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, 2004
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 incorporation or organization)	(I.R.S. Employer Identification No.)
14911 Quorum Drive, Suite 600, Dallas, Texas	75254-1491
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code (972)851-0500

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

	Name of Each Exchange on
Title of Each Class	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 whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).     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

     The aggregate market value of common stock held by nonaffiliates as of December 31, 2003 (the last business day of the Registrant’s most recently completed second quarter) was $501,252,460. This amount is based on the closing price of the Registrant’s Common Stock on the New York Stock Exchange on December 31, 2003. 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 31, 2004, the Registrant had 19,846,066 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 26, 2004, 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, 2004

TABLE OF CONTENTS

	Page
Part I.
Item 1. Business		1
Item 2. Properties		10
Item 3. Legal Proceedings		10
Item 4. Submission of Matters to a Vote of Security Holders		10
Item 4A. Executive Officers of the Registrant		11
Part II.
Item 5. Market for the Registrant’s Common Stock, Related Stockholder Matters and Issuer Purchases of Equity Securities		12
Item 6. Selected Financial Data		13
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations		14
Item 7A. Quantitative and Qualitative Disclosures about Market Risk		23
Item 8. Financial Statements and Supplemental Data		24
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		47
Item 9A. Controls and Procedures		47
Item 9B. Other Information		47
Part III.
Item 10. Directors and Executive Officers of the Registrant		47
Item 11. Executive Compensation		47
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		47
Item 13. Certain Relationships and Related Transactions		47
Item 14. Principal Accountant Fees and Services		47
Part IV.
Item 15. Exhibits, Financial Statement Schedule, and Reports on Form 8-K		48
Signatures		51
Note Purchase Agreement
Subsidiaries of The Company
Consent of Independent Registered Public Accounting Firm
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,” and “the company” 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 this 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.

Financial Information About Industry Segments

     Financial information by industry segment is presented in Part II. Financial Statements and Supplemental Data on page 43 of this report.

Building Products

     Through Elk Premium Building Products, Inc. and its subsidiaries (collectively Elk), we are engaged in the manufacture of premium roofing products, performance nonwoven fabrics and composite building products. The Building Products segment is our primary business, accounting for 97%, 96% and 97% of consolidated sales in fiscal 2004, 2003 and 2002, respectively.

     Premium Roofing Products

     Roofing products are premium laminated fiberglass asphalt shingles and accessory roofing products for steep slope applications. We manufacture these products at plants located in (1) Ennis, Texas, (2) Shafter, California, (3) Myerstown, Pennsylvania, and (4) Tuscaloosa, Alabama. In early fiscal 2003, we began construction of a second roofing plant at the Tuscaloosa, Alabama facility. Construction also included the installation of certain infrastructure and material handling improvements designed to enhance the efficiency of the overall Tuscaloosa facility. This new plant was completed ahead of schedule and under budget. Construction and testing of the new facility was completed in the quarter ended June 30, 2004 and placed in service on July 1, 2004. This new plant will increase company-wide capacity by approximately 25%.

     During fiscal 2004 we also completed significant production enhancements at the other roofing plants. The most significant of these improvements was the installation of additional packaging lines at the Shafter and Myerstown plants.

     The major 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, Prestique Raised Profile®, Capstone®, Domain® Winslow™, and Prestique Grandé High Definition.

     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.

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Product	Limited Warranty	Limited Wind Warranty
Domain Winslow	50 years	up to 110 mph
Prestique Gallery Collection	50 years	up to 110 mph
Prestique Plus High Definition	50 years	up to 110 mph
Capstone	40 years	up to 110 mph
Prestique Grandé High Definition	40 years	up to 90 mph
Prestique I High Definition	40 years	up to 90 mph
Prestique High Definition	30 years	80 mph
Prestique Raised Profile	30 years	70 mph

     Elk also offers starter-strip products, Seal-a-Ridge®, Z® Ridge, RidgeCrest™, Elk 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 contract carrier or by customer vehicles from the manufacturing plants or warehouses. Elk’s products are distributed nationwide. Over the last five calendar years, the laminated asphalt shingle segment has grown at a compound annual growth rate of 12.7%. Industry shipments of laminated asphalt shingles are expected to continue to grow 7% to 10% annually. Over 80% of all asphalt shingles are used in reroofing and remodeling and less than 20% are used in new construction. On average, steep-sloped roofs are replaced every 18 – 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. The ten largest Building Products customers typically 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 2004, 18% of consolidated sales in fiscal 2003, and 18% of consolidated sales in fiscal 2002.

     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 an important marketing activity, 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 Contractor Program™ to reward top performing contractors for their brand loyalty and quality of service and has developed Elk Edge® seminars to educate contractors and build their affinity for our products.

     Even though the premium roofing products 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 shingles sales is the laminated segment which accounts for 60% of all asphalt shingles 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.

     Performance Nonwoven Fabrics

     Elk’s performance nonwoven fabrics subsidiary is a leading manufacturer of nonwoven fiberglass shingle substrates and other products utilizing coated and non-coated nonwoven fabrics formed from fiberglass, polyester, cellulose and blended base fibers. Non-coated 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 radiant barriers. Many of Elk’s coated nonwoven products utilize our proprietary Versashield® fire barrier coatings.

     Performance nonwoven fabrics products are manufactured on two nonwoven fabric (or mat) lines that run in parallel at Elk’s Ennis, Texas facility.

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     During fiscal 2004, 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. We continually 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 2004, most external shipments of nonwoven fabrics were made 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 traditional markets for advanced composite technology (decking, fencing, railing, building product structural components and accessories) and the development of new high-end non-asphaltic roofing products. Composite wood products are sold under the CrossTimbers™ name and marketed as an alternative to treated wood. Composite building products are manufactured in Lenexa, Kansas, sold by Elk sales personnel, and shipped by contract carrier.

     We are currently expanding and consolidating our capacity at the current Lenexa facility. Additional capacity from this $22,000,000 investment in the composite building products business is expected to be completed in December 2004.

     We believe that industry-wide sales of composite wood products currently account for approximately 7% 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. Competitors include companies focusing on traditional wood products and companies offering wood alternative products. Some of these competitors are larger in size and have greater financial resources than we do, but the market currently is generally fragmented without dominant competitors. We believe that our established building products distribution channels will enhance our ability to compete successfully in this market.

     Raw Materials

     In the Building Products segment, the significant raw materials are ceramic coated granules, asphalt, glass fibers, resins, mineral filler, polypropylene and wood particles. 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 causes. Asphalt costs can be significantly affected by trends in oil prices and our cost of sales can vary as a result of changes in the price and availability of asphalt. Historically, we have been able to pass some of the higher raw material costs through to the customer.

     Transportation

     The majority of our building products are shipped by 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 oil prices. Further, carriers are subject to final rules issued in April 2003 by the U.S. Department of Transportation which govern truck drivers’ hours of service and 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.

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     Backlog

     Backlog is not significant, nor is it material to our Building Products businesses.

     Strategies

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

     The key objectives of the Building Products segment are summarized as follows:

• Utilize all existing roofing manufacturing capacity to fully leverage the capital investments in place.

• Develop an overall strategy and positioning of our “Brand” that further extends the Elk brand with our supply chain and extend it to reach the consumer.

• Improve our shingle operational effectiveness and further improve our raw material supply chain to achieve optimum cost.

• Utilize Elk’s existing nonwoven fabric capacity and develop applications into the potential Specialty Fabrics platform in fire retardants.

• Expand the composite lumber business as well as develop a 2^nd generation superior product.

• 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 businesses typically provide extended payment terms to certain customers for roofing products shipped during the late winter and early spring months, with payment generally due during late spring or early summer. As of June 30, 2004, $5,662,000 in receivables relating to such shipments were outstanding, all of which are due in the first quarter of fiscal 2005.

     Seasonal Business

     Our Building Products businesses 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 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 and related borrowings fluctuate during the year because of seasonality. Generally, working capital requirements and borrowings are higher in the spring and summer months, and lower in the fall and winter months.

Other, Technologies

     Other, Technologies consists of our other operations. These dissimilar operations are combined, as none individually meets the materiality criteria for separate segment reporting. The businesses aggregated together as Other, Technologies accounted for 3%, 4% and 3% of consolidated sales in fiscal 2004, 2003 and 2002, respectively. The operations included as Other, Technologies are: (1) Ortloff Engineers, LTD (Ortloff), which provides proprietary technologies and related engineering services to the natural gas processing industry, (2) 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 (3) Elk Technologies, Inc. (Elk Technologies), which develops and markets fabrics featuring VersaShield® fire retardant coatings designed for use outside of traditional building products applications, including home furnishings and other consumer products. Elk Technologies has produced nominal commercial sales to date.

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     Ortloff

     Ortloff is engaged in licensing proprietary technologies and providing related engineering services to the natural gas processing industries, with particular emphasis on the natural gas liquids (NGL) recovery, sulfur recovery, and liquefied natural gas (LNG) segments. Ortloff’s proprietary technologies are used in a very significant number of turbo expander plant projects. Ortloff licenses technology covered by and related to patents owned by ElkCorp for use in new or redesigned natural gas and refinery gas processing facilities, and utilizes technology licensed from others and its own expertise in the performance of consulting and engineering assignments. In addition, Ortloff offers significant expertise and other nonpatented technology associated with its processes that are difficult for customers to obtain on a cost effective basis from others. Ortloff has been successful in expanding its markets into several parts of the world beyond the Americas where natural gas deposits are being produced and processed to generate products for sale in the world markets, and has entered into a Cooperative Marketing Agreement with UOP LLC and a global technology license agreement with a major international energy company to further leverage Ortloff’s worldwide coverage. Ortloff has initiated the first stages of a potential joint venture in China to allow further international exposure to its technology in key Asian markets.

     ElkCorp holds certain patents, which are significant to Ortloff’s operations. We believe that ElkCorp holds significant state-of-the-art patents covering some of the most competitive processes for the cryogenic processing of refinery and natural gas streams to remove the higher value components, such as ethane and propane, which are primarily used as petrochemical feedstocks. In addition, Ortloff has developed technologies and filed applications for patents covering processes for the production of LNG which it believes will provide considerable efficiency improvements in and cost savings for the design and construction of those facilities. However, we do not believe that the loss of any one of these patents or of any license, franchise or concession would have a material adverse effect on our overall business operations. We also believe that Ortloff has widely recognized expertise in the design of facilities for natural gas and refinery gas processing and sulfur recovery. Ortloff competes with several larger international engineering firms with greater financial and geographic resources and manpower. It has entered into cooperative marketing and global licensing agreements with larger companies to better compete in international projects.

     Patent license fees are calculated by standard formulas that take into account both specific project capacity criteria and market conditions, adjusted for special conditions that may exist in a project. Engineering consulting assignments are performed under consulting services agreements at negotiated rates.

     No raw materials are utilized in Ortloff’s consulting and technology licensing business.

     Chromium

     Chromium Corporation 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 all of 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 competition on the basis of 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.

     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 have been advised by our suppliers that they maintain substantial inventories of chromic acid in order to minimize the potential effects of foreign interruption in ore supply.

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     Elk Technologies

     Elk Technologies, Inc.’s current areas of emphasis include fire retardant fabrics for mattresses, upholstered furniture, curtains and bed clothing. While these activities have produced nominal commercial sales to date, 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.

     Strategies

     Our objectives for each of the Other, Technologies companies are listed below. While we intend to continue to position these companies for long-term profitability, we also intend to explore the potential sale of Ortloff and Chromium in fiscal 2005 to third parties whose operations are more synergistic, so that we can focus on our Building Products platforms.

     Ortloff

• Increase penetration of international markets through the UOP Cooperative Marketing Agreement, and other global licensing agreements in the cryogenic gas processing and sulfur recovery technologies.

• Further penetrate the LNG markets.

• Continue to generate patent licensing and consulting revenue and policing potential infringement of our patents.

Chromium

• Continue to offer plating and finishing services for pistons, valves and cylinder liners in existing locomotive and marine markets.

• Market locomotive products through the extensive sales network of the Electro-Motive Division of General Motors in international and specific domestic markets.

• Grow sales of hard-chrome wear plates designed for use in other industrial markets to 30% of Chromium's monthly sales.

     Elk Technologies

• Penetrate the mattress, bedding and upholstered furniture markets with fire retardant products. We believe the potential market for mattresses is 40 million mattresses per year. Up to three linear yards per mattress will likely be required.

• Continue to develop fire retardant technology for other markets.

Discontinued Operations

     Cybershield, Inc., through subsidiaries (collectively Cybershield) has been engaged in shielding plastic enclosures from electromagnetic and radio frequency interference. Products include EMI/RFI shielding, conductive gaskets, decorative paints, metal coatings and EXACT™ metal patterning. Cybershield’s markets include digital cellular phones, PDA’s, telecommunications and consumer electronics equipment, bar coding, computer and computer peripherals, aerospace, automotive, military and medical equipment.

     Prior to fiscal 2003, Cybershield was principally a North American provider of shielding solutions to the digital wireless telecommunications industry, serving both the handset and infrastructure segments of the industry. In recent years, most worldwide cellular phone production has shifted to Asia where Cybershield has no production facilities. Cybershield attempted to implement strategies to diversify its customer base among a wide spectrum of electronic device manufacturers serving the cellular, consumer, military, automotive, medical equipment, aerospace and other industries and to utilize a proprietary process (EXACT™) to metalize complex patterns of electroless conductive metals with great precision in three-dimensional plastic parts.

     In December 2003, 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. Progress towards replacing lost cellular revenue with revenue from other sources was progressing slower than anticipated, and the profit contribution from new commercial production of EXACT business was lower than contemplated. 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. Therefore, the Canton, Georgia facility is included as a component of discontinued operations. As a result of these actions, Cybershield is classified as a discontinued operation in the Consolidated Financial Statements.

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     On August 10, 2004, we 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 book value of assets, net of assumed liabilities, at the date of sale.

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 clean up 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.

     Chromium has engaged in limited remediation activities at its former plating operation, which is 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 cleanup plan the applicant submits, and, 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.

     Chromium completed a supplemental groundwater and soil assessment at the facility. The plan 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 will now submit 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 cleanup standard as prescribed by the Texas Risk Reduction Program.

     Until the significant actions that will be included in the RAP are identified, the estimate of costs to remediate the site are not determinable, nor can we determine at this point in time if it is reasonably possible that we will incur material additional costs at the site. If a RAP similar to a plan successfully used at another Chromium plant is approved by TCEQ, remediation costs will be immaterial to our consolidated results of operations, financial position and liquidity. However, other potential scenarios, none of which are reasonably expected at this time, could potentially result in material costs to us. We believe that sufficient information for establishing a reserve for this environmental exposure in accordance with SFAS No. 5, “Accounting for Contingencies,” may be available by the end of the first half of fiscal 2005, and further anticipate that we may be in a position at that time to determine if it is reasonably possible that we will incur material additional costs with regard to this site.

     Our 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, we

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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 by reason of environmental laws and regulations. Such laws and regulations 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. We establish and maintain reserves for such known or probable remediation activities in accordance with SFAS No. 5.

Persons Employed

     At June 30, 2004, we and our subsidiaries had 1,148 employees. Of this total, 859 were employed in the Building Products business segment, 101 were employed in Other, Technologies, 15 were employed by Cybershield (which was sold in August 2004), and 173 (including most sales personnel) were employed by the corporate office. Included in these totals are 144 employees in Building Products and 49 employees in Other, Technologies who were 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 are substantially non-cyclical, but can be affected by weather, the availability of financing, insurance claims-paying practices, and general economic conditions. In addition, the asphalt roofing products manufacturing business is 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, 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 and wood particles. 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 recent regulatory changes in the trucking industry, from price increases of our products, operating results could be adversely affected and/or lower than projected.

     Temporary Shortages or Disruptions

     Temporary shortages or disruption in supply of raw materials or transportation do result from time to time from a variety of causes. If we experience temporary shortages or disruption of supply of raw materials, operating results could be adversely affected and/or 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. Construction of the new Tuscaloosa, Alabama facility was completed in the fourth quarter of fiscal 2004. We expect that fixed operating costs will increase approximately $14,000,000 annually as a result of this new facility. However, we also believe that during fiscal 2005, higher asphalt shingle sales resulting from growth in market demand and expanded manufacturing capacity will offset these higher operating costs. Progress in achieving anticipated operating efficiencies and financial results

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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 adversely affected.

     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

     Our litigation is subject to inherent and case-specific uncertainty. The outcome of such litigation 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 internally generated funds, borrowings under our available credit facilities, and funding from the sale of $50,000,000 in Senior Notes scheduled to be closed in November 2004. Significant increases in interest rates could substantially affect our borrowing costs or our cost of alternative sources of capital.

     Technological Changes or Loss of Key Customers

     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 the method of distribution or delivery of such technology, products and services. In addition, 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, and explosions, operating results could be adversely affected if any of our manufacturing facilities became inoperable for an extended period of time due to these or other 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 nominal 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 decking and fencing products operation is producing and selling a new generation of voided embossed products. We believe that this new generation of products will allow this business to achieve sustained operating profitability. 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 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.

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Item 2. Properties

     All manufacturing facilities, except for composite building products facilities in Lenexa, Kansas, are owned by ElkCorp and its subsidiaries and are not subject to any significant encumbrances.

     Building Products

     Asphalt building products are manufactured at plants located in Ennis, Texas; Shafter, California; Myerstown, Pennsylvania; and two adjacent plants in Tuscaloosa, Alabama. Fiberglass roofing mat, nonwoven industrial, reinforcement and filtration products are manufactured on two parallel production lines located in Ennis, Texas. Remote leased warehouse storage locations are maintained in (1) Denver, Colorado, (2) Plant City, Florida, (3) Greenville, South Carolina, (4) Tacoma, Washington, and (5) Richmond, British Columbia, Canada. Composite building products are manufactured at leased facilities in Lenexa, Kansas.

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

     Other, Technologies

     The Ortloff engineering and process licensing group is located in leased offices in Midland, Texas.

     Chromium’s operating facilities are located in Cleveland, Ohio. Corporate headquarters and most administrative offices for Chromium are located at the same leased facility as our corporate offices in Dallas, Texas. Some administrative offices are located at the Cleveland, Ohio manufacturing facility. Elk Technologies operates out of administrative offices located at the same leased facility as our corporate offices in Dallas, Texas, and utilizes the services of the technology center located at our Ennis, Texas facility.

     Discontinued Operations

     Cybershield’s operating facility in Lufkin, Texas was sold on August 10, 2004. The Canton, Georgia facility was closed in fiscal 2002 and is held for sale.

     Corporate Offices

     In August 2003, our corporate headquarters was relocated to 14911 Quorum Drive, Suite 600, Dallas, Texas. The corporate headquarters is located in leased offices.

Item 3. Legal Proceedings

     There are various lawsuits and claims pending against ElkCorp and its subsidiaries arising in the ordinary course of their businesses. 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, 2004.

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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	Sept. 1,
Name	Title	As Officer	2004
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	3 years		46
Richard A. Nowak	President and Chief Operating Officer of ElkCorp and each Building Products subsidiary; Officer and Director of all subsidiaries except one	3 years		62
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	9 years		46
James J. Waibel	Senior Vice President, Administration of ElkCorp	10 years		60
Matti Kiik	Senior Vice President, Research and Development of ElkCorp	3 years		62
Gregory J. Fisher	Senior Vice President, Chief Financial Officer and Controller of ElkCorp	3 years		54
Leonard R. Harral	Vice President, Chief Accounting Officer and Treasurer of ElkCorp; Director of one subsidiary	10 years		52
Thomas W. Cave	Vice President and Assistant Secretary of ElkCorp	12 years		49

     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 and Mr. Fisher 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 Stock, 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 947 holders of record and approximately 4,600 beneficial owners of ElkCorp’s common stock on August 31, 2004.

     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 2004 and fiscal year 2003 are set forth in the following table:

Period	Dividend		High		Low
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
Fiscal 2003
First Quarter	$	.05	$	27.93	$	14.85
Second Quarter	$	.05	$	18.60	$	14.60
Third Quarter	$	.05	$	19.32	$	14.55
Fourth Quarter	$	.05	$	22.60	$	18.63

     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, 2004, such limitation was $41,024,000 and actual cumulative expenditures for these items were $14,972,000.

     Equity Compensation Plan Information for ElkCorp is presented in Part III, Item 12 on page 47 of this Annual Report on Form 10-K.

     Issuer Purchase of Equity Securities for Quarter Ended June 30, 2004:

							Maximum Number (or
							Approximate Dollar
					Total Number of		Value) of Shares
					Shares Purchased as		That May yet be
	Total Number of				Part of Publicly		Purchased Under the
	Shares Purchased		Average Price Paid		Announced Plans or		Plans or Programs
Period	(Note 2)		per Share		Programs		(Note 1)
April, 2004		—	$	—		—	$	10,600,000
May, 2004		—	$	—		—	$	10,600,000
June, 2004		25,009	$	27.71		—	$	10,600,000
Total		25,009	$	27.71		—

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(1)

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 2004, as 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.

(2)

As a result of participant diversification directives, the ElkCorp ESOP accumulated a surplus of unallocated shares. In June 2004, we purchased 25,009 shares from the ElkCorp ESOP. The dollar value of this repurchase transaction is reflected in the statement of shareholders’ equity but has no impact on previously announced repurchase programs outlined in (1) above.

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,
	2004			2003			2002			2001		2000
Sales	$	572,976		$	485,127		$	475,331		$	349,628	$	361,778
Income (Loss):
From continuing operations	$	31,670		$	24,803		$	19,959		$	7,857	$	26,744
From discontinued operations		(11,164	)		(703	)		(4,866	)		905		3,188
Net Income	$	20,506		$	24,100		$	15,093		$	8,762	$	29,932
Income (Loss) Per Share – Basic
From continuing operations	$	1.62		$	1.27		$	1.03		$	.40	$	1.37
From discontinued operations		(.57	)		(.03	)		(.25	)		.05		.16
Net Income	$	1.05		$	1.24		$	.78		$	.45	$	1.53
Income (Loss) Per Share – Diluted
From continuing operations	$	1.59		$	1.27		$	1.02		$	.40	$	1.33
From discontinued operations		(.56	)		(.04	)		(.25	)		.05		.16
Net Income	$	1.03		$	1.23		$	.77		$	.45	$	1.49
Total Assets	$	480,708		$	442,291		$	381,428		$	360,048	$	322,574
Long-Term Debt	$	156,858		$	152,526		$	119,718		$	123,300	$	91,300
Shareholders’ Equity	$	215,042		$	196,528		$	176,092		$	162,102	$	161,904
Cash Dividends Per Share	$	.20		$	.20		$	.20		$	.20	$	.20

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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 a leading manufacturer of Elk premium roofing and other building products. In addition, our subsidiaries provide technologically advanced products and services to other industries. We strive to be the brand of choice in each of our businesses.

     Building Products is our dominant business, accounting for 97% of consolidated sales in fiscal 2004. Our Building Products segment consists of Elk Premium Building Products, Inc. and its operating subsidiaries (collectively Elk). These companies manufacture (1) premium laminated fiberglass asphalt shingles, (2) coated and non-coated nonwoven fabrics used in asphalt shingles and other applications in the building and construction, filtration, floor coverings and other industries, and (3) nontoxic composite wood decking, railing, marine dock and fencing products.

     The focus of these businesses is innovative product development, manufacturing excellence and superior customer service. We target our roofing products toward the steep-sloped roofing market. This market was favorable again in fiscal 2004 as Elk’s shingle shipments increased 14.2% compared to fiscal 2003 and average selling prices increased 2.8%. Higher raw material costs, particularly asphalt, were a continuing concern throughout fiscal 2004, but we were able to maintain improved margins of shingle pricing over raw material costs during the year compared to the prior fiscal year. We anticipate raw material and transportation costs to continue to increase moderately in the near-term, but also believe these higher costs can be offset by price increases implemented in late fiscal 2004 and announced for early fiscal 2005. We expect that industry shipments of laminated asphalt shingles will continue to grow 7% to 10% annually for the next several years and we are taking steps to meet increasing demand for our products. A major initiative to improve manufacturing capacity was accomplished in fiscal 2004, when we completed a second shingle manufacturing plant at the Tuscaloosa, Alabama facility ahead of schedule and under budget. This new plant will increase our overall capacity by about 25%. We expect the start-up of this new facility to negatively impact operating results in the early part of fiscal 2005, but expect the new plant to contribute to our operating profit as fiscal 2005 progresses. We also completed capacity additions in fiscal 2004 at our Shafter, California and Myerstown, Pennsylvania plants.

     Our key strategy in fiscal 2004 in performance nonwoven fabrics and composite building products was to position these businesses as core growth platforms. For performance nonwoven fabrics, our primary objectives were to achieve higher capacity utilization and grow internal and external mat shipments in line with growth in the roofing market. For composite building products, our goal in fiscal 2004 was to attain profitable operations through improved manufacturing results. This objective was achieved in the fourth quarter of fiscal 2004 through the introduction of a new voided product line, which reduced product weight without sacrificing strength, lowered raw material content and allowed higher extrusion speeds. We intend to significantly increase the composite building products line in fiscal 2005 with the investment of approximately $22,000,000 to expand the capabilities of our current composite lumber operations in Lenexa, Kansas. Start-up of this expanded facility will negatively impact operating results initially, but is expected to improve operating income in the second half of fiscal 2005.

     Our dissimilar businesses are combined and reported as Other, Technologies, as none individually meet the materiality criteria for separate segment reporting. These operations include (1) Ortloff Engineers, LTD (Ortloff), which provides proprietary technologies and related engineering services to the natural gas processing industry, (2) 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 (3) Elk Technologies, Inc., which develops and markets fabrics featuring VersaShield fire retardant coatings designed for use outside of traditional building products applications, including home furnishings and other consumer products. To date this business has produced a nominal amount of commercial sales.

     Our primary objectives for these businesses in fiscal 2004 were to (1) position Chromium and Ortloff for sustained long-term profitability and (2) become the supplier of choice in selected consumer fire-barrier markets. We were successful in fiscal 2004 in that Chromium and Ortloff were each profitable. However, these companies do not fit into our focus on Building Products platforms, and we are positioning them for sale in the next fiscal year.

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We continue to be excited about the potential of our fire-barrier products. This business is not yet generating significant revenues. However, in fiscal 2004, several additional bedding makers chose our technology for fire-resistant mattresses. New open flame fire standards are expected to be adopted in the state of California in January 2005 and national distribution of code-compliant product is expected next fiscal year.

     In December 2003, we made the decision to discontinue Cybershield, Inc. (Cybershield) and to sell Cybershield or its assets. A significant portion of the current year loss for Cybershield relates to the write-down of assets to estimated market value as a result of this decision. The Lufkin, Texas facility and its operations were sold August 10, 2004. The idle Canton, Georgia facility is currently held for sale.

Performance Data

     The following table and subsequent discussion set forth performance data from our continuing operations, expressed as a percentage of net 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,
	2004			2003			2002
Sales		100.0	%		100.0	%		100.0	%
Cost of sales		79.2			79.9			79.8
Gross margin		20.8			20.1			20.2
Selling, general and administrative:
Other selling, general and administrative		11.0			11.8			10.9
Noncash stock option compensation		—			(1.1	)		1.2
Income from operations		9.8			9.4			8.1
Interest expense, net		1.0			1.2			1.3
Income from continuing operations before income taxes		8.8			8.2			6.8
Provision for income taxes		3.3			3.1			2.6
Income from continuing operations		5.5	%		5.1	%		4.2	%

Fiscal 2004 Compared to Fiscal 2003

Overall Performance

     Sales from continuing operations of $572,976,000 in fiscal 2004 were 18.1% higher than $485,127,000 in fiscal 2003. During fiscal 2004, income from continuing operations of $31,670,000 was 27.7% higher than $24,803,000 for the prior year. Included in income from continuing operations last year was $3,496,000 of benefit, net of tax, from the reversal of noncash stock option compensation. Income from continuing operations in fiscal 2004 was 48.6% higher than pro forma income from continuing operations of $21,307,000 in fiscal 2003 (which excludes the $3,496,000 after tax stock option compensation benefit in the prior year). For comparative purposes, management believes this comparison is appropriate, since the fiscal 2003 benefit resulted solely from changes in our stock price and not from operations.

     Consolidated income from operations of $55,908,000 in fiscal 2004 was 22.1% higher than $45,774,000 in fiscal 2003. Income from operations in the prior year included a $5,378,000 pretax benefit as a result of the aforementioned noncash stock option compensation. Consolidated operating income from fiscal 2004 was 38.4% higher than pro forma consolidated operating income from continuing operations of $40,396,000 (which excludes the $5,378,000 noncash stock option compensation benefit in the prior year). For comparative purposes, management believes this comparison is appropriate, since the fiscal 2003 benefit resulted solely from changes in our stock price and not from operations.

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     Cost of sales was 79.2% of sales in fiscal 2004 compared to 79.9% 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. Other selling, general and administrative (Other SG&A) costs in fiscal 2004 were 10.3% higher than in the prior fiscal year, primarily as a result of increased business activity and higher marketing expenses; however, as a percentage of sales, the relationship between sales and other SG&A costs was better in the current year than 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, 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.

Results of Business Segments

     Sales in the Building Products segment increased 19.4% to $557,576,000 in fiscal 2004 compared to $467,002,000 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 premium roofing products sales. Compared to the same period last year, unit shingle shipments increased 14.2%, with most regions of the United States of America 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 the year-ago period. In fiscal 2004, external sales of performance nonwoven fabrics increased $2,247,000, or 7.3%, compared to last year. 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. Sales of composite building products were $8,525,000 in fiscal 2004. We entered the composite wood business in the second quarter of fiscal 2003 and reported $1,240,000 in sales last year.

     Operating income for the Building Products segment of $67,030,000 for fiscal 2004 increased 46.0% compared to $45,901,000 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. We also incurred an operating loss of approximately $2,300,000 for the composite wood business during fiscal 2004 compared to an approximate $2,700,000 operating loss in fiscal 2003. The composite wood business achieved profitability in March 2004 and generated approximately $200,000 of operating profit in the fourth quarter of fiscal 2004.

     The Other, Technologies companies reported combined sales of $15,400,000 in fiscal 2004 compared to $18,125,000 in fiscal 2003. Ortloff recognized lower license fee and consulting income in fiscal 2004 compared to 2003. License fees can vary significantly between reporting periods since this business is largely project driven. Chromium’s sales were 12.4% higher in fiscal 2004 compared to 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. During the first quarter of fiscal 2004, Chromium and the Electro-Motive Division of General Motors (GM EMD) signed a manufacturer’s representation agreement whereby GM EMD will promote and market Chromium’s reciprocating engine components through the extensive GM EMD sales network in international and specific domestic markets. Elk Technologies had a nominal level of sales of fire retardant mattress fabrics during fiscal 2004.

     Other, Technologies companies had combined operating income of $2,462,000 in fiscal 2004, compared to $5,262,000 in fiscal 2003. Due to higher sales activity levels, Chromium had an operating profit of approximately

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$600,000 in fiscal year 2004 compared to incurring a small operating loss in fiscal 2003. Ortloff had operating income of approximately $2,600,000 in fiscal 2004, compared to approximately $5,800,000 operating income in fiscal 2003. Elk Technologies incurred approximately $700,000 in marketing and development costs in fiscal 2004 compared to approximately $400,000 in fiscal 2003.

Fiscal 2003 Compared to Fiscal 2002

Overall Performance

     During the fiscal year ended June 30, 2003, income from continuing operations of $24,803,000 was 24.3% higher than $19,959,000 in fiscal 2002. Sales from continuing operations of $485,127,000 were 2.1% higher in fiscal 2003 than sales of $475,331,000 in fiscal 2002. Consolidated operating income from continuing operations of $45,774,000 in fiscal 2003 was 19.5% higher than $38,310,000 in the prior fiscal year. Operating income for fiscal 2003 included a $5,378,000 benefit from the reversal of noncash stock option compensation, compared to a $6,034,000 charge for this noncash item in fiscal 2002. In fiscal 2002, we changed our accounting for certain stock options from fixed awards with no compensation expense to variable awards, which generally results in periodic expense or income, as we determined that variable accounting was more appropriate for such stock options. Pursuant to variable option accounting, income is charged or credited during each accounting period to reflect any excess or deficit of the market value of shares underlying vested options, from the exercise price of vested options. Based on a decline in our share price subsequent to June 30, 2002 and actions taken by the Board of Directors to terminate the feature of the 1998 Incentive Stock Option Plan that caused certain stock options to be accounted for as variable awards, we recorded a reversal of the majority of fiscal 2002 noncash stock option compensation in the first quarter of fiscal 2003. We now have no options subject to variable stock option accounting. Accordingly, subsequent to the quarter ended September 30, 2002, income was not affected by variable accounting for stock options.

     Operating income from continuing operations in fiscal 2002 also included a favorable settlement with a vendor resulting in $5,625,000 of income. As a percentage of sales, operating income was 9.4% in fiscal 2003 compared to 8.1% in fiscal 2002. Cost of sales were 79.9% of sales in fiscal 2003 compared to 79.8% in the prior fiscal year. The impact of higher asphalt costs in fiscal 2003 were partially offset by, among other things, lower unit manufacturing costs and strict management of controllable expenses at our roofing plants. Other selling, general and administrative (Other SG&A) costs in fiscal 2003 were $5,708,000 higher than in fiscal 2002. However, fiscal 2002 benefited from a $5,625,000 vendor settlement. As a percentage of sales, Other SG&A costs were 11.8% in fiscal 2003, compared to 10.9% in fiscal 2002.

     Interest expense, net was $5,977,000 in fiscal 2003 compared to $6,087,000 in fiscal 2002. In fiscal 2003, the company capitalized $995,000 of interest related to the construction of an additional Tuscaloosa, Alabama shingle plant and other significant capital projects. No interest cost was capitalized in fiscal 2002. The average interest rate paid on indebtedness was 5.0% in fiscal 2003 compared to 5.1% in fiscal 2002.

     Our effective tax rate was 37.7% for fiscal 2003 compared to 38.1% for fiscal 2002. The difference between years primarily relates to the impact of noncash stock option compensation on the effective tax rate.

Results of Business Segments

     Sales in the Building Products segment increased 1.6% to $467,002,000 for the year ended June 30, 2003 compared to $459,673,000 in fiscal 2002. In fiscal 2003, premium roofing sales, which represented 93.2% of Building Products segment sales, increased 4.7% compared to fiscal 2002. Unit shingle shipments in the last half of fiscal 2003 more than offset the impact of a general slowing in the roofing market early in fiscal 2003. The increase in demand for our premium roofing products was driven by strong roof replacement demand in the Texas market as a result of widespread spring 2003 hail damage. Roofing activity in the Northeast and Midwest areas of the United States was hampered in the latter part of fiscal 2003 by persistent record rainfall from April to mid-June 2003. For the year, unit shingle shipments in fiscal 2003 increased 3.7% over fiscal 2002. For the month of June 2003, unit shingle shipments set a company record.

     Average selling prices for premium laminated asphalt shingles were about 3.0% higher in fiscal 2003 than in fiscal 2002, primarily as a result of shingle price increases in the second half of fiscal 2003 to recover higher asphalt costs and increases in other energy related costs. However, the increases in unit sales and average selling prices were somewhat offset by a sales mix weighted proportionately more to lower priced products.

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     In fiscal 2003, outside sales of performance nonwoven fabrics, which represented 6.6% of Building Product sales, decreased 30.2% compared to fiscal 2002, primarily as a result of a weak commercial roofing market. Although overall production of nonwoven fabrics was comparable in fiscal 2003 to the prior fiscal year, in fiscal 2003 a much higher proportion of nonwoven fabric production was consumed internally in our own manufacturing of shingle products. Intercompany nonwoven fabrics sales are eliminated in consolidation. Composite building products, which began operations in October 2002, accounted for 0.2% of Building Products sales in fiscal 2003.

     Despite increased sales in fiscal 2003, operating income for the Building Products segment of $45,901,000 was 13.9% lower compared to $53,325,000 in fiscal 2002. Prior year operating income included a $5,625,000 favorable vendor settlement. Asphalt costs in fiscal 2003 were $16,900,000 higher than in the prior fiscal year. Approximately $7,900,000 of these higher asphalt costs were offset by higher average sales per shingle unit. In the fourth quarter of fiscal 2003, shingle inventories were repositioned into the Texas market from other geographic areas to meet strong demand and to serve our Texas market share. Higher freight transfer costs related to inventory repositioning negatively impacted fiscal 2003 operating earnings by approximately $1,500,000.

     In fiscal 2003, delayed delivery and production inefficiencies related to the start-up of newly installed composite building products equipment reduced Building Products operating income for the year by approximately $2,700,000.

     The Other, Technologies companies reported combined sales of $18,125,000 in fiscal 2003 compared to $15,658,000 in fiscal 2002. Ortloff achieved a 56.6% increase in licensing revenues, primarily as a result of several key international projects in fiscal 2003. Higher international licensing fees are the result of our strategy of establishing cooperative marketing or licensing arrangements with several key international suppliers of process technologies, providing Ortloff with the opportunity to bid its technology packages on large international projects that might not otherwise be available to it. Licensing revenues can vary significantly between reporting periods since this business is largely project driven. Chromium sales were lower in fiscal 2003 compared to fiscal 2002 as a result of deferred maintenance expenditures by its railroad customers.

     The Other, Technologies companies reported operating income of $5,262,000 in fiscal 2003, 68.0% higher than $3,132,000 in fiscal 2002. This increase was primarily the result of higher technology licensing fees generated in fiscal 2003. Chromium reported an approximate $100,000 operating loss in fiscal 2003 compared to a modest operating profit in fiscal 2002. Start-up costs relating to Elk Technologies, Inc. also reduced operating income in fiscal 2003 by approximately $400,000.

     Fiscal 2003 and 2002 results have been restated for Cybershield, which became a discontinued operation for accounting and reporting purposes in fiscal 2004. In fiscal 2003, Cybershield incurred an approximate $1,100,000 operating loss compared to an approximate $7,500,000 operating loss in fiscal 2002. The fiscal 2002 loss included $5,273,000 of plant closure costs relating to Cybershield’s Canton, Georgia plant. Significantly reduced volumes in the cellular handset business caused Cybershield’s sales to decline significantly in fiscal 2003. Cellular handset production previously in the United States and Latin America largely shifted to Asia where the company had no significant operations.

New Accounting Standards

     There are no new accounting pronouncements that have not been adopted which impact the company.

Financial Condition

Overview

     Our liquidity needs generally arise principally from working capital requirements, capital expenditures and payment of dividends. During the three years ended June 30, 2004, we have relied primarily on internally generated funds and proceeds from sales of Senior Unsecured Notes to finance our capital expenditure requirements. Our working capital requirements 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. We generally use our Revolving Credit Facility (Facility) to finance higher working capital requirements. There were no borrowings under the Facility during the current fiscal year until mid-March 2004.

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During the spring months of 2004, our borrowings increased to about $46,000,000 before being reduced to $10,300,000 at June 30, 2004. Borrowing activity in fiscal 2004 was representative of our expected seasonal liquidity trends and requirements.

Operating Activities

     We determine cash flows from operating activities primarily from income from operations, deferred taxes, depreciation and amortization. Cash flows also either increase or decrease by changes in working capital requirements. In fiscal 2004, we generated cash flows of $50,540,000 from operating activities, compared to $23,167,000 in fiscal 2003 and $26,999,000 in fiscal 2002.

     Our overall working capital level related to continuing operations at June 30, 2004 was not significantly different than it was at June 30, 2003, increasing about $4,800,000. Trade receivables at June 30, 2004 were slightly higher than at June 30, 2003 due to higher sales levels. 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, 2004, receivables from customer programs with extended due dates were $5,662,000 compared to $7,291,000 at June 30, 2003. Extended term receivables outstanding at June 30, 2004 are due in the first quarter of fiscal 2005. At June 30, 2004, inventories were $8,608,000 higher than at June 30, 2003. We believe our inventories are being maintained at historically appropriate levels. The current ratio was 3.2 to 1 at June 30, 2004 compared to 3.7 to 1 at June 30, 2003.

Investing Activities

     Cash flows from investing activities primarily reflect our capital expenditure strategy. Net cash used for investing activities was $63,631,000 in fiscal 2004, $51,883,000 in fiscal 2003 and $9,975,000 in fiscal 2002. Approximately $40,000,000 of current year capital expenditures relate to the construction of a second shingle manufacturing plant at the Tuscaloosa, Alabama facility, including the installation of certain infrastructure and material handling improvements designed to enhance the overall efficiency of the expanded facility. Construction of the facility and testing of production equipment has been completed and the plant was placed in service July 1, 2004. Other significant capital expenditures in fiscal 2004 included approximately $6,000,000 for productivity enhancement projects. We also invested approximately $4,600,000 to upgrade certain key information technology platforms, which are expected to be complete in the first half of fiscal 2005.

     In fiscal 2005, we are investing approximately $22,000,000 to expand the capabilities of our composite lumber facility in Lenexa, Kansas. Additional capacity from these investments is expected to be available in December 2004.

     Excluding major capacity initiatives such as the Lenexa expansion, consolidated ordinary levels of capital expenditures are generally expected to be approximately $10,000,000 to $15,000,000 per year for the near-term.

Financing Activities

     Cash flows from financing activities generally reflect changes in our borrowings, together with dividends paid on common stock, treasury stock transactions and exercises of stock options. Net cash provided by financing activities was $8,308,000 in fiscal 2004, compared to $21,336,000 provided in fiscal 2003 and $4,716,000 used in fiscal 2002.

     During fiscal 2004, we increased the primary credit available under our Facility from $100,000,000 to $125,000,000 and extended its maturity to November 30, 2008. In June 2004, we finalized an agreement to issue an additional $50,000,000 in Senior Unsecured Notes in a private placement transaction with a group of institutional investors. Closing on this agreement was deferred until November 15, 2004, subject to our satisfaction of certain conditions. These financing steps were initiated in a historically low interest rate environment to provide funds for growth and expansion initiatives, including possible acquisitions to extend our premium building products line of business.

     At June 30, 2004, liquidity consisted of $273,000 of cash and $111,621,000 of available borrowings under the $125,000,000 committed Facility. The debt to capital ratio (after deducting cash of $273,000 from $155,300,000 of principal debt) was 41.9%. We have no off-balance sheet arrangements or transactions with unconsolidated, limited purpose entities.

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     Our Board of Directors has authorized our repurchase of common stock from time to time on the open market. As of June 30, 2004, we have repurchase authority of approximately $10,600,000 remaining. We did not make any open market purchases of common stock in fiscal 2004.

Contractual Obligations

     The following table summarizes our future payments relating to contractual obligations at June 30, 2004:

	(In thousands)
	Payments Due by Period
			Less than						After 5
	Total		1 year		1 – 3 years		4 – 5 years		years
Contractual Obligations:
Long-term Debt	$	155,300	$	—	$	—	$	95,300	$	60,000
Operating Leases		21,584		2,736		4,416		3,352		11,080
Plant Construction Commitments		9,842		9,842		—		—		—
Total Contractual Obligations	$	186,726	$	12,578	$	4,416	$	98,652	$	71,080

     In addition to the amounts reflected in the table, we will have an incremental $50,000,000 of Senior Unsecured Notes, scheduled to be closed in November 2004, that will be due after five years.

     Interest expense is not included in the above table as interest on floating rate obligations cannot be reasonably estimated. Interest on fixed interest rate obligations in place at June 30, 2004 is $5,356,500 per year through fiscal 2009. As a result of an interest rate swap in July 2004, $1,172,500 of annual interest will be converted from a fixed to floating rate through July 2007. Interest payments on $50,000,000 of Senior Unsecured Notes schedule to be closed in November 2004 will increase interest expense an additional $3,140,000 per year.

     Our only other significant commercial commitment at June 30, 2004 is our $125,000,000 Revolving Credit Facility, the term of which extends through November 30, 2008.

Environmental

     Our operations are subject to extensive federal, state and local laws and regulations relating to environmental matters. Such laws and regulations 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 Building Products segment and our primary customers are building materials distributors. Due to consolidation in the industry, credit risk is concentrated. Ten customers typically account for approximately 50% of consolidated sales. We evaluate the collectibility of accounts receivables based on a combination of factors. The balance in the reserve for doubtful accounts is evaluated on an ongoing basis based on such factors as customer’s past payment history, length of time the receivables are past due, the status of customer’s 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

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for loss contingencies when it is probable that a liability has been incurred and the amount of loss can be estimated reasonably. 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 factors such as an examination of known defects for potential exposure, claims paid history, independent data as to average length of time between asphalt roofing replacements and average length of home ownership.

• 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 Other, Technologies companies, is evaluated by management and our environmental consultants when known or anticipated exposure is identified and quantifiable.

• Self-insurance reserves – We partially insure ourself against losses for both casualty and medical insurance. 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. For the Building Products segment, 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 No. 101, “Revenue Recognition in Financial Statements” (SAB 101), as amended. The majority of sales are for manufactured products, where revenue is recognized at the time products are shipped to customers. Such revenues, particularly in the Building Products segment, 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.

     License revenue recognition is recorded when the following conditions are all complete: (a) a customer contracts for the nonexclusive use of inventions covered by our patents; (b) there are no remaining items relating to the license contract that have to be accomplished; and (c) the license fee is nonrefundable. Service revenues are recognized as they are performed. Revenue recognition may be subject to judgment and interpretation that the specific requirements of SAB 101 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.

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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 are no natural gas hedge transactions in effect at June 30, 2004. 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 an interest rate swap to effectively convert the interest rate from fixed to floating on $60,000,000 of our outstanding debt at June 30, 2004. The fair value of this swap was $1,558,000 at June 30, 2004. In July 2004, we entered into an additional interest rate swap to effectively convert the interest rate from fixed to floating on an additional $25,000,000 of our outstanding debt. Based on outstanding debt at June 30, 2004, our annual interest costs would increase or decrease $703,000 for each theoretical 1% increase or decrease in the floating interest rate. After an additional $50,000,000 of Senior Unsecured Notes are funded in November 2004, and after considering the additional interest rate swap entered into in July 2004, our interest costs would increase or decrease $953,000 annually for each theoretical 1% increase or decrease in the floating rate.

Credit Risk

     We are subject to credit risks applicable to cash and cash equivalents, accounts receivable and derivative instruments. Cash and cash equivalents are maintained at financial institutions or in short-term investments with high credit quality. Concentrations of credit risk with respect to accounts receivable primarily relate to the large building materials 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% and 18% of consolidated sales in fiscal 2004 and fiscal 2003, respectively. Derivative contracts are entered into with counterparties who are, in our opinion, creditworthy counterparties.

New Accounting Standards

     There are no new accounting pronouncements that have not been adopted which impact us.

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 and mineral filler, 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.

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 the results of operations and financial condition 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

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meaning of the Private Securities Litigation Reform Act of 1995. These statements usually are accompanied by words such as “optimistic,” “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 here. 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 the company serves, changes in the amount and severity of inclement weather, actions of competitors, new and planned facilities not meeting expected productivity rates and projected financial results, and technological changes, together with other risks detailed herein. Refer to Risks Relating to the Company on pages 8 and 9 of this annual report on Form 10-K for a more detailed description of these items.

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, 2004. 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 an interest rate swap to effectively convert the interest rate from fixed to floating on $60,000,000 of our outstanding debt at June 30, 2004. The fair value of this swap was $1,558,000 at June 30, 2004. In July 2004, we entered into an additional interest rate swap to effectively convert the interest rate from fixed to floating on an additional $25,000,000 of our outstanding debt. Based on outstanding debt at June 30, 2004, our interest costs would increase or decrease $703,000 for each theoretical 1% increase or decrease in the floating interest rate. After an additional $50,000,000 of Senior Unsecured Notes are funded in November 2004, and after considering the additional interest rate swap entered into in July 2004, our interest costs will increase or decrease $953,000 for each theoretical 1% increase or decrease in the floating rate.

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Item 8. Financial Statements and Supplemental Data

Index to Financial Statements and Financial Statement Schedule

	Page
Financial Statements:
Report of Independent Registered Public Accounting Firm		25
Consolidated Balance Sheets at June 30, 2004 and 2003		26
Consolidated Statements of Operations for the years ended June 30, 2004, 2003, and 2002		27
Consolidated Statements of Cash Flows for the years ended June 30, 2004, 2003, and 2002		28
Consolidated Statements of Shareholders’ Equity for the years ended June 30, 2004, 2003, and 2002		29
Summary of Significant Accounting Policies		30
Notes to Consolidated Financial Statements		36
Financial Statement Schedules:
Report of Independent Registered Public Accounting Firm		45
Schedule II - Consolidated Valuation and Qualifying Accounts		46

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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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors,
ElkCorp

In our opinion, the accompanying consolidated balance sheets 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 2003, and the results of their operations and their cash flows for each of the three 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

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ELKCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

	June 30,
($ In thousands)	2004			2003
Assets
Current Assets
Cash and cash equivalents	$	273		$	5,056
Trade receivables, less allowance of $605 and $935		121,091			118,252
Inventories		62,129			53,521
Prepaid expenses and other		8,587			6,689
Deferred income taxes		7,359			2,808
Discontinued operations		5,096			19,369
Total current assets		204,535			205,695
Property, Plant and Equipment, at Cost
Land		5,171			5,171
Buildings		84,612			83,029
Machinery and equipment		234,368			216,749
Construction in progress		80,592			43,007
		404,743			347,956
Less - Accumulated depreciation		(133,635	)		(121,694	)
Property, plant and equipment, net		271,108			226,262
Other Assets		5,065			10,334
	$	480,708		$	442,291
Liabilities and Shareholders’ Equity
Current Liabilities
Accounts payable	$	37,247		$	35,369
Accrued liabilities		25,419			18,958
Discontinued operations		531			1,212
Total current liabilities		63,197			55,539
Long-Term Debt		156,858			152,526
Deferred Income Taxes		45,611			37,698
Commitments and Contingencies (See Note)
Shareholders’ Equity
Common stock ($1 par, 19,988,078 shares issued)		19,988			19,988
Paid-in capital		57,852			57,331
Unearned compensation – unvested restricted stock		(628	)		(385	)
Retained earnings		143,540			126,969
		220,752			203,903
Less - Treasury stock (288,220 and 451,185 shares at cost)		(5,710	)		(7,375	)
Total shareholders’ equity		215,042			196,528
	$	480,708		$	442,291

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

	Year Ended June 30,
($ In thousands, except per share data)	2004			2003			2002
Sales	$	572,976		$	485,127		$	475,331
Costs and Expenses
Cost of goods sold		453,816			387,382			379,346
Selling, general and administrative:
Other selling, general and administrative		63,252			57,349			51,641
Noncash stock option compensation (benefit)		—			(5,378	)		6,034
Income From Operations		55,908			45,774			38,310
Other Income (Expense)
Interest expense		(5,444	)		(6,184	)		(6,192	)
Other		133			207			105
Income from Continuing Operations Before Income Taxes		50,597			39,797			32,223
Provision for income taxes		18,927			14,994			12,264
Income from Continuing Operations		31,670			24,803			19,959
Loss from Discontinued Operations, Net of Income Tax Benefits of $6,013, $378, and $2,620		(11,164	)		(703	)		(4,866	)
Net Income	$	20,506		$	24,100		$	15,093
Income (Loss) Per Common Share – Basic
Income from continuing operations	$	1.62		$	1.27		$	1.03
Discontinued operations		(.57	)		(.03	)		(.25	)
Net income per common share	$	1.05		$	1.24		$	.78
Income (Loss) Per Common Share – Diluted
Income from continuing operations	$	1.59		$	1.27		$	1.02
Discontinued operations		(.56	)		(.04	)		(.25	)
Net income per common share	$	1.03		$	1.23		$	.77

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

	Year Ended June 30,
($ In thousands)	2004			2003			2002
Cash Flows From Operating Activities
Income from continuing operations	$	31,670		$	24,803		$	19,959
Adjustments to reconcile income from continuing operations to net cash from continuing operating activities:
Depreciation and amortization		18,086			17,295			16,611
Deferred income taxes		3,362			7,072			5,183
Changes in assets and liabilities, net of acquisition:
Trade receivables		(2,839	)		(26,188	)		(22,837	)
Inventories		(8,608	)		(8,409	)		778
Prepaid expenses and other		(1,898	)		2,799			(1,090	)
Accounts payable		1,878			9,450			(9,619	)
Accrued liabilities		6,461			(4,927	)		14,433
Net cash provided by continuing operations		48,112			21,895			23,418
Net cash provided by discontinued operations		2,428			1,272			3,581
Net cash provided by operating activities		50,540			23,167			26,999
Cash Flows From Investing Activities
Additions to property, plant and equipment		(62,950	)		(49,181	)		(10,701	)
Acquisition of business		—			(2,224	)		—
Other, net		(681	)		(478	)		726
Net cash used for investing activities		(63,631	)		(51,883	)		(9,975	)
Cash Flows From Financing Activities
Proceeds from sale of Senior Notes		—			25,000			120,000
Borrowings (repayments) on Revolving Credit Facility, net		10,300			—			(123,300	)
Dividends paid on common stock		(3,935	)		(3,903	)		(3,873	)
Exercises of stock options		2,540			231			2,739
Purchases of common stock from ESOP		(693	)		—			—
Other		96			8			(282	)
Net cash provided by (used for) financing activities		8,308			21,336			(4,716	)
Net Increase (Decrease) in Cash and Cash Equivalents		(4,783	)		(7,380	)		12,308
Cash and Cash Equivalents at Beginning of Year		5,056			12,436			128
Cash and Cash Equivalents at End of Year	$	273		$	5,056		$	12,436

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

																		Accumulated
																		Other			Total
	Comprehensive			Common		Paid-in			Retained			Treasury			Unearned			Comprehensive			Shareholders’
($ In thousands, except per share data)	Income			Stock		Capital			Earnings			Stock			Compensation			Income			Equity
Balance, June 30, 2001				$	19,988	$	58,368		$	95,552		$	(11,806	)	$	—		$	—		$	162,102
Comprehensive Income:
Net income	$	15,093			—		—			15,093			—			—			—			15,093
Unrealized gains on derivatives, net of tax		31			—		—			—			—			—			31			31
Comprehensive income	$	15,124
Exercises of stock options, including tax benefit of $757					—		51			—			2,688			—			—			2,739
Dividends, $.20 per share					—		—			(3,873	)		—			—			—			(3,873	)
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

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

     The Building Products segment consists of Elk Premium Building Products, Inc. and its operating subsidiaries (collectively Elk). These companies manufacture (1) premium laminated fiberglass asphalt shingles, (2) coated and non-coated nonwoven fabrics used in asphalt shingles and other applications in the building and construction, filtration, floor coverings and other industries, and (3) nontoxic composite wood decking, marine dock, and fencing products. Building Products accounted for 97% of consolidated sales in fiscal 2004.

     Other, Technologies consists of the company’s other operations. These dissimilar operations are combined, as none individually meets the materiality criteria for separate segment reporting. In fiscal 2003, operating profit from Ortloff Engineers, LTD (Ortloff), which provides proprietary technologies and related engineering services to the natural gas processing industry, exceeded 10% of consolidated operating profit. In accordance with Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 131, “Disclosures about Segments of an Enterprise and Related Information,” this business was presented as a separate segment in fiscal 2003 because it exceeded this quantitative threshold. However, this business has not historically met the 10% reporting test, did not in fiscal 2004, nor will it typically be expected to in the future. Accordingly, this business is included in Other, Technologies in fiscal 2004. Prior periods have been restated to include Ortloff in Other, Technologies in all periods presented.

     Other, Technologies also includes 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. An additional operation, Elk Technologies, Inc., develops and markets fabrics featuring VersaShield® fire retardant coating designed for use outside of traditional building products applications, including home furnishings and other consumer products. This business has produced nominal commercial sales to date.

     In December 2003, the company made the decision to discontinue Cybershield, Inc. and its subsidiaries (Cybershield) and sell Cybershield or its assets. Cybershield had previously been included in Other, Technologies for segment reporting purposes. Prior periods have been restated to present Cybershield as a discontinued operation 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 significant 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 and Cash Equivalents

     Cash equivalents are highly liquid investments purchased with an original maturity of, or which are subject to redemption in, three months or less. There were no cash equivalents at June 30, 2004. Cash equivalents were $5,000,000 at June 30, 2003.

Concentration of Credit Risk

     The majority of the company’s sales are in the Building Products segment, which accounted for 97% of consolidated sales in fiscal 2004. The company performs ongoing credit evaluations and maintains reserves for potential credit losses. Its primary customers are building materials distributors. The ten largest Building Products customers typically account for approximately 50% of annual consolidated sales. One customer accounted for 19%, 18%, and 18% of consolidated sales in fiscal years 2004, 2003 and 2002, respectively.

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Revenue Recognition

     Significant revenue recognition policies are as follows:

• Manufactured Products – Revenue is recognized at the time products are shipped to customers. All risks and rewards of ownership pass to the customer upon shipment. In Building Products, 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.

• Service Revenues – Service revenues and related expenses are immaterial and are not disaggregated in the financial statements. When services are provided, generally by companies in Other, Technologies, revenue is recognized as services are performed.

• License Fees – License fees are generally recognized when the following conditions are all complete: (a) a customer contracts for a nonexclusive license to use the inventions covered by company patents; (b) there are no remaining items relating to the license contract that have to be accomplished by the company; and (c) the license fee is nonrefundable. Licenses are granted without term on an individual project basis.

Freight Costs

     Freight costs for all reporting periods 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. 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,
	2004		2003
Raw Materials	$	12,169	$	8,826
Work-In-Process		160		89
Finished Goods		49,800		44,606
	$	62,129	$	53,521

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. 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 2004, 2003 and 2002, the company recorded to expense $18,054,000, $17,229,000, and $16,539,000, 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 amortized over the asset’s estimated useful life. In fiscal 2004 and 2003, $3,079,000 and $995,000 of interest cost was capitalized, respectively. In 2002, no interest cost was capitalized.

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Intangibles

     There is no recorded goodwill at June 30, 2004. Future goodwill and other intangibles with indefinite useful lives, when recorded, will not be amortized but will be tested at least annually for impairment. The cost of patents is amortized over their useful lives. Patent amortization expense is immaterial.

Advertising Costs

     Advertising costs are expensed as incurred. For fiscal years 2004, 2003 and 2002, advertising costs were $8,905,000, $7,057,000 and $8,180,000, respectively.

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 Noncash Stock Option 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, stock option compensation expense, and basic and diluted earnings per common share for the fiscal years ended June 30, 2004, 2003 and 2002, respectively, assuming all options granted in 1996 and thereafter were valued using the Black-Scholes model, would have been as follows (in thousands, except per share amounts):

	(In thousands)
	Year Ended June 30,
	2004			2003			2002
Net income:
As reported	$	20,506		$	24,100		$	15,093
Add: Stock-based employee compensation expense included in reported net income, net of related tax effects		—			(3,496	)		3,922
Deduct: Total stock-based compensation expense determined under fair value based method for all awards granted since January 1, 1996, net of related tax effects		(2,519	)		(2,273	)		(3,975	)
Pro forma earnings	$	17,987		$	18,331		$	15,040
Earnings per common share:
Basic – as reported	$	1.05		$	1.24		$	.78
Basic – pro forma	$	.92		$	.94		$	.78
Diluted – as reported	$	1.03		$	1.23		$	.77
Diluted – pro forma	$	.90		$	.94		$	.77

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     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 2004, 2003 and 2002; dividend yields of 1.0%, 0.9%, and 1.0%; risk-free interest rates of 3.7%, 5.1%, and 5.1%; expected market price volatility of .435, .489, and .42; and expected lives of options of 9.0 years. Based on this model, the weighted average fair value of stock options granted in fiscal 2004, 2003 and 2002 was $11.40, $15.52, and $11.94, 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,
	2004		2003		2002
Interest paid	$	8,250	$	7,256	$	5,961
Income taxes paid	$	10,871	$	5,415	$	2,805

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 hedge transactions to set the price relating to approximately 50% of its anticipated use of natural gas not subject to fixed rate contracts through October 2002. The company entered into a similar hedge to fix the price on 50% of its projected natural gas usage from December 31, 2003 through April 30, 2004. For these cash flow hedges, the fair value of the derivatives was recorded on the balance sheet. The effective portion of the changes in the fair value of these derivatives was recorded in other comprehensive income and reclassified to cost of sales in the period in which earnings were impacted by the hedged items. The ineffective portion of the changes in fair value of these derivatives was immaterial. There are no hedge commitments on natural gas at June 30, 2004. 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 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 or will be reported in the balance sheet, as applicable. 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 swap 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.

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Fair Value of Financial Instruments

     The carrying amounts of the company’s cash, cash equivalents, 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 estimated reasonably. 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

     There are no new accounting pronouncements that have not been adopted which impact the company.

Discontinued Operations

     In December 2003, 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. Progress towards replacing lost cellular revenue with revenue from other sources was progressing slower than anticipated, and the profit contribution from new commercial production of the EXACT precision metallization process was lower than originally contemplated. 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. Therefore, the Canton, Georgia facility is included as a component of discontinued operations. As a result of these actions, Cybershield is classified as a discontinued operation in the Consolidated Financial Statements pursuant to SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” Cybershield had previously been included in Other, Technologies for segment reporting purposes, and prior periods have been restated to present Cybershield as a discontinued operation in all periods presented.

     On August 10, 2004, 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 book value of assets, net of assumed liabilities, at the date of sale.

     During fiscal years 2004, 2003 and 2002, the company reported losses from discontinued operations of $11,164,000, $703,000 and $4,866,000, net of tax, respectively. Included in these losses are write-downs of Cybershield’s net assets to estimated market value. In fiscal 2004, the pretax write-down of assets of Cybershield’s Lufkin facility totaled $10,496,000. Pretax write-downs of Cybershield’s Canton, Georgia assets were $1,850,000 in fiscal 2004 and $3,600,000 in fiscal 2002. The fiscal 2004 Canton write-down was a result of market conditions and an updated fair market value analysis of the facility performed by independent valuation experts. The fiscal 2002 write-down related to the impairment of property, plant and equipment and goodwill, and an inventory write-down.

     In fiscal 2002, Cybershield recorded $1,673,000 in other costs related to severance, relocation costs and the settlement of a dispute related to operations at the Canton, Georgia facility.

     Net assets of discontinued operations at June 30, 2004 (in thousands) are summarized as follows:

Current Assets:
Trade receivables	$	541
Inventory		354
Long-lived assets held for sale, including the Canton, Georgia facility		4,089
Other		112
		5,096
Current Liabilities:
Accounts payable and accrued liabilities		531
Net Assets	$	4,565

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     Summary operating results of discontinued operations are as follows:

	(In thousands)
	Year Ended June 30,
	2004			2003			2002
Sales	$	8,167		$	21,019		$	31,195
Cost of sales		10,570			19,197			27,331
Selling, general and administrative		2,428			2,903			7,750
Write-down of assets		12,346			—			3,600
Operating loss		(17,177	)		(1,081	)		(7,486	)
Income tax benefit		(6,013	)		(378	)		(2,620	)
Loss from discontinued operations	$	(11,164	)	$	(703	)	$	(4,866	)

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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,
	2004		2003		2002
Income from continuing operations	$	31,670	$	24,803	$	19,959
Denominator for basic earnings per share-weighted average shares outstanding		19,609		19,481		19,311
Effect of dilutive securities:
Restricted shares and employee stock options		316		119		346
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		19,925		19,600		19,657
Basic earnings per share from continuing operations	$	1.62	$	1.27	$	1.03
Diluted earnings per share from continuing operations	$	1.59	$	1.27	$	1.02
Stock options excluded from computation of diluted earnings per share due to anti-dilutive effect		730,000		1,413,000		594,000

Long-Term Debt

	(In thousands)
	June 30,
	2004		2003
Senior Notes	$	145,000	$	145,000
Revolving Credit Facility		10,300		—
Fair value of interest rate swap		1,558		7,526
	$	156,858	$	152,526

     In June 2002, the company issued $120,000,000 of Senior Notes (Notes) and in March 2003, issued an incremental $25,000,000 in 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%, and $60,000,000 mature in fiscal 2012 and carry a coupon rate of 7.49%. Interest is payable semiannually on June 15 and December 15 of each year for $120,000,000 of Notes and July 15 and January 15 of each year for $25,000,000 of Notes. In June 2004, the company executed an agreement to issue an additional $50,000,000 in Notes scheduled to be closed, subject to the company’s satisfaction of certain conditions, on November 15, 2004. These new Notes mature in November 2014 and carry a coupon rate of 6.28%. Interest on the new Note issuance will be payable semiannually on May 15 and November 15 of each year.

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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 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, 2004, the fair value of the derivative was $1,558,000 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 and are recorded each period in other income or expense, as applicable. 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 new interest rate swap is also a fair value hedge with the same accounting and reporting as the aforementioned interest rate swap.

     At June 30, 2004, 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, 2004, $10,300,000 of borrowings were outstanding on the Facility and $3,079,000 of letters of credit were outstanding. Borrowings under the Facility bear interest at (1) the lender’s prime rate, or (2) at the company’s option, a Eurodollar rate, in each case plus specified basis points based on the company’s leverage ratio, as defined, at each quarter end. The Facility also provides for a commitment fee on the average unused portion of the line and for letters of credit issued under the Facility. The commitment fee rate and letter of credit fee rate are also determined by the company’s leverage ratio. At June 30, 2004, the rate in effect for Eurodollar borrowings was the Eurodollar rate plus 1.375%, the letter of credit rate was 1.375% and the commitment fee rate was .375%.

     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 defined terms. The Facility also contains a minimum fixed charge coverage ratio and the Notes contain a minimum interest coverage ratio, also based on defined terms. Dividend payments and stock repurchases are also limited to certain specified levels by the Facility agreement. At June 30, 2004, the company was in compliance with all requirements.

     The company has no off-balance sheet arrangements or transactions with unconsolidated, limited purpose entities.

Shareholders’ Equity

     Authorized common stock, par value $1.00, is 100,000,000 shares, of which 19,988,078 shares were issued at June 30, 2004. 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.

Acquisition

     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

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above certain thresholds of the newly formed subsidiary. 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 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 terminates at the end of such five year period and no further payments are due. As of June 30, 2004, no earn-out payments have been earned or paid. Existing cash resources were used to fund the acquisition. Assets acquired included $180,000 in trade receivables, $228,000 in inventory, $79,000 in other current assets, $1,123,000 in property and equipment and $614,000 in 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.

Product Warranties

     The company provides its customers limited warranties on certain products. Limited warranties relating to products sold by the Building Products segment generally range from 20 to 50 years. Warranties relating to Other, Technologies companies are not significant to their operations. Warranty reserves are established based on known or probable claims, together with historical experience factors. During 2004, 2003 and 2002, the company recorded to expense $3,313,000, $2,853,000 and $2,769,000, respectively, in warranty claim settlements and reserves. The company periodically assesses the adequacy of its recorded warranty liability and adjusts the amount as necessary. Changes in the company’s warranty liability during 2004 and 2003 were as follows:

	(In thousands)
	Year Ended June 30,
	2004			2003
Balance at beginning of year	$	2,675		$	2,395
Amounts charged to expense		3,313			2,853
Warranty settlements		(2,885	)		(2,573	)
Balance at end of year	$	3,103		$	2,675

Restricted Stock and Stock Options

     In October 2002, shareholders approved the 2002 ElkCorp Equity Incentive Compensation Plan (Equity Incentive Compensation Plan), which provides 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 2004 and 2003 generally vest 20% per year over a five-year restriction period. 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 2004 and 2003, compensation expense of $96,000 and $39,000 was recognized relating to restricted stock awards, respectively.

     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 2004 generally vest ratably over five years. Options granted to directors are fully vested at grant date.

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     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, 2001		1,670,534		$	7.56 - $34.25	$	18.74
Granted		357,260		$	17.20 - $26.04	$	20.20
Cancelled		(48,137	)	$	8.44 - $28.04	$	21.45
Exercised		(278,011	)	$	8.33 - $19.94	$	11.47
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

     The following table summarizes information about options outstanding at June 30, 2004:

	Options Outstanding					Options Exercisable
			Weighted-Average
Range of Exercise	Number		Remaining	Exercise				Weighted Average
Prices	Outstanding		Contractual Life	Price		Number Exercisable		Exercise Price
$7.56 – $19.99		740,969	5.22 yrs.	$	17.36		588,392	$	17.02
$20.00 – $23.99		668,419	8.11 yrs.	$	21.62		153,068	$	20.73
$24.00 – $34.25		737,424	6.53 yrs.	$	28.02		434,664	$	28.03

     At June 30, 2004, 2003 and 2002, options for 1,176,124, 1,100,815, and 864,554 shares were exercisable, respectively. A total of 1,060,098, 1,463,803, and 665,006 shares were reserved for future grants of stock options and restricted stock at June 30, 2004, 2003 and 2002, respectively.

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 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 $3,811,000, $3,592,000, and $2,874,000, in 2004, 2003 and 2002, respectively.

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     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, 2004 and 2003 totaling $2,583,000 and $2,005,000, 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 2004 or 2003. In lieu of stock loans, 12,320 and 25,535 shares of restricted stock were granted to executive officers in fiscal 2004 and 2003, respectively.

Noncash Stock Option Compensation

     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. Prior to March 2002, no optionee ever utilized the cashless relinquishment alternative, and a total of only three optionees, none being executive officers of the company, utilized this exercise alternative for nominal numbers of shares. The company believed that its prior use of “fixed” accounting for options outstanding under the 1998 Plan was appropriate. However, in fiscal 2002 the company determined that options granted under the 1998 Plan should have been accounted for using “variable” option accounting. Noncash stock compensation expense of $6,034,000 ($3,922,000 net of tax, or $.20 per diluted share) was recorded in fiscal 2002. The impact of variable accounting on each year prior to fiscal 2002 was not material.

     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 “fixed” accounting for these employee stock options thereafter. Based on this action, together with a decline in the company’s share price subsequent to June 30, 2002, 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. Subsequent to August 13, 2002, the company is again utilizing the “fixed” method of stock option accounting.

Commitments and Contingencies

     The company and its subsidiaries lease certain office space, facilities, and equipment under operating leases, expiring on various dates through 2017. Total rental expense was $4,080,000 in 2004, $3,671,000 in 2003, and $2,869,000 in 2002. At June 30, 2004, future minimum rental commitments under noncancelable operating leases, payable over the remaining lives of the leases, are:

	(In thousands) Minimum
Fiscal Year	Rental Commitments
2005	$	2,736
2006		2,409
2007		2,007
2008		1,708
2009		1,644
Thereafter		11,080
Total	$	21,584

     In conjunction with the Lenexa, Kansas composite building products expansion, the company has commitments for purchase orders and construction contracts totaling $9,842,000 at June 30, 2004.

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     Chromium has engaged in limited remediation activities at its former plating operation, which is located 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 cleanup plan the applicant submits, and, 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.

     Chromium completed a supplemental groundwater and soil assessment at the facility. The plan 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 will now submit a proposed Remedial Action Plan (“RAP”) to the TCEQ in which it will propose activities and engineering controls to cleanup the site under the VCP to a site specific risk-based cleanup standard as prescribed by the Texas Risk Reduction Program.

     Until the significant actions that will be included in the RAP are identified, the estimate of costs to remediate the site are not determinable, nor can the company determine at this point in time if it is reasonably possible that it will incur material additional costs at the site. If a RAP similar to a plan successfully used at another Chromium plant is approved by TCEQ, remediation costs will be immaterial to the company’s consolidated results of operations, financial position and liquidity. However, other scenarios, none of which are reasonably expected at this time, could potentially result in material costs to the company. The company believes that sufficient information for establishing a reserve for this environmental exposure in accordance with SFAS No. 5, “Accounting for Contingencies,” may be available by the end of the first half of fiscal 2005, and further anticipates that it may be in a position at that time to determine if it is reasonably possible that the company will incur material additional costs with regard to this site.

     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.

     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.

Settlement with Vendor

     In fiscal 2002, the company reached a cash settlement relating to a dispute with a vendor and the company recorded $5,625,000 of nonrecurring income. The cash settlement primarily represented a reimbursement of costs previously recorded to expense as selling, general and administrative costs. This cash settlement was recorded as a reduction of selling, general and administrative costs in fiscal 2002.

Accrued Liabilities

     Accrued liabilities consist of the following:

	(In thousands)
	June 30,
	2004		2003
Product warranty reserves	$	3,103	$	2,675
Self-insurance reserves		1,855		1,488
Compensation and employee benefits		9,884		5,241
All other		10,577		9,554
	$	25,419	$	18,958

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Income Taxes

     The company’s effective tax rate was 37.4% in 2004, 37.7% in 2003, and 38.1% in 2002. The difference between the federal statutory tax rate and the effective tax rate is reconciled as follows:

	Year Ended June 30,
	2004			2003			2002
Federal statutory tax rate		35.0	%		35.0	%		35.0	%
Change in tax rate resulting from:
State income taxes, net of federal tax effect		2.1	%		2.3	%		2.5	%
Miscellaneous items		.3	%		.4	%		.6	%
		37.4	%		37.7	%		38.1	%

Components of the income tax provisions consist of the following:

	(In thousands)
	Year Ended June 30,
	2004		2003		2002
Federal:
Current	$	6,516	$	7,698	$	6,281
Deferred, net		11,340		6,382		5,183
State		1,071		914		800
	$	18,927	$	14,994	$	12,264

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

	(In thousands)
	June 30,
	2004			2003			2002
Deferred tax assets:
Accrued liabilities, difference in expense recognition	$	2,967		$	2,648		$	4,249
Receivables, bad debt reserve		314			360			257
Inventories, difference in capitalization		2,318			1,179			979
Nonqualified deferred compensation plan		679			525			262
Asset impairment		4,030			861			1,115
Other		88			71			—
		10,396			5,644			6,862
Deferred tax liabilities:
Fixed assets, primarily depreciation method differences and deferred testing costs		(45,611	)		(38,412	)		(34,660	)
Deferred license fees		(3,037	)		(2,122	)		—
Other		—			—			(20	)
		(48,648	)		(40,534	)		(34,680	)
Net deferred tax liability	$	(38,252	)	$	(34,890	)	$	(27,818	)

     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. The tentative agreement has been submitted to the Joint Committee of the IRS for final review and approval.

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Financial Information By Company Segments

	(In thousands)
	Year Ended June 30,
	2004			2003			2002
Sales
Building Products	$	557,576		$	467,002		$	459,673
Other, Technologies		15,400			18,125			15,658
Corporate		—			—			—
	$	572,976		$	485,127		$	475,331
Income from Continuing Operations
Building Products	$	67,030		$	45,901		$	53,325
Other, Technologies		2,462			5,262			3,132
Corporate		(13,584	)		(5,389	)		(18,147	)
		55,908			45,774			38,310
Other income		133			207			105
Interest expense		(5,444	)		(6,184	)		(6,192	)
Income from continuing operations before income taxes	$	50,597		$	39,797		$	32,223
Identifiable Assets
Building Products	$	428,246		$	376,110		$	314,668
Other, Technologies		19,860			18,773			11,748
Corporate		27,506			28,039			32,588
Discontinued Operations		5,096			19,369			22,424
	$	480,708		$	442,291		$	381,428
Depreciation and Amortization
Building Products	$	14,635		$	13,738		$	13,239
Other, Technologies		718			732			670
Corporate		2,733			2,825			2,702
	$	18,086		$	17,295		$	16,611
Capital Expenditures
Building Products	$	55,879		$	47,528		$	9,161
Other, Technologies		326			241			1,149
Corporate		6,745			1,412			391
	$	62,950		$	49,181		$	10,701

Product Sales

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

	(In thousands)
	Year Ended June 30,
	2004		2003		2002
Premium roofing	$	516,078	$	435,036	$	415,659
Performance nonwoven fabrics		32,973		30,726		44,014
Composite building products		8,525		1,240		—
Technology licensing and consulting fees		6,934		10,693		6,829
Hard chrome and other surface finishes		8,339		7,417		8,829
Other		127		15		—
	$	572,976	$	485,127	$	475,331

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Quarterly Summary of Operations

(Unaudited, in thousands, except per share amounts)

	First Quarter						Second Quarter					Third Quarter					Fourth Quarter
	2004			2003			2004			2003		2004			2003		2004			2003
Sales	$	159,739		$	115,478		$	123,208		$	102,545	$	131,947		$	123,616	$	158,082		$	143,488
Gross Profit		33,148			24,375			27,258			18,992		26,615			23,482		32,139			30,896
Income from Continuing Operations		10,057			9,388			7,014			2,708		6,247			4,395		8,352			8,312
Discontinued Operations		(920	)		(392	)		(7,857	)		108		(2,189	)		67		(198	)		(486	)
Net Income (Loss)		9,137			8,996			(843	)		2,816		4,058			4,462		8,154			7,826
Net Income (Loss) Per Share:
Income from Continuing Operations –
Basic		.51			.48			.36			.14		.32			.23		.42			.43
Diluted		.51			.48			.35			.14		.31			.23		.42			.42
Discontinued Operations –
Basic		(.04	)		(.02	)		(.40	)		—		(.11	)		—		(.01	)		(.03	)
Diluted		(.05	)		(.02	)		(.39	)		—		(.11	)		—		(.01	)		(.02	)
Net Income (Loss) –
Basic		.47			.46			(.04	)		.14		.21			.23		.41			.40
Diluted		.46			.46			(.04	)		.14		.20			.23		.41			.40

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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 appearing in the 2004 Annual Report on Form 10-K of ElkCorp also included an audit of the financial statement schedule 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, 2004, 2003, AND 2002

	( Dollars in thousands)
Column A	Column B		Column C					Column D			Column E
			Additions					Deductions
	Balance at		Charged to Costs					For Purposes For Which			Balance at
Description	Beginning of Period		and Expenses		Other			Reserves Were Created			End of Period
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
Year Ended June 30, 2002
CONSOLIDATED:
Allowance for doubtful accounts	$	807	$	264	$	—		$	(381	)	$	690
Allowance for inventory obsolescence	$	126	$	—	$	—		$	—		$	126

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

     None.

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 pursuant to 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)	Changes in Internal Controls
	There have been no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Item 9B. Other Information

     None.

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 26, 2004 Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission. The Proxy Statement is incorporated herein by reference. 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 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 Item 1 of this report in Item 4A, under the caption “Executive Officers of ElkCorp” of this Annual Report on Form 10-K. Information concerning our code of ethics is incorporated herein by reference to the material under the caption “Code of Financial Ethics” of the Proxy Statement.

Item 11. Executive Compensation

     The information required by this item is incorporated herein by reference to the information under the caption “Executive Compensation” 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” 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 “Audit Fees” of the Proxy Statement.

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PART IV

Item 15. Exhibits, Financial Statement Schedule and Reports on Form 8-K

     (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:

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets at June 30, 2004, and 2003

Consolidated Statements of Operations for the years ended June 30, 2004, 2003 and 2002

Consolidated Statements of Cash Flows for the years ended June 30, 2004, 2003, and 2002

Consolidated Statements of Shareholders’ Equity for the years ended June 30, 2004, 2003, and 2002

Summary of Significant Accounting Policies

Notes to Consolidated Financial Statements

     2. Financial Statement Schedules

Report of Independent Registered Public Accounting Firm
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.	2002 ElkCorp Equity Incentive Compensation Plan filed as Exhibit 10.3 hereto and incorporated by reference to Appendix A in the Registrant’s Proxy Statement dated September 20, 2002 (File 1-5341).
3.	Deferred Compensation Plan filed as Exhibit 10.4 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).

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B. Reports on Form 8-K

     We filed two Forms 8-K in the fourth quarter of fiscal 2004 as follows: On April 16, 2004, we filed a Form 8-K relating to a press release containing our consolidated operating results and other financial information for our third quarter of fiscal 2004. On June 17, 2004, we filed a Form 8-K regarding updating our earnings outlook for the fourth quarter and fiscal year 2004.

C. 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).
**3.11	Certificate of Amendment to Certificate of Incorporation dated December 2, 1998 (file No. 1-5341).
**3.2	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).
**4.12	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).
**4.13	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).
**4.14	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).
**4.15	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).
**4.16	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).
**4.17	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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**4.18	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).
**4.19	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).
*4.20	Note Purchase Agreement dated as of June 15, 2004 for the sale of $50,000,000 Aggregate Principal Amount of Senior Notes, filed herewith.
**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	2002 ElkCorp Equity Incentive Compensation Plan filed as Appendix A in the company’s Proxy Statement dated September 20, 2002 (File 1-5341).
**10.4	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).
* 21	Subsidiaries of the Registrant.
* 23	Consent of Independent Registered Public Accounting Firm.
* 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 herewith.
**	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 10, 2004	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

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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	September 10, 2004
/s/ Richard A. Nowak      Richard A. Nowak	President, Chief Operating Officer and Director	September 10, 2004
/s/ Gregory J. Fisher      Gregory J. Fisher	Senior Vice President, Chief Financial Officer and Controller	September 10, 2004
/s/ Leonard R. Harral      Leonard R. Harral	Vice President, Chief Accounting Officer and Treasurer	September 10, 2004
/s/ James E. Hall      James E. Hall	Director	September 10, 2004
/s/ Dale V. Kesler	Director	September 10, 2004
Dale V. Kesler
/s/ Shauna R. King	Director	September 10, 2004
Shauna R. King
/s/ Michael L. McMahan	Director	September 10, 2004
Michael L. McMahan
/s/ David W. Quinn	Director	September 10, 2004
David W. Quinn
/s/ Harold K. Work	Director	September 10, 2004
Harold K. Work

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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).
**3.11	Certificate of Amendment to Certificate of Incorporation dated December 2, 1998 (file No. 1-5341).
**3.2	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).
**4.12	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).
**4.13	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).
**4.14	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).
**4.15	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).
**4.16	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).
**4.17	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).
**4.18	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).

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**4.19	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).
*4.20	Note Purchase Agreement dated as of June 15, 2004 for the sale of $50,000,000 Aggregate Principal Amount of Senior Notes, filed herewith.
**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	2002 ElkCorp Equity Incentive Compensation Plan filed as Appendix A in the company’s Proxy Statement dated September 20, 2002 (File 1-5341).
**10.4	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).
* 21	Subsidiaries of the Registrant.
* 23	Consent of Independent Registered Public Accounting Firm.
* 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 herewith.
**	Incorporated by reference.

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EX-4.20

EXHIBIT 4.20

EXECUTION COPY

ELKCORP

$50,000,000
6.28% Senior Notes
due November 15, 2014

NOTE PURCHASE AGREEMENT

Dated as of June 15, 2004

PPN: 287456 A@ 6

TABLE OF CONTENTS

Section	Page
1. AUTHORIZATION OF NOTES		1
2. SALE AND PURCHASE OF NOTES		1
3. CLOSING		2
4. CONDITIONS TO CLOSING		2
4.1. Representations and Warranties		2
4.2. Performance; No Default		2
4.3. Compliance Certificates		3
4.4. Opinions of Counsel		3
4.5. Purchase Permitted By Applicable Law, etc.		3
4.6. Sale of Other Notes		3
4.7. Payment of Special Counsel Fees		4
4.8. Private Placement Number		4
4.9. Changes in Corporate Structure		4
4.10. Subsidiary Guaranty		4
4.11. Proceedings and Documents		4
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY		4
5.1. Organization; Power and Authority		4
5.2. Authorization, etc.		5
5.3. Disclosure		5
5.4. Organization and Ownership of Shares of Subsidiaries; Affiliates		6
5.5. Financial Statements		6
5.6. Compliance with Laws, Other Instruments, etc.		7
5.7. Governmental Authorizations, etc.		7
5.8. Litigation; Observance of Agreements, Statutes and Orders		7
5.9. Taxes		8
5.10. Title to Property; Leases		8
5.11. Licenses, Permits, etc.		8
5.12. Compliance with ERISA		9
5.13. Private Offering by the Company		10
5.14. Use of Proceeds; Margin Regulations		10
5.15. Existing Debt; Future Liens		10
5.16. Foreign Assets Control Regulations, Anti-Terrorism Order, etc.		11
5.17. Status under Certain Statutes		11
5.18. Environmental Matters		11
5.19. Solvency of Subsidiary Guarantors		12
6. REPRESENTATIONS OF THE PURCHASERS		12
6.1. Purchase for Investment		12

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Section	Page
6.2. Source of Funds		12
7. INFORMATION AS TO COMPANY		14
7.1. Financial and Business Information		14
7.2. Officer’s Certificate		16
7.3. Inspection		17
8. PREPAYMENT OF THE NOTES		18
8.1. No Scheduled Prepayments		18
8.2. Optional Prepayments with Make-Whole Amount		18
8.3. Allocation of Partial Prepayments		18
8.4. Maturity; Surrender, etc.		18
8.5. Purchase of Notes		19
8.6. Make-Whole Amount		19
9. AFFIRMATIVE COVENANTS		20
9.1. Compliance with Law		20
9.2. Insurance		20
9.3. Maintenance of Properties		21
9.4. Payment of Taxes and Claims		21
9.5. Corporate Existence, etc.		21
10. NEGATIVE COVENANTS		21
10.1. Consolidated Net Debt		22
10.2. Interest Coverage		22
10.3. Adjusted Consolidated Net Worth		22
10.4. Debt of Restricted Subsidiaries		22
10.5. Liens		23
10.6. Sale of Assets		24
10.7. Mergers, Consolidations, etc.		25
10.8. Disposition of Stock of Restricted Subsidiaries		26
10.9. Designation of Restricted and Unrestricted Subsidiaries		27
10.10. Subsidiary Guaranty		27
10.11. Nature of Business		27
10.12. Transactions with Affiliates		28
11. EVENTS OF DEFAULT		28
12. REMEDIES ON DEFAULT, ETC.		30
12.1. Acceleration		30
12.2. Other Remedies		31
12.3. Rescission		31
12.4. No Waivers or Election of Remedies, Expenses, etc.		31
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES		32
13.1. Registration of Notes		32
13.2. Transfer and Exchange of Notes		32

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Section	Page
13.3. Replacement of Notes		32
14. PAYMENTS ON NOTES		33
14.1. Place of Payment		33
14.2. Home Office Payment		33
15. EXPENSES, ETC.		33
15.1. Transaction Expenses		33
15.2. Survival		34
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT		34
17. AMENDMENT AND WAIVER		34
17.1. Requirements		34
17.2. Solicitation of Holders of Notes		35
17.3. Binding Effect, etc.		35
17.4. Notes held by Company, etc.		35
18. NOTICES		36
19. REPRODUCTION OF DOCUMENTS		36
20. CONFIDENTIAL INFORMATION		36
21. SUBSTITUTION OF PURCHASER		37
22. RELEASE OF SUBSIDIARY GUARANTOR		38
23. MISCELLANEOUS		38
23.1. Successors and Assigns		38
23.2. Payments Due on Non-Business Days		38
23.3. Severability		38
23.4. Construction		38
23.5. Counterparts		39
23.6. Governing Law		39

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SCHEDULE A	—	Information Relating to Purchasers
SCHEDULE B	—	Defined Terms
SCHEDULE B-1	—	Existing Priority Debt
SCHEDULE B-2	—	Existing Investments
SCHEDULE 4.9	—	Changes in Corporate Structure
SCHEDULE 5.3	—	Disclosure Materials
SCHEDULE 5.4	—	Subsidiaries; Affiliates
SCHEDULE 5.5	—	Financial Statements
SCHEDULE 5.8	—	Litigation
SCHEDULE 5.11	—	Licenses, Permits, etc.
SCHEDULE 5.15	—	Existing Debt
SCHEDULE 5.18	—	Environmental Matters
SCHEDULE 10.5	—	Liens
EXHIBIT 1(a)	—	Form of Senior Note
EXHIBIT 1(b)	—	Form of Subsidiary Guaranty
EXHIBIT 4.4(a)	—	Form of Opinion of Counsel for the Company
EXHIBIT 4.4(b)	—	Form of Opinion of Special Counsel for the Purchasers

iv

ELKCORP
14911 Quorum Drive, Suite 600
Dallas, Texas 75254-1491
(972) 851-0500
Fax: (972) 851-0550

$50,000,000 6.28% Senior Notes due November 15, 2014

Dated as of June 15, 2004

TO EACH OF THE PURCHASERS LISTED IN
THE ATTACHED SCHEDULE A:

Ladies and Gentlemen:

     ELKCORP, a Delaware corporation (the “Company”), agrees with you as follows:

1. AUTHORIZATION OF NOTES.

     The Company has authorized the issue and sale of $50,000,000 aggregate principal amount of its 6.28% Senior Notes due November 15, 2014 (the “Notes”, such term to include any such Notes issued in substitution therefor pursuant to Section 13 of this Agreement). The Notes shall be substantially in the form set out in Exhibit 1(a) with such changes therefrom, if any, as may be approved by you, the Other Purchasers and the Company. Certain capitalized terms used in this Agreement are defined in Schedule B; references to a “Schedule” or an “Exhibit” are, unless otherwise specified, to a Schedule or an Exhibit attached to this Agreement. Subject to Section 22, the Notes will be guaranteed by each Restricted Subsidiary that as of the Closing is or in the future becomes a signatory to the Bank Guaranty or a borrower under the Credit Agreement (individually, a “Subsidiary Guarantor” and collectively, the “Subsidiary Guarantors”) pursuant to a guaranty in substantially the form of Exhibit 1(b) (the “Subsidiary Guaranty”). The Notes shall be unsecured and shall rank pari passu with the Company’s Debt to Banks under the Credit Agreement and with all other senior unsecured Debt of the Company.

2. SALE AND PURCHASE OF NOTES.

     Subject to the terms and conditions of this Agreement, the Company will issue and sell to you and each of the other purchasers named in Schedule A (the “Other Purchasers”), and you and the Other Purchasers will purchase from the Company, at the Closing provided for

in Section 3, Notes in the principal amount specified opposite your names in Schedule A at the purchase price of 100% of the principal amount thereof. Your obligation hereunder and the obligations of the Other Purchasers are several and not joint obligations and you shall have no liability to any Person for the performance or non-performance by any Other Purchaser hereunder.

3. CLOSING.

     The sale and purchase of the Notes to be purchased by you and the Other Purchasers shall occur at the offices of Gardner Carton & Douglas LLP, Suite 3700, 191 North Wacker Drive, Chicago, Illinois 60606 at 9:00 a.m., Chicago time, at a closing (the “Closing”) on November 15, 2004 or on such other Business Day thereafter on or prior to November 30, 2004 as may be agreed upon by the Company and you and the Other Purchasers. At the Closing the Company will deliver to you the Notes to be purchased by you in the form of a single Note (or such greater number of Notes in denominations of at least $100,000 as you may request) dated the date of the Closing and registered in your name (or in the name of your nominee), against delivery by you to the Company or its order of immediately available funds in the amount of the purchase price therefor by wire transfer of immediately available funds for the account of the Company to account number 1252603284 at Bank of America, 910 Main Street, Dallas, Texas 75202, ABA #111000012. If at the Closing the Company fails to tender such Notes to you as provided above in this Section 3, or any of the conditions specified in Section 4 shall not have been fulfilled to your satisfaction, you shall, at your election, be relieved of all further obligations under this Agreement, without thereby waiving any rights you may have by reason of such failure or such nonfulfillment.

4. CONDITIONS TO CLOSING.

     Your obligation to purchase and pay for the Notes to be sold to you at the Closing is subject to the fulfillment to your satisfaction, prior to or at the Closing, of the following conditions:

4.1. Representations and Warranties.

     The representations and warranties of the Company in this Agreement shall be correct when made and at the time of the Closing, except for changes between the date hereof and the date of Closing that (i) are contemplated herein or occur in the ordinary course of business, or (ii) would have been permitted by Sections 9 and 10 hereof had such Sections applied since such date and, in any or all of such instances (y) are disclosed in the Officer’s Certificate delivered pursuant to Section 4.3 and (z) have not, individually or in the aggregate, resulted in and could not reasonably be expected to result in a Material Adverse Effect.

4.2. Performance; No Default.

     The Company shall have performed and complied with all agreements and conditions contained in this Agreement required to be performed or complied with by it prior to or at the Closing and after giving effect to the issue and sale of the Notes (and the application of the proceeds thereof as contemplated by Section 5.14) no Default or Event of Default shall have

2

occurred and be continuing. Neither the Company nor any Restricted Subsidiary shall have entered into any transaction since the date of the Memorandum that would have been prohibited by Sections 10.1 through 10.12 hereof had such Sections applied since such date.

4.3. Compliance Certificates.

     (a) Officer’s Certificate. The Company shall have delivered to you an Officer’s Certificate, dated the date of the Closing, certifying that the conditions specified in Sections 4.1, 4.2 and 4.9 have been fulfilled.

     (b) Secretary’s Certificate. Each of the Company and each Subsidiary Guarantor shall have delivered to you a certificate certifying as to the resolutions attached thereto and other corporate proceedings relating to the authorization, execution and delivery of the Notes and the Agreement or the Subsidiary Guaranty, as the case may be.

4.4. Opinions of Counsel.

     You shall have received opinions in form and substance satisfactory to you, dated the date of the Closing (a) from Baker & McKenzie, counsel to the Company, covering the matters set forth in Exhibit 4.4(a) and covering such other matters incident to the transactions contemplated hereby as you or your counsel may reasonably request (and the Company instructs its counsel to deliver such opinion to you) and (b) from Gardner Carton & Douglas LLP, your special counsel in connection with such transactions, substantially in the form set forth in Exhibit 4.4(b) and covering such other matters incident to such transactions as you may reasonably request.

4.5. Purchase Permitted By Applicable Law, etc.

     On the date of the Closing your purchase of Notes shall (i) be permitted by the laws and regulations of each jurisdiction to which you are subject, without recourse to provisions (such as Section 1405(a)(8) of the New York Insurance Law) permitting limited investments by insurance companies without restriction as to the character of the particular investment, (ii) not violate any applicable law or regulation (including, without limitation, Regulation U, T or X of the Board of Governors of the Federal Reserve System) and (iii) not subject you to any tax, penalty or liability under or pursuant to any applicable law or regulation, which law or regulation was not in effect on the date hereof. If requested by you, you shall have received an Officer’s Certificate certifying as to such matters of fact as you may reasonably specify to enable you to determine whether such purchase is so permitted.

4.6. Sale of Other Notes.

     Contemporaneously with the Closing the Company shall sell to the Other Purchasers and the Other Purchasers shall purchase the Notes to be purchased by them at the Closing as specified in Schedule A.

3

4.7. Payment of Special Counsel Fees.

     Without limiting the provisions of Section 15.1, the Company shall have paid on or before the Closing the fees, charges and disbursements of your special counsel referred to in Section 4.4, to the extent reflected in a statement of such counsel rendered to the Company at least one Business Day prior to the Closing.

4.8. Private Placement Number.

     A Private Placement Number issued by Standard & Poor’s CUSIP Service Bureau (in cooperation with the Securities Valuation Office of the National Association of Insurance Commissioners) shall have been obtained by Gardner Carton & Douglas LLP for the Notes.

4.9. Changes in Corporate Structure.

     Except as specified in Schedule 4.9, the Company shall not have changed its jurisdiction of incorporation or been a party to any merger or consolidation and shall not have succeeded to all or any substantial part of the liabilities of any other entity, at any time following the date of the most recent financial statements referred to in Schedule 5.5.

4.10. Subsidiary Guaranty.

     Each Subsidiary Guarantor shall have executed and delivered the Subsidiary Guaranty in favor of you and the Other Purchasers.

4.11. Proceedings and Documents.

     All corporate and other proceedings in connection with the transactions contemplated by this Agreement and all documents and instruments incident to such transactions shall be satisfactory to you and your special counsel, and you and your special counsel shall have received all such counterpart originals or certified or other copies of such documents as you or they may reasonably request.

5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

     The Company represents and warrants to you that:

5.1. Organization; Power and Authority.

     The Company is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, and is duly qualified as a foreign corporation and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Company has the corporate power and authority to own or hold under lease the properties it purports to own or hold under lease, to transact the business it transacts and

4

proposes to transact, to execute and deliver this Agreement and the Notes and to perform the provisions hereof and thereof.

5.2. Authorization, etc.

     This Agreement and the Notes have been duly authorized by all necessary corporate action on the part of the Company, and this Agreement constitutes, and upon execution and delivery thereof each Note will constitute, a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

     The Subsidiary Guaranty at the time of Closing will have been duly authorized by all necessary corporate or partnership action on the part of each Subsidiary Guarantor and upon execution and delivery thereof will constitute the legal, valid and binding obligation of each Subsidiary Guarantor, enforceable against each Subsidiary Guarantor in accordance with its terms, except as such enforceability may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

5.3. Disclosure.

     The Company, through its agent, Banc of America Securities LLC, has delivered to you and each Other Purchaser a copy of a Private Placement Memorandum dated May 2004 relating to the transactions contemplated hereby and the Company has delivered to you the SEC Reports (together with the aforementioned Private Placement Memorandum, the “Memorandum”). The Memorandum fairly describes, in all material respects, the general nature of the business and principal properties of the Company and its Subsidiaries. Except as disclosed in Schedule 5.3, this Agreement, the Memorandum, the documents, certificates or other writings delivered to you by or on behalf of the Company in connection with the transactions contemplated hereby and the financial statements listed in Schedule 5.5, taken as a whole, do not contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading in light of the circumstances under which they were made. Except as disclosed in the Memorandum or as expressly described in Schedule 5.3, or in one of the documents, certificates or other writings identified therein, or in the financial statements listed in Schedule 5.5, since June 30, 2003, there has been no change in the financial condition, operations, business or properties of the Company or any Subsidiary except changes that individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect. There is no fact known to the Company that could reasonably be expected to have a Material Adverse Effect that has not been set forth herein or in the Memorandum or in the other documents, certificates and other writings delivered to you by or on behalf of the Company specifically for use in connection with the transactions contemplated hereby.

5

5.4. Organization and Ownership of Shares of Subsidiaries; Affiliates.

     (a) Schedule 5.4 contains (except as noted therein) complete and correct lists of: (i) the Company’s Subsidiaries, showing, as to each Subsidiary, the correct name thereof, the jurisdiction of its organization, and the percentage of shares of each class of its capital stock or similar equity interests outstanding owned by the Company and each other Subsidiary, (ii) the Company’s Affiliates, other than Subsidiaries, and (iii) the Company’s directors and senior officers. Except as noted therein, each Subsidiary listed in Schedule 5.4 is designated a Restricted Subsidiary by the Company.

     (b) All of the outstanding shares of capital stock or similar equity interests of each Subsidiary shown in Schedule 5.4 as being owned by the Company and its Subsidiaries have been validly issued, are fully paid and nonassessable and are owned by the Company or another Subsidiary free and clear of any Lien (except as otherwise disclosed in Schedule 5.4).

     (c) Each Subsidiary identified in Schedule 5.4 is a corporation or other legal entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, and is duly qualified as a foreign corporation or other legal entity and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each such Subsidiary has the corporate or other power and authority to own or hold under lease the properties it purports to own or hold under lease and to transact the business it transacts and proposes to transact.

     (d) No Subsidiary is a party to, or otherwise subject to, any legal restriction or any agreement (other than this Agreement, the agreements listed on Schedule 5.4 and customary limitations imposed by corporate or limited partnership law statutes) restricting the ability of such Subsidiary to pay dividends out of profits or make any other similar distributions of profits to the Company or any of its Subsidiaries that owns outstanding shares of capital stock or similar equity interests of such Subsidiary.

5.5. Financial Statements.

     The Company has delivered to you and each Other Purchaser copies of the financial statements of the Company and its Subsidiaries listed on Schedule 5.5. All of said financial statements (including in each case the related schedules and notes) fairly present in all material respects the consolidated financial position of the Company and its Subsidiaries as of the respective dates specified in such Schedule and the consolidated results of their operations and cash flows for the respective periods so specified and have been prepared in accordance with GAAP consistently applied throughout the periods involved except as set forth in the notes thereto (subject, in the case of any interim financial statements, to normal year-end adjustments).

6

5.6. Compliance with Laws, Other Instruments, etc.

     The execution, delivery and performance by the Company of this Agreement and the Notes will not (i) contravene, result in any breach of, or constitute a default under, or result in the creation of any Lien in respect of any property of the Company or any Subsidiary under, any indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease, corporate charter or by-laws, or any other agreement or instrument to which the Company or any Subsidiary is bound or by which the Company or any Subsidiary or any of their respective properties may be bound or affected, (ii) conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree, or ruling of any court, arbitrator or Governmental Authority applicable to the Company or any Subsidiary or (iii) violate any provision of any statute or other rule or regulation of any Governmental Authority, including the USA Patriot Act, applicable to the Company or any Subsidiary.

     The execution, delivery and performance by each Subsidiary Guarantor of the Subsidiary Guaranty will not (i) contravene, result in any breach of, or constitute a default under, or result in the creation of any Lien in respect of any property of such Subsidiary Guarantor under any indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease, corporate charter or by-laws, or any other agreement or instrument to which such Subsidiary Guarantor is bound or by which such Subsidiary Guarantor or any of its properties may be bound or affected, (ii) conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree, or ruling of any court, arbitrator or Governmental Authority applicable to such Subsidiary Guarantor or (iii) violate any provision of any statute or other rule or regulation of any Governmental Authority, including the USA Patriot Act, applicable to such Subsidiary Guarantor.

5.7. Governmental Authorizations, etc.

     No consent, approval or authorization of, or registration, filing or declaration with, any Governmental Authority is required in connection with the execution, delivery or performance by the Company of this Agreement or the Notes or the execution, delivery or performance by each Subsidiary Guarantor of the Subsidiary Guaranty.

5.8. Litigation; Observance of Agreements, Statutes and Orders.

     (a) Except as disclosed in Schedule 5.8, there are no actions, suits or proceedings pending or, to the knowledge of the Company, threatened against or affecting the Company or any Subsidiary or any property of the Company or any Subsidiary in any court or before any arbitrator of any kind or before or by any Governmental Authority that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

     (b) Neither the Company nor any Subsidiary is in default under any term of any agreement or instrument to which it is a party or by which it is bound, or any order, judgment, decree or ruling of any court, arbitrator or Governmental Authority or is in violation of any applicable law, ordinance, rule or regulation (including Environmental Laws and the USA Patriot Act) of any Governmental Authority, which default or

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     violation, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

5.9. Taxes.

     The Company and its Subsidiaries have filed all tax returns that are required to have been filed in any jurisdiction, and have paid all taxes shown to be due and payable on such returns and all other taxes and assessments levied upon them or their properties, assets, income or franchises, to the extent such taxes and assessments have become due and payable and before they have become delinquent, except for any taxes and assessments (i) the amount of which is not individually or in the aggregate Material or (ii) the amount, applicability or validity of which is currently being contested in good faith by appropriate proceedings and with respect to which the Company or a Subsidiary, as the case may be, has established adequate reserves in accordance with GAAP. The Company knows of no basis for any other tax or assessment that could reasonably be expected to have a Material Adverse Effect. The charges, accruals and reserves on the books of the Company and its Subsidiaries in respect of Federal, state or other taxes for all fiscal periods are adequate. The Federal income tax liabilities of the Company and its Subsidiaries have been determined by the Internal Revenue Service and paid for all fiscal years up to and including the fiscal year ended June 30, 1995.

5.10. Title to Property; Leases.

     The Company and its Subsidiaries have good and sufficient title to their respective properties that individually or in the aggregate are Material, including all such properties reflected in the most recent audited balance sheet referred to in Section 5.5 or purported to have been acquired by the Company or any Subsidiary after said date (except as sold or otherwise disposed of in the ordinary course of business or in transactions contemplated by the Memorandum that would be permitted by Section 10 if such Section applied at the time of any such sale or other disposition), in each case free and clear of Liens prohibited by this Agreement. All leases that individually or in the aggregate are Material are valid and subsisting and are in full force and effect in all material respects.

5.11. Licenses, Permits, etc.

     Except as disclosed in Schedule 5.11,

     (a) the Company and its Subsidiaries own or possess all licenses, permits, franchises, authorizations, patents, copyrights, service marks, trademarks and trade names, or rights thereto, that individually or in the aggregate are Material, without known conflict with the rights of others;

     (b) to the best knowledge of the Company, no product of the Company infringes in any material respect any license, permit, franchise, authorization, patent, copyright, service mark, trademark, trade name or other right owned by any other Person; and

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     (c) to the best knowledge of the Company, there is no Material violation by any Person of any right of the Company or any of its Subsidiaries with respect to any patent, copyright, service mark, trademark, trade name or other right owned or used by the Company or any of its Subsidiaries.

5.12. Compliance with ERISA.

     (a) The Company and each ERISA Affiliate have operated and administered each Plan in compliance with all applicable laws except for such instances of noncompliance as have not resulted in and could not reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any ERISA Affiliate has incurred any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans (as defined in Section 3 of ERISA), and no event, transaction or condition has occurred or exists that could reasonably be expected to result in the incurrence of any such liability by the Company or any ERISA Affiliate, or in the imposition of any Lien on any of the rights, properties or assets of the Company or any ERISA Affiliate, in either case pursuant to Title I or IV of ERISA or to such penalty or excise tax provisions or to Section 401(a)(29) or 412 of the Code, other than such liabilities or Liens as would not be individually or in the aggregate Material.

     (b) The present value of the aggregate benefit liabilities under each of the Plans (other than Multiemployer Plans), determined as of the end of such Plan’s most recently ended plan year on the basis of the actuarial assumptions specified for funding purposes in such Plan’s most recent actuarial valuation report, did not exceed the aggregate current value of the assets of such Plan allocable to such benefit liabilities. The term “benefit liabilities” has the meaning specified in section 4001 of ERISA and the terms “current value” and “present value” have the meaning specified in section 3 of ERISA.

      (c) The Company and its ERISA Affiliates have not incurred withdrawal liabilities (and are not subject to contingent withdrawal liabilities) under section 4201 or 4204 of ERISA in respect of Multiemployer Plans that individually or in the aggregate are Material.

     (d) The expected postretirement benefit obligation (determined as of the last day of the Company’s most recently ended fiscal year in accordance with Financial Accounting Standards Board Statement No. 106, without regard to liabilities attributable to continuation coverage mandated by section 4980B of the Code) of the Company and its Subsidiaries is not Material.

     (e) The execution and delivery of this Agreement and the issuance and sale of the Notes hereunder will not involve any transaction that is subject to the prohibitions of section 406 of ERISA or in connection with which a tax could be imposed pursuant to section 4975(c)(1)(A)-(D) of the Code. The representation by the Company in the first sentence of this Section 5.12(e) is made in reliance upon and subject to the accuracy of your representation in Section 6.2 as to the sources of the funds used to pay the purchase price of the Notes to be purchased by you.

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5.13. Private Offering by the Company.

     Neither the Company nor anyone acting on its behalf has offered the Notes or any similar securities for sale to, or solicited any offer to buy any of the same from, or otherwise approached or negotiated in respect thereof with, any person other than you, the Other Purchasers and not more than four other Institutional Investors, each of which has been offered the Notes at a private sale for investment. Neither the Company nor anyone acting on its behalf has taken, or will take, any action that would subject the issuance or sale of the Notes to the registration requirements of Section 5 of the Securities Act.

5.14. Use of Proceeds; Margin Regulations.

     The Company will apply the proceeds of the sale of the Notes for general corporate purposes and to fund growth opportunities. No part of the proceeds from the sale of the Notes will be used, directly or indirectly, for the purpose of buying or carrying any margin stock within the meaning of Regulation U of the Board of Governors of the Federal Reserve System (12 CFR 221), or for the purpose of buying or carrying or trading in any securities under such circumstances as to involve the Company in a violation of Regulation X of said Board (12 CFR 224) or to involve any broker or dealer in a violation of Regulation T of said Board (12 CFR 220). Margin stock does not constitute more than 1% of the value of the consolidated assets of the Company and its Subsidiaries and the Company does not have any present intention that margin stock will constitute more than 1% of the value of such assets. As used in this Section, the terms “margin stock” and “purpose of buying or carrying” shall have the meanings assigned to them in said Regulation U.

5.15. Existing Debt; Future Liens.

     (a) Except as described therein, Schedule 5.15 sets forth a complete and correct list of all outstanding Debt of the Company and its Subsidiaries as of March 31, 2004, since which date there has been no Material change in the amounts, interest rates, sinking funds, installment payments or maturities of the Debt of the Company or its Subsidiaries. Neither the Company nor any Subsidiary is in default and no waiver of default is currently in effect, in the payment of any principal or interest on any Debt of the Company or such Subsidiary and no event or condition exists with respect to any Debt of the Company or any Subsidiary that would permit (or that with notice or the lapse of time, or both, would permit) one or more Persons to cause such Debt to become due and payable before its stated maturity or before its regularly scheduled dates of payment.

     (b) Except as disclosed in Schedule 5.15, neither the Company nor any Subsidiary has agreed or consented to cause or permit in the future (upon the happening of a contingency or otherwise) any of its property, whether now owned or hereafter acquired, to be subject to a Lien not permitted by Section 10.5.

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5.16. Foreign Assets Control Regulations, Anti-Terrorism Order, etc.

     Neither the sale of the Notes by the Company hereunder nor its use of the proceeds thereof will violate (a) the Trading with the Enemy Act, as amended, (b) any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating thereto or (c) to the knowledge of the Company, the Anti-Terrorism Order. Without limiting the foregoing, neither the Company nor any Subsidiary (i) is a blocked person described in Section 1 of the Anti-Terrorism Order or (ii) engages in any dealings or transactions, or is otherwise associated, with any such person.

5.17. Status under Certain Statutes.

     Neither the Company nor any Subsidiary is subject to regulation under the Investment Company Act of 1940, as amended, the Public Utility Holding Company Act of 1935, as amended, the Interstate Commerce Act, as amended by the ICC Termination Act, as amended, or the Federal Power Act, as amended.

5.18. Environmental Matters.

     Except as disclosed in Schedule 5.18, neither the Company nor any Subsidiary has knowledge of any claim or has received any notice of any claim, and no proceeding has been instituted raising any claim against the Company or any of its Subsidiaries or any of their respective real properties now or formerly owned, leased or operated by any of them or other assets, alleging any damage to the environment or violation of any Environmental Laws, except, in each case, such as could not reasonably be expected to result in a Material Adverse Effect. Except as disclosed in Schedule 5.18,

     (a) neither the Company nor any Subsidiary has knowledge of any facts which would give rise to any claim, public or private, of violation of Environmental Laws or damage to the environment emanating from, occurring on or in any way related to real properties now or formerly owned, leased or operated by any of them or to other assets or their use, except, in each case, such as could not reasonably be expected to result in a Material Adverse Effect;

     (b) neither the Company nor any of its Subsidiaries has stored any Hazardous Materials on real properties now or formerly owned, leased or operated by any of them and has not disposed of any Hazardous Materials in a manner contrary to any Environmental Laws in each case in any manner that could reasonably be expected to result in a Material Adverse Effect; and

     (c) all buildings on all real properties now owned, leased or operated by the Company or any of its Subsidiaries are in compliance with applicable Environmental Laws, except where failure to comply could not reasonably be expected to result in a Material Adverse Effect.

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5.19. Solvency of Subsidiary Guarantors.

     After giving effect to the transactions contemplated herein and after giving due consideration to any rights of contribution (i) each Subsidiary Guarantor has received fair consideration and reasonably equivalent value for the incurrence of its obligations under the Subsidiary Guaranty, (ii) the fair value of the assets of each Subsidiary Guarantor (both at fair valuation and at present fair saleable value) exceeds its liabilities, (iii) each Subsidiary Guarantor is able to and expects to be able to pay its debts as they mature, and (iv) each Subsidiary Guarantor has capital sufficient to carry on its business as conducted and as proposed to be conducted.

6. REPRESENTATIONS OF THE PURCHASERS.

6.1. Purchase for Investment.

     You represent that you are purchasing the Notes for your own account or for one or more separate accounts maintained by you or for the account of one or more pension or trust funds and not with a view to the distribution thereof, provided that the disposition of your or their property shall at all times be within your or their control. You understand that the Notes have not been registered under the Securities Act and may be resold only if registered pursuant to the provisions of the Securities Act or if an exemption from registration is available, except under circumstances where neither such registration nor such an exemption is required by law, and that the Company is not required to register the Notes. You represent that you are an “accredited investor” within the meaning of subparagraph (a)(1), (2), (3) or (7) of Rule 501 of Regulation D under the Securities Act and you agree that any resale of Notes by you will comply with the preceding sentence.

6.2. Source of Funds.

     You represent that at least one of the following statements is an accurate representation as to each source of funds (a “Source”) to be used by you to pay the purchase price of the Notes to be purchased by you hereunder:

     (a) the Source is an “insurance company general account” (as the term is defined in the United States Department of Labor’s Prohibited Transaction Exemption (“PTE”) 95-60) in respect of which the reserves and liabilities (as defined by the annual statement for life insurance companies approved by the National Association of Insurance Commissioners (the “NAIC Annual Statement”) for the general account contract(s) held by or on behalf of any employee benefit plan together with the amount of the reserves and liabilities for the general account contract(s) held by or on behalf of any other employee benefit plans maintained by the same employer (or affiliate thereof as defined in PTE 95-60) or by the same employee organization in the general account do not exceed 10% of the total reserves and liabilities of the general account (exclusive of separate account liabilities) plus surplus as set forth in the NAIC Annual Statement filed with such Purchaser’s state of domicile; or

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     (b) the Source is a separate account that is maintained solely in connection with such Purchaser’s fixed contractual obligations under which the amounts payable, or credited, to any employee benefit plan (or its related trust) that has any interest in such separate account (or to any participant or beneficiary of such plan (including any annuitant)) are not affected in any manner by the investment performance of the separate account; or

     (c) the Source is either (i) an insurance company pooled separate account, within the meaning of PTE 90-1 (issued January 29, 1990), or (ii) a bank collective investment fund, within the meaning of PTE 91-38 (issued July 12, 1991) and, except as you have, prior to the execution of this Agreement, disclosed to the Company in writing pursuant to this paragraph (c), no employee benefit plan or group of plans maintained by the same employer or employee organization beneficially owns more than 10% of all assets allocated to such pooled separate account or collective investment fund; or

     (d) the Source constitutes assets of an “investment fund” (within the meaning of Part V of PTE 84-14 (the “QPAM Exemption”) managed by a “qualified professional asset manager” or “QPAM” (within the meaning of Part V of the QPAM Exemption), no employee benefit plan’s assets that are included in such investment fund, when combined with the assets of all other employee benefit plans established or maintained by the same employer or by an affiliate (within the meaning of Section V(c)(1) of the QPAM Exemption) of such employer or by the same employee organization and managed by such QPAM, exceed 20% of the total client assets managed by such QPAM, the conditions of Part I(c) and (g) of the QPAM Exemption are satisfied, neither the QPAM nor a person controlling or controlled by the QPAM (applying the definition of “control” in Section V(e) of the QPAM Exemption) owns a 5% or more interest in the Company and (i) the identity of such QPAM and (ii) the names of all employee benefit plans whose assets are included in such investment fund have been disclosed to the Company in writing pursuant to this clause (d); or

     (e) the Source constitutes assets of a “plan(s)” (within the meaning of Section IV of PTE 96-23 (the “INHAM Exemption”)) managed by an “in-house asset manager” or “INHAM” (within the meaning of Section IV of the INHAM exemption), the conditions of Section I(a), (g) and (h) of the INHAM Exemption are satisfied, neither the INHAM nor a person controlling or controlled by the INHAM (applying the definition of “control” in Section IV(d) of the INHAM Exemption) owns a 5% or more interest in the Company and (i) the identity of such INHAM and (ii) the name(s) of the employee benefit plan(s) whose assets constitute the Source have been disclosed to the Company in writing pursuant to this clause (e); or

     (f) the Source is a governmental plan; or

     (g) the Source is one or more employee benefit plans, or a separate account or trust fund comprised of one or more employee benefit plans, each of which has been identified to the Company in writing, prior to the execution of this Agreement, pursuant to this paragraph (g); or

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     (h) the Source does not include assets of any employee benefit plan, other than a plan exempt from the coverage of ERISA.

As used in this Section 6.2, the terms “employee benefit plan”, “governmental plan” and “separate account” shall have the respective meanings assigned to such terms in Section 3 of ERISA.

7. INFORMATION AS TO COMPANY.

7.1. Financial and Business Information.

The Company will deliver to each holder of Notes that is an Institutional Investor:

     (a) Quarterly Statements — within 50 days (or such other shorter period within which Quarterly Reports on Form 10-Q are required to be timely filed with the Securities and Exchange Commission, including any extension permitted by Rule 12b-25 of the Exchange Act) after the end of each quarterly fiscal period in each fiscal year of the Company (other than the last quarterly fiscal period of each such fiscal year), duplicate copies of,

          (i) consolidated balance sheet of the Company and its Subsidiaries as at the end of such quarter,

          (ii) consolidated statements of income of the Company and its Subsidiaries for such quarter and (in the case of the second and third quarters) for the portion of the fiscal year ending with such quarter, and

          (iii) consolidated statements of cash flows of the Company and its Subsidiaries for such quarter or (in the case of the second and third quarters) for the portion of the fiscal year ending with such quarter,

setting forth in each case in comparative form the figures for the corresponding periods in the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP applicable to quarterly financial statements generally, and certified by a Senior Financial Officer as fairly presenting, in all material respects, the financial position of the companies being reported on and their results of operations and cash flows, subject to changes resulting from year-end adjustments, provided that delivery within the time period specified above of copies of the Company’s Quarterly Report on Form 10-Q prepared in compliance with the requirements therefor and filed with the Securities and Exchange Commission shall be deemed to satisfy the requirements of this Section 7.1(a);

     (b) Annual Statements — within 105 days (or such other shorter period within which Annual Reports on Form 10-K are required to be timely filed with the Securities and Exchange Commission, including any extension permitted by Rule 12b-25 of the Exchange Act) after the end of each fiscal year of the Company, duplicate copies of,

          (i) consolidated balance sheet of the Company and its Subsidiaries, as at the end of such year, and

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          (ii) consolidated statements of income, changes in shareholders’ equity and cash flows of the Company and its Subsidiaries, for such year,

setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP, and accompanied by an opinion of independent certified public accountants of recognized national standing, which opinion shall state that such financial statements present fairly, in all material respects, the financial position of the companies being reported upon and their results of operations and cash flows and have been prepared in conformity with GAAP, and that the examination of such accountants in connection with such financial statements has been made in accordance with generally accepted auditing standards, and that such audit provides a reasonable basis for such opinion in the circumstances, provided that the delivery within the time period specified above of the Company’s Annual Report on Form 10-K for such fiscal year (together with the Company’s annual report to shareholders, if any, prepared pursuant to Rule 14a-3 under the Exchange Act) prepared in accordance with the requirements therefor and filed with the Securities and Exchange Commission shall be deemed to satisfy the requirements of this Section 7.1(b);

     (c) Unrestricted Subsidiaries — if, at the time of delivery of any financial statements pursuant to Section 7.1(a) or (b), Unrestricted Subsidiaries account for more than 10% of (i) the consolidated total assets of the Company and its Subsidiaries reflected in the balance sheet included in such financial statements or (ii) the consolidated revenues of the Company and its Subsidiaries reflected in the consolidated statement of income included in such financial statements, an unaudited balance sheet for all Unrestricted Subsidiaries taken as whole as at the end of the fiscal period included in such financial statements and the related unaudited statements of income, stockholders’ equity and cash flows for such Unrestricted Subsidiaries for such period, together with consolidating statements reflecting all eliminations or adjustments necessary to reconcile such group financial statements to the consolidated financial statements of the Company and its Subsidiaries shall be delivered together with the financial statements required pursuant to Sections 7.1(a) and (b);

     (d) SEC and Other Reports — promptly upon their becoming available, one copy of (i) each financial statement, report, notice or proxy statement sent by the Company or any Restricted Subsidiary to public securities holders generally, and (ii) each regular or periodic report, each registration statement other than registration statements on Form S-8 (without exhibits except as expressly requested by such holder), and each prospectus and all amendments thereto filed by the Company or any Restricted Subsidiary with the Securities and Exchange Commission and of all press releases and other statements made available generally by the Company or any Restricted Subsidiary to the public concerning developments that are Material;

     (e) Notice of Default or Event of Default — promptly, and in any event within five days after a Responsible Officer becoming aware of the existence of any Default or Event of Default or that any Person has given any notice or taken any action with respect to a claimed default hereunder or that any Person has given notice or taken any action with respect to a claimed default of the type referred to in Section 11(f), a written notice

15

specifying the nature and period of existence thereof and what action the Company is taking or proposes to take with respect thereto;

     (f) ERISA Matters — promptly, and in any event within five Business Days after a Responsible Officer becoming aware of any of the following, a written notice setting forth the nature thereof and the action, if any, that the Company or an ERISA Affiliate proposes to take with respect thereto:

          (i) with respect to any Plan, any reportable event, as defined in section 4043(c) of ERISA and the regulations thereunder, for which notice thereof has not been waived pursuant to such regulations as in effect on the date hereof; or

          (ii) the taking by the PBGC of steps to institute, or the threatening by the PBGC of the institution of, proceedings under section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by the Company or any ERISA Affiliate of a notice from a Multiemployer Plan that such action has been taken by the PBGC with respect to such Multiemployer Plan; or

          (iii) any event, transaction or condition that could result in the incurrence of any liability by the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, or in the imposition of any Lien on any of the rights, properties or assets of the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or such penalty or excise tax provisions, if such liability or Lien, taken together with any other such liabilities or Liens then existing, could reasonably be expected to have a Material Adverse Effect;

     (g) Notices from Governmental Authority — promptly, and in any event within 30 days of receipt thereof, copies of any notice to the Company or any Subsidiary from any Federal or state Governmental Authority relating to any order, ruling, statute or other law or regulation that could reasonably be expected to have a Material Adverse Effect; and

     (h) Requested Information — with reasonable promptness, such other data and information relating to the business, operations, affairs, financial condition, assets or properties of the Company or any of its Subsidiaries or relating to the ability of the Company to perform its obligations hereunder and under the Notes as from time to time may be reasonably requested by any such holder of Notes.

7.2. Officer’s Certificate.

     Each set of financial statements delivered after the date of Closing to a holder of Notes pursuant to Section 7.1(a) or (b) shall be accompanied by a certificate of a Senior Financial Officer setting forth:

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     (a) Covenant Compliance — the information (including detailed calculations) required in order to establish whether the Company was in compliance with the requirements of Section 10.1 through Section 10.12, inclusive, during the quarterly or annual period covered by the statements then being furnished (including with respect to each such Section, where applicable, the calculations of the maximum or minimum amount, ratio or percentage, as the case may be, permissible under the terms of such Sections, and the calculation of the amount, ratio or percentage then in existence); and

     (b) Event of Default — a statement that such officer has reviewed the relevant terms hereof and has made, or caused to be made, under his or her supervision, a review of the transactions and conditions of the Company and its Subsidiaries from the beginning of the quarterly or annual period covered by the statements then being furnished to the date of the certificate and that such review shall not have disclosed the existence during such period of any condition or event that constitutes a Default or an Event of Default or, if any such condition or event existed or exists (including any such event or condition resulting from the failure of the Company or any Subsidiary to comply with any Environmental Law), specifying the nature and period of existence thereof and what action the Company shall have taken or proposes to take with respect thereto.

7.3. Inspection.

     The Company will permit the representatives of each holder of Notes that is an Institutional Investor:

     (a) No Default — if no Default or Event of Default then exists, at the expense of such holder and upon reasonable prior notice to the Company, to visit the principal executive office of the Company, to discuss the affairs, finances and accounts of the Company and its Subsidiaries with the Company’s officers, and (with the consent of the Company, which consent will not be unreasonably withheld) its independent public accountants, and (with the consent of the Company, which consent will not be unreasonably withheld) to visit the other offices and properties of the Company and each Restricted Subsidiary, all at such reasonable times and as often as may be reasonably requested in writing; and

     (b) Default — if a Default or Event of Default then exists, at the expense of the Company, to visit and inspect any of the offices or properties of the Company or any Subsidiary, to examine all their respective books of account, records, reports and other papers, to make copies and extracts therefrom, and to discuss their respective affairs, finances, and accounts with their respective officers and independent public accountants (and by this provision the Company authorizes said accountants to discuss the affairs, finances and accounts of the Company and its Subsidiaries), all at such times and as often as may be requested.

Each holder agrees to treat any information obtained in connection with any inspection pursuant to this Section 7 as Confidential Information subject to Section 20 so as to avoid any disclosure obligation on the Company under Regulation FD under the Exchange Act.

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8. PREPAYMENT OF THE NOTES.

8.1. No Scheduled Prepayments.

     No regularly scheduled prepayments are due on the Notes prior to their stated maturity.

8.2. Optional Prepayments with Make-Whole Amount.

     The Company may, at its option, upon notice as provided below, prepay at any time all, or from time to time any part of, the Notes in an amount not less than $1,000,000 in the aggregate in the case of a partial prepayment, at 100% of the principal amount so prepaid, plus the Make-Whole Amount determined for the prepayment date with respect to such principal amount. The Company will give each holder of Notes written notice of each optional prepayment under this Section 8.2 not less than 30 days and not more than 60 days prior to the date fixed for such prepayment. Each such notice shall specify such date, the aggregate principal amount of the Notes to be prepaid on such date, the principal amount of each Note held by such holder to be prepaid (determined in accordance with Section 8.3), and the interest to be paid on the prepayment date with respect to such principal amount being prepaid, and shall be accompanied by a certificate of a Senior Financial Officer as to the estimated Make-Whole Amount due in connection with such prepayment (calculated as if the date of such notice were the date of the prepayment), setting forth the details of such computation. Two Business Days prior to such prepayment, the Company shall deliver to each holder of Notes a certificate of a Senior Financial Officer specifying the calculation of such Make-Whole Amount as of the specified prepayment date.

8.3. Allocation of Partial Prepayments.

     In the case of each partial prepayment of the Notes pursuant to this Section 8, the principal amount of the Notes to be prepaid shall be allocated among all of the Notes at the time outstanding in proportion, as nearly as practicable, to the respective unpaid principal amounts thereof not theretofore called for prepayment.

8.4. Maturity; Surrender, etc.

     In the case of each prepayment of Notes pursuant to this Section 8, the principal amount of each Note to be prepaid shall mature and become due and payable on the date fixed for such prepayment, together with interest on such principal amount accrued to such date and the applicable Make-Whole Amount, if any. From and after such date, unless the Company shall fail to pay such principal amount when so due and payable, together with the interest and Make-Whole Amount, if any, as aforesaid, interest on such principal amount shall cease to accrue. Any Note paid or prepaid in full shall be surrendered to the Company and canceled and shall not be reissued, and no Note shall be issued in lieu of any prepaid principal amount of any Note.

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8.5. Purchase of Notes.

     The Company will not and will not permit any Affiliate to purchase, redeem, prepay or otherwise acquire, directly or indirectly, any of the outstanding Notes except upon the payment or prepayment of the Notes in accordance with the terms of this Agreement and the Notes. The Company will promptly cancel all Notes acquired by it or any Affiliate pursuant to any payment, prepayment or purchase of Notes pursuant to any provision of this Agreement and no Notes may be issued in substitution or exchange for any such Notes.

8.6. Make-Whole Amount.

     The term “Make-Whole Amount” means, with respect to any Note, an amount equal to the excess, if any, of the Discounted Value of the Remaining Scheduled Payments with respect to the Called Principal of such Note over the amount of such Called Principal, provided that the Make-Whole Amount may in no event be less than zero. For the purposes of determining the Make-Whole Amount, the following terms have the following meanings:

     “Called Principal” means, with respect to any Note, the principal of such Note that is to be prepaid pursuant to Section 8.2 or has become or is declared to be immediately due and payable pursuant to Section 12.1, as the context requires.

     “Discounted Value” means, with respect to the Called Principal of any Note, the amount obtained by discounting all Remaining Scheduled Payments with respect to such Called Principal from their respective scheduled due dates to the Settlement Date with respect to such Called Principal, in accordance with accepted financial practice and at a discount factor (applied on the same periodic basis as that on which interest on the Notes is payable) equal to the Reinvestment Yield with respect to such Called Principal.

     “Reinvestment Yield” means, with respect to the Called Principal of any Note, .50% over the yield to maturity implied by (i) the yields reported, as of 10:00 A.M. (New York City time) on the second Business Day preceding the Settlement Date with respect to such Called Principal, on the display designated as the “PX1 Screen” on the Bloomberg Financial Market Service (or such other display as may replace the PX1 Screen on Bloomberg Financial Market Service) for actively traded U.S. Treasury securities having a maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date, or (ii) if such yields are not reported as of such time or the yields reported as of such time are not ascertainable, the Treasury Constant Maturity Series Yields reported, for the latest day for which such yields have been so reported as of the second Business Day preceding the Settlement Date with respect to such Called Principal, in Federal Reserve Statistical Release H.15 (519) (or any comparable successor publication) for actively traded U.S. Treasury securities having a constant maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date. Such implied yield will be determined, if necessary, by (a) converting U.S. Treasury bill quotations to bond-equivalent yields in accordance with accepted financial practice and (b) interpolating linearly between (1) the actively traded U.S. Treasury security with the maturity closest to and greater than the Remaining

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Average Life and (2) the actively traded U.S. Treasury security with the maturity closest to and less than the Remaining Average Life.

     “Remaining Average Life” means, with respect to any Called Principal, the number of years (calculated to the nearest one-twelfth year) obtained by dividing (i) such Called Principal into (ii) the sum of the products obtained by multiplying (a) the principal component of each Remaining Scheduled Payment with respect to such Called Principal by (b) the number of years (calculated to the nearest one-twelfth year) that will elapse between the Settlement Date with respect to such Called Principal and the scheduled due date of such Remaining Scheduled Payment.

     “Remaining Scheduled Payments” means, with respect to the Called Principal of any Note, all payments of such Called Principal and interest thereon that would be due after the Settlement Date with respect to such Called Principal if no payment of such Called Principal were made prior to its scheduled due date, provided that if such Settlement Date is not a date on which interest payments are due to be made under the terms of the Notes, then the amount of the next succeeding scheduled interest payment will be reduced by the amount of interest accrued to such Settlement Date and required to be paid on such Settlement Date pursuant to Section 8.2 or 12.1.

     “Settlement Date” means, with respect to the Called Principal of any Note, the date on which such Called Principal is to be prepaid pursuant to Section 8.2 or has become or is declared to be immediately due and payable pursuant to Section 12.1, as the context requires.

9. AFFIRMATIVE COVENANTS.

     The Company covenants that so long as any of the Notes are outstanding:

9.1. Compliance with Law.

     The Company will, and will cause each Subsidiary to, comply with all laws, ordinances or governmental rules or regulations to which each of them is subject, including, without limitation, Environmental Laws, and will obtain and maintain in effect all licenses, certificates, permits, franchises and other governmental authorizations necessary to the ownership of their respective properties or to the conduct of their respective businesses, in each case to the extent necessary to ensure that non-compliance with such laws, ordinances or governmental rules or regulations or failures to obtain or maintain in effect such licenses, certificates, permits, franchises and other governmental authorizations could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

9.2. Insurance.

     The Company will, and will cause each Restricted Subsidiary to, maintain, with financially sound and reputable insurers, insurance with respect to their respective properties and businesses against such casualties and contingencies, of such types, on such terms and in such amounts (including deductibles, co-insurance and self-insurance, if adequate reserves are

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maintained with respect thereto) as is customary in the case of entities of established reputations engaged in the same or a similar business and similarly situated.

9.3. Maintenance of Properties.

     The Company will and will cause each Restricted Subsidiary to maintain and keep, or cause to be maintained and kept, their respective properties in good repair, working order and condition (other than ordinary wear and tear), so that the business carried on in connection therewith may be properly conducted at all times, provided that this Section shall not prevent the Company or any Restricted Subsidiary from discontinuing the operation and the maintenance of any of its properties if such discontinuance is desirable in the conduct of its business and the Company has concluded that such discontinuance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

9.4. Payment of Taxes and Claims.

     The Company will, and will cause each Subsidiary to, file all income tax or similar tax returns required to be filed in any jurisdiction and to pay and discharge all taxes shown to be due and payable on such returns and all other taxes, assessments, governmental charges, or levies imposed on them or any of their properties, assets, income or franchises, to the extent such taxes and assessments have become due and payable and before they have become delinquent and all claims for which sums have become due and payable that have or might become a Lien on properties or assets of the Company or any Subsidiary, provided that neither the Company nor any Subsidiary need pay any such tax or assessment or claims if (i) the amount, applicability or validity thereof is contested by the Company or such Subsidiary on a timely basis in good faith and in appropriate proceedings, and the Company or a Subsidiary has established adequate reserves therefor in accordance with GAAP on the books of the Company or such Subsidiary or (ii) the nonpayment of all such taxes and assessments in the aggregate could not reasonably be expected to have a Material Adverse Effect.

9.5. Corporate Existence, etc.

     The Company will at all times preserve and keep in full force and effect its corporate existence. Subject to Sections 10.6, 10.7 and 10.8, the Company will at all times preserve and keep in full force and effect the corporate existence of each of its Restricted Subsidiaries (unless merged into the Company or a Restricted Subsidiary) and all rights and franchises of the Company and its Restricted Subsidiaries unless, in the good faith judgment of the Company, the termination of or failure to preserve and keep in full force and effect such corporate existence, right or franchise could not, individually or in the aggregate, have a Material Adverse Effect.

10. NEGATIVE COVENANTS.

     The Company covenants that so long as any of the Notes are outstanding:

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10.1. Consolidated Net Debt.

     The Company will not incur, and will not permit any Restricted Subsidiary to incur, any Debt if, after giving effect thereto and to the application of the proceeds therefrom, Consolidated Net Debt would exceed 55% of Consolidated Total Capitalization.

10.2. Interest Coverage.

     The Company will not permit the ratio of Consolidated EBITDA to Consolidated Interest Expense (in each case for the Company’s then most recently completed four fiscal quarters) to be less than 2.0 to 1.0 at any time.

10.3. Adjusted Consolidated Net Worth.

     The Company will not permit at any time its Adjusted Consolidated Net Worth as of the end of any fiscal year to be less than $130,000,000 plus the cumulative sum of 50% of Consolidated Net Income (but only if a positive number) for each fiscal year ending after June 30, 2001.

10.4. Debt of Restricted Subsidiaries.

     The Company will not permit any Restricted Subsidiary that is not a Subsidiary Guarantor to create, assume, incur or otherwise become liable for, directly or indirectly, any Debt, other than:

     (a) Debt owed to the Company or another Restricted Subsidiary;

     (b) Debt of a Restricted Subsidiary secured by Liens permitted under Sections 10.5(g) or (h);

     (c) Debt of a Subsidiary outstanding at the time of its acquisition by the Company and initial designation as a Restricted Subsidiary, provided that (i) such Debt was not incurred in contemplation of such Subsidiary becoming a Restricted Subsidiary and (ii) immediately after giving effect to the designation of such Subsidiary as a Restricted Subsidiary, no Default or Event of Default would exist; provided, however, that such Debt may not be extended, renewed or refunded unless such Debt could be incurred under clause (d) below; and

     (d) Additional Debt, provided that after giving effect to the incurrence thereof and the application of the proceeds thereof, Priority Debt does not exceed 15% of Adjusted Consolidated Net Worth, and any renewals or extension of such Debt, provided that (i) there is no increase in the principal amount or decrease in maturity of such Debt at the time of such extension or renewal and (ii) immediately after such extension or renewal no Default or Event of Default would exist.

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10.5. Liens.

     The Company will not, and will not permit any Restricted Subsidiary to, permit to exist, create, assume or incur, directly or indirectly, any Lien on its properties or assets, whether now owned or hereafter acquired, except:

     (a) Liens for taxes, assessments or governmental charges not then due and delinquent or the nonpayment of which is permitted by Section 9.4;

     (b) Liens incidental to the conduct of business or the ownership of properties and assets (including landlords’, lessors’, carriers’, warehousemen’s, mechanics’, materialmen’s and other similar Liens) and Liens to secure the performance of bids, tenders, leases or trade contracts, or to secure statutory obligations (including obligations under workers compensation, unemployment insurance and other social security legislation), surety or appeal bonds or other Liens of like general nature incurred in the ordinary course of business and not in connection with the borrowing of money;

     (c) any attachment or judgment Lien, unless the judgment it secures has not, within 60 days after the entry thereof, been discharged or execution thereof stayed pending appeal, or has not been discharged within 60 days after the expiration of any such stay;

     (d) Liens securing Debt of a Restricted Subsidiary owed to the Company or to another Restricted Subsidiary;

     (e) Liens securing Debt existing on property or assets of the Company or any Restricted Subsidiary as of the date of this Agreement that are described in Schedule 10.5;

     (f) encumbrances in the nature of leases, subleases, zoning restrictions, easements, rights of way, minor survey exceptions and other rights and restrictions of record on the use of real property and defects in title arising or incurred in the ordinary course of business, which, individually and in the aggregate, do not materially impair the use of the property or assets subject thereto by the Company or such Restricted Subsidiary in their business or which relate only to assets that in the aggregate are not Material;

     (g) Liens (i) existing on property at the time of its acquisition by the Company or a Restricted Subsidiary and not created in contemplation thereof, whether or not the Debt secured by such Lien is assumed by the Company or a Restricted Subsidiary; or (ii) on property created contemporaneously with its acquisition or within 180 days of the acquisition or completion of construction or improvements thereof to secure or provide for all or a portion of the purchase price or cost of construction or improvements of such property after the date of Closing; or (iii) existing on property of a Person at the time such Person is merged or consolidated with, or becomes a Restricted Subsidiary of, or substantially all of its assets are acquired by, the Company or a Restricted Subsidiary and not created in contemplation thereof; provided that in the case of clauses (i), (ii) and (iii)

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such Liens do not extend to additional property of the Company or any Restricted Subsidiary (other than property that is an improvement to or is acquired for specific use in connection with the subject property) and, in the case of clause (ii) only, that the aggregate principal amount of Debt secured by each such Lien does not exceed the lesser of cost of acquisition or construction or the fair market value (determined in good faith by one or more officers of the Company to whom authority to enter into the transaction has been delegated by the board of directors of the Company) of the property subject thereto;

     (h) Liens resulting from extensions, renewals or replacements of Liens permitted by paragraphs (e) and (g), provided that (i) there is no increase in the principal amount or decrease in maturity of the Debt secured thereby at the time of such extension, renewal or replacement, (ii) any new Lien attaches only to the same property theretofore subject to such earlier Lien and (iii) immediately after such extension, renewal or replacement no Default or Event of Default would exist; and

     (i) Liens securing Debt not otherwise permitted by paragraphs (a) through (h) above, provided that, after giving effect to the incurrence of the Debt so secured, Priority Debt does not exceed 15% of Adjusted Consolidated Net Worth, and any renewals or extensions of Liens securing such Debt, provided that (i) there is no increase in the principal amount or decrease in maturity of the Debt secured thereby at the time of such renewal or extension, (ii) any new Lien attaches only to the same property theretofore subject to such earlier Lien and (iii) immediately after such renewal or extension no Default or Event of Default would exist.

10.6. Sale of Assets.

     Except as permitted by Section 10.7, the Company will not, and will not permit any Restricted Subsidiary to, sell, lease, transfer or otherwise dispose of, including by way of merger (collectively a “Disposition”), any assets, including capital stock of Restricted Subsidiaries, in one or a series of transactions, to any Person, other than:

     (a) Dispositions in the ordinary course of business;

     (b) Dispositions by the Company to a Restricted Subsidiary, by a Subsidiary Guarantor to the Company or to another Subsidiary Guarantor or by a Restricted Subsidiary that is not a Subsidiary Guarantor to the Company or a Restricted Subsidiary; or

     (c) Dispositions not otherwise permitted by Section 10.6(a) or (b), provided that:

          (i) each such Disposition is made in an arms length transaction for a consideration at least equal to the fair market value of the property subject thereto;

          (ii) the aggregate net book value of all assets disposed of in any period of 365 consecutive days pursuant to this Section 10.6(c) does not exceed 10% of

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Consolidated Total Assets as of the end of the immediately preceding fiscal quarter; and

     (iii) at the time of such Disposition and after giving effect thereto no Default or Event of Default shall have occurred and be continuing.

Notwithstanding the foregoing, the Company may, or may permit any Restricted Subsidiary to, make a Disposition and the assets subject to such Disposition shall not be subject to or included in the foregoing limitation and computation contained in Section 10.6(c)(ii) of the preceding sentence to the extent that (i) each such Disposition is for a consideration at least equal to the fair market value of the property subject thereto, and

     (A) such assets are leased back by the Company or any Restricted Subsidiary, as lessee, within 365 days of the original acquisition or construction thereof by the Company or such Restricted Subsidiary; or

     (B) the net after tax proceeds from such disposition are within 365 days of such Disposition:

     (i) reinvested in productive assets used or useful in carrying on the business of the Company and its Restricted Subsidiaries; or

     (ii) applied to the payment or prepayment of any outstanding Debt of the Company or any Restricted Subsidiary that is pari passu with or senior to the Notes, including the Notes.

If any prepayment of the Notes is to be made pursuant to foregoing clause (ii), the Company may offer to prepay (on a date not less than 30 or more than 60 days following such offer) at a price of 100% of the principal amount of the Notes to be prepaid (without any Make-Whole Amount), together with interest accrued to the date of prepayment; provided that if any holder of the Notes declines such offer, the proceeds that would have been paid to such holder shall be offered pro rata to the other holders of the Notes that have accepted the offer. A failure by a holder of Notes to respond at least 10 days prior to the proposed prepayment date shall be deemed to constitute a rejection of such offer by such holder. If at the time of making such offer to prepay and following such prepayment there is no Debt of the Company or any Restricted Subsidiary outstanding other than the Notes, any net proceeds remaining unapplied shall not be subject to or included in the limitation and computation contained in Section 10.6(c)(ii).

10.7. Mergers, Consolidations, etc.

          The Company will not, and will not permit any Restricted Subsidiary to, consolidate with or merge with any other Person or convey, transfer, sell or lease all or substantially all of its assets in a single transaction or series of transactions to any Person except that:

     (a) the Company may consolidate or merge with any other Person or convey, transfer, sell or lease all or substantially all of its assets in a single transaction or series of transactions to any Person, provided that:

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     (i) the successor formed by such consolidation or the survivor of such merger or the Person that acquires by conveyance, transfer, sale or lease all or substantially all of the assets of the Company as an entirety, as the case may be, is a solvent corporation organized and existing under the laws of the United States or any state thereof (including the District of Columbia), and, if the Company is not such corporation, such corporation (y) shall have executed and delivered to each holder of any Notes its assumption of the due and punctual performance and observance of each covenant and condition of this Agreement and the Notes and (z) shall have caused to be delivered to each holder of any Notes an opinion of independent counsel reasonably satisfactory to the Required Holders, to the effect that all agreements or instruments effecting such assumption are enforceable in accordance with their terms and comply with the terms hereof; and

     (ii) immediately after giving effect to such transaction, the successor formed by such consolidation or the survivor of such merger or the Person that acquires by conveyance, transfer, sale or lease all or substantially all of the assets of the Company as an entirety, as the case may be, can incur $1.00 of additional Debt; and

     (iii) immediately before and after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; and

     (b) Any Restricted Subsidiary may (x) merge into the Company (provided that the Company is the surviving corporation) or a Restricted Subsidiary or (y) sell, transfer or lease all or any part of its assets to the Company or a Restricted Subsidiary, or (z) merge or consolidate with, or sell, transfer or lease all or substantially all of its assets to, any Person in a transaction that is permitted by Section 10.6 or, as a result of which, such Person becomes a Restricted Subsidiary; provided in each instance set forth in clauses (x) through (z) that, (1) immediately before and after giving effect thereto, there shall exist no Default or Event of Default and (2) a Subsidiary Guarantor may engage in any of the foregoing transactions only with the Company or another Subsidiary Guarantor.

No such conveyance, transfer, sale or lease of all or substantially all of the assets of the Company shall have the effect of releasing the Company or any successor corporation that shall theretofore have become such in the manner prescribed in this Section 10.7 from its liability under this Agreement or the Notes.

10.8. Disposition of Stock of Restricted Subsidiaries.

     (a) The Company will not permit any Restricted Subsidiary to issue its capital stock, or any warrants, rights or options to purchase, or securities convertible into or exchangeable for, such capital stock, to any Person other than the Company or a Restricted Subsidiary, except in the case of Foreign Restricted Subsidiaries (i) for directors’ qualifying shares or (ii) to satisfy local ownership requirements.

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     (b) The Company will not, and will not permit any Restricted Subsidiary to, sell, transfer or otherwise dispose of any shares of capital stock of a Restricted Subsidiary if such sale would be prohibited by Section 10.6, except in the case of Foreign Restricted Subsidiaries (i) for directors’ qualifying shares or (ii) to satisfy local ownership requirements.

     (c) If a Restricted Subsidiary at any time ceases to be such as a result of a sale or issuance of its capital stock, any Liens on property of the Company or any other Restricted Subsidiary securing Debt owed to such Restricted Subsidiary, which is not contemporaneously repaid, together with such Debt, shall be deemed to have been incurred by the Company or such other Restricted Subsidiary, as the case may be, at the time such Restricted Subsidiary ceases to be a Restricted Subsidiary.

10.9. Designation of Restricted and Unrestricted Subsidiaries.

          The Company may designate any Restricted Subsidiary as an Unrestricted Subsidiary and any Unrestricted Subsidiary as a Restricted Subsidiary; provided that,

     (a) if such Subsidiary initially is designated a Restricted Subsidiary, then such Restricted Subsidiary may be subsequently designated as an Unrestricted Subsidiary and such Unrestricted Subsidiary may be subsequently designated as a Restricted Subsidiary, but no further changes in designation may be made;

     (b) if such Subsidiary initially is designated an Unrestricted Subsidiary, then such Unrestricted Subsidiary may be subsequently designated as a Restricted Subsidiary and such Restricted Subsidiary may be subsequently designated as an Unrestricted Subsidiary, but no further changes in designation may be made;

     (c) the Company may not designate a Restricted Subsidiary as an Unrestricted Subsidiary unless: (i) such Restricted Subsidiary does not own, directly or indirectly, any Debt or capital stock of the Company or any other Restricted Subsidiary, (ii) such designation, considered as a sale of assets, is permitted pursuant to Sections 10.6, 10.7 and 10.8, (iii) immediately before and after such designation there exists no Default or Event of Default; and

     (d) a Subsidiary Guarantor may not be designated an Unrestricted Subsidiary.

10.10. Subsidiary Guaranty.

          The Company will not permit any Restricted Subsidiary to become a borrower or a guarantor of Debt owed to banks under the Credit Agreement unless such Restricted Subsidiary is, or concurrently therewith becomes, a party to the Subsidiary Guaranty.

10.11. Nature of Business.

          The Company will not, and will not permit any Restricted Subsidiary to, engage in any business if, as a result, the general nature of the business in which the Company and its Restricted Subsidiaries, taken as a whole, would then be engaged would be substantially changed

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from the general nature of the business in which the Company and its Restricted Subsidiaries, taken as a whole, are engaged on the date of this Agreement as described in the Memorandum.

10.12. Transactions with Affiliates.

          The Company will not and will not permit any Restricted Subsidiary to enter into directly or indirectly any Material transaction or Material group of related transactions (including without limitation the purchase, lease, sale or exchange of properties of any kind or the rendering of any service) with any Affiliate (other than the Company or another Restricted Subsidiary), except in the ordinary course of the Company’s or such Restricted Subsidiary’s business and upon fair and reasonable terms no less favorable to the Company or such Restricted Subsidiary than would be obtainable in a comparable arm’s-length transaction with a Person not an Affiliate.

11. EVENTS OF DEFAULT.

          An “Event of Default” shall exist if any of the following conditions or events shall occur and be continuing on or at any time after the date of Closing:

     (a) the Company defaults in the payment of any principal or Make-Whole Amount, if any, on any Note when the same becomes due and payable, whether at maturity or at a date fixed for prepayment or by declaration or otherwise; or

     (b) the Company defaults in the payment of any interest on any Note for more than five Business Days after the same becomes due and payable; or

     (c) the Company defaults in the performance of or compliance with any term contained in Sections 10.1 through 10.12; or

     (d) the Company defaults in the performance of or compliance with any term contained herein (other than those referred to in paragraphs (a), (b) and (c) of this Section 11) and such default is not remedied within 30 days after the earlier of (i) a Responsible Officer obtaining actual knowledge of such default or (ii) the Company receiving written notice of such default from any holder of a Note; or

     (e) any representation or warranty made in writing by or on behalf of the Company or any Subsidiary Guarantor or by any officer of the Company or a Subsidiary Guarantor in this Agreement, the Subsidiary Guaranty or in any writing furnished in connection with the transactions contemplated hereby or thereby proves to have been false or incorrect in any material respect on the date as of which made; or

     (f) (i) the Company or any Restricted Subsidiary is in default (as principal or as guarantor or other surety) in the payment of any principal of or premium or make-whole amount or interest on any Debt that is outstanding in an aggregate principal amount of at least $5,000,000 beyond any period of grace provided with respect thereto, or (ii) the Company or any Restricted Subsidiary is in default in the performance of or compliance with any term of any evidence of any Debt that is outstanding in an aggregate

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principal amount of at least $5,000,000 or of any mortgage, indenture or other agreement relating thereto or any other condition exists, and as a consequence of such default or condition such Debt has become, or has been declared, due and payable before its stated maturity or before its regularly scheduled dates of payment; or

     (g) the Company or any Restricted Subsidiary (i) is generally not paying, or admits in writing its inability to pay, its debts as they become due, (ii) files, or consents by answer or otherwise to the filing against it of, a petition for relief or reorganization or arrangement or any other petition in bankruptcy, for liquidation or to take advantage of any bankruptcy, insolvency, reorganization, moratorium or other similar law of any jurisdiction, (iii) makes an assignment for the benefit of its creditors, (iv) consents to the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, (v) is adjudicated as insolvent or to be liquidated, or (vi) takes corporate action for the purpose of any of the foregoing; or

     (h) a court or governmental authority of competent jurisdiction enters an order appointing, without consent by the Company or any Restricted Subsidiary, a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, or constituting an order for relief or approving a petition for relief or reorganization or any other petition in bankruptcy or for liquidation or to take advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution, winding-up or liquidation of the Company or any Restricted Subsidiary, or any such petition shall be filed against the Company or any Restricted Subsidiary and such petition shall not be dismissed within 60 days; or

     (i) a final judgment or judgments for the payment of money aggregating at least $5,000,000 are rendered against one or more of the Company and its Restricted Subsidiaries, which judgments are not, within 60 days after entry thereof, bonded, discharged or stayed pending appeal, or are not discharged within 60 days after the expiration of such stay; or

     (j) if (i) any Plan shall fail to satisfy the minimum funding standards of ERISA or the Code for any plan year or part thereof or a waiver of such standards or extension of any amortization period is sought or granted under section 412 of the Code, (ii) a notice of intent to terminate any Plan shall have been or is reasonably expected to be filed with the PBGC or the PBGC shall have instituted proceedings under ERISA section 4042 to terminate or appoint a trustee to administer any Plan or the PBGC shall have notified the Company or any ERISA Affiliate that a Plan may become a subject of any such proceedings, (iii) the aggregate “amount of unfunded benefit liabilities” (within the meaning of section 4001(a)(18) of ERISA) under all Plans determined in accordance with Title IV of ERISA, shall be at least $5,000,000, (iv) the Company or any ERISA Affiliate shall have incurred or is reasonably expected to incur any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, (v) the Company or any ERISA Affiliate withdraws from any Multiemployer Plan, or (vi) the Company or any Subsidiary establishes or amends any employee welfare benefit plan that provides post-employment welfare benefits in a

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manner that would increase the liability of the Company or any Subsidiary thereunder; and any such event or events described in clauses (i) through (vi) above, either individually or together with any other such event or events, could reasonably be expected to have a Material Adverse Effect; or

     (k) any Subsidiary Guarantor defaults in the performance of or compliance with any term contained in the Subsidiary Guaranty, and such default continues beyond any period of grace in respect thereof, or the Subsidiary Guaranty ceases to be in full force and effect, except as provided in Section 22, or is declared to be null and void in whole or in material part by a court or other governmental or regulatory authority having jurisdiction or the validity or enforceability thereof shall be contested by any of the Company or any Subsidiary Guarantor or any of them renounces any of the same or denies that it has any or further liability thereunder.

As used in Section 11(j), the terms “employee benefit plan” and “employee welfare benefit plan” shall have the respective meanings assigned to such terms in Section 3 of ERISA.

12. REMEDIES ON DEFAULT, ETC.

12.1. Acceleration.

     (a) If an Event of Default with respect to the Company described in paragraph (g) or (h) of Section 11 (other than an Event of Default described in clause (i) of paragraph (g) or described in clause (vi) of paragraph (g) by virtue of the fact that such clause encompasses clause (i) of paragraph (g)) has occurred, all the Notes then outstanding shall automatically become immediately due and payable.

     (b) If any other Event of Default has occurred and is continuing, holders of a majority or more in principal amount of the Notes at the time outstanding may at any time at its or their option, by notice or notices to the Company, declare all the Notes then outstanding to be immediately due and payable.

     (c) If any Event of Default described in paragraph (a) or (b) of Section 11 has occurred and is continuing, any holder or holders of Notes at the time outstanding affected by such Event of Default may at any time, at its or their option, by notice or notices to the Company, declare all the Notes held by it or them to be immediately due and payable.

          Upon any Notes becoming due and payable under this Section 12.1, whether automatically or by declaration, such Notes will forthwith mature and the entire unpaid principal amount of such Notes, plus (x) all accrued and unpaid interest thereon and (y) the Make-Whole Amount determined in respect of such principal amount (to the full extent permitted by applicable law), shall all be immediately due and payable, in each and every case without presentment, demand, protest or further notice, all of which are hereby waived. The Company acknowledges, and the parties hereto agree, that each holder of a Note has the right to maintain its investment in the Notes free from repayment by the Company (except as herein specifically provided for) and that the provision for payment of a Make-Whole Amount by the Company in

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the event that the Notes are prepaid or are accelerated as a result of an Event of Default, is intended to provide compensation for the deprivation of such right under such circumstances.

12.2. Other Remedies.

          If any Default or Event of Default has occurred and is continuing, and irrespective of whether any Notes have become or have been declared immediately due and payable under Section 12.1, the holder of any Note at the time outstanding may proceed to protect and enforce the rights of such holder by an action at law, suit in equity or other appropriate proceeding, whether for the specific performance of any agreement contained herein or in any Note, or for an injunction against a violation of any of the terms hereof or thereof, or in aid of the exercise of any power granted hereby or thereby or by law or otherwise.

12.3. Rescission.

          At any time after any Notes have been declared due and payable pursuant to clause (b) or (c) of Section 12.1, the holders of a majority in principal amount of the Notes then outstanding, by written notice to the Company, may rescind and annul any such declaration and its consequences if (a) the Company has paid all overdue interest on the Notes, all principal of and Make-Whole Amount, if any, on any Notes that are due and payable and are unpaid other than by reason of such declaration, and all interest on such overdue principal and Make-Whole Amount, if any, and (to the extent permitted by applicable law) any overdue interest in respect of the Notes, at the Default Rate, (b) all Events of Default and Defaults, other than non-payment of amounts that have become due solely by reason of such declaration, have been cured or have been waived pursuant to Section 17, and (c) no judgment or decree has been entered for the payment of any monies due pursuant hereto or to the Notes. No rescission and annulment under this Section 12.3 will extend to or affect any subsequent Event of Default or Default or impair any right consequent thereon.

12.4. No Waivers or Election of Remedies, Expenses, etc.

          No course of dealing and no delay on the part of any holder of any Note in exercising any right, power or remedy shall operate as a waiver thereof or otherwise prejudice such holder’s rights, powers or remedies. No right, power or remedy conferred by this Agreement or by any Note upon any holder thereof shall be exclusive of any other right, power or remedy referred to herein or therein or now or hereafter available at law, in equity, by statute or otherwise. Without limiting the obligations of the Company under Section 15, the Company will pay to the holder of each Note on demand such further amount as shall be sufficient to cover all costs and expenses of such holder incurred in any enforcement or collection under this Section 12, including, without limitation, reasonable attorneys’ fees, expenses and disbursements.

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13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.

13.1. Registration of Notes.

          The Company shall keep at its principal executive office a register for the registration and registration of transfers of Notes. The name and address of each holder of one or more Notes, each transfer thereof and the name and address of each transferee of one or more Notes shall be registered in such register. Prior to due presentment for registration of transfer, the Person in whose name any Note shall be registered shall be deemed and treated as the owner and holder thereof for all purposes hereof, and the Company shall not be affected by any notice or knowledge to the contrary. The Company shall give to any holder of a Note that is an Institutional Investor, promptly upon request therefor, a complete and correct copy of the names and addresses of all registered holders of Notes.

13.2. Transfer and Exchange of Notes.

          Upon surrender of any Note at the principal executive office of the Company for registration of transfer or exchange (and in the case of a surrender for registration of transfer, duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder of such Note or his attorney duly authorized in writing and accompanied by the address for notices of each transferee of such Note or part thereof), the Company shall execute and deliver, at the Company’s expense (except as provided below), one or more new Notes (as requested by the holder thereof) in exchange therefor, in an aggregate principal amount equal to the unpaid principal amount of the surrendered Note. Each such new Note shall be payable to such Person as such holder may request and shall be substantially in the form of Exhibit 1(a). Each such new Note shall be dated and bear interest from the date to which interest shall have been paid on the surrendered Note or dated the date of the surrendered Note if no interest shall have been paid thereon. The Company may require payment of a sum sufficient to cover any stamp tax or governmental charge imposed in respect of any such transfer of Notes. Notes shall not be transferred in denominations of less than $500,000, provided that if necessary to enable the registration of transfer by a holder of its entire holding of Notes, one Note may be in a denomination of less than $500,000. Any transferee, by its acceptance of a Note registered in its name (or the name of its nominee), shall be deemed to have made the representations and agreement set forth in Section 6.

13.3. Replacement of Notes.

          Upon receipt by the Company of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of any Note (which evidence shall be, in the case of an Institutional Investor, notice from such Institutional Investor of such ownership and such loss, theft, destruction or mutilation), and

     (a) in the case of loss, theft or destruction, of indemnity reasonably satisfactory to it (provided that if the holder of such Note is, or is a nominee for, an original Purchaser or another Institutional Investor holder of a Note with a minimum net worth of at least $50,000,000, such Person’s own unsecured agreement of indemnity shall be deemed to be satisfactory), or

32

     (b) in the case of mutilation, upon surrender and cancellation thereof,

the Company at its own expense shall execute and deliver, in lieu thereof, a new Note, dated and bearing interest from the date to which interest shall have been paid on such lost, stolen, destroyed or mutilated Note or dated the date of such lost, stolen, destroyed or mutilated Note if no interest shall have been paid thereon.

14. PAYMENTS ON NOTES.

14.1. Place of Payment.

          Subject to Section 14.2, payments of principal, Make-Whole Amount, if any, and interest becoming due and payable on the Notes shall be made in Chicago, Illinois at the principal office of Bank of America in such jurisdiction. The Company may at any time, by notice to each holder of a Note, change the place of payment of the Notes so long as such place of payment shall be either the principal office of the Company in such jurisdiction or the principal office of a bank or trust company in such jurisdiction.

14.2. Home Office Payment.

          So long as you or your nominee shall be the holder of any Note, and notwithstanding anything contained in Section 14.1 or in such Note to the contrary, the Company will pay all sums becoming due on such Note for principal, Make-Whole Amount, if any, and interest by the method and at the address specified for such purpose below your name in Schedule A, or by such other method or at such other address as you shall have from time to time specified to the Company in writing for such purpose, without the presentation or surrender of such Note or the making of any notation thereon, except that upon written request of the Company made concurrently with or reasonably promptly after payment or prepayment in full of any Note, you shall surrender such Note for cancellation, reasonably promptly after any such request, to the Company at its principal executive office or at the place of payment most recently designated by the Company pursuant to Section 14.1. Prior to any sale or other disposition of any Note held by you or your nominee you will, at your election, either endorse thereon the amount of principal paid thereon and the last date to which interest has been paid thereon or surrender such Note to the Company in exchange for a new Note or Notes pursuant to Section 13.2. The Company will afford the benefits of this Section 14.2 to any Institutional Investor that is the direct or indirect transferee of any Note purchased by you under this Agreement and that has made the same agreement relating to such Note as you have made in this Section 14.2.

15. EXPENSES, ETC.

15.1. Transaction Expenses.

          Whether or not the transactions contemplated hereby are consummated, the Company will pay all costs and expenses (including reasonable attorneys’ fees of one special counsel and, if reasonably required, local or other counsel) incurred by you and each Other Purchaser or holder of a Note in connection with such transactions and in connection with any amendments, waivers or consents under or in respect of this Agreement, the Notes or the

33

Subsidiary Guaranty (whether or not such amendment, waiver or consent becomes effective), including: (a) the costs and expenses incurred in enforcing or defending (or determining whether or how to enforce or defend) any rights under this Agreement, the Notes or the Subsidiary Guaranty or in responding to any subpoena or other legal process or informal investigative demand issued in connection with this Agreement, the Notes or the Subsidiary Guaranty, or by reason of being a holder of any Note, and (b) the costs and expenses, including financial advisors’ fees, incurred in connection with the insolvency or bankruptcy of the Company or any Subsidiary or in connection with any work-out or restructuring of the transactions contemplated hereby and by the Notes. The Company will pay, and will save you and each other holder of a Note harmless from, all claims in respect of any fees, costs or expenses if any, of brokers and finders (other than those retained by you).

15.2. Survival.

          The obligations of the Company under this Section 15 will survive the payment or transfer of any Note, the enforcement, amendment or waiver of any provision of this Agreement or the Notes, and the termination of this Agreement.

16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.

          All representations and warranties contained herein shall survive the execution and delivery of this Agreement and the Notes, the purchase or transfer by you of any Note or portion thereof or interest therein and the payment of any Note, and may be relied upon by any subsequent holder of a Note, regardless of any investigation made at any time by or on behalf of you or any other holder of a Note. All statements contained in any certificate or other instrument delivered by or on behalf of the Company pursuant to this Agreement shall be deemed representations and warranties of the Company under this Agreement. Subject to the preceding sentence, this Agreement and the Notes embody the entire agreement and understanding between you and the Company and supersede all prior agreements and understandings relating to the subject matter hereof.

17. AMENDMENT AND WAIVER.

17.1. Requirements.

          This Agreement, the Notes and the Subsidiary Guaranty may be amended, and the observance of any term hereof or of the Notes may be waived (either retroactively or prospectively), with (and only with) the written consent of the Company and the Required Holders, except that (a) no amendment or waiver of any of the provisions of Section 1, 2, 3, 4, 5, 6 or 21 hereof, or any defined term (as it is used therein), will be effective as to you unless consented to by you in writing, and (b) no such amendment or waiver may, without the written consent of the holder of each Note at the time outstanding affected thereby, (i) subject to the provisions of Section 12 relating to acceleration or rescission, change the amount or time of any prepayment or payment of principal of, or reduce the rate or change the time of payment or method of computation of interest or of the Make-Whole Amount on, the Notes, (ii) change the

34

percentage of the principal amount of the Notes the holders of which are required to consent to any such amendment or waiver, or (iii) amend any of Sections 8, 11(a), 11(b), 12, 17 or 20.

17.2. Solicitation of Holders of Notes.

     (a) Solicitation. The Company will provide each holder of the Notes (irrespective of the amount of Notes then owned by it) with sufficient information, sufficiently far in advance of the date a decision is required, to enable such holder to make an informed and considered decision with respect to any proposed amendment, waiver or consent in respect of any of the provisions hereof or of the Notes. The Company will deliver executed or true and correct copies of each amendment, waiver or consent effected pursuant to the provisions of this Section 17 to each holder of outstanding Notes promptly following the date on which it is executed and delivered by, or receives the consent or approval of, the requisite holders of Notes.

     (b) Payment. The Company will not directly or indirectly pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, or grant any security, to any holder of Notes as consideration for or as an inducement to the entering into by any holder of Notes or any waiver or amendment of any of the terms and provisions hereof unless such remuneration is concurrently paid, or security is concurrently granted, on the same terms, ratably to each holder of Notes then outstanding even if such holder did not consent to such waiver or amendment.

17.3. Binding Effect, etc.

          Any amendment or waiver consented to as provided in this Section 17 applies equally to all holders of Notes and is binding upon them and upon each future holder of any Note and upon the Company without regard to whether such Note has been marked to indicate such amendment or waiver. No such amendment or waiver will extend to or affect any obligation, covenant, agreement, Default or Event of Default not expressly amended or waived or impair any right consequent thereon. No course of dealing between the Company and the holder of any Note nor any delay in exercising any rights hereunder or under any Note shall operate as a waiver of any rights of any holder of such Note. As used herein, the term “this Agreement” or “the Agreement” and references thereto shall mean this Agreement as it may from time to time be amended or supplemented.

17.4. Notes held by Company, etc.

          Solely for the purpose of determining whether the holders of the requisite percentage of the aggregate principal amount of Notes then outstanding approved or consented to any amendment, waiver or consent to be given under this Agreement or the Notes, or have directed the taking of any action provided herein or in the Notes to be taken upon the direction of the holders of a specified percentage of the aggregate principal amount of Notes then outstanding, Notes directly or indirectly owned by the Company or any of its Affiliates shall be deemed not to be outstanding.

35

18. NOTICES.

          All notices and communications provided for hereunder shall be in writing and sent (a) by facsimile if the sender on the same day sends a confirming copy of such notice by a recognized overnight delivery service (charges prepaid), or (b) by registered or certified mail with return receipt requested (postage prepaid), or (c) by a recognized overnight delivery service (with charges prepaid). Any such notice must be sent:

     (i) if to you or your nominee, to you or it at the address specified for such communications in Schedule A, or at such other address as you or it shall have specified to the Company in writing,

     (ii) if to any other holder of any Note, to such holder at such address as such other holder shall have specified to the Company in writing, or

     (iii) if to the Company, to the Company at its address set forth at the beginning hereof to the attention of the Chief Financial Officer, or at such other address as the Company shall have specified to the holder of each Note in writing.

Notices under this Section 18 will be deemed given only when actually received.

19. REPRODUCTION OF DOCUMENTS.

          This Agreement and all documents relating thereto, including, without limitation, (a) consents, waivers and modifications that may hereafter be executed, (b) documents received by you at the Closing (except the Notes themselves), and (c) financial statements, certificates and other information previously or hereafter furnished to you, may be reproduced by you by any photographic, photostatic, microfilm, microcard, miniature photographic or other similar process and you may destroy any original document so reproduced. The Company agrees and stipulates that, to the extent permitted by applicable law, any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made by you in the regular course of business) and any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. This Section 19 shall not prohibit the Company or any other holder of Notes from contesting any such reproduction to the same extent that it could contest the original, or from introducing evidence to demonstrate the inaccuracy of any such reproduction.

20. CONFIDENTIAL INFORMATION.

          For the purposes of this Section 20, “Confidential Information” means information delivered to you by or on behalf of the Company or any Subsidiary in connection with the transactions contemplated by or otherwise pursuant to this Agreement that is proprietary or confidential in nature and that was clearly marked or labeled or otherwise adequately identified when received by you as being confidential information of the Company or such Subsidiary, provided that such term does not include information that (a) was publicly known or otherwise known to you prior to the time of such disclosure, (b) subsequently becomes publicly

36

known through no act or omission by you or any person acting on your behalf, (c) otherwise becomes known to you other than through disclosure by the Company or any Subsidiary or from a third party that was not known to you to be prohibited from making such disclosure or (d) constitutes financial statements delivered to you under Section 7.1 that are otherwise publicly available. You will maintain the confidentiality of such Confidential Information in accordance with procedures adopted by you in good faith to protect confidential information of third parties delivered to you, provided that you may deliver or disclose Confidential Information to (i) your directors, trustees, officers, employees, agents, attorneys and affiliates (to the extent such disclosure reasonably relates to the administration of the investment represented by your Notes), (ii) your financial advisors and other professional advisors who agree to hold confidential the Confidential Information substantially in accordance with the terms of this Section 20, (iii) any other holder of any Note, (iv) any Institutional Investor to which you sell or offer to sell such Note or any part thereof or any participation therein (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this Section 20), (v) any Person from which you offer to purchase any security of the Company (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this Section 20), (vi) any federal or state regulatory authority having jurisdiction over you, (vii) the National Association of Insurance Commissioners or any similar organization, or any nationally recognized rating agency that requires access to information about your investment portfolio or (viii) any other Person to which such delivery or disclosure may be necessary or appropriate (w) to effect compliance with any law, rule, regulation or order applicable to you, (x) in response to any subpoena or other legal process, (y) in connection with any litigation to which you are a party or (z) if an Event of Default has occurred and is continuing, to the extent you may reasonably determine such delivery and disclosure to be necessary or appropriate in the enforcement or for the protection of the rights and remedies under your Notes and this Agreement. Each holder of a Note, by its acceptance of a Note, will be deemed to have agreed to be bound by and to be entitled to the benefits of this Section 20 as though it were a party to this Agreement. On reasonable request by the Company in connection with the delivery to any holder of a Note of information required to be delivered to such holder under this Agreement or requested by such holder (other than a holder that is a party to this Agreement or its nominee), such holder will enter into an agreement with the Company embodying the provisions of this Section 20.

21. SUBSTITUTION OF PURCHASER.

          You shall have the right to substitute any one of your Affiliates as the purchaser of the Notes that you have agreed to purchase hereunder, by written notice to the Company, which notice shall be signed by both you and such Affiliate, shall contain such Affiliate’s agreement to be bound by this Agreement and shall contain a confirmation by such Affiliate of the accuracy with respect to it of the representations set forth in Section 6. Upon receipt of such notice, wherever the word “you” is used in this Agreement (other than in this Section 21), such word shall be deemed to refer to such Affiliate in lieu of you. In the event that such Affiliate is so substituted as a purchaser hereunder and such Affiliate thereafter transfers to you all of the Notes then held by such Affiliate, upon receipt by the Company of notice of such transfer, wherever the word “you” is used in this Agreement (other than in this Section 21), such word shall no longer be deemed to refer to such Affiliate, but shall refer to you, and you shall have all the rights of an original holder of the Notes under this Agreement.

37

22. RELEASE OF SUBSIDIARY GUARANTOR.

          You and each subsequent holder of a Note agree to release any Subsidiary Guarantor from the Subsidiary Guaranty (i) if such Subsidiary Guarantor ceases to be such as a result of a disposition permitted by Sections 10.6, 10.7 or 10.8 or (ii) at such time as the banks party to the Credit Agreement release such Subsidiary from the Bank Guaranty and any other holders of Debt guaranteed by such Subsidiary release such Subsidiary from such Guaranties; provided, however, that you and each subsequent holder will not be required to release a Subsidiary Guarantor from the Subsidiary Guaranty under the circumstances contemplated by clause (ii), if (A) a Default or Event of Default has occurred and is continuing, (B) such Subsidiary Guarantor is to become a borrower under the Credit Agreement or (C) such release is part of a plan of financing that contemplates such Subsidiary Guarantor guaranteeing any other Debt of the Company. Your obligation to release a Subsidiary Guarantor from the Subsidiary Guaranty is conditioned upon your prior receipt of a certificate from a Senior Financial Officer of the Company stating that none of the circumstances described in clauses (A), (B) and (C) above are true.

23. MISCELLANEOUS.

23.1. Successors and Assigns.

          All covenants and other agreements contained in this Agreement by or on behalf of any of the parties hereto bind and inure to the benefit of their respective successors and assigns (including, without limitation, any subsequent holder of a Note) whether so expressed or not.

23.2. Payments Due on Non-Business Days.

          Anything in this Agreement or the Notes to the contrary notwithstanding, any payment of principal of or Make-Whole Amount or interest on any Note that is due on a date other than a Business Day shall be made on the next succeeding Business Day without including the additional days elapsed in the computation of the interest payable on such next succeeding Business Day.

23.3. Severability.

          Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall (to the full extent permitted by law) not invalidate or render unenforceable such provision in any other jurisdiction.

23.4. Construction.

          Each covenant contained herein shall be construed (absent express provision to the contrary) as being independent of each other covenant contained herein, so that compliance

38

with any one covenant shall not (absent such an express contrary provision) be deemed to excuse compliance with any other covenant. Where any provision herein refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person.

23.5. Counterparts.

          This Agreement may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one instrument. Each counterpart may consist of a number of copies hereof, each signed by less than all, but together signed by all, of the parties hereto.

23.6. Governing Law.

          This Agreement shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of Illinois excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State.

39

          If you are in agreement with the foregoing, please sign the form of agreement on the accompanying counterpart of this Agreement and return it to the Company, whereupon the foregoing shall become a binding agreement between you and the Company.

Very truly yours,
ELKCORP
By:
Name:	Gregory J. Fisher
Title:	Senior Vice President, Chief Financial Officer
	and Controller

S-1

The foregoing is agreed
to as of the date thereof.

MONY LIFE INSURANCE COMPANY OF AMERICA

By:	MONY Capital Management, Inc.,
	Authorized Agent
By:
	Leonard Mazlish
	Senior Managing Director

S-2

C.M. LIFE INSURANCE COMPANY

By:

Name:

Title:

HAKONE FUND LLC

By:

Name:

Title:

MASSACHUSETTS MUTUAL LIFE INSURANCE
COMPANY

By:

Name:

Title:

MASSMUTUAL ASIA LIMITED

By:

Name:

Title:

MML BAY STATE LIFE INSURANCE COMPANY

By:

Name:

Title:

S-3

ALLSTATE LIFE INSURANCE COMPANY

By:

Name:

By:

Name:

          Authorized Signatories

S-4

TEACHERS INSURANCE AND ANNUITY

ASSOCIATION OF AMERICA

By:
	Name:
	Title:

S-5

AMERICAN FAMILY LIFE INSURANCE COMPANY

By:
Name:	Phillip Hannifan
Title:	Investment Director

S-6

SCHEDULE A

INFORMATION RELATING TO PURCHASERS

This information is confidential.

Schedule A

1

SCHEDULE B

DEFINED TERMS

          As used herein, the following terms have the respective meanings set forth below or set forth in the Section hereof following such term:

          “Affiliate” means, at any time, and with respect to any Person, (a) any other Person that at such time directly or indirectly through one or more intermediaries Controls, or is Controlled by, or is under common Control with, such first Person, and (b) any Person beneficially owning or holding, directly or indirectly, 10% or more of any class of voting or equity interests of the Company or any Subsidiary or any corporation of which the Company and its Subsidiaries beneficially own or hold, in the aggregate, directly or indirectly, 10% or more of any class of voting or equity interests. As used in this definition, “Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. Unless the context otherwise clearly requires, any reference to an “Affiliate” is a reference to an Affiliate of the Company. Notwithstanding anything in the foregoing to the contrary, a Person that (i) would be an Affiliate of the Company solely by virtue of its ownership of voting or equity interests of the Company and (ii) is eligible pursuant to Rule 13d-1(b) under the Exchange Act to file a statement with the Securities and Exchange Commission on Schedule 13G, shall not be deemed to be an Affiliate.

          “Adjusted Consolidated Net Worth” means, as of any date, consolidated stockholders’ equity of the Company and its Restricted Subsidiaries on such date (including, without duplication, minority interests in Restricted Subsidiaries), less the amount by which outstanding Restricted Investments on such date exceed 20% of consolidated stockholders’ equity of the Company and its Restricted Subsidiaries on such date; provided, however, that the effects on shareholders’ equity of any changes recorded by the Company and its Restricted Subsidiaries related to the impairment of goodwill and other intangibles as may be required under Statement of Financial Accounting Standards No. 142 shall not be taken into account in determining Adjusted Consolidated Net Worth.

          “Anti-Terrorism Order” means Executive Order 13224 of September 23, 2001 Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)).

          “Bank Guaranty” means each of the Subsidiary Guaranties dated as of November 30, 2000, August 15, 2002 and September 30, 2002 of the Subsidiary Guarantors of Debt outstanding under the Credit Agreement, as such Guaranties may be amended, restated or otherwise modified, and any successor thereto.

          “Banks” means the banks party to the Credit Agreement, including Bank of America, N.A., as administrative agent for such banks.

Schedule B

1

          “Business Day” means (a) for the purposes of Section 8.6 only, any day other than a Saturday, a Sunday or a day on which commercial banks in New York City are required or authorized to be closed, and (b) for the purposes of any other provision of this Agreement, any day other than a Saturday, a Sunday or a day on which commercial banks in Chicago, Illinois or New York City are required or authorized to be closed.

          “Capital Lease” means, at any time, a lease with respect to which the lessee is required concurrently to recognize the acquisition of an asset and the incurrence of a liability in accordance with GAAP.

          “Closing” is defined in Section 3.

          “Code” means the Internal Revenue Code of 1986, as amended from time to time, and the rules and regulations promulgated thereunder from time to time.

          “Company” means ELKCORP, a Delaware corporation.

          “Confidential Information” is defined in Section 20.

          “Consolidated EBIT” means, for any period, the sum of Consolidated Net Income for such period, plus, to the extent deducted in determining such Consolidated Net Income, (i) federal, state, local and foreign income, value added and similar taxes and (ii) Consolidated Interest Expense.

          “Consolidated EBITDA” means, for any period, the sum of Consolidated EBIT for such period, (i) plus, to the extent deducted in determining Consolidated Net Income, any (a) depreciation and amortization expense, (b) extraordinary expenses or losses, (c) charges recorded by the Company and its Restricted Subsidiaries related to the impairment of goodwill and other intangibles as may be required under Statement of Financial Accounting Standards No. 142, (d) other non-cash charges, (ii) minus, to the extent included in Consolidated Net Income, any (x) extraordinary income or gains and (y) other non-cash income. If, during the period for which Consolidated EBITDA is being calculated, the Company or a Restricted Subsidiary has (i) acquired one or more Persons (or the assets thereof) or (ii) disposed of one or more Restricted Subsidiaries (or substantially all of the assets thereof), Consolidated EBITDA shall be calculated on a pro forma basis as if all of such acquisitions (other than acquisitions by or resulting in Unrestricted Subsidiaries) and all such dispositions had occurred on the first day of such period.

          “Consolidated Interest Expense” means, for any period, the consolidated interest expense of the Company and its Restricted Subsidiaries for such period determined in accordance with GAAP. If, during the period for which Consolidated Interest Expense is being calculated, the Company or a Restricted Subsidiary has (i) acquired one or more Persons (or the assets thereof) or (ii) disposed of one or more Restricted Subsidiaries (or substantially all of the assets thereof), Consolidated Interest Expense shall be calculated on a pro forma basis as if (i) all of such acquisitions (other than acquisitions by or resulting in Unrestricted Subsidiaries) and all such dispositions had occurred on the first day of such period and (ii) any Debt incurred, assumed,

Schedule B

2

repaid, replaced or refinanced in connection therewith had been so incurred, assumed, repaid, replaced or refinanced on the first day of such period.

          “Consolidated Net Debt” means, as of any date, outstanding Debt of the Company and its Restricted Subsidiaries as determined on a consolidated basis in accordance with GAAP (excluding valuation effects of FAS 133) less cash in excess of $2,000,000.

          “Consolidated Net Income” means, for any period, the net income or loss of the Company and its Restricted Subsidiaries for such period (including, without duplication, income attributed to minority interests) determined on a consolidated basis in accordance with GAAP.

          “Consolidated Total Assets” means, as of any date, the assets and properties of the Company and its Restricted Subsidiaries determined on a consolidated basis in accordance with GAAP.

          “Consolidated Total Capitalization” means, as of any date, the sum of Consolidated Net Debt and Adjusted Consolidated Net Worth as of such date.

          “Credit Agreement” means the Credit Agreement dated as of November 30, 2000, as amended by the First Amendment dated as of March 31, 2001, the Second Amendment dated as of June 5, 2002, the Third Amendment dated as of February 20, 2003, the Fourth Amendment dated as of March 7, 2003 and the Fifth Amendment dated as of December 3, 2003, among the Company and 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, and the other lenders party thereto, as such agreement may be hereafter amended, modified, restated, supplemented, refinanced, increased or reduced from time to time, and any successor credit agreement or similar facilities.

          “Debt” with respect to any Person means, at any time, without duplication,

     (a) its liabilities for borrowed money;

     (b) its liabilities for the deferred purchase price of property acquired by such Person (excluding accounts payable and other accrued liabilities arising in the ordinary course of business but including all liabilities created or arising under any conditional sale or other title retention agreement with respect to any such property);

     (c) all liabilities appearing on its balance sheet in accordance with GAAP in respect of Capital Leases; and

     (d) all liabilities for borrowed money secured by any Lien with respect to any property owned by such Person (whether or not it has assumed or otherwise become liable for such liabilities); and

     (e) any Guaranty of such Person with respect to liabilities of a type described in any of clauses (a) through (d) hereof.

Schedule B

3

          “Default” means an event or condition the occurrence or existence of which would, with the lapse of time or the giving of notice or both, become an Event of Default.

          “Default Rate” means that rate of interest that is the greater of (i) 2% per annum above the rate of interest stated in clause (a) of the first paragraph of the Notes or (ii) 2% over the rate of interest publicly announced by Bank of America in Chicago, Illinois as its “base” or “prime” rate.

          “Disposition” is defined in Section 10.6.

          “Environmental Laws” means any and all Federal, state, local, and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the environment or the release of any materials into the environment, including but not limited to those related to hazardous substances or wastes, air emissions and discharges to waste or public systems.

          “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the rules and regulations promulgated thereunder from time to time in effect.

          “ERISA Affiliate” means any trade or business (whether or not incorporated) that is treated as a single employer together with the Company under section 414 of the Code.

          “Event of Default” is defined in Section 11.

          “Exchange Act” means the Securities Exchange Act of 1934, as amended.

          “Foreign Restricted Subsidiary” means any Restricted Subsidiary organized under the laws of a jurisdiction other than the United States or any state thereof (including the District of Columbia).

          “GAAP” means generally accepted accounting principles as in effect from time to time in the United States of America.

          “Governmental Authority” means

     (a) the government of

     (i) the United States of America or any State or other political subdivision thereof, or

     (ii) any jurisdiction in which the Company or any Subsidiary conducts all or any part of its business, or which asserts jurisdiction over any properties of the Company or any Subsidiary, or

Schedule B

4

     (b) any entity exercising executive, legislative, judicial, regulatory or administrative functions of, or pertaining to, any such government.

          “Guaranty” means, with respect to any Person, any obligation (except the endorsement in the ordinary course of business of negotiable instruments for deposit or collection) of such Person guaranteeing or in effect guaranteeing any indebtedness, dividend or other obligation of any other Person in any manner, whether directly or indirectly, including (without limitation) obligations incurred through an agreement, contingent or otherwise, by such Person:

     (a) to purchase such indebtedness or obligation or any property constituting security therefor;

     (b) to advance or supply funds (i) for the purchase or payment of such indebtedness or obligation, or (ii) to maintain any working capital or other balance sheet condition or any income statement condition of any other Person or otherwise to advance or make available funds for the purchase or payment of such indebtedness or obligation;

     (c) to lease properties or to purchase properties or services primarily for the purpose of assuring the owner of such indebtedness or obligation of the ability of any other Person to make payment of the indebtedness or obligation; or

     (d) otherwise to assure the owner of such indebtedness or obligation against loss in respect thereof.

          In any computation of the indebtedness or other liabilities of the obligor under any Guaranty, the indebtedness or other obligations that are the subject of such Guaranty shall be assumed to be direct obligations of such obligor.

          “Hazardous Material” means any and all pollutants, toxic or hazardous wastes or any other substances that might pose a hazard to health or safety, the removal of which may be required or the generation, manufacture, refining, production, processing, treatment, storage, handling, transportation, transfer, use, disposal, release, discharge, spillage, seepage, or filtration of which is or shall be restricted, prohibited or penalized by any applicable law (including, without limitation, asbestos, urea formaldehyde foam insulation and polycholorinated biphenyls).

          “holder” means, with respect to any Note, the Person in whose name such Note is registered in the register maintained by the Company pursuant to Section 13.1.

          “INHAM Exemption” is defined in Section 6.2(e).

          “Institutional Investor” means (a) any original purchaser of a Note, (b) any holder of more than $2,000,000 in aggregate principal amount of the Notes at the time outstanding, and (c) any bank, trust company, savings and loan association or other financial

Schedule B

5

institution, any pension plan, any investment company, any insurance company, any broker or dealer, or any other similar financial institution or entity, regardless of legal form.

          “Investments” means all investments made, in cash or by delivery of property, directly or indirectly, by any Person, in any other Person, whether by acquisition of shares of capital stock, indebtedness or other obligations or securities or by loan, Guaranty, advance, capital contribution or otherwise.

          “Lien” means, with respect to any Person, any mortgage, lien, pledge, charge, security interest or other encumbrance, or any interest or title of any vendor, lessor, lender or other secured party to or of such Person under any conditional sale or other title retention agreement or Capital Lease, upon or with respect to any property or asset of such Person (including in the case of stock, stockholder agreements, voting trust agreements and all similar arrangements).

          “Make-Whole Amount” is defined in Section 8.6.

          “Material” means material in relation to the business, operations, affairs, financial condition, assets or properties of the Company and its Restricted Subsidiaries taken as a whole.

          “Material Adverse Effect” means a material adverse effect on (a) the business, operations, affairs, financial condition, assets or properties of the Company and its Restricted Subsidiaries taken as a whole, or (b) the ability of the Company to perform its obligations under this Agreement and the Notes, or (c) the ability of any Subsidiary to perform its obligations under the Subsidiary Guaranty, or (d) the validity or enforceability of this Agreement, the Notes or the Subsidiary Guaranty.

          “Memorandum” is defined in Section 5.3.

          “Multiemployer Plan” means any Plan that is a “multiemployer plan” (as such term is defined in section 4001(a)(3) of ERISA).

          “Notes” is defined in Section 1.

          “Officer’s Certificate” means a certificate of a Senior Financial Officer or of any other officer of the Company whose responsibilities extend to the subject matter of such certificate.

          “Other Purchasers” is defined in Section 2.

          “PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA or any successor thereto.

Schedule B

6

          “Person” means an individual, partnership, corporation, limited liability company, association, trust, unincorporated organization, or a government or agency or political subdivision thereof.

          “Plan” means an “employee benefit plan” (as defined in section 3(3) of ERISA) that is or, within the preceding five years, has been established or maintained, or to which contributions are or, within the preceding five years, have been made or required to be made, by the Company or any ERISA Affiliate or with respect to which the Company or any ERISA Affiliate may have any liability.

          “Priority Debt” means, as of any date, the sum (without duplication) of (a) outstanding unsecured Debt of Restricted Subsidiaries that are not Subsidiary Guarantors other than (i) Debt owed to the Company or another Restricted Subsidiary, (ii) Debt of a Person that is not an Unrestricted Subsidiary outstanding at the time it becomes a Restricted Subsidiary and (iii) Debt of Restricted Subsidiaries outstanding on the date of this Agreement that is described in Schedule B-1 and (b) Debt of the Company and its Restricted Subsidiaries secured by Liens not otherwise permitted by Sections 10.5(a) through (h).

          “property” or “properties” means, unless otherwise specifically limited, real or personal property of any kind, tangible or intangible, choate or inchoate.

          “Purchaser” means each purchaser listed in Schedule A.

          “QPAM Exemption” means Prohibited Transaction Class Exemption 84-14 issued by the United States Department of Labor.

          “Required Holders” means, at any time, the holders of at least a majority in principal amount of the Notes at the time outstanding (exclusive of Notes then owned by the Company or any of its Affiliates).

          “Responsible Officer” means any Senior Financial Officer and any other officer of the Company with responsibility for the administration of the relevant portion of this Agreement.

          “Restricted Investments” means all Investments of the Company and its Restricted Subsidiaries, other than:

     (a) property or assets to be used or consumed in the ordinary course of business;

     (b) current assets arising from the sale of goods or services in the ordinary course of business;

     (c) Investments in Restricted Subsidiaries or in any Person that, as a result thereof, becomes a Restricted Subsidiary;

Schedule B

7

     (d) Investments in common stock of the Company;

     (e) Investments existing as of the date of this Agreement that are listed in the attached Schedule B-2; and

     (f) Investments in:

     (i) obligations, maturing within one year from the date of acquisition, of or fully guaranteed by the United States of America, or an agency thereof, or Canada, or any province thereof;

     (ii) state, or municipal securities having an effective maturity within one year from the date of acquisition that are rated in one of the top two rating classifications by at least one nationally recognized rating agency;

     (iii) certificates of deposit or banker’s acceptances maturing within one year from the date of acquisition of or issued by commercial banks whose long-term unsecured debt obligations (or the long-term unsecured debt obligations of the bank holding company owning all of the capital stock of such bank) are rated in one of the top two rating classifications by at least one nationally recognized rating agency;

     (iv) commercial paper maturing within 270 days from the date of issuance that, at the time of acquisition, is rated in one of the top two rating classifications by at least one credit rating agency of recognized national standing;

     (v) repurchase agreements; and

     (vi) money market instrument programs that are properly classified as current assets in accordance with GAAP.

          “Restricted Subsidiary” means any Subsidiary (a) of which at least a majority of the voting securities are owned by the Company and/or one or more Restricted Subsidiaries and (b) that the Company has not designated an Unrestricted Subsidiary by notice in writing given to the holders of the Notes pursuant to Section 10.9 hereof.

          “SEC Reports” means the Company’s Annual Report on Form 10-K for the year ended June 30, 2003 and its Quarterly Reports on Form 10-Q for the periods ending September 30 and December 31, 2003 and March 31, 2004, in each case, as filed with the Securities and Exchange Commission.

          “Securities Act” means the Securities Act of 1933, as amended from time to time.

          “Senior Financial Officer” means the chief financial officer, principal accounting officer, treasurer or comptroller of the Company.

Schedule B

8

          “Source” is defined in Section 6.2.

          “Subsidiary” means, as to any Person, any corporation, association or other business entity in which such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries owns sufficient equity or voting interests to enable it or them (as a group) ordinarily, in the absence of contingencies, to elect a majority of the directors (or Persons performing similar functions) of such entity, and any partnership, limited liability company or joint venture if more than a 50% interest in the profits or capital thereof is owned by such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries (unless such partnership, limited liability company or joint venture can and does ordinarily take major business actions without the prior approval of such Person or one or more of its Subsidiaries). Unless the context otherwise clearly requires, any reference to a “Subsidiary” is a reference to a Subsidiary of the Company.

          “Subsidiary Guarantor” is defined in Section 1.

          “Subsidiary Guaranty” is defined in Section 1.

          “this Agreement” or “the Agreement” is defined in Section 17.3.

          “Unrestricted Subsidiary” means any Subsidiary of the Company that has been so designated by notice in writing given to the holders of the Notes.

          “USA Patriot Act” means Public Law 107-56 of the United States of America, United and Strengthening America by Providing Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act of 2001.

Schedule B

9

SCHEDULE B-1

EXISTING PRIORITY DEBT

None.

Schedule B-1

SCHEDULE B-2

EXISTING INVESTMENTS

The Company maintains a Deferred Compensation Plan for certain of its officers and directors, pursuant to which such persons may defer a portion of their compensation and direct that such deferred compensation be invested in various mutual funds and other investment vehicles. To fund the amounts payable to the participants pursuant to the Deferred Compensation Plan, the Company makes investments in the applicable mutual funds and other investment vehicles. At May 31, 2004, the Company had investments of approximately $2,000,000 pursuant to the Deferred Compensation Plan.

Schedule B-2

SCHEDULE 4.9

CHANGES IN CORPORATE STRUCTURE

None.

Schedule 4.9

SCHEDULE 5.3

DISCLOSURE MATERIALS

See Schedule 5.8.

As contemplated in the Memorandum, the Company may sell its conductive coatings business, including, without limitation, Cybershield, Inc., Cybershield International, Inc., Cybershield of Texas, Inc. and Cybershield of Georgia, Inc., or substantially all of the assets held by such entities. If the Company disposes of the assets of any of these entities, the Company may dissolve such entities following the disposition(s).

Schedule 5.3

SCHEDULE 5.4

SUBSIDIARIES AND AFFILIATES

(a) Subsidiaries and Affiliates

     (i) Subsidiaries

The Company has the Subsidiaries shown on the attached organizational chart (domicile of organization is shown parenthetically for each Subsidiary). Except as otherwise indicated on such organizational chart, line relationships indicate ownership of 100% of the common stock or other voting securities of the underlying Subsidiary. See Schedule 5.3.

     (ii) Affiliates

Except as shown above in part (a)(i) of this Schedule 5.4 and in Schedule B-2, the Company has no equity investments in any other corporation or entity.

     (iii) Directors and Senior Officers of Company

Directors:	James E. Hall*	Richard A. Nowak
	Thomas D. Karol	David W. Quinn***
	Dale V. Kesler**	Harold K. Work
	Michael L. McMahan
	* Chair of Corporate Governance Committee
	** Chair of Compensation Committee
	*** Chair of Audit Committee
Senior Officers:	Thomas D. Karol	Chairman of the Board and Chief Executive Officer
	Richard A. Nowak	President and Chief Operating Officer
	Gregory J. Fisher	Senior Vice President, Chief Financial Officer and Controller
	Matti Kiik	Senior Vice President- Research and Development
	David G. Sisler	Senior Vice President, General Counsel and Secretary
	James J. Waibel	Senior Vice President- Administration
	Leonard R. Harral	Vice President, Chief Accounting Officer and Treasurer
	Thomas W. Cave	Vice President and Assistant Secretary

Schedule 5.4

SCHEDULE 5.5

FINANCIAL STATEMENTS

1.	The financial statements and the notes thereto included in the SEC Form 10-K for each of the fiscal years ended June 30, 1999, 2000, 2001, 2002 and 2003.
2.	The financial statements and the notes thereto included in the SEC Forms 10-Q for the fiscal quarters ended September 30, 2003, December 31, 2003 and March 31, 2004.

Schedule 5.5

SCHEDULE 5.8

CONFIDENTIAL

LITIGATION

This information is confidential.

Schedule 5.8

SCHEDULE 5.11

LICENSES, PERMITS, ETC.

None.

Schedule 5.11

SCHEDULE 5.15

EXISTING DEBT

Debt of the Company and its Subsidiaries as of March 31, 2004:

ElkCorp	6.99% Senior Notes, Series A, due June 15, 2009	$	60,000,000
ElkCorp	7.49% Senior Notes, Series B, due June 15, 2012	$	60,000,000
ElkCorp	4.69% Senior Notes due July 15, 2007	$	25,000,000

The Company also maintains the Credit Agreement. At March 31, 2004, $18,200,000 was outstanding under the Credit Agreement and at May 31, 2004, $37,400,000 was outstanding under the Credit Agreement.

At March 31, 2004, the Company had $3,079,000 of letters of credit outstanding under the Credit Agreement. In connection with the disposition of its conductive coatings business, the Company may issue a letter of credit in an amount up to $500,000.

Effective June 17, 2002, the Company entered into a pay floating (6 month Libor plus 1.91%), receive fixed (7.49%), interest rate swap with Bank of America, N.A. through June 15, 2012, covering a notional amount of $60,000,000. In addition, the Company may enter into an interest rate swap on its $25,000,000 of 4.69% Senior Notes due July 15, 2007, converting the Indebtedness evidenced by such Notes from fixed rate to floating rate. These interest rate swaps do not constitute Debt.

The Subsidiaries guarantee the obligations set forth above and any future obligations that may become outstanding under the Credit Agreement.

Schedule 5.15

SCHEDULE 5.18

ENVIRONMENTAL MATTERS

Chromium has engaged in limited remediation activities at its former plating operation, which is located on the site of Cybershield’s Lufkin, Texas manufacturing facility. 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 cleanup plan the applicant submits, and, 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.

Under the VCP, Chromium submitted a testing program, which the TCEQ has approved, for a supplemental groundwater and soil assessment at the facility. This program was designed to, among other things, further define the cleanup requirements at the site. Once the investigation is complete, Chromium intends to clean up the site under the VCP to a site specific risk-based cleanup standard as prescribed by the Texas Risk Reduction Program. Preliminary results from recent groundwater and soil assessments indicate that there has been no environmental impairment beyond Company property boundaries or to any aquifer. However, until Chromium has the final results from its supplemental assessment and completes its cleanup plan, the estimate of costs to remediate the site are not determinable, nor can the Company determine at this point in time if it is reasonably possible that it will incur material additional costs at the site. If a remediation plan similar to a plan successfully used at another Chromium plant is approved by TCEQ, remediation costs will be immaterial to the Company’s consolidated results of operations, financial position and liquidity. However, other potential scenarios, none of which are reasonably expected at this time, could potentially result in material costs to the Company. It is not possible to estimate potential environmental exposure until this testing is complete and a remediation plan is developed for submission to the TCEQ. The Company believes that sufficient information for establishing a reserve for this environmental exposure in accordance with SFAS No. 5, “Accounting for Contingencies,” may be available by the end of the first half of fiscal 2005, and further anticipates that it may be in a position at that time to determine if it is reasonably possible that the Company will incur material additional costs with regard to this site.

The Company’s operations are subject to extensive federal, state and local laws and regulations relating to environmental matters. 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.

Schedule 5.18

SCHEDULE 10.5

EXISTING LIENS

Cybershield of Georgia, Inc.	The real property comprising Cybershield of Georgia, Inc.’s
	Canton, Georgia facility was conveyed to Cherokee County,
	Georgia and leased-back for nominal consideration in
	exchange for tax abatements granted by Cherokee County.
	At the conclusion of the tax abatement, Cybershield of
	Georgia, Inc. may obtain title to the property for nominal or
	no consideration.

Schedule 10.5

EXHIBIT 1(a)

[FORM OF SENIOR NOTE]

ELKCORP

6.28% SENIOR NOTE
DUE NOVEMBER 15, 2014

No. R-[                   ]	[Date]
$[                   ]	PPN: 287456 A@ 6

         FOR VALUE RECEIVED, the undersigned, ELKCORP (herein called the “Company”), a corporation organized and existing under the laws of the State of Delaware, promises to pay to [    ], or registered assigns, the principal sum of $[      ] on November 15, 2014, with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of 6.28% per annum from the date hereof, payable semiannually, on May 15 and November 15 in each year, commencing with the May or November next succeeding the date hereof, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law on any overdue payment (including any overdue prepayment) of principal, any overdue payment of interest and any overdue payment of any Make-Whole Amount (as defined in the Note Purchase Agreement referred to below), payable semiannually as aforesaid (or, at the option of the registered holder hereof, on demand), at a rate per annum from time to time equal to the greater of (i) 8.28% or (ii) 2% over the rate of interest publicly announced by Bank of America, or its successor, from time to time in Chicago, Illinois as its “base” or “prime” rate.

         Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America at the principal office of Bank of America in Chicago, Illinois or at such other place as the Company shall have designated by written notice to the holder of this Note as provided in the Note Purchase Agreement referred to below.

         This Note is one of a series of Senior Notes (herein called the “Notes”) issued pursuant to a Note Purchase Agreement dated as of June 15, 2004 (as from time to time amended, the “Note Purchase Agreement”), between the Company and the respective Purchasers named therein and is entitled to the benefits thereof. Each holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality provisions set forth in Section 20 of the Note Purchase Agreement and (ii) to have made the representations and agreement set forth in Section 6 of the Note Purchase Agreement.

         This Note is a registered Note and, as provided in the Note Purchase Agreement, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a

Exhibit 1(a)

written instrument of transfer duly executed, by the registered holder hereof or such holder’s attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary.

         This Note is subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreement but not otherwise.

         If an Event of Default, as defined in the Note Purchase Agreement, occurs and is continuing, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Note Purchase Agreement.

         Payment of the principal of, and interest and Make-Whole Amount, if any, on this Note, and all other amounts due under the Note Purchase Agreement, is guaranteed pursuant to the terms of a Guaranty dated as of November 15, 2004 of certain subsidiaries of the Company.*

         This Note shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of Illinois excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State.

ELKCORP

By:

Name:

Title:

* This paragraph must be removed at such time as there are no Subsidiary Guarantors.

Exhibit 1(a)

2

EXHIBIT 1(b)

[FORM OF SUBSIDIARY GUARANTY]

     THIS GUARANTY (this “Guaranty”) dated as of November 15, 2004 is made by the undersigned (each, a “Guarantor”), in favor of the holders from time to time of the Notes hereinafter referred to, including each purchaser named in the Note Purchase Agreement hereinafter referred to, and their respective successors and assigns (collectively, the “Holders” and each individually, a “Holder”).

W I T N E S S E T H:

     WHEREAS, ELKCORP, a Delaware corporation (the “Company”), and the initial Holders have entered into a Note Purchase Agreement dated as of June 15, 2004 (the Note Purchase Agreement as amended, supplemented, restated or otherwise modified from time to time in accordance with its terms and in effect, the “Note Purchase Agreement”);

     WHEREAS, the Note Purchase Agreement provides for the issuance by the Company of $50,000,000 aggregate principal amount of Notes (as defined in the Note Purchase Agreement);

     WHEREAS, the Company owns, directly or indirectly, all of the issued and outstanding capital stock or partnership interests of each Guarantor and, by virtue of such ownership and otherwise, each Guarantor will derive substantial benefits from the purchase by the Holders of the Company’s Notes;

     WHEREAS, it is a condition precedent to the obligation of the Holders to purchase the Notes that each Guarantor shall have executed and delivered this Guaranty to the Holders; and

     WHEREAS, each Guarantor desires to execute and deliver this Guaranty to satisfy the conditions described in the preceding paragraph;

     NOW, THEREFORE, in consideration of the premises and other benefits to each Guarantor, and of the purchase of the Company’s Notes by the Holders, and for other good and valuable consideration, the receipt and sufficiency of which are acknowledged, each Guarantor makes this Guaranty as follows:

     SECTION 1. Definitions. Any capitalized terms not otherwise herein defined shall have the meanings attributed to them in the Note Purchase Agreement.

     SECTION 2. Guaranty. Each Guarantor, jointly and severally with each other Guarantor, unconditionally and irrevocably guarantees to the Holders the due, prompt and complete payment by the Company of the principal of, Make-Whole Amount, if any, and interest on, and each other amount due under, the Notes or the Note Purchase Agreement, when and as the same shall become due and payable (whether at stated maturity or by required or optional prepayment or by declaration or otherwise) in accordance with the terms of the Notes and the Note Purchase Agreement (the Notes and the Note Purchase Agreement being sometimes

Exhibit 1(b)

hereinafter collectively referred to as the “Note Documents” and the amounts payable by the Company under the Note Documents, and all other monetary obligations of the Company thereunder, being sometimes collectively hereinafter referred to as the “Obligations”). This Guaranty is a guaranty of payment and not just of collectibility and is in no way conditioned or contingent upon any attempt to collect from the Company or upon any other event, contingency or circumstance whatsoever. If for any reason whatsoever the Company shall fail or be unable duly, punctually and fully to pay such amounts as and when the same shall become due and payable, each Guarantor, without demand, presentment, protest or notice of any kind, will forthwith pay or cause to be paid such amounts to the Holders under the terms of such Note Documents, in lawful money of the United States, at the place specified in the Note Purchase Agreement, or perform or comply with the same or cause the same to be performed or complied with, together with interest (to the extent provided for under such Note Documents) on any amount due and owing from the Company. Each Guarantor, promptly after demand, will pay to the Holders the reasonable costs and expenses of collecting such amounts or otherwise enforcing this Guaranty, including, without limitation, the reasonable fees and expenses of counsel. Notwithstanding the foregoing, the right of recovery against each Guarantor under this Guaranty is limited to the extent it is judicially determined with respect to any Guarantor that entering into this Guaranty would violate Section 548 of the United States Bankruptcy Code or any comparable provisions of any state law, in which case such Guarantor shall be liable under this Guaranty only for amounts aggregating up to the largest amount that would not render such Guarantor’s obligations hereunder subject to avoidance under Section 548 of the United States Bankruptcy Code or any comparable provisions of any state law.

     SECTION 3. Guarantor’s Obligations Unconditional. The obligations of each Guarantor under this Guaranty shall be primary, absolute and unconditional obligations of each Guarantor, shall not be subject to any counterclaim, set-off, deduction, diminution, abatement, recoupment, suspension, deferment, reduction or defense based upon any claim each Guarantor or any other person may have against the Company or any other person, and to the full extent permitted by applicable law shall remain in full force and effect without regard to, and shall not be released, discharged or in any way affected by, any circumstance or condition whatsoever (whether or not each Guarantor or the Company shall have any knowledge or notice thereof), including:

     (a) any termination, amendment or modification of or deletion from or addition or supplement to or other change in any of the Note Documents or any other instrument or agreement applicable to any of the parties to any of the Note Documents;

     (b) any furnishing or acceptance of any security, or any release of any security, for the Obligations, or the failure of any security or the failure of any person to perfect any interest in any collateral;

     (c) any failure, omission or delay on the part of the Company to conform or comply with any term of any of the Note Documents or any other instrument or agreement referred to in paragraph (a) above, including, without limitation, failure to give notice to any Guarantor of the occurrence of a “Default” or an “Event of Default” under any Note Document;

Exhibit 1(b)

2

     (d) any waiver of the payment, performance or observance of any of the obligations, conditions, covenants or agreements contained in any Note Document, or any other waiver, consent, extension, indulgence, compromise, settlement, release or other action or inaction under or in respect of any of the Note Documents or any other instrument or agreement referred to in paragraph (a) above or any obligation or liability of the Company, or any exercise or non-exercise of any right, remedy, power or privilege under or in respect of any such instrument or agreement or any such obligation or liability;

     (e) any failure, omission or delay on the part of any of the Holders to enforce, assert or exercise any right, power or remedy conferred on such Holder in this Guaranty, or any such failure, omission or delay on the part of such Holder in connection with any Note Document, or any other action on the part of such Holder;

     (f) any voluntary or involuntary bankruptcy, insolvency, reorganization, arrangement, readjustment, assignment for the benefit of creditors, composition, receivership, conservatorship, custodianship, liquidation, marshaling of assets and liabilities or similar proceedings with respect to the Company, any Guarantor or to any other person or any of their respective properties or creditors, or any action taken by any trustee or receiver or by any court in any such proceeding;

     (g) any discharge, termination, cancellation, frustration, irregularity, invalidity or unenforceability, in whole or in part, of any of the Note Documents or any other agreement or instrument referred to in paragraph (a) above or any term hereof;

     (h) any merger or consolidation of the Company or any Guarantor into or with any other corporation, or any sale, lease or transfer of any of the assets of the Company or any Guarantor to any other person;

     (i) any change in the ownership of any shares of capital stock of the Company or any change in the corporate relationship between the Company and any Guarantor, or any termination of such relationship;

     (j) any release or discharge, by operation of law, of any Guarantor from the performance or observance of any obligation, covenant or agreement contained in this Guaranty; or

     (k) any other occurrence, circumstance, happening or event whatsoever, whether similar or dissimilar to the foregoing, whether foreseen or unforeseen, and any other circumstance which might otherwise constitute a legal or equitable defense or discharge of the liabilities of a guarantor or surety or which might otherwise limit recourse against any Guarantor.

Exhibit 1(b)

3

     SECTION 4. Full Recourse Obligations. The obligations of each Guarantor set forth herein constitute the full recourse obligations of such Guarantor enforceable against it to the full extent of all its assets and properties.

     SECTION 5. Waiver. Each Guarantor unconditionally waives, to the extent permitted by applicable law, (a) notice of any of the matters referred to in Section 3, (b) notice to such Guarantor of the incurrence of any of the Obligations, notice to such Guarantor or the Company of any breach or default by such Company with respect to any of the Obligations or any other notice that may be required, by statute, rule of law or otherwise, to preserve any rights of the Holders against such Guarantor, (c) presentment to or demand of payment from the Company or the Guarantor with respect to any amount due under any Note Document or protest for nonpayment or dishonor, (d) any right to the enforcement, assertion or exercise by any of the Holders of any right, power, privilege or remedy conferred in the Note Purchase Agreement or any other Note Document or otherwise, (e) any requirement of diligence on the part of any of the Holders, (f) any requirement to exhaust any remedies or to mitigate the damages resulting from any default under any Note Document, (g) any notice of any sale, transfer or other disposition by any of the Holders of any right, title to or interest in the Note Purchase Agreement or in any other Note Document and (h) any other circumstance whatsoever which might otherwise constitute a legal or equitable discharge, release or defense of a guarantor or surety or which might otherwise limit recourse against such Guarantor.

     SECTION 6. Subrogation, Contribution, Reimbursement or Indemnity. Until one year and one day after all Obligations have been indefeasibly paid in full, each Guarantor agrees not to take any action pursuant to any rights which may have arisen in connection with this Guaranty to be subrogated to any of the rights (whether contractual, under the United States Bankruptcy Code, as amended, including Section 509 thereof, under common law or otherwise) of any of the Holders against the Company or against any collateral security or guaranty or right of offset held by the Holders for the payment of the Obligations. Until one year and one day after all Obligations have been indefeasibly paid in full, each Guarantor agrees not to take any action pursuant to any contractual, common law, statutory or other rights of reimbursement, contribution, exoneration or indemnity (or any similar right) from or against the Company which may have arisen in connection with this Guaranty. So long as the Obligations remain, if any amount shall be paid by or on behalf of the Company to any Guarantor on account of any of the rights waived in this paragraph, such amount shall be held by such Guarantor in trust, segregated from other funds of such Guarantor, and shall, forthwith upon receipt by such Guarantor, be turned over to the Holders (duly endorsed by such Guarantor to the Holders, if required), to be applied against the Obligations, whether matured or unmatured, in such order as the Holders may determine. The provisions of this paragraph shall survive the term of this Guaranty and the payment in full of the Obligations.

     SECTION 7. Effect of Bankruptcy Proceedings, etc. This Guaranty shall continue to be effective or be automatically reinstated, as the case may be, if at any time payment, in whole or in part, of any of the sums due to any of the Holders pursuant to the terms of the Note Purchase Agreement or any other Note Document is rescinded or must otherwise be restored or returned by such Holder upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the

Exhibit 1(b)

4

Company or any other person, or upon or as a result of the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to the Company or other person or any substantial part of its property, or otherwise, all as though such payment had not been made. If an event permitting the acceleration of the maturity of the principal amount of the Notes shall at any time have occurred and be continuing, and such acceleration shall at such time be prevented by reason of the pendency against the Company or any other person of a case or proceeding under a bankruptcy or insolvency law, each Guarantor agrees that, for purposes of this Guaranty and its obligations hereunder, the maturity of the principal amount of the Notes and all other Obligations shall be deemed to have been accelerated with the same effect as if any Holder had accelerated the same in accordance with the terms of the Note Purchase Agreement or other applicable Note Document, and such Guarantor shall forthwith pay such principal amount, Make-Whole Amount, if any, and interest thereon and any other amounts guaranteed hereunder without further notice or demand.

     SECTION 8. Term of Agreement. This Guaranty and all guaranties, covenants and agreements of each Guarantor contained herein shall continue in full force and effect and shall not be discharged until such time as all of the Obligations shall be paid and performed in full and all of the agreements of such Guarantor hereunder shall be duly paid and performed in full.

     SECTION 9. Representations and Warranties. Each Guarantor represents and warrants to each Holder that:

     (a) such Guarantor is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and has the requisite power and authority to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged;

     (b) such Guarantor has the requisite power and authority and the legal right to execute and deliver, and to perform its obligations under, this Guaranty, and has taken all necessary action to authorize its execution, delivery and performance of this Guaranty;

     (c) this Guaranty constitutes a legal, valid and binding obligation of such Guarantor enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law);

     (d) the execution, delivery and performance of this Guaranty will not (i) contravene, result in any breach of, or constitute a default under, or result in the creation of any Lien in respect of any property of such Guarantor under any indenture, mortgage, deed of trust, loan, credit agreement, corporate charter or by-laws, or any other agreement evidencing Debt, (ii) contravene, result in any breach of, or constitute a default under, or result in the creation of any Lien in respect of any property of such Guarantor under, any other agreement or instrument to which such Guarantor is bound or by which

Exhibit 1(b)

5

such Guarantor or any of its properties may be bound or affected, except as could not reasonably be expected to have a Material Adverse Effect, (iii) conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree, or ruling of any court, arbitrator or Governmental Authority applicable to such Guarantor, except as could not reasonably be expected to have a Material Adverse Effect, or (iv) violate any provision of any statute or other rule or regulation of any Governmental Authority applicable to such Guarantor, except as could not reasonably be expected to have a Material Adverse Effect;

     (e) no consent, approval or authorization of, or registration, filing or declaration with, any Governmental Authority is required in connection with the execution, delivery or performance by such Guarantor of this Guaranty;

     (f) except as disclosed in Section 5.8 of the Note Purchase Agreement, no litigation, investigation or proceeding of or before any arbitrator or governmental authority is pending or, to the knowledge of such Guarantor, threatened by or against such Guarantor or any of its properties or revenues (i) with respect to this Guaranty or any of the transactions contemplated hereby or (ii) which could reasonably be expected to have a Material Adverse Effect;

     (g) such Guarantor (after giving due consideration to any rights of contribution) has received fair consideration and reasonably equivalent value for the incurrence of its obligations hereunder or as contemplated hereby and after giving effect to the transactions contemplated herein, (i) the fair value of the assets of such Guarantor (both at fair valuation and at present fair saleable value) exceeds its liabilities, (ii) such Guarantor is able to and expects to be able to pay its debts as they mature, and (iii) such Guarantor has capital sufficient to carry on its business as conducted and as proposed to be conducted.

     SECTION 10. Notices. All notices under the terms and provisions hereof shall be in writing, and shall be delivered or sent by facsimile if the sender on the same day sends a confirming copy of such notice by a recognized overnight delivery service (charges prepaid), mailed by registered or certified mail with return receipt requested (postage prepaid), or sent by a recognized overnight delivery service, charges prepaid, addressed (a) if to the Company or any Holder at the address set forth in, the Note Purchase Agreement or (b) if to a Guarantor, in care of the Company at the Company’s address set forth in the Note Purchase Agreement, or in each case at such other address as the Company, any Holder or such Guarantor shall from time to time designate in writing to the other parties. Any notice so addressed shall be deemed to be given when actually received.

     SECTION 11. Survival. All warranties, representations and covenants made by each Guarantor herein or in any certificate or other instrument delivered by it or on its behalf hereunder shall be considered to have been relied upon by the Holders and shall survive the execution and delivery of this Guaranty, regardless of any investigation made by any of the

Exhibit 1(b)

6

Holders. All statements in any such certificate or other instrument shall constitute warranties and representations by such Guarantor hereunder.

     SECTION 12. Submission to Jurisdiction. Each Guarantor irrevocably submits to the jurisdiction of the courts of the State of Illinois and of the courts of the United States of America having jurisdiction in the State of Illinois for the purpose of any legal action or proceeding in any such court with respect to, or arising out of, this Guaranty, the Note Purchase Agreement or the Notes. Each Guarantor consents to process being served in any suit, action or proceeding by mailing a copy thereof by registered or certified mail, postage prepaid, return receipt requested. Each Guarantor agrees that such service upon receipt (i) shall be deemed in every respect effective service of process upon it in any such suit, action or proceeding and (ii) shall, to the fullest extent permitted by law, be taken and held to be valid personal service upon and personal delivery to such Guarantor.

     SECTION 13. Miscellaneous. Any provision of this Guaranty which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by applicable law, each Guarantor hereby waives any provision of law that renders any provisions hereof prohibited or unenforceable in any respect. The terms of this Guaranty shall be binding upon, and inure to the benefit of, each Guarantor and the Holders and their respective successors and assigns. No term or provision of this Guaranty may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by each Guarantor and the Required Holders. The section and paragraph headings in this Guaranty are for convenience of reference only and shall not modify, define, expand or limit any of the terms or provisions hereof, and all references herein to numbered sections, unless otherwise indicated, are to sections in this Guaranty. This Guaranty shall in all respects be governed by, and construed in accordance with, the laws of the State of Illinois, including all matters of construction, validity and performance.

Exhibit 1(b)

7

            IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be duly executed as of the day and year first above written.

Chromium Corporation

Cybershield, Inc.

Cybershield of Georgia, Inc.

Cybershield International, Inc.

Cybershield of Texas, Inc.

Elk Composite Building Products, Inc.

Elk Corporation of Alabama

Elk Corporation of America

Elk Corporation of Arkansas

Elk Corporation of Texas

Elk Group, Inc.

Elk Performance Nonwoven Fabrics, Inc.

Elk Premium Building Products, Inc.

Elk Technologies, Inc.

Elk Technology Group, Inc.

OEL, Ltd.

Gregory J. Fisher

Vice President

Elk Group, L.P.

By: Elk Group, Inc.

Its General Partner

Gregory J. Fisher

Vice President

Exhibit 1(b)

8

NELPA, Inc.

Monte L. Miller

President, Secretary and Treasurer

Exhibit 1(b)

9

FORM OF JOINDER TO SUBSIDIARY GUARANTY

     The undersigned (the “Guarantor”), joins in the Subsidiary Guaranty dated as of November 15, 2004 from the Guarantors named therein in favor of the Holders, as defined therein, and agrees to be bound by all of the terms thereof and represents and warrants to the Holders that:

     (a) the Guarantor is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and has the requisite power and authority to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged;

     (b) the Guarantor has the requisite power and authority and the legal right to execute and deliver this Joinder to Subsidiary Guaranty (“Joinder”) and to perform its obligations hereunder and under the Subsidiary Guaranty and has taken all necessary action to authorize its execution and delivery of this Joinder and its performance of the Subsidiary Guaranty;

     (c) the Subsidiary Guaranty constitutes a legal, valid and binding obligation of the Guarantor enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law);

     (d) the execution, delivery and performance of this Joinder will not (i) contravene, result in any breach of, or constitute a default under, or result in the creation of any Lien in respect of any property of such Guarantor under any indenture, mortgage, deed of trust, loan, credit agreement, corporate charter or by-laws, or any other agreement evidencing Debt, (ii) contravene, result in any breach of, or constitute a default under, or result in the creation of any Lien in respect of any property of such Guarantor under, any other agreement or instrument to which such Guarantor is bound or by which such Guarantor or any of its properties may be bound or affected, except as could not reasonably be expected to have a Material Adverse Effect, (iii) conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree, or ruling of any court, arbitrator or Governmental Authority applicable to such Guarantor, except as could not reasonably be expected to have a Material Adverse Effect, or (iv) violate any provision of any statute or other rule or regulation of any Governmental Authority applicable to such Guarantor, except as could not reasonably be expected to have a Material Adverse Effect;

     (e) no consent, approval or authorization of, or registration, filing or declaration with, any Governmental Authority is required in connection with the execution, delivery or performance by such Guarantor of this Joinder;

Exhibit 1(b)

10

     (f) except as disclosed in writing to the Holders, no litigation, investigation or proceeding of or before any arbitrator or governmental authority is pending or, to the knowledge of the Guarantor, threatened by or against the Guarantor or any of its properties or revenues (i) with respect to this Joinder, the Subsidiary Guaranty or any of the transactions contemplated hereby or (ii) that could reasonably be expected to have a Material Adverse Effect;

     (g) such Guarantor (after giving due consideration to any rights of contribution) has received fair consideration and reasonably equivalent value for the incurrence of its obligations hereunder or as contemplated hereby and after giving effect to the transactions contemplated herein, (i) the fair value of the assets of such Guarantor (both at fair valuation and at present fair saleable value) exceeds its liabilities, (ii) such Guarantor is able to and expects to be able to pay its debts as they mature, and (iii) such Guarantor has capital sufficient to carry on its business as conducted and as proposed to be conducted.

Capitalized Terms used but not defined herein have the meanings ascribed in the Subsidiary Guaranty.

            IN WITNESS WHEREOF, the undersigned has caused this Joinder to Subsidiary Guaranty to be duly executed as of                ,      .

[Name of Guarantor]

By:

Name:

Title:

Exhibit 1(b)

11

EXHIBIT 4.4(a)

FORM OF OPINION OF COUNSEL
TO THE COMPANY

     The opinion of Baker & McKenzie, counsel to the Company, shall be to the effect that:

     1. Each of the Company and each Subsidiary Guarantor is a corporation or limited partnership validly existing and in good standing under the laws of its jurisdiction of organization, and each has all requisite corporate or partnership power and authority to own and operate its properties, to carry on its business as now conducted, and, in the case of the Company, to enter into and perform the Agreement and to issue and sell the Notes and, in the case of each Subsidiary Guarantor, to enter into and perform the Subsidiary Guaranty.

     2. The Agreement and the Notes have been duly authorized by proper corporate action on the part of the Company, have been duly executed and delivered by an authorized officer of the Company and constitute the legal, valid and binding agreements of the Company, enforceable in accordance with their terms, except to the extent that enforcement thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws of general application relating to or affecting the enforcement of the rights of creditors or by equitable principles, regardless of whether enforcement is sought in a proceeding in equity or at law.

     3. The Subsidiary Guaranty has been duly authorized by proper corporate or partnership action on the part of each Subsidiary Guarantor, has been duly executed and delivered by an authorized officer of each such Subsidiary Guarantor (or the General Partner thereof) and constitutes the legal, valid and binding obligation of each Subsidiary Guarantor, enforceable in accordance with its terms, except to the extent the enforcement thereof may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar laws of general application relating to or affecting the enforcement of the rights of creditors or by equitable principles, regardless of whether enforcement is sought in a proceeding in equity or at law.

     4. A Texas court, or a Federal court sitting in Texas, would honor the choice of Illinois law to govern the Agreement, the Notes and the Subsidiary Guaranty.

     5. Based on the representations set forth in the Agreement, the offer, sale and delivery of the Notes and delivery of the Subsidiary Guaranty do not require the registration of the Notes or the Subsidiary Guaranty under the Securities Act of 1933, as amended, or the qualification of an indenture under the Trust Indenture Act of 1939, as amended.

     6. No authorization, approval or consent of, and no designation, filing, declaration, registration and/or qualification with, any Governmental Authority is necessary or required in connection with the execution, delivery and performance by the Company of the Note Purchase

Exhibit 4.4(a)

Agreement or the offer, issuance and sale by the Company of the Notes, and no authorization, approval or consent of, and no designation, filing, declaration, registration and/or qualification with, any Governmental Authority is necessary or required in connection with the execution, delivery and performance by any Subsidiary Guarantor of the Subsidiary Guaranty.

     7. The issuance and sale of the Notes by the Company, and the execution, delivery and performance by the Company of the terms and conditions of the Notes and the Agreement do not result in any breach or violation of any of the provisions of, or constitute a default under, or result in the creation or imposition of any Lien on, the property of the Company or any Subsidiary pursuant to the provisions of (i) the certificate or articles of incorporation or bylaws of the Company or any Subsidiary, (ii) any loan agreement to which the Company or any Subsidiary is a party or by which any of them or their property is bound that is filed (or incorporated by reference) as an exhibit to the Company’s Annual Report on Form 10-K for its fiscal year ended June 30, 2003 or any other report or registration statement subsequently filed by the Company with the Securities and Exchange Commission, (iii) any other Material agreement or instrument to which the Company or any Subsidiary is a party or by which any of them or their property is bound that is filed (or incorporated by reference) as an exhibit to the Company’s Annual Report on Form 10-K for its fiscal year ended June 30, 2003 or any other report or registration statement subsequently filed by the Company with the Securities and Exchange Commission, (iv) any law (including usury laws) or regulation applicable to the Company, or (v) to the knowledge of such counsel, any order, writ, injunction or decree of any court or Governmental Authority applicable to the Company.

     8. The execution, delivery and performance of the Subsidiary Guaranty do not result in any breach or violation of any of the provisions of, or constitute a default under, or result in the creation or imposition of any Lien on, the property of any Subsidiary Guarantor pursuant to the provisions of (i) its certificate or articles of incorporation or by-laws, (ii) any loan agreement to which any Subsidiary Guarantor is a party or by which it or its property is bound that is filed (or incorporated by reference) as an exhibit to the Company’s Annual Report on Form 10-K for its fiscal year ended June 30, 2003 or any other report or registration statement subsequently filed by the Company with the Securities and Exchange Commission, (iii) any other Material agreement or instrument to which any Subsidiary Guarantor is a party or by which it or its property is bound that is filed (or incorporated by reference) as an exhibit to the Company’s Annual Report on Form 10-K for its fiscal year ended June 30, 2003 or any other report or registration statement subsequently filed by the Company with the Securities and Exchange Commission, (iv) any law or regulation applicable to any Subsidiary Guarantor, or (v) to the knowledge of such counsel, any order, writ, injunction or decree of any court or Governmental Authority applicable to any Subsidiary Guarantor.

     9. Except as disclosed in Schedule 5.8 to the Note Purchase Agreement, to such counsel’s knowledge there are no actions, suits or proceedings pending, or threatened against the Company or any Subsidiary, at law or in equity or before or by any Governmental Authority, that are likely to result, individually or in the aggregate, in a Material Adverse Effect.

Exhibit 4.4(a)

2

     9. Neither the Company nor any Subsidiary is (i) a “public utility company” or a “holding company,” or a “subsidiary company” of a “holding company,” as such terms are defined in the Public Utility Holding Company Act of 1935, as amended, (ii) a “public utility” as defined in the Federal Power Act, as amended, or (iii) an “investment company” or a company “controlled” by an “investment company,” as such terms are defined in the Investment Company Act of 1940, as amended.

     10. The issuance of the Notes and the intended use of the proceeds of the sale of the Notes do not violate or conflict with Regulation U, T or X of the Board of Governors of the Federal Reserve System.

The opinion of Baker & McKenzie shall cover such other matters relating to the sale of the Notes as the Purchasers may reasonably request. With respect to matters of fact on which such opinion is based, such counsel shall be entitled to rely on appropriate certificates of public officials and officers of the Company. With respect to matters governed by the laws of any jurisdiction other than the United States of America and the States of Delaware and Texas, such counsel may rely upon the opinions of counsel deemed (and stated in their opinion to be deemed) by them to be competent and reliable; provided that, with respect to the opinions in numbered paragraphs 2 and 3, such counsel may assume that the laws of the State of Illinois are the same as the laws of the State of Texas. Such opinion shall state that subsequent transferees and assignees of the Notes may rely thereon.

Exhibit 4.4(a)

3

EXHIBIT 4.4(b)

FORM OF OPINION OF SPECIAL COUNSEL
TO THE PURCHASERS

     The opinion of Gardner Carton & Douglas LLP, special counsel to the Purchasers, shall be to the effect that:

     1. The Company is a corporation organized and validly existing in good standing under the laws of the State of Delaware, with requisite corporate power and authority to enter into the Agreement and to issue and sell the Notes.

     2. The Agreement and the Notes have been duly authorized, executed and delivered by and constitute the legal, valid and binding agreements of the Company, enforceable in accordance with their terms, except to the extent that enforcement thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws of general application relating to or affecting the enforcement of the rights of creditors or by equitable principles, regardless of whether enforcement is sought in a proceeding in equity or at law.

     3. The Subsidiary Guaranty constitutes the legal, valid and binding obligation of each Subsidiary Guarantor, enforceable in accordance with their terms, except to the extent that enforcement thereof may be limited by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or similar laws of general application relating to or affecting the enforcement of the rights of creditors or by equitable principles, regardless of whether enforcement is sought in a proceeding in equity or at law.

     4. Based upon the representations set forth in the Agreement, the offer, sale and delivery of the Notes and delivery of the Subsidiary Guaranty do not require the registration of the Notes or the Subsidiary Guaranty under the Securities Act of 1933, as amended, nor the qualification of an indenture under the Trust Indenture Act of 1939, as amended.

     5. The issuance and sale of the Notes and compliance with the terms and provisions of the Notes and the Agreement do not conflict with or result in any breach of any of the provisions of the Certificate of Incorporation or By-Laws of the Company.

     6. No approval, consent or withholding of objection on the part of, or filing, registration or qualification with, any governmental body, Federal or state, is necessary in connection with the execution and delivery of the Note Purchase Agreement or the Notes.

The opinion of Gardner Carton & Douglas LLP shall state that the opinion of Baker & McKenzie delivered to you pursuant to the Agreement, is satisfactory in form and scope to Gardner Carton & Douglas LLP, and, in its opinion, the Purchasers are justified in relying thereon. The opinion shall state that subsequent transferees and assignees of the Notes may rely thereon. The opinion also shall cover such other matters relating to the sale of the Notes as the Purchasers may reasonably request.

Exhibit 4.4(b)

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, and (f) Elk Composite Building Products, Inc., a Delaware 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) OEL, LTD, d/b/a Ortloff Engineers, LTD, a Nevada corporation, (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.

5. Ortloff de Venezuela, S.A., a Republic of Venezuela corporation.

EX-23

EXHIBIT 23

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 reports dated August 30, 2004 relating to the financial statements and financial statement schedule, which appear in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Dallas, Texas
September 10, 2004

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-15(e)) for the registrant and have:

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

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

c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; 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 10, 2004	By	/s/ Thomas D. Karol
		Thomas D. Karol
		Chief 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-15(e)) for the registrant and have:

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

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

c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; 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 10, 2004	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.ss. 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.ss. 1350) that:

(1) The Annual Report on Form 10-K for the period ended June 30, 2004, 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, 2004 fairly presents, in all material respects, the financial condition and results of operations of ElkCorp.

Date: September 10, 2004

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.ss. 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.ss. 1350) that:

(1) The Annual Report on Form 10-K for the period ended June 30, 2004, 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, 2004 fairly presents, in all material respects, the financial condition and result of operations of ElkCorp.

Dated: September 10, 2004

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