schedule such audit so as to not unnecessarily interfere with the Purchaser’s operations. If an audit determines that there is any discrepancy in amounts owed by the Purchaser to the Company, such amounts will immediately be paid. The Company will be solely responsible for the costs of any audit; provided, however, that if an audit determines that the Purchaser has failed to pay and turn over to the Company an amount equal to or greater than 5% of Company Long Term Receivables and Scheduled Relationship Receivables actually paid during the period under audit, then the Purchaser shall immediately pay to the Company all costs and expenses incurred in connection with such audit.

          (c) The Purchaser will have the right to audit the Company’s and Parent’s books and records pertaining or relating to the Company Long Term Receivables once every twelve (12) months. The Purchaser will give the Company and Parent reasonable notice of its intent to audit, and the parties will attempt to schedule such audit so as to not unnecessarily interfere with the Company’s and Parent’s

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operations. If an audit determines that there is any discrepancy in amounts owed by the Company or Parent to the Purchaser in connection with such Company Long Term Receivables, such amounts will immediately be paid. The Purchaser will be solely responsible for the costs of any audits; provided, however, that if an audit determines that the Company or Parent has failed to pay and turn over to the Purchaser an amount equal to or greater than 5% of the amounts payable to the Purchaser pursuant to Section 9.5(a) during the period under audit, then the Company and the Parent shall immediately pay to the Purchaser all costs and expenses incurred in connection with such audit.

     9.7 Additional Assistance. Each of the Parent, the Company and the Purchaser agree that it will:

          (a) provide assistance to the other party as reasonably requested in preparing and filing Tax Returns and responding to Tax Contests;

          (b) make available to the other party as reasonably requested all information, records, and documents relating to Taxes concerning the Company or the Business;

          (c) provide timely notice to the other party in writing of any pending or threatened Tax audits, assessments or Tax proceedings for which such party may have a Liability under this Agreement;

          (d) furnish the other party with copies of all correspondence received from any taxing authority in connection with any Tax audit or Tax proceedings with respect to any taxable period for which such party may have a Liability under this Agreement; and

          (e) retain any books and records that could reasonably be expected to be necessary or useful in connection with any preparation by any other party of any Tax Return, or for any audit, examination, or proceeding relating to Taxes. Such books and records will be retained until the expiration of the applicable statute of limitations (including extensions thereof); provided, however, that in the event of an audit, examination, investigation or proceeding has been instituted prior to the expiration of the applicable statute of limitations (or in the event of any claim under this Agreement), the books and records will be retained until there is a final determination thereof (and the time for any appeals has expired).

ARTICLE 10

MISCELLANEOUS

     10.1 Governing Laws and Forum. Except as expressly provided in this Agreement (including Article 8 or any exhibit or schedule to this Agreement), the internal laws of the State of Delaware (without reference to its principles of conflicts of law) govern the construction, interpretation and other matters arising out of or in connection with this Agreement and its exhibits and schedules (whether arising in contract, tort, equity or otherwise). With respect to any action or other Legal Proceeding arising out of or in connection with this Agreement (whether arising in contract, tort, equity or otherwise) other than pursuant to Article 8 of this Agreement, the parties irrevocably (a)consent and submit to the exclusive jurisdiction of federal and state courts located in New Castle County, Delaware (except to the extent another provision of this Agreement specifies a different forum or procedure for a particular matter), (b)waive any objection to that choice of forum based on venue or to the effect that the forum is not convenient and (c)WAIVE TO THE FULLEST EXTENT PERMITTED BY LAW ANY RIGHT TO TRIAL OR ADJUDICATION BY JURY.

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     10.2 Binding Effect and Assignment. This Agreement binds and benefits the parties and their respective successors and assignees, except that the Purchaser will not assign any of its rights under this Agreement prior to the Closing without the prior written consent of the Parent. No party may delegate any performance of its obligations under this Agreement, except that the Purchaser may at any time delegate the performance of its obligations to any Affiliate of the Purchaser so long as the Purchaser remains fully responsible for the performance of the delegated obligation.

     10.3 Severability. If any provision of this Agreement is determined to be invalid, illegal or unenforceable, the remaining provisions of this Agreement will remain in full force, if the essential terms and conditions of this Agreement for each party remain valid, binding and enforceable.

     10.4 Entire Agreement. This Agreement together with its exhibits and schedules constitutes the final agreement between the parties, and is the complete and exclusive statement of the parties’ agreement on the matters contained in this Agreement. All prior and contemporaneous negotiations and agreements between the parties on the matters contained in this Agreement are superseded by this Agreement.

     10.5 Counterparts. The parties may execute this Agreement in multiple counterparts, each of which constitutes an original as against the party that signed it, and all of which together constitute one agreement. This Agreement is effective upon delivery of one executed counterpart from each party to the other parties. The signatures of all parties need not appear on the same counterpart. The delivery of signed counterparts by facsimile or email transmission which includes a copy of the sending party’s signature(s) is as effective as signing and delivering the counterpart in person.

     10.6 Expenses. Except to the extent specified otherwise in this Agreement, each party will pay its own professional fees and other expenses incurred by it in connection with this Agreement and the Contemplated Transactions.

     10.7 Amendment. The parties may amend this Agreement only by a written agreement signed by each party to be bound by the amendment and that identifies itself as an amendment to this Agreement.

     10.8 Waiver. The parties may waive a provision of this Agreement only by a writing signed by the party intended to be bound by the waiver. A party is not prevented from enforcing any right, remedy or condition in the party’s favor because of any failure or delay in exercising any right or remedy or in requiring satisfaction of any condition, except to the extent that the party specifically waives the same in writing. A written waiver given for one matter or occasion is effective only in that instance and only for the purpose stated. A waiver once given is not to be construed as a waiver for any other matter or occasion. Any enumeration of a party’s rights and remedies in this Agreement is not intended to be exclusive, and a party’s rights and remedies are intended to be cumulative to the extent permitted by law and include any rights and remedies authorized in law or in equity.

     10.9 Notices. Each party giving any notice required or permitted under this Agreement will give the notice in writing, and use one of the following methods of delivery to the party to be notified, at the address set forth below or another address of which the sending party has been notified in accordance with this Section 10.9 (a)personal delivery, (b)facsimile or telecopy transmission with a reasonable method of confirming transmission, (c)commercial overnight courier with a reasonable method of confirming delivery, or (d)pre-paid, United States of America certified or registered mail, return receipt requested. Notice to a party is effective for purposes of this Agreement only if given as provided in this Section 10.9 and if the intended addressee has actually received the notice.

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If to the Parent:	ELK TECHNOLOGY GROUP, INC.
	14911 Quorum Drive, Suite 600
	Dallas, Texas 75254
	Facsimile: (972) 851-0552
	Attention: General Counsel
With a copy to:	Baker & McKenzie LLP
	2001 Ross Avenue, Suite 2300
	Dallas, Texas 75201
	Facsimile: (214) 978-3099
	Attention: Alan Harvey, Esq.
If to the Company:	OEL, LTD., D.B.A. ORTLOFF ENGINEERS, LTD.
	14911 Quorum Drive, Suite 600
	Dallas, Texas 75254
	Facsimile: (972) 851-0552
	Attention: General Counsel
With copies to:	ELK TECHNOLOGY GROUP, INC.
	14911 Quorum Drive, Suite 600
	Dallas, Texas 75254
	Facsimile: (972) 851-0552
	Attention: General Counsel
	Baker & McKenzie LLP
	2001 Ross Avenue, Suite 2300
	Dallas, Texas 75201
	Facsimile:(214) 978-3099
	Attention: Alan Harvey, Esq.
If to the Purchaser:	TORGO LTD.
	415 West Avenue, Suite 2000
	Midland, Texas 79701-4438
	Facsimile: (432) 685-0256
	Attention: President
With a copy to:	Lynch, Chappell & Alsup, P.C.
	The Summit, Suite 700
	Midland, Texas 79701
	Facsimile: (432) 683-2587
	Attention: Thomas W. Ortloff

     10.10 Construction of Agreement.

          (a) Where this Agreement states that a party “shall” or “will” perform in some manner or otherwise act or omit to act, it means that the party is legally obligated to do so in accordance with this Agreement.

          (b) In the negotiation of this Agreement, each party has received advice from its own attorney. This Agreement is not to be construed for or against any party based on which party drafted any of the provisions of this Agreement.

Asset Purchase Agreement

29

          (c) The captions, titles and headings, and table of contents, included in this Agreement are for convenience only, and do not affect this Agreement’s construction or interpretation.

          (d) This Agreement does not, and is not intended to, confer any rights or remedies in favor of any person other than the parties signing this Agreement, except as may be specifically set forth in other provisions of this Agreement.

          (e) The words “including,” “includes,” or “include” are to be read as listing non-exclusive examples of the matters referred to, whether or not words such as “without limitation” or “but not limited to” are used in each instance. Any reference in this Agreement to wire transfers or other payments requires payment in dollars of the United States of America unless some other currency is expressly stated in that reference.

          (f) Any reference in this Agreement to the singular includes the plural where appropriate. Any reference in this Agreement to the masculine, feminine or neuter gender includes the other genders where appropriate.

     10.11 No Joint Venture. Nothing in this Agreement creates a joint venture or partnership between the parties. This Agreement does not authorize any party (a)to bind or commit, or to act as an agent, employee or legal representative of, another party, except as may be specifically set forth in other provisions of this Agreement or (b)to have the power to control the activities and operations of another party. The parties are independent contractors with respect to each other under this Agreement. Each party agrees not to hold itself out as having any authority or relationship contrary to this Section 10.11.

     10.12 Bulk Transfer Laws. The Purchaser acknowledges that the Company will not comply with the provisions of any bulk transfer laws of any jurisdiction in connection with the transactions contemplated by this Agreement.

(This space intentionally left blank)

Asset Purchase Agreement

30

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first set forth above.

"Purchaser”	“Parent”
TORGO LTD., a Texas limited partnership	ELK TECHNOLOGY GROUP, INC., a Delaware corporation
By:	By:
Name:	Name:
Title:	Title:
	“Company”
	OEL, LTD., D.B.A. ORTLOFF ENGINEERS, LTD., a Nevada corporation
	By:
	Name:
	Title:

Signature Page to Asset Purchase Agreement

EXHIBIT A

Certain Definitions

For purposes of the Agreement (including this Exhibit A):

     “AAA Rules” has the meaning set forth in Section 8.3(c)(i).

     “Acquisition” means any of the following transaction or series of transactions: (a)any merger, consolidation, share exchange, business combination, issuance of securities, acquisition of securities, tender offer, exchange offer or other similar transaction (i)in which the Company is a constituent corporation, (ii)in which a person or “group” (as defined in the Securities Exchange Act of 1934, as amended, and the rules promulgated thereunder) of persons directly or indirectly acquires beneficial or record ownership or voting power of securities representing more than fifty percent(50%) of the outstanding securities of any class of voting securities of the Company or (iii)in which the Company issues securities representing more than fifty percent (50%) of the outstanding voting securities of the Company; or (b)any sale, lease, exchange, transfer, license, acquisition or disposition of any business or businesses or assets of the Company that constitute or account for fifty percent(50%) or more of the consolidated net revenues, net income or assets of the Company.

     “Affiliate” means (A)in the case of an individual, the members of the immediate family (including parents, siblings and children) of (i)the individual, (ii)the individual’s spouse and (iii)any Business Entity that directly or indirectly, through one or more intermediaries controls, or is controlled by, or is under common control with any of the foregoing individuals or (B)in the case of a Business Entity, another Business Entity or a person that directly or indirectly, through one or more intermediaries controls, or is controlled by, or is under common control with the Business Entity.

     “Affiliated Group” means a group of corporations with which the Company or any Subsidiary has filed consolidated, combined, unitary or similar Tax Returns.

     “Affiliate Indemnified Party” has the meaning set forth in Section 9.2(a).

     “Affiliated Period” means any period in which the Company or any Subsidiary was a member of an Affiliated Group.

     “Agreement” has the meaning set forth in the introductory paragraph.

     “Assets” has the meaning set forth in Section 1.1.

     “Assumed Liabilities” has the meaning set forth in Section 1.3.

     “Best Efforts” means the efforts that a prudent person desirous of achieving a result would use in similar circumstances to ensure that such result is achieved as expeditiously as is reasonable; provided, however, that an obligation to use Best Efforts under this Agreement does not require the person subject to that obligation to take actions that would require extraordinary out-of-pocket expenditures of cash, involve commencement of legal proceedings against a third person or in a Material Adverse Change or significant diminution of the benefits to such person of the Contemplated Transactions.

     “Business” has the meaning set forth in Section 1.1.

     “business day” means any day other than Saturday, Sunday or any day on which banking institutions in the State of Texas are closed either under applicable law or action of any Governmental Entity.

     “Business Entity” means any corporation (including any non-profit corporation), general partnership, limited partnership, limited liability partnership, joint venture, estate, trust, company (including any limited liability company or joint stock company), firm or other enterprise, association, organization or entity.

     “Claimed Amount” has the meaning set forth in Section 8.3(a).

     “Claim Notice” has the meaning set forth in Section 8.3(a).

     “Claims” means any security interests, liens, pledges, charges, escrows, options, rights of first refusal, mortgages, indentures, security agreements or other encumbrances, claims, agreements, arrangements or commitments of any kind or character, whether written or oral and whether or not relating in any way to credit or the borrowing of money.

     “Closing” has the meaning set forth in Section 1.6.

     “Closing Date” has the meaning set forth in Section 1.6.

     “Closing Date Adjustment” has the meaning set forth in Section 1.8(a).

     “Closing Date Net Working Capital” has the meaning set forth in Section 1.8(a).

     “Closing Date Working Capital Detail” has the meaning set forth in Section 1.8(a).

     “Code” means the Internal Revenue Code of 1986, as amended.

     “Company” has the meaning set forth in the introductory paragraph.

     “Company Cash” means all cash and cash equivalents (including marketable securities and short term investments) calculated in accordance with GAAP applied on a basis consistent with past practice.

     “Company Disclosure Schedule” has the meaning set forth in introductory language to Article 2.

     “Company Employee” has the meaning set forth in Section 9.1.

     “Company Intellectual Property” has the meaning set forth in Section 2.8(a).

     “Company Sales Agreement” means an agreement entered into by the Company or its Affiliates for the license, use, lease, sale or performance of the Company’s or its Affiliate’s technology, services or products included in the Assets.

     “Company Long Term Receivables” means, with respect to each Company Sales Agreement entered into prior to the Effective Date all amounts that are due and payable to the Company on or after the expiration of 365 days from the Effective Date.

     “Company’s Senior Management” means John Wilkinson, Joe Lynch, Hank Hudson, Richard Pitman and Don Tyler.

     “Contemplated Transactions” has the meaning set forth in Section 2.3.

     “Contract” has the meaning set forth in Schedule 1.1.

     “Controlling Party” has the meaning set forth in Section 8.3(d)(ii).

     “Damages” includes any Liabilities, losses, damages, settlements, judgments, awards, penalties, fines, costs or expenses (including, without limitation, reasonable legal, expert and consultant fees and expenses) but excluding (i)any special, indirect, consequential, exemplary and punitive damages and also excluding any damages associated with any lost profits or lost opportunities, and (ii)any legal fees incurred in connection with the dispute resolution process described in Section 8.3(c).

     “Deductible” has the meaning set forth in Section 8.4(a)(i).

     “Effective Date” means (i) if the Closing Date is on or before May 31, 2005, then the Effective Date shall be May 1, 2005 or (ii) if the Closing Date is after May 31, 2005, then the Effective Date shall be the Closing Date, provided, however, that if the Closing Date does not occur on or before May 31, 2005 primarily due to the fault of either the Parent or the Company, then the Effective Date shall be May 1, 2005.

     “Employee Benefit Plan” has the meaning set forth in Section 2.18(a).

     “Environmental law” means any law statute, rule or regulation of any Governmental Entity or the common law relating to the environment or occupational health and safety, including, without limitation, any statute, regulation or order pertaining to (i)treatment, storage, disposal, generation and transportation of toxic or hazardous substances or solid or hazardous waste; (ii)air, water and noise pollution; (iii)groundwater and soil contamination; (iv)the release or threatened release into the environment of toxic or hazardous substances, or solid or hazardous waste, including, without limitation, emissions, discharges, injections, spills, escapes or dumping of pollutants, contaminants or chemicals; (v)the protection of wild life, marine sanctuaries and wetlands, including, without limitation, all endangered and threatened species; (vi)storage tanks, vessels and containers; (vii)underground and other storage tanks or vessels, abandoned, disposed or discarded barrels, containers and other closed receptacles; (viii)health and safety of employees and other persons; and (ix)manufacture, processing, use, distribution, treatment, storage, disposal, transportation or handling of pollutants, contaminants, chemicals or industrial, toxic or hazardous substances or oil or petroleum products or solid or hazardous waste. As used above, the terms “release” and “environment” has the meaning set forth in the CERCLA.

     “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

     “ERISA Affiliate” has the meaning set forth in Section 2.18(c).

     “Excluded Assets” has the meaning set forth in Section 1.2.

     “Excluded Liabilities” has the meaning set forth in Section 1.3.

     “Expected Claim Notice” has the meaning set forth in Section 8.3(e).

     “Expiration Date” has the meaning set forth in Section 5.1(c).

     “Financial Statements” has the meaning set forth in Section 2.5(a).

     “GAAP” means generally accepted accounting principles in the United States.

     “Governmental Entity” means any of the following: (i)nation, state, commonwealth, province, territory, county, municipality, district or other jurisdiction of any nature; (ii)federal, state, local, municipal, foreign or other government; or (iii)governmental or quasi-governmental authority of any nature (including any governmental division, department, agency, commission, instrumentality, official, organization, unit, body or entity and any court or other tribunal).

     “Hired Employee” has the meaning set forth in Section 9.1.

     “HSR Act” means the Hart Scott Rodino Antitrust Improvement Act of 1976, as amended.

     “Indemnification Period” has the meaning set forth in Section 8.3(e).

     “Indemnified Party” has the meaning set forth in Section 8.3(a).

     “Indemnifying Party” has the meaning set forth in Section 8.3(a).

     “Initial Date Net Working Capital” has the meaning set forth in Section 1.8(a).

     “Initial Working Capital Detail” has the meaning set forth in Section 1.8(a).

     “Intellectual Property” means all of the following anywhere in the world and all legal rights, title, or interest in the following arising under the laws of the United States, any state, or any other country or international treaty regime, whether or not filed, perfected, registered or recorded and whether now or later existing, filed, issued or acquired, including all renewals:

          (i) all patents and applications for patents and all related reissues, reexaminations, divisions, renewals, extensions, provisionals, continuations and continuations in part;

          (ii) all copyrights, copyright registrations and copyright applications, copyrightable works, and all other corresponding rights;

          (iii) all mask works, mask work registrations and mask work applications, and all other rights relating to semiconductor design and topography;

          (iv) all industrial designs, industrial models, utility models, certificates of invention and other indices of invention ownership, and any related registrations and applications;

          (v) all trade dress and trade names, logos, Internet addresses and domain names, trademarks and service marks and related registrations and applications, including any intent to use applications, supplemental registrations and any renewals or extensions, all other indicia of commercial source or origin, and all goodwill of the person’s business associated with any of the foregoing;

          (vi) all inventions (whether patentable or not and whether or not reduced to practice), invention disclosures, invention notebooks, file histories, know how, technology, technical data, trade secrets, confidential business information, manufacturing and production processes and techniques, research and development information, financial, marketing and business data, pricing and cost information, business and marketing plans, and customer, distributor, reseller and supplier lists and information, correspondence, records, and other documentation, and other proprietary information of every kind;

          (vii) all computer software including but not limited to all source code, object or executable code, firmware, software compilations, software implementations of algorithms, software tool sets, compilers, software models and methodologies, development tools, files, records, technical drawings, and data relating to the foregoing;

          (viii) all databases and data collections and all rights in the same; (ix)all rights of paternity, integrity, disclosure, and withdrawal, and any other rights that may be known or referred to as “moral rights,” in any of the foregoing;

          (x) any rights analogous to those set forth in the preceding clauses and any other proprietary rights relating to intangible property;

          (xi) all tangible embodiments of any of the foregoing, in any form and in any media, in the possession of the person (or other persons engaged or retained by the person);

          (xii) all versions, releases, upgrades, derivatives, enhancements and improvements of any of the foregoing; and

          (xiii) all statutory, contractual and other claims, demands, and causes of action for royalties, fees, or other income from, or infringement, misappropriation or violation of, any of the foregoing, and all of the proceeds from the foregoing which are accrued and unpaid as of, and/or accruing after, the date of this Agreement.

     The terms “knowledge” and “known” will qualify the matter referred to as being the actual knowledge of an appropriate executive officer of the Company, the Parent or the Purchaser, as applicable.

     “law” means any foreign, federal, state or local statute, ordinance, regulation, rule, code, treaty, common law or other form of law.

     “Legal Proceeding” means any action, suit, litigation, arbitration proceeding (including any civil, criminal, administrative, investigative or appellate proceeding), hearing, inquiry, audit, examination or investigation commenced, brought, conducted or heard by or before, or otherwise involving any court or other Governmental Entity or any arbitrator or arbitration panel.

     “Liability” means any liability (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due).

     “Marked Assets” has the meaning set forth in Section 9.3(a).

     “Material Adverse Change” means a change which would have a Material Adverse Effect.

     A violation or other matter is deemed to have a “Material Adverse Effect” on (i)the Purchaser, if such violation or other matter would be material on the ability of Purchaser to perform its obligations under this Agreement or on the ability of Purchaser to consummate the Contemplated Transactions, (ii)the Parent, if such violation or other matter would have a material adverse effect on the ability of the Parent to perform its obligations under this Agreement or on the ability of Parent to consummate the Contemplated Transactions or (iii)the Company or any Subsidiary, if such violation or other matter either individually or in the aggregate with all other circumstances, changes or effects, has a material adverse effect on the business, assets, financial condition or results of operations of the Company and each Subsidiary, taken as a whole, but excluding (x)effects or changes that are generally applicable to the

industries and markets in which the Company or any Subsidiary operates, (y)changes in the United States or world financial markets or general economic conditions or (z)effects directly or primarily arising out of the execution or delivery of this Agreement, the consummation of the Contemplated Transactions or the public announcement thereof.

     “Material Contract” has the meaning set forth in Section 2.11(a).

     “Mediation Period” has the meaning set forth in Section 8.3(c)(i).

     “Most Recent Balance Sheet” has the meaning set forth in Section 2.5(a).

     “Non-controlling Party” has the meaning set forth in Section 8.3(d)(ii).

     “Nondisclosure Agreement” has the meaning set forth in Section 5.2(a)(ii).

     “Objection Notice” has the meaning set forth in Section 8.3(b)(ii).

     “Ordinary Course” means the ordinary course of business consistent with past custom and practice (including with respect to frequency and amount) of the Company and each Subsidiary and not material to the Company or any Subsidiary.

     “Parent” has the meaning set forth in the introductory paragraph.

     “Parent Disclosure Schedule” has the meaning set forth in introductory language to Article 3.

     “Parent Indemnitees” has the meaning set forth in Section 8.2.

     “Parent Marks” has the meaning set forth in Section 9.3(a).

     “person” means any individual, Entity or Governmental Entity.

     “Post-Closing Period” means any taxable period or portion of a period that begins after the Closing Date.

     “Pre-Closing Period” means any taxable period or portion of a period that begins on or before the Closing Date and ends on the Closing Date.

     “Purchase Price” has the meaning set forth in Section 1.2.

     “Purchaser” has the meaning set forth in the introductory paragraph.

     “Purchaser Indemnitee” has the meaning set forth in Section 8.1.

     “Purchaser Required Consents” has the meaning set forth in Section 6.2(f).

     “Records” has the meaning set forth in Section 9.3.

     “Retained Records” has the meaning set forth in Section 9.3.

     “Response” has the meaning set forth in Section 8.3(b).

     “Review Period” has the meaning set forth in Section 1.8(b).

     “Rights” has the meaning set forth in Section 1.3.

     “Scheduled Relationships” means the projects generally described on Schedule 9.5.

     “Scheduled Relationships Receivables” means with respect to any of the Scheduled Relationships as to which an agreement is entered into from the Closing Date until the expiration of four (4) years thereafter, all amounts that are due and payable to the Purchaser (or its Affiliates), or their respective successors or assigns, directly or indirectly, in connection with such Scheduled Relationship. For the purposes of this definition, an agreement shall be deemed to have been entered into on the date determined in accordance with Section 9.5(b)

     “Security Interest” means any mortgage, pledge, security interest, encumbrance, charge or other lien (whether arising by contract or by operation of law), other than (i)mechanic’s, materialmen’s and similar liens, (ii)liens arising under worker’s compensation, unemployment insurance, social security, retirement and similar legislation or (iii)liens on goods in transit incurred pursuant to documentary letters of credit, in each case arising in the Ordinary Course.

     “Shares” has the meaning set forth in the paragraph following the introductory paragraph.

     “Straddle Period” means any taxable period that begins before and ends after the Closing Date.

     “Subsidiary” means any Business Entity with respect to which the Company, directly or indirectly, has the power to vote or direct the voting of sufficient securities to elect a majority of the directors or managers.

     “Tax” means all taxes, including gross receipts, ad valorem, value-added, excise, real property, personal property, sales, use, transfer, withholding, employment, unemployment, insurance, social security, business license, business organization, environmental, workers compensation, license, lease, service, service use, severance, stamp, occupation, customs, duties, franchise and other taxes imposed by the United States of America or any state, local or foreign government, or any agency thereof, or other political subdivision of the United States or any such government, and any interest, penalties, assessments or additions to tax resulting from, attributable to or incurred in connection with any tax or any contest or dispute thereof.

     “Tax Arbitrator” means a nationally recognized accounting or law firm mutually acceptable to the parties engaged in a dispute related to a Tax Contest.

     “Tax Contest” means an audit, claim, dispute or controversy relating to Taxes.

     “Tax Returns” means all reports, returns, declarations, statements or other information required to be supplied to a taxing authority in connection with Taxes.

     “Transaction” has the meaning set forth in the paragraph following the introductory paragraph.

EXHIBIT B–1

Company Disclosure Schedule

EXHIBIT B–2

Parent Disclosure Schedule

SCHEDULE 1.1

Assets

     (a) all accounts, notes, licenses and other receivables, and all deposits, advances, prepaid expenses (except for such expenses included within the definition of Excluded Assets) and credits;

     (b) all inventories, including raw material, supplies, cleaning and maintenance supplies, office supplies, works in progress and other inventory items;

     (c) all machinery, equipment, business machines, vehicles, furniture, fixtures, parts, improvements located on real property leased by the Company, and other tangible property;

     (d) all written or oral contracts or agreements, including real property and vehicle leases (collectively, the “Contracts”);

     (e) all Company Intellectual Property, patents, copyrights, methods, know-how, software, technical documentation, trade secrets, trademarks, trade names, service marks and other intellectual property (and all rights thereto and applications therefor) which are used in the Business and as to which the Company claims an ownership interest or as to which the Company is a licensee or licensor, all trademarks and logos related thereto, and all stationary, forms, labels, brochures, advertising materials and similar items bearing any of the foregoing, but excluding any (i) trademarks, service marks, logos, trade dress, trade names and other names or identifiers of or identifying or source-identifying the Parent, any Affiliate of the Parent other than Company and each Subsidiary, or any third party, or (ii) Intellectual Property used in the business of the Parent or any Affiliate of the Parent other than the Company or a Subsidiary;

     (f) all computer hardware and equipment (i) owned, leased or licensed by the Company; or (ii)which is used exclusively in the Business, and all computer printouts, databases and related items;

     (g) all rights to causes of action, lawsuits, judgments, claims and demands of any nature available to or being pursued by the Company, whether arising by way of counterclaim or otherwise;

     (h) all guarantees, warranties, indemnities and similar rights in favor of the Company;

     (i) all governmental permits, licenses or similar rights relating to the Business;

     (j) all information, files, correspondence, records, data, plans, contracts and recorded knowledge, including customer and supplier lists, and all accounting or other books and records of the Company;

     (k) all telephone numbers and fax numbers utilized in the Business;

     (l) all other tangible and intangible assets (including the domain name “ortloff.com”) of any kind or description, wherever located, that are carried on the books of the Company or which are owned by the Company; and

     (m) subject to Section 9.2(f), all rights to the name OEL, Ltd., Ortloff Engineers, Ltd. and Ortloff.

SCHEDULE 1.3

Assumed Liabilities

     Assumed Liabilities” means

     (a) all obligations of the Company under the agreements, contracts, leases, licenses, and other arrangements referred to in the definition of Assets including without limitation the agreements listed on Exhibit A of the Assignment and Assumption Agreement;

     (b) all liabilities of the Company set forth on the face of the Most Recent Balance Sheet; and

     (c) all liabilities of the Company which have arisen after the date of the Most Recent Balance Sheet in the Ordinary Course;

provided, however, that the Assumed Liabilities shall not include (i) any liability of the Company for Taxes measured on the income or revenue of the Company, (ii) any liability of the Company for transfer, sales, use, and other taxes arising in connection with the consummation of the transactions contemplated by this Agreement, (iii) any liability of the Company for costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby, or (iv) any liability or obligation of the Company under this Agreement.

SCHEDULE 1.5

Allocation of Purchase Price

SCHEDULE 1.8

Working Capital Detail

SCHEDULE 6.2(f)

Purchaser Required Consents

Bank of America, N.A.

Required Holders under Note Purchase Agreement dated as of June 1, 2002

Required Holders under Note Purchase Agreement dated as of March 1, 2003

Required Holders under Note Purchase Agreement dated as of June 15, 2004

Consultancy Services Agreement, dated July 28, 2003, between OEL and Larsen & Toubro Limited

License Agreement dated effective as of June 30, 2001, between Elcor Corporation and Tengizchevroil

License Agreement dated effective November 24, 1993, between OEL and Amoco Corporation

License Agreement Concerning Amoco Sulfur Recovery Technology between The Ortloff Corporation and Standard Oil Company (Indiana)

Global Technology License Terms Agreement dated September 9, 2002, by and between ElkCorp and ExxonMobil Development Company, and six associated license agreements with Exxon affiliates

SCHEDULE 9.5

Scheduled Relationships

UOP/Foster Wheeler/Marathon Qatar

UOP/ConocoPhillips/GTL Plant Train 1

UOP/ConocoPhillips/GTL Plant Train 2

UOP/Total/Barzan Qatar

ExxonMobil/Qatargas 6

ExxonMobil/RasGas LNG Train 8

ExxonMobil/RasGas LNG Train 9

EX-10.7

Exhibit 10.7

PURCHASE AGREEMENT

BY AND BETWEEN

ELK PREMIUM BUILDING PRODUCTS, INC.

AND

JOSEPH PRESSUTTI AND
SUSAN PRESSUTTI, BOTH INDIVIDUALLY
AND AS TRUSTEES OF
THE PRESSUTTI FAMILY TRUST

AUGUST 25, 2005

TABLE OF CONTENTS

				Page
1.	DEFINITIONS				1
2.	PURCHASE AND SALE OF COMPANY SHARES, PURCHASED REAL ESTATE AND PURCHASED INTELLECTUAL PROPERTY				7
	(a)	Basic Transaction			7
	(b)	Purchase Price			7
	(c)	Allocation			8
	(d)	The Closing			8
	(e)	Deliveries at the Closing			8
	(f)	Inventory Valuation and Adjustment of Purchase Price			9
3.	REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION, THE PURCHASED REAL ESTATE, AND THE PURCHASED INTELLECTUAL PROPERTY				10
	(a)	Representations and Warranties of the Sellers			10
		(i)	Organization; Authorization of Transaction		10
		(ii)	Noncontravention		11
		(iii)	Brokers’ Fees		11
		(iv)	Company Shares		11
		(v)	Purchased Real Estate		11
		(vi)	Purchased Intellectual Property		13
	(b)	Representations and Warranties of the Buyer			16
		(i)	Organization of the Buyer		16
		(ii)	Authorization of Transaction		16
		(iii)	Noncontravention		16
		(iv)	Brokers’ Fees		16
		(v)	Investment		16
		(vi)	Tax Elections		17
4.	REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY AND ITS SUBSIDIARIES				17
	(a)	Organization, Qualification, and Corporate Power			17
	(b)	Capitalization			17

-i-

TABLE OF CONTENTS
(Continued)

		Page
(c)	Noncontravention		18
(d)	Brokers’ Fees		18
(e)	Title to Assets		18
(f)	Subsidiaries		18
(g)	Financial Statements		19
(h)	Events Subsequent to Most Recent Fiscal Year End		19
(i)	Undisclosed Liabilities		22
(j)	Legal Compliance		22
(k)	Tax Matters		22
(l)	Real Property		24
(m)	Intellectual Property		25
(n)	Tangible Assets		26
(o)	Inventory		26
(p)	Contracts		27
(q)	Notes and Accounts Receivable		28
(r)	Powers of Attorney		28
(s)	Insurance		28
(t)	Litigation		29
(u)	Product Warranty and Advertising		29
(v)	Product Liability		29
(w)	Employees		30
(x)	Employee Benefits		30
(y)	Guaranties		32
(z)	Environment, Health, and Safety		32
(aa)	Certain Business Relationships with the Company and its Subsidiaries		33
(bb)	Off-site Disposal of Hazardous Materials		33
(cc)	Customers and suppliers		34
(dd)	Projections		34
(ee)	Disclosure		34

-ii-

TABLE OF CONTENTS
(Continued)

			Page
	(ff)	Disclaimer		34
5.	PRE-CLOSING COVENANTS			35
	(a)	General		35
	(b)	Notices and Consents		35
	(c)	Operation of Business		35
	(d)	Preservation of Business		36
	(e)	Access		36
	(f)	Notice of Developments		36
	(g)	Exclusivity		36
	(h)	Key Employee Agreements		36
	(i)	Releases		37
6.	POST-CLOSING COVENANTS			37
	(a)	General		37
	(b)	Litigation Support		38
	(c)	Transition		38
	(d)	Confidentiality		38
	(e)	Covenant Not to Compete		39
	(f)	Non-solicitation of Employees		39
	(g)	Termination of Agreement with ABMT		39
7.	CONDITIONS TO OBLIGATIONS TO CLOSE			39
	(a)	Conditions to Obligation of the Buyer		39
	(b)	Conditions to Obligation of the Sellers		41
8.	REMEDIES FOR BREACHES OF THIS AGREEMENT			42
	(a)	Survival of Representations and Warranties		42
	(b)	Indemnification Provisions for Benefit of the Buyer		42
	(c)	Indemnification Provisions for Benefit of the Sellers		43
	(d)	Matters Involving Third Parties		43
	(e)	Determination of Adverse Consequences		45
	(f)	Exclusive Remedy		45

-iii-

TABLE OF CONTENTS
(Continued)

			Page
9.	TAX MATTERS			45
	(a)	Cooperation on Tax Matters		45
	(b)	Tax Sharing Agreements		46
	(c)	Certain Taxes		46
10.	TERMINATION			46
	(a)	Termination of Agreement		46
	(b)	Effect of Termination		47
11.	MISCELLANEOUS			47
	(a)	Press Releases and Public Announcements		47
	(b)	No Third Party Beneficiaries		47
	(c)	Entire Agreement		47
	(d)	Succession and Assignment		47
	(e)	Counterparts		47
	(f)	Headings		48
	(g)	Notices		48
	(h)	Governing Law		49
	(i)	Amendments and Waivers		49
	(j)	Severability		49
	(k)	Expenses		49
	(l)	Construction		49
	(m)	Incorporation of Exhibits, Annexes, and Schedules		50
	(n)	Specific Performance		50
	(o)	Submission to Jurisdiction		50
	(p)	Joint and Several Obligations		50

Annex 1:	Exceptions to the Representations and Warranties of the Sellers
Annex 2:	Exceptions to the Representations and Warranties of the Buyer
Annex 3:	Seller’s Personal Property
Exhibit A:	Form of Escrow Agreement
Exhibit B-1:	Purchased Intellectual Property
Exhibit B-2:	Intellectual Property Retained by Seller

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TABLE OF CONTENTS
(Continued)

	Page
Exhibit C:	Purchased Real Estate
Exhibit D:	Forms of Assignments
Exhibit E:	Form of Assumption Agreement (Note and Deed of Trust)
Exhibit F:	Financial Statements
Exhibit G:	Capital Budget of the Company and its Subsidiaries
Exhibit H:	[Intentionally Omitted]
Exhibit I:	Agreement of Purchase and Sale of Real Estate and Escrow Instructions
Exhibit J:	Agreement of Purchase and Sale of Real Estate and Escrow Instructions
Exhibit K:	Preliminary Title Reports

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PURCHASE AGREEMENT

     Agreement entered into as of August 25, 2005, by and between Elk Premium Building Products, Inc., a Delaware corporation (the “Buyer”), and Joseph Pressutti (individually herein so called) and Susan Pressutti (individually herein so called), both individually and as Trustees of the Pressutti Family Trust (the “Pressutti Family Trust” and, together with Joseph Pressutti and Susan Pressutti, the “Sellers”). The Buyer and the Sellers are referred to collectively herein as the “Parties.”

RECITALS

     The Sellers own all of the outstanding capital stock of RGM Products, Inc., a California corporation (the “Company”), certain real property and improvements on which the Company’s manufacturing facility in Fresno, California is located and certain real property adjacent thereto, and certain rights in patents and intellectual property utilized in the Company’s business.

     This Agreement contemplates a transaction in which the Buyer will purchase from the Sellers, and the Sellers will sell to the Buyer, all of the outstanding capital stock of the Company and certain rights in patents and intellectual property utilized in the Company’s business, and the Buyer (or its designated Affiliate) will purchase from 3441 South Willow Investments, L.P. (herein so called), an Affiliate of Sellers, and the Sellers will cause 3441 South Willow Investments, L.P. to sell to the Buyer (or its designated Affiliate), the Purchased Real Estate.

     Now, therefore, in consideration of the premises and the mutual promises herein made, and in consideration of the representations, warranties, and covenants herein contained, the Parties agree as follows:

1. DEFINITIONS.

     “3441 South Willow Investments, L.P.” has the meaning set forth in the Recitals above.

     “Adverse Consequences” means all actions, suits, proceedings, hearings, investigations, charges, complaints, claims, demands, injunctions, judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs of defense and other costs, amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses, expenses, and fees, including court costs and reasonable attorneys’ fees and expenses.

     “Affiliate” has the meaning set forth in Rule 12b-2 of the regulations promulgated under the Securities Exchange Act.

     “Affiliated Group” means any affiliated group within the meaning of Code §1504 or any similar group defined under a similar provision of state, local, or foreign law.

     “Assumed Real Estate Debt” means the indebtedness in the principal amount of $3,982,269 in favor of The Ohio National Life Insurance Company evidenced by that certain Promissory Note dated May 31, 2005 executed by 3441 South Willow Investments, L.P., in the

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original principal amount of $4,000,000 and secured by the deed of trust liens on the Purchased Real Estate pursuant to that certain Deed of Trust, Financing Statement, Security Agreement and Fixture Filing (With Assignment of Rents and Leases) dated May 31, 2005 (the “Deed of Trust”), that Buyer (or its Affiliate) will assume in accordance with §2 below.

     “Basis” means any past or present fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act, or transaction that forms or could form the basis for any specified consequence.

     “Buyer” has the meaning set forth in the preface above.

     “CERCLA” has the meaning set forth in §4(z) below.

     “Closing” has the meaning set forth in §2 below.

     “Closing Date” has the meaning set forth in §2 below.

     “Code” means the Internal Revenue Code of 1986, as amended.

     “Company” has the meaning set forth in the Recitals above.

     “Company Share” means any share of the Common Stock, no par value per share, of the Company.

     “Confidential Information” means any information concerning the businesses and affairs of the Company and its Subsidiaries that is not already generally known to those knowledgeable in the roofing industry.

     “Confidentiality Agreement” means that certain confidentiality agreement dated ___, 2005 between the Buyer and Joseph Pressutti.

     “Controlled Group of Corporations” has the meaning set forth in Code §1563.

     “Deferred Intercompany Transaction” has the meaning set forth in Treas. Reg. §1.1502-13.

     “Disclosure Schedule” has the meaning set forth in §4 below.

     “Employee Benefit Plan” means any (a) nonqualified deferred compensation or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b) qualified defined contribution retirement plan or arrangement which is an Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or arrangement which is an Employee Pension Benefit Plan (including any Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe benefit plan or program.

     “Employee Pension Benefit Plan” has the meaning set forth in ERISA §3(2).

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     “Employee Welfare Benefit Plan” has the meaning set forth in ERISA §3(1).

     “Environment” shall mean soil, land surface or subsurface strata, surface waters (including navigable waters, ocean waters, streams, ponds, drainage basins, and wetlands), groundwaters, drinking water supply, surface water sediments, ambient air (including indoor air), plant and animal life, and any other environmental medium or natural resource.

     “Environmental Law” means applicable federal, state, and local laws including, without limitation, statutes, regulations, ordinances, and judicial and administrative orders relating to protection of the public health, welfare, and the Environment, including without limitation, those laws relating to the storage, handling, and use of chemicals and other Hazardous Materials (including without limitation California Proposition 65), those relating to the generation, processing, treatment, storage, transport, disposal, investigation and remediation, or other management of Hazardous Materials or waste materials of any kind, and those relating to the protection of environmentally sensitive areas.

     “Environmental Permits” has the meaning set forth in Section 4(z).

     “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

     “Escrow Agreement” means that certain escrow agreement in the form attached hereto as Exhibit A to be executed at the Closing by the Sellers, the Buyer, and the escrow agent thereunder.

     “Facilities” shall mean any real property, leaseholds, or other interests currently or formerly owned or operated by the Company.

     “Fiduciary” has the meaning set forth in ERISA §3(21).

     “Financial Statement” has the meaning set forth in §4(g) below.

     “GAAP” means United States generally accepted accounting principles as in effect as of the date of any document purported to be prepared in accordance with GAAP.

     “Hazardous Materials” shall mean any ‘hazardous substance,’ ‘pollutant or contaminant,’ ‘petroleum’ and ‘natural gas liquids,’ as those terms are defined or used in Section 101 of CERCLA and any other waste or other substance that is listed, defined, designated, or classified as, or otherwise determined to be, hazardous, radioactive, or toxic or a pollutant or a contaminant under or pursuant to any Environmental Law and any other substances regulated because of their effect or potential effect on public health and the Environment, including, without limitation, RCRA 8 metals, aluminum, MEK, PCBs, lead paint, asbestos, vermiculite, urea formaldehyde, mold, volatile and semi-volatile compounds, radioactive materials, all derivatives of petroleum or synthetic substitutes for petroleum, and putrescible and infectious materials.

     “Indemnified Party” has the meaning set forth in §8(d) below.

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     “Indemnifying Party” has the meaning set forth in §8(d) below.

     “Intellectual Property” means, currently existing anywhere, (a) all inventions, technology, processes and methods (whether patentable or unpatentable and whether or not reduced to practice), all improvements thereto, and all patents, patent applications, and patent disclosures, together with all reissuances, continuations, continuations-in-part, revisions, extensions, and reexaminations thereof, and any foreign or international patent and patent application taking priority from any of the foregoing, (b) all trademarks, service marks, trade dress, logos, trade names, corporate names, and domain names, together with all translations, adaptations, derivations, and combinations thereof and including all goodwill associated therewith, and all applications, registrations, and renewals in connection therewith, (c) all copyrights, all common law rights similar or equivalent to copyrights, all works (whether or not copyrightable), and all applications, registrations, and renewals in connection therewith, (d) all mask works and all applications, registrations, and renewals in connection therewith, (e) all trade secrets and confidential business information (including ideas, research and development, know-how, formulas, compositions, manufacturing and production processes and techniques, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information, and business and marketing plans and proposals), (f) all computer software (including data and related documentation), (g) all other proprietary rights, and (h) all copies, manifestations, representations, translations, transliterations and any other tangible embodiments of any kind thereof (in whatever form or medium).

     “IP Purchase Price” has the meaning set forth in §2(b) below.

     “Joseph Pressutti” has the meaning set forth in the preface above.

     “Knowledge” means actual knowledge after reasonable investigation.

     “Liability” means any liability (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due), including any liability for Taxes.

     “Material Adverse Effect” or “Material Adverse Change” means an effect or change that would be materially adverse on the business, financial condition, results of operations, properties, profitability, business prospects, or operations of the Company and its Subsidiaries taken as a whole; provided that none of the following shall be deemed to constitute, and none of the following shall be taken into account in determining whether there has been, a Material Adverse Effect: (A) any adverse change, event, development, or effect attributable to general conditions affecting the United States economy which does not affect the Company and its Subsidiaries materially disproportionately relative to other participants in the roofing industry, (B) any adverse change, event, development, or effect affecting the roofing industry generally which does not affect the Company and its Subsidiaries materially disproportionately relative to other participants in the roofing industry, or (C) the taking of any action contemplated by this Agreement or any of the other agreements contemplated hereby (or the omission to take any

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action if such omission is required by this Agreement or any of the other agreements contemplated hereby).

     “Most Recent Balance Sheet” means the balance sheet contained within the Most Recent Financial Statements.

     “Most Recent Financial Statements” has the meaning set forth in §4(g) below.

     “Most Recent Fiscal Month End” has the meaning set forth in §4(g) below.

     “Most Recent Fiscal Year End” has the meaning set forth in §4(g) below.

     “Multiemployer Plan” has the meaning set forth in ERISA §3(37).

     “Non-compete Payment” has the meaning set forth in §2(b) below.

     “Occupational Safety and Health Law” shall mean any legal requirement designed to provide safe and healthful working conditions and to reduce occupational safety and health hazards.

     “Off-site Waste Facilities” has the meaning set forth in §4(z) below.

     “Ordinary Course of Business” means the ordinary course of business consistent with past custom and practice (including with respect to quantity and frequency).

     “Party” has the meaning set forth in the preface above.

     “PBGC” means the Pension Benefit Guaranty Corporation.

     “Person” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, or a governmental entity (or any department, agency, or political subdivision thereof).

     “Pressutti Family Trust” has the meaning set forth in the preface above.

     “Process Agent” has the meaning set forth in §11(o) below.

     “Prohibited Transaction” has the meaning set forth in ERISA §406 and Code §4975.

     “Purchased Intellectual Property” means the Intellectual Property described on Exhibit B-1 and any and all other Intellectual Property currently owned by any of the Sellers or their respective Affiliates (but not any other persons or entities) used or useful in the business of the Company and its Subsidiaries, and all rights, title, and interest in and to all such Purchased Intellectual Property, but specifically excluding all Intellectual Property owned or created by any of the Sellers or their respective Affiliates described on Exhibit B-2 and all Intellectual Property acquired or created after the Closing by any of the Sellers or their respective Affiliates (other

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than any improvements on existing Intellectual Property in the form of continuation-in-part applications).

     “Purchased Real Estate” means the real property and improvements described on Exhibit C.

     “Purchased Real Estate Agreements” means those certain Agreements For Purchase and Sale of Real Estate and Escrow Instructions in the forms attached hereto as Exhibits I and J executed by Buyer’s Affiliate and 3441 South Willow Investments, L.P., a California limited partnership, for 3333 South Willow Avenue, Fresno, California 93725 and 3441 South Willow Avenue, Fresno, California 93725.

     “Purchase Price” has the meaning set forth in §2(b) below.

     “Release” shall mean any spilling, leaking, emitting, discharging, depositing, escaping, leaching, dumping, disposing, injecting, pumping, pouring, emptying, or other releasing into the Environment, whether known or unknown and whether intentional or unintentional.

     “Reportable Event” has the meaning set forth in ERISA §4043.

     “Securities Act” means the Securities Act of 1933, as amended.

     “Securities Exchange Act” means the Securities Exchange Act of 1934, as amended.

     “Security Interest” means any mortgage, pledge, lien, encumbrance, charge, or other security interest, other than (a) liens for Taxes not yet due and payable or for Taxes which are being actively contested in good faith by appropriate proceedings, (b) mechanics’, materialmens’, and similar liens, (c) purchase money liens and liens securing rental payments under capital lease arrangements, (d) other liens arising in the Ordinary Course of Business and not incurred in connection with the borrowing of money.

     “Sellers” has the meaning set forth in the preface above.

     “Seller’s Affiliates” includes all Affiliates of each Seller, including, without limitation, the Pressutti Family Trust and 3441 South Willow Investments, L.P., and their respective partners, owners, beneficiaries, officers, directors, trustees and representatives.

     “Share Purchase Price” has the meaning set forth in §2(b) below.

     “Subsidiary” means any corporation with respect to which a specified Person (or a Subsidiary thereof) owns a majority of the common stock or has the power to vote or direct the voting of sufficient securities to elect a majority of the directors.

     “Susan Pressutti” has the meaning set forth in the preface above.

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     “Tax” means any federal, state, local, or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental, customs duties, capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not.

     “Tax Return” means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

     “Third Party Claim” has the meaning set forth in §8(d) below.

     “Title Reports” means the title reports attached hereto as Exhibit K.

2. PURCHASE AND SALE OF COMPANY SHARES, PURCHASED REAL ESTATE AND PURCHASED INTELLECTUAL PROPERTY.

     (a) Basic Transaction. For the consideration specified below in this §2, on and subject to the terms and conditions of this Agreement, the Buyer agrees to purchase from the Sellers, and the Sellers agree to sell to the Buyer: all of the outstanding Company Shares and the Purchased Intellectual Property. Concurrently with the Closing, the Buyer agrees to purchase (or cause one of its Affiliates to purchase), and the Sellers agree to cause 3441 South Willow Investments, L.P. to sell to the Buyer (or an Affiliate of Buyer designated by Buyer), the Purchased Real Estate in accordance with the terms and conditions of this Agreement and the Purchased Real Estate Agreements.

     (b) Purchase Price. The Buyer agrees to pay to the Pressutti Family Trust at the Closing, in cash payable by wire transfer or delivery of other immediately available funds to the Pressutti Family Trust, for the Company Shares, $17,965,000 (the “Share Purchase Price”); provided, however, that the Share Purchase Price is subject to adjustment pursuant to §2(f) below. The Buyer also agrees to pay to Joseph Pressutti at the Closing, in cash payable by wire transfer or delivery of other immediately available funds to Joseph Pressutti, $4,500,000 (the “IP Purchase Price”) for the Purchased Intellectual Property (the Share Purchase Price and the IP Purchase Price are collectively referred to as the “Purchase Price”); provided that, notwithstanding the foregoing, $2,300,000 of the Share Purchase Price otherwise payable to The Pressutti Family Trust at the Closing in accordance with this §2(b) shall be paid to the escrow agent under, and to be held in accordance with, the Escrow Agreement in order to secure the indemnification obligations of the Sellers contained in §8(b) (it being understood that $800,000 of such $2,300,000 may not be used for indemnification obligations other than obligations based on any purchase price adjustment payable by Sellers with respect to §2(f)). At the Closing, the Buyer shall also pay to Joseph Pressutti $50,000 for his Covenant Not to Compete set forth in §6(e) (the “Non-compete Payment”). In addition to paying the Purchase Price and Non-compete Payment as set forth above, at the Closing the Buyer (or an Affiliate of Buyer designated by Buyer) will pay to 3441 South Willow Investments, L.P. $2,502,279.69 for the Purchased Real Estate, and will assume the Assumed Real Estate Debt, in each case upon the terms and

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conditions set forth in this Agreement and the Purchased Real Estate Agreements (with $575,000 of such amount being allocated to the Purchased Real Estate at 3333 South Willow, Fresno, California and the balance of such amount being allocated to the Purchased Real Estate at 3441 South Willow, Fresno, California). The Company shall distribute to the Sellers immediately prior to Closing all furniture, furnishings and personal property in the Seller’s suite of offices and described on Annex 3 attached hereto. The Parties agree that these items have a fair value of $1,000.

     (c) Allocation. The Buyer and the Sellers each acknowledge that the amount of Purchase Price allocated to the Company Shares, Purchased Intellectual Property, Covenant Not to Compete, and Purchased Real Estate in this §2 represents the fair market value of the assets being purchased, determined pursuant to arm’s-length negotiation. The Buyer and the Seller each agree to report the sale of the business for income tax purposes according to the allocations set forth in this Section 2(c) and not to take any position inconsistent with such allocation on its tax returns without the written consent of the other, and each party will indemnify the other for any inconsistent position taken.

     (d) The Closing. The closing of the transactions contemplated by this Agreement (the “Closing”) shall take place at the offices of Baker & McKenzie in Palo Alto, California, commencing at 10:00 a.m. local time, as promptly as reasonably practicable but in no event later than the earlier of August 30, 2005 or the fifth business day following the satisfaction or waiver of all conditions to the obligations of the Parties to consummate the transactions contemplated hereby (other than conditions with respect to actions the respective Parties will take at the Closing itself) or such other date as the Parties may mutually determine (the “Closing Date”).

     (e) Deliveries at the Closing. The closing of the sale or exchange of the Purchased Real Estate will take place simultaneously with the Closing of the purchase of the Company Shares and the Purchased Intellectual Property. At the Closing, (i) the Sellers will deliver to the Buyer the various certificates, instruments, and documents referred to in §7(a) below, (ii) the Buyer will deliver to the Sellers the various certificates, instruments, releases, and documents referred to in §7(b) below, (iii) the Sellers will deliver to the Buyer stock certificates representing all of the outstanding Company Shares, endorsed in blank or accompanied by duly executed assignment documents, (iv) the Sellers will execute, acknowledge (if appropriate), and deliver to the Buyer assignments with respect to the Purchased Intellectual Property in the forms attached hereto as Exhibits D-1 through D-2 and such other instruments of sale, transfer, conveyance and assignment with respect to the Purchased Intellectual Property as the Buyer may reasonably request, (v) the Buyer (or one of its Affiliates) will execute, acknowledge (if appropriate), and deliver to the Seller and 3441 South Willow Investments, L.P. an assumption agreement with respect to the Assumed Real Estate Debt in the form of Exhibit E and such other instruments of assumption with respect to the Assumed Real Estate Debt as the Sellers and/or the lender under the Assumed Real Estate Debt may reasonably request, (vi) the Sellers will cause 3441 South Willow Investments, L.P. to execute and deliver to the Buyer a deed with respect to the Purchased Real Estate in the form attached hereto as Exhibit D-3 and such other instruments of transfer, conveyance, and assignment with respect to the Purchased Real Estate as the Buyer may reasonably request, (vii) the Sellers will deliver, and will cause the Company to deliver, to Buyer the Assignment and Assumption of Lease, Termination of Guaranty, and Release of Landlord in

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the form attached hereto as Exhibit D-4, and (viii) the Buyer will deliver the consideration specified in §2(b) above.

(f) Inventory Valuation and Adjustment of Purchase Price.

     (i) Buyer and Seller, and their respective representatives, will each examine and evaluate the inventory of the Company as of the Closing Date (including raw materials, manufactured and purchased parts, goods in process, and finished goods) promptly after the Closing, and each will submit to the other within forty-five (45) days after the Closing a detailed written list and description of all items and amounts he or it believes is obsolete, damaged or defective, or slow moving and the value placed on each. The information exchanged shall be arranged so as to separate the various items into the three (3) different categories, and the total value for each category, and shall explain the valuation methodology used and how the values were arrived at. For purposes of this subsection (f), “value” means the amount of money that is reasonably estimated to be realized from the orderly disposal of such items in the normal course (not at a fire sale or distressed proceed sale) and shall be determined in accordance with GAAP, and “slow moving” means items that are reasonably likely to take more than twelve (12) months from and after the Closing Date (based on the prior twelve (12) months sales) to dispose of in the normal course of the Company’s business as presently conducted prior to the Closing (and disregarding any changes or actions that Buyer makes or may make to the Company’s business or operations after the Closing (e.g., deciding to terminate the sale of a product or product line).

     (ii) The parties will exchange information and discuss each other’s lists and valuations, and attempt to reach agreement on the value of each category and the adjustment from the amount shown for such inventory on the Company’s books. If the parties’ respective valuations of the obsolete, damaged or defective, or slow moving inventories are within 10% of each other, then the agreed value will be the average of the two. If not within 10%, and the parties cannot otherwise agree on a value of the obsolete, damaged or defective, or slow moving inventories within five (5) days of exchanging lists and values, then the parties agree to promptly have an unrelated and independent third party (who has not worked or consulted for either Buyer or Seller (or any Affiliate) within the last three (3) years and is employed by a nationally recognized accounting firm) to evaluate and value the items and amount of obsolete, damaged or defective, and “slow moving” inventory. The third party is to be mutually agreed upon within five (5) days after the parties cannot reach agreement on value, and shall have at least five (5) years’ experience in evaluating inventory for the premium roofing products industry. Each side shall pay one-half of the fees and costs of the third party evaluator. The decision of the third party as to what is or is not obsolete, damaged or defective, or slow moving inventory and the value thereof shall be final and binding on all parties.

     (iii) For purposes hereof, Buyer consents to Robert Crum, Randy Fortel and other persons they select (such as sales managers employed by the Company) providing reasonable assistance to Seller after the Closing in examining, evaluating and valuing the inventory, and trying to bring to a conclusion this matter. There shall be no charge to Seller for these persons’ services in this matter. Buyer and Seller and their representatives shall have reasonable access to all inventory and relevant information.

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     (iv) The amount payable by Sellers to Buyer (which shall be an adjustment to the Share Purchase Price) with respect to obsolete, damaged or defective, and slow moving inventory shall equal the difference between (x)the cost of the Company’s inventory items as of the Closing Date determined to be obsolete, damaged or defective, or slow-moving in accordance with this subsection (f) less inventory reserves, in each case as reflected in the books of the Company as of the Closing Date and [y] the agreed value (or the value determined by the third party evaluator) of the Company’s obsolete, damaged or defective, and slow moving inventory as of the Closing Date, in each case determined as provided in the subsection (f)).

     For example, if (A) the agreed value for all obsolete, damaged and slow moving inventory is $400,000, and such inventory items are reflected on the Company’s books at $825,000 (i.e., the parties agree that the value of such inventory items are $425,000 less than the cost reflected on the books of the Company as of the Closing Date), and (B) if the Inventory Reserve on such books is $75,000, then the Buyer would get a Purchase Price adjustment of $350,000 [$825,000 less $400,000 less $75,000]. $350,000 would be payable to Buyer from the Sellers, and the parties would direct the escrow agent under the Escrow Agreement to deliver such $350,000 to Buyer and would direct the escrow agent under the Escrow Agreement to deliver to Sellers the difference between $800,000 and $350,000.

     (v) The parties shall use their best efforts to conclude this matter and have funds disbursed from Escrow within ninety (90) days of the Closing. The parties shall promptly sign instructions to the escrow agent under the Escrow Agreement in accordance with this subsection (f). Notwithstanding the foregoing, Buyer shall be entitled to make a claim under the Escrow Agreement for the amount it believes is owing to it in accordance with this subsection (f) even though the agreed value for all obsolete, damaged and defective, and slow-moving inventory has not yet been established in accordance with this subsection (f).

3. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION, THE PURCHASED REAL ESTATE, AND THE PURCHASED INTELLECTUAL PROPERTY.

     (a) Representations and Warranties of the Sellers. Except as set forth in Annex 1 attached hereto, each of the Sellers represents and warrants to the Buyer that the statements contained in this §3(a) are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this §3(a)).

          (i) Organization; Authorization of Transaction. The Pressutti Family Trust is duly organized, validly existing, and in good standing under the laws of the jurisdiction of its formation and has full power and authority to execute and deliver this Agreement and to perform its obligations hereunder. Each of the Sellers has full power and authority to execute and deliver this Agreement and to perform his, her, or its obligations hereunder. This Agreement constitutes the valid and legally binding obligation of each of the Sellers, enforceable in accordance with its terms and conditions. None of the Sellers need give any notice to, make any

10

filing with, or obtain any authorization, consent, or approval of any government or governmental agency or other third party in order to consummate the transactions contemplated by this Agreement, except as set forth on Annex 1 attached hereto.

          (ii) Noncontravention. Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will (A) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which any of the Sellers is subject or (B) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract, lease, license, instrument, or other arrangement to which any of the Sellers is a party or by which he, she, or it is bound or to which any of his, her, or its assets is subject, except as set forth on Annex 1 attached hereto or §4(c) of the Disclosure Schedule.

          (iii) Brokers’ Fees. None of the Sellers, the Company or any of its Subsidiaries has incurred any Liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement.

          (iv) Company Shares. The Pressutti Family Trust holds of record and owns beneficially 401,818 Company Shares, free and clear of any restrictions on transfer (other than any restrictions under the Securities Act and state securities laws), Taxes, Security Interests, options, warrants, purchase rights, contracts, commitments, equities, claims, and demands. The Pressutti Family Trust is not a party to any option, warrant, purchase right, or other contract or commitment that could require it to sell, transfer, or otherwise dispose of any capital stock of the Company (other than this Agreement). The Pressutti Family Trust is not a party to any voting trust, proxy, or other agreement or understanding with respect to the voting of any capital stock of the Company. Upon delivery of the 401,818 Company Shares to the Buyer at the Closing, the Buyer will be the absolute owner of all outstanding Company Shares free, clear, and discharged of and from any and all liens, encumbrances, and marital rights and interests other than any liens or encumbrances created by the Buyer.

          (v) Purchased Real Estate. The Purchased Real Estate is described on Exhibit C and is the only real property that is owned by any of the Sellers or any of their respective Affiliates that is utilized by the Company and its Subsidiaries. With respect to each parcel of the Purchased Real Estate:

     (A) 3441 South Willow Investments, L.P. has good and marketable title to the parcel of real property, free and clear of any Security Interest, easement, covenant, or other restriction, except as described on the Title Reports or on Annex I attached hereto and except for real estate taxes, assessments, and other governmental levies, fees, or charges imposed with respect to such Purchased Real Estate that are not due and payable as of the Closing and except for recorded easements, covenants, and other restrictions which do not and will not materially impair the use or occupancy of the property subject thereto in the operation of the business of the Company and its Subsidiaries as currently

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conducted thereon, and except for zoning, building codes, and other land use laws regulating the use or occupancy of such Purchased Real Estate or the activities conducted thereon that are imposed by any governmental authority having jurisdiction over such Purchased Real Estate and are not violated by the current use or occupancy of such Purchased Real Estate or the operation of the business of the Company and its Subsidiaries as currently conducted thereon (all such exceptions are referred to as “Permitted Encumbrances”) and upon Closing the Buyer will acquire good and marketable title to the parcel of real property, free and clear of any Security Interest, ownership interest, easement, covenant, marital rights and interests, or other restriction, except as described on the Title Report or Annex I attached hereto and except for Permitted Encumbrances;

     (B) there are no pending or, to the Knowledge of any of the Sellers and the directors and officers (and employees with responsibility for real estate matters) of the Company and its Subsidiaries, threatened condemnation or zoning proceedings, lawsuits, or administrative actions relating to the property or other matters that could have a material adverse effect on the current use, occupancy, or value thereof;

     (C) the buildings and improvements are located within the boundary lines of the described parcels of land, are not in violation of applicable setback requirements, zoning laws, and ordinances (and none of the properties or buildings or improvements thereon are subject to “permitted non-conforming use” or “permitted non-conforming structure” classifications), and do not encroach on any easement which may burden the land, and the land does not serve any adjoining property for any purpose inconsistent with the use of the land, the property is not located within any flood plain or subject to any similar type restriction for which any permits or licenses necessary to the use thereof have not been obtained where not having obtained any such permits or licenses could have a Material Adverse Effect, and the property is not located within a delineated earthquake fault zone;

     (D) all facilities have received all approvals, which are listed on Annex I attached hereto, of governmental authorities (including licenses and permits) required in connection with the ownership or operation as currently conducted thereof and have been constructed, operated, and maintained in accordance with applicable laws, rules, and regulations;

     (E) there are no leases, subleases, licenses, concessions, or other agreements, written or oral, granting to any party or parties the right of use or occupancy of any portion of the parcel of real property (other than in favor of the Company and its Subsidiaries, which lease will be assigned to the Buyer free and clear of all Security Interests (other than in favor of the lender under and to secure the Assumed Real Estate Debt) at the Closing at no additional cost to the Buyer), and no party (other than the Company and its Subsidiaries) is in possession of the parcel of real property;

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     (F) there are no outstanding options or rights of first refusal to purchase the parcel of real property, or any portion thereof or interest therein;

     (G) all facilities located on the parcel of real property are supplied with utilities and other services necessary for the operation of such facilities, in the manner the Company and its Subsidiaries are presently using them in the conduct of their business; and

     (H) the parcel of real property abuts on and has direct vehicular access to a public road, or has access to a public road via a permanent, irrevocable, appurtenant easement benefiting the parcel of real property, and access to the property is provided by paved public right-of-way.

          (vi) Purchased Intellectual Property.

     (A) Except as set forth on §4(m) of the Disclosure Schedule, Joseph Pressutti owns all rights, title, and interest in and to each and every item of the Purchased Intellectual Property, free and clear of any restrictions on transfer, ownership or license or other rights of any third party (including, without limitation, marital rights and interests) (except in favor of the Company or its Subsidiaries), Taxes, Security Interests, options, warrants, purchase rights, contracts, commitments, equities, claims, and demands. Joseph Pressutti is not a party to any option, warrant, purchase right, or other contract or commitment that could require him to sell, transfer or otherwise dispose of any of the Purchased Intellectual Property (other than this Agreement). Each item of Purchased Intellectual Property owned or used by Joseph Pressutti immediately prior to the Closing will be owned or available for use by the Buyer to the same extent and on identical terms and conditions immediately subsequent to the Closing. Except as set forth on §4(m) of the Disclosure Schedule, each current and former employee or contractor of Joseph Pressutti who has worked on, created, developed, or is or was involved in or has assisted with or contributed to the creation or development of, any Purchased Intellectual Property has executed and delivered to Joseph Pressutti an agreement (containing no exceptions to or exclusions from the scope of its coverage) assigning to Joseph Pressutti all of such employee’s or contractor’s rights, title, and interest in and to any such Purchased Intellectual Property. Except as set forth on §4(m) of the Disclosure Schedule, each such employee or contractor, and any other employee or contractor who has received or to whom was disclosed any trade secrets or other confidential information that is part of any Purchased Intellectual Property, has executed and delivered to Joseph Pressutti an agreement agreeing to keep confidential and not disclose, or use for any purpose other than as permitted by Joseph Pressutti, any such trade secrets or other confidential information.

     (B) Except as set forth on §4(m) of the Disclosure Schedule, none of the Sellers with respect to the Purchased Intellectual Property has interfered with,

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infringed upon, misappropriated, or otherwise come into conflict with any rights, title, or interest in or to any Intellectual Property of any third parties. Except as set forth on §4(m) of the Disclosure Schedule, none of the Sellers and the directors and officers (and employees and agents with responsibility for Intellectual Property matters) of the Company and its Subsidiaries (i) has ever received any charge, complaint, claim, threat, demand, or notice alleging that any such interference, infringement, misappropriation or violation (including, without limitation, any offer to license, or claim that any Seller, the Company or any of its Subsidiaries must license or refrain from using, any Intellectual Property rights of any third party), or (ii) has any Knowledge that the continued operation of the Company and its Subsidiaries or their business after the Closing would cause or result in any such interference, infringement, misappropriation, or violation.

     (C) To the Knowledge of any of the Sellers and the directors and officers (and employees and agents with responsibility for Intellectual Property matters) of the Company and its Subsidiaries, except as set forth on §4(m) of the Disclosure Schedule, (i) no third party has interfered with, infringed upon, misappropriated, or otherwise come into conflict with any rights of the Sellers with respect to the Purchased Intellectual Property, and (ii) there are no circumstances indicating that any third party will or may be likely to interfere with, infringe upon, misappropriate, or otherwise come into conflict with any rights with respect to the Purchased Intellectual Property.

     (D) None of the Sellers and their respective Affiliates (i) has been issued any patent, has obtained or acquired any patent or patent application, or has pending applications for any patents or registrations that are part of the Purchased Intellectual Property except as described on Exhibit B-1, (ii) has granted to any third party any license, agreement or other permission with respect to any of the Purchased Intellectual Property (other than the Company and its Subsidiaries), (iii) has registered, has obtained or acquired any application or registration for, or has pending any application for registration of any trademarks or copyrights included in the Purchased Intellectual Property, or (iv) has sold, licensed, transferred, or otherwise disposed of any Intellectual Property used or useful in the business of the Company and its Subsidiaries or rights therein or thereto within the last two years.

     (E) The Purchased Intellectual Property does not use, pursuant to license, sublicense, agreement, or permission, any Intellectual Property that any third party owns. None of the Sellers has disclosed or made available outside the operation of the Company and its Subsidiaries’ business or without a confidentiality or non-disclosure obligation, or failed to take all reasonable action to maintain and protect, each item of the Purchased Intellectual Property, including, without limitation, the confidentiality and secrecy of any trade secrets or other confidential information that is part of any Purchased Intellectual Property.

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     (F) To the Knowledge of any of the Sellers and the directors and officers (and employees and agents with responsibility for Intellectual Property matters) of the Company and its Subsidiaries, no product, system, program, or software module designed, developed, sold, licensed, or otherwise used or made available by any of the Sellers contains any “back door,” “time bomb,” “Trojan horse,” “worm,” “drop dead device,” “virus,” or other software routines or hardware components designed to permit unauthorized access or to disable or erase software, hardware, or data without the consent of the user, or contains any open source code or software that may be subject to an open source or general public license.

     (G) Disclaimer. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT OR ANY AGREEMENT OR CERTIFICATE DELIVERED PURSUANT TO THIS AGREEMENT, SELLERS MAKE NO REPRESENTATIONS, WARRANTIES, OR GUARANTEES, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, AT LAW OR IN EQUITY, IN RESPECT OF THE COMPANY SHARES, THE PURCHASED INTELLECTUAL PROPERTY, THE COMPANY OR ANY OF ITS ASSETS, LIABILITIES, ON-GOING CONTRACTS AND OBLIGATIONS, OR ANY OF COMPANY’S OPERATIONS OR BUSINESSES, INCLUDING, WITHOUT LIMITATION, WITH RESPECT TO MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE, NON-INFRINGEMENT OR PROJECTED FINANCIAL RESULTS, AND ANY SUCH OTHER REPRESENTATIONS OR WARRANTIES OR GUARANTEES ARE HEREBY EXPRESSLY DISCLAIMED.

     NOTWITHSTANDING ANYTHING TO THE CONTRARY, EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT OR ANY AGREEMENT OR CERTIFICATE DELIVERED PURSUANT TO THIS AGREEMENT, THE SELLER IS GIVING NO ASSURANCES THAT ANY MANUFACTURER, SUPPLIER, LESSOR, CUSTOMER, OR OTHER PARTY WITH WHICH THE SELLERS OR THE COMPANY HAS A RELATIONSHIP WILL CONTINUE ON AND AFTER THE CLOSING TO MAINTAIN ITS RELATIONSHIP REGARDING THE COMPANY AND ITS BUSINESS WITH THE BUYER OR THE COMPANY OR MAINTAIN SUCH RELATIONSHIP ON THE SAME TERMS THAT IT IS NOW CONDUCTED WITH THE SELLERS AND THE COMPANY.

     IN CONNECTION WITH THE BUYER’S INVESTIGATION OF THE COMPANY, THE COMPANY SHARES, THE PURCHASED INTELLECTUAL PROPERTY, AND THE PURCHASED REAL ESTATE, THE BUYER HAS RECEIVED CERTAIN ESTIMATES, PROJECTIONS, AND OTHER FORECASTS REGARDING THE COMPANY’S FUTURE RESULTS OF OPERATIONS AND FINANCIAL CONDITION. THE BUYER ACKNOWLEDGES THAT THERE ARE UNCERTAINTIES

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INHERENT IN ATTEMPTING TO MAKE SUCH ESTIMATES, PROJECTIONS AND OTHER FORECASTS AND THAT THE BUYER IS FAMILIAR WITH SUCH UNCERTAINTIES. ACCORDINGLY, EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT OR ANY AGREEMENT OR CERTIFICATE DELIVERED PURSUANT TO THIS AGREEMENT, THE SELLERS ARE NOT MAKING ANY REPRESENTATION OR WARRANTY WITH RESPECT TO SUCH ESTIMATES, PROJECTIONS, AND OTHER FORECASTS (INCLUDING THE REASONABLENESS OF THE ASSUMPTIONS UNDERLYING SUCH ESTIMATES, PROJECTIONS, AND FORECASTS OR THAT SUCH ESTIMATES, PROJECTIONS, AND FORECASTS WILL BE ACHIEVED).

     (b) Representations and Warranties of the Buyer. Except as set forth in Annex 2 attached hereto, the Buyer represents and warrants to the Sellers that the statements contained in this §3(b) are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this §3(b)).

          (i) Organization of the Buyer. The Buyer is a corporation duly organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation.

          (ii) Authorization of Transaction. The Buyer has full corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement constitutes the valid and legally binding obligation of the Buyer, enforceable in accordance with its terms and conditions. The Buyer need not give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency or other person in order to consummate the transactions contemplated by this Agreement.

          (iii) Noncontravention. Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will (A) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which the Buyer is subject or any provision of its charter or bylaws or (B) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract, lease, license, instrument, or other arrangement to which the Buyer is a party or by which it is bound or to which any of its assets is subject.

          (iv) Brokers’ Fees. The Buyer has no Liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement.

          (v) Investment. The Buyer is not acquiring the Company Shares with a view to or for sale in connection with any distribution thereof within the meaning of the Securities Act.

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          (vi) Tax Elections. The Buyer has not made, and after the Closing the Buyer and the Company will not make, in each case with respect to the transactions contemplated by this Agreement, any election under the Internal Revenue Code of 1986, as amended, pursuant to Section 338 or 338(h)(10) and/or any corresponding provisions of any State Revenue or Taxation Code.

4. REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY AND ITS SUBSIDIARIES. The Sellers represent and warrant to the Buyer that the statements contained in this §4 are correct and complete as of the date of this Agreement and will be correct and complete as of the Closing Date (as though made then and as though the Closing Date were substituted for the date of this Agreement throughout this §4), except as set forth in the disclosure schedule delivered by the Sellers to the Buyer on the date hereof and initialed by Joseph Pressutti and the Buyer (the “Disclosure Schedule”). Nothing in the Disclosure Schedule shall be deemed adequate to disclose an exception to a representation or warranty made herein, however, unless the Disclosure Schedule identifies the exception with reasonable particularity. Without limitation to the foregoing, the mere listing (or inclusion of a copy) of a document or other item shall not be deemed adequate to disclose an exception to a representation or warranty made herein (unless the representation or warranty pertains to the existence of the document or other item itself). The Disclosure Schedule will be arranged in paragraphs corresponding to the lettered and numbered paragraphs contained in this §4.

     (a) Organization, Qualification, and Corporate Power. Each of the Company and its Subsidiaries is a corporation duly organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation. Each of the Company and its Subsidiaries is duly authorized to conduct its business as currently conducted and is in good standing under the laws of each jurisdiction where such qualification is required, except where the failure to be so qualified would not have a Material Adverse Effect. Each of the Company and its Subsidiaries has full corporate power and authority and all licenses, permits, and authorizations necessary to carry on its businesses as currently conducted and to own and use the properties owned and as currently used by it, except to the extent the failure to have obtained such license, permit or authorization would not have a Material Adverse Effect. §4(a) of the Disclosure Schedule lists the directors and officers of each of the Company and its Subsidiaries. The Sellers have delivered to the Buyer correct and complete copies of the charter and bylaws of each of the Company and its Subsidiaries (as amended to date). The minute books (containing the records of meetings of the stockholders, the board of directors, and any committees of the board of directors), the stock certificate books, and the stock record books of each of the Company and its Subsidiaries are correct and complete in all material respects. None of the Company and its Subsidiaries is in violation of any provision of its charter or bylaws.

     (b) Capitalization. The entire authorized capital stock of the Company consists only of 1,000,000 Company Shares, of which 401,818 Company Shares are issued and outstanding and no Company Shares are held in treasury. No other capital stock or equity securities of the Company are authorized or outstanding. All of the issued and outstanding Company Shares have been duly authorized, are validly issued, fully paid, and nonassessable, and are held beneficially and of record by The Pressutti Family Trust. There are currently no outstanding or authorized

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options, warrants, purchase rights, subscription rights, conversion rights, exchange rights, or other contracts or commitments that could require the Company to issue, sell, or otherwise cause to become outstanding any of its capital stock. There are no outstanding or authorized stock appreciation, phantom stock, profit participation, or similar rights with respect to the Company. There are no voting trusts, proxies, or other agreements or understandings with respect to the voting of the capital stock of the Company.

     (c) Noncontravention. Neither the execution and the delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will (i) violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any government, governmental agency, or court to which any of the Company and its Subsidiaries is subject or any provision of the charter or bylaws of any of the Company and its Subsidiaries or (ii) conflict with, result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract, lease, license, permit, instrument, or other arrangement to which any of the Company and its Subsidiaries is a party or by which it is bound or to which any of its assets is subject (or result in the imposition of any Security Interest upon any of its assets), except as set forth in §4(c) of the Disclosure Schedule or except where the violation, conflict, breach, default, acceleration, termination, modification, cancellation, failure to give notice, or Security Interest would not have a Material Adverse Effect. None of the Company and its Subsidiaries need give any notice to, make any filing with, or obtain any authorization, consent, or approval of any government or governmental agency in order for the Parties to consummate the transactions contemplated by this Agreement, except as set forth in §4(c) of the Disclosure Schedule or except where the failure to give, make, or obtain any such authorization, consent, or approval would not have a Material Adverse Effect.

     (d) Brokers’ Fees. None of the Company and its Subsidiaries has any Liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the transactions contemplated by this Agreement.

     (e) Title to Assets. The Company and its Subsidiaries have good and marketable title to, or a valid leasehold interest in, or valid license for, all properties and assets currently used by them, located on their premises, or shown on the Most Recent Balance Sheet or acquired after the date thereof, free and clear of all Security Interests, except for properties and assets used or sold in the Ordinary Course of Business since the date of the Most Recent Balance Sheet.

     (f) Subsidiaries. §4(f) of the Disclosure Schedule sets forth for each Subsidiary of the Company (i) its name and jurisdiction of incorporation, and (ii) the number of issued and outstanding shares of each class of its capital stock. All of the issued and outstanding shares of capital stock of each Subsidiary of the Company have been duly authorized and are validly issued, fully paid, and nonassessable. The Company holds of record and owns beneficially all of the outstanding shares of each Subsidiary of the Company, free and clear of any restrictions on transfer (other than restrictions under the Securities Act and state securities laws), Taxes, Security Interests, option, warrants, purchase rights, contracts, commitments, equities, claims, and demands. There are no outstanding or authorized options, warrants, purchase rights, subscription rights, conversion rights, exchange rights, or other contracts or commitments that

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could require the Company to sell, transfer, or otherwise dispose of any capital stock of any of its Subsidiaries or that could require any Subsidiary of the Company to issue, sell, or otherwise cause to become outstanding any of its own capital stock. There are no outstanding stock appreciation, phantom stock, profit participation, or similar rights with respect to any Subsidiary of the Company. There are no voting trusts, proxies, or other agreements or understandings with respect to the voting of any capital stock of any Subsidiary of the Company. None of the Company and its Subsidiaries controls directly or indirectly or has any direct or indirect equity participation in any corporation, partnership, trust, or other business association which is not a Subsidiary of the Company.

     (g) Financial Statements. Attached hereto as Exhibit A are the following financial statements (collectively the “Financial Statements”): (i) unaudited consolidated balance sheets and statements of income, changes in stockholders’ equity, and cash flow as of and for the fiscal years ended December 31, 2003 and December 31, 2004 (the “Most Recent Fiscal Year End”) for the Company and its Subsidiaries, and (ii) unaudited consolidated balance sheets and statements of income, changes in stockholders’ equity, and cash flow (the “Most Recent Financial Statements”) as of and for the 7 months ended July 31, 2005 (the “Most Recent Fiscal Month End”) for the Company and its Subsidiaries. The foregoing Financial Statements (including any notes thereto) have been prepared in a manner consistent with the accounting principles that have been historically applied and maintained by the Company and its Subsidiaries and present fairly the financial condition of the Company and its Subsidiaries as of such dates and the results of operations of the Company and its Subsidiaries for such periods, and are consistent with the books and records of the Company and its Subsidiaries; provided, however, that the Most Recent Financial Statements are subject to normal year-end adjustments (which will not be material individually or in the aggregate) and all Financial Statements lack full footnotes and other presentation items.

     (h) Events Subsequent to Most Recent Fiscal Year End. Since the Most Recent Fiscal Year End, there has not been any Material Adverse Change. Without limiting the generality of the foregoing, and except as set forth on §4(h) of the Disclosure Schedule, since that date:

          (i) except as contemplated by the penultimate sentence of §2(b) and distributions to the Sellers disclosed in §4(h)(xiii) of the Disclosure Schedule or as otherwise disclosed in §4(h)(i) of the Disclosure Schedule, none of the Company and its Subsidiaries has sold, leased, transferred, or assigned any of its assets, tangible or intangible, other than for fair consideration in the Ordinary Course of Business;

          (ii) none of the Company and its Subsidiaries has entered into any agreement, contract, lease, or license (or, except for purchase orders to buy raw materials or sell the Company and its Subsidiaries’ products entered into in the Ordinary Course of Business, series of related agreements, contracts, leases, and licenses) either involving more than $25,000 or outside the Ordinary Course of Business;

          (iii) no party (including the Company and each of its Subsidiaries) has accelerated, terminated, modified, or cancelled any agreement, contract, lease, or license (or

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series of related agreements, contracts, leases, and licenses) involving more than $25,000 to which the any of the Company and its Subsidiaries is a party or by which it is bound other than modifications of purchase order agreements that, in the aggregate, are not material to the business, financial condition, results of operations, profitability, prospects, or operations of the Company and its Subsidiaries and are not outside the Ordinary Course of Business or cancellation of purchase order agreements that are not material to the business, financial condition, results of operations, profitability, prospects, or operations of the Company and its Subsidiaries and are not outside the Ordinary Course of Business and in which the Company or one of its Subsidiaries is the seller and the buyer thereunder has compensated the Company or one of its Subsidiaries for corresponding raw materials purchases made by the Company or one of its Subsidiaries such that none of the Company and its Subsidiaries has suffered a Material Adverse Effect;

          (iv) none of the Company and its Subsidiaries has imposed any Security Interest upon any of its assets, tangible or intangible;

          (v) none of the Company and its Subsidiaries has made any capital expenditure (or series of related capital expenditures) either involving more than $25,000 or outside the Ordinary Course of Business other than as contemplated on the Capital Budget of the Company and its Subsidiaries attached hereto as Exhibit G;

          (vi) none of the Company and its Subsidiaries has made any capital investment in, any loan to, or any acquisition of the securities or assets of, any other Person (or series of related capital investments, loans, and acquisitions) either involving more than $25,000 or outside the Ordinary Course of Business;

          (vii) none of the Company and its Subsidiaries has issued any note, bond, or other debt security or created, incurred, assumed, or guaranteed any indebtedness for borrowed money or capitalized lease obligation either involving more than $10,000 singly or $25,000 in the aggregate;

          (viii) none of the Company and its Subsidiaries has delayed or postponed the payment of accounts payable beyond their stated terms or has delayed or postponed the payment of other Liabilities outside the Ordinary Course of Business;

          (ix) none of the Company and its Subsidiaries has cancelled, compromised, waived, or released any right or claim (or series of related rights and claims) either involving more than $25,000 or outside the Ordinary Course of Business;

          (x) none of the Company and its Subsidiaries has granted any license or sublicense of any rights under or with respect to any Intellectual Property;

          (xi) there has been no change made or authorized in the charter or bylaws of any of the Company and its Subsidiaries;

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          (xii) none of the Company and its Subsidiaries has issued, sold, or otherwise disposed of any of its capital stock, or granted any options, warrants, or other rights to purchase or obtain (including upon conversion, exchange, or exercise) any of its capital stock;

          (xiii) none of the Company and its Subsidiaries has declared, set aside, or paid any dividend or made any distribution with respect to its capital stock (whether in cash or in kind) or redeemed, purchased, or otherwise acquired any of its capital stock;

          (xiv) none of the Company and its Subsidiaries has experienced any destruction, disappearance, loss, or material damage (whether or not covered by insurance) to its property;

          (xv) none of the Company and its Subsidiaries has made any loan to, or entered into any other transaction with, any of its directors, officers, and employees either involving more than $5,000 in the aggregate or outside the Ordinary Course of Business, except as set forth on §4(h)(xv) of the Disclosure Schedule;

          (xvi) none of the Company and its Subsidiaries has entered into any employment contract or collective bargaining agreement, written or oral, or modified the terms of any existing such contract or agreement, except as set forth on §4(h)(xvi) of the Disclosure Schedule;

          (xvii) none of the Company and its Subsidiaries has granted any increase in the base compensation of any of its directors, officers, and employees;

          (xviii) none of the Company and its Subsidiaries has adopted, amended, modified, or terminated any bonus, profit-sharing, incentive, severance, or other plan, contract, or commitment for the benefit of any of its directors, officers, and employees (or taken any such action with respect to any other Employee Benefit Plan);

          (xix) none of the Company and its Subsidiaries has made any other change in employment terms for any of its directors, officers, and employees outside the Ordinary Course of Business;

          (xx) none of the Company and its Subsidiaries has made or pledged to make any charitable or other capital contribution outside the Ordinary Course of Business;

          (xxi) no officer or key employee has terminated his/her employ or has been terminated from the employ of the Company or any of its Subsidiaries, or has become disabled or incapacitated;

          (xxii) there has not been any other material occurrence, event, incident, action, failure to act, or transaction outside the Ordinary Course of Business involving the Company or any of its Subsidiaries and having or reasonably likely to have a Material Adverse Effect; and

          (xxiii) none of the Company and its Subsidiaries has committed to any of the foregoing.

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     (i) Undisclosed Liabilities. None of the Company and its Subsidiaries has any Liability (and to the Knowledge of any of the Sellers and the directors and officers of the Company and its Subsidiaries there is no Basis for any present or future action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand against it giving rise to any Liability), except for (i) Liabilities set forth on the face of the Most Recent Balance Sheet (rather than in any notes thereto), (ii) Liabilities which have arisen after the Most Recent Fiscal Month End in the Ordinary Course of Business (none of which results from, arises out of, relates to, is in the nature of, or was caused by any breach of contract, breach of warranty, tort, infringement, or violation of law), and (iii) Liabilities set forth on §4(i) of the Disclosure Schedule.

     (j) Legal Compliance. Except as set forth on §4(j) of the Disclosure Schedule, the Company and its Subsidiaries and their predecessors and Affiliates have complied with all applicable laws (including rules, regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and charges thereunder) of federal, state, local, and foreign governments (and all agencies thereof) except to the extent that noncompliance will not and could not reasonably be expected to have a Material Adverse Effect, and no action, suit, proceeding, hearing, investigation, charge, complaint, claim, demand, or notice has been filed or commenced against the Company or any of its Subsidiaries alleging any failure so to comply. §4(j) of the Disclosure Schedule lists each material license, franchise, permit, certificate, approval, or other similar authorization of any governmental entity affecting, or relating in any way to, the business of the Company and its Subsidiaries.

     (k) Tax Matters.

          (i) Except as set forth on §4(k) of the Disclosure Schedule, each of the Company and its Subsidiaries has timely filed all Tax Returns that it was required to file. All such Tax Returns were correct and complete in all material respects. All Taxes due and owing by any of the Company and its Subsidiaries (whether or not shown on any Tax Return) have been paid. None of the Company and its Subsidiaries currently is the beneficiary of any extension of time within which to file any Tax Return. No claim has ever been made by an authority in a jurisdiction where the Company or any of its Subsidiaries does not file Tax Returns that it is or may be subject to taxation by that jurisdiction. There are no Security Interests on any of the assets of the Company or any of its Subsidiaries that arose in connection with any failure (or alleged failure) to pay any Tax.

          (ii) Each of the Company and its Subsidiaries has withheld, deposited and paid all Taxes required to have been withheld, deposited and/or paid by the each of Company and its Subsidiaries in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder, or other third party.

          (iii) None of the Sellers or any director or officer (or employee responsible for Tax matters) of the Company or its Subsidiaries knows or has reason to know of any threatened or potential additional assessments of Taxes for any period for which Tax Returns have or should have been filed. There is no dispute or claim concerning any Tax Liability of the Company or any of its Subsidiaries either (A) claimed or raised by any authority or (B) as to which any of the

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Sellers and the directors and officers (and employees responsible for Tax matters) of the Company and its Subsidiaries has Knowledge. §4(k) of the Disclosure Schedule lists all federal, state, local, and foreign income Tax Returns filed by the Company and its Subsidiaries for taxable periods for which the statute of limitations is open, indicates those Tax Returns that have been audited, and indicates those Tax Returns that currently are the subject of audit. The Sellers have delivered to the Buyer correct and complete copies of all income Tax Returns, examination reports, statements of deficiencies assessed against or agreed to by the Company and its Subsidiaries, and any other written communications to or from a taxing authority for a taxable year for which the statute of limitations is open.

          (iv) None of the Company and its Subsidiaries has waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency.

          (v) Except as set forth on §4(k) of the Disclosure Schedule, none of the Company and its Subsidiaries has made any payments, is obligated to make any payments, or is a party to any agreement that under certain circumstances could obligate it to make any payments that will not be deductible under Code §280G. None of the Company and its Subsidiaries has been a United States real property holding corporation within the meaning of Code §897(c)(2) during the applicable period specified in Code §897(c)(1)(A)(ii). Except with respect to its wholly-owned subsidiaries, none of the Company and its Subsidiaries is a party to any Tax allocation, sharing or indemnity agreement. None of the Company and its Subsidiaries (A) has been a member of an Affiliated Group filing a consolidated federal income Tax Return or (B) has Liability for the Taxes of any Person (other than any of the Company and its Subsidiaries) under Treas. Reg. §1.1502-6 (or any similar provision of state, local, or foreign law), as a transferee or successor, by contract, or otherwise.

          (vi) §4(k)(vi) of the Disclosure Schedule sets forth the following information with respect to the Company and its Subsidiaries: (A) the basis of the Company and its Subsidiaries in their assets; (B) the amount of any net operating loss, net capital loss, unused investment or other credit, unused foreign tax, or excess charitable contribution allocable to the Company and its Subsidiaries; and (C) the amount of any deferred gain or loss allocable to the Company and its Subsidiaries arising out of any Deferred Intercompany Transaction.

          (vii) The unpaid Taxes of the Company and its Subsidiaries (A) did not, as of the Most Recent Fiscal Month End, exceed the reserve for Tax Liability (rather than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the face of the Most Recent Balance Sheet (rather than in any notes thereto) and (B) do not exceed that reserve as adjusted for the passage of time through the Closing Date in accordance with the past custom and practice of the Company and its Subsidiaries in filing their Tax Returns.

          (viii) None of the Company and its Subsidiaries has received any notices of increases in the assessed value of its properties for Tax purposes since January 1, 2005.

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          (ix) None of the Company and its Subsidiaries has participated in any reportable transaction under Code §6011 and the applicable Treasury Regulations thereunder or any similar provision under state, local, or foreign law.

     (l) Real Property.

          (i) None of the Company and its Subsidiaries owns any real property.

          (ii) §4(l) of the Disclosure Schedule lists and describes briefly all real property leased or subleased to the Company and its Subsidiaries. The Sellers have delivered to the Buyer a correct and complete copy of each such lease (as amended to date) listed in §4(l) of the Disclosure Schedule. With respect to each of such leases:

     (A) the lease is legal, valid, binding, enforceable, and in full force and effect;

     (B) the lease will continue to be legal, valid, binding, enforceable, and in full force and effect on identical terms following the consummation of the transactions contemplated hereby;

     (C) no party to the lease has given or received a currently pending notice of breach or default, and, to the Knowledge of any of the Sellers and the directors and officers (and employees with responsibility for real estate matters) of the Company and its Subsidiaries, no event has occurred which, with notice or lapse of time, would constitute a breach or default or permit termination, modification, or acceleration thereunder;

     (D) no party to the lease has given or received notice repudiating any provision thereof;

     (E) there are no disputes, oral agreements, or forbearance programs in effect as to the lease;

     (F) none of the Company and its Subsidiaries has assigned, transferred, conveyed, mortgaged, deeded in trust, or encumbered any interest in the leasehold;

     (G) to the Knowledge of any of the Sellers and the directors and officers (and employees with responsibility for real estate matters) of the Company and its Subsidiaries, all Facilities leased and all actions and activities of the Company and its Subsidiaries thereunder have received all approvals of governmental authorities (including licenses and permits) required in connection with the operation thereof and have been operated and maintained in accordance with applicable laws, rules, and regulations, except, in each case, as could not reasonably be expected to have a Material Adverse Effect; and

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     (H) all Facilities leased thereunder are supplied with utilities and other services necessary for the operation of said Facilities as such Facilities are presently being used by the Company and its Subsidiaries in the conduct of their business.

     (m) Intellectual Property.

          (i) The Company and its Subsidiaries own or have the right to use pursuant to license, sublicense, agreement, or permission all Intellectual Property used in the operation of the businesses of the Company and its Subsidiaries as presently conducted. None of the Company and its Subsidiaries is a party to any option, warrant, purchase right, or other contract or commitment that could require the Company or any of its Subsidiaries to sell, transfer, or otherwise dispose of any of its Intellectual Property. Each item of Intellectual Property owned or used by the Company and its Subsidiaries immediately prior to the Closing will be owned or available for use by the Company and its Subsidiaries to the same extent and on identical terms and conditions immediately subsequent to the Closing. Each current and former employee or contractor of the Company and its Subsidiaries who has worked on, created, developed, or is or was involved in or has assisted with or contributed to the creation or development of, any of their Intellectual Property has executed and delivered to the Company or its Subsidiaries an agreement (containing no exceptions to or exclusions from the scope of its coverage) assigning to the Company all of such employee’s or contractor’s rights, title, and interest in and to any such Intellectual Property. Each such employee or contractor, and any other employee or contractor who has received or to whom was disclosed any trade secrets or other confidential information that is part of the Company and its Subsidiaries’ Intellectual Property, has executed and delivered to the Company an agreement agreeing to keep confidential and not disclose, or use for any purpose other than as permitted by the Company and its Subsidiaries, any such trade secrets or other confidential information.

          (ii) Neither the Company nor its Subsidiaries or the operation of the Company and its Subsidiaries or their business have interfered with, infringed upon, misappropriated, or otherwise come into conflict with any rights, title, or interest in or to any Intellectual Property of any third parties. None of the Sellers and the directors and officers (and employees and agents with responsibility for Intellectual Property matters) of the Company and its Subsidiaries (A) has ever received any charge, complaint, claim, threat, demand, or notice alleging that any such interference, infringement, misappropriation or violation (including, without limitation, any offer to license, or claim that the Company or its Subsidiaries must license or refrain from using, any Intellectual Property rights of any third party), or (B) has any Knowledge that the continued operation of the Company and its Subsidiaries or their business after the Closing would cause or result in any such interference, infringement, misappropriation, or violation.

          (iii) To the Knowledge of any of the Sellers and the directors and officers (and employees and agents with responsibility for Intellectual Property matters) of the Company and its Subsidiaries, (A) no third party has interfered with, infringed upon, misappropriated, or otherwise come into conflict with any rights of the Company and its Subsidiaries with respect to their Intellectual Property, and (B) there are no circumstances indicating that any third party will

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or may be likely to interfere with, infringe upon, misappropriate, or otherwise come into conflict with any rights with respect to the Company and its Subsidiaries’ Intellectual Property.

          (iv) Except as set forth on Section 4(m) of the Disclosure Schedule, none of the Company and its Subsidiaries (A) has been issued any patent, has obtained or acquired any patent or patent application, and has pending applications for any patents or registrations, (B) has granted to any third party any license, agreement, or other permission with respect to any of its Intellectual Property, (C) has registered, has obtained or acquired any application or registration for, and has pending application for registration of any trademarks or copyrights, and (D) has sold, licensed, transferred, or otherwise disposed of any Intellectual Property or rights therein or thereto within the last two years.

          (v) The Company and its Subsidiaries’ Intellectual Property do not use, pursuant to license, sublicense, agreement, or permission, any Intellectual Property that any third party owns (other than the Purchased Intellectual Property). None of the Company and its Subsidiaries has disclosed or made available outside the operation of the Company or its Subsidiaries’ business or without a confidentiality or non-disclosure obligation, and each of the Company and its Subsidiaries has taken reasonable actions to maintain and protect, each item of its Intellectual Property, including, without limitation, the confidentiality and secrecy of any trade secrets or other confidential information that is part of any of its Intellectual Property.

          (vi) To the Knowledge of the Sellers and the directors and officers (and employees and agents with responsibility for Intellectual Property matters) of the Company and its Subsidiaries, no product, system, program, or software module designed, developed, sold, licensed, or otherwise used by the Company or its Subsidiaries contains any “back door,” “time bomb,” “Trojan horse,” “worm,” “drop dead device,” “virus,” or other software routines or hardware components designed to permit unauthorized access or to disable or erase software, hardware, or data without the consent of the user, or contains any open source code or software that may be subject to an open source or general public license.

     (n) Tangible Assets. Each of the Company and its Subsidiaries owns or leases all buildings, machinery, equipment, and other tangible assets used in the conduct of its businesses as presently conducted (except assets belonging to customers). Each such tangible asset is in reasonable working condition and repair (subject to normal wear and tear). §4(n) of the Disclosure Schedule is a property ledger listing the Company and its Subsidiaries’ tangible assets as of the Most Recent Balance Sheet Date. All machinery, equipment, toolings, raw materials and supplies, and other tangible assets provided to the Company and its Subsidiaries by their customers are readily identifiable and are being maintained and used by the Company and/or its Subsidiaries in accordance with all agreements the Company and its Subsidiaries have with such customers.

     (o) Inventory. The inventory of the Company and its Subsidiaries consists of raw materials and supplies, manufactured and purchased parts, goods in process, and finished goods, all of which is merchantable and fit for the purpose for which it was procured or manufactured, and none of which is obsolete, damaged, or defective, subject only to the reserve for inventory writedown set forth on the face of the Most Recent Balance Sheet (rather than in any notes

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thereto) as adjusted for the passage of time through the Closing Date in accordance with the past custom and practice of the Company and its Subsidiaries except as set forth on §4(o) of the Disclosure Schedule. §4(o) of the Disclosure Schedule is an inventory list that lists the inventory of the Company and its Subsidiaries as of the Most Recent Balance Sheet Date.

     (p) Contracts. §4(p) of the Disclosure Schedule lists the following contracts and other agreements to which any of the Company and its Subsidiaries is a party:

          (i) any agreement (or group of related agreements) for the lease of personal property to or from any Person providing for remaining lease payments in excess of $25,000 per annum;

          (ii) except for non-continuing purchase orders to buy raw materials or sell the Company’s products entered into in the Ordinary Course of Business, or modifications of purchase order agreements that, in the aggregate, are not material to the business, financial condition, results of operations, profitability, prospects, or operations of the Company and are not outside the Ordinary Course of Business, any agreement (or group of related agreements) for the purchase or sale of raw materials, commodities, supplies, products, or other personal property, or for the furnishing or receipt of services, the continued performance of which will extend over a period of more than one year, or involve consideration in excess of $25,000;

          (iii) any agreement concerning a partnership or joint venture;

          (iv) any agreement (or group of related agreements) under which it has created, incurred, assumed, or guaranteed any indebtedness for borrowed money, or any capitalized lease obligation, in excess of $25,000 or under which it has imposed a Security Interest on any of its assets, tangible or intangible;

          (v) any agreement concerning confidentiality or noncompetition;

          (vi) any agreement with any of the Sellers or any of their respective Affiliates (other than the Company and its Subsidiaries);

          (vii) any profit sharing, stock option, stock purchase, stock appreciation, deferred compensation, severance, or other material plan or arrangement for the benefit of its current or former directors, officers, and employees;

          (viii) any collective bargaining agreement;

          (ix) any agreement for the employment of any individual on a full-time, part-time, consulting, or other basis providing annual compensation in excess of $25,000 or providing severance benefits or benefits triggered by a change in control of the Company or its Subsidiaries;

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          (x) any agreement (or series of related agreements) under which it has advanced or loaned any amount to any of its directors, officers, and employees outside the Ordinary Course of Business or that involves singly or in the aggregate in excess of $5,000;

          (xi) any agreement relating to the disposal of solid waste or Hazardous Materials;

          (xii) any other agreement under which the consequences of a default or termination would or is reasonably likely to have a Material Adverse Effect; or

          (xiii) any other agreement (or group of related agreements) the performance of which involves consideration in excess of $40,000.

The Sellers have delivered to the Buyer a correct and complete copy of each written agreement (as amended to date) listed in §4(p) of the Disclosure Schedule, and a written summary setting forth the material terms and conditions of each oral agreement referred to in §4(p) of the Disclosure Schedule. With respect to each such agreement: (A) the agreement is legal, valid, binding, enforceable, and in full force and effect; (B) the agreement will continue to be legal, valid, binding, enforceable, and in full force and effect on identical terms following the consummation of the transactions contemplated hereby (except to the extent it will expire on its own terms (without regard to the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby) before such consummation); (C) none of the Company and its Subsidiaries has given or received notice of breach or default, and to the Knowledge of the Sellers, the Company and its Subsidiaries, no event has occurred which with notice or lapse of time would constitute a material breach or default, or permit termination, modification, or acceleration, under the agreement; and (D) no party has repudiated any provision of the agreement.

     (q) Notes and Accounts Receivable. All notes and accounts receivable of the Company and its Subsidiaries are reflected properly on their books and records, are valid receivables subject to no setoffs or counterclaims, are current and collectible within 90 days after the Closing, subject only to the reserve for bad debts set forth on the face of the Most Recent Balance Sheet (rather than in any notes thereto) as adjusted for the passage of time through the Closing Date in accordance with the past custom and practice of the Company and its Subsidiaries except as described on §4(q) of the Disclosure Schedule.

     (r) Powers of Attorney. There are no outstanding powers of attorney executed on behalf of any of the Company and its Subsidiaries.

     (s) Insurance. §4(s) of the Disclosure Schedule lists each insurance policy to which any of the Company and its Subsidiaries has been a party, a named insured, or otherwise the beneficiary of coverage at any time within the past three years. There is no claim by the Company or any of its Subsidiaries pending under any of such policies as to which, to the Knowledge of any of the Sellers and the directors and officers (and employees responsible for insurance matters) of the Company and its Subsidiaries, coverage has been questioned, denied, or disputed. All premiums due and payable under each such policy have been paid and neither the

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Company and its Subsidiaries nor, to the Knowledge of any of the Sellers and the directors and officers (and employees responsible for insurance matters) of the Company and its Subsidiaries, any other party to the policies is in breach or default, and no event has occurred which, with notice or lapse of time, would constitute such a breach or default, or permit termination, modification, or acceleration, under the policy, and no party to the policy has repudiated any provision thereof. The Company and its Subsidiaries have been covered during the past ten years by insurance in scope and amount customary and reasonable for the business in which they have engaged during the aforementioned period for a company of the size, net worth and with the financial resources of the Company, and manufacturing and selling the products the Company did, at the various time during the period.

     (t) Litigation. None of the Company and its Subsidiaries is subject to any outstanding injunction, judgment, order, decree, or ruling and none of the Company and its Subsidiaries is a party or, to the Knowledge of any of the Sellers and the directors and officers (and employees with responsibility for litigation matters) of the Company and its Subsidiaries, is threatened to be made a party to any action, suit, proceeding, hearing, or investigation of, in, or before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or before any arbitrator. None of the Sellers and the directors and officers (and employees with responsibility for litigation matters) of the Company and its Subsidiaries has any grounds to believe that any such action, suit, proceeding, hearing, or investigation may be brought or threatened against the Company or its Subsidiaries.

     (u) Product Warranty and Advertising. Each product manufactured, sold, leased, or delivered by the Company and its Subsidiaries has been in conformity with all applicable contractual commitments and all express and applicable implied warranties, and none of the Company and its Subsidiaries has any Liability (and, to the Knowledge of the Company and its Subsidiaries, there is no Basis for any present or future action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand against them giving rise to any Liability) for replacement or repair thereof or other damages in connection therewith, subject only to the reserve for product warranty claims set forth on the face of the Most Recent Balance Sheet (rather than in any notes thereto) as adjusted for the passage of time through the Closing Date in accordance with the past custom and practice of the Company and its Subsidiaries or, except as described in §4(u) of the Disclosure Schedule. None of the Company and its Subsidiaries has engaged in deceptive or unsubstantiated advertising or other promotional or other conduct in violation of the California Business and Professions Code or other applicable Laws. Except as set forth on §4(u) of the Disclosure Schedule, no product manufactured, sold, leased, or delivered by the Company or its Subsidiaries is subject to any guaranty, warranty, or other indemnity beyond the applicable standard terms and conditions of sale or lease of and limited warranty with respect to such product. §4(u) of the Disclosure Schedule includes copies of the typical standard terms and conditions of sale or lease for the Company and its Subsidiaries with respect to their principal customers and all forms of limited warranty issued for any and all of the Company and its Subsidiaries’ products and services.

     (v) Product Liability. None of the Company and its Subsidiaries has any Liability (and, to the Knowledge of the Company and its Subsidiaries, there is no Basis for any present or future action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand

29

against any of them giving rise to any Liability) arising out of any injury to individuals or property as a result of the ownership, possession, or use of any product manufactured, sold, leased, or delivered by the Company or its Subsidiaries. None of the Company and its Subsidiaries has manufactured, marketed, sold or distributed any asbestos or vermiculite or products containing asbestos or vermiculite.

     (w) Employees. To the Knowledge of any of the Sellers and the directors and officers (and employees with responsibility for employment matters) of the Company and its Subsidiaries, no officer or group of employees has any plans to terminate employment with the Company or its Subsidiaries. None of the Company and it Subsidiaries is a party to or bound by any collective bargaining agreement, or has it experienced any strikes, grievances, claims of unfair labor practices, or other collective bargaining disputes. To the Knowledge of any of the Sellers and the directors and officers (and employees with responsibility for employment matters) of the Company and its Subsidiaries, none of the Company and its Subsidiaries has committed any unfair labor practice. None of the Sellers and the directors and officers (and employees with responsibility for employment matters) of the Company and its Subsidiaries has any Knowledge of any organizational effort presently being made or threatened by or on behalf of any labor union with respect to employees of the Company and its Subsidiaries.

     (x) Employee Benefits.

          (i) §4(x) of the Disclosure Schedule lists each Employee Benefit Plan that the Company and its Subsidiaries maintain or to which the Company or its Subsidiaries contributes.

     (A) Each such Employee Benefit Plan (and each related trust, insurance contract, or fund) complies in all material respects with the applicable requirements of ERISA, the Code, and other applicable laws.

     (B) All required reports and descriptions (including Form 5500 Annual Reports, Summary Annual Reports, PBGC-1’s, and Summary Plan Descriptions, if applicable) have been filed if due or distributed appropriately with respect to each such Employee Benefit Plan. The requirements of Part 6 of Subtitle B of Title 1 of ERISA and of Code §4980B have been met in all material respects with respect to each such Employee Benefit Plan which is an Employee Welfare Benefit Plan.

     (C) All contributions (including all employer contributions and employee salary reduction contributions) which are due have been paid to each such Employee Benefit Plan which is an Employee Pension Benefit Plan and all contributions for any period ending on or before the Closing Date which are not yet due have been paid to each such Employee Pension Benefit Plan or accrued in accordance with the past custom and practice of the Company and its Subsidiaries. All premiums or other payments for all periods ending on or before the Closing Date have been paid or accrued with respect to each such Employee Benefit Plan which is an Employee Welfare Benefit Plan.

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     (D) Each such Employee Benefit Plan which is an Employee Pension Benefit Plan meets the requirements of a “qualified plan” under Code §401(a) and has received, within the last three years, a favorable determination letter from the Internal Revenue Service that the Employee Pension Benefit Plan satisfies the applicable requirements of the Tax Reform Act of 1986, as amended.

     (E) The market value of assets under each such Employee Benefit Plan which is an Employee Pension Benefit Plan (other than any Multiemployer Plan) equals or exceeds the present value of all vested and nonvested Liabilities thereunder determined in accordance with PBGC methods, factors, and assumptions applicable to an Employee Pension Benefit Plan terminating on the date for determination.

     (F) The Sellers have delivered to the Buyer correct and complete copies of the plan documents and summary plan descriptions, the most recent determination letter received from the Internal Revenue Service, the most recent Form 5500 Annual Report, and all related trust agreements, insurance contracts, and other funding agreements which implement each such Employee Benefit Plan.

          (ii) With respect to each Employee Benefit Plan that the Company and its Subsidiaries maintain or ever has maintained or to which any of them contributes, ever has contributed, or ever has been required to contribute:

     (A) No such Employee Benefit Plan which is an Employee Pension Benefit Plan is or has ever been subject to Section 302 or Title IV of ERISA.

     (B) There have been no Prohibited Transactions with respect to any such Employee Benefit Plan. No Fiduciary has any Liability for breach of fiduciary duty or any other failure to act or comply in connection with the administration or investment of the assets of any such Employee Benefit Plan. No action, suit, proceeding, hearing, or investigation with respect to the administration or the investment of the assets of any such Employee Benefit Plan (other than routine claims for benefits) is pending or, to the Knowledge of any of the Sellers and the directors and officers (and employees with responsibility for employee benefits matters) of the Company and its Subsidiaries, threatened. None of the Sellers and the directors and officers (and employees with responsibility for employee benefits matters) of the Company and its Subsidiaries has any Knowledge of any Basis for any such action, suit, proceeding, hearing, or investigation.

          (iii) None of the Company and its Subsidiaries do contribute to, ever has contributed to, has been required to contribute to any Multiemployer Plan, or has any Liability (including withdrawal Liability) under any Multiemployer Plan.

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          (iv) None of the Company and its Subsidiaries maintains, has ever maintained, contributes, has ever contributed, or ever has been required to contribute to any Employee Welfare Benefit Plan providing medical, health, or life insurance or other welfare-type benefits for current or future retired or terminated employees, their spouses, or their dependents (other than in accordance with Code §4980B).

     (y) Guaranties. The Company and its Subsidiaries are not guarantors or otherwise liable for any Liability or obligation (including indebtedness) of any other Person.

     (z) Environment, Health, and Safety.

     Except as set forth in §4(z) of the Disclosure Schedule:

          (i) The Company and its Subsidiaries have obtained, and timely applied for renewals of, all permits, licenses, certificates, approvals, registrations, applications, and other authorizations, registrations, or exemptions (“Environmental Permits”) that are required in connection with the conduct of their business as presently conducted under Environmental Law and related orders. The Environmental Permits are listed in §4(z) of the Disclosure Schedule.

          (ii) The Company and its Subsidiaries are in compliance with the Environmental Permits.

          (iii) The Company and its Subsidiaries are, and at all times have been, in compliance with, and have not been and are not in violation of or liable under any Environmental Law or Occupational Safety and Health Law and have no Liability under the common law relating to the Environment. None of any of the Sellers, the Company, or its Subsidiaries has received any order, notice, or other communication from (i) any governmental authority or private citizen, or (ii) the current or prior owner or operator of the Facilities or any facility to which waste from the site has been sent for storage, transfer, recycling, or disposal (“Off-site Waste Facilities”), of any actual or alleged violation or liability arising under any Environmental Law or Occupational Safety and Health Law with respect to any of the Facilities, any other properties or assets (whether real, personal, or mixed) which the Company or its Subsidiaries has owned or operated, or the Off-site Waste Facilities. None of the Sellers, the Company, its Subsidiaries or any of their Affiliates has received notice or is aware of any events, conditions, circumstances, activities, practices, incidents, actions, or plans which may (i) interfere with or prevent compliance with Environmental Law or Occupational Safety and Health Law, or (ii) give rise to any common law or legal liability, including liability under the United States Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. §§9601 et seq., as amended (“CERCLA”), and any successor federal statute, rule, or regulation or comparable state statute, rule, or regulation or other Environmental Laws, or otherwise form the basis of any claim, action, demand, suit, proceeding, hearing, or investigation, based on or related to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, handling, management, or Release of a Hazardous Material.

          (iv) There is not any civil, criminal, or administrative action, suit, demand, claim, hearing, notice, or demand letter, notice of violation, investigation, or proceeding pending

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or threatened against either the Company or any of its Subsidiaries in connection with the conduct of their businesses relating in any way to Environmental Law, Occupational Safety and Health Law, or the common law relating to the Environment.

          (v) The Sellers have delivered to Buyer true and complete copies and results of any reports, studies, analyses, tests, or monitoring possessed by any of the Sellers, the Company or its Subsidiaries pertaining to Hazardous Materials in, on, or under the Facilities, or concerning compliance by the Sellers, the Company, its Subsidiaries or any other Person for whose conduct they are or may be held responsible, with Environmental Law or Occupational Safety and Health Law.

          (vi) The Sellers each agree reasonably to cooperate with Buyer in connection with Buyer’s application for the transfer, renewal, or issuance of any Environmental Permits and the filing of any reports or notices or other actions necessary to satisfy any requirements arising under Environmental Law or Occupational Safety and Health Law involving the Company and its Subsidiaries’ businesses for a period of one year after Closing; provided that, any transfer or application fees and costs associated with such transfers or applications are to be borne by the Buyer.

          (vii) There has been no Release of any Hazardous Materials at or from the Facilities or, to the Knowledge of any of the Sellers and any director or officer (or employee responsible for environmental matters) of the Company and its Subsidiaries, at any other locations where any Hazardous Materials were generated, manufactured, refined, transferred, produced, imported, used, or processed from or by the Facilities, or from or by any other properties and assets (whether real, personal, or mixed) in which any of the Sellers, the Company or its Subsidiaries has or had an interest, or to the Knowledge of any of the Sellers and any director or officer (or employee responsible for environmental matters) of the Company and its Subsidiaries, from or by any geologically or hydrologically adjoining property, whether by the Company, its Subsidiaries or any other Person.

          (viii) The Seller has provided to the Buyer a current Phase I Environmental Assessment in a form acceptable to the Buyer with respect to the Purchased Real Estate. Buyer acknowledges receipt of the Phase I Environmental Assessment.

     (aa) Certain Business Relationships with the Company and its Subsidiaries. None of the Sellers, the members of Joseph Pressutti or Susan Pressutti’s immediate family, or their respective Affiliates has been involved in any business arrangement or relationship with any of the Company and its Subsidiaries within the past 24 months, and none of the Sellers, the members of Joseph Pressutti or Susan Pressutti’s immediate family, or their respective Affiliates owns any asset, tangible or intangible, which is used in the business of any of the Company and its Subsidiaries.

     (bb) Off-site Disposal of Hazardous Materials. The Company and its Subsidiaries have sent Hazardous Materials for off-site disposal only to those off-site waste management or recycling or reclamation facilities identified in §4(bb) of the Disclosure Schedule.

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     (cc) Customers and suppliers.

          (i) §4(cc) of the Disclosure Schedule lists the 20 largest customers of the Company (on a consolidated basis) for the most recent fiscal year and sets forth opposite the name of each such customer the percentage of consolidated net sales attributable to the customer. §4(cc) of the Disclosure Schedule also lists any additional current customers that the Company anticipated will be among the 10 largest customers for the current fiscal year.

          (ii) Since the date of the Most Recent Balance Sheet, to the knowledge without independent investigation of any of the Sellers and any director or officer of the Company, no material supplier of the Company or any of its Subsidiaries has indicated that it will stop, or materially decrease the rate of, supplying materials, products, or services to the Company or any of its Subsidiaries. No customer listed on §4(cc) of the Disclosure Schedule has indicated that it will stop, or materially decrease the rate of, buying materials, products, or services from the Company or any of its Subsidiaries.

     (dd) Projections. In connection with the Buyer’s investigation of the Company, the Sellers and/or the Company have provided the Buyer with certain estimates, projections, and other forecasts regarding the Company’s future results of operations and financial condition. Although the Sellers cannot guarantee that the Company’s actual future results and financial condition will be the same as those so projected, such projections were prepared in good faith and, to the knowledge of any of the Sellers and the officers and directors of the Company, they believe the assumptions used are reasonable.

     (ee) Disclosure. The representations and warranties contained in this §4 do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements and information contained in this §4 not misleading.

     (ff) Disclaimer. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT OR ANY AGREEMENT OR CERTIFICATE DELIVERED PURSUANT TO THIS AGREEMENT, THE SELLERS MAKE NO REPRESENTATIONS, WARRANTIES, OR GUARANTEES, EXPRESS, IMPLIED, STATUTORY, OR OTHERWISE, AT LAW OR IN EQUITY, IN RESPECT OF THE COMPANY SHARES, THE PURCHASED INTELLECTUAL PROPERTY, THE COMPANY, ITS SUBSIDIARIES, OR ANY OF THEIR ASSETS, LIABILITIES, ON-GOING CONTRACTS AND OBLIGATIONS, OR ANY OF COMPANY AND ITS SUBSIDIARIES’ OPERATIONS OR BUSINESSES, INCLUDING, WITHOUT LIMITATION, WITH RESPECT TO MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE, NON-INFRINGEMENT, OR PROJECTED FINANCIAL RESULTS, AND ANY SUCH OTHER REPRESENTATIONS OR WARRANTIES OR GUARANTEES ARE HEREBY EXPRESSLY DISCLAIMED.

     NOTWITHSTANDING ANYTHING TO THE CONTRARY, EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT OR ANY AGREEMENT OR CERTIFICATE DELIVERED PURSUANT TO THIS AGREEMENT, THE SELLER IS GIVING NO ASSURANCES THAT ANY MANUFACTURER, SUPPLIER, LESSOR,

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CUSTOMER, OR OTHER PARTY WITH WHICH THE SELLERS OR THE COMPANY HAS A RELATIONSHIP WILL CONTINUE ON AND AFTER THE CLOSING TO MAINTAIN ITS RELATIONSHIP REGARDING THE COMPANY AND ITS BUSINESS WITH THE BUYER OR THE COMPANY OR MAINTAIN SUCH RELATIONSHIP ON THE SAME TERMS THAT IT IS NOW CONDUCTED WITH THE SELLERS AND THE COMPANY.

     IN CONNECTION WITH THE BUYER’S INVESTIGATION OF THE COMPANY, THE COMPANY SHARES, THE PURCHASED INTELLECTUAL PROPERTY, AND THE PURCHASED REAL ESTATE, THE BUYER HAS RECEIVED CERTAIN ESTIMATES, PROJECTIONS, AND OTHER FORECASTS REGARDING THE COMPANY’S FUTURE RESULTS OF OPERATIONS AND FINANCIAL CONDITION. THE BUYER ACKNOWLEDGES THAT THERE ARE UNCERTAINTIES INHERENT IN ATTEMPTING TO MAKE SUCH ESTIMATES, PROJECTIONS, AND OTHER FORECASTS AND THAT THE BUYER IS FAMILIAR WITH SUCH UNCERTAINTIES. ACCORDINGLY, EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT OR ANY AGREEMENT OR CERTIFICATE DELIVERED PURSUANT TO THIS AGREEMENT, THE SELLERS ARE NOT MAKING ANY REPRESENTATION OR WARRANTY WITH RESPECT TO SUCH ESTIMATES, PROJECTIONS, AND OTHER FORECASTS (INCLUDING THE REASONABLENESS OF THE ASSUMPTIONS UNDERLYING SUCH ESTIMATES, PROJECTIONS, AND FORECASTS AND FORECASTS OR THAT SUCH ESTIMATES, PROJECTIONS, AND FORECASTS WILL BE ACHIEVED).

5. PRE-CLOSING COVENANTS. The Parties agree as follows with respect to the period between the execution of this Agreement and the Closing.

     (a) General. Each of the Parties will use its reasonable best efforts to take all action and to do all things necessary, proper, or advisable in order to consummate and make effective the transactions contemplated by this Agreement (including satisfaction, but not waiver, of the closing conditions set forth in §7 below).

     (b) Notices and Consents. The Sellers will cause each of the Company and its Subsidiaries to give any notices to third parties, and will cause each of the Company and its Subsidiaries to use its reasonable best efforts to obtain any third party consents, that the Buyer reasonably may request in connection with the matters referred to in §3(a)(ii) and §4(c) above. Each of the Parties will (and the Sellers will cause each of the Company and its Subsidiaries to) give any notices to, make any filings with, and use its reasonable best efforts to obtain any authorizations, consents, and approvals of governments and governmental agencies in connection with the matters referred to in §3(a)(ii), §3(b)(ii), and §4(c) above.

     (c) Operation of Business. Unless with the prior express written consent of the Buyer in each instance, the Sellers will not cause or permit any of the Company and its Subsidiaries to engage in any practice, take any action, incur any material Liability, or enter into any transaction outside the Ordinary Course of Business. Without limiting the generality of the foregoing, unless with the prior express written consent of the Buyer, the Sellers will not cause

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or permit any of the Company and its Subsidiaries to (i) declare, set aside, or pay any dividend or make any distribution with respect to its capital stock other than in the Ordinary Course of Business or redeem, purchase, or otherwise acquire any of its capital stock, or (ii) otherwise engage in any practice, take any action, or enter into any transaction of the sort described in §4(h) above.

     (d) Preservation of Business. The Sellers will cause each of the Company and its Subsidiaries to exercise its reasonable best efforts to keep its business and properties substantially intact, including its present operations, physical facilities, working conditions, and relationships with lessors, licensors, suppliers, customers, and employees.

     (e) Access. The Sellers will permit, and the Sellers will cause each of the Company and its Subsidiaries to permit, representatives of the Buyer to have access, at mutually agreed times in accordance with the letter of intent between the parties and in a manner so as not to interfere with the normal business operations of the Company and its Subsidiaries, and subject to the Confidentiality Agreement, to all premises, properties, personnel, books, records (including Tax records), contracts, and documents of or pertaining to each of the Company and its Subsidiaries and Buyer shall have the right to take samples of various media upon reasonable notice at reasonable times.

     (f) Notice of Developments. The Sellers will give prompt written notice to the Buyer of any material adverse development causing a breach of any of the representations and warranties in §4 above. Each Party will give prompt written notice to the other of any material adverse development causing a breach of any of its own representations and warranties in §3 above. No disclosure by any Party pursuant to this §5(f), however, shall be deemed to amend or supplement Annex 1, Annex 2, or the Disclosure Schedule or to prevent or cure any misrepresentation, breach of warranty, or breach of covenant.

     (g) Exclusivity. The Sellers will not (and the Sellers will not cause or permit any of the Company and its Subsidiaries or 3441 South Willow Investments, L.P. to) (i) solicit, initiate, or encourage the submission of any proposal or offer from any Person relating to the acquisition of any capital stock or other voting securities, or any substantial portion of the assets of, the Company and its Subsidiaries (including any acquisition structured as a merger, consolidation, or share exchange) or 3441 South Willow Investments, L.P. or (ii) participate in any discussions or negotiations regarding, furnish any information with respect to, assist or participate in, or facilitate in any other manner any effort or attempt by any Person to do or seek any of the foregoing. The Sellers will notify the Buyer immediately if any Person makes any proposal, offer, inquiry, or contact with respect to any of the foregoing, other than any inquiry made by any Person that has made any such inquiries, offer, or proposals in advance of the date hereof and to whom the Sellers reply with only a statement that such Seller is under an obligation not to engage in any discussions or negotiations concerning such inquiry.

     (h) Key Employee Agreements. The Sellers will enter into “double-trigger” change of control severance or similar agreements with the key employees of the Company listed on §5(h) of the Disclosure Schedule, as and upon such terms as mutually agreed upon by the Sellers and the Buyer, to provide a specified severance package to such employees if they are terminated

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by the Company without cause or leave the Company for good reason before the eighteen month anniversary of the Closing, and the Sellers shall not take any material action with respect to such employees without prior consultation with the Buyer.

     (i) Releases. The Sellers will, prior to the Closing, cause all accounts receivables and accounts payables (other than one of the Sellers obligations with respect to the Cadillac lease) between the Company and its Subsidiaries and the Sellers and any of his, her, or its Affiliates reflected on the Most Recent Balance Sheet or thereafter incurred in the Ordinary Course of Business to be extinguished without payment of any kind. The parties will cooperate and use their best efforts to arrange for a release of the Sellers and their respective Affiliates (other than the Company and its Subsidiaries) of all personal guarantees and obligations with respect to the Assumed Real Estate Debt and any other Liabilities of the Company and its Subsidiaries set forth on §5(i) of the Disclosure Schedule effective at the Closing and, except to the extent the Buyer would be entitled to indemnification against such Liabilities (without regard to whether such Liabilities exceed the deductibles and thresholds referenced in the proviso of §8(b)), the Buyer will indemnify and hold Sellers harmless (including reasonable attorneys fees) with respect to all such Liabilities..

6. POST-CLOSING COVENANTS. The Parties agree as follows with respect to the period following the Closing.

     (a) General. In case at any time after the Closing any further action is reasonably necessary or desirable to carry out the purposes of this Agreement, each of the Parties will take such further action (including the execution and delivery of such further instruments and documents) as any other Party reasonably may request, all at the sole cost and expense of the requesting Party (unless the requesting Party is entitled to indemnification therefore under §8 below). The Sellers acknowledge and agree that from and after the Closing the Buyer will be entitled to possession of all documents, books, records (including Tax records), agreements, and financial data of any sort relating to the Company and its Subsidiaries subject to the Sellers being hereby entitled to review or request and receive (to the extent such documents, books, records, agreements, and financial data have not been destroyed) any copies thereof they in good faith believe to be necessary or prudent in respect of its obligations or Liabilities hereunder or with respect to any domestic or foreign Tax obligations or Tax Returns. The Buyer acknowledges and agrees that from and after the Closing the Buyer will keep, maintain, and prevent the destruction of all documents, books, records (including tax records), agreements, and financial data of the Company and its Subsidiaries for the same length of time and in the same manner as the Buyer currently keeps and maintains such materials, but not less than five years after the Closing. To the extent the Sellers have a reasonable need for any such documents, books, records (including tax records), agreements, and financial data of the Company at the end of such five year term, they may provide written notice to the Buyer, within 90 days prior to the expiration of such five year term, specifying such need and the documents, books (including tax records), agreements, and financial data that they wish for the Buyer to not destroy, in which event the Buyer, at its sole discretion, may continue to retain such documents, books, records (including tax records), agreements, and financial data or provide the Sellers a reasonable opportunity to remove such documents, books, records, agreements, and financial data at the Sellers’ cost.

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     (b) Litigation Support. In the event and for so long as any Party actively is contesting or defending against any action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand in connection with (i) any transaction contemplated under this Agreement or (ii) any fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act, or transaction on or prior to the Closing Date involving any of the Company and its Subsidiaries, the other Party will cooperate with it and its counsel in the contest or defense, making available its personnel, and providing such testimony and access to its books and records as shall be reasonably necessary in connection with the contest or defense, all at the sole cost and expense of the contesting or defending Party (unless the contesting or defending Party is entitled to indemnification therefor under §8 below).

     (c) Transition. None of the Sellers will, directly or indirectly, take any action that is designed or intended to have the effect of discouraging any lessor, licensor, customer, supplier, or other business associate of any of the Company and its Subsidiaries from maintaining the same business relationships with the Company and its Subsidiaries after the Closing as it maintained with the Company and its Subsidiaries prior to the Closing, except as set forth on §6(c) of the Disclosure Schedule. For the first eighteen months following the Closing, the Sellers will refer all customer inquiries relating to products sold by the Company and its Subsidiaries within the two year period immediately prior to the Closing to the Buyer, except as set forth on §6(c) of the Disclosure Schedule.

     (d) Confidentiality. Each of the Sellers will treat and hold as such all of the Confidential Information, refrain from using any of the Confidential Information except in connection with this Agreement, and deliver promptly to the Buyer or destroy, at the request and option of the Buyer, all tangible embodiments (and all copies) of the Confidential Information which are in any of their possession. For purposes of this §6(d), Confidential Information does not include information which is generally available to the public or generally known to persons knowledgeable in the roofing industry immediately prior to the time of disclosure or use. If Buyer has knowledge that Seller has or will be in breach of this §6(d), without in any way limiting any of Buyer’s rights otherwise resulting or arising from any such breach, Buyer, as promptly as practicable, shall send written notice to Seller of any such breach or alleged breach of this §6(d) specifying in reasonable detail the breach or alleged breach. In the event that a Seller is requested or required (by oral question or request for information or documents in any legal proceeding, interrogatory, subpoena, civil investigative demand, or similar process) to disclose any Confidential Information, the Seller will notify the Buyer promptly of the request or requirement so that the Buyer may seek an appropriate protective order or waive compliance with the provisions of this §6(d). If, in the absence of a protective order or the receipt of a waiver hereunder, the Seller is, on the advice of counsel, compelled to disclose any Confidential Information to any tribunal, the Seller may disclose the Confidential Information to the tribunal; provided, however, that the Seller shall use his reasonable best efforts to obtain, at the request of the Buyer and at Buyer’s sole expense, an order or other assurance that confidential treatment will be accorded to such portion of the Confidential Information required to be disclosed as the Buyer shall designate. The foregoing provisions shall not apply to any Confidential Information which is generally available to the public or generally known to persons knowledgeable in the roofing industry immediately prior to the time of use or disclosure for reasons other than a disclosure by the Seller not permitted by this §6(d). The obligations under this §6(d) shall

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survive for seven years from the Closing Date, except for Confidential Information constituting trade secrets of the Company and its Subsidiaries, for which such obligations shall survive until such information becomes part of the public domain.

     (e) Covenant Not to Compete. For a period of five (5) years from and after the Closing Date, each Seller agrees that such Seller will not, and will cause his, her, or its Affiliates not to, compete with the Company and its Subsidiaries or the Buyer by directly or indirectly owning, engaging in, operating, controlling, or participating in the ownership, management, operation, or control of, or being connected as a stockholder, agent, partner, joint venturer, or otherwise, with any business engaged in any of the manufacture, sale, marketing, or distribution of any products competitive with what the Company and its Subsidiaries currently sell, market, or distribute anywhere in North America; provided, however, that the ownership of less than 2% of the outstanding stock of any publicly traded corporation by the Sellers and their Affiliates shall not be deemed to violate this sentence. If Buyer has knowledge that Seller has or will be in breach of this §6(e), without in any way limiting any of Buyer’s rights otherwise resulting or arising from any such breach, Buyer, as promptly as practicable, shall send written notice to Seller of any such breach or alleged breach of this §6(e) specifying in reasonable detail the breach of alleged breach. If the final judgment of a court of competent jurisdiction declares that any term or provision of this §6(e) is invalid or unenforceable, the Parties agree that the court making the determination of invalidity or unenforceability shall have the power to reduce the scope, duration, or area of the term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified after the expiration of the time within which the judgment may be appealed.

     (f) Non-solicitation of Employees. Between the date hereof and the fifth anniversary of the Closing Date, none of the Sellers or their respective Affiliates will directly or indirectly attempt to hire, solicit, or hire any officer, employee, or independent individual contractor of the Company or its Subsidiaries, without the prior written consent of Buyer.

     (g) Termination of Agreement with ABMT. In the event at any time within 90 days after the Closing Date Buyer terminates, or provides notice of termination of, the agreement between the Company and Advanced Building Materials Technology as in effect immediately prior to the Closing, at the request of Buyer, Sellers shall promptly pay Buyer 50% of any costs incurred by Buyer as a result of any such termination.

7. CONDITIONS TO OBLIGATIONS TO CLOSE.

     (a) Conditions to Obligation of the Buyer. The obligation of the Buyer to consummate the transactions to be performed by it in connection with the Closing is subject to satisfaction of the following conditions:

          (i) the representations and warranties set forth in §3(a) and §4 above shall be true and correct in all material respects at and as of the Closing Date;

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          (ii) the Sellers shall have performed and complied with all of their covenants hereunder in all material respects through the Closing;

          (iii) the Sellers, the Company and its Subsidiaries shall have procured all of the third party consents specified in §5(b) above;

          (iv) no action, suit, or proceeding shall be pending or threatened before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling, or charge would (A) prevent consummation of any of the transactions contemplated by this Agreement, (B) cause any of the transactions contemplated by this Agreement to be rescinded following consummation, (C) affect adversely the right of the Buyer to own the Company Shares, the Purchased Real Estate, or the Purchased Intellectual Property and to control the Company and its Subsidiaries and use the Purchased Real Estate and the Purchased Intellectual Property, or (D) affect adversely the right of the Company and its Subsidiaries to own their assets and to operate their businesses (and no such injunction, judgment, order, decree, ruling, or charge shall be in effect);

          (v) the Sellers shall have delivered to the Buyer a certificate to the effect that each of the conditions specified above in §7(a)(i)-(iii) is satisfied in all respects and that to the Knowledge of the Sellers no contingency of the type referred to in §7(a)(iv) has occurred or is threatened;

          (vi) the Company and its Subsidiaries shall have received all authorizations, consents, and approvals of governments and governmental agencies referred to in §3(a)(ii), §3(b)(ii), and §4(c) above;

          (vii) the Sellers and the escrow agent thereunder shall have entered into the Escrow Agreement;

          (viii) [intentionally omitted];

          (ix) the Buyer shall have received the resignations, effective as of the Closing, of each director and officer of the Company and its Subsidiaries other than those whom the Buyer shall have specified in writing at least five business days prior to the Closing, and the Buyer shall have received evidence reasonably satisfactory to the Buyer that the authority of any and all directors, officers, and employees of the Company and its Subsidiaries other than those whom Buyer shall have specified in writing at least five (5) business days prior to the Closing to conduct bank transactions on behalf of the Company has been terminated;

          (x) the Buyer shall have obtained a title insurance policy with respect to the Purchased Real Estate in form and substance satisfactory to the Buyer;

          (xi) the Buyer shall be reasonably satisfied with the key employment contracts required pursuant to §5(i) above;

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          (xii) the concurrent closing between Buyer (or an Affiliate of Buyer designated by Buyer) and 3441 South Willow Investments, L.P. of the transactions contemplated by the Purchased Real Estate Agreements;

          (xiii) the gross fixed assets of the Company and its Subsidiaries plus their current assets, less trade accounts payable and other current liabilities (other than current maturities or other elements of indebtedness for borrowed money), calculated consistently with and in the same manner and with the same methodology as in the past, are not less than reflected on the Company’s March 31, 2005 Balance Sheet; and

          (xiv) all actions to be taken by the Sellers in connection with consummation of the transactions contemplated hereby and all certificates, opinions, instruments, and other documents reasonably required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to the Buyer.

The Buyer may waive any condition specified in this §7(a) if it executes a writing so stating at or prior to the Closing.

     (b) Conditions to Obligation of the Sellers. The obligation of the Sellers to consummate the transactions to be performed by them in connection with the Closing is subject to satisfaction of the following conditions:

          (i) the representations and warranties set forth in §3(b) above shall be true and correct in all material respects at and as of the Closing Date;

          (ii) the Buyer shall have performed and complied with all of its covenants hereunder in all material respects through the Closing;

          (iii) no action, suit, or proceeding shall be pending or threatened before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling, or charge would (A) prevent consummation of any of the transactions contemplated by this Agreement or (B) cause any of the transactions contemplated by this Agreement to be rescinded following consummation (and no such injunction, judgment, order, decree, ruling, or charge shall be in effect);

          (iv) the Buyer shall have delivered to the Sellers a certificate to the effect that each of the conditions specified above in §7(b)(i) and (ii) is satisfied in all respects and that to the actual Knowledge of the Buyer no contingency of the type referred to in §7(b)(iii) has occurred or is threatened;

          (v) the Buyer and the escrow agent thereunder shall have entered into the Escrow Agreement;

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          (vi) the Sellers and their respective Affiliates shall be released from any guarantees or other obligations under the Assumed Real Estate Debt and the other Liabilities set forth on the Disclosure Schedule in a manner acceptable to the Sellers;

          (vii) the concurrent closing between the Buyer (or an Affiliate of Buyer designated by Buyer) and 3441 South Willow Investments, L.P. of the Purchased Real Estate Agreements and the payment of the Purchase Price and assumption of the Real Estate Debt by Buyer and release of Seller and Seller’s Affiliates with respect thereto; and

          (viii) all actions to be taken by the Buyer in connection with consummation of the transactions contemplated hereby and all certificates, instruments, and other documents reasonably required to effect the transactions contemplated hereby will be reasonably satisfactory in form and substance to the Sellers; and

          (ix) Seller is paid the Purchase Price and all other amounts due under §2 of this Agreement.

The Sellers may waive any condition specified in this §7(b) if they execute a writing so stating at or prior to the Closing.

8. REMEDIES FOR BREACHES OF THIS AGREEMENT.

     (a) Survival of Representations and Warranties. All of the representations and warranties of the Sellers contained in §3(a) and §4 (other than §§3(a)(i), 3(a)(ii), 3(a)(iii), 3(a)(iv), 3(a)(v)(A), 4(b), 4(k), and the first three sentences of 3(vi)(A)) shall survive the Closing hereunder (even if the Buyer knew or had reason to know of any misrepresentation or breach of warranty at the time of Closing) and continue in full force and effect for a period of two (2) years thereafter, after which all such representations and warranties shall expire and be of no force or effect. All of the other representations and warranties of the Parties contained in this Agreement (including the representations and warranties of the Sellers contained in §3(a)(i), 3(a)(ii), 3(a)(iii), 3(a)(iv), 3(a)(v)(A), 4(b), 4(k), and the first three sentences of 3(vi)(A)) shall survive the Closing (even if the damaged Party knew or had reason to know of any misrepresentation or breach of warranty at the time of Closing) and continue in full force and effect forever thereafter (subject to any applicable statutes of limitations).

     (b) Indemnification Provisions for Benefit of the Buyer. In the event any of the Sellers breaches any of his, her, or its representations, warranties, and covenants contained herein (ignoring for purposes of determining whether or not any such breach has occurred, or the amount of Adverse Consequences associated therewith, any materiality qualifiers in such representations, warranties, and covenants or any language in such representations, warranties, and covenants providing that a breach will only occur if it could reasonably be expected to have a Material Adverse Effect or any similar language), and, if there is an applicable survival period pursuant to §8(a) above, provided that the Buyer makes a written claim for indemnification against the Sellers within the applicable survival period stated in §8(a), then the Sellers jointly and severally agree to indemnify the Buyer from and against the entirety of any Adverse Consequences the Buyer suffers through and after the date of the claim for indemnification

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(including any Adverse Consequences the Buyer may suffer after the end of the applicable survival period) resulting from, arising out of, relating to, in the nature of, or caused by such breach; provided, however, that the Sellers shall not have any obligation to indemnify the Buyer from and against any Adverse Consequences resulting from, arising out of, relating to, in the nature of, or caused by the breach of any representation or warranty of the Sellers except to the extent the Adverse Consequences resulting from, arising out of, relating to, in the nature of, or caused by such breach of a representation or warranty exceed a deductible of $10,000 (at which point the Sellers will be obligated to indemnify only for amounts in excess of the $10,000) and then not until the Buyer has suffered Adverse Consequences by reason of all such breaches of all representations and warranties in excess of a $300,000 aggregate threshold (at which point the Sellers will be obligated to indemnify the Buyer from and against all such Adverse Consequences beyond such $300,000 threshold); provided further, that the Sellers’ and Seller’s Affiliates’ maximum aggregate liability to Buyer, collectively, under this Agreement and ancillary documents, agreements, assignments and certificates (including, without limitation, the Purchased Real Estate Agreements and the documents related to the Purchased Intellectual Property) for breaches of any representations, warranties, covenants, or agreements shall not exceed $1,500,000 (the “Liability Cap”) under any circumstance; provided further that, notwithstanding the foregoing, the Liability Cap shall not apply to breaches of covenants and agreements set forth in §§6 or 9 or as contemplated in the parenthetical contained in §8(d)(ii)(A) and amounts paid by Sellers with respect to breaches of §§6 or 9 and the first $800,000 of any purchase price adjustment payable by Sellers with respect to §2(f) shall not be counted in determining whether the Liability Cap has been met (e.g. a purchase price adjustment payment pursuant to §2(f) of $800,000 will not result in only $700,000 being available with respect to breaches of this Agreement as a result of the Liability Cap).

     (c) Indemnification Provisions for Benefit of the Sellers. In the event the Buyer breaches any of its representations, warranties, and covenants contained herein (even if one or more of the Sellers knew or had reason to know of any misrepresentation or breach of warranty or covenant at the time of Closing), and, if there is an applicable survival period pursuant to §8(a) above, provided that the Sellers make a written claim for indemnification against the Buyer within the applicable survival period stated in §8(a), then the Buyer agrees to indemnify the Sellers from and against the entirety of any Adverse Consequences the Sellers may suffer through and after the date of the claim for indemnification (including any Adverse Consequences the Sellers may suffer after the end of the applicable survival period) resulting from, arising out of, relating to, in the nature of, or caused by the breach.

     (d) Matters Involving Third Parties.

          (i) If any third party notifies any Party (the “Indemnified Party”) with respect to any matter (a “Third Party Claim”) that may give rise to a claim for indemnification against any other Party (the “Indemnifying Party”) under this §8, then the Indemnified Party shall promptly notify each Indemnifying Party thereof in writing; provided, however, that no delay on the part of the Indemnified Party in notifying any Indemnifying Party shall relieve the Indemnifying Party from any obligation hereunder unless (and then solely to the extent) the Indemnifying Party is thereby prejudiced. Notification of any claims for indemnity hereunder

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shall be provided regardless of whether the claimed amounts are above or below the $300,000 aggregate threshold amount.

          (ii) Any Indemnifying Party will have the right to defend the Indemnified Party against the Third Party Claim with counsel of its choice reasonably satisfactory to the Indemnified Party so long as (A) the Indemnifying Party notifies the Indemnified Party in writing within 15 days after the Indemnified Party has given notice of the Third Party Claim that, notwithstanding any other provision of this Agreement to the contrary (including without limitation the limitation on liability set forth in §8(b)), the Indemnifying Party will indemnify the Indemnified Party from and against the entirety of any Adverse Consequences the Indemnified Party may suffer resulting from, arising out of, relating to, in the nature of, or caused by the Third Party Claim, (B) the Indemnifying Party provides the Indemnified Party with evidence reasonably acceptable to the Indemnified Party that the Indemnifying Party will have the financial resources to defend against the Third Party Claim and fulfill its indemnification obligations hereunder, (C) the Third Party Claim involves only money damages and does not seek an injunction or other equitable relief, (D) settlement of, or an adverse judgment with respect to, the Third Party Claim is not, in the good faith judgment of the Indemnified Party, likely to establish a precedential custom or practice adverse to the continuing business interests of the Indemnified Party, and (E) the Indemnifying Party conducts the defense of the Third Party Claim actively and diligently.

          (iii) So long as the Indemnifying Party is conducting the defense of the Third Party Claim in accordance with §8(d)(ii) above, (A) the Indemnified Party may retain separate co-counsel at its sole cost and expense and participate in the defense of the Third Party Claim, (B) the Indemnified Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Indemnifying Party (not to be withheld unreasonably), and (C) the Indemnifying Party will not consent to the entry of any judgment or enter into any settlement with respect to the Third Party Claim without the prior written consent of the Indemnified Party (not to be withheld unreasonably).

          (iv) In the event any of the conditions in §8(d)(ii) above is or becomes unsatisfied, however, (A) the Indemnified Party may defend against, and consent to the entry of any judgment or enter into any settlement with respect to, the Third Party Claim in any manner it reasonably may deem appropriate (and the Indemnified Party need not consult with, or obtain any consent from, the Indemnifying Party in connection therewith), (B) the Indemnifying Party will reimburse the Indemnified Party promptly and periodically for the costs of defending against the Third Party Claim (including reasonable attorneys’ fees and expenses), and (C) the Indemnifying Party will remain responsible for any Adverse Consequences the Indemnified Party may suffer resulting from, arising out of, relating to, in the nature of, or caused by the Third Party Claim to the fullest extent provided in this §8, but, in the case of both clause (B) and (C) immediately above, subject to the limits on such liability set forth in §8(b). The Indemnifying Party may retain separate counsel at its sole cost and expense and participate in the defense of the Third Party Claim.

44

     (e) Determination of Adverse Consequences. The Parties shall make appropriate adjustments for tax benefits and insurance coverage and take into account the time cost of money in determining Adverse Consequences for purposes of this §8. All indemnification payments under this §8 shall be deemed adjustments to the Purchase Price.

     (f) Exclusive Remedy. The Buyer and the Sellers acknowledge and agree that the foregoing indemnification provisions in this §8 shall be the sole and exclusive monetary remedy and monetary recourse (whether based in contract, tort, or on any other grounds) of the Buyer and the Sellers with respect to this Agreement, any agreement, document, or certificate delivered pursuant hereto, and the transactions contemplated by this Agreement and any agreement, document, or certificate delivered pursuant hereto, including without limitation, with respect to the Purchased Real Estate and the Purchased Intellectual Property. Without limiting the generality of the foregoing, the Buyer and the Sellers hereby waive any statutory, equitable, or common law rights or remedies relating to any environmental, health, or safety matters, including without limitation any such matters arising under any Environmental Law, Occupational Safety and Health Law, including, without limitation, CERCLA. Each Seller hereby agrees that he, she, or it will not make any claim for indemnification against the Company by reason of the fact that he, she, or it was a director, officer, employee, or agent of the Company or was serving at the request of the Company as a partner, trustee, director, officer, employee, or agent of another entity (whether such claim is for judgments, damages, penalties, fines, costs, amounts paid in settlement, losses, expenses, or otherwise) with respect to any action, suit, proceeding, complaint, claim, or demand brought by the Buyer against such Seller (whether such action, suit, proceeding, complaint, claim, or demand is pursuant to this Agreement, applicable law, or otherwise).

9. TAX MATTERS. The following provisions shall govern the allocation of responsibility as between the Buyer and the Sellers for certain tax matters following the Closing Date:

     (a) Cooperation on Tax Matters.

          (i) The Parties shall cooperate fully, as and to the extent reasonably requested by any other Party, in connection with the filing of Tax Returns pursuant to this Section and any audit, litigation, or other proceeding with respect to Taxes. Such cooperation shall include the retention and (upon a Party’s reasonable request) the provision of records and information which are reasonably relevant to any such audit, litigation, or other proceeding and making employees or themselves available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder.

          (ii) Buyer and Sellers further agree, upon request, to use their reasonable best efforts to obtain any certificate or other document from any governmental authority or any other Person as may be necessary to mitigate, reduce or eliminate any Tax that could be imposed (including, but not limited to, with respect to the transactions contemplated hereby).

          (iii) Buyer and Sellers further agree, upon request, to provide the other party with all information that either party may be required to report pursuant to Section 6043 of the Code and all Treasury Department Regulations promulgated thereunder.

45

          (iv) The Sellers shall prepare or cause to be prepared and timely file all income Tax Returns for the Company and its Subsidiaries required to be filed for taxable periods ending at or prior to the Closing and shall, except to the extent the Buyer and the Sellers may otherwise agree, control and conduct all tax examinations involving income Taxes for any period ending at or prior to the Closing; provided that the Sellers shall not take any actions, or fail to take any actions, that would cause the Company to not be an S corporation within the meaning of §1361 of the Code at all times prior to the Closing. The Company and its Subsidiaries shall prepare or cause to be prepared all Tax Returns for the Company and its Subsidiaries required to be filed covering periods ending after the Closing Date.

     (b) Tax Sharing Agreements. All tax sharing agreements or similar agreements with respect to or involving the Company and its Subsidiaries shall be terminated as of the Closing Date and, after the Closing Date, the Company and its Subsidiaries shall not be bound thereby or have any liability thereunder.

     (c) Certain Taxes. All transfer, documentary, sales, use, stamp, registration and other such Taxes and governmental fees (including any penalties and interest) incurred in transferring the Company Shares, the Purchased Real Estate and the Purchased Intellectual Property from Sellers to Buyer, shall be paid by Buyer when due, and Buyer will, at its own expense, file all necessary Tax Returns and other documentation with respect to all such transfer, documentary, sales, use, stamp, registration and other Taxes and governmental fees, and, if required by applicable law, Sellers will, and will cause their respective affiliates to, join in the execution of any such Tax Returns and other documentation.

10. TERMINATION.

     (a) Termination of Agreement. The Parties may terminate this Agreement as provided below:

          (i) the Buyer and the Sellers may terminate this Agreement by mutual written consent at any time prior to the Closing;

          (ii) the Buyer may terminate this Agreement by giving written notice to the Sellers at any time prior to the Closing (A) in the event any of the Sellers has breached any material representation, warranty, or covenant contained in this Agreement in any material respect, the Buyer has notified the Sellers of the breach, and the breach has continued without cure for a period of 30 days after the notice of breach; or (B) if the Closing shall not have occurred on or before August 30, 2005 by reason of the failure of any condition precedent under §7(a) hereof (unless the failure results primarily from the Buyer itself breaching any representation, warranty, or covenant contained in this Agreement); and

          (iii) the Sellers may terminate this Agreement by giving written notice to the Buyer at any time prior to the Closing (A) in the event the Buyer has breached any material representation, warranty, or covenant contained in this Agreement in any material respect, the Sellers have notified the Buyer of the breach, and the breach has continued without cure for a

46

period of 30 days after the notice of breach or (B) if the Closing shall not have occurred on or before August 30, 2005 by reason of the failure of any condition precedent under §7(b) hereof (unless the failure results primarily from any of the Sellers itself breaching any representation, warranty, or covenant contained in this Agreement).

     (b) Effect of Termination. If any Party terminates this Agreement pursuant to §10(a) above, all rights and obligations of the Parties hereunder shall terminate without any Liability of any Party to any other Party (except for any Liability of any Party then in breach); provided that the terms and provisions of the Confidentiality Agreement shall survive any such termination pursuant to §10(a) above.

11. MISCELLANEOUS.

     (a) Press Releases and Public Announcements. Neither party shall issue any press or news release or make any similar public announcement relating to the subject matter of this Agreement without the prior written approval of the other party; provided, however, that Buyer or its Affiliate may make any public disclosure it believes in good faith is required by applicable law or regulation (in which case the Buyer will use its reasonable best efforts to advise the Sellers prior to making the disclosure).

     (b) No Third Party Beneficiaries. This Agreement shall not confer any rights or remedies upon any Person other than the Parties and their respective successors and permitted assigns.

     (c) Entire Agreement. This Agreement (including the documents referred to herein) constitutes the entire agreement among the Parties and supersedes any prior understandings, agreements, or representations by or among the Parties, written or oral, to the extent they related in any way to the subject matter hereof; provided, however, the Confidentiality Agreement shall survive in it entirety except to the extent the Closing occurs, in which case the Confidentiality Agreement shall have no further force or effect.

     (d) Succession and Assignment. This Agreement shall be binding upon and inure to the benefit of the Parties named herein and their respective successors and permitted assigns. No Party may assign either this Agreement or any of its rights, interests, or obligations hereunder without the prior written approval of the other Party; provided, however, that the Buyer may (i) assign any or all of its rights and interests hereunder to one or more of its Affiliates and (ii) designate one or more of its Affiliates to perform its obligations hereunder (in any or all of which cases the Buyer nonetheless shall remain responsible for the performance of all of its obligations hereunder). Notwithstanding the foregoing, from and after the Closing, the Buyer may assign its rights (but not its obligations) under this Agreement to any other Person that buys all or substantially all of the business of the Company and its Subsidiaries from the Buyer.

     (e) Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument.

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     (f) Headings. The section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement.

     (g) Notices. All notices, requests, demands, claims, and other communications hereunder will be in writing. Any notice, request, demand, claim, or other communication hereunder shall be deemed duly given if (and then five business days after) it is sent by registered or certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient as set forth below:

If to the Sellers:

2525 W. Sierra
Fresno, California 93711
Attention: Mr. Joseph Pressutti
Facsimile No. (559) 439-3468

with a copy to:

Richard D. Rosman, Esq.
11777 San Vicente Boulevard, Suite 702
Los Angeles, California 90067
(310) 571-3822

If to the Buyer:

Elk Premium Building Products, Inc.
14911 Quorum Drive
Suite 600
Dallas, Texas 75254
Attn: David G. Sisler
Facsimile No.: (972) 851-0552

with a copy to:

Baker & McKenzie
2001 Ross Avenue, Suite 4500
Dallas, Texas 75201
Attention: Alan G. Harvey
Facsimile No.: (214) 978-3099

If to the Process Agent:

GKL Corporate Search
915 L. Street, Ste. 1250
Sacramento, California 95814-3705

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Facsimile No. (916) 442-1797

Any Party may send any notice, request, demand, claim, or other communication hereunder to the intended recipient at the address set forth above using any other means (including personal delivery, expedited courier, messenger service, telecopy, telex, ordinary mail, or electronic mail), but no such notice, request, demand, claim, or other communication shall be deemed to have been duly given unless and until it actually is received by the intended recipient. Any Party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other Parties notice in the manner herein set forth.

     (h) Governing Law. This Agreement shall be governed by and construed in accordance with the domestic laws of the State of California without giving effect to any choice or conflict of law provision or rule (whether of the State of California or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of California.

     (i) Amendments and Waivers. No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by the Buyer and the Sellers. No waiver by any Party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence.

     (j) Severability. Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction.

     (k) Expenses. Each of the Parties will bear his or its own costs and expenses (including legal fees and expenses) incurred in connection with this Agreement and the transactions contemplated hereby. The Sellers agree that none of the Company and its Subsidiaries has borne or will bear any of the Sellers’ costs and expenses (including any of their legal fees and expenses) in connection with this Agreement or any of the transactions contemplated hereby. Without limitation to the foregoing, the Buyer will be responsible for the costs and expenses of the Title Policy and related Surveys (not to exceed $20,000) and the Taxes and other governmental fees specified in §9(c).

     (l) Construction. The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement. Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The word “including” shall mean including without limitation. The Parties intend that each representation, warranty, and covenant contained herein shall have independent significance.

49

     (m) Incorporation of Exhibits, Annexes, and Schedules. The Exhibits, Annexes, and Schedules identified in this Agreement are incorporated herein by reference and made a part hereof.

     (n) Specific Performance. Each of the Parties acknowledges and agrees that the other Parties would be damaged irreparably in the event any of the provisions of this Agreement are not performed in accordance with their specific terms or otherwise are breached. Accordingly, each of the Parties agrees that the other Party shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically this Agreement and the terms and provisions hereof in any action instituted in any court of the United States or any state thereof having jurisdiction over the Parties and the matter (subject to the provisions set forth in §11(o) below), in addition to any other remedy to which they may be entitled, at law or in equity.

     (o) Submission to Jurisdiction. Each of the Parties submits to the jurisdiction of any state or federal court sitting in Dallas County, Texas, in any action or proceeding arising out of or relating to this Agreement and agrees that all claims in respect of the action or proceeding may be heard and determined in any such court. Each of the Parties waives any defense of inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety, or other security that might be required of any other Party with respect thereto. Each Party appoints GKL Corporate Search (the “Process Agent”) as his or its agent to receive on his or its behalf service of copies of the summons and complaint and any other process that might be served in the action or proceeding. Any Party may make service on the other Party by sending or delivering a copy of the process (i) to the Party to be served at the address and in the manner provided for the giving of notices in §11(g) above or (ii) to the Party to be served in care of the Process Agent at the address and in the manner provided for the giving of notices in §11(g) above. Nothing in this §11(o), however, shall affect the right of any Party to bring any action or proceeding arising out of or relating to this Agreement in any other court or to serve legal process in any other manner permitted by law or at equity. Each Party agrees that a final judgment in any action or proceeding so brought shall be conclusive and may be enforced by suit on the judgment or in any other manner provided by law or at equity.

     (p) Joint and Several Obligations. The Sellers’ obligations under this Agreement shall be joint and several obligations.

*****

50

     IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date first above written.

BUYER:

ELK PREMIUM BUILDING PRODUCTS, INC.

By:
	Name:
	Title:

SELLERS:

Joseph Pressutti

Susan Pressutti

The Pressutti Family Trust

By:
	Susan Pressutti, co-trustee
By:
	Joseph Pressutti, co-trustee

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ANNEX 1

EXCEPTIONS TO THE REPRESENTATIONS
AND WARRANTIES OF THE SELLERS

Annex 1 to Stock Purchase Agreement

ANNEX 2

EXCEPTIONS TO THE REPRESENTATIONS
AND WARRANTIES OF THE BUYER

None.

Annex 2 to Stock Purchase Agreement

ANNEX 3

SELLER’S PERSONAL PROPERTY

Annex 3 to Stock Purchase Agreement

EXHIBIT A

FORM OF ESCROW AGREEMENT

Exhibit A to Stock Purchase Agreement

EXHIBIT B-1

PURCHASED INTELLECTUAL PROPERTY

     A. Issued U.S. Patents

U.S. Patent
Number	Title
RE 36,858	Low-Cost Highly Aesthetic and Durable Shingle
5,365,711	Low-Cost Highly Aesthetic and Durable Shingle
4,920,721	High Profile Fiberglass Shingle

     B. Patent Applications Still in Progress (not yet filed with USPTO)

Subject Matter of Patent Application	Inventors
Continuation-in-part application to be prepared to cover improvements to U.S. Application No. 10/453,699	Joseph Pressutti, Lawrence Penner, Frank Gardanier and Walter Becker
Methods and machines for making the King Ridge and Chancellor products – related to U.S. Application No. 10/288,202	Lawrence Penner

Exhibit B to Stock Purchase Agreement

EXHIBIT B-2

INTELLECTUAL PROPERTY RETAINED BY SELLER

None.

Exhibit B to Stock Purchase Agreement

EXHIBIT C

PURCHASED REAL ESTATE

3333 S. Willow Avenue, Fresno, California

THE LAND REFERRED TO ABOVE IS SITUATED IN THE COUNTY OF FRESNO, STATE OF CALIFORNIA, AND IS DESCRIBED AS FOLLOWS:

Parcel 2 of Parcel Map NO. 6421, according to the map thereof recorded in Book 41, Page 74 of Parcel Maps, in the Office of the County Recorder of said County.

Excepting therefrom all oil, gas, minerals, and other hydrocarbon substances from the property conveyed in Book 7056, Page 177 of Official Records, Document No. 66065, that portion thereof lying below a depth of 500 feet, measured vertically, from the contour of the surface of said property however, Grantor or its successors and assigns shall not have the right for any purpose whatsoever to enter upon, into or through the surface of said property or any part thereof lying between said surface and 500 feet below of said surface.

AND

3441 S. Willow Avenue, Fresno, California

THE LAND REFERRED TO ABOVE IS SITUATED IN THE COUNTY OF FRESNO, STATE OF CALIFORNIA, AND IS DESCRIBED AS FOLLOWS:

That portion of Lot 30 of Malaga Tract, according to the map thereof recorded in Book 2 Page 17, of Plats, Fresno County Records, described as follows:

Beginning at the Southeast corner of said Lot 30, thence North 89° 37’ 06” West, along the Southerly line of said Lot 30, 766.33 feet; thence North 0° 13’16” East, 507.82 feet; thence South 89° 46’ 44” East, 776.29 feet to a point in the Easterly line of said Lot 30; thence South 0° 13’ 01” West, along said Easterly line 510.00 feet to the point of beginning.

EXCEPTING THEREFROM all of the minerals and mineral ores of every kind and character now known to exist or hereafter discovered upon, within or underlying said land or that may be produced therefrom, including, without limiting the generality of the foregoing, all petroleum, oil, natural gas and other hydrocarbon substances and products derived therefrom together with the exclusive perpetual right of ingress and egress beneath the surface of said land to explore for, extract, mine and remove the same, and to make such use of the said land beneath the surface as is necessary or useful in connection therewith, which use may include lateral or slant drilling, boring, digging or sinking of wells, shafts or tunnels, provided, however, that said grantor, its successors and assigns, shall not use the surface of said land in the exercise of any of aid rights, and shall not disturb the surface of said land or any improvements thereof, as reserved by Southern Pacific Company, a Corporation, in the Deed recorded October 25, 1966, as Document No. 75882 in Book 5370, Page 204 of Official Records.

Exhibit C to Stock Purchase Agreement

EXHIBIT D

FORMS OF ASSIGNMENTS

Exhibit D to Stock Purchase Agreement

EXHIBIT E

FORM OF ASSUMPTION AGREEMENT
(NOTE AND DEED OF TRUST)

Exhibit E to Stock Purchase Agreement

EXHIBIT F

FINANCIAL STATEMENTS

Exhibit F to Stock Purchase Agreement

EXHIBIT G

CAPITAL BUDGET OF THE COMPANY AND ITS SUBSIDIARIES

Exhibit G to Stock Purchase Agreement

EXHIBIT H

[Intentionally Omitted]

Exhibit H to Stock Purchase Agreement

EXHIBIT I

AGREEMENT OF PURCHASE AND SALE OF REAL ESTATE
AND ESCROW INSTRUCTIONS

Exhibit I to Stock Purchase Agreement

EXHIBIT J

AGREEMENT OF PURCHASE AND SALE OF REAL ESTATE
AND ESCROW INSTRUCTIONS

Exhibit J to Stock Purchase Agreement

EXHIBIT K

PRELIMINARY TITLE REPORTS

Exhibit K to Stock Purchase Agreement

EX-21

EXHIBIT 21

SUBSIDIARIES OF THE REGISTRANT

1.	Elk Premium Building Products, Inc., a Delaware corporation, which owns all of the outstanding stock of (a) Elk Corporation of America, a Nevada corporation, (b) Elk Corporation of Alabama, a Delaware corporation, (c) Elk Corporation of Texas, a Nevada corporation, (d) Elk Corporation of Arkansas, an Arkansas corporation, (e) Elk Performance Nonwoven Fabrics, Inc., a Delaware corporation, (f) Elk Composite Building Products, Inc., a Delaware corporation, and (g) RGM Products, Inc., a California corporation.
2.	Elk Technology Group, Inc., a Delaware corporation, which owns all of the outstanding stock of (a) Chromium Corporation, a Delaware corporation, (b) Elk Technologies, Inc., a Delaware corporation, (c) Midland Path Forward, Inc., a Nevada Corporation, formerly known as OEL, LTD, d/b/a Ortloff Engineers, LTD, (d) Cybershield of Georgia, Inc., a Georgia corporation, and (e) Lufkin Path Forward, Inc., a Texas corporation, and successor by merger with Cybershield, Inc., Cybershield of Texas, Inc. and Cybershield International, Inc.
3.	Elk Group, Inc., a Nevada corporation, which is a general partner with a 1% partnership interest in Elk Group, L.P. (Elk Group L.P.), a Texas limited partnership.
4.	NELPA, Inc., a Nevada corporation, which is a limited partner with a 99% partnership interest in Elk Group L.P.

EX-23.1

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     We have issued our reports dated August 30, 2005, accompanying the consolidated financial statements, management’s assessment of the effectiveness of internal control over financial reporting, and schedule included in the Annual Report of ElkCorp on Form 10-K for the year ended June 30, 2005. We hereby consent to the incorporation by reference of said reports in the Registration Statements of ElkCorp on
Form S-3 (File No. 333-73196) and on Form S-8 (File No. 333-96499).

/s/ Grant Thornton LLP

Grant Thornton LLP

Dallas, Texas
August 30, 2005

EX-23.2

EXHIBIT 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-73196) and Form S-8 (No. 333-96499) of ElkCorp (formerly Elcor Corporation) of our report dated August 30, 2004, except for changes in presentation as noted in footnotes titled “Discontinued Operations” and “Financial Information by Company Segments,” as to which the date is August 30, 2005, relating to the financial statements and our report dated August 30, 2004 relating to the financial statement schedule, which appear in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Dallas, Texas
August 30, 2005

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

I, Thomas D. Karol, certify that:

1.	I have reviewed this annual report on Form 10-K of ElkCorp;
2.	Based on my knowledge, this annual 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 annual 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 annual 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-(15e)) and internal control over financial reporting (as defined in Exchange act Rules 13a-15(f) and 15d- 15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure control 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 annual report is being prepared;
b)	Designed such internal controls over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, 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;
c)	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; and
d)	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; and

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 registrant’s board of directors (or persons performing the equivalent functions):

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; and
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: September 6, 2005	By	/s/ Thomas D. Karol
		Thomas D. Karol
		Principal Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

I, Gregory J. Fisher, certify that:

1.	I have reviewed this annual report on Form 10-K of ElkCorp;
2.	Based on my knowledge, this annual 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 annual 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 annual 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-(15e)) and internal control over financial reporting (as defined in Exchange act Rules 13a-15(f) and 15d- 15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure control 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 annual report is being prepared;
b)	Designed such internal controls over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, 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;
c)	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; and
d)	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; and

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 registrant’s board of directors (or persons performing the equivalent functions):

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; and
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: September 6, 2005	By	/s/ Gregory J. Fisher
		Gregory J. Fisher
		Senior Vice President,
		Chief Financial Officer and
		Controller

EX-32.1

EXHIBIT 32.1

CERTIFICATE OF THE CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C.s. 1350):

     I, Thomas D. Karol, Chief Executive Officer of ElkCorp, certify to my knowledge and belief pursuant to Section 906 of Sarbanes-Oxley Act of 2002 (18 U.S.C.s. 1350) that:

(1)	The Annual Report on Form 10-K for the period ended June 30, 2005, which this statement accompanies, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Annual Report on Form 10-K for the period ended June 30, 2005 fairly presents, in all material respects, the financial condition and results of operations of ElkCorp.

Date: September 6, 2005

By	/s/ Thomas D. Karol
	Thomas D. Karol
	Chief Executive Officer

EX-32.2

EXHIBIT 32.2

CERTIFICATE OF THE CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C.s. 1350):

     I, Gregory J. Fisher, Senior Vice President, Chief Financial Officer and Controller of ElkCorp, certify to my knowledge and belief pursuant to Section 906 of Sarbanes-Oxley Act of 2002 (18 U.S.C.s. 1350) that:

(1)	The Annual Report on Form 10-K for the period ended June 30, 2005, which this statement accompanies, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Annual Report on Form 10-K for the period ended June 30, 2005 fairly presents, in all material respects, the financial condition and result of operations of ElkCorp.

Dated: September 6, 2005

By	/s/ Gregory J. Fisher
	Gregory J. Fisher
	Senior Vice President,
	Chief Financial Officer and
	Controller